Center for American Progress » Labor and Work

The Importance of Preschool and Child Care for Working Mothers

Sarah Jane Glynn, Jane Farrell, and Nancy Wu — Wed, 08 May 2013 12:59:55 +0000

SOURCE: AP/Cliff Owen

Pre-K teaching assistant Mirna Ayala, left, and teacher Laura Amling, right, work with their three-year-old students to draw an alphabet shape at Powell Elementary School in Washington.

Endnotes and citations are available in the PDF version of this issue brief.

In his 2013 State of the Union address, President Barack Obama made a historic pledge to provide universal, high-quality pre-K education to our nation’s children. He chose to make this one of his administration’s priorities with good reason: Early childhood education has myriad benefits, including better, more equitable long-term outcomes for children of divergent economic backgrounds. Moreover, investments in these programs help cultivate a future workforce, secure long-term economic competitiveness, and develop our nation’s future leaders. Universal high-quality pre-K and child care would also throw a much-needed raft to families across America that are struggling to stay afloat while footing costly child care bills, missing work to provide care, or sending their children—our nation’s future innovators and workforce—to low-quality care centers.

Why expanding pre-K access would benefit children and parents

Only 6 out of 10 kindergarten programs in America are open for full-day enrollees. Increased funding for Head Start and child care subsidies together can encourage extended hours to better accommodate parents’ work schedules.
Enabling more women to work by improving access to child care can help mitigate the gender wage gap and reduce a mother’s likelihood of going on public assistance.
Lower costs and increased access to child care can lead to a decrease in the number of women leaving employment and an increase in the rate of entering employment, enabling mothers to keep working when they want or need to do so.

In addition to the positive long-term impacts that high-quality preschool and child care have on children and the economy, these programs provide important benefits to working parents, especially working mothers. The prohibitively high costs of private child care and the dearth of quality, accessible public providers means that parents are often left to choose between the lesser of two evils: low-quality care or forgoing needed pay to stay at home and care for a child themselves.

In response to this urgent problem, President Obama has proposed to allocate $1.4 billion in 2014 to expand public child care services, $15 billion over the next decade to expand state home-visitation programs to America’s most vulnerable families, and $75 billion over the next decade to invest in expanding access to quality preschool. This funding would help millions of parents, especially mothers, across America better balance their work and caregiving responsibilities without putting their children’s well-being or their own jobs at risk.

What choices do working parents have?

Most families currently have three options for securing child care. First, parents can stay at home and care for their children themselves. But this is increasingly difficult, as most families now rely on two breadwinners to stay above water. Moreover, mothers are more likely than fathers to take time away from paid work to care for a child, which can exacerbate mothers’ lifetime earnings gap. Second, parents can pay for child care out of pocket. But this approach is very costly for families, eating up 35.9 percent of a low-income family’s monthly budget. The third option for families is to use federal- or state-funded child care, but access to any publicly funded program, let alone a high-quality program, is very limited. Nationwide, nearly three in four children are not enrolled in a federal or state-funded pre-K program.

Understanding the drawbacks, risks, and shortcomings of each of these options—and especially how these limited choices negatively impact families and working mothers— makes clear the need for increased investment in high-quality pre-K and child care. We explore each option in detail below.

Option 1: Stay at home

Fifty years ago suggesting that one parent stay at home and forgo paid employment to provide child care would have made plenty of sense both culturally and economically. This was largely because families could live comfortably on one breadwinner’s income and also because women had traditionally been relegated to the domestic sphere. But in the past 40 years, due to both social advances and economic changes, American families have undergone a dramatic change. Leaving the workforce to provide care today, even temporarily, carries real risks.

The majority of parents now work, regardless of the age of their children. Parents are workers and workers are parents, both out of necessity and preference: 70.5 percent of mothers are in the labor force, including 64.8 percent of mothers with a child under the age of 6. That’s in large part because many families in today’s economy rely on two incomes in order to pay the bills. In fact, the only married-couple families that have seen real income growth over the past 30 years are families where both parents work.

Given that the cost of child care may be nearly as large as one parent’s entire salary, a worker’s choice to leave the workforce or work part time so that his or her family doesn’t need to cover those costs may appear to be an economically rational decision. And while there are mothers who choose to stay home for other reasons, short-term economic pressures are often part of the equation. But this choice is not without consequences.

Women are more likely than men to cut back their work hours or leave work entirely to care for their children. Unfortunately, this puts them at an economic disadvantage in the long run. Leaving the workforce, even for less than a year, can have long-term negative consequences for women’s careers and lifetime earnings.

The fact that women are more likely to take time out of the workforce to provide unpaid care for their children is part of the reason why there is a persistent gender wage gap in this country—10.5 percent of the differences in men’s and women’s earnings can be attributed to labor-force experience. When women work less, they pay less into Social Security over a shorter period of time, which is one of the reasons why retired women are more likely to live in poverty than retired men.

Access to child care is essential to a woman’s ability to participate in the workforce, and a lack of access to child care affects the work-family balance of both women and men. Women need to have the ability to make the choices that are best for them and their families in both the short and long term, and greater national investments in child care and preschool programs could help remove some of the constraints that may push mothers toward decisions that have negative economic consequences for them and their families down the road. It would make quality care more affordable for American families and support mothers’ employment.

Option 2: Pay for it out of pocket

Using part of a family’s total income is a second but equally problematic option for securing child care. In recent years the costs of care have skyrocketed, placing a disproportionate burden on families’ budgets. The fact is, for millions of families across the United States, paying for high-quality private child care is an economic impossibility.

In almost half of all states, the cost of child care exceeds the average rent payment, meaning that too many families with young children end up struggling to make ends meet. In 2011, the latest year for which data are available, the average family with a working mother and a child under age 5 that made child care payments spent nearly 10 percent of its total family income on child care. While that may not sound like an overwhelming burden, it ends up amounting to nearly a quarter—22.5 percent—of married mothers’ earnings, and more than a quarter—26.1 percent—of never-married mothers’ incomes. (see Table 1)

The costs of child care are even more extreme for younger mothers. The average age when mother’s first give birth in the United States is 25.7 years, meaning that half of new mothers are under the age of 26 when they have their first child. Not surprisingly, younger mothers tend to have lower incomes: By virtue of their age, they have less job tenure and are more likely than older mothers to still be completing their education. But this means that mothers under age 25 with a young child who are paying for child care end up spending a staggering one-third—33 percent—of their income on care because they typically earn less. (see Table 1) It is critical that these women have the opportunity to finish their education and gain job experience, but child care expenses can make that a daunting prospect.

The story becomes even bleaker for mothers who are living below the poverty line. As Table 1 shows, 26 percent of working mothers in poverty pay for child care out of pocket, and those expenses eat up nearly half—42.6 percent—of their monthly wages. It is vital that these women have work support, since they are more likely to be single parents and since seeking paid employment is required to have access to certain governmental benefits. Employment is also an important pathway into the middle class, but when child care is as expensive as it is, it places a disproportionate burden on the mothers who can least afford it.

While paying for child care out of pocket may be simple and affordable for wealthy families, it is not truly an option for many Americans, especially young single mothers.

Option 3: Utilize publicly funded and subsidized programs

A final option for accessing child care is utilizing programs funded or subsidized by states and the federal government. Unfortunately, while it may seem as though this must be a viable option for families who do not want to lose a co-breadwinner’s earnings or for those who can’t afford private care, the United States still has a long way to go on this front.

Only about 22 percent of children in low-income families currently receive federally subsidized child care, and while preschool enrollment has increased nationwide in recent years, the lowest-income children are the least likely to participate in preschool programs. Twenty-eight percent of 4-year-olds were enrolled in state-funded pre-K programs, and only 4 percent of 3-year-olds were similarly enrolled. Forty percent are not enrolled in any pre-K program at all. Clearly, the publicly funded services that are available are lacking, insufficient, or both.

Publicly funded programs are helpful for some low-income families and mothers, but access is too limited and quality is often far too low. Unless we expand and strengthen these programs, they will continue to not be a viable option for many working parents.

Lack of affordable care holds mothers back

There is a great deal of empirical evidence that shows how higher child care costs have a negative impact on mothers’ employment. Mothers are more likely to leave employment and less likely to start new jobs when the costs of child care are high. It is also difficult for parents to keep their jobs when they do not have access to consistent quality child care. A study conducted by Jeffrey D. Lyons in North Carolina found that about one in four families who were on a waitlist for child care assistance either lost or had to quit their jobs while they waited for an opening.

A similar study in New York City found that more than a third of families on the child care assistance waitlist either lost jobs or were unable to work, and one in five had either missed or been late for work because of their child care problems. Perhaps even more alarmingly, a quarter of families on a child care waitlist in Minnesota had to rely on public assistance in order to make ends meet while waiting to access child care subsidies.

This data was all collected before the recession, and since jobs are even scarcer now and family budgets stretched even thinner, there is reason to suspect that the current situation is worse than what these numbers portray.

Evidence from other countries shows that child care subsidies increase women’s labor force participation, help them obtain more stable jobs, and increase their income. While interventions in the United States have been much more modest by international standards, there is ample evidence showing that child care assistance helps working moms. Families who receive child care support are more likely to be employed and have longer employment spells that families who do not receive support. The effects are particularly strong for single mothers, who are nearly 40 percent more likely to maintain employment over two years than those who do not have help paying for child care.

Conclusion

The benefits of high-quality pre-K and child care are enormous. It is an essential way to close the achievement gap between children of different economic backgrounds and prepare them for kindergarten, primary school, and beyond. Decades of research have also shown that investing in our children at an early age pays social, educational, and economic dividends over the course of a child’s lifetime. Children deserve access to affordable high-quality education that promotes school readiness, regardless of their family situation.

We shouldn’t forget that affordable high-quality child care is also essential to parents’ abilities to balance work success with family responsibilities—a goal that every parent deserves to easily achieve. President Obama’s preschool and child care plan will strengthen families and make them more economically secure while also reducing inequality and improving educational achievement in this country.

Sarah Jane Glynn is a Senior Policy Analyst at the Center for American Progress. Jane Farrell is a Research Assistant for Economic Policy at the Center. Nancy Wu is an intern on the Economic Policy team at the Center.

Lessons Learned

Judith Warner — Fri, 26 Apr 2013 13:05:09 +0000

SOURCE: AP/Damian Dovarganes

Child care aid recipient Sarah Comito kisses her son Matthew at their home in Oxnard, California.

Endnotes and citations are available in the PDF version of this report.

Over the past half century, the American family has undergone cataclysmic change. In 1950 only 11.9 percent of women with children under the age of 6 were in the labor force; today 77 percent of those mothers work outside the home. In 1968 48 percent of children were raised in homes where the father worked full time, the mother was not in the labor force, and the parents were married; 40 years later only 20 percent of children lived in such households.

Women have gone from making up only about one-third of the U.S. workforce in 1969 to nearly half of the workforce now, and their earnings have become increasingly essential to families’ basic economic stability. Yet while the structure of America’s families has changed, their basic needs have stayed essentially the same. Children must be cared for and raised; dinners have to be made, and sick relatives have to be taken to the doctor and attended to at home. Indeed, it could well be argued that the demands of caretaking have only grown in recent years, as an “intensive” style of parenthood has increasingly become the norm and the care needs of a generation of grandparents with greater longevity have exploded.

American society has consistently failed to adapt to the heightened demands placed upon its families and, in particular, on women. Our workplaces are structured today as though we were still living in the early 1960s. The United States is the only industrialized nation that does not guarantee working mothers paid time off to care for a new child. We are the only developed country that doesn’t guarantee paid sick leave. The lengths of our school day and school year are grossly insufficient to meet the needs of working families, with the result that 15 million school-age children are unsupervised every afternoon. What child care “system” we have—Head Start for the most at-risk young children and Child Care Development Fund vouchers for the working poor to purchase what care they can—is both grossly inadequate in the number of families it serves and also chaotic, haphazard, and starved of the funds that could guarantee young children an acceptable standard of care. Even the most fortunate—the better-educated and better-off professionals who tend to have access to paid leave, flexibility, sick days, and decent child care—find balancing the necessary demands of work and home an increasingly fraught and anxious-making endeavor in our era of “extreme jobs” and 24/7 availability.

The need for policies that can at least begin to ease the massive pressures on American families is indisputable. Nearly three-quarters of Americans now say that they, their neighbors, and their friends experience hardship in balancing work, family, and professional responsibilities at least somewhat often, and nearly 40 percent say that they experience such conflict “all the time” or “very often.” In addition, a whopping 72 percent report that they and their families would be likely to suffer significant financial hardships if they had a serious illness or needed to care for a new child or a family member who was ill.

“It just doesn’t have to be that way, doesn’t have to be that hard.”
– Michelle Obama, White House Forum on Workplace Flexibility, 2010

It’s long been accepted wisdom that Americans view family matters as purely private concerns and that public policy solutions for families—other than the very poorest—have no place in our culture. Yet polls consistently show that support for family-friendly policies is, in fact, overwhelming. A bipartisan poll of more than 1,200 voters, conducted in November 2012 by Lake Research Partners and The Tarrance Group, found 86 percent of respondents saying that it was important for Congress and the president to consider new laws such as paid sick days and paid family and medical leave insurance, with nearly two-thirds of the respondents saying that they judge such action to be “very important.” This support held up across party lines, with 73 percent of Republicans, 87 percent of Independents, and 96 percent of Democrats in agreement. Other polling has found that more than two-thirds of Americans agree that the government or businesses should be doing more to help fund child care for working parents; three-fourths of Americans believe that employers should give workers more flexibility in their schedules and work locations; and three-quarters of Americans support a policy guaranteeing employees a minimum number of paid sick days.

Despite this very robust support, there has been remarkably little progress in family policy over the past several decades. And the few victories achieved have been hard fought, partial, and constantly challenged:

The Family and Medical Leave Act of 1993, which provides workers with 12 weeks of unpaid, job-protected leave to recover from a serious illness, care for a new child, or care for a seriously ill spouse, parent, or child, was passed with such onerous eligibility limitations that 40 percent of all workers in the United States are now excluded from coverage.
The Child and Dependent Care Tax Credit, which allows qualifying families to deduct from their taxes up to $3,000 for the costs of care for one dependent or $6,000 for the care costs for two or more, is nonrefundable and excludes low-income families who do not owe taxes.
The Child Care and Development Block Grant, which created a voucher system for needy working families or mothers transitioning from welfare, was created with virtually no federal standards and has funding levels so low that today only one in six children eligible for assistance receives it. In 2011 22 states had waiting lists; in Florida alone in 2012 that list contained the names of 75,000 children.

In the past decade, some points of light have emerged from some states and cities. State funding for public pre-kindergarten programs more than doubled nationwide between 2001 and 2011, with nine states passing legislation to provide universal pre-K programs to all 4-year-olds. Only a handful of those states, however, had allocated sufficient funding to reach all eligible children as of this writing. Paid family leave became a reality in California and New Jersey in 2002 and 2008, respectively. It also became a reality on paper in Washington state in 2007, but implementation has been delayed repeatedly because of a lack of funding. Four cities—Seattle, Washington, D.C., San Francisco, and Portland—and one state—Connecticut—have passed laws granting at least some workers the right to paid sick days.

Yet even these advances have been very partial and, in the case of pre-K, have come under serious threat in the wake of the Great Recession. Total state funding for pre-K programs decreased by nearly $30 million between 2009 and 2010 and by $60 million between 2010 and 2011. Four states—Michigan, Minnesota, Missouri, and Ohio—now enroll a smaller percentage of 4-year-olds than they did a decade ago, and Arizona defunded its program entirely for the 2010–2011 school year.

Paid leave in California and New Jersey was passed with compromises that sacrificed workers’ job security. As a result, a troubling number of those who need it don’t take it. A 2011 follow-up study on the effectiveness of paid leave in California found that about one-third of the workers surveyed who had been aware that they had the right to paid family leave didn’t apply for it because they feared making their employers “unhappy” and possibly being fired. The survey also found that one-third of respondents who knew that they were entitled to paid leave didn’t apply for it because the level of wage replacement was simply too low.

The growing success of paid-sick-day advocacy has sparked newly energetic and effective efforts by business groups and hostile politicians to turn back the tide, most recently through the use of state-level “preemption” legislation designed to prohibit local governments from passing their own ordinances—such as paid-sick-day measures—that are inconsistent with state law. Lawmakers in Wisconsin were the first to embrace this strategy, passing a law in 2011 that voided a highly popular 2008 Milwaukee paid-sick-day measure. In 2012 lawmakers in Louisiana passed similar legislation aimed at preventing local authorities from taking any future action on paid sick days, and Mississippi, Florida, Michigan, Arizona, Indiana, and Washington state are currently considering similar measures.

Why has change been so slow to come and so paltry? Why is there such a gap between public opinion and political will? And why has it been possible, at some times and in some places, to achieve at least some positive change? What lessons can be drawn from the few instances of success and the many failures that we’ve seen in the family policy arena? This report seeks to answer these and other pressing questions, with the goal of envisioning a road map for the future.

Throughout its 10-year history, the Center for American Progress has generated an influential body of research cataloguing the challenges facing today’s families and spelling out policy solutions that would better their lives while enhancing the economic strength of our nation. We have long argued that adopting policies that allow all people to realize their human potential are not only the “right” thing for us to do as a society but also the necessary course of action to promote long-term growth and prosperity. Faced with the glaring discrepancy between the urgent need for policies to help families thrive and the sluggish pace of progress, we felt that it was time to take a step back and reflect on both our successes and our failures. We wanted to take stock of our strengths and examine the roadblocks—the attitudes, ideas, and practices of our allies as well as our opponents—that have stood and continue to stand in our way.

This report does not seek to give an encyclopedic account of the battles of the past, nor does it delve into the intricacies of policy analysis or potential legislation. (For this, please see the following among CAP’s most recent policy papers: “Investing in Our Children: A Plan to Expand Access to Preschool and Child Care,” “Our Working Nation in 2013: An Updated National Agenda for Work and Family Policies,” and “Comprehensive Paid Family and Medical Leave for Today’s Families and Workplaces: Crafting a System that Builds on the Experience of Existing Federal and State Programs.”) It is instead a work of reflection. It’s based on interviews with more than three dozen veterans of the fight for family-friendly policy in America representing a variety of perspectives, generations, and stakeholder groups. Our goal has been to distill hours of wide-ranging conversation down to the essence of what that aggregate experience has taught.

The first part of the report covers the positive lessons learned about messaging and messengers, timing, coalition building, an ideal scope of legislation, and fighting the opposition. What has worked in the battle for family-friendly policies is relatively straightforward:

Recruiting and engaging powerful, high-profile champions
Conceiving policies that affect the largest number of people possible
Building broad and diverse coalitions, including members of the business community
Being flexible and creative
Using language that corresponds to widely shared American values
Driving home to elected leaders that supporting family-friendly policy pays off politically
Recognizing when the stars are aligned and seizing the moment
Remembering that successful legislation requires follow up
Taking the long view

The second part of the report takes up the more challenging problem of examining what didn’t work and what still isn’t working. This discussion turns around three central questions:

Why, despite the persistent, pressing, and long-standing need for support for working families, hasn’t there been a strong public demand for policy change?
Why hasn’t the push for policies such as paid sick days or paid family and medical leave—measures which could benefit everyone at some point in their lives—attracted a dedicated constituency?
Why have families never been able to unite as a meaningful lobby?

The lack of demand and a lack of awareness that there might even be something to demand, combined with the related lack of a lobbying constituency, have made it very difficult to mobilize public opinion, much less political will, on behalf of families and children. We explore this problematic lack of demand in the second half of the report. And we argue that what we need to do moving forward is change the national conversation about the struggles of working families in America. We need to bring new voices to the debate and also shift the debate away from received wisdom and cliché so that the real needs of real families are heard and addressed. To do this, we must:

Counter the argument that work-family conflict is a purely private concern that individuals need to “work out” on their own.
Replace the belief that “this is just how it is” with the argument that “it doesn’t have to be this way.”
Contradict the conventional wisdom that family-friendly policies are bad for business with proof that they in fact boost growth.
Recognize that while work-family conflict is universal, how it plays out and how people talk about it varies in different communities—and develop messages that take those varied viewpoints into account.
Undertake an ambitious new body of research to find out what people want, what they feel would be most helpful in making their lives easier, and what words they use to talk about work-family issues. This effort should take the form of a national listening tour that would draw in a wide variety of different communities, including conservatives and people of faith.
Build a movement to develop a sense of urgency and excitement around these issues.
Make sure that work-family policy finds its place as part of a broader, inspiring, progressive agenda that seeks to help people meet all of their responsibilities and improve their lives.

This is a promising time to both reflect upon the past and also consider the future of family policy in America. In 2012 our country re-elected a Democratic president with a proven commitment to issues of family economic security, who has signed legislation promoting equal pay for women, hosted a White House forum on workplace flexibility, and expressed a desire to meaningfully expand access to affordable, high-quality child care. President Barack Obama’s call for high-quality pre-K for all children in his 2013 State of the Union address showed that family-friendly policy now has a place at the heart of the progressive agenda. What’s more, the record presence of 20 women in the Senate, as well as a number of female members of the House with a long track record of advocacy on women’s and children’s issues, argues strongly for the possibility of initiating a substantive conversation on family policy in the current Congress. And the passage of health care reform legislation has the potential to prove to Americans at all income levels that government policy—public action—can lead to positive change in their families’ lives.

In addition, demographic changes have given more voice and power to women, Latinos, and African Americans—constituencies with a proven record of greater support for family-friendly policies and greater faith in the role of government—in particular, federal government. Furthermore, the growing power of Millennials as a political force heralds the arrival in politics of a generation of both men and women who consider the ability to combine work and family essential to living a good life. The Great Recession, which introduced significant numbers of middle-class people to the dislocation and insecurity of life in low-wage, no-benefit jobs, led many Americans to rethink the role that government could and should play in their lives. Bleak though the legislative outlook now seems in our bitterly divided Congress, this is potentially a very fruitful time for thinking creatively and productively about creating a better future for our families.

Judith Warner is a Senior Fellow at the Center for American Progress.

Top 6 Policies to Help the Middle Class that Won’t Cost Taxpayers a Penny

David Madland and Karla Walter — Wed, 24 Apr 2013 12:54:35 +0000

SOURCE: AP/M. Spencer Green

President Barack Obama gestures as he speaks at Argonne National Laboratory in Argonne, Illinois, Friday, March 15, 2013. Policymakers can take steps to strengthen the middle class that won't cost taxpayers any money.

Strengthening America’s middle class should be elected officials’ top priority. Incomes are either stagnant or falling for the middle class, while the costs of life’s necessities continue to rise. As a result, the risk of the middle class falling behind economically is growing. A weak middle class hurts all of us by stifling our country’s economic growth and undermining our democracy.

Unfortunately, reducing the deficit has distracted our political leaders from this pressing challenge and has made it seem like little can be done, as Congress blocked or failed to act on important legislation to help the middle class. In reality, however, there are many things that the federal government can do to help the middle class.

Rather than make excessive short-term budget cuts as we are currently doing, we can and should make needed investments in the middle class, such as expanding access to preschool and child care, as part of a package that reduces the deficit over the longer term, as CAP has proposed on many occasions. Furthermore, there are a number of things that policymakers can do that won’t require any additional expenditures.

To help remind politicians that they have lots of room to act, we have compiled a list of the top six policies that would help the middle class without costing taxpayers a penny. Together, these policies will boost the incomes of millions of hardworking Americans; put families on a path to a sustainable retirement; ensure that workers don’t have to choose between staying home while sick or losing their job; allow struggling homeowners to stay in their homes; and empower students with valuable information on college quality.

While these policies would not address all of the challenges faced by the middle class, they would make a meaningful difference in the lives of millions of working Americans.

1. Increase the minimum wage

Over the past four decades, workers have become much more productive and our country has become much richer, but the value of the minimum wage has declined significantly. Since 1968 the inflation-adjusted value of the minimum wage has declined by 31 percent.[1] The minimum wage would be more than $10.50 per hour today if it had kept up with inflation. This decrease has occurred even as workers have become more productive. Over the same period of time, productivity—the measure of output per hour of work—increased by 124 percent.[2] (see Figure 1)

Raising the minimum wage would not only help boost incomes for those struggling to reach the middle class, but it would also cause employers to raise wages through “spillover effects” for even those more solidly in the middle class. After increasing wages for low-wage workers, employers feel the need to increase the wages of workers near the minimum wage in order to preserve their relative position. Studies have estimated that this spillover effect can increase the share of the workforce affected by the hike by 5 to 10 percentage points.

Furthermore, raising the minimum wage is good for the economy because it boosts workers’ purchasing power, providing needed demand in the economy.

The minimum wage should also be indexed to prevent congressional inaction from reducing its value. Indexing to inflation is good, but indexing to one-half of the average wage would be better because it would help ensure that workers reap some of the economic gains they help create. It would also raise living standards as the country becomes richer.

2. Make saving for retirement easier, cheaper, and more secure

Social Security provides retirees an essential baseline of income, but middle-class Americans depend upon accumulations in private retirement accounts to maintain their standard of living in retirement. Because of flaws in our private retirement system, however, many Americans do not have enough retirement savings to maintain their current standard of living. Ernst and Young estimates that 59 percent of new middle-class retirees will outlive their retirement savings, while Boston College’s National Retirement Risk Index estimates that 53 percent of all households are at risk of having an insecure retirement. (see Figure 2)

In order to help the middle class retire with dignity, we need to expand retirement coverage and improve the quality of retirement plans available. We can achieve these goals and improve the current retirement system by creating a new hybrid retirement plan type—the Secure, Accessible, Flexible, and Efficient Retirement Plan, or SAFE Retirement Plan, a hybrid between a traditional pension and a 401(k) plan—and opening the federal Thrift Savings Plan, the 401(k) for federal employees, to the public.

Under this proposal, workers would be automatically enrolled in a retirement plan—their choice of the SAFE Retirement Plan, the Thrift Savings Plan, or their current workplace plan, if they have one. Furthermore, both of these new plans, especially the SAFE Retirement plan, would boost retirement savings and security compared to a typical 401(k) plan. The SAFE Retirement Plan is estimated to cost roughly half as much as a 401(k) to provide the same level of benefit, and savers in the plan would be more secure because risk is spread across all workers. The TSP would provide much lower fees and more suitable investment options than a typical 401(k).

These plans wouldn’t cost the government money because they are not government programs but rather sensible retirement plans facilitated by government action.

3. Lower monthly housing costs by providing homeowners with principal forgiveness

Although housing markets are beginning to recover from the collapse of the housing bubble, more than one in five homeowners are still “underwater” on their loans, meaning that they owe more on their mortgages than their loans are worth. (see Figure 3) Not only does this threaten individual homeowners, but the more than $600 billion in negative equity also significantly hampers economic recovery. Barring an ill-advised effort to reinflate the housing bubble, we will likely need to deal with the unique problems of underwater mortgages for some time to come.

Owing more on a home than it is worth is a significant threat to middle-class families that have long relied on homeownership as a means to build wealth. Home equity accounts for 40 percent to 50 percent of total wealth for middle-class families with incomes falling between $30,000 and $70,000.

Providing troubled underwater homeowners with principal forgiveness, which means permanently reducing the outstanding principal balance of an underwater loan to reflect current market value as part of a loan modification, can accomplish three important goals:

Help ensure the long-term success of mortgage modifications.
Stabilize the nation’s hardest-hit housing markets.
Remove a major barrier to consumer confidence and spending.

Some investors are already forgiving principal balances in their modifications, either through the Home Affordable Modification Program, or HAMP, Principal Reduction Alternative or as part of the National Mortgage Settlement. Using HAMP is optional for investors, however, even when reducing principal returns more value than simply forbearing principal. The U.S. Treasury Department should require that HAMP participants reduce principal in those cases.

Moreover, Fannie Mae and Freddie Mac are still barred from participating in the HAMP principal reduction program by their regulator, the Federal Housing Finance Agency, even though the agency’s own analytics demonstrate that allowing principal forgiveness with these incentives would save Fannie Mae and Freddie Mac $3.6 billion in total. Permitting the two mortgage giants to do principal forgiveness would be a significant step toward helping homeowners, the housing market, and the larger economy.

For all investors—including Fannie and Freddie as well as private investors—one option for reducing principal without taking the full loss is to offer “shared appreciation” loan modifications, in which the investor writes down principal in exchange for the borrower pledging to share with the investor a portion of any future appreciation when the home is ultimately sold or refinanced.

4. Let all workers earn paid sick days

Paid sick days should be available to all U.S. workers. Implementing this policy would provide greater job security to millions of Americans, reduce worker turnover, and ultimately strengthen the middle class.

There are currently no federal laws guaranteeing workers the right to earn paid sick days. Nearly 40 percent of workers in middle-income families and more than 55 percent of workers in low-income families do not have access to paid sick days.[3] Twenty-three percent of adults report either being threatened with losing a job or being fired for taking time off when they or a family member have been sick. (see Figure 4)

What’s more, adults that do not have access to paid sick days are 1.5 times more likely to go to work sick with a contagious infection or illness. The cost of “presenteeism,” or the decreased productivity of a worker who works when sick, costs the U.S. economy $160 billion each year, surpassing even the cost of absenteeism, when a worker doesn’t show up at all.

Policymakers should guarantee workers the ability to accrue up to seven job-protected, paid sick days per year to recover from their own short-term illnesses or care for an ill family member. The Healthy Families Act would implement paid sick days.

5. Ensure that workers who want to form a union are able to do so

Unions help strengthen the middle class by enabling workers to negotiate for fair wages and benefits and helping ordinary citizens get involved in the political process.

But as unions became weaker over the past four decades—due in part to an unfair union election process—they became less able to perform these functions. The middle class has withered as a result, with the share of income going to the middle class falling alongside the percentage of workers in unions. (see Figure 5)

Indeed, according to Harvard University’s Bruce Western and the University of Washington’s Jake Rosenfeld, “Union decline explains one-third of the growth in inequality—an effect equal to the growing stratification of earnings by education.” If unionization rates increased by 10 percentage points—to roughly the level that they were in 1980—the typical middle-class household, unionized or not, would earn $1,501 more per year, according to research conducted by the Center for American Progress Action Fund.

Unfortunately, the current union election process is stacked against workers who want to form a union. One study by Stanford University’s John-Paul Ferguson finds that 35 percent of the time that workers file a petition for an election, the election does not happen.

To ensure that workers who want to form a union are able to do so, the following should occur:

The National Labor Relations Board should help put an end to needless election delays and modernize the union election process.
Congress should pass comprehensive labor-law reform that establishes a fair process for workers to decide on union representation that expands coverage so that more workers are provided the right to organize; establishes meaningful penalties and remedies for workers who are fired or discriminated against for exercising their right to organize; and includes measures to promote productive bargaining between workers and companies.
Congress should also make the right to join a union a civil right. This would give workers who are discriminated against in exercising their right to organize a private right to sue, just as workers have a right to sue if they face other forms of workplace discrimination.

6. Require colleges to provide consumer information via college scorecards

Two-thirds of students with four-year bachelor’s degrees finish their studies with student-loan debt, and the average amount of debt per student is nearly $25,000. (see Figure 6) Yet average debt loads at schools can range from $950 or less to $55,250, and graduation rates range from 0 percent to 91 percent. Many students, however, are unaware of these differences.

The federal government should require colleges and universities to do a better job of providing pertinent information to prospective students concerning their likelihood of graduating, finding employment, and paying off student debt. Schools should be required to direct students to this information on all promotional materials to allow students to easily compare schools.

Expanding access to college education is a key mechanism for building a strong middle class. The college wage premium—the percent increase that a college graduate earns compared to a similar worker without a college degree—is approximately 45 percent, according to data from the Economic Policy Institute. Furthermore, the overall middle class has shrunk as the supply of highly skilled workers hasn’t kept up with the demand for those skills. Approximately one-third of the rise in income inequality since the late 1970s is due to the rising college premium.

Despite the increasing return on investment in a college degree, many students still have a difficult time figuring out the costs and benefits of different schools. This is especially difficult for those who are the first college students in their families, as they lack guidance from family members who attended college and went through the process of choosing a school to attend.

The Obama administration has developed an important new tool in helping prospective students and their families access this information: a college scorecard, which provides a standardized, easy to read one-page summary of the cost, debt, and graduation rates of degree-granting colleges in the United States. The scorecard should be improved, however, in order to help more middle-class families access the information that they need to make an informed decision.

The college scorecard, for example, is currently only available on government websites. The federal government should require institutions to include information about the availability of the college scorecard on college websites, enrollment forms, financial-aid paperwork, and other promotional materials in order to make it visible enough to grab the attention of applicants. Moreover, the scorecard should include other important data such as the average earnings for recent graduates. Ideally, some critical data—graduation rates and earnings, for example—should be available at the degree and program level. Finally, comparison tools should be provided that allow for easy comparisons among institutions and, ultimately, degree and program levels.

Conclusion

The American middle class is in trouble. Hard work has less power to lift families into the ranks of the middle class. And even when working families achieve a middle-class lifestyle, unstable work environments, the rising cost of obtaining a college education, and the inability to save for a secure retirement make it difficult to remain in the middle class.

There are many things that the federal government can do to help secure the American promise that hard work can lead to a better future. Some measures will require additional investment in the middle class, and they can be part of a package that reduces the deficit over the longer term. Still other policies that Congress and the Obama administration can adopt would help the middle class without costing taxpayers a penny. The top six policies in this column provide a good place to start.

David Madland is the Director of the American Worker Project at American Progress. Karla Walter is the Associate Director of the American Worker Project.

Endnotes

[1] Authors’ analysis of data from the U.S. Bureau of Labor Statistics and the U.S. Department of Labor, Wage and Hour Division.

[2] Authors’ analysis of data from the U.S. Bureau of Labor Statistics.

[3] The family income categories used in this analysis are based on the categories first laid out in the 2010 Center for American Progress and Center for WorkLife Law report, “The Three Faces of Work-Family Conflict.” They are modified for the data available through the American Time Use Survey. The universe is families with a currently employed worker over the age of 18. Families are divided into three groups:

Low-income families, who make up approximately the bottom one-third—37.68 percent—of families by income
Middle-income families, who include those families not falling within the low-income and the professional-class families groups
Professional families, who make up approximately the top 20 percent of families—24.07 percent—in which the worker has at least a college degree

Interactive: The Game of Wages

Jane Farrell — Tue, 09 Apr 2013 17:25:00 +0000

How Pay Inequity Hurts Women of Color

Sophia Kerby — Tue, 09 Apr 2013 14:30:15 +0000

SOURCE: iStockphoto

As women’s earnings continue to become increasingly important to families, closing the gender-based wage gap is crucial to gaining access to wealth accumulation in communities of color, which are still deprived of economic security.

Endnotes and citations are available in the PDF version of this issue brief.

Today, April 9, is Equal Pay Day—the date that marks how many extra days women must work in 2013 to earn what men earned in 2012. Unfortunately, the wages of working women and particularly the wages of women of color continue to lag behind the pay of their male counterparts. Moreover, for women of color there is a double pay gap. As a group, women of color earn less than their white female peers—a reality that means they need to work longer to earn the same pay as white women and then even longer to match the earnings of white men. The gender- and race-based wage gap affects families of color with long-term consequences that hinder wealth accumulation.

Women currently make up about half of all workers in the U.S. labor force and among mothers in the labor force the majority are either breadwinners or share that responsibility with a partner. In 2010, 13.1 percent of women in the workforce were black, 4.7 percent were Asian, and 12.8 percent were Latina. What’s more, these women of color are increasingly the breadwinners in their families—53.3 percent of black households and 40.1 percent of Latino households.

This issue brief will examine our nation’s gender-based wage gap and its racial overlay. It will look specifically at the long-term implications of the wage gap on communities of color and then suggest policy recommendations to narrow and eventually eliminate the wage gap to ensure equal work earns equal pay.

The wage and income gap

The gender-based wage gap disproportionately hurts women of color who have made less than their white counterparts for decades. Women of color are more likely to work in lower-paying jobs and experience higher levels of unemployment and poverty.

Women on average earn 77 cents for every dollar a man earns for comparable work—a gender wage gap of 23 percent. Women of color suffer from an even more severe gap. According to the National Partnership for Women and Families, African American women and Latinas in the United States are paid $18,817 and $23,298 less than non-Hispanic white men yearly, respectively. That’s 64 cents and 55 cents for every dollar a man earns.

The gender gap persists for median weekly earnings as well. Women’s median weekly earnings in 2012 were $691, a marginal decline compared to 2011. Men’s median weekly earnings were $854, a marginal increase compared to 2011. Women of all major racial and ethnic groups earn less than men of the same group. The largest gap is within Asian American communities where women earn a median weekly income of $770 compared to $1,055 for Asian American men. While the wage gap between men and women is smaller within Latino and black families, their median weekly earnings are significantly lower. The weekly median earnings for Latinas are $521 compared to $592 for Latino men. For black women, their weekly earnings are $599 compared to $665 for black men. African American women’s median weekly earnings were only 68.1 percent, and Latina women’s only 59.3 percent of median weekly white men’s earnings of $854.

Nearly half of the wage gap between men and women is due to differences in occupations because women are concentrated in industries such as the care and social services sectors that historically pay less and provide fewer benefits. Another 10 percent of the gender wage gap is due to differences in work experience between men and women, which are often the result of caretaking responsibilities. Often times workers with care responsibilities, usually women, withdraw from the workforce or limit their time at work to allow them to provide needed care at home. As a consequence these caretakers earn less income in the short run, are less likely to earn raises and promotions, have less access to workplace retirement benefits, earn less in Social Security retirement benefits, and accumulate lower lifetime earnings.

Yet even when controlling for occupational differences, experience, and education level, economists cannot explain the remaining 40 percent of the wage gap between men and women. Certainly part of the gender gap is due to the fact that the American workplace and institutions, such as schools and churches, never adjusted to support working families. A lack of flexible structures for working families forces them to make tough decisions. Schools that do not offer early drop-off or late pick-up options to parents, for example, force families to decide between being missing work or paying for child care. For low-income families, such decisions could mean losing a job.

Long-term implications of the wage gap

Lower income for all women, particularly those of color, means less money to support their families with necessities such as housing, food, education, and health care. Closing the pay gap is even more important for women of color who are more likely than their white counterparts to be breadwinners.

The long-term wage gap hurts families of color tremendously, forcing families to choose between putting food on the table or saving for a college education and retirement. On average, an African American woman working full time loses the equivalent of 118 weeks of food each year due to the wage gap. A Latina loses 154 weeks’ worth of food. The stubbornly persistent gender-based wage gap adds up substantially over the lifetime of a woman’s career. For women of color the loss of savings over a 30-hour-a-week to a 40-hour-a-week work lifespan is significant. A woman of color will have to live on one-third to 45 percent less than a white man based on the average benefits that are afforded through Social Security and pension plans. Research shows that a woman’s average lifetime earnings are more than $434,000 less than a comparable male counterpart over a 35-year working life.

Analysis done in 2012 by the Center for American Progress illustrates that the money lost over the course of a working woman’s lifetime could do one of the following:

Feed a family of four for 37 years
Pay for seven four-year degrees at a public university
Buy two homes
Purchase 14 new cars
Simply be saved for retirement and used to boost her quality of life when she leaves the workforce

Lifetime earnings are even lower for women of color because they face higher levels of unemployment and poverty rates. In March 2013 unemployment rates of black and Latina women were significantly higher than their white counterparts at 12.2 percent and 9.3 percent respectively compared to white women at 6.1 percent. According to the National Women’s Law Center, poverty rates among women, particularly women of color, remain historically high and unchanged in the last year. The poverty rate among women was 14.6 percent in 2011—the highest in the last 18 years. For black and Latina women that same year, the poverty rate was 25.9 percent and 23.9 percent, respectively.

Pay gap among Millennials

Furthermore, the gender wage gap often starts right out of college. The American Association of University Women reports that women are less likely than men to be fully employed in their first year out of college. When they do have a steady job, women earn less, adding to the burden of student loan debt. In fact, Millennial women—those born between 1978 and 2000—are paid 82 cents for every dollar paid to their male peers, and young women contribute a larger portion of their salaries to repaying student loans. In 2009, 47 percent of young women were paying more than 8 percent of their income toward student loan debt one year after graduation. For Millennial men, only 39 percent were contributing more than 8 percent of their income to paying off their student debt.

These income disparities so early in a woman’s career create financial barriers that prevent women from obtaining the same types of economic advantages that are available to their male counterparts such as purchasing a house or saving for retirement. Women are losing out financially from their very first paycheck. Even when controlling for factors such as the type of degree earned, type of occupation right out of college, and hours worked in that job, researchers found a significant pay discrepancy across the board between Millennial women and men.

Millennial women of color are particularly impacted by the wage gap starting right out of college. Even while more women than men of color are graduating from college, the impact of student loans exacerbates the gender-based wage gap. From 2009 to 2010 black females earned 68 percent of associate’s degrees and 66 percent of bachelor’s degrees awarded to African American students. Hispanic females earned 62 percent of associate’s degrees and 61 percent of bachelor’s degrees awarded to Hispanic students. Since women of color are more likely to attend college within their communities, the amount of student debt that young students of color take out disproportionately impacts them. In the 2007-08 academic year, 81 percent of African Americans and 67 percent of Latinos with a bachelor’s degree graduated with student debt compared to 64 percent of their white peers. Although women of color are making progress in closing the achievement gap within their racial and ethnic groups, the impact of student debt on the wage gap right out of college puts women of color in a vulnerable state.

Barriers to wealth accumulation

Pay discrepancy often hinders wealth accumulation and creates barriers to moving into the middle class. Such income disparities translate into wealth gaps that fall particularly heavily on those living at the intersection of gender and race. Lower earnings mean fewer opportunities to participate in wealth-building mechanisms such as investments in stocks and bonds and pension plans. Access to these opportunities is often unavailable in low-paying jobs that are predominantly held by women of color. According to the Bureau of Labor Statistics, black and Latino women were significantly more likely than their white counterparts to be among the working poor—those who are employed whose incomes fall below the federal poverty line. The working-poor rates for black and Latino women in 2011 were 14.5 percent and 13.8 percent respectively compared to white women who had a working-poor rate of 6.6 percent.

Closing the wage gap is crucial for women of color. The racial wealth differences in the United States are consequences of disparities occurring over a lifetime and result in a median wealth of only $5 for women of color between the ages of 35 to 49—virtually no wealth at all. Conversely, white women in that age cohort have a median wealth of $42,600, and white men in that age group enjoy a median wealth of $70,030. While earnings are important in accumulating wealth, other factors play a significant role in building wealth including paid sick leave, health insurance, pensions, and 401(k) plans. Over time the lack of equitable pay prevents women of color from taking advantage of wealth-building resources that act as a buffer to potential financial setbacks such as a health emergency, a death in the family, or temporary unemployment.

Impact on immigrant women

Immigrant women face specific economic barriers that make them the least economically secure population in the United States and puts them at a unique disadvantage. These barriers include the realities of having language and cultural barriers, the complexity of their immigration status, the responsibility of caring for extended family members, working in low-paying jobs, and lacking eligibility for many public benefit programs.

There are approximately 4 million undocumented immigrant women living and working in the United States, but because of their immigration status, they work the lowest-paying jobs in the country. Undocumented immigrant women typically earn minimum wage or less, get no sick leave or vacation days, and receive no health insurance. Undocumented immigrant Mexican women face hourly wage disparity of 71 cents. Pay equity is often a lifeline for immigrant women since many are mothers and are most likely to support family members in their home countries.

Immigrant women, especially those who are undocumented, are especially susceptible to abuse in the workplace as they work in low-paying jobs with no benefits and have little access to public-benefit programs. Since immigrant women predominantly work in the domestic workforce, they face a host of barriers to achieving pay equity in the workforce.

Immigrants comprise 46 percent of the domestic workforce and almost the entire population of domestic workers in major cities such as New York. A study by Domestic Workers United found that 33 percent of domestic workers in New York City experienced some form of physical or verbal abuse, often because of their race or immigration status. Under these conditions immigrant women struggle to achieve pay equity against the numerous barriers put up against them such as language and cultural barriers, immigration status, and concentration in low-income jobs with limited benefits.

Impact on lesbian women of color

Lesbian women of color struggle even more with issues of pay inequity, high poverty, unemployment rates, and discrimination. Working gay and transgender people of color still earn less than their heterosexual and white gay and transgender counterparts, but lesbian women of color struggle even more severely. The average Latina lesbian couple earns $3,000 less than Latino opposite-sex couples. Black lesbian couples face an even greater economic disparity earning $10,000 less than black same-sex male couples. Black same-sex couples significantly lag behind white same-sex couples with median incomes of $41,500 compared to $63,500.

Furthermore, lesbian couples of color experience high rates of poverty and unemployment. In 2012 the poverty rate for black lesbian couples was 21.1 percent; for Latina lesbian couples the rate, was 19.1 percent; for Native American lesbian couples, the rate was 13.7 percent; and for Asian Pacific Islander lesbian couples, it was 11.8 percent. These numbers stand in stark contrast to white lesbian couples who had poverty rates of only 4.3 percent.

Pay equity is imperative for lesbian couples of color who are more likely to have children than their white counterparts. An estimated 2 million children are being raised in gay, lesbian, and transgender families who tend to be more racially and ethnically diverse. In fact 46.7 percent of black lesbian couples and 41.5 percent of Latina lesbian couples are raising children compared to 23.1 percent of white lesbian couples. These families suffer when household incomes are unjustly decreased based on gender-, race-, and sexual orientation-wage bias.

What closing the wage gap means for families

The disparity in income adds up to more than $430,000 in lost wages for an individual woman and even more for a woman of color over her working life. This means less food on the table, less in savings for retirement and medical emergency, less money going toward a college education for their children to name just a few of the negative financial impacts. If the wage gap were closed today, a working black woman with her increased yearly pay could afford one of the following:

Groceries for more than two years
Mortgage and utilities payments for almost 10 months
Rent on an apartment for more than 16 months of rent
Health insurance premiums for more than three years
4,549 additional gallons of gas

Furthermore, women breadwinners are on the rise among all races and ethnicities. From 1975 to 2010 black and Latina women nearly doubled in percentage of working wives who are earning the same or more than their spouses. Among black families, 53.3 percent of women are breadwinners, up from 45.7 percent in 2007 and 28.7 percent in 1975. For Latino and white families in 2010, about 4 in 10 working wives are breadwinners—nearly double their rates from 1975.

As families continue to rely on women to contribute to household income and support their families, closing the wage gap for all women and in particular women of color is an imperative.

Policy suggestions and recommendations

The gender wage gap doesn’t just hurt women; it also hurts families. With nearly two-thirds of mothers being breadwinners or sharing the responsibilities of supporting the household, women’s paychecks are vital to families more than ever.

Below are CAP’s suggested recommendations and policy solutions to significantly reduce the pay equity gap among women of color:

Support the Paycheck Fairness Act. Sen. Barbara Mikulski (D-MD) and Rep. Rosa DeLauro (D-CT) co-sponsored the Paycheck Fairness Act, which will require that an employer to justify paying a man more than a woman for the same job. It would also make it easier for women to file class action suits against their employers for alleged sex-based discrimination. Though the bill failed to pass in 2011 and 2012, it was reintroduced this year.
Pass legislation to support paid sick and family medical leave. According to CAP’s paid family and medical leave report, federally required paid family and medical leave programs will likely have positive effects on employment and lifetime income. Requiring employers to provide sick leave not only ensures workers’ rights, but it will also help lessen gender-based pay disparities since women are more likely to use unpaid sick leave to care for their children.

Conclusion

Adequately addressing and eventually eliminating the income and wealth gap experienced by women of color requires a multifaceted approach led by engagement at both the state and federal level. As women’s earnings become increasingly important to family incomes, the wage gap becomes a family issue. Promoting and uplifting women of color is crucial to growing our economy. Ensuring that all working women, and particularly women of color, receive fair wages for their work not only means that they can adequately provide for themselves and their families, but also means they can make an even greater contribution to the nation’s prosperity.

Sophia Kerby is a Research Assistant with Progress 2050 at the Center for American Progress.

What Causes the Gender Wage Gap?

Jane Farrell and Sarah Jane Glynn — Tue, 09 Apr 2013 14:27:32 +0000

SOURCE: AP/J. Scott Applewhite

Senate Majority Leader Harry Reid (D-NV), left, accompanied by Lilly Ledbetter, right, the woman who has become the symbol for the workplace-equality movement, speaks during a news conference on Capitol Hill in Washington, Tuesday, June 5, 2012, as the Senate considered the Paycheck Fairness Act.

An all-too-common response to workers and advocates concerned about the 23-cent gender wage gap for full-time year-round workers across occupations is that it is just a byproduct of the choices women make: choices to work fewer hours, take on lower-paying jobs, or opt out of the workforce for longer periods of time than men. When framed in this way, it’s easy to dismiss equal-pay policies or legislation as superfluous. After all, we can’t force women to apply for higher-paying jobs or to work longer hours, right?

Unfortunately, decades of evidence have revealed a far more complicated story, and it is clear that the gender wage gap is about more than just personal choice. It is a real and persistent problem, and it is a problem that calls for immediate and nimble policy solutions. But in order to achieve pay equity, it helps to understand the origins of the gap.

Among men and women employed full time, 60 percent of the wage gap can be attributed to known factors such as work experience at 10 percent, union status at 4 percent, and the aforementioned choice of occupation at 27 percent, among other measureable differences. (see Figure 1) A woman’s work experience is abbreviated if she needs to take maternity leave or take time off from a job to care for a child, which she is more likely to do than her male counterpart. Another quarter of the wage gap is attributable to the differences in wages paid by industries that employ mostly men or mostly women. These include blue-collar industries such as mining, manufacturing, and construction, which generally employ men, and service-sector or clerical jobs, which generally pay less and employ more women.

One mitigating factor that has actually reduced the gender wage gap is women’s access to higher education. This has helped ease the disparity by nearly 7 percent, as shown in Figure 1, but women’s access to college and advanced degrees has not been enough to close the gap completely. Women need an additional degree in order to make as much as men with a lower degree over the course of a lifetime. A woman would need a doctoral degree, for instance, to earn the same as a man with a bachelor’s degree, and a man with a high school education would earn approximately the same amount as a woman with a bachelor’s degree.

But what causes the remaining gap of more than 10 cents on the dollar—or $4,465 per year among workers making the median wage—between men and women? This is less clear but perhaps more troubling. More than 40 percent of the gender wage gap is “unexplained,” meaning that there is no obvious measureable reason for a difference in pay. This leaves us with possible explanations that range from overt sexism to unintentional gender-based discrimination to reluctance among women to negotiate for higher pay.

Whatever the reasons, a woman should have recourse if she is being paid less than her male counterpart for the same job. Passing the Paycheck Fairness Act and establishing a commission to address the gender pay gap would both be important steps toward achieving this goal.

Jane Farrell is a Research Assistant for Economic Policy at the Center for American Progress. Sarah Jane Glynn is a Senior Policy Analyst at the Center.

Growing Occupations Could Help Decrease the Wage Gap if They Were to Pay a Living Wage

Jane Farrell and Lindsay Rosenthal — Tue, 09 Apr 2013 14:26:46 +0000

SOURCE: AP/Matt Rourke

Supporters of Pennsylvania's new law increasing the minimum wage rally in Philadelphia. If women were paid a living wage, the gender-based wage gap would decrease in growing industries.

Approximately 6.2 cents, or 27 percent, of our nation’s 23-cent gender wage gap can be explained by occupational segregation. This means that women are more likely to be employed in low-wage or minimum-wage service-sector positions such as home health aides, retail salespersons, or food-service workers.

These jobs fill essential functions in our economy, are increasingly in high demand, and represent occupations with the largest projected job growth over the coming years. Unfortunately, they are also undervalued and most of these positions are not currently providing adequate compensation to the people who work in them, predominantly women.

The top 16 occupations with the most expected job growth will create a total of 6.5 million new jobs by 2020.[1] Women made up 70 percent of workers in these occupations in 2010,[2] but the median annual wage for these 16 jobs was just $30,015 (in 2010 dollars). If these trends hold true through 2020, a disproportionately large and growing number of women will continue to occupy these oftentimes low-wage jobs.

One way that policymakers can help close the gender wage gap is by supporting policies that ensure that all jobs pay a living wage and provide adequate protections and benefits to workers. Our labor policies, including minimum-wage requirements, should help protect those who occupy important, if currently undervalued, positions in our economy.

Sectors with projected job growth must pay a living wage

As shown in the chart below, two of the top four occupations with the most projected growth are home health aides and personal care aides. (see Figure 1) In 2010 women were 88 percent of home health aides and 86 percent of personal care aides. Of these women, half were women of color, who on average experience an even larger gender wage gap than white female counterparts in the same industries.

Jobs in the fastest-growing sectors could decrease the wage gap if they paid a living wage

The median annual wage for these jobs is around $20,000 per year, and many do not offer important benefits. Less than half of home health aides and personal aides employers provide health insurance, and even fewer offer paid sick leave. Women who work in these jobs frequently rely on public benefits such as food stamps, public housing, or energy assistance to make ends meet even though they are fully employed. While providing important and needed care to other people’s families, they are often forced to choose between missing a day’s pay or caring for their own loved one.

While home health and personal care aides are not currently receiving the compensation they deserve, they provide vital services by caring for elderly and disabled Americans. Millions of Americans currently rely on home health and personal aides for their care and medical needs, and that number is only going to grow in the coming decades as the ratio of people over age 64 to people ages 20 to 64 is expected to rise by 80 percent. Moreover, the home care industry is thriving, bringing in more than $84 billion in revenue in 2009 alone.

Since positions such as home health and personal care aides don’t offer access to decent wages or benefits, these positions suffer from turnover rates of 40 percent to 60 percent. High turnover rates take a toll on the bottom line of the companies that employ these workers because the costs of replacing and training an employee are very high. Replacing an employee making $30,000 a year or less can cost an employer as much as 16 percent of the employee’s annual salary. Turnover also may take a toll on the quality of care that patrons receive. Having a workforce that is always in flux likely limits consumer access to highly experienced home-care providers.

Our society needs the services women are providing in the health sector, and we need to offer them wages and benefits that makes holding those jobs sustainable.

Conclusion

Women are overrepresented in professions that make the list of the top 16 jobs with the most projected job growth over the next few years, but these occupations also pay the lowest median wages.

Looking at particular industries shows stratifications between men and women’s access to higher-paying jobs. Figure 1 above, for example, shows that women are 94 percent of child-care workers, who typically make a median annual wage of less than $20,000 per year. Conversely, women make up less than half of postsecondary teachers, who earned a median annual wage of more than $45,000 in 2010. While women are also more than half of all food-service workers—one of the fastest-growing professions—they are 70 percent of low-paid counter workers, servers, and food-preparation workers but only 20 percent of chefs and head cooks. The same can be said of women and men in retail. The gender wage gap within retail sales is among the largest of any occupation, with women only making 64.3 percent of what their male counterparts make.

The evidence is clear: Women are currently employed in jobs that are serving vital functions in our society. In fact, their labor is in such demand that many of the jobs primarily held by women are among the fastest growing in the country. But we are not valuing their work by compensating them fairly and giving them access to the benefits or salaries that they need. Until we recognize and reward the work of women who currently hold the lowest-paying jobs in this country, we are unlikely to eliminate the wage gap.

Jane Farrell is a Research Assistant with the Economic Policy team at the Center for American Progress. Lindsay Rosenthal is a Research Assistant with the Health Policy program and the Women’s Health and Rights program at the Center.

Endnotes

[1] We chose the top 16 occupations because they were all projected to grow by approximately a quarter of a million jobs or more between 2010 and 2020.

[2] Based on author’s calculations using data from the Bureau of Labor Statistics, Employment and Earnings Report, January 2011 (Department of Labor, 2012); Bureau of Labor Statistics Employment Projects, “Table 1.4: Occupations with the most job growth, 2010 and projected 2020,” available at http://www.bls.gov/emp/ep_table_104.htm (last accessed April 2013).

Unequal Pay Day for Immigrant Women

Ann Garcia and Patrick Oakford — Tue, 09 Apr 2013 14:26:10 +0000

Each year Equal Pay Day highlights the continued disparity in pay between men and women in the United States. In 2011 women who worked full time and year round earned only 77 cents to every dollar earned by men. That wage gap persists and is even more pronounced in the immigrant community: An immigrant woman who has naturalized earns just 75 cents to a naturalized man’s dollar, and undocumented immigrant women from Mexico are even more disadvantaged, earning only 71 cents for every dollar that undocumented men from Mexico earn.

There are 5.4 million undocumented women living in America, and those who are employed are perhaps the most underpaid workers in the workforce due to the double wage disparity that is a consequence of gender-based and immigration-status-based discrimination.

Correcting the gender wage gap in the United States will require a host of actions, including passing the Paycheck Fairness Act, which prohibits gender-based pay discrepancies and bans workplace policies that don’t allow employees to disclose their wages to each other. Common-sense immigration reform that includes a road map to citizenship would represent a significant step toward pay equity. As we move into the congressional debate on wage disparities and immigration reform, let us consider the women who are earning far less money than they deserve and remember that reform is not just about fixing a broken immigration system; it can also be a step toward gender equality.

Ann Garcia is a Policy Analyst for the Immigration Policy team at the Center for American Progress. Patrick Oakford is a Research Assistant in the Economic Policy department at the Center.

Top 10 Numbers that Show Why Pay Equity Matters to Latina Women and Their Families

Jennifer Molina and Morriah Kaplan — Tue, 09 Apr 2013 14:25:31 +0000

SOURCE: AP/Perry Baker

Macrina Castillo of Mexico is shown at her place of work, the Mundo de Musica Latina music store in Columbia, South Carolina, in 2005. Latina women currently earn significantly less pay than both Latino men and women overall.

Each year the United States commemorates Equal Pay Day to illustrate the gap between men’s and women’s wages. Data show that women still earn 77 cents to every dollar a man earns. This gender-based wage gap stubbornly remains despite the passage of the Equal Pay Act in 1963 and a variety of legislation prohibiting employment discrimination.

The wage gap is even greater for most women of color. For Latina women in particular, who only make 55 cents to every dollar earned by white men, pay equity is key to the economic advancement of their families and communities.

Below are 10 facts that demonstrate why pay equity is important for Latina women and their families.

1. $521: The median weekly earning for Latinas in 2012, compared to $710 for white women, $599 for black women, and $770 for Asian American women. Latinas will make 80 percent of the earnings of Latino men and 59 percent of the annual earnings of white men.

2. $29,020: The yearly earnings of the average Latina, compared to a median salary of $48,202 for all men. Research done by the National Partnership for Women and Families shows that a Latina woman working full time loses the equivalent of 154 weeks’ worth of food on average each year.

3. $9,605: The average annual Social Security payment received by Latina women 65 years of age and older in 2010, compared to an average $12,815 received by Latino men.

4. 40 percent: The share of all Latina-headed households living below the poverty level in 2010. In Latina-headed households with children under the age of 5, the percent living in poverty increases to more than 50 percent. With more than 2 million households in the United States currently headed by Latinas, pay equity is incredibly important.

5. 208,000: The number of Latina women who worked in jobs paying below the federal minimum wage in 2011, compared to 172,000 Latino men. Because many Latina women are tied to their immigration status, they are forced to accept almost any working terms in order to support their families such as long working hours, no benefits, and low pay. If the wage gap is closed, Latina women will have the opportunity to provide more for their families.

6. 11.8 percent: The Latina unemployment rate for 2011, compared to 7.5 percent for white women and 11.2 percent for Latino men. Latinas are an important part of the American workforce, representing 5.8 percent of the total worker population in the United States. Yet they have the lowest employment-to-population ratio in the nation at 52.7 percent.

7. One-third: The proportion of Latinas who are uninsured, compared to 16 percent of white women and 20 percent of African American women. This lack of health coverage explains why in 2010 more than 42 percent of Latinas did not make a single trip to a medical provider. Pay equity will help those without health insurance, afford medical providers.

8. 51 cents to 68 cents: The range that the average Latina is paid, compared to every dollar earned by the average man in the 20 states with the largest Latina populations working full time. These numbers illustrate that even in the states with the largest Latina populations, the wage gap is still significant, and in some cases, the wage gap is much larger than in states with smaller Latina populations. Closing the wage gap would affect millions of women in these states alone.

9. 42.3 percent: The share of Latinas that have access to a single paid sick day, compared to 60 percent of African Americans and white women. Access to parental leave among Latinos is the lowest of any racial group despite their being more likely to have young children in need of care or supervision. Lack of access to paid sick leave forces Latino families to make hard decisions such as the choice between losing pay and taking time off work to care for a sick child.

10. 61 percent: The share of all Latino-earned bachelor’s degrees earned by Latina women in the 2009–10 school year. Latina women also earn 62 percent of associate’s degrees, 64 percent of master’s degrees, and 53 percent of all first-professional degrees awarded to Latino students. Though Latinas are earning more degrees, it is still not enough to close the wage gap. Data show that female managers still earn just 81 percent of what male managers do, even after researchers controlled for age, education, hours worked beyond full time, sector, marital status, and the presence of children in the household.

As Latinas continue to comprise a growing share of our nation’s population, we must continue to push forward the importance of pay equity. Closing the wage gap will lead to fewer Latinas in poverty and more opportunities for both Latinas and their families. The challenges that Latina women face not only affect them but also affect our entire society, as their children attend our schools and they become the nation’s majority.

Jennifer Molina and Morriah Kaplan are interns with Progress 2050 at the Center for American Progress.

Top 10 Numbers that Show Why Pay Equity Matters to Asian American Women and Their Families

Morriah Kaplan and Jennifer Molina — Tue, 09 Apr 2013 14:24:52 +0000

SOURCE: AP/ Kathy Willens

A waitress serves steamy containers of dim sum at the Golden Unicorn restaurant in Chinatown in New York. Asian American women earn significantly less than their male counterparts.

The wage gap is even greater for most women of color including Asian American women. Asian American women make 87.6 percent of what the average man earns and 73 percent of what Asian American men make. Pay equity is therefore crucial to the economic advancement of Asian American women, as well as their families and communities.

Here are 10 numbers that demonstrate why pay equity is important for Asian American women and their families.

1. $770: The median weekly earnings for Asian American women in 2012. Asian American women might show the smallest gender gap, but it is growing. Asian American women’s earnings dropped from 86.6 percent of all men’s earnings in 2010 to 84.8 percent in 2011.

2. 48 percent: The share of Asian American women working in service and sales occupations, compared to about 1 in 10 Asian American men and a similar share of white men. These are generally low-paying jobs, as the median hourly wages in the service and sales industries are $10.02 and $12.06, respectively. This exacerbates the wage gap for Asian American women and highlights the need for pay equity.

3. 12.1 percent: The share of Asian American women living in poverty, compared to 7.7 percent of white men. In 2011 there were more than 1 million Asian American women living in poverty—an increase from less than 0.7 million in 1999. According to the American Community Survey, from 2002 to 2010 the number of Asian Americans living in poverty increased by 46 percent. Pay equity will help decrease the number of Asian American women living in poverty and will combat poverty in the community as a whole.

4. 21: The number of Asian American and Pacific Islander women who are officers of large corporations. This represents 0.3 percent of the total number of officers of large corporations. Men hold close to 85 percent of all board seats. Although Asian American women currently make up 57 percent of the labor force, Asian American and Pacific Islander women leaders are significantly underrepresented in the four major employment sectors—corporate, government, nonprofit, and education. This underrepresentation serves to widen the gender wage gap.

5. 60 percent: The share of Asian American women living in the United States who are immigrants. According to the U.S. Census Bureau, 40 percent of all Asian Americans speak English less than “very well,” and 1.2 million Asian Americans are undocumented. Although foreign-born women have similar educational attainment levels as U.S.-born women, foreign degrees and technical skills are often nontransferable due to language and cultural differences. This, combined with a lack of legal status, often results in women working low-wage laborious jobs.

6. 45.5 percent: The share of Asian American women who do not have access to paid sick leave from their jobs. The lack of paid leave creates barriers to taking care of sick children, as well as their own health, resulting in poorer health outcomes and higher health care costs. Access to paid leave is directly related to type of employment, as low-wage work typically offers fewer benefits and less flexibility, leaving these women especially susceptible to the economic challenges presented by low-wage work alongside little flexibility and minimal or no benefits.

7. 7.1 percent: The long-term unemployment rate of Asian Americans in 2010. As of March 2013 approximately 25,000 of the 166,000 unemployed Asian American women were looking for full-time jobs compared to the approximately 19,000 unemployed Asian American men looking for full-time jobs. The higher number of Asian American women seeking full-time jobs indicates that this group in particular faces greater issues of underemployment. By closing the wage gap, we can offset some of the wage inequities caused by underemployment.

8. $10,840 less: The annual wage disparity between Asian American women who held a bachelor’s degree and their Asian American male counterparts as of 2010. The disparity in earnings of Asian American women compared to white men is even greater at $11,354. This large disparity hinders Asian American women, who receive the same education as males and are unable to earn the same salary due to pay inequality.

9. 31 percent: The share of Asian American and Pacific Islander women raising children with a same-sex partner in California. Studies show that lesbian couples have a greater poverty rate than both different-sex couples and gay couples.

10. 20.6 percent: The percentage of Asian and Pacific Islander women who are uninsured. This is particularly harmful for Asian American women since, as a group, they have one of the highest risks of cancer. Additionally, many of them do not have access to health insurance since many Asian American women work in low-income jobs without health benefits.

Although the wage gap tends to be smaller for Asian American women than for other minority women, the numbers above show how they are still significantly impacted by pay inequity. Closing the wage gap will bring more Asian American women into leadership positions, give equal opportunity to immigrant women, and bring positive change to all of our communities.

Jennifer Molina and Morriah Kaplan are interns with Progress 2050 at the Center for American Progress.

Top 10 Numbers that Show Why Pay Equity Matters to African American Women and Their Families

Sandra Shaker and Morriah Kaplan — Tue, 09 Apr 2013 14:24:34 +0000

SOURCE: AP/Steve Helber

Denise Armstrong helps her son Joseph, 13, with his schoolwork in a library in Richmond, Virginia.

The wage gap is even greater for most women of color. For African American women in particular, who only make 69.5 percent of all men’s earnings, pay equity is incredibly important to their families and communities. Here are 10 numbers that demonstrate why pay equity matters to African American women and their families.

1. $599: The average weekly earnings of black women, compared to $854 for men of all races and ethnicities. African American women earn only 68.1 cents to every dollar white men earn.

2. 4 million: The number of households in the United States headed by African American women. Forty percent of all households headed by African American women live below the poverty line, and that number rises to 50 percent in households with children under the age of 5. Pay equity would provide countless resources for these women and their families.

3. 62 percent: The share of African American women who have little or no money left to save for retirement once they pay their bills, according to the Women’s Institute for a Secure Retirement. Not only does the wage gap limit the immediate resources that African American women could have access to such as food or gallons of gas, it also adds up over the years and means fewer savings for Social Security and pension.

4. 1 percent: The share of U.S. corporate officers—those who are in senior-level positions or those who are corporate board members—who were black women in 2011. Since female executives earn on average 42 percent less than men, and income is based on pay history, it becomes unlikely that the pay gap for a black woman will significantly close during her career, even if she does beat the odds and obtain a high-paying position.

5. $5: The median wealth for a single African American woman, compared to $42,600 for a white woman. This means that black women are missing out on opportunities to accumulate wealth, preventing opportunities for saving or investment or for educating their children. In fact, by 2007 the dollar amount of the racial pay gap was enough to pay full tuition at a four-year public university for two children, plus tuition at a public medical school.

6. 765,000: The number of jobs eliminated in state and local governments between 2007 and 2011 as a result of the Great Recession. Women and African Americans comprised about 70 percent and 20 percent of those losses, respectively. As effects of the sequestration—and lingering effects of the Great Recession—are felt and these jobs reduced further, employment for African American women is being put on the chopping block, without the employee benefits needed to create a safety net. African American women need the income that is rightfully theirs regardless of the circumstances, but this need is magnified when one considers that their jobs are oftentimes the first to go.

7. 42 percent: The share of African American women who are not able to earn paid sick days to recover from illnesses. For a two-parent family household, just 3.5 sick days without pay is equivalent to losing an entire month of groceries.

8. $10,000 less: The joint income of African American lesbian couples compared to black same-sex male couples. According to the 2010 census, African American gay* and transgender same-sex couples are more likely than their white counterparts to struggle economically, while they are twice as likely as white couples to be raising children—38 percent of African Americans.

9. 18.6 percent less: The earnings of Haitian women compared to U.S.-born white women. West Indian women and African women also earn less than their white counterparts—8.3 percent and 10.1 percent, respectively. Although immigrant women are key components of expanding a nation’s wealth, citizenship status sets black immigrant women back in terms of wages and benefits. Pay equity is necessary to bridge the gap not only between their female counterparts, but also between their earnings and those of all men.

10. 47.1 percent: The poverty rate for African American single mothers in 2010. This was significantly higher than the national poverty rate at that time of 15.1 percent. Approximately 50 percent of black children were part of families headed by single mothers in 2009. The wage gap limits the income single mothers have for themselves and their children, perpetuating their cycle of poverty.

It’s time for African American women to get what they have been working for in terms of pay equity. Factors such as job sector, sexual orientation, or citizenship status should not affect the level of earnings an African American woman receives. Pay equity is not only necessary to promote a just workforce in the long run, but it is also needed for the immediate benefit of the children and families of these hardworking women.

Sandra Shaker and Morriah Kaplan are interns with Progress 2050 at the Center for American Progress.

* In this column, “gay” is used as an umbrella term for those who identify as gay, lesbian, and bisexual.

Top 10 Numbers That Show Why Pay Equity Matters to Native American Women and Their Families

Sandra Shaker and Morriah Kaplan — Tue, 09 Apr 2013 14:24:12 +0000

SOURCE: iStockphoto

Poverty in the Native American community undoubtedly presents its women and families with a special set of obstacles.

The wage gap is even greater for most women of color. For Native American women in particular—who only had a 45.9 percent employment rate in 2011 and whose communities consistently face high rates of poverty—pay equity is key for the economic advancement of their families and communities.

Here are 10 numbers that demonstrate why pay equity matters to Native American women and their families.

1. $32,062: The median income of American Indian and Alaska Native households, compared to $50,046 for the nation as a whole. Native American households are already earning less than the rest of the nation’s racial and ethnic groups, and women’s pay inequity further exacerbates this reality.

2. 27 percent: The national poverty rate for American Indians and Alaska Natives in 2011; this is the highest of all national poverty rates by race. Between 2007 and 2011 nine states had poverty rates of about 30 percent or more for Native Americans, and some states such as South Dakota and North Dakota had much higher rates—at 48.3 percent and 41.6 percent, respectively. Pay inequity for Native American women ensures that they will continue to top poverty rates in the future.

3. 371,085: The number of Native American women between the ages of 25 and 54 in the workforce, compared to 390,723 Native American men. Since fewer Native American women than men are employed, pay inequity contributes to the lower amount of earnings that may be available for these women and their families. Keeping full earnings from these women only augments the poverty rates in Native American communities.

4. 0.09 percent: The share of Native American women employed in the private sector as executive or senior-level officials and managers, compared to 0.19 percent of Native American men. In 2000 and again in 2005, the participation rate for Native American women as officials and managers in private industry was 0.1 percent. Meanwhile, Native American women are disproportionately represented among service workers and other generally low-paid positions, and still fall below their representation as officials and managers, professionals, craft workers, and operatives. Current trends suggest that Native American women will continue to be underemployed and underpaid where they are hired.

5. 21.4 percent: The share of Native American families maintained by a single female householder with no spouse present, according to the 2010 census, compared with about 9.2 percent of non-Hispanic white households. Single-parent Native American households have the highest poverty rates in the country. Withholding income from Native American women disadvantages them and their families, particularly when they are the sole breadwinners.

6. 22 percent: The share of Native American women ages 25 and older that graduated high school. About 14 percent of Native American women hold a bachelor’s degree or higher. Although the number of Native American students enrolled in colleges and universities has more than doubled in the past 30 years, the graduation rate for Native American women has grown only slightly, from 21.7 percent in 2004 to 23.9 percent in 2008. Low graduation rates hinder professional success in the future, and, when combined with pay inequity, will keep Native American women from accumulating wealth and achieving financial security.

7. 50 percent higher: The assault rates for women residing on Native American reservations compared to the next most-victimized demographic, African American males. Native American communities already face high poverty rates and 29.2 percent of Native Americans were without any form of health care coverage in 2010. Pay equity would help alleviate stress caused by poverty and help Native American women obtain the health care services they need.

8. 8.5 percent: The share of American Indian and Alaska Native youth struggling with alcohol-use disorders, compared to 5.8 percent of the general population. Poverty and reduced incomes keep Native American women from providing their children with the health care services they need.

9. 31 percent: The share of Native American children living in poverty, compared to 11 percent of non-Hispanic white children. As women of all races and ethnicities are often tasked with the responsibility of being the primary caretakers for their children, pay inequity not only leads to a worse standard of living for women, but also for their children as well. Poverty leads to various issues among Native American youth such as mental health disorders, alcohol-use disorders, victimization, gang involvement, and suicide.

10. 58 percent: The share of Native American grandparents living with their grandchildren and who are also responsible for their grandchildren’s care. Pay inequity for women makes it harder for grandmothers to support children under their care and simultaneously provide for their own retirement.

As we look at the different women of color affected by pay inequity, we should not forget about Native American women. Poverty in the Native American community undoubtedly presents its women and families with a special set of obstacles. As the fight to close the gender wage gap continues, it is imperative to pay attention to the needs of Native American women and their families and ensure that they truly have equal access to health care, education, and a respectable standard of living.

Sandra Shaker and Morriah Kaplan are interns with Progress 2050 at the Center for American Progress.

The Gender Wage Gap Differs by Occupation

Sarah Jane Glynn and Nancy Wu — Tue, 09 Apr 2013 14:22:48 +0000

SOURCE: AP/Toby Talbot

People gather on the steps of the statehouse in Vermont for a rally on National Equal Pay Day. Recent surveys show that women earn more than men in only 7 out of 500 professions.

The median wage gap between genders fell since 2000, but progress is currently stalled. Women still earn less than men in nearly every occupation, though some suffer from greater wage disparities than others. The following is a list of the top 10 occupations with the largest and smallest gender wage gaps.

Of the 534 occupations listed by the Bureau of Labor Statistics, women earn more than men in exactly seven professions. Together, these seven occupations account for about 1.5 million working women, or about 3 percent of the full-time female labor force. The remaining 97 percent of full-time working women work in occupations where they earn less than their male counterparts.

The median weekly earnings for all full-time wage and salary workers in 2011 were $756. Both women and men in the 4 out of 10 jobs with the smallest wage gaps notably earn below this threshold. This indicates that jobs where women don’t experience a wage gap tend to be lower paying than the average. But in the 10 jobs with the worst gender wage gaps—where men earn significantly more than women—men’s average weekly earnings are always at or above the median. In these jobs, men are earning more than the average worker, but interestingly women’s wages fall below the national average of $756 in 4 of the 10 jobs noted above.

Education, success, and occupational prestige are not enough to protect women from the gender wage gap. While data show that American women are in more senior managerial professions than other OECD countries, these high-achieving women are still disadvantaged by an above-average wage gap. Managerial professionals, CEOs, and administrators all rank in the top 10 occupations in which women earn less than men.

So what does this list show? Even in the top 10 jobs with the smallest gender wage gaps, women make more than men in only seven professions. Additionally, it tops out with women earning a premium of 6.4 percent compared to their male counterparts, compared to a 39.4 percent gap in the top occupation where men earn more than women.

Let’s be clear: There should not be a gender wage gap in either direction. But a comparison of what that wage gap looks like in actual dollars per week shows that the situation is much more serious for women than for men. The 51,000 female operations research analysts earn $68 per week more than men. Compare this to the 745,000 male chief executives who earn an average of $658 more per week than similarly employed women.

We cannot attribute the wage gap to just one factor, which means that we need multiple strategies to eradicate it. The Lilly Ledbetter Fair Pay Act was an important first step but more needs to be done. Passing the Paycheck Fairness Act would prevent employers from firing workers who voluntarily talk about their salaries with co-workers, sanction employers who illegally commit wage discrimination, and provide funds for negotiation training for women and girls. It is also necessary to establish a National Equal Pay Enforcement Task Force that would bring together the Equal Employment Opportunity Commission, the Department of Justice, the Department of Labor, and the Office of Personnel Management to address barriers to pay equity and recommend steps that could be taken to address the issue.

Nancy Wu is an intern on the Economic Policy team at the Center for American Progress. Sarah Jane Glynn is a Senior Policy Analyst at the Center.

Jobs Numbers Show Sharp Cuts in Hiring

Heather Boushey — Fri, 05 Apr 2013 17:32:46 +0000

SOURCE: AP/Michael Dwyer

In this Monday, February 25, 2013, photo, Ann Oganesian, left, of Newton, Massachusetts, pauses as she speaks with a State Department employee about job opportunities with the federal government during a job fair in Boston.

This column was originally posted at MarketWatch.

Sequester spring is not starting out well.

In a reversal of recent trends, today’s new data from the U.S. Bureau of Labor Statistics show that employers have cut back sharply on hiring. Government cutbacks have already been slowing our nation’s economic growth and are now actively pulling employment downward, but the worst may be yet to come.

The sharp across-the-board cuts in government spending implemented March 1 are only beginning to show their ugly consequences. While it’s too early to know what the full impact will be on the unemployment rate, government spending cuts are already stealing wind from the sails of the recovery.

In March the U.S. economy only added 88,000 new jobs, but the unemployment rate ticked down slightly to 7.6 percent. The employment data for January and February were revised upward by a total of 61,000 jobs, and over the past three months, the economy has added an average of 168,000 jobs per month. At this rate, the United States will get back to full employment in 2020.

As jobs fail to appear fast enough to soak up all those who need a job, many people have given up searching for work. In March the labor force declined by about half a million people, and the labor-force participation rate decreased by 0.2 percentage points to 63.3 percent. Adult men’s labor-force participation (men ages 20 and over) was 72.7 percent in March, hitting the low of August 2012 and lower than any other month since 1948 at the end of World War II.

For those who continue looking for a job, the search remains an arduous process. Among those out of work and searching for a new job, 37.1 percent have been doing so for at least six months, and the typical unemployed worker takes 18.1 weeks to find a new job. When the unemployment rate was 4.6 percent in 2007, just before the start of the Great Recession, it took the typical unemployed worker only 8.5 weeks to find a new job.

Unemployment continues to be higher among those who are young, have less education, are veterans, or are nonwhite. In March the unemployment rate among teens was 24.2 percent, while it was 33.8 percent among African American teens and 28.1 percent among Hispanic teens.

Among those with only a high school diploma, the unemployment rate was 7.6 percent. African Americans and Hispanics had unemployment rates of 13.3 percent and 9.2 percent, respectively, while Iraq and Afghanistan veterans had an unemployment rate of 9.2 percent.

Housing hangover

The recovery in housing is also showing up in the labor market. Construction employment rose in March, adding 18,000 new jobs for a total of 162,000 over the past year. Alongside new homes, however, consumers should be out there buying new furniture, garden supplies, and appliances. But employment in retail sales is down in furniture (-1,800), building material and garden supply stores (-10,100), and electronics and appliances (-5,700).

One issue may be that too many new homes are actually being bought by investors and are not owner-occupied. Thus, even though housing is recovering, it isn’t (yet) leading the recovery in jobs as it has in so many prior recoveries.

Even though unemployment is stagnant, the low rate of inflation means that those with jobs are seeing a rise in their real take-home pay, although it’s a small one. Over the past three months, wages rose by an annualized quarterly rate of 2.3 percent, just above the rate of inflation as measured by the Consumer Price Index for All Urban Consumers, or CPI-U, which increased 2 percent over the past 12 months.

Based on Congressional Budget Office estimates, due to the combined effect of the payroll tax increase (800,000 fewer jobs in 2013) and sequestration (750,000 fewer jobs from March–December 2013), the U.S. economy will create 142,000 fewer jobs each month for the rest of the year. In January Congress allowed the payroll tax to revert to its usual level, eliminating the two-year tax holiday, and in March Congress allowed the so-called sequestration to occur, which will cost about 750,000 jobs over 10 months in 2013. Most of these jobs will be lost in the second and third quarters of this year, so we are only now beginning to see the effects. Without austerity, we might have seen a more robust number this month.

About five or six years ago, I had lunch with a good economist friend where we debated what the worst-case outcomes could be from the collapse of the housing bubble. My friend suggested that the worst that could happen would be an L-shaped recovery, one where employment didn’t grow enough to bring on full employment, but where employment grew just enough that policymakers could breathe a sigh of relief that things weren’t actually moving in the wrong direction. For years now, I have hoped that the lunchtime conversation wouldn’t be so prescient. With the sequester’s impacts yet to be felt, however, I wonder if we weren’t too optimistic.

Heather Boushey is Chief Economist at the Center for American Progress.

The High Cost of Youth Unemployment

Sarah Ayres — Fri, 05 Apr 2013 15:19:13 +0000

SOURCE: AP/Jim Cole

Martina Ryberg, right, of Plymouth State University talks with Tara Rossetti of On Call International during a job fair for college students, Wednesday, April 4, 2012, in Manchester, New Hampshire.

Endnotes and citations are available in the PDF version of this issue brief.

Nearly everyone has struggled in the wake of the Great Recession, but young Americans have suffered the most. While others have slowly returned to work, the unemployment rate for Americans ages 16–24 stands at 16.2 percent, more than double the national rate of unemployment. And even when this group eventually starts earning a paycheck, the impact of their unemployment will follow them for years. According to a new analysis by the Center for American Progress, young Americans will lose a staggering $20 billion in earnings over the next decade.

Research shows that workers who are unemployed as young adults earn lower wages for many years following their period of unemployment due to forgone work experience and missed opportunities to develop skills. Building on this research, we estimate that the nearly 1 million young Americans who experienced long-term unemployment during the worst of the recession will lose more than $20 billion in earnings over the next 10 years. This equates to about $22,000 per person. The economic consequences of these lost wages to individuals and to the broader economy are serious. These young Americans—referred to as Millennials—will increasingly be forced to delay moving out of their parents’ homes, struggle to make payments on ballooning student-loan debt, and fail to save adequately for retirement. As a consequence of the prolonged unemployment of Millennials, the U.S. economy will feel the loss of aggregate demand in the form of slower growth and less job creation.

To be sure, getting our economy back on track will require getting people of all ages back to work. But the problem of youth unemployment is especially pernicious, and as such it deserves special attention from lawmakers.

In this issue brief we make the case that the United States has a serious youth-unemployment problem that will cost us dearly in the long run. We will show that the employment prospects for young Americans are dismal by both historical and international comparisons, and we will explore in detail the costs associated with our current levels of youth unemployment in terms of lost earnings, slower economic growth, and greater taxpayer burden.

Just how bad is the U.S. job market for teens and young adults?

Youth unemployment is at a historic high

Today’s young Americans face the worst employment prospects in recent history. What’s more, trends in employment and unemployment rates since World War II indicate that the labor market is becoming even less friendly to young workers. Even prior to the Great Recession, young people had a hard time in the labor market, and their employment situation has worsened since. Over the past several decades, employment and labor-force participation among Americans ages 16–24 have declined, while the unemployment rate for this group has risen. During that same time period, these employment measures have remained stable or even improved for Americans in the prime working age group of 25–54, indicating that the youth-employment problem cannot be attributed solely to a worsening economy. And although declining employment and labor-force participation among young people can be pegged in part to rising educational attainment—more youth completing high school and postsecondary education—the data suggest that there is more to the story. Let’s look at three job-prospect measures for young Americans.

Labor-force participation: The labor-force participation rate is the percentage of individuals in the population who are either employed or unemployed and actively looking for work. This measure indicates the level of interest individuals have in working, although it can decline when workers become discouraged or pursue education—even if they would otherwise have the desire to work.

While labor-force participation among young people increased in the years following World War II, it began to decline starting in the 1980s. The biggest drop in labor-force participation has been for teenagers, who saw their numbers decline from a high of nearly 60 percent in 1978 to an all-time low of 33.5 percent in 2012. Young adults ages 20–24 have fared somewhat better, but their labor-force participation rate has dropped from a high of 79.6 percent in 1987 to 70.1 percent today. Over the past three decades, labor-force participation among adults ages 25–54 has remained mostly stable at around 80 percent.

To be sure, declining labor-force participation among teens and young adults is not necessarily a bad economic sign. Downward moves in labor-force participation can be attributed in part to increasing school enrollment, a positive development that boosts both workers’ earnings and broader economic growth. But today’s high unemployment rates indicate that there are too many young people who want to work but cannot find jobs.

Employment-to-population ratio: The employment-to-population ratio is the proportion of individuals in the population who are employed. A high employment-to-population ratio indicates that people in the population are able to find jobs.

Since the 1980s the employment-to-population ratio for teenagers and young adults has declined, with the steepest drops occurring in the past decade. During that time employment among teenagers has dropped the most, falling from 50 percent in 1978 to just 25.8 percent today. Employment among young adults peaked at 72.9 percent in 2000, falling to 60.8 percent today. By contrast, employment among Americans of prime working age currently stands at 75.9 percent, about the same as it was in the mid-1980s.

Here again, declining employment rates among young people are not necessarily bad if they represent increases in educational attainment. But because these changes are also accompanied by rising unemployment rates, they suggest that young people are dropping out of the labor market due to discouraging job prospects.

Unemployment rate: The unemployment rate is the share of individuals in the labor force who are unemployed. To be considered unemployed, a worker must be looking for a job by sending out resumes, filling out applications, interviewing for positions, or engaging in other job-search activities. The unemployment rate indicates whether people are able to find employment, but it can also decline if workers become discouraged and quit looking for work—even if they want a job.

Since World War II young people have become increasingly more likely to be unemployed, while the unemployment rate for adults has remained lower and relatively more stable. Today the unemployment rate among teens—although down slightly from an all-time high of 27.2 percent in 2010—is 24.2 percent, higher than it ever was prior to the Great Recession of 2007–2009. Young adults have fared somewhat better than teens, but they also experienced an all-time high unemployment rate in 2010, when 17.2 percent of people ages 20–24 were out of work. The trends in unemployment indicate that young job seekers have suffered disproportionately in the recession compared to adult workers.

Youth unemployment in the United States is high relative to European countries with more youth-friendly labor markets

While advanced economies around the world are struggling with high unemployment in the wake of the global recession, the fact that some countries have been able to keep their youth unemployment rates relatively low indicates that high youth unemployment is not an inevitable consequence of an economic downturn. German, Danish, Dutch, and Austrian youth, for example, all enjoy lower unemployment rates than their American counterparts. While American youth are unemployed at a rate of 16.2 percent, youth in these countries are unemployed at rates of 7.9 percent, 15 percent, 10.3 percent, and 9.9 percent, respectively.

What’s more, these countries have done a better job than the United States of keeping youth unemployment low relative to overall unemployment. The ratio of youth unemployment to overall unemployment is an indicator of how much more difficult it is for a young person to find a job compared to an adult worker. In the United States, the unemployment rate for workers ages 16–24 is more than twice the overall unemployment rate of 7.6 percent. In Germany, however, the unemployment rate for young workers—7.9 percent—is only 1.5 times the overall unemployment rate of 5.3 percent. Denmark, the Netherlands, and Austria also have ratios of youth unemployment to overall unemployment that are lower than that experienced in the United States.

Certainly, more work must be done to understand why some countries seem to have labor markets that are more youth friendly, but some hypothesize it is because these countries tend to have workforce-development systems that support apprenticeships, vocational programs, and other worker-training programs that bolster the transition between school and work. Providing young people with more structured pathways into work could be the key to maintaining relatively low youth-unemployment levels even during periods of economic downturn. What we do know for sure from these examples is that America’s high level of youth unemployment is avoidable.

Youth unemployment is even worse than the unemployment rate suggests

The high unemployment rate for young Americans is a bad sign, but it doesn’t even begin to tell the whole story of just how grim employment prospects are for today’s young adults. Looking just at the overall unemployment rate obscures the extremely high rates of unemployment among communities of color, ignores workers who have given up on finding a job, and fails to take into account the many workers who are underemployed relative to their skills and education levels.

Unemployment is a major problem for young Americans in general, but it’s an even bigger problem for young people of color. While the overall unemployment rate for teenagers is 25.1 percent, the unemployment rate for black teens is 43.1 percent. And fully half of black males ages 16–19 are looking for work but unable to find a job.

What’s more, the unemployment rate does not include discouraged workers—people who have looked for a job in the past year but who have grown discouraged and given up because they believe that there are no jobs available—or at least none for which they would qualify. The percentage of people aged 16–24 who are not in the labor force but who want a job is 11 percent, compared to 7.1 percent of people of all ages not in the labor force but who want a job. Furthermore, a study by the Center for Labor Market Studies estimated that in 2009 there were 2.8 million teens who wanted to work but who were not currently looking or were employed part time but wanted full-time work. This is in addition to the 1.5 million teens who were counted as unemployed, suggesting that the employment situation for young Americans may be even bleaker than the unemployment statistics convey.

Moreover, unemployment numbers tell us nothing about the quality of jobs available to young workers, many of who find themselves overqualified and underpaid. In fact, about half of all recent college graduates are in jobs that do not require a four-year degree, and 37 percent are in jobs that require no more than a high school diploma.

What is the true cost of youth unemployment?

Youth unemployment leads to depressed lifetime earnings

Not only is unemployment bad for young people now, but the negative effects of being unemployed have also been shown to follow a person throughout his or her career. A young person who has been unemployed for six months can expect to earn about $22,000 less over the next 10 years than they could have expected to earn had they not experienced a lengthy period of unemployment. In April 2010 the number of people ages 20–24 who were unemployed for more than six months had reached an all-time high of 967,000 people. We estimate that these young Americans will lose a total of $21.4 billion in earnings over the next 10 years.

This estimate is based on a study that found men who experienced a six-month period of unemployment at age 22 earned 8 percent less at age 23 than they would have otherwise. The wage gap narrows with age, but it still persists. By age 26, the men earned 6 percent less than they would have if they had never been unemployed. Even by age 31, their wages were 3 percent or 4 percent lower than they otherwise would have been. Long-term unemployment robs young people of the opportunity to gain the skills, experiences, and connections that translate into higher wages.

Related studies have found similar negative effects on future earnings. Researchers in the United Kingdom found that one year of youth unemployment at the age of 22 resulted in wages that were 13 percent to 21 percent less 20 years later. Another study that looked at American men who graduated from college during a recession estimated that an increase in the national unemployment rate of 1 percent translated into 6 percent to 7 percent lower wages initially and 2.5 percent lower wages 15 years down the road.

The impact of these lost earnings on young Americans is readily apparent. Young Americans today find themselves being increasingly squeezed by everything from rising tuition costs to health care expenses to energy bills, but income for the typical household hasn’t increased in 20 years. The repercussions of this financial squeeze are clear. Today Americans under the age of 40 have accumulated less wealth than their parents did at that age more than 25 years ago. More than 13 percent of borrowers—mainly young adults—have defaulted on their student loans, and another 26 percent are delinquent. Young adults are now more likely to live with their parents and less likely to own a home than they were before the recession. And more than half of Americans ages 25–34 have saved less than $10,000 for retirement, increasing the odds that they will lack sufficient savings to retire in their old age.

Yet another casualty of these lost wages is long-term U.S. economic growth. When workers earn less because they were once unemployed, they spend less money at supermarkets, bookstores, cafes, and other businesses. The effect of taking this spending out of the economy adds up, resulting in fewer jobs and slower economic growth. Allowing high levels of youth unemployment to persist will weaken America’s economic growth and prosperity for years to come.

Youth unemployment incurs fiscal costs

Moreover, youth unemployment creates an additional cost burden for taxpayers in the form of lost revenues, the need for government-provided health care, increased crime, and additional welfare payments. In a recent study commissioned by the White House Council on Community Solutions, researchers estimate that the fiscal cost of the 6.7 million Americans ages 16–24 who are neither working nor attending school is $1.6 trillion over their lifetimes. Failing to create jobs for unemployed young people today will leave taxpayers with a huge bill down the road.

Conclusion

Ignoring the dire employment situation for young Americans is simply not an option. The economic consequences of high youth unemployment are enduring, and failing to employ young people today will result in lost earnings, greater costs, and slower economic growth tomorrow. Unfortunately, Congress is moving in the wrong direction with sequestration and misguided policy decisions to end programs that are proven to put young people to work. While youth unemployment has risen, Congress has cut $1 billion from youth jobs programs over the past decade. Furthermore, sequestration, with its across the board automatic spending cuts, will result in the elimination of 4,200 AmeriCorps positions, cutting back on an important source of jobs that allow young people to gain valuable experience and develop marketable skills. In future briefs, CAP will propose a series of forward-thinking policies that will help lawmakers tackle the nation’s youth-unemployment crisis. But Congress can start to address the crisis now by putting a stop to these shortsighted funding cuts and beginning to take youth unemployment seriously.

Sarah Ayres is a Policy Analyst with the Economic Policy team at the Center for American Progress.

Growing the Wealth

David Madland and Karla Walter — Tue, 02 Apr 2013 18:07:23 +0000

SOURCE: AP/Pat Sullivan

Inclusive capitalism, when partnered with democratic workplace practices, has a proven record of helping workers and businesses alike in a myriad of ways.

Endnotes and citations are available in the PDF version of this report.

American companies use a variety of financial incentives, from broad-based profit sharing and stock options to worker cooperatives and employee stock ownership plans, to reward their employees with a portion of the wealth those workers help generate. This kind of compensation goes well beyond simply paying wages or providing individual incentives, but rather involves granting workers ownership stakes in the company or a share of its profits based on workers’ collective performance—a concept we describe as inclusive capitalism.

Inclusive capitalism, when partnered with democratic workplace practices, has a proven record of helping workers and businesses alike in a myriad of ways. Additionally, it is an economic philosophy that can draw bipartisan support. Yet policy to advance inclusive capitalism has not been part of the national dialogue for quite some time.

The purpose of this report is to change this dynamic and jump-start a policy conversation aimed at promoting inclusive capitalism. While we do not advocate for specific policy changes in this report, our hope is that it will spark dialogue among policymakers and advocates about how inclusive capitalism can help address some of the most fundamental problems facing our economy; what government can do to encourage employers to use it more; and how to ensure that inclusive capitalism is done right so workers can enjoy the upsides of broad-based sharing and having an increased say on the job without being exposed to undue risk.

Inclusive capitalism is by no means a new or rare phenomenon in the United States. Companies and workers have practiced inclusive capitalism since the founding of our nation. Today almost half of U.S. workers receive some sort of inclusive capitalism compensation—though in most firms its use is quite limited.

Companies practicing broad-based inclusive capitalism range from unionized American steel manufacturers and air carriers to leading technology firms to growing, socially minded companies. The United States Steel Corporation, for example, pays quarterly cash profit-sharing payments to its unionized workforce, while a significant portion of Southwest Airlines’ stock is owned by its employees.3 Likewise, the high-tech firm Intel Corporation rewards its employees with both cash profit sharing and broad-based stock ownership through restricted stock and stock options. And then there are the socially minded companies such as the tea and coffee purveyor Equal Exchange and the beer maker New Belgium Brewing that are both employee-owned, the former through a worker cooperative and the other through an employee stock ownership plan.

At its best, inclusive capitalism aligns the interests of workers and employers in ways that benefit both parties. Workers are respected and compensated for their contributions toward the firm’s success. Firms benefit from increased worker productivity, greater worker satisfaction, and employees with the drive to suggest and make changes to improve company performance.

Consequently, inclusive capitalism can improve company performance while at the same time improving worker wellbeing. As such, these programs are not about redistributing wealth but about creating additional wealth shared between American workers and businesses.

Studies of inclusive capitalism bear this out. For both lower- and middle-income workers, inclusive capitalism is associated with higher pay, expanded benefits and greater job security, participation in decision making, trust in the company and management, and better labor-management relations.

For businesses, inclusive capitalism is often associated with increased productivity and profitability and a greater likelihood of corporate survival. In addition, companies benefit from greater worker loyalty and effort, lower turnover rates, and an increased willingness on the part of workers to suggest innovations. Looking specifically at one type of inclusive capitalism—employee stock ownership plans, or ESOPs—Douglas Kruse, professor and director of the doctoral program in industrial relations and human resources at Rutgers University, found that productivity improved by 4 percent to 5 percent on average in the year of ESOP adoption and continues after adoption, more than doubling the rate of annual productivity growth of the U.S. economy over the past 20 years.

Another study examining the effects of stock options found that companies that offered options broadly to their employees showed significant improvements in their firm’s operating performance.

Investors also come out ahead when companies adopt capital-sharing programs. Companies and investors that adopt partnership approaches make profits over and above the cost of sharing ownership with employees, according to a review of more than 70 empirical studies.

Finally, inclusive capitalism in the form of worker-ownership is often thought to benefit democracy by giving workers a real, participatory role in their work life that can translate into their civic life.

In short, inclusive capitalism can encourage competition and profit-seeking behavior that can benefit investors, managers, and workers, which is why the concept has attracted believers of all political stripes. Former President Ronald Reagan called these sorts of programs “People’s Capitalism” and argued that the “energy and vitality unleashed by this kind of People’s Capitalism—free and open markets, robust competition, and broad-based ownership of the means of production—can serve this nation well.”

Similarly, the liberal icon Sen. Hubert Humphrey Jr. (D-MN) called capital sharing one of the “twin pillars of our economy.”

Not only can inclusive capitalism help workers and business and draw bipartisan support, but it has the potential to address at least partly some of the most fundamental problems facing our country: weak economic growth, excessive speculative economic activities that fail to build societal wealth, high unemployment, stagnant worker compensation, and the dramatic differences in income and wealth between the struggling middle class and the very rich.

Today policymakers continue to support inclusive capitalism. A bipartisan list of advocates ranging from Sen. Bernie Sanders (I-VT) and Rep. Chaka Fattah (D-PA) to Sen. Kelly Ayotte (R-NH) and Rep. Dana Rohrabacher (R-CA) separately introduced legislation in the 112th session of Congress to expand government support for inclusive capitalism. But only the most modest of these bills received any legislative action and inclusive capitalism has not yet become a part of the larger national debate on how to address the nation’s economic problems.

Despite this across-the-board support for the concept of wealth sharing, far too few workers enjoy the benefits of broad-based sharing programs. More than half of American workers do not have access or choose not to participate in inclusive capitalism programs and most participating workers receive only very modest amounts of income from these programs.

What’s more, sharing programs are sometimes implemented in ways that take advantage of workers. On occasion companies have implemented sharing programs that expose workers to excessive risk, using the programs as a substitute for good wages and benefits or providing their workers little say on the job. Neither workers nor firms benefit from inclusive capitalism when workers are marginalized.

Research suggests that the most successful broad-based sharing programs are those in which workers have a high level of trust of management, are paid wages at or above the market rate, and have a high level of job security and involvement in decision making over their work at the job and department level. A recent study of 780 companies employing more than 300,000 workers confirms that the best results happen when broad-based inclusive capitalism is combined with a supportive company culture.

Yet today most companies provide generous incentive pay only to top executives providing rewards for the short-term success of the company. While strong evidence suggests that providing workers with a stake in a firm’s performance leads to good results for both the firm and the workers, paying executives based on company performance has a very mixed record and is a major cause of the growing income gap between the middle class and the top 1 percent.

Government should do more to limit excessive top executive pay and ensure that incentive pay for corporate executives encourages decision making to support the long-term, sustainable growth of the company. The Center for American Progress has recommended closing loopholes in the tax code that allow firms unlimited deductions on executive compensation in the form of incentive-based pay. Similarly, Germany passed a law in 2009 reining in excessive executive compensation, which included provisions stipulating that management boards should reduce executive compensation when companies perform poorly and requiring that incentive compensation be determined based on longer-term performance.

While the debate surrounding reining in executive pay has received a good deal of attention, how to encourage real broad-based sharing has not been included in this conversation and outside the personal knowledge of a narrow group of experts, little information is available for interested parties seeking to understand the relevant policy issues.

The purpose of this report is to provide baseline knowledge that is essential to creating a broad discussion about inclusive capitalism policy. To help achieve this goal, the report describes the types of inclusive capitalism that firms currently practice and briefly reviews the history of federal policy in this area.

Most importantly, our report catalogs existing government policies that support inclusive capitalism programs providing one-stop shopping for those seeking to understand what governments are doing in this area. Both federal and state governments have a long history of supporting inclusive capitalism programs—with policy mechanisms that range from federal tax incentives to state technical assistance programs—but these efforts have not been compiled in a comprehensive way.

Additionally, we highlight some key questions about how existing inclusive capitalism policy is working and the challenges to ensuring that inclusive capitalism helps all workers. Addressing these questions will be important for any future policy development. Lastly, we discuss the potential of inclusive capitalism to address at least partly some of the most fundamental problems facing our economy.

This report is an initial analysis of the current policy landscape supporting inclusive capitalism. We hope that it helps provide a path forward for policymakers to support broad-based and sustainable capital-sharing programs.

David Madland is the Director of the American Worker Project at the Center for American Progress. Karla Walter is the Associate Director of the American Worker Project at the Center for American Progress.

States at Work: Progressive State Policies to Rebuild the Middle Class

Karla Walter, Tom Hucker, and David Madland — Thu, 21 Mar 2013 13:10:39 +0000

SOURCE: AP/David Goldman

Incomes for the middle class and the poor are stagnant or falling, while the costs of life’s necessities continue to rise, and the risks of falling behind economically grow.

Read the full report (CAP Action)

As our country inches its way out of the Great Recession and looks toward the future, it is clear that we need a new framework to guide our economic growth. The old trickle-down economic model of the past several decades is failing nearly everyone, save those at the very top.

Incomes for the middle class and the poor are stagnant or falling, while the costs of life’s necessities continue to rise, and the risks of falling behind economically grow. Our country faces a mounting economic opportunity deficit, as the American promise—the idea that if you work hard, you can achieve the good life, exemplified by a secure paycheck that grows year after year; a nice home in a safe neighborhood with decent schools; retirement savings; health care; some leisure time to spend with friends and family; and the ability to send your kids to college and pass them a bigger share of the American Dream—feels like it is slipping out of reach for far too many.

These problems are particularly acute for immigrants and people of color, who are rapidly becoming the majority population of the United States and will certainly be so by 2050. If current racial and ethnic disparities in income, employment, education, health, and other social services continue, we will not fully capitalize on the global economic advantages that we can derive from our increasingly diverse population, and we will not meet the nation’s 21st-century workforce requirements.

It is imperative that we chart a course that underscores American ideals of fairness, equity, and opportunity, recognizing that our country’s greatest strength has always been our people. In short, we need to rebuild a strong and growing middle class. Doing so is essential for a vibrant democracy and a healthy economy—and for our conception of what America is all about.

Read the full report (CAP Action)

Legal Status for Undocumented Workers Is Good for American Workers

David Madland and Nick Bunker — Wed, 20 Mar 2013 13:52:43 +0000

SOURCE: AP/Alan Diaz

Immigration reform activists hold a sign in front of Freedom Tower in downtown Miami, Monday, January 28, 2013.

See also: The Economic Effects of Granting Legal Status and Citizenship to Undocumented Immigrants by Robert Lynch and Patrick Oakford

Read the full column (CAP Action)

A new report by our colleagues at the Center for American Progress shows that creating a path for undocumented immigrants to earn legal status and citizenship will lead to substantial wage gains for these workers. In turn, these wage gains will help spur the American economy and lead to significant increases in gross domestic product, tax revenue, and jobs in the coming years.

Some observers may worry that the gains for newly documented immigrants will come at the expense of native-born American workers. But our review of economic research finds these fears to be unfounded.

Studies of the last large-scale legalization effort in 1986 found that legalization did not reduce wages for native-born American workers and, in some cases, actually raised wages. More recent research on the effect of increases in immigration over the past few decades find little to no wage or employment effects, providing additional confirmation for the earlier legalization studies, as well as alleviating concerns about possible harm from future immigration.

Further, this body of research finds that those with low levels of education, as well as Americans of color, are also likely to be unharmed by immigration, though the research does suggest that the wages of other immigrants may be reduced.

Read the full column (CAP Action)

Celebrating AmeriCorps Week

Zach Murray — Thu, 14 Mar 2013 18:49:54 +0000

SOURCE: AP/Patricia McDonnell

AmeriCorp volunteers Derek Haddad, left foreground, and Eddie Galan, right, both of Boston, applaud Friday, October 19, 2001, as they join some 1,000 new AmeriCorps members—who volunteer for one year to work in community service—during a rally to kick off their year of service.

We are in the midst of AmeriCorps Week, which takes place from March 9 to March 17. It is a time for the country to celebrate the remarkable impact of the iconic federal community-service organization that—over the course of the past 20 years—has engaged tens of thousands of corps members in efforts to construct affordable housing, guide and mentor students in underperforming schools, feed hungry Americans, and tackle countless other pressing challenges facing communities across the nation. So it is more than a bit ironic that as we celebrate the work of AmeriCorps, budget fights in Washington, D.C.—highlighted by the release of the House Republican budget on Tuesday and the recent allowance of the sequester—threaten the program and put at risk the creative approaches that it employs to better the lives of countless Americans and their families.

Sequestration means devastating cuts for national service—4,200 AmeriCorps positions, which represent 4.3 million hours of critical service, will be cut over time. These cuts are in addition to the $100 million in cuts that occurred between 2010 and 2012. Thus, the stakes are high as President Barack Obama and Congress continue to wrangle over the budget and efforts to reduce the deficit.

As our leaders seek to balance the nation’s spending priorities, the value of national service remains clear. In the 20 years since President Bill Clinton signed legislation creating the Corporation for National and Community Service, AmeriCorps, the corporation’s flagship service program, has supported 800,000 service members, 1 billion hours of volunteer service, 4 million volunteers, and $2.4 billion in education aid for service members.

But if AmeriCorps is to survive and thrive going forward, creative strategies must be devised to ensure the future of national service. Recent CAP publications make the case for government-agency investment in service. The report “Service as a Strategy” outlines several reasons why national service is a viable strategy to help move a diverse number of government programs toward reaching their goals, and it offers approaches for public agencies to model when launching their own service programs. A chief example is the recently launched FEMA Corps, which uses resources from both the Federal Emergency Management Agency and the Corporation for National Service to fund emergency-response service workers who are playing a key role in recovery efforts from tragedies such as Hurricane Sandy.

In “The Great Public Service Talent Search,” CAP outlines a course for building upon the existing potential of service to fulfill the talent needs of the public-service field—one that will ultimately improve the outcomes that service agencies achieve. Through commitments of human and financial capital, AmeriCorps already boosts the talent-development capacity of nonprofits across the United States. Many AmeriCorps alumni continue their civic engagement after participating in the program, through careers in government and the nonprofit sector and as social entrepreneurs representing the next generation of public servants. This commitment could be harnessed even more strategically.

Consider just one example: To groom future leaders in the fight against hunger, Joel Berg, CAP Senior Fellow and the executive director of the New York City Coalition Against Hunger, launched the Anti-Hunger and Opportunity Corps in collaboration with the U.S. Department of Agriculture and AmeriCorps VISTA. The program provides young people with an opportunity to lend their skills to food pantries, soup kitchens, and anti-hunger agencies across the country through technical assistance and Supplemental Nutrition Assistance Program, or SNAP, outreach. In 2012 corps members in this program recruited 1,611 volunteers and raised $3,553,176 in grants and $31,920 in charitable giving. Like the broader AmeriCorps program, the Anti-Hunger and Opportunity Corps successfully leverages private-public partnerships and sustains its anti-hunger efforts through matching funds from the Walmart Foundation. Not only do efforts such as the Anti-Hunger and Opportunity Corps advance the goal of talent development, but they are also improving program outcomes in the present as well as in the future, as some graduates of the program consider future anti-hunger work.

AmeriCorps continues to evolve to meet the needs of communities and the nation. The short-term investment in volunteer service pays huge returns, building careers, supporting social innovation, and improving people and communities. National-service programs deliver untold societal benefits, and they deserve greater attention in public policy and budget fights. We need to ensure that the potential of AmeriCorps is maximized and that the program is given the chance to thrive for another 20 years and beyond.

Zach Murray is a Bill Emerson National Hunger Fellow with the Poverty and Prosperity program and Progress 2050 project at the Center for American Progress.

Infographic: Where Are U.S. Women in 2013?

Jane Farrell — Fri, 08 Mar 2013 14:08:48 +0000

Women make up more than 50 percent of the U.S. population and more than 49 percent of the workforce, yet they still hold a disproportionately small number of leadership roles in both the public and private sector. At every level of government across America, women are underrepresented. The United States ranks nearly 70th out of 188 countries in terms of women elected to national offices, having dropped down from 57th in November 2004.

While there is room for more research on how women in leadership roles affect policy outcomes, the advancement of women in our workplaces has had clear benefits for our economy and nation. Studies have shown that Fortune 500 corporations with more women on their boards perform better financially and that hedge funds run by women also outperform the industry standard. But right now, of the 1,000 CEOs leading our nation’s largest businesses, only 42—4.2 percent—are women.

Furthermore, women are more likely to work in many of the low-wage, service-sector jobs that underpin much of our economy. Women make up 54 percent of all service-sector workers and 77 percent of all education and health-service workers. This includes 80 percent of those in health care and social-assistance jobs, and more than 80 percent of workers in nursing and residential-care facilities. As these occupations are some of the fastest-growing jobs in our economy, it is important to pause and take note of not just the absolute gains women are making in employment, but the ways in which they are being represented and empowered—or disempowered—at every level.

Jane Farrell is a Research Assistant for Economic Policy at the Center for American Progress.