Sunday, June 30, 2013

Paul Krugman Doesn't Forget the Unemployed

"The hardest work in the world is being out of work." ~ Whitney Young, Jr.

As usual, Paul Krugman wrote another excellent piece today for the New York Times, this one titled War On the Unemployed. (But I also enjoyed some of the reader's comments equally well. Below are a few samples.)

Karen Garcia - New Paltz, NY: "Politicians need to feel shame, and they need to feel it good and hard. They need to feel the wrath of the electorate. They need to be relentlessly exposed in all their heartless venality, with all the means at our disposal. Paul Krugman dishes it out in his popular columns. The Nuns on the Bus, Occupy Sandy, and Occupy Our Homes dish it out through direct action. Walmart and McDonalds strikers dish it out to the CEOs who rake in 1000 times the wage of the average employee.

According to the Census Bureau, almost 2 million of us live on less than $2 a day. The U.N. has us near rock bottom among developed countries in terms of education and social mobility and health care -- despite boasting the world's highest GDP. One in four children lives in poverty, because their parents are unemployed or underemployed. Our per capita murder rate is higher than Libya's.

Desperate times call for desperate measures. During the Depression, the so-called Bonus Army marched on Washington and camped out in full view of the politicians. All they wanted was back pay for serving their country, and what they got was inhumane eviction by the U.S. military. People took to the streets in droves back then, the jobless joining the wage slaves in strikes, the homeless joining the slum dwellers in rent strikes.

Those politicians finally got shamed and scared, and we got the New Deal. Without pressure from us to convince them otherwise, our current crop will just assume we love feasting on the Raw Deal."

Mancuroc - Rochester, NY: "Paul Kruman writes, Under the radar, with too many people unaware of what’s going on...The fault lies squarely with the Fourth Estate, and it will take more than an occasional column by Dr. Krugman to put things right.

The so-called "liberal" media give the unemployed short shrift in their news coverage, and their star moderators and pundits are so wrapped up in protecting their undeserved incomes that they won't dream of rocking the boat. Their employers are part of a tight oligopoly of media corporations that don't countenance more than token criticism of the economic system that makes them wealthy. The corporate owners of the "liberal media" are quite willing to accept liberal positions on social issues, but the minute anything is raised that they perceive to threaten their pocket books, they get nervous.

The one reliable voice for working people on cable TV is Ed Schultz. He was evidently doing too well in his prime time weekday MSNBC spot for the comfort of his Comcast bosses, so he was banished to a weekend slot that is just about guaranteed to have a low audience.

R. Law, Texas: "The catechism of the radical rightists assigns blame to people for not having jobs, for jobs disappearing, never minding the machinations of Wall Street caused the Crash, and certainly forgetting the billionaire class would have been virtually wiped out if not for the beneficence of the vast, evil, centralized government Treasury in DC.

The radical rightists are direct benefactors of Wall Street's bail-out and the billionaire class who now conceive themselves, individually and as a class, as being Too Big To Fail, just like large banks.

They have even recently taken to calling themselves ' makers ' to try and perpetuate the myth they are Too Big To Fail, and wrap themselves in words of holiness and scripture to try and attain added validity.

They are deluded, and their delusion/illusion requires they demonize the most defenseless - the young, the poor and the jobless - or everyone will remember the only reason we are where we are is because of the de-regulated schemes of the bailed-out billionaire class, their radical rightist political henchmen, and the VSP lackeys on Faux Noise Machina 24/7.

It's nauseatingly anti-American and anti-capitalist from almost every conceivable angle. Their contrived VSP alternate narrative must not take the place of the actual reality we see (and have seen) with our own lyin' eyes. 

Rima Regas - Mission Viejo, CA: "I've been angry - steamed - for the past five years, reading stories about people who also lost their jobs to the recession and couldn't get interviewed, much less hired. The conclusion within the 99er community is that ageism and those who lost their jobs in 08-09 are specifically kept out of jobs they are well-qualified to do.

Now, North Carolina, in its anti-human effort to roll ever civil liberty and benefit it can, has managed to turn back its clock at least a hundred years, on many levels - not just the unemployment benefits issue. They've passed some of the most regressive voter laws in the land, including one that punishes parents whose college aged kids vote.

What's different about North Carolina is that there is a growing movement to push back against GOP policies. That movement is Moral Mondays, and it is headed by the North Carolina chapter president of the NAACP, William Barber. He's an impressive orator, organizer, and leader. People from all walks of life, races, professions have joined him in his weekly protests and so far several hundred have been arrested.

We need more William Barbers. We need one in each state to organize a voter revolt. Judging by the fundraising email traffic since last week, the Democrats are ready to put on a fight. That's good, but it isn't enough. The effort needs to be intense and include grassroots civil rights groups. Let's be serious this time!"

John McBride - Seattle, WA: "Angry? Angry? Angry isn't half, or half of half of it, and not just jobs. Let's put it this way here at home."

From Pew Research

Americans

Canadians

Satisfied with how things are going 31%  55%
Say their economy is good 33% 67%
Say they are doing well personally 67% 82%
Are worried about unemployment 58% 37%
Convinced that debt is a big problem 61% 40% 
Thinks inequality is worse since 2007 66%  76%
Thinks economy favors the wealthy 61%  58% 
Gap between the rich and the poor is a problem 47%  45%
In the past 12 months they could not afford health or medical care for their family 31%  11%
Say they didn't have money to buy clothing for their family in the past year 27%  11%
There have been times in the past year when they did not have enough money to buy food for their families 24% 9%

And in the world? Brazil, Turkey, Egypt, Spain and even China. The rich of the world are as conscious as the royals and nobles of France in 1788. No, not just jobs. The rich own the world, and run it. And we don't.

An "acceptable" level of unemployment means that the government economist to whom it is acceptable still has a job. ~ Author Unknown

McDonald's Paying Workers with Debit Cards

Corporate America is always finding innovated and ingenious ways of improving their bottom lines, and usually at the expense of the bottom 47% of American wage earners, who are only taking home $27,000 or less a year. This time they've come up with another new way of fracking blood from stone.

When a single mother named Natalie Gunshannon went to get her first paycheck from her new job at McDonald’s, she was in for a shock --- McDonald’s gave Natalie her salary on a debit card that came with ridiculous hidden charges, like forcing her to pay $5 every time she withdraws her money at her bank.

What’s more, when Natalie asked for a check, McDonald’s refused, saying she had to take the card --- and the charges --- or not take any money at all. This scheme allows her local franchise operator to save a few dollars from the cost of cutting checks by making deals with big banks that force employees to use fee-ridden cards. In many cases, the high costs push workers below minimum wage, most often making them eligible for government entitlements (after all, "entitlements" are usually just "wage subsidies" that companies like McDonald's and Wal-Mart mostly benefit from.)

As reported by MSN Money, according to a Congressional study, $6,000 is the average amount taxpayers are being charged per each Walmart employee for government programs such as food stamps (SNAP) and Medicaid.

Sadly this story is far from unique. Not only do workers in the service sector face poverty wages, they're frequently exploited in other, often illegal ways. A report last month found that nearly 90 percent of fast food workers in New York City had had their wages stolen by their bosses.

Meanwhile business has been booming for bars and restaurants, fast food joints, retail chains, and other low-wage employers --- profits and executive pay have never been higher --- while average working Americans saw the biggest drop in hourly pay on record. This year, thousands of retail and fast food workers have gone on strike demanding a living wage and fair treatment at work.

The practice of replacing checks with expensive debit cards is gaining ground with employers around the country --- and in some cases, has even been used for food stamps. This practice saves businesses money and allows banks to charge ridiculous sums.

Natalie was forced to pay $15 to replace her card if she ever lost it -- because employers know that they won't have to pay the high fees, their employees will be the ones charged. (This is also happening with Social Security retirement and disability recipients as well.)

This is an abuse of employer privileges, pure and simple, telling workers that they have no choice but to accept unfair charges or go hungry. Employers are forcing this upon their workers because, in a bad economy, they don't think workers have a choice to speak up --- even though the practice is illegal.

By the way, Natalie Gunshannon is suing the McDonald’s franchise owner. Her J.P. Morgan Chase payroll card (she contends) imposes fees on virtually every transaction, including: $1.50 for an ATM withdrawal, $5 for over-the-counter cash withdrawals and $1 to check the balance. There's even a charge to pay a bill online or if the card is lost or stolen.

Behind government jobs, McDonald's and Wal-Mart are America's two largest employers. According to a recent CRS report prepared for members and committees of Congress, 29% of American jobs are currently prone to offshoring. So that means jobs in the retail, fast food, healthcare, hospitality and the restaurant and bar industries will be dominating the job market in the U.S. --- So therefore, wages and benefits must be made better for the sake of the entire U.S. economy, specially since since manufacturing has been offshored to low-wage countries; and many tech jobs have been "insourced" with H-1B visas. But fast food and retail jobs can NOT be offshored, and must be made middle-class jobs with benefits (such as healthcare insurance and paid sick days.)

Tell McDonald's and others to ban the practice of forcing employees into fee-laden debit cards. And if you work in food service or retail, and want to put an end to this kind of abuse, sign a petition at SumOfUs to get rid of these exploitative debit cards before the effects of high unemployment, low wages and employee abuse trickle up to hurt us all --- even more than it already has.

Power Africa: Obama and his Globalist Administration

Treason is defined, in part, as someone who "adheres to their enemies, giving them aid and comfort." Whereas a globalist is defined, in part, as someone who advocates "a policy of placing the interests of the entire world above those of individual nations". But where does one line cross the other? And who does Obama and his administration really care for more, the needs of those in this country, those in other countries, or U.S. corporate CEOs?

CAPE TOWN: The White House said that U.S. President Barack Obama will unveil a $ 7 billion plan to upgrade African power networks in bid to end blackouts that deter business investment on the continent.

The initiative, dubbed "Power Africa", aims to double access to power in sub-Saharan Africa, where more than two-thirds of the population is without electricity. (My note: Do they have refrigerators, computers and TVs that need electric power? How will these people pay their monthly electric bills?)

Despite breakneck economic growth, an estimated 587 million Africans, roughly half the continent's population, do not have access to electricity, according to the International Energy Agency. (My note: Neither does North Korea --- should will build them a power grid too?)

Only around 25 per cent of people in rural areas have access to electricity. (My note: They are probably not still living in grass huts either.)

As Connie Kaplan, a famous 99er, just recently emailed me: "Why the hell can't our Prez & govt spend 7 billion on INFRASTRUCTURE THAT WE DESPERATELY NEED? It creates jobs. I'm sick of our taxes being used for nation building vs. our needs!"

Currently there are 3.8 million job openings for 11.7 million unemployed Americans. But the United States will commit more than $7 billion in financial support to Africa over the next five years. The list of government agencies and their Obama-appointed globalist leaders include:

U.S. Agency for International Development (USAID) will provide $285 million in technical assistance, grants and risk mitigation to advance private sector energy transactions and help governments adopt and implement the policy, regulatory, and other reforms necessary to attract private sector investment in the energy and power sectors. Dr. Rajiv Shah serves as the 16th Administrator of USAID and leads the efforts of more than 9,600 professionals in 80 missions around the world. He was sworn in on Dec. 31, 2009. Prior to joining the Obama administration, Shah served for seven years with the Bill & Melinda Gates Foundation.

The Overseas Private Investment Corporation (OPIC) will commit up to $1.5 billion in financing and insurance to energy projects in sub-Saharan Africa. Elizabeth L. Littlefield was appointed by President Obama as the President and CEO of OPIC, the US Government’s Development Finance Institution. Operating in 105 countries, OPIC manages a $16 billion portfolio of financing and insurance to support private investment in sustainable economic development, especially in the world’s poorest countries. Prior to joining CGAP in 1999, Ms. Littlefield was JP Morgan’s Managing Director in charge of capital markets and financing in emerging Europe, Middle East and Africa. 

The U.S. Export-Import Bank (Ex-Im) will make available up to $5 billion in support of U.S. exports for the development of power projects across sub-Saharan Africa. The Ex-Im Bank does not compete with private sector lenders but provides export financing products that fill gaps in trade financing --- and assumes credit and country risks that the private sector is unable or unwilling to accept. Fred P. Hochberg is Chairman and President of the Export-Import Bank of the United States (Ex-Im Bank) and one of the highest ranking business leaders in the Obama Administration. From 2004 to 2008, Hochberg was dean of Milano, The New School for Management and Urban Policy in New York,

The Millennium Challenge Corporation (MCC) will invest up to $1 billion in African power systems through its country compacts to increase access and the reliability and sustainability of electricity supply through investments in energy infrastructure, policy and regulatory reforms and institutional capacity building. The MCC Board of Directors is composed of the Secretary of State (Was Hilary Clonton, now John Kerry), the Secretary of Treasury, the U.S. Trade Representative, the Administrator of USAID, the CEO of the MCC and four public members appointed by the President of the United States with the advice and consent of the U.S. Senate.

OPIC and the U.S. Trade and Development Agency (USTDA) will provide up to $20 million in project preparation, feasibility and technical assistance grants to develop renewable energy projects. These efforts will be coordinated through the U.S. - Africa Clean Energy Finance Initiative (US-ACEF) and supported by the recently launched U.S. - Africa Clean Energy Development and Finance Center (CEDFC) in Johannesburg, South Africa. The Director is Leocadia I. Zak. After being nominated by President Barack Obama in November 2009, Zak was confirmed by the U.S. Senate on March 10, 2010. Prior to joining USTDA, Zak was a partner in the Washington, D.C. and Boston offices of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. practicing in the areas of corporate, municipal and international finance.

The U.S. African Development Foundation (USADF) will launch a $2 million Off-Grid Energy Challenge to provide grants of up to $100,000 to African-owned and operated enterprises to develop or expand the use of proven technologies for off-grid electricity benefitting rural and marginal populations. Jack Leslie was sworn in as the Chairman by Obama. Jack Leslie was Chairman of Weber Shandwick, a public relations firm that had acquired large accounts like Coca-Cola and the insurance company Cigna.

In 2014, OPIC and USAID will jointly host an African energy and infrastructure investment conference. The conference will bring investors, developers, and companies together with U.S. and African government officials to demonstrate the opportunities for investment and the tools and resources available from the U.S. government and other partners to support investment.

MY NOTE: Why? So that American corporations can give the people in Africa jobs, and then sell their Chinese-manufactured electrically powered products to them? (See my post: Obama Hypes Africa for more Sweatshops)

Obama Hypes Africa for more Sweatshops

Because Obama is in Africa, the pundits on MSNBC were saying this morning that China has invested far more in Africa than the U.S., and that we should "catch up" (as in, a race to the bottom). They also noted that the Chinese were using their own workers, rather than hiring the local population.

So what the pundits on MSNBC are saying is, American companies should invest more in Africa (more than Chinese companies), and hire the local workers --- rather than U.S. companies investing more in America, and hiring American workers. The American "mainstream media" is now advocating for the propagation of more globalism.

And as far as the Chinese using their own workers --- maybe the Chinese are using their own slaves, rather than enslaving and exploiting foreign workers.

During the 1800's the American Colonization Society began sending black volunteers to the Pepper Coast of Africa (the present republic of Liberia) to establish a colony for freed American blacks. It was supported by prominent American politicians such as Abraham Lincoln, who believed that repatriation was preferable to emancipation of slaves.

The African Growth and Opportunity Act was signed into law by President George W. Bush on May 18, 2000 as part of the Trade and Development Act of 2000. The trade agreement allows businesses in West African countries (such as Liberia) to export to the United States duty and quota free, raising interest from U.S. clothing manufacturers that have seen increases in the cost of hiring workers in China --- where much clothing manufacturing now occurs.

It's been a while since Kathie Lee Gifford learned that her Walmart-sold clothing line was produced by Honduran children working 20-hour shifts. But little has changed since then.

At Classic, the largest factory in Jordan, management hired young women from Asia, stripped them of their passports, forced them to work grueling hours for awful pay under a managerial regime that subjected them to routine rape. After an exposé, Kohl’s, Macy’s and Lands’ End stopped doing business with Classic, but the factory’s chief customer, Wal-Mart, was unfazed (75 percent of Classic-made apparel is still going to Wal-Mart and Hanes.)

Penney’s and other big name U.S. brands insist their companies had no responsibility for the factories where their products were made because they did not directly own them. This is much like "plausible deniability", and the factories are called "contract manufacturers --- just like the ones Apple and others use in the tech industry.

After fierce activism by anti-sweatshop groups, wages in Indonesians rose, but companies like Nike responded by shifting its production to other low-wage nations, such as Vietnam. Nike egregiously exploits hundreds of thousands of workers on a daily basis and have a global sourcing model that is the most extremely destructive and inhumane of all others.

President Bill Clinton’s 1994 North American Free Trade Agreement (NAFTA) merely included a side agreement that required adherence to local labor laws, no matter how weak. The more recent trade agreements with Colombia, Panama, South Korea and Peru require compliance with the International Labor Organization's standards, but these improvements aren’t adequate either, as there's no effective way to enforce them.

As major U.S. corporations (from apparel to computer manufacturers) constantly seek out the lowest wages, the lowest taxes and the least governmental regulations (concerning worker's rights and other labor laws) --- as these corporations hop from one country to the next --- will Africa be their next "emerging market"?

Now Obama is in South Africa saying that America is moving beyond just aide, but will open up trade and investment to promote new "opportunities" in Africa. And he spoke of "lifting people out of poverty" --- a typical globalist's goal --- someone who advocates a policy of placing the interests of the entire world above those of individual nations.

Should American companies invest more in Africa (building factories) and hire the local workers --- rather than investing more in America and hiring American workers? If so, will the descendants of America's emancipated slaves in West Africa eventually become corporate America's new labor force? Will the free people of Liberia once again become slaves for American industrialists like they once were in the cotton fields on those huge plantations back in the 1800's?

Of course, more American investment in Africa will also mean an increased U.S. military presence --- to "defend America's interests abroad".

According to a recent CRS report by Linda Levine (Specialist in Labor Economics) that was prepared for members and committees of Congress, 29% of American jobs are currently prone to offshoring. At the current rate of globalization, babies born today will live to see when America becomes "the next emerging market".

Saturday, June 29, 2013

Bank Bailouts: Hindsight is 20/20

Brad DeLong (professor of Economics) from his blog on June 28, 2013 about the bankers:

Four years ago I was largely frozen with respect to financial sophistication. It seemed to me then that 2008-9 had demonstrated that our modern sophisticated financial systems had created enormous macroeconomic risks, but it also seemed to me then that in a world short of risk-bearing capacity with an outsized equity premium virtually anything that induced people to commit their money to long-term risky investments by creating either the reality or the illusion that finance could, in John Maynard Keynes's words, "defeat the dark forces of time and ignorance which envelop our future".

But the events and economic research of the past years have demonstrated...I should have read a little further in Keynes, to "when the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done".

When we look back at something that happened in the past, it is much easier to see how something could have been done differently or prevented --- usually because we have more of the facts and a better understanding after the event, hence the term "hindsight is 20/20".

Today the banks are bigger than ever, and still "too big fail" --- but even with hindsight, the Attorney General Eric Holder believes that the bankers are still "too big to jail".

Pro-corporate Supreme Court deals blow to Workers

Employment Discrimination:

When a supervisor illegally discriminates against an employee, the employer is responsible under federal law. But a 5-4 Court in Vance v. Ball State ignored how workplaces really work and severely constrained who counts as a supervisor in employment discrimination cases. This will make it much easier for companies to avoid liability when someone is discriminated against by an employee who directs their day-to-day activities and exercises control over their work conditions but doesn't technically have the power to take “tangible employment actions” against them (like hiring or firing them).

On the same day, the same five far-right Justices in University of Texas Southwestern Medical Center v. Nassar made it much harder for employees to show that they were retaliated against for daring to complain about illegal discrimination. The fact that retaliation against complaints of race or sex discrimination is race or sex discrimination went out the window. The dissent accused the majority of being driven by their personal zeal to reduce the number of retaliation claims filed against employers, in stark opposition to the intent of anti-discrimination statutes.

Letting Corporations Ignore Laws Designed to Impose Reasonable Limits on their Power:

In Mutual Pharmaceutical v. Bartlett, the 5-4 majority took another step in immunizing certain drug manufacturers from state lawsuits against their dangerous products. Left to suffer was Karen Bartlett, who took a generic drug that caused 2/3 of her skin to deteriorate, burn off, or become an open wound, while also making her nearly blind. The majority twisted logic to conclude that the generic drug manufacturer could not comply with both state and federal laws, so state laws got chucked. Justice Sotomayor's dissent accused the majority of imposing their own policy rather than applying the law.

In American Express v. Italian Colors Restaurant, the same 5-4 majority gave large corporations a road map on how to force customers into agreeing to surrender rights they thought were protected by federal law. In this case, Amex used its monopoly power to force a local restaurant into an agreement to settle their disputes by one-on-one arbitration (not a lawsuit of any type, and not class-based arbitration), with terms that prevented it from ever being able to challenge the corporate giant's illegal exercise of monopoly power. The majority ignored precedent saying that courts should not enforce arbitration agreements that prevent parties from vindicating their federally protected statutory rights.

This trend extended even to human rights abuses in Kiobel v. Royal Dutch Petroleum. Victims of atrocities in Nigeria accused the oil giant of encouraging the Nigerian military to commit those atrocities, and they sued under the Alien Tort Statute. The Court unanimously concluded that American federal courts could not hear the claims of this particular set of plaintiffs. However, the five arch-conservatives set up a broad rule that makes it all the more difficult for such cases to be heard in the future.

Americana for Sale - Foreign Investment in the U.S.

Bain Capital

It's nothing personal, it's just business.

American CEOs earn the highest executive salaries in the world, but their companies are offshoring jobs overseas for cheaper labor, saying they "have to be more competitive in the global marketplace". But if American wages (as well as regulations and taxes) are supposed to be such a huge disadvantage, then why are so many foreign businesses buying American businesses and paying American employees?

American Standard (based in Piscataway, New Jersey) has a history dating back to the 1800's. It's now principally owned by Sun Capital and Bain Capital. Recently Lixil Corp. (a Japanese company) agreed to pay about $342 million for what is now known as American Standard Brands, the 138-year-old U.S. maker of toilets and bathroom and kitchen fixtures.

In August 2005, in another attempted buyout of a U.S. company, Chinese oil and gas giant CNOOC offered $18.5 billion to buyout the energy firm Unocal (Union Oil Company of California), as a joint bid by Bain Capital. Some U.S. lawmakers said American companies would struggle to compete against China's state-owned and subsidized company, potentially posing national security concerns in the vital energy market. So the largest proposed purchase of a U.S. company by a Chinese one was eventually withdrawn and Chevron's proposal was ultimately successful.

Other notable withdrawn Chinese buyouts of U.S. companies include Qingdao Haier's $2.3 billion proposed buyout of the American icon Maytag in 2005. And there was also China's Superior Aviation's $1.8 billion bid for another American icon, Hawker Beechcraft, headquartered in Wichita, Kansas.

The Committee on Foreign Investment in the United States (CFIUS), a unit of the Treasury Department, is tasked with overseeing these deals, but typically the government is looking for matters of national security --- and it is rare for CFIUS to block deals. During 2011, the most recent year with data available, the CFIUS was notified 111 times of deals that fell under its purview. Of those 111 covered deals, 40 were investigated and just five were withdrawn during that investigation.

Recently China's top pork producer, Shuanghui International, offered to buy the U.S. pork producer Smithfield (valued at about $4.7 billion without debt).  Including the assumed debt, the deal would be the biggest Chinese buyout of a U.S. company ever. The proposed buyout is a new chapter in questions about safety of food and the quality of goods from global companies.

Richard Raymond, former undersecretary of Agriculture for Food Safety (and now a food safety and public health consultant), says "I'm surprised and disappointed. I just hate to see a large American company like that going under foreign ownership. From a safety standpoint, they're still under USDA's Food Safety Inspection Service, so I don't think that's an issue."

Meaning, unless pork is a matter of national security (not considering food safety), the deal to sell Smithfield may go through --- and another American icon becomes a foreign-owned company. As our toilets go, so goes our bacon. Americana is up for sale to the highest bid.

Budweiser is owned by Anheuser-Busch InBev, a Belgian and Brazilian company with headquarters in Leuven, Belgium. Its U.S. operations include a dozen breweries plus hops farms, malt plants, barley elevators and a rice mill.

Alka-Seltzer is owned by Bayer (as in aspirin), a German pharmaceutical company. It operates multiple sites in the United States, for manufacturing, administration, marketing and research and development.

The Good Humor ice cream brand was introduced in Ohio in the 1920s. The product was sold from trucks and grew so popular that it went national within a decade. In 1961, Thomas J. Lipton (as in tea) acquired it. The company's parent, Unilever, a British-Dutch multinational company, merged Good Humor with its other ice cream brands, Breyers, Klondike Bar and Popsicle in 1993. (and is now Good Humor-Breyers)

Perhaps no convenience store chain is better known among Americans than 7-Eleven, originator of the Slurpee and the Big Gulp. It operates more than 7,000 stores throughout the country. It operates nearly twice that many in Japan, home of Seven & I, the Tokyo company that now owns the U.S. chain.

Gerber is one of the best-known makers of baby products in the United States. The company was founded in Michigan in 1927, and its pureed bananas, pacifiers and baby bottles have been flying off U.S. store shelves ever since. In 1994, the company merged with Sandoz Laboratories, which merged with another company in 1996 to form drug-maker Novartis. In 2007, the company sold off Gerber to the Swiss multinational Nestlé (as in chocolate) for $5.5 billion (However, there's still Hershey).

Harvey Firestone founded his tire company in 1900 in Akron, Ohio. Firestone Tire and Rubber hit the big time a few years later when it became the exclusive supplier of tires to Ford Motor, and for decades, it was profitable. The company fell on hard times in 1979 and was sold in 1988 to Bridgestone in Japan. It now operates several businesses as Firestone Diversified Products.

The founding of John Hancock Life Insurance dates back to 1862. Between John Hancock’s 150-year vintage and the founding father who provided its name, anything more "American" would be hard to imagine. However, John Hancock was acquired in 2004 by Manulife Financial, a Canadian insurance company.

Frigidaire was founded in 1918 in Fort Wayne, Ind. The company was owned by General Motors (GM) from 1919 until 1979, when it was sold to White Sewing. Seven years later, White Sewing, along with Frigidaire (as in kitchen appliances) was sold to Electrolux, the Swedish appliance company.

The first Holiday Inn opened in 1952 in Memphis, Tenn. and took its name from the 1942 Bing Crosby film of the same name. In 1988, Holiday Inn was purchased by Bass, a U.K. company -- but today, it's owned by InterContinental Hotels Group, another UK company.

Foreign invertors aren't just buying iconic America companies, but real estate too. The Chrysler Building is one of the landmarks of the Manhattan skyline. Located on 42nd Street and Lexington Avenue, it's New York's third-tallest building and a towering tribute to both Chrysler and the city that it calls home. The Art Deco building has had two foreign owners in the last 11 years. TNW, a German investment group, bought a 75% stake for $300 million in 2001. Seven years later, the Abu Dhabi Investment Council bought it, and now owns 90% of the building --- and Chrysler itself is now a subsidiary of the Italian multinational automaker Fiat.

So far this year, 484 U.S. companies that have been bought by foreign companies worth $43.6 billion. Of those, Chinese companies have bought 10 of those companies worth $10.5 billion.

But if American wages (as well as regulations and taxes) are supposed to be such a huge disadvantage in the global marketplace, then why are so many foreign businesses buying American businesses and paying American employees? Nike pays their workers 20¢ an hour in Vietnam, so why aren't all these foreign investors going to Vietnam instead? And why aren't American business fleeing our shores?

It's not that wages in the U.S. are too high, or that government regulations are too strict, or that corporate taxes are too high. Companies like Walmart pay their employees ("associates") an average of $8.50 an hour, forcing many of their workers to use government programs such as SNAP and Medicaid. Companies such as Nike and Apple use "contract manufactures" in low-wage countries to produce their products. And the "effective" corporate tax rate that most U.S. companies pay is lower than China's. And government regulations are constantly under attack by corporate lobbyists, endangering public safety (products, food, medicine, and the environment --- not to mention all the illegal activities in the financial sector.)

No, it's the major institutional investors --- such as the banks, hedge funds, and the private equity firms, such as Vanguard and Bain Capital --- that puts pressure on these firms to constantly increase their profits...and at any cost to the U.S. government's revenues (in the form of lower taxes), the workers (in the form of lower wages and worker safety), consumer protections (such as for products, food and medicine) and the environment (for clean air and water. Have you seen Beijing's smog lately? Mitt Romney accused Obama of wanting to be more like Europe, when Romney would rather we be more like China.)

In 2011 President Obama approved another free-trade agreement (Trans-Pacific Partnership, pushed by business groups and lobbyists such as the U.S. Chamber of Commerce) with South Korea, Panama and Colombia --- so offshoring (globalization) will continue to escalate. A CRS Report prepared for members and committees of Congress in 2012 says 29% of American jobs are still prone to offshoring to low-wage countries, and include: China, India, the Philippines, Argentina, Brazil, Bulgaria, China, the Czech Republic, Hungary, Jordan, Lithuania, Mexico, Slovenia, Russia, and Ukraine (President Obama is in Africa today). The most recent (and biggest ever) free-trade agreement is currently pending.

Also, thousands of wealthy foreigners have been flocking to America and making business investments here, including in real estate (which has recently helped drive up home values) --- and putting themselves on a path to citizenship in the process. Under the U.S. government's  Immigrant Investor program, foreign investors can get conditional visas that puts them in the front of the line, and allows them and their families to live, work and attend school in the U.S. But to qualify for the visa, they must invest at least $1 million in a new or recently created business, or $500,000 for businesses in rural or high-unemployment areas. In other words, U.S. citizenships are up for sale as well.

So it's not just U.S. politicians that are up for sale to the highest bidder, so is the rest of Americana. It's nothing personal, it's just business. In America, everything has a price. It's called capitalism. It's the American way.

Excerpted from Forbes: For years, economists have been talking about a structural shift in the global economy. In that shift, multinationals would have to choose where to spend their capital and ad budgets. Do you increase spending in the United States, or do you open a new factory and service center in Asia? That question was answered in 2012. For the first time ever, global corporations invested more in emerging markets than the core economies of U.S., Europe and Japan, according to the 2013 World Investment Report.

Developing economies absorbed more foreign investment than the developed ones, continuing the trend of cash rich corporations. This growth was driven by foreign investment in the oil and mining industries, as well as in the manufacturing and service industries --- driven by continued investment in lower-income countries such as Cambodia, the Philippines, Myanmar and Viet Nam for labor-intensive jobs.

The BRICS countries (Brazil, Russia, India, China and South Africa) continued to be the leading recipients of foreign investment among emerging countries. But the U.S. remains No. 1 for foreign corporate investments. Companies invested over $160 billion in the U.S. last year. In second place was China with $121 billion. Brookings: "By 2020 China’s foreign investment will surpass $1 trillion, of which a good share will flow to the United States."

But if American wages (as well as regulations and taxes) are supposed to be such a huge disadvantage, then why are so many foreign businesses buying American businesses and paying American employees? Why don't companies like Nike, Microsoft, Apple and Facebook all move to countries like Cambodia, the Philippines, Myanmar and Viet Nam?

Friday, June 28, 2013

Offshoring Hurting Workers & Long-term Unemployed

The year 1979 may very well have been the year when the middle-class in America had first began it's long decent into oblivion. According the U.S. Bureau of Labor Statistics, manufacturing in the U.S. peaked in 1979 when we had over 19.6 million manufacturing jobs --- but it has been on a downward trend ever since. And 1979 was also when the mergers of labor organizations began increasing --- when the total number of union members had peaked at over 22 million. And so it' no coincidence that today the labor force participation rate is at the lowest it's been since 1979. And 1979 is also the year when the U.S. broke off formal diplomatic relations with Taiwan and established full diplomatic relations with China.

Major U.S. companies initially responded to heightened competition from Japanese and European multinational corporations by opening factories abroad during the 1970s and 1980s. They manufactured goods that were formerly produced by comparatively well paid, often unionized, factory workers in the U.S. (Read this December 2012 Congressional Report on the Offshoring Jobs).

It's unclear how many jobs were offshored between 1979 and 2001, but data shows there were 398,887 private manufacturing establishments of all sizes in the United States during the first quarter of 2001, and by the end of 2010, the number had declined to 342,647 --- a loss of 56,190 factories. So the onslaught has continued.

And according to the Wall Street Journal, since then, thirty-five big U.S.-based multinational companies have added jobs, but nearly three-fourths of those jobs were overseas. Collectively, these companies employed roughly 6.4 million workers world-wide.

As of 2013: Nike's factories in China
and other Asian emerging markets.

As of 2013 (from Nike's interactive map) Nike has 777 factories in 43 Countries employing 1,009,496 workers. Just in Vietnam alone Nike has 71 factories with 311,548 workers, mostly female, with an average age of 30.

For a complete list of Nike's factories and employees, down the PDF from Nike's website or the Excel version.

As with many other major corporations, the Vanguard Group is the largest institutional investor of Nike --- followed by many other banks and private equity firms.

From Nike's website: "When we look at our overall impact on the world, the needs of nearly one million workers in Nike’s contract supply chain overshadows any other group."

Nike is but one of many examples (albeit, a very classic example) of globalization.

On May 12, 1998 Nike's CEO Phil Knight gave a speech at the National Press Club where he spoke of Nike’s reasons for moving factories out of the United States and into mainly third world countries in Asia. "During the 1990s, all our experiences have caused us to really believe in the benefits of international trade. The uplifting of impoverished people, the better values for consumers in industrialized nations, and most of all, the increased understandings between peoples of different cultures."

That seems to be the morality and mindset of a typical globalist, someone who advocates a policy of placing the interests of the entire world above those of individual nations. As one major American hedge fund manager had privately admitted: "The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade."

But then again, are they really so concerned about lifting the poor out of poverty in third world nations, or is it just a simple matter of plain old fashion human greed --- and they are only using these humanitarian excuses as a cause for their actions?

Since the 1990's many U.S. companies have been criticized for offshoring jobs. Businesses in the manufacturing, tech and apparel industries, such as Apple and Nike (to name just a few) have been often targeted for using cheap labor in unsafe working conditions abroad.

The World Trade Organization cites a report from 2000 by the US Department of Labor (Displaced Workers Survey) that used data from 1975–95. It found that rates of job losses were particularly high in sectors with high levels of imports and sectors with high import growth.

The Bureau of Statistics Displaced Workers Summary from August 24, 2012 reports there were a total of 12.9 million displaced workers from 2009-11. The prior survey, which covered 2007-09, numbered 15.4 million. The previous survey reflected the steep decline in jobs associated with the Great Recession that began in December 2007 and officially ended in June 2009. According to the Center on Budget and Policy Priorities, 8.7 million net jobs were actually lost during the last recession (not considering churn in the job market).

Prior to the last recession, there appeared to be enough job growth to compensate for most of the lost jobs due to offshoring, although, many Americans were forced into taking lower paying jobs (such as in the retail and fast food industries) and most often without any benefits (such as healthcare and pension plans). And many times they only found part-time or temporary positions, which set them on a never-ending course of "job hopping".

But since the recession, long-term unemployment has been a huge drag on the economy --- and according to the Bureau of Labor Statistics, with 11.7 million unemployed Americans, and 8 million working part-time, and another 7 million working multiple jobs to make ends meets, all those millions of offshored jobs are looking even more appetizing.

Since the Great Recession, although old news, major attention has again returned to offshoring (some even say "reshoring") --- and in conjunction to the Occupy Wall Street movement, an ever increasing focus has also been on wealth inequality, income disparity, corporate greed (and CEO pay), and stagnate wages and the minimum wage. And then it all comes back again full circle --- back to offshoring for cheap labor.

According to a new report by the research firm Audit Analytics, large U.S. companies have boosted their offshore earnings by 15 percent last year --- to a record $1.9 trillion, while avoiding hefty tax bills by keeping their profits abroad (rather than invest in American workers). Their overseas earnings stockpile has climbed by 70 percent over the past five years, but most American workers aren't sharing in the corporate booty. If they aren't under- or unemployed, 50% of the work force who are working take home $27,000 a year of less. And instead of seeing a pay increase, saw the biggest drop in hourly pay on record (workers haven't been reaping the same rewards that their employers have been).

Nike is NOT an American Icon, but a Typical One

Wall Street Journal (June 27, 2013) Nike's profits are up again --- their fourth-quarter profits jumped 22%. Nike also expects overall profits for fiscal 2014 to rise in the low double-digits as sales are expected to climb, helped as Nike gears up for the 2014 World Cup in Brazil. Margins are expected to strengthen throughout the year, helped by higher selling prices. Demand for athletic gear in the U.S. has also been strong in recent years, and Nike's sales have been bolstered by apparel tied to a contract with the National Football League.

Nike's grand strategy for reaping in huge profits every year is really quite simple: just don't pay workers. That's how they sell a shoe for $180 that only costs just $5 to manufacture.

The people who are laboring to make that $180 pair of shoes, and other Nike gear and apparel, are mostly young women, ages 16-24 (Although, in Pakistan, children were once sewing Nike soccer balls for $0.60 a day.) In Vietnam the average worker is paid about $0.20 an hour, or $1.60 a day. (The cost of eating is reportedly $2.10 a day).

And workers in Vietnam are forced to work 65 hours a week. Not only are they forced into overtime without compensation, the 65 hour work week is in clear violation of Vietnamese labor laws. In the Sam Yang factory in Vietnam there is only one doctor who works two hours a day to service 6,000 workers.

Employees in Vietnam have stated that verbal abuse and sexual harassment are frequent and that corporal punishment is often used. Supervisors have been reported to frequently grab the women's breasts and buttocks.

Nike has reportedly responded to many of these allegations by widely publishing their Code of Conduct in the factories --- but in Vietnam, few workers have even heard of such a code, nor ever learned what provisions were within it.

Although Nike argues that they enter a country only when it is ready to make shoes, and then leaves when it has developed past this point, the data suggest a different story. Nike's movement directly correlates with a increased standard of living and increased union bargaining power. When the pressure for wage increase is put on, just like with most other American-based multi-national manufactures, Nike moves on.

This corporate strategy allows for the cheapest labor costs and bargains with the worst governments. The result? Companies like Nike can keep manipulating their stocks, dodging corporate taxes and making shoes for only $1.60 a day --- just so that Nike's CEO can earn $96,000 a day. Heaven forbid if American workers ever made Nike shoes, or else Nike's CEO might only earn a measly $10,000 a day (unless Nike raised the price on their cow leather and rubber shoes to $500 a pair.)

And Nike is just but ONE of many U.S. corporations that operate like this. That's how they can afford to pay their CEOs too much. Here's a list of the top paid CEOs from Forbes and what they earn in just ONE year --- many of them on the back of cheap and exploited foreign labor.

Last year's congressional study on offshoring says 29% of U.S. jobs are prone to outsourcing --- and then add in all the new work visas with the new immigration bill --- on top of the long-termed unemployed (and the 99ers) that we already have, and there were be plenty of shoe-shine jobs available for a nickel a shine. Bring jobs back to America and pay workers a "living wage"...no excuses, Just Do It!

REPORT: 1/3 of U.S. Jobs Prone to Offshoring

Congressional Report on the Offshoring of Jobs (December 2012)

Passages in this post were excerpted from the report "Offshoring (or Offshore Outsourcing) and Job Loss Among U.S. Workers" [The extension of task fragmentation] by Linda Levine, Specialist in Labor Economics, December 17, 2012. This is a CRS Report prepared for members and committees of Congress. The full report is here in PDF. Please read this very comprehensive (and somewhat disturbing) report on the future of offshoring American jobs to low-wage countries.

The change in the skill (educational) level of jobs being moved abroad has led some to wonder whether the offshoring of service, unlike production, activities will result in college graduates facing a dwindling supply of entry-level jobs that have traditionally served as stepping-stones to higher skilled and higher paying positions.

The notion that offshoring depresses job growth in the United States appears to underlie support among some policymakers for measures meant to encourage U.S. firms to expand employment domestically rather than abroad. While some members of the public policy community also support the adoption by other countries of trade and labor policies intended to level the playing field for U.S. companies and workers in the international marketplace, still others advocate for limited government intervention as the best means of promoting economic growth.

The overseas relocation of manufacturing work predates by decades the recent wave of services offshoring. Major U.S. companies, initially responding to heightened competition from Japanese and European multinational corporations, opened facilities abroad during the 1970s and 1980s that turned out goods formerly produced by comparatively well paid, often unionized U.S. factory workers (e.g., assembly-line workers in the auto industry).

U.S. companies reacted to the back-to-back recessions of the early 1980s by focusing on their core missions and contracting out activities that specialized domestic enterprises could perform more efficiently (e.g., janitorial services). Firms also restructured their operations by outsourcing jobs to employees of temporary help agencies, professional and business services
establishments (e.g., accounting firms), and independent contractors located in the United States. The persistence of these changes over time indicates that domestic outsourcing of formerly in-house functions is a permanent reorganization of how work is performed in the United States.

Another development was the educational systems of low-wage foreign nations graduating an abundant supply of well educated (sometimes English-speaking) individuals. In some cases, the number of persons with IT and accounting skills reportedly exceeded the immediate needs of their local economies (e.g., China, Eastern Europe, India, and the Philippines). With English the language of the computer industry worldwide, IT services can be provided from many non-English-speaking, comparatively low-wage nations (e.g., Argentina, Brazil, Bulgaria, China, the Czech Republic, Hungary, Jordan, Lithuania, Mexico, Slovenia, Russia, and Ukraine).

Research suggests that the extension of task fragmentation to service activities accounts for the greater relative contribution of offshoring to increased wage dispersion (inequality) in the United States in recent decades. Technological change and de-unionization appear to have accounted for relatively more of the so-called polarization of wages that occurred during the1980s and 1990s.

Researchers have mostly focused on determining which jobs are susceptible to being moved abroad and then on estimating U.S. employment in these potentially offshorable activities in a given year. One such empirical analysis was undertaken in the early years of services offshoring by Bardhan and Kroll. They estimated that more than 14 million jobs in 49 service occupations, representing about 11% of total U.S. employment in 2001, have attributes that could allow them to be sent overseas.

The occupational groups identified as being vulnerable to offshoring include office support (e.g., data entry and payroll clerks), auditors and tax preparers, computer programmers and software engineers, medical transcriptionists and paralegals, and technical writers. They are concentrated in such industries within the service sector as information, finance and insurance, and professional and business services.

The researchers also took an occupational approach and created an index of offshorability for hundreds of blue-collar, white-collar, and service occupations based on the degree to which the jobs required personal interaction that necessitated workers to be in close proximity to customers. It was estimated that a majority of occupations (533) and employed persons (92.6 million in 2004) are non offshorable—that is, they are completely immune to offshoring. Conversely, it's estimated that a minority of U.S. occupations (about 200) and workers (almost 30 million) fall in the highly offshorable and offshorable categories. Two categories were considered, which included 22.2% of U.S. workers in 2004, too conservative an estimate of potentially offshorable jobs in light of technological and other advances expected to arise in the coming years...and  totals almost 40 million workers --- or 29% of all U.S. jobs.

Thursday, June 27, 2013

For Older Workers, Long-term Unemployment Persists

"We're losing the battle. More and more of them are lost every single week. And once they're lost, once they start that march to the safety net, they're done, they're done." ~ Joe Carbone of WorkPlace.org on the long-term unemployed.

* Below is excerpted from a Senate hearing titled "Missed by the Recovery: Solving the Long-Term Unemployment Crisis for Older Workers". Hyperlinks in the statements below, as well as comments in parentheses, were only provided as references. Who were witnesses at the hearing? An employee of the Government Accountability Office, the executive director of the National Employment Law Project, the CEO of a temp agency, a policy director from a libertarian think tank, and an unemployed British-born older worker. The following is what our government has known about long-term unemployment (especially for older workers) and when they knew it

Opening statement of then-Senator Herb Kohl (D-Wisconsin), Chairman of the hearing

While Americans were hit hard by this recession, the ramifications for older workers are particularly severe. Once older workers lost their jobs, they struggled far more than other groups to find work again. In 2007, less than one in four unemployed older workers was out of work for more than half a year. But only four years later, more than half of unemployed workers over 55 are confronting long-term unemployment.

As a bipartisan opinion in the New York Times over the weekend stated, this problem is, quote, ``nothing short of a national emergency.'' (The Human Disaster of Unemployment) One solution that shows real potential was developed in Connecticut by one of our witnesses here today, Joe Carbone. He has created an innovative program called Platform to Employment that works individually with those out of work to ensure that they have updated skills to thrive in today's economy. The program partners with local businesses to place these workers into internships. So far, 70 percent of those internships have turned into jobs. This program shows real promise to get people back to work and I believe it needs to be spread across the country.

However, it's also important that we look at some of the other reasons why older workers have been kept out of work for so long and address what we can do about it. We asked GAO to look into the issue and it found that employers are wary of hiring older workers, sometimes because they're concerned about health care costs, but other times because they assume that if one is over 55 or has been out of work, then your skills are not up to date.

GAO surveyed experts who highlighted a number of approaches the government could take to help address this problem. One suggested approach addressed in my Older Workers Opportunity Act would provide tax credits for businesses employing older workers with flexible work programs. Another area the experts mentioned is discrimination. Today I'm announcing my support for the Protecting Older Workers Against Discrimination Act (PDF from AARP) a bill authored by Senators Harkin and Grassley that is aimed at restoring the rights of older workers to pursue claims of age discrimination.

One common theme we've heard is that older workers want to keep working, not only because they need the money, but because they want to remain relevant and productive members of society. We need to encourage this. Left unchecked, long-term unemployment among older workers is a problem that will continue to grow as our work force grays. In only four years from now, the Bureau of Labor Statistics projects that nearly one in four workers will be over the age of 55. We hope this hearing raises awareness about this growing problem and provides some solutions to consider."

Statement of Sheila Whitelaw, an unemployed older worker: A Philadelphia woman who has been out of work for more than two years. She has served as executive director for three nonprofits, worked as a nanny and office manager, and spent over a decade in the retail industry.

Ms. Whitelaw: I am British by birth and, I'm proud to say, an American citizen. I have been an executive director of three nonprofit organizations. I have also worked as a nanny and an office manager and have spent over a dozen years in the retail sector. I have been promoted in many of the jobs I have had and have never been fired. I have an impeccable work history, but now I am out of work and no one will hire me.

I came to this country with a bachelor's degree in English literature. I married and had two daughters. We moved from the city of Philadelphia to the suburbs so that my daughters could receive a great education. Once my children got a bit older, I decided I needed to go back to work. I found a position as an office manager and stayed for eight years. I then worked for three nonprofit arts organizations.

My final position as executive director was cut short as my daughter was diagnosed with leukemia. Our family moved out to Seattle for five months so that my daughter could receive a bone marrow transplant.

Upon returning to Philadelphia, I cared for my daughter for another year. I was in more of a caregiving mode and at that time I found a part-time nanny position. I stayed with the family for four years and then decided that I missed working with adults and found a job selling women's clothing. In my 12 years at the boutique, I worked my way up from sales associate to manager. But, unfortunately, in January 2010 the store lost its lease and the owner decided not to reopen.

I applied for unemployment benefits and was approved. Then came the hardest part of all, looking for work as an older worker. I didn't know how long it might take to find a job, the economy was in such bad shape. These past two years have been a complete nightmare. I have sent out hundreds of resumes and made many cold calls, as well as attending job fairs. I spend several hours every single day, including weekends, searching for openings on the Internet. I have had over 15 interviews, but rarely have I received a response.

I gather that many employers can calculate my age by looking at my resume or looking me up on line. Many applications require that I put my date of birth to even submit the forms, and I suspect I am weeded out in that process. I have also stopped putting the date of the boutique closure on my application for fear that employers will see how long I have been out of work and judge me because of that.

Last summer as my unemployment benefits ran out, I had to put my husband in a nursing home because of his increasing inability to take care of himself with Alzheimer's. I moved to a smaller apartment and took a position in a hotel gift shop. The conditions were absolutely deplorable and, after finding mice droppings in my handbag, I quit.

Although the State informed me that I might be eligible for a recent extension of unemployment benefits, I had forfeited my eligibility because I left the job after four days of work. I now live on my social security and $35 a month in food stamps. Life is exceedingly hard. I am working with a social worker to find subsidized housing for me in the future. I can work, I need to work, and I want to work, but that seems very far off right now. I didn't have any real retirement money and a small savings accounts is almost depleted.

At this point I don't expect to retire, even if I'm able to find a job. I plan to keep working as long as I am physically able and I am blessed to be in good health. Contrary to what employers think, age is just a number. My age does not define my ability, negate my work experience, or reduce my dedication to the job at hand.

Statement of Charles A. Jeszeck - Director for Education, Workforce, and Income Security Issues at the U.S. Government Accountability Office. He's spent over 26 years with GAO working on issues concerning defined benefit and defined contribution pensions, PBGC, social security, unemployment insurance, as well as older worker unemployment issues.

Mr. Jeszeck: The recession has had a devastating effect on millions of workers of all ages, resulting in lost economic growth and reduced income and in the stress of having to seek new work simply to pay the bills. My comments are based on the findings of our report that this committee is releasing today. In particular, I will focus on the growth of long-term unemployment among older workers and its implications for their retirement security. In summary, while older workers are less likely to lose their jobs compared to younger workers, it takes them longer to find new work. Further, if they are lucky enough to be rehired they are more likely to be reemployed at lower wages.

Regarding retirement, long-term joblessness can lead to reduced future accruals for workers with traditional pensions, while workers with 401[k] plans will lose contributions or may draw down their accounts. In each instance, older workers have less time to recoup their losses than do younger workers.

As in past recessions, the jobless rate for older workers has been lower than for younger workers. The jobless rate for workers age 55 and over peaked at 7.6 percent in February 2010, compared to January 2010 peak of 10.6 percent for all workers. However, older workers consistently suffer longer spells of unemployment. In 2007, the median duration of unemployment was ten weeks for older workers, compared to nine weeks for prime age workers age 25 to 54. By 2011, the median duration for older workers had increased to 35 weeks, compared to 26 weeks for prime age workers. Also in 2011, over half, 55 percent, of jobless older workers were unemployed for 27 weeks or more and 15 percent were jobless for 2 years or more.

Rehired older workers displaced from work between 2007 and 2009 also generally sustained greater earnings losses than prime age workers. The median earnings replacement rate for these older workers was 85 percent, meaning that on average older workers in their new jobs earned only 85 percent of their previous wage. This is compared to 95 percent for prime age workers. About 70 percent of these rehired older workers sustained some job loss, compared to 53 percent of prime age workers. Job loss can affect the retirement security of older workers in many ways. For those fortunate enough to have a traditional pension, long-term unemployment can lead to fewer years of accruing benefits from growth in wages in service and may prevent short-tenured employees from vesting. For those workers with 401[k] plans, long-term joblessness can result in lost employee and employer contributions and can lead a worker to draw down her account balance. In our report we analyzed a worker 55 years of age with an average 401[k] balance of $70,000 who was unemployed for 2 years, drew down half of her account for living expenses, and then reinstituted contributions upon reemployment. Using rate of return assumptions from SSA, we found that she had still not made up the losses to her account by age 62. Such drawdowns may be fairly common. An October 2011 AARP survey of workers age 50 and over found that nearly a quarter said that they had used all of their savings during the past three years.

Long-term joblessness also hurts those workers who rely primarily on social security. Although it favors low earners, because the social security retirement benefit formula relies on claimant's highest 35 years of wages long-term joblessness of a year or two could reduce their benefit. Further, long-term unemployed workers nearing age 62 may opt to claim benefits earlier than they would have if they had still been working. The SSA Office of the Chief Actuary has estimated that about 6 percent, or 139,000, more older workers filed for benefits between 2007 and 2009 than had been expected without a recession. Claiming benefits early, particularly for life-long low earners, can increase the risk of poverty at older ages. Even in the best of times, a secure retirement is a difficult prospect, especially for those workers with no traditional pension and little retirement savings. The effects of the recent recession illustrate how daunting that endeavor will be for many in the years to come.

Statement of Joseph Carbone - President and CEO of The WorkPlace in Bridgeport, Connecticut. Mr. Carbone has developed the Platform to Employment, a public-private partnership that provides participants with placements at local companies. His program has been featured on 60 Minutes in a segment titled ``Trapped in Unemployment.''

Mr. Carbone: Certainly the word ``scourge'' is a strong word and I think it understates the level of social change that is being caused to the American workforce as a result of this horrible recession. It's not just the number of people that are unemployed; that in and of itself is certainly staggering. It's the length of unemployment that really does present the greatest challenge to the American workforce system. It's not unusual, in fact it's a daily occurrence, that you're interacting with people who have been out of work two, three, four years. It's not uncommon.

Understanding and developing an appreciation for the damaging effects of long- term unemployment is something for national discussion and I commend you for bringing it up here. I saw the same article in the New York Times over the weekend. Something happens at the one-year point of unemployment. It's terribly insidious and it's kind of structural. We hear the term ``structural'' usually in reference to the economy, but something structural with respect to the person. It's the mind. It's no longer just being out of work; it's the mind. It's one's self-esteem, it's one's confidence. It's the emotional effect that unemployment has with respect to family and children and how you feel about life and things of that sort.

At a time when it's more and more difficult to convince business that you're the right candidate for the job, where you need to be at your best, it seems to be a case in which you're facing a mountain of challenges. Overcoming this is really daunting for anybody, but it's compounded for older workers. They're dealing with the stigma of being older. They're dealing with the prejudices that come with it, with the discrimination that comes with it, and this mean perception that lots of folks have that you're looking for something for nothing or your skills are too dull to be of help to anybody. It's a challenge if you're under 50. It's a category 5 hurricane if you're over 50.

I fear that we're losing the battle. We've already had thousands of people in this Nation reach the point where their benefits have expired and thousands more every week fall into that category. And until or unless there are relevant services and tools that are part of the American workforce system, that understands the effects of long-term unemployment and provides them for this population, so that population stays connected to the system and is served, we will continue to lose them. That one-year point of unemployment is a critical time to either keep them and catch them or to lose them.

Three million people or more have exhausted benefits already and another three million may very well exhaust benefits by the end of this year. Now, there's no shortage of stats. You've heard them all. But the increase in terms of the percentage of the population of 55 and older that are unemployed for a year is four times what it was four years ago.

Our program, Platform to Employment, was basically a research project, and I think very clearly it showed that if you address the issues of one's self-confidence, the emotional issues, and you recognize the position of benefit, the buyer's market that business has, you can't help to give them a chance to reenter the workforce. Short of that, it's very, very difficult. Now, time may be kind of running out here. As I said before, the one-year point is that point. But we're going to be having what could be two or three million people reach the conclusion of benefits at the end of this year.

It could be 25 to 30 percent of them might very well be people that are 55 and older. The more time that people are unemployed, the more hopeless and desperate that they become. After a while they stop looking for work, they give up, and they rely upon the regional safety net for support.

The SCSEP program, the Senior Community Service Employment Program, may not have been designed for this particular population, but I think it's a service vehicle that you should consider. It keeps the focus on employment. I see no merit whatsoever in moving this program from the U.S. Department of Labor to HHS. This is a plan that's been considered for two or three years. It sends exactly the wrong message to older workers in particular who are long-term unemployed that you're a social service issue, you are not an employment issue. You ought to take that program, examine the regulations, declare long-term unemployed people a group that is a priority in the program, and consider the investment option [and] the cost of the safety net, as opposed to the cost of investment in the person in the program. Do a pilot project. I suggest to you that it will be thousands of savings per person to invest on the employment side as opposed to the safety net and, most important, you're giving people a chance to have the American dream and to have opportunity, which is a basic fundamental right of being an American.

Statement of Diana Furchtgott-Roth - A Senior Fellow at the libertarian Manhattan Institute for Policy Research. Formerly Ms. Furchtgott-Roth served as Chief Economist at the U.S. Department of Labor, as well as Chief of Staff, and President George W. Bush's Council of Economic Advisers.

Ms. Furchtgott-Roth: "Unemployment is a serious issue for older workers and also a problem for other workers. Millions of Americans are looking for work. I agree that older workers face serious difficulties in today's underperforming labor market, but I disagree with the GAO report's implication that the problems facing older workers require policies that treat older workers differently from younger workers. Such policies would needlessly set one generation against each other. They rest on the false premise that the problems facing older workers are the result of discrimination or other factors that work specially against older workers and in favor of younger workers. In fact, the problems facing older workers in today's stagnant labor market are not dissimilar from the problems facing all workers--lack of robust growth.

Over the past ten years, employment has increased among Americans 55 and older by 8.9 million. At the same time, it has declined by 3.1 million in the 25 to 54 age group and declined by 313,000 among those age 20 to 24. The labor force participation rate of seniors has increased by 5.7 percentage points over the past ten years, yet it's declined in other age groups. Compared with those age 20 to 24 and 25 to 54, unemployment rates are lowest for those 55 and over and have seen the smallest increase over the past decade.

In November 2011 the Pew Research Center issued a lengthy study entitled The Rising Age Gap in Economic Wellbeing. It concluded that the gap in wellbeing between older and younger workers was at a record. The older group had 47 times the net worth of the younger group in 2009, compared to a multiple of 10 in the quarter before. Older Americans, the report from Pew concluded, had benefited from appreciation of their homes, higher incomes, and lower unemployment rates.

Younger workers have student loans and no jobs. There was a lengthy article [in the New York Times] called A Generation Hobbled by the Soaring Costs of College showing that debt among some students they interviewed was $125,000 when they graduated.

The reality is that the administration's policies have failed across the board and resulted in a serious deficit of employment opportunities for all workers, old and young alike. The problem will not be solved by special policies that favor one group over another. What we need instead are policies that broadly create more job opportunities for all, with older workers benefiting as much as younger workers.

Just a few sample policies: Add more certainty to the tax system. Rates on income and capital are scheduled to rise dramatically next January 1st [capital gains taxes rose from 15% to 23.8%] creating extensive uncertainty and what some people have called ``Tax Armageddon.'' Older Americans are disproportionately hurt by tax uncertainty because they have fewer opportunities to react to changes, particularly those affecting capital gains. (Editor's note: I strongly disagree with Ms. Furchtgott-Roth's premise.)

Another example that we could do is eliminate the Environmental Protection Agency's new regulations on coal, which are affecting the utility sector, which employs a disproportionate number of older workers. Over 100 coal-fired plants have closed since January 2010. The closing of coal- fired plants causes electric utilities to require higher rates, which harm older Americans on fixed incomes. (Editor's note: I detect an agenda by Ms. Furchtgott-Roth not related to long-term unemployment for older Americans.)

If we approved the Keystone XL Pipeline, Canadian oil could go to our refiners in the Gulf to be made into gasoline and other products. Millions of older Americans live in the States that would benefit from these construction projects. (Editor's note: Again, I detect an agenda by Ms. Furchtgott-Roth not related to long-term unemployment for older Americans.)

One proposed bill that would interfere with job creation is S. 1471, the Fair Employment Opportunity of 2011. The bill would set up another protected class of workers, the unemployed. The unemployed would be allowed to sue employers for discrimination. This would increase the cost of hiring American workers, making it more likely that employers would expand plants offshore, making America a less favorable place to do business. Employers would face more paperwork to show that they weren't discriminating against the unemployed, and trial lawyers would target companies with threats of lawsuits. (Editor's note: Yet again, I detect an agenda not related to long-term unemployment for older Americans. Ms. Furchtgott-Roth is a member of the Manhattan Institute for Policy Research, which is a libertarian American think tank --- and she was an also economic advisor to George W. Bush.)

Statement of Christine Owens - Executive Director of the National Employment Law Project. Ms. Owens previously served as Director of Public Policy for the AFL-CIO and founded and ran the Workers Options Resource Center, which fought for an increase in the Federal minimum wage.

Ms. Owens: Older workers are less likely to become unemployed, but when they become unemployed they are more likely to remain so and to remain so for longer periods of time. Moreover, older unemployed workers are three times as likely as younger unemployed workers to become unemployed because they have lost their jobs, and in contrast younger workers are three times as likely to be unemployed because they are looking for a first job or reentering the workforce, perhaps after finishing college.

Each group would benefit from public and private policies that take into account the discrete problems that they face. We don't want to pick winners and losers, but public policy responses to an unemployment crisis is not a zero sum game. There are two bills currently pending before Congress that we believe would enhance prospects for older long-term unemployed job-seekers.

The first is the Fair Employment Opportunity Act (text). It would bar employers and agencies from refusing to consider or hire qualified individuals simply because they are unemployed. It does not promise a job to any candidate. It does not require employers to consider unqualified candidates. It simply opens the doors that are now shut on qualified applicants simply because they are unemployed.

Similar to existing workplace laws it borrows from, it provides a cause of action for job applicants and remedies for applicants, applicants wrongfully denied the opportunity to apply for a job. And it preserves the right of employers to impose an employment restriction where doing so is a legitimate criterion for the job in question. This legislation is a commonsense solution to a problem that, despite considerable public attention over the last couple of years, has actually persisted.

Recent advertisements continue to express restrictions to limiting job openings to those who are currently employed. We hear complaints from unemployed workers all the time, who come to us with their accounts of having been approached by a recruiter and then, once the recruiter learns the person is unemployed, the person won't be considered.

Also in our testimony we cite examples of headhunters, recruiters, and employment agencies that have gone on the record saying that they are told not to refer unemployed job candidates. This is a real problem. I wish we didn't need legislation to correct it, but it is not self-correcting.

Second, Congress should pass the Protecting Older Americans Against Discrimination Act, which has bipartisan sponsorship of Senators Harkin and Grassley, as well as Senator Leahy. The measure was introduced in March of this year. It would reverse the Supreme Court's decision in 2009 in Gross v. FDL Financial, which upended longstanding and established burdens of proof in employment discrimination cases involving mixed motives and held that under the Age Discrimination in Employment Act plaintiffs must show not only that age was a motivating factor for the employment action, but must essentially disprove any other factor the employer may have relied on, whether the plaintiff knows it or not.

This is a radical decision. It rewrote the law. It disregarded interpretations of Title 7, which is a parallel law, and it has created significant mischief. It has created second-class status for ADEA plaintiffs. It essentially gives employers a green light to discriminate if they had another reason in addition to age discrimination. It creates confusion for trial judges and juries that are hearing dual-basis cases involving both age and gender or race discrimination.

And it has now been extended to the Americans With Disabilities Act, the Rehab Act, and Title 7 retaliation cases. The Protecting Older Americans Against Discrimination Act would right this wrong, restore the standards Congress intended. In the words of Senator Grassley, ``Older Americans have immense value to our society and our economy and they deserve the protections Congress originally intended.''

I want to end by quoting that New York Times op-ed ``What we can't assume is that these problems will correct themselves. For older unemployed workers, their families and their communities and the nation, the situation will only get worse as we wait. Every month of delay is a month in which our unemployed friends and neighbors drift further away.''

Mr. Carbone. [My program] covers long-term unemployed people. It's called Platform to Employment. What we did, it was basically a research project. We wanted to learn more about long-term unemployment, so we looked at a two-year study that we had done in-house with our one-stops. It was clear to us that long-term unemployed people were facing a severe loss of confidence. The emotional issues would certainly inhibit their ability to perform well in the job-seeking side of things.

We also had to recognize that it was a buyer's market, that business doesn't have to consider these people. So we had to make it a case in which a program could be offered that would hold business free of any risk.

So we took 100 people that in microcosm looked like our district. In fact, the statistics pretty much mirrored, I think, the national statistics. And they engaged in the first five weeks, which was all about restoring one's confidence and getting emotional support from specialists during that period, then job search, then going into companies where a job was actually open. We would subsidize the wages, actually cover the wages, for a period of up to eight weeks and they would be on my payroll at WorkPlace, Inc. So the businesses were completely free of risk. Business could have terminated the contract after one day or after eight weeks and not hired the person. We've got 71 percent employment as of today, in full-time jobs that are private sector jobs. These are all people that were two years or longer out of work. They came from all employment disciplines, all walks of life. They came from the Greenwich side of my region and the Bridgeport side of my region. They found life again.

I think [we should] start with the two most essential parts of [my program] and try to establish them in the American workforce system. Dealing with the issue of self-confidence with long-term unemployment must be addressed. There are 3,000 one-stops coast to coast in America. That's where the rubber meets the road, where your constituents that are unemployed and our friends that are, that's where they interact with the American workforce system. If you're long-term unemployed, there is very little difference in terms of what's offered for you than if you're unemployed for three days. So I think you take the issue of a program that can restore their self-confidence, you include the kind of programs that can deal with the emotional issues that will inhibit your ability to be successful at this.

And you look at the standpoint of business, you know, whether or not old tax credits or OJT programs or things of that sort still have relevance. I question that. So the program worked out very well and, yes, I did it with private money, and by doing it with private money it opened the doors to a lot of businesses that if it was government money they would have never really let us in.

Mr. Jeszeck. The economy really needs to create more jobs. That ultimately is going to set the stage for really helping a lot of people.

Mr. Carbone. I can tell you more from the standpoint of the experience that we had with Platform to Employment. I think it takes a while, it takes a long period of time, for people to come to a conclusion that perhaps the level of business responsibility or managerial responsibility I had before is not necessarily in reach at this moment. It takes a while to think in terms of a platform, a way station, a place in which you can get off unemployment and onto employment and then have a chance to kind of get your life back together again. I think it has more to do with that than it does just anything else.

Mr. Jeszeck. One of the things we found, was that if you just looked at unemployment rates among older Americans, that relationship still held true, that generally more education led to lower unemployment. However, once you were unemployed, the likelihood that you would have long-term joblessness was pretty much equal, regardless of your level of education; that once you fell into that group of being unemployed, it cut across racial differences, gender differences, education differences. It does seem that there's some other forces at work here. Once you fall into that category, it's either employer perceptions or the fear that older workers may cost more because of their higher health care costs, or unwillingness to invest in older workers because they might not have enough time at your workplace so you can recoup that investment in their training, a number of different things. But once you fell into that category, it pretty much washed the educational differences out.

Ms. Furchtgott-Roth. One important factor is that the more senior the worker--and people in their 50s are often at the peak earnings of their careers, so there are fewer jobs open to them. They have to face taking a cut in pay, which can psychologically be very difficult. So if you think about a 25-year-old starting out, there are more jobs open. So that's a factor.

Ms. Whitelaw. One of the other things that I have found in my job search, which is sort of alarming to me, is when you go for the interview they look at you. If you manage to get even an interview, they look at you and they can sort of figure out your age somewhat. And then what I've encountered is they try to dissuade you in a very clever way of not taking the job, by throwing things at you like: You're going to have to carry 50 pounds in a box; is that okay? You have to climb ladders, you have to work until 11:00 o'clock at night. I found that to be quite rampant actually. So I realized what they were trying to do. I mean, at least my feeling was that they were trying to dissuade me from even thinking about the job.

Mr. Jeszeck. In our focus groups, which we made clear are not generalizable--we didn't derive any statistical analysis from them, but just at a personal level one of the things we found, that for these older workers, particularly when they were employed for long, extended periods of time, some of them for two years, they would take any job that was available. They had reached points where it didn't matter what they were before in their old company, and some of them had positions that had a lot of responsibility. But at this point they really had reached the point that they needed work and would virtually do pretty much anything for anyone who would hire them.

Mr. Carbone. I think it was Pew that did a study, and when you look at long-term unemployed folks by education the numbers are remarkably alike, somewhere 35 percent average. It didn't matter if you had a high school degree or if you had advanced college degrees. I think it's the case of the fall. I think the fall is hurting more when you're in a higher level position. You were probably at the peak of your earnings or you were doing very well. It takes longer to reach that point. I think it's less education. It's less that. It's not that businesses or industries don't want that. It's that it takes a while for a person to realize that, I've got to do something that is perhaps not at the same level that I was doing before. I think that has a lot to do with the length of the unemployment and how they compete for work.

Mr. Carbone. Just look at the want ads, check out the Craigslists of the world. There has been nothing more disheartening. I spend a lot of my time interacting with long- term unemployed people. And it's bad enough when you go to 3 or 400 different places where you apply for work and you don't get responses, but it's when in earnest you're looking for employment and you'll see as part of the advertisement: If you're unemployed, don't apply. Or if you've been unemployed a year or longer, don't apply. These folks that issue--I mentioned before about self- confidence. Very important. It's a critical component to getting back on your feet. That just adds another level of: You're done, you're done. It's there. Many companies are overt about it. We've seen some companies that are icons, that actually put it on their web sites. But a lot of other companies in a much more quiet way will practice it, will practice it. And I worry more about them than I do the ones that put it on the web site, because I think there's a lot more of them out there that do that.

15 years ago when I came to The WorkPlace, if somebody said, ``what's long-term unemployment,'' I would have said 39 weeks. And now it's 99 weeks in Connecticut. It's kind of tapering down. It won't be for long, but it was. And that changes the way we do our business. So we kind of spent two years as unemployment was surging, preparing the one- stops for this huge increase in the number of participants as the unemployment rate was rising. But while that was happening, it was sort of--kind of almost a silent feature, because I will tell you, and I take a lot of guilt on this, I didn't even notice it until it became a crisis, where one day the acting commissioner of labor sent a letter out saying: On May 15, 12,000 people in Connecticut are going to reach this 99-week of benefit point, be unemployed, and no further benefits. So you could imagine that you go that period of time and all of a sudden not only don't you have a check coming in, but you don't have a job.

There are issues that are facing you that the American workforce system never had to address before, and frankly is not prepared to address, not prepared. It's not Platform to Employment per se in 50 States everywhere. It's the elements of the program that proved to be essential to enabling long-term unemployed people to gain employment. Putting those elements in the American workforce system is what this is all about. It doesn't take a lot. It doesn't cost a lot. But it's a way of connecting this population.

When I said before that we're losing the battle, more and more of them are lost every single week. And once they're lost, once they start that march to the safety net, they're done, they're done. So it's looking back at the American workforce system and seeing what's not there that needs to be there.

By the way, we do it for other groups and we should. We do it for veterans, we do it for dislocated workers, we do it for people with disabilities, and we should. This is a special population whose numbers eclipse all other special populations in our system already, and growing every day, and we're not addressing it. We're basically telling them to walk the plank and get lost.

Ms. Furchtgott-Roth. We're at an almost record high in terms of the share of the unemployed that is long-term. We were at, I think, a record high last year, something like last year. It's gone down slightly. That's why we really need to focus on economic growth to get rid of this problem.

If you look at North Dakota, it has the lowest unemployment rate in the Nation. Unemployment is 3 percent. It's taking advantage of oil and natural gas exploration. And there are other States, other parts of the country that want to do that, but are impeded by regulation. We can almost call the United States ``Saudi America'' in terms of the percent of oil that we have that's going to come on line in the next 20 or 30 years, and we need to take advantage of this new American energy revolution to be putting people back to work. You can't get a motel room in North Dakota. The same with Eagle Ford south of San Antonio in Texas. We need to be encouraging these other kinds of policies to reduce long-term unemployment as well as short-term unemployment. (Editor's note: There Ms. Furchtgott-Roth goes again. I detect an agenda not related to long-term unemployment for older Americans. She wants us to believe that drill-baby-drill and more fracking is the answer for millions of long-term unemployed Americans. TransCanada -- of the XL pipeline --- says on their website that it would only create 20,000 jobs. How did she get on this hearing? Note how Senator Blumenthal closes the hearing.)

Senator Richard Blumenthal (D- Connecticut) - I wish we had the oil and gas in Connecticut that North Dakota has. So we are actually relying on different kinds of energy to generate employment, fuel cells and alternative sources of energy, which may not be subject to that kind of regulation, but are equally important to the energy future of the country, I think. But thank you for that comment.

[Whereupon, at 3:12 p.m. on May 15, 2012, the hearing was adjourned.]

* EXCERPTED FROM THE HEARING "MISSED BY THE RECOVERY: SOLVING THE LONG-TERM UNEMPLOYMENT CRISIS FOR OLDER WORKERS" BEFORE THE " SPECIAL COMMITTEE ON AGING" IN THE UNITED STATES SENATE'S ONE HUNDRED TWELFTH CONGRESS ( SECOND SESSION, WASHINGTON, DC) (Senate Hearing 112-541)