Citizen by birth: Part 1


Citizenship by birth

If you are born in the United States, you are a citizen of the country, regardless of the citizenship status of your parents.  This is known as jus soli (“right of soil).  Advocates for ending birthright citizenship talk about moving the United States to the same doctrine as many of the other countries in the world to change citizenship based on the status of your parents, this is known as jus sanguinis (“right of blood”).  This is why when an undocumented immigrant has a child here, the child is a citizen.  This is the legal doctrine that creates the idea and derogatory term as “anchor baby.”  According to the Pew Hispanic Center, about 340,000 babies in 2008 were born to those here illegally.

More recently, in the last few years, at least, there has been increased scrutiny on maternity hotels in the United States.  This is where immigrants from other countries will come to the United States for the expressed purpose of having their child so that the child can gain citizenship in the United States.  Even those opposed to ending birthright citizenship note how this causes an increased difficulty for mothers and babies because the babies might not be properly cared for.

Some seemingly moderate Republicans have a view on ending birthright citizenship, such as Judge Richard Posner and Senator Lindsey Graham or Rand Paul.  All think that it would be better practice to end this immigration practice in an effort to curb immigration.  But these views have mainly been on the fringes of the Republican Party and outside the mainstream of the Democratic Party, as well.

There are many reasonns, looking back, where we should have known that the Republican Party, writ large, would captulate to their party’s nominee, whoeveer it was.  The one that probably stood out the most at the time, that was undeercovered was when Donald Trump talked about ending birthright citizenship.  May of the Republicans who were running decided to try to appease the leader in the polls istead of standing up for what they previously thought was right.

The most egregious example of one of the candidates bending over backwards waas former Louisiana Governor Bobby Jindal.  Jindal claimed his citizenship through his parents, almost explicitly through the idea of birthright citizenship.  Jindal’s parents were not citizens but he was able to claim citizenship because of the fact that he was born in the United States.

Chris Christie and Scott Walker also came out in favor of ending birthright citizenship to gain favor with the Republican base that they needed to continue in their presidential runs.

Some of the Republican candidates had previous issues with the idea of birthright citizenship.  This included the South Carolina Senator, Lindsey Graham, who once said that immigrants could “drop their babies and leave.”.  This also included Kentucky Senator Rand Paul.  Both of these Senators sponsored legislation ending birthright citizenship in the Senate.

The principled Conservative, John Kasich, previously supported ending birthright citizenship but ended up denouncing that end in his presidential run, this time around.  He talked about reforming the immigration system that we have, including a path to citizenship for many of the undocumented immigrants, out there.

And some tried to hold strong to their values such as former Florida Governor, Jeb Bush and Florida Senator, Marco Rubio.

I’m not trying to pick on Republicans with this idea.  Senator Harry Reid once offered up legislation to end birthright citizenship but over the course of the last 20 years, has moved from immigration hawk to an immigration reform advocate.

Ending birthright citizenship is not really an idea that can be laughed off, at this point.  Republicans hold a trifecta in the federal government and will hold a majority on the Supreme Court once Trump puts his nomination through.  Representative Steve King of Iowa will likely push his legislation of ending birthright citizenship the first day the House is in session, like he does seemingly every session, now.

The ending of birthright citizenship is a direct assault on the 14th Amendment of our Constitution that was passed at the end of the Civil War.

Because of this and because of the possibly high importance on this issue from both Congressional Republicans and the President elect, what I want to do is look at the history of birthright citizenship and why I think it is so important and ultimately talk about why the attacks on it are misguided and unfounded.




100 Facts

This is a concept that I’m borrowing from Matthew Berry who is a fantasy football analyst for ESPN.  Prior to the season each year, he unveils a list of facts that he likes to look at and make arguments for why he likes certain players.  I’m using them in a slightly different way.  Hopefully, these will help you as you go through the last month of election season 2016.

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  1. Barack Obama was inaugurated as President on January 20, 2009.  There were, according to the Bureau of Labor Statistics (BLS),  134,053,000 jobs in January of 2009.  The preliminary numbers for August of 2016, according to the BLS show that there are 144,598,000 jobs currently.  That is an increase of 10.5 million jobs.
  2. To put that in perspective, there were 1.34 million jobs under George W. Bush.  There were 16.1 million jobs created when Ronald Reagan was president. I calculated this by looking at the number of jobs in January when a President was inaugurated (exceptions are Harry Truman, Lyndon Johnson, and Gerald Ford) until January of when they left office.   Here are the numbers for the rest of the presidents since World War II.
    President Number of jobs created
    Truman 8248000
    Eisenhower 4129000
    Kennedy 3572000
    Johnson 12183000
    Nixon 9181000
    Ford 2073000
    Carter 10345000
    Reagan 16131000
    HW Bush 2637000
    Clinton 22900000
    W Bush 1348000
  3. The unemployment rate in January of 2009 was 7.8%.  The unemployment rate as of August 2016 is 4.9%.  It has been under 6% since October of 2014.  When Mitt Romney ran for President, he said that he would strive for an unemployment rate of under 6%.  The Congressional Budget Office (CBO) maintained that the unemployment rate would be under 6% by 2017 with the policies enacted prior to the election.
  4. The unemployment rate in May of 2016 was 4.7%.
  5. In a May 2016 national poll, Public Policy Polling (PPP), 64% of self-identified Republicans stated that they thought that unemployment had increased under Barack Obama.
  6. The labor force participation rate, which takes a measure of the entire population age 16 and older that is either employed or currently looking for work, is at 62.8%.  The labor force participation rate hit 66% in October of 1988 and hovered between 66 and 67% essentially until November of 2008 and has declined fairly steadily until now.  Why is that?  According to the BLS, the reasons include the retiring baby boomer population, the stabilization of women in the workforce, and the diversity of the workforce.  They projected in 2006 that the labor force participation rate would be 65.9% in 2010 and 64.5% by 2020.  We are below those numbers but I think that part of that may be because of the ACA which helps people get health insurance in the private market so some do not have to work or look for work.  Even moreso, they may get health insurance through Medicaid expansions in various states.
  7. From 1948-1977, the labor force participation rate was lower than it is now.
  8. Federal income tax rates are at the lowest percentage of people’s income since the Great Depression.  This is consistent since 2006.  There was a marginal tax increase from 35-39.6% of those who make $220,438 single or $440,876 in 2013.
  9. Federal tax revenues as percentage of Gross Domestic Product (GDP) is around 18%.   This is slightly higher than the historical average (usually around 17-18% of GDP since World War II).
  10. US Government spending as a percentage of the GDP in 2015 was 20.44%  This is relatively high compared to 1994-2007 where federal spending was less than 20% of the GDP.  From 1947-1980, the percentage of federal spending compared to GDP was below 20%.
  11. Spending in FY2015, according to the CBO was $3.7 trillion.  Mandatory spending constituted $2.3 trillion of US Government spending.  Discretionary spending was $1.2 trillion.  Revenues for the US Government was $3.2 trillion.
  12. Discretionary spending for defense and nondefense spending was essentially the same at about $583 billion.
  13. Individual income taxes are $1.5 trillion of US Government revenues.  Payroll taxes are $1.1 trillion.  Corporate income taxes are $344 billion.  Other taxes constitute $299 billion of revenues for the US Government.
  14. 96.9% of households received a tax cut under President Barack Obama signing the American Recovery and Reinvestment Tax Act of 2009.  There was an expansion of the Making Work Pay Credit Act (and replaced it) that had a payroll tax cut of 2%.  Neither Romney nor Obama proposed allowing the payroll tax cut to continue and it expired on January 1, 2013.      The American Taxpayer Relief Act of 2012 also extended tax cuts for those  making less than $400,000 ($450,000 for married taxpayers filing jointly).  All in all 90% saw their tax bills saw their taxes stay the same  because of this legislation.
  15. 2 out of every 1,000 deaths in the US apply for the estate tax, per the Joint Committee on Taxation.  The Tax Policy Center found that 5,330 estates will owe the estate tax in 2015.
  16. Of those 5,3330 estates.  30 small farms and closely held businesses will owe money for the estate tax.  The top 10% of income earners will pay 97% of the total of estate tax liability ($18.4 billion).  The richest 0.1% will pay 35% of the total.
  17. The requested budget for the Centers for Disease Control for fiscal year 2017 was $11.8 billion.  The requested budget for the Food and Drug Administration for FY 2016 was $4.9 billion.
  18. The Government Accountability Office (GAO) found in a nationwide study in 2013 that 84% of white registered voters had a valid driver’s license.  73% of registered Hispanic voters had a valid driver’s license. 63% of registered black voters had a valid driver’s license.
  19. Section 4 of the Voting Rights Act established a formula to determine which jurisdictions would have to seek preclearance from the United States Department of Justice in order to make changes to voting rights or election laws.  The first part of the formula was to determine if the state or jurisdiction had a test or device in place to restrict people from voting.  The other part of the formula was if there were less than 50% of voting age persons registered or voting in the presidential election of 1964.  There were changes made in 1970 and 1975.  The Act was extended in 1982 and again in 2006.    In Shelby County v. Holder, the Supreme Court found that the preclearance requirement of Section 4 was unconstitutional because it relied upon an outdated formula and violated the “equal sovereignty of the states.”  A phrase not found in the Constitution.  But one that is found in Dred Scott v. Sanford.
  20. 40 counties in North Carolina were subject to preclearance prior to the decision in Shelby County.
  21. One day after the decision in Shelby County, North Carolina Senate Rules Committee Chairman, a Republican, announced that they had an “omnibus bill coming out” that would direct attention to election law.  The law would require certain photo id’s, eliminated or reduced same day voting registration, changed how provisional ballots would be cast, and eliminated and reduced early voting days.  Prior to the bill being passed, the North Carolina legislature requested racial data to determine how the law would be written.
  22. The data for the legislature included the information that black North Carolina voters disproportionately used early voting.  60.36% and 64.01% of black North Carolina voters voted early in 2008 and 2012 compared to 44.47% and 49.39% of white voters.  It also included that black voters used the first seven days of early voting, in particular.  The early voting days would include 2 “souls-to-the-polls” days where black churches would give rides to prospective voters.
  23. Armed with this information, the legislature struck down the first 7 days of early voting, taking early voting from 17 days to 10 days.  This effectively eliminated a “souls-to-the polls” day, as well.
  24. The data also included the information that black voters disproportionately used same-day registration when available.  Same-day registration also allows poll workers to help voters.  A disproportionate number of black voter applications were considered incomplete.  Help from poll workers would certainly help them, disproportionately.  The data also included provisional ballots including out-of-precinct voting.  As it turns out, black voters also voted with provisional ballots, disproportionately.  Finally, they looked into pre-registration.  Pre-registration allowed 16 or 17 year olds to announce their intent to vote when they applied for driver’s licenses.  The DMV would then automatically register these 16 or 17 year olds.  Black teenagers used pre-registration disproportionately more than their white counterparts.
  25. Absentee voting was exempted from the new voter ID restrictions.  As it turns out, black voters don’t really use absentee voting.
  26. The voter law eliminated same day registration.  It prohibited out-of-precinct voting.  It eliminated pre-registration.  It was struck down as unconstitutional because the provisions of the law were passed with discriminatory intent.
  27. Zoltan Hajnal, Nazita Lajevardi, and Lindsay Nielson presented a working paper that states with strict voter id laws “tend to emerge in states with larger black populations.”  Latino turnout was 10.3 points lower in states with photo ID laws; black turnout was 4.8 points lower in general elections in states with photo ID laws.
  28. The GAO found that turnout declined by between 2-3% in Kansas and Tennessee after they enacted voter id laws.
  29. According to a national poll from PPP published on 08/30/2016, 59% of Donald Trump supporters think that more than 10% of votes cast are fraudulent.
  30. Loyola Law School professor Justin Levett investigated over 1 billion votes cast to determine how many cases of voter fraud there would be.  He found 31 credible cases.
  31.  Rep. James Sensenbrenner (R-WI05) introduced H.R. 885 Voting Rights Amendment Act of 2015 to revise Section 4 of the Voting Rights Act.  It has 110 co-sponsors.  93 of which are Democrats.  17 are Republicans.  Rep. Terri Sewell (D-AL07) introduced H.R. 2867 to revise Section 4 of the Voting Rights Act to determine preclearance.  The bill has 178 co-sponsors.  All of the co-sponsors are Democrats.
  32. The Dow Jones Industrial Average had a closing value on January 20, 2009 of 7949.09.  The closing value on May 16, 2016 was 17710.71.
  33. According to the May 2016 PPP poll, 57% of self-identified Republicans believe the stock market has gone down since Barack Obama became President.
  34. According to the CBO, raising the minimum wage to $10.10/hour real incomes  would increase by $5 billion among families at or below the poverty level, essentially moving 900,000 people out of poverty.  Families who have income between one and three times the poverty level would receive $12 billion in additional real income.  Families between three and six times the poverty level would receive an additional $2 billion in real income.
  35. The central estimate from the CBO for raising the minimum wage by $10.10/hour finds that there will be a net loss of 500,000 jobs.
  36. 50.6% of workers currently making $7.25/hour or less are aged 16-24.  According to the Economic Policy Institute (EPI), 12.5% of workers earning $11.10/hour or less are less than 20 years old.   The CBO found that that for workers earning less than $11.50/hour, only 12% of workers are aged 16-19.
  37. According to EPI, 73.7% of workers making less than $11.10/hour are aged 20-54.
  38. 54% of workers earning less than $11.10/hour, according to EPI, work full-time at these jobs.  EPI defines full-time as 35 or more hours per week.
  39. The CBO estimates that 70% of low-wage workers have a high school diploma and/or some college.  10% of low-wage workers have a Bachelor’s degree.
  40. The National Center for Education Statistics houses information about the average cost of higher education.  They provide information about the average cost of in-state public tuition for four year universities.  With that information and the information about the minimum wage, we can determine how many hours it would take to work at exactly minimum wage to afford one year of college.  From 1971-1980, it would take on average, 5.28 hours per week to afford one year.  From 1981-1990, it would take 7.85 hours per week to afford one year.  From 1991-2000, it would take 11.80 hours per week to afford one year.  From 2001-2010, it would take on average 18.08 hours per week to afford one year.  In 2011, the last year I have data available for just tuition, took 20.42 hours per week to afford one year of tuition at a public four year institution.
  41. 97% of the benefits paid out by the Earned Income Tax Credit (EITC) go to families with children.  Almost all of these benefits are given to families in the bottom three quintiles of income distribution.
  42. The US Census Bureau found that the EITC lifted 6.2 million people out of poverty including 3.2 million children.
  43. The EITC reduced welfare participation by 6.5% relative to its 1993 peak according to Jeffrey Grogger.  V. Joseph Hotz, Charles H. Mullin, and John Karl Scholz wrote that the EITC had the “most significant effects in reducing welfare caseloads during the 1990s.”
  44. Between March of 1990 and March of 2000, the employment rates of single mothers rose from 55.2% to 73.9%.  Grogger concluded that the expansions of the EITC in the 1990s are the most important single factor in why there was this large increase in single mothers working.
  45. The BLS writes that only 12% of workers have access to paid family leave.  Only 5% of those in the lowest 25% of income threshold have access to paid family leave.
  46.  Women who report taking paid leave are more likely to be working 9 to 12 months after a child’s birth than those who report not taking leave at all.  “Many women who would not have otherwise returned to work re-enter the labor force within a year.”  Women who report leaves of 30 or more days are 54% more likely to report wage increases in the year following the child’s birth than are women who take no leave at all.
  47. Women who return to work have a 39% lower likelihood of receiving public assistance 40% lower likelihood of food stamp receipt in the year following the child’s birth.  Men are also significantly less likely to receive public assistance and food stamps.
  48. Women lose about $275,000 in lifetime wages and social security benefits when they have to leave the labor force early due to caregiving responsibilities.
  49. The median cost of replacing an employee is 21% of the employee’s annual salary. Employee absenteeism due to work-family responsibilities cost employers between $500-$2,000 per employee per year.
  50. There were 28,647 deaths from opioid drugs in 2014.  This is 61% of all drug overdose deaths in 2014.
  51. Most overdose deaths occur within one to three hours after the victim has taken the drugs.  According to the National Institues of Health (NIH) found that 90% of users had reported witnessing an overdose and providing lay remedies to revive the victim.
  52. 10-56% of individuals are willing to call 911 in case of an overdose but only after initial efforts to revive a victim have been made.  88% of opioid users in Washington said they were more likely to call 911 in the event of a future overdose after learning about Good Samaritan laws.
  53. 32 states plus the District of Columbia have passed Good Samaritan laws.
  54. The NIH survey found that 87% of users reported they would be willing to participate in a Naloxone training program and 84% said they would carry naloxone after training.
  55. The CDC has provided Naloxone training to over 53,000 people and have been used to reverse over 10,000 drug overdoses.  In San Francisco, there has been 3,6000 prescriptions filled since 2013 and have saved 916 lives.
  56. Needle exchange programs are barred from buying syringes.  There are 0.9 to 2 billion injections nationally each year but only about 43 million sterile syringes distributed by needle exchange programs.
  57. After taking into account mother-to-child HIV transmission, injection drugs are responsible for 35% of all AIDS infections.
  58. The estimated cost of treating an HIV patient from diagnosis to death would cost $120,000.  A needle exchange program costs, on average, of $131,000.
  59.  Almost half of the student loan debt in the United States is held by students who attended for-profit universities.  12% of college students attend for-profit universities.  (This statistic was found prior to the closing of Corinthian Colleges and ITT Tech)
  60. About 25% of all Post-9/11 GI Bill benefits have been paid to 15 publicly traded universities.
  61. Manufacturing output is up about 50% since the North American Free Trade Agreement (NAFTA) took effect.
  62. NAFTA was negotiated by the George H.W. Bush administration.
  63.  In January of 1994, the unemployment rate in Michigan was 7.0%.  The unemployment rate for August of 2016 is 4.5%.  The unemployment rate in Ohio in January of 1994 was 6.3%.  The preliminary numbers for August 2016 show the unemployment rate is 4.7%.  The unemployment rate in Pennsylvania for January 1994 was 6.6%.  The unemployment rate in August of 2016 is 5.7%.
  64. China is not part of the Trans Pacific Partnership (TPP) and is not likely to benefit from the agreement.
  65. The International Monetary Fund (IMF) announced that the Chinese currency was no longer undervalued.  The currency is on the rise.
  66. Moody’s Analytics found that Trump’s tax plans would cost about 3.5 million jobs.  What’s more is that it would $9.5 trillion over its first decade.  Both Moody’s and the Tax Policy Center conclude that the very richest would be the best off under Trump’s plan.
  67. Hillary Clinton’s tax plan would have little or no impact on 95% of Americans.  Tax increases would fall predominantly on the wealthiest one percent.  Revenues for taxes would be increased by $1.1 trillion over the first decade and $2.1 trillion over the next decade.
  68. Trump did say that he would try to negotiate the national debt.  This would be a disaster for the US economy.
  69. Stop and frisk was declared unconstitutional.
  70. New York City had a massive crime drop in the 1990s.  The number of stop and frisks increased in the 2000s.  Where it succeeded was placing mistrust in police officers in the black population.  52% of stop and frisks were of black people.
  71. During the period of 2001-2010, violent crime declined by 59% in Los Angeles, 56% in New Orleans, 49% in Dallas, and 37% in Baltimore without stop and frisk
  72. 88% of stops were of innocent New Yorkers.
  73. Overall, crime has been falling since 1993.
  74. Donald Trump argued in his book, The America We Deserve, that “Iraq remains a threat, and now has more incentive than ever to attack us.”
  75. George W. Bush signed the dill to withdraw US troops from Iraqi territory on December 31, 2011.
  76. Trump supported Libya intervention.  He also claimed it would be easy to topple Qaddafi.
  77.   Ford announced it was moving small car production to Mexico.  They are keeping medium to larger car production in Detroit. This is, in part, due to a contract with the United Autoworkers. Also, Ford was the only one of the Detroit automakers who did not take money for a bailout.
  78. Since the end of the Great Recession, more Mexican immigrants have returned to Mexico from the US.
  79. Barack Obama announced that they would increase the number of Syrian refugees that the US could take in, to 10,000 refugees.
  80. Clinton’s proposed a plan to accept 65,000 refugees.  The Senate assumed that Clinton would want to bring in 155,000 refugees per year for each of her first term to get to 620,000 refugees.
  81. According to the State Department, 785,000 refugees have been admitted to the US since 9/11.  About a dozen have been arrested or removed from the US due to terrorism concerns.
  82. Canada provides us with more oil than all of OPEC combined.
  83. There is capacity left in the current pipelines to bring in more than 1 million more barrels per day.
  84. A majority of Republicans find each aspect of the Affordable Care Act (ACA) favorable outside of the individual mandate and an increase on Medicare payroll tax on upper income earners.
  85. The individual mandate is the most well-known part of the ACA.
  86. The uninsured rate is the lowest on record, in large part, due to the ACA.  It is below 9%.  States that accepted the Medicaid expansion have seen their uninsured rate drop the most.  There are 19 states who have not expanded Medicaid, their uninsured rate is 16.7%.
  87. Aetna left the private marketplace as a threat to the Department of Justice blocking the Humana merger.
  88. In the six years since the ACA was passed, Republicans have fought to overturn the law and just now managed to put together a proposal to replace the ACA.
  89. The proposal includes converting Medicare into a voucher program and raising the retirement age above 65.  It also includes the resumption of discriminating against pre-existing condition.  And according to Jonathan Cohn, the analyst, “some higher-income consumers, by contrast, would apparently get a new tax break.”
  90. Deductible plans under this proposal would be much higher.  Older adults would pay much higher premiums to make plans more affordable for younger adults.
  91. Despite not saying “radical Islam”, ISIS has lost significant ground in the last year and a half.
  92. In December of 2015, the Pentagon noted that over 20,000 ISIS fighters had been killed.  Army Lt. Gen. Sean MacFarland said that there has been 45,000 ISIS fighters killed in total.
  93. In the Journal of the American Medical Association, there was an article published noting that fetal pain perception does not begin until the beginning of the third trimester (28 weeks).
  94. A ban on abortion at 20 weeks is the earliest ban on abortions that is politically popular (either a plurality or majority supporting it).
  95.  According to the National Crime Victimization Survey (NCVS) conducted by the Bureau of Justice Statistics, in the five year period of 2007-2011, the NCVS found that there were 29,618,300 victims of attempted or completed violent crime.  235,700 of the self-protective behaviors of the victims involved a firearm.
  96. In 2010, across the United States there were 230 justified homicides.
  97. The Law Center to Prevent Gun Violence, in 2013, found that of the 10 states with the lowest gun death rates, 7 of them had the strongest gun laws.  The states that did not appear were Minnesota, Iowa, and Maine.  Of those three Maine was the only one with an F grade.  Of the 10 states with the highest gun death rate, the highest grade was given to Alabama with a D-.  All others had F’s.
  98. Citizenship and Immigration Services (CIS) found that in 2012, 1 of every 400 cases submitted to E-Verify that resulted in a Tentative Nonconfirmation (TNC) status were reversed under appeal by the worker.  A nationwide system would result in 400,000 people to resolve issues that should not have come up.  The GAO found that 164,000 citizens per year will receive a TNC for issues related to a name change.
  99. Going to mandatory E-Verify System would increase spending by $23.4 billion over 10 years according to the CBO and would decrease revenues by $17.3 billion as more people would be paid outside the tax system.
  100. Suspicionless drug testing for welfare recipients is unconstitutional.  When Florida enacted a law requiring mandatory drug testing for recipients of Temporary Assistance of Needy Families (TANF), the pass rate by recipients was 96.3%  This policy cost the state more than $100,000.  A previous enactment of the same policy found that 3.8% failed the test.  Enacting the policy cost $2.7 million.  Michigan, who enacted a similar policy, found that about 10% of welfare recipients tested positive.  In an article in the Journal of Health and Social Policy, only 5% of welfare recipients showed evidence of drug abuse.

The death tax

Every 2-4 years, Republican lawmakers and Conservative Presidential candidates talk incessantly about the need for tax reform.  The tax reform that they are referring to also includes the call for a repeal of the estate tax, the so-called death tax. The way that the tax is talked about, you would assume that everyone has to pay the tax.  That once you or a loved one dies, there is a considerable amount of tax on the property that is left and then it is taxed again once inherited.

As you probably know, either due to my writing style or the fact that you’ve rad up on the issue, this view is incorrect. The estate tax is only levied on those above a certain threshold for their estate’s value.  The value is $5.45 million per person or $10.9 million per married couple.  Because it’s such a high threshold, there is not that many people affected by the tax.  According to the Joint Committee on Taxation, there were 2.6 million deaths in the United States in 2013 and there were 4,700 estate tax returns filed.  So the percentage of those affected were 0.2%.  Or 2 out of every 1,000 deaths.  This is partially due to the fact that the exemption is so high, now.  At its peak, the Joint Committee on Taxation noted that 6% of all deaths were affected by the estate tax.

The Joint Committee on Taxation gives a brief history on estate or inheritiance taxes which I hope to paraphrase:

Inheritance or estate taxes have been around primarily to finance debts from war or the threat of war.  From 1797 to 1802, the stamp tax was enacted on the inventories of dead people.  After the repeal of the stamp tax, there was not a tax on inheritance until the Civil War.  From 1862 to 1870, there was an inheritance tax to help pay for the Civil War.  There was another estate tax imposed in 1898 to finance the Spanish American War until 1902 when it was repealed. There was not an estate tax again until World War I in 1916.  It remained in effect.  The top rate was increased during the Great Depression when revenues for the government were most needed. The estate tax remained in effect until 2001 when there was legislation passed to reduce the estate tax and eventually eliminate. In 2012, there was another law enacted to permanently place the estate tax in with an increase indexed for inflation.  If you want to read more about the history of the estate tax, you can read the full report from the Joint Committee on Taxation.  It’s fairly interesting.

“Further, the House considered, HR 1105, the Death Tax Repeal Act of 2015.  As you may know, I have long supported the full and permanent repeal of the estate tax because I do not believe that death should be a taxable event, and because it acts as a direct, job-killing tax on family-owned farms and small businesses, which have historically created countless good jobs in Wisconsin and across the country over the last decade.  For these reasons, I was pleased to support this legislation, which passed in a bipartisan fashion by a vote of 240-179.  The bill was received in the Senate on April 20, 2015, and I look forward to Senate action on this important piece of legislation.” – Paul Ryan 

The most consistent attack on the estate tax is that it unfairly attacks family farms and small businesses.  The non-partisan (despite what Mitt Romney said in 2012) Tax Policy Center estimates that only 30 small farms or businesses will pay the estate tax for 2015.  Their definition was one that has more than half of its value from a farm or business and is valued at less than $5 million.  Their study in 2013 found that on average, these small businesses or farms would owe less than 5% of their total value in the estate tax.   The Congressional Budget Office (CBO) notes in their report that “certain types of businesses can spread their tax payments over 15 years in some circumstances. For farmers, a special method of calculating the value of a family farm can lower the amount of estate tax owed.”  They also note that the vast majority of estates, including farms and small businesses can afford the estate tax bill with liquid assets.

The Center on Budget Policy and Priorities (CBPP) released a policy paper on the potential effect of repealing the estate tax.  Repealing the estate tax would hurt problems that both liberals and conservatives believe are very important.  First, it would increase the deficit of the United States.  Eliminating the estate tax would cost nearly $270 billion in additional revenues from from 2016 to 2025 according to the Joint Committee on Taxation.  Once you count the interest, this will add nearly $320 billion.  This may not seem like very much when you consider the totality of the US budget but it’s significantly more than what the US Government will spend on the Environmental Protection Agency, the Centers for Disease Control, and the Food and Drug Administration (and is more than if you combine the three according to the CBPP)  This also hurts other potential revenue.  The estate tax was mainly created to tax money that otherwise would not have been taxed.  32% of the value of estates worth $5 million to $10 million to about 55% of the value of estates of those worth more than $100 million are unrealized capital gains. Capital gains are taxed only when they are realized so if the gains are held onto until death, they are never taxed.  The repeal of the estate tax would make income inequality worse.  Inheritance, which is certainly concentrated at the top “1%”, accounts for about 40% of all household wealth.  Reducing the amount of money in inheritance through the estate tax actually encourages the wealthiest offspring to work instead of relying on their inheritance contributing more to the economy.


Paid family leave

One of the ways that we can reduce income inequality would be to provide for paid family and medical leave. The Family and Medical Leave Act (FMLA) which was passed in 1993 provides up to 12 weeks of leave.  This law only applies to companies with more than 50 employees and doesn’t actually give employees a chance to recover their wages.  Moreover, only about 60% of workers are covered by FMLA establishments.   It is up to the employers if they will provide paid leave to their employees.  According to the Department of Labor, published in 2013, in the employee benefits survey only 12% of workers have access to paid family leave.

A national paid leave law would provide employees to earn a portion of their pay while they take time to address a serious health condition, care for a family member with a serious health condition, and care for a newborn, newly adopted child or newly-placed foster child. According to National Partnership for Women and Families, a serious health condition is one that requires either inpatient care or continuing treatment by a health care provider.  Continuing with National Partnership for Women and Families, usually payment for these types of programs are either by join employer-employee contributions or solely by employee contributions and the funds are paid to a special insurance system where funds are disbursed. As Cohn notes in The New Republic, the paid family leave is typically set up in a similar fashion to unemployment or disability insurance where the money is taken out via a payroll tax and is then withdrawn when you need it.

California passed a paid family leave law in 2004.  The law is similar to other government social insurance funds, such as disability or unemployment and would provide up to six weeks of paid leave at up to 55% of an employee’s earnings.  While it is a good program, I did not take advantage of it while I was in California as even 55% of my wages while I was there when my daughter was born would not have been enough to support my family.  In a survey conducted by the Center for Economic Policy and Research, 89% of businesses said they felt the law either had a positive or no noticeable effect.  Further, they found that 87% of employers reported that the state’s paid family leave program resulted in no cost increases.  The researchers wrote “fears expressed by opponents of the program that PFL would create a heavy burden on the state’s employers even report reduction in costs and improvements in productivity or profitability.”  In a report from the White House Counsel of Economic Advisers, they found that 90% of California employers reported no noticeable or a positive effect on on profitability, turnover, and morale.

Jonathan Cohn writes in The New Republic that businesses actually like to offer paid family leave and it makes more sense to begin to offer it contrary to what some conservative politicians argue.   Google announced that it was extending paid leave for its employees by several weeks.  The White House Counsel of Economic Advisers in their report on paid leave found that 2/3 of human resource managers called family-supportive policies including flexible schedules as the single most important factor in attracting and retaining employees.  And in that same report 90% of respondent employers characterized their family-friendly policies as cost-effective.  In a report written by Linda Houser and Thomas Vartanian titled Pay Matters: The Positive Economic Impacts of Paid Family Leave for Families, Businesses and the Public they studied the economic impacts of paid leave compared to the effects of unpaid leave or no leave.  Houser and Vartanian had a number of interesting findings in their paper.  Women who report taking paid leave are more likely to be working 9 to 12 months after a child’s birth than are those who report taking no leave at all.

The reason that it makes more business sense is that, as Houser and Vartanian find, employees have stronger labor force attachment after returning from leave.  Betsey Stevenson, a member of the president’s Council of Economic Advisers, suggested “women who are offered maternity leave are more likely to return to the same firm, and many women who would not have otherwise returned to work re-enter the labor force within a year.”  As Cohn notes, numerous studies have shown that offering paid leave tends to improve retention.  This is very important, in the same report from the White House Council of Economic advisers found that the median cost of replacing an employee was 21% of that employee’s annual salary.  What’s more is that an employee absenteeism due to work-family responsibilities cost employers about $500 – $2,000 per employee per year.

The reason that there is a need to be able to provide this as a government benefit instead of relying on the private sector is that corporations are not reacting quick enough and those that would benefit the most from these policies are not offered.  As we see with the statistics from the Department of Labor, overwhelmingly, the poorest do not have access to paid family leave:

Characteristics Family leave  
  Paid Unpaid
Worker characteristics    
Management, professional, and related 20 92
    Management, business, and financial 25 92
    Professional and related 17 92
Service 7 80
    Protective service 14 90
Natural resources, construction, and maintenance 8 81
    Construction, extraction, farming, fishing, and 7 80
    Installation, maintenance, and repair 9 83
Production, transportation, and material moving 7 86
    Production 8 88
    Transportation and material moving 6 84
Full time 15 90
Part time 5 77
Average wage within the following categories3:    
    Lowest 25 percent 5 78
        Lowest 10 percent 4 75
    Second 25 percent 11 87
    Third 25 percent 15 91
    Highest 25 percent 21 93
        Highest 10 percent 22 94

It makes financial sense for employees to support paid family leave. Heather Boushey, the executive director and chief economist at the Washington Center for Equitable Growth writes that women lose an estimated $274,044 and men $233,716 in lifetime wages and social security benefits when they have to leave the labor force early due to care giving responsibilities. Women in the workforce have not changed in a significant manner since the mid 1990s.  In their paper Female Labor Supply: Why is the US Falling Behind, Francine D. Blau and Lawrence M. Kahn write “by giving workers the right to thei job back after taking the leave, [paid leave] raises the job prospects of those who have left the labor force after the birth of a child.”  Houser and Vartanian found in their paper that women who report leaves of 30 or more days are 54% more likely to report wage increases in the year following the child’s birth than are women who take no leave at all.  Perhaps the idea that those returning from leave have a labor force attachment have some merit.  By shifting the burden to provide this leave away from businesses and place it squarely with the government, there will be new opportunities for small businesses who cannot afford to currently provide paid family leave.  Smaller businesses would not have to compete with larger firms for the same talent pool and be able to offer more competitive offers.  As we have seen, human resource managers believe that family supportive policies are what can attract and retain employees.

Finally, it makes sense for the government to encourage it.  While there will be a small uptick in government spending in “entitlement” spending due to how the Paid Leave Insurance would be distributed, there would likely be a cost savings as those who take leaves will likely see a decrease in other government spending.  Houser and Vartanian found that those who received paid family leave were much less likely to have to rely on public assistance.   Specifically they found

Women who return to work after a paid leave have a 39% lower likelihood of receiving public assistance and a 40% lower likelihood of food stamp receipt in the year following the child’s birth, when compared to those who return to work and take no leave at all.  Men who return to work after a paid family leave have a significantly lower likelihood of receiving public assistance and food stamps in the year following the child’s birth, when compared to those who return to work and take no family leave at all.

This should be self-evident by relying on the paid family leave, they were able to stay afloat without having to deal with additional public assistance.

Where it stands now

Hillary Clinton, Bernie Sanders, and Martin O’Malley all announced their support for paid family leave laws.  Clinton previously supported a similar law in her 2008 run for the Democratic nomination.  Cohn believes that Clinton would support such a law if she became president and would lay it out as a central tenant in her governing agenda.  The most ambitious form of paid leave among federal legislators is The Family and Medical Insurance Leave Act (The FAMILY Act) which has been introduced by Kirsten Gillibrand and Rosa DeLauro.  Their law would allow workers up to 12 weeks of up to 66%  of their monthly wages up to a capped amount for a serious health condition; the serious health condition of their child, parent, spouse or domestic partner; and the birth or adoption of a child.  It would cover all workers in all companies and would be funded by payroll contributions which they described as two-tenths of one percent by each the employer and employee.  It would also create a new Office of Paid Family and Medical Leave within the Social Security Administration.  Clinton’s plan would cost about $1 billion in annual spending.  This bill would cost more.  While she hasn’t endorsed this plan, she has said she supports the principle.

Marco Rubio in his failed bid to win the Republican presidential nomination offered a plan to pay for family leave which was based on a tax credit.  Rubio argued against a federal mandate comparing the paid family and medical leave to Obamacare.  Rubio argued for a tax credit to help pay for it.  The tax credit would be a “25% non-refundable tax credit for businesses that voluntarily offer at least four weeks of paid family leave, limited  to twelve weeks of leave and $4,000 per employee each year.”  In other words, as Jonathan Cohn writes, “for every four dollars in wages that companies paid out to employees on leave, they would get just one dollar back from the government.”    Since the $4,000 is the maximum tax credit, a company would need to pay $16,000 to get the maximum credit.  As Cohn reports other policy analysts as saying that the tax credit is just too small for companies to take advantage of the policies.  The Tax Policy Center issued a report on tax breaks similar to this such as hiring people on welfare and people with disabilities, and found that   While I should refrain from commenting on someone’s failures when they were trying to run for President, Rubio’s plan was modeled after the Republican plan put forth by Deb Fischer and Angus King. It is surprising that Rubio even mentioned this type of plan while other more conventional candidates running for President such as Jeb Bush argued against paid family leave.

I think it’s more likely that Gillibrand’s plan with the FAMILY Act is the better plan; I think that Rubio’s plan is more likely to pass.  My assumption is that there will be a compromise to increase the tax credit for employers to be able to take advantage of offering such a package.  While I do believe that paid family leave would be difficult to be able to pass through an increasingly hyperpartisan Congress, I think that it’s worth seeing where everyone’s support lies.  My support lies with Gillibrand and her plan.  I think it’s a better plan because I believe that it covers more workers and is more likely to be followed through with.  Rubio’s plan, I believe, will be hailed as a plan that will solve the issue while doing nothing.  Nevertheless, paid family leave is an important idea and one that deserves our support.   I believe that I have laid out the arguments in favor of such a plan.




Legislative priorities: Reforming opioid and heroin laws

Policy goal: The ultimate goal of reforming these laws is to focus on harm reduction rather than penalization, decrease the atmosphere of fear, and help prevent unnecessary death.

Specific policy aims:

  1. Support Good Samaritan laws
  2. Provide standing prescription for naloxone and opiod overdose reversal medications
  3. Work towards creating safer injection sites for drug users
  4. Extend legal clean needle exchange programs to cover all 50 states and rescind the ban on federal funding for syringes
  5. Work with general practice physicians and pain-specialists to rewrite the guidelines for prescribing opioid painkillers

Information for specific policy aims:

The leading cause of accidental death in America is drug overdoses, specifically opioid overdoses.  As prescriptions for these types of painkillers have risen over the years, as has the death toll from overdoses.  This was brought up in the presidential primary in New Hampshire with stories from candidates including New Jersey Governor Chris Christie and at least a passing mention of the other Republican contenders.  In 2014, there were 28,647 deaths from opioid drugs.  This represents 61% of all drug overdose deaths in 2014.  The number of overdoses from opioids has more than tripled since 2000.  Unfortunately, the epidemic is growing as opposed to slowing.

With that in mind, we need ways to be able to get victims of drug overdoses to the hospital so that they can be treated as soon as possible.  As in most medical emergencies, time is of the essence.  More than half of drug overdoses occur in front of another witness but only 10-56% of individuals are willing to call 911 for help.  Even with that in mind, people are only willing to call 911 after efforts of reviving the victim are unsuccessful.  In most cases this fear comes in the form of penalties to those who are witnesses to the overdose.  Law enforcement can, in most states, charge people with drug or paraphernalia possession and/or being under the influence when they arrive on the scene.

Twenty states and the District of Columbia provide some type of immunity for people acting as “Good Samaritans” and are calling the authorities to handle a medical emergency.  They are offered protection from being charged with being under the influence, drug possession, or possession of paraphanaelia.  They are not immune from trafficking drug charges or large quantities of drugs (intent to sell).  This is a commonsense practice that can save hundreds, if not, thousands of lives.

Another practice that can be effective in reducing the number of deaths related to opioids would be to allow for standing prescriptions of the opioid reversal drug, naloxone.  Naloxone is an injection that is available at 0.4 mg/ml to 1-mg/ml solution.  It can be administered into a vein, into a muscle, or under the skin.  There is work being done to make naloxone into a spray.  There is also a tablet that may be created for naloxone, as well.  It only produces effects if opioids are present in the body.  A dose of naloxone will compete with an opioid on the receptor and will partially or completely reverse the opioid effect.  Naloxone will produce withdrawal symptoms within minutes and will subside after about 2 hours.  But because it does not last very long, there may be a need for repeated doses of naloxone to be able to positively reverse the drug overdose.  It is not a habit forming drug.

While there are those who think that prescribing Naloxone will further the drug overdose epidemic, I find this line of argument mainly unfounded.  The National Institutes of Health (NIH) found that 35% of those surveyed would feel more comfortable using greater amounts of heroin if Naloxone were readily available.  In the same study, 90% of users had reported witnessing an overdose and providing lay remedies to revive the victim.  While the 35% of those who may feel more comfortable using a greater amount of heroin, the ones who have tried to revive a victim would be able to save many lives if Naloxone was available.  87% reported that they would be willing to participate in a training program and 84% would carry naloxone after training.

The American Medical Association (AMA) has endorsed policies that would strengthen community programs to both train and educate health care workers and opioid users about the use of naloxone.  The European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) found evidence that take-home naloxone programs decrease overdose-related mortality.

The CDC has provided training for people to use this drug since 1996.  They’ve trained over 53,000 people and have used it to reverse over 10,000 drug overdoses.  The most successful program has been San Francisco which has over 3,600 prescriptions filled since 2013 and have saved 916 lives.  Some states, such as Washington, have passed laws that allow for anyone at risk of having or witnessing a drug overdose to obtain a prescription.

We should adopt this practice of providing those at risk of witnessing an overdose to have a prescription of Naloxone and to allow for a standing prescription of Naloxone on pharmacies.  In order to do so, we will need to put in rules so that doctors cannot be held liable if a patient overdoses and naloxone is not administered in time to be able to save the patient.  The availability of the prescription would not be enough, we would need to provide additional community training to overcome the potential risks of take-home Naloxone.  The NIH study found that 62% of heroin users would be less likely to call 911 for an overdose and 30% might leave an overdose victim after naloxone revival.  We would need to work with specialists and the medical community to provide additional training so that the Naloxone resuscitation will be as effective as humanly possible.  West Virginia has expanded the use of Naloxone to reduce deaths with opioid overdoses and we will have to look to West Virginia to see how their programs work to ensure that any similar programs will be administered correctly.

While we are in the middle of an opioid abuse epidemic, there are a number of opioid addicts who move to use heroin.  The dangers of heroin include the danger of needles, specifically dirty needles.  Dirty needles can lead to outbreaks of HIV, hepatitis, and other blood-borne pathogens.  Needle exchange programs allow people to trade dirty needles in exchange for free sterile needles.  Beyond that, they serve as safe spaces for drug users to try to access medical care and referrals to drug treatment programs.  Federal funding for these programs have been banned since 1988.

In January of 2016,a new omnibus budget was passed to allow public health departments and nonprofit organizations to use federal funding for needle-exchange programs in high risk areas, as flagged by the CDC.  The budget would not allow these health departments and public health organizations to be able to pay for the syringes.

The CDC stated a health goal for 100% coverage providing all injections are performed with a sterile syringe.  The Drug Policy Alliance found that we are far short of this goal.  The estimates of sterile syringe coverage in major metropolitan areas are from 0.03% to 22% with a mean of 3.2%.  There are about 0.9 to 2 billion injections nationally each year but there are only about 43 million sterile syringes distributed by needle exchange programs annually.

According to the Substance Abuse and Mental Health Services Administration, there are an estimated 350,000 regular injection drug users in America.  Drug users still deserve to be able to be safe from diseases and not risk contracting blood-borne pathogens.   After taking out mother-to-child HIV transmission cases, about 35% of all AIDS infections can be attributed to injection drug use.  This can almost directly be linked to the lack of availability of clean needles.  The CDC has reported that the one-time use of sterile syringes remains the most effective way to limit HIV transmission associated with injection drug use.

HIV and AIDS are not the only diseases that injection drug users are at risk of contracting.  The most prevalent other diseases are hepatitis B and hepatitis C.  While these diseases are not as common in the United States as they are in other portions of the world, there are an estimated 800,000 to 1.4 million people in the United States with chronic hepatitis B and hepatitis C, according to the National Institutes of Health.  According to the Hepatitis B Foundation, about 40,000 people will become newly infected with Hepatitis B each year.  The death rate, according to the CDC, is 0.7% from the cases that they studied.  From the same set of cases, the CDC found that 61.6% of cases caused hospitalization.  Hepatitis C actually seems to be more dangerous.  The CDC found that in 2007, the number of deaths associated with hepatitis C surpassed the number of deaths by HIV.  This number has only increased since 2007.  The CDC believes that this number is even underestimating the actual death total.  They noted that the “mortality burden is likely much greater than these numbers suggest because death certificate validation studies have concluded that only a fraction of HCV-infected decedents have HCV listed on their death certificate, even when pre-mortem evidence of serious liver disease is present.”  In 2014, a total of 2,194 cases of acute hepatitis C were reported to the CDC from 40 states.

In a 2000 report by former United States Surgeon General David Satcher, “there is conclusive scientific evidence that syringe exchange programs, as part of a comprehensive HIV prevention strategy, are an effective public health intervention that reduces transmission of HIV.”  In a study cited by the World Health Organization (WHO) found “an 18.6% annual decrease in the HIV rate in 36 cities with [needle exchanges] compared to an 8.1% annual increase in 67 cities that did not contain [needle exchange programs].”  In a study by Don C. Des Jarlais et. Al in the American Journal of Public Health, they found that over a 12-year period in New York City there was a decrease in new cases of HIV among injection drug users while the number of syringes exchanged in the needle exchange programs increased from 250,000 to over 3 million.

Needle exchange programs are cost effective programs to help reduce public risk.  The cost of treating a person with HIV is estimated at $190,000 according to the CDC.  There is another estimate of treating HIV patients from the US Conference of Mayors.  They estimated that the lifetime cost would be $120,000 from diagnosis to death.  The average city cost to run needle exchange program would be about $131,000.  Unfortunately, that current estimation might be understating it.  The needle exchange program would have to be expanded to provide adequate syringe coverage and would need to be expanded from its current setup.  Franklin Laufer in his article Cost-Effectiveness of Syringe Exchange as an HIV Prevention Strategy estimated that 87 HIV infections were averted as a direct result of the needle exchange program.

As previously mentioned, needle exchange programs do not only exchange clean needles for dirty needles.  97% of these programs provide public health services such as substance abuse treatment, counseling, sex education, HIV counseling and testing, tuberculosis screening, and primary health care.  Because of the various treatment and services they offer, they seem to be leading to a more conducive environment to reduce drug abuse.  The NIH found that needle exchange programs lead to a “reduction in risk behaviors as high as 80 percent in injecting drug users.”  In a Seattle study, they found that needle exchange participants were five times more likely to enter drug treatment than drug users who do not participate in the program.  Surgeon General Satcher concluded that needle exchange programs successfully refer clients into substance abuse programs.

Based on the evidence, needle exchange programs are a cost effective way to reduce the harm for drug users limiting their chances of contracting HIV, AIDS, or hepatitis while providing health care and substance abuse counseling for injection drug users.  There does not seem to be any scientific evidence that there is an increase in drug use because of these programs or that drug users feel more empowered to be able to use drugs because of these programs.  Absent substantial evidence that this is the case, we should be increasing federal funding for these programs and rescind the ban on purchasing syringes for these programs.  We should also be funding community outreach programs to work with local law enforcement, teachers, health care providers, and community activists to essentially help design needle exchange programs that are specific to each community.  The single biggest driver of success of these programs is the extent to which the community buys into the program.  Getting local organizers and activists to help design the program will help with the success of the programs.

Postal Service Reform

Priorities for United States Postal Service (USPS) Reform:

  • Maintain six-day delivery
  • Reduce debt by USPS and return the USPS to viability
  • Solve or reduce debt caused by the Retirement Health Benefit Fund (RHBF)
  • Stop postal office closures
  • Generate new revenue for the USPS

Relevant Organizations:

American Postal Workers Union (APWU): member of the AFL-CIO, President of the APWU is Cliff Guffey.  APWU represents employees of the United States Postal Service (USPS), who are clerks, maintenance employees, and motor vehicle service workers.  APWU represents more than 220,000 employees and retirees, and nearly 2,000 private-sector mail workers.  Members belong to a local union in their city or town.  Locals elect their own officers and conduct day-to-day business.  These officers report to regional coordinators who then report to the National Executive Board.  The APWU has the APWU-COPA that raises voluntary contributions to assist the campaigns of legislators who support working families.  The APWU’s President has appeared for Congressional hearings on various issues related to postal reform. The APWU gave $3,657,735 in contributions and spent $681,000 on lobbying in 2012.  Most of the money given to candidates in 2012 by APWU was given to Democratic candidates.  The top recipient was Representative Stephen Lynch (MA-09) at $20,000.  The APWU gave $6,000 to Representative Loretta Sanchez in 2012.

National Association of Letter Carriers (NALC): affiliated with the AFL-CIO, current president is Fredric Rolando.  NALC has 2,500 local branches representing carriers in all 50 states also including, Washington, D.C., Puerto Rico, the Virgin Islands, and Guam.  NALC represents non-rural letter carriers employed by the United States Postal Service.  NALC represents 300,058 active and retired members, 214,084 are active letter carriers.  NALC operates from its national headquarters in Washington with state associations and branches throughout the nation, along with a regional network of national business agents.  NALC gave $3,088,669 in contributions and $240,000 on lobbying in 2012.  Most of the candidates that NALC spent money on in 2012 was Democratic candidates.  NALC gave Representative Loretta Sanchez $8,500 in 2012.    NALC spent the most money on Janice Hahn and Ron Barber whom they spent $20,000 on each.

National Rural Letter Carriers’ Association (NRLCA): represents rural letter carriers employed by the United States Postal Service, mission is to improve the methods used by rural letter carriers, to benefit their conditions of labor with the United States Postal Service, and to promote a fraternal spirit among its members. NRLCA represents 104,717 members.  NRLCA spent $902,925 in contributions and $500,000 in lobbying in 2012.  NRLCA spent most of its money giving to Democratic candidates.  The candidate who received the most money from NRLCA was Representative Stephen Lynch who received $20,000.

National Postal Mail Handlers Union (NPMHU):  represents 47,000 active mail handler craft workers who load, unload, prepare, sort and containerize mail for delivery by the United States Postal Service.  The mission of the NPMHU is to come with an agreement with the U.S. Postal Service that establishes wages, cost-of-living adjustments, working conditions, and fringe benefits.  The group is a member of the AFL-CIO federation.  Members of the NPMHU join a local union with jurisdiction in their city, town,  or area.  They work with regional groups and go all the way to a national group which is headquartered in Washington, D.C.   NPMHU gave $417,500 in contributions and $30,800 on lobbying in 2012.  The top recipient was Representative Stephen Lynch who received $20,000.

National League of Postmasters (NLP): Professional and premier organization for postmasters.  Postmaster is the head of an individual post office.  NLP represents the interests of postmasters.  The purpose is to provide a place where postmasters and other members may assist one another in matters connected with their career employment in the USPS.

National Association of Postmasters of the United States (NAPUS): The larger of the group between the postmasters. NAPUS has 80% of the postmasters in its group. NAPUS has state organizations called chapters in all 50 states and Puerto Rico and the U.S. Virgin Islands. Each chapter has elected and appointed officers. NAPUS spent $382,807 on contributions and $190,000 on lobbying in 2012. They gave JoAnn Emerson $9,500 and Steny Hoyer $9,500 in 2012. Those were the two highest recipients of NAPUS money.

National Association of Postal Supervisors (NAPS): Management association representing first-line supervisors who work both in facilities where postal employees process and deliver mail, to mid-level and senior managers in every functional area of the Postal Service as well as postmasters. NAPS has branches in all 50 states, Guam, Puerto Rico, and the U.S. Virgin Islands. NAPS spent $593,650 on contributions to candidates and $80,000 on lobbying in 2012. NAPS spent $20,000 on contributions to Rep. Stephen Lynch who was the largest recipient for contributions from NAPS.

Action during the 112th Congress by Rep. Loretta Sanchez

On August 4, 2011, Representative Stephen Lynch (MA-9) introduced H.R. 1351, the United States Postal Service Pension Obligation Recalculation and Restoration Act of 2011.  Representative Loretta Sanchez had signed on as a co-sponsor on 06/21/11.  H.R. 1351 attempted to amend provisions for calculating the amount of the postal surplus for the supplemental liability under the Civil Service Retirement System.  If there was a surplus after recalculating the supplemental liability, they would transfer it to the Postal Service Retiree Health Benefits Funds.  Despite a total of 230 co-sponsors for the legislation, H.R. 1351 died in committee.

H.R. 1351 was supported by the following groups: NAPS, APWU, NALC, NPMHU, NLP, NARLCA, and NAPUS.

Representative Sam Graves (MO-1) introduced H. Res. 137, expressing the sense of the House of Representatives that the United States Postal Service should take all appropriate measures to ensure the continuation of its 6-day mail delivery service.  Representative Loretta Sanchez signed as co-sponsor on 03/16/11.  H. Res. 137 urges the United States Postal Service to take all appropriate measures to ensure the continuation of 6-day mail delivery service.  H. Res.  137 had 222 cosponsors but still died in committee.

  1. Res. 137 was supported by the following groups: NAPS, APWU, NALC, NPMHU, NLP, NARLCA, and NAPUS.

H.R. 466, to amend title 39, United States Code, to extend the authority of the United States Postal Service to issue a semipostal to raise funds for breast cancer research was introduced by Representative Joe Baca (CA-43) on January 26, 2011.  Rep. Loretta Sanchez signed as a co-sponsor on 03/02/11.  H.R. 466 would have extended for four years, the authority of the USPS to issue a semipostal to contribute to funding for breast cancer research.  H.R. 466 had 141 cosponsors and died in committee.

H.R. 6121, the Victory for Veterans Stamp Act of 2012 was introduced by Representative John Larson (CT-1) on July 12, 2012.  H.R. 6121 would have created a stamp that gives money from the proceeds equally to the post office, the postal debt, and to help veterans.  Rep. Loretta Sanchez signed as co-sponsor on 07/12/12.  H.R. 6121 received 116 cosponsors and died in committee.

Congressional Action during 112th Congress

There have not been any bills related to postal reform that have been passed by Congress.  The only bills that are even partially related are bills to re-name post offices.  The biggest pieces of legislation that have been attempted to have been passed are as follows:

H.R. 2309 Postal Reform Act of 2011: Establishes the Commission on Postal Reorganization, requests reduction of mail service days from 6 to 5, imposes a limitation on USPS contributions to postal employees’ health and life insurance premiums, gives power to the PRC to negotiate with the USPS on almost all issues.  Rep. Loretta Sanchez did not co-sponsor this legislation.  This legislation was not supported by any group.  This legislation died in committee.

H.R. 2967 Innovate to Deliver Act of 2011: Provides nonpostal services using USPS infrastructure, invest excess money of the CPF. Rates and fees are at least equal to the costs of providing postal services. Revises prepayment schedule of Retiree Health Benefit Fund to allow amortization of payments over a longer period.  Rep. Loretta Sanchez did not co-sponsor this legislation and this legislation was not supported by any group.

H.R. 1351 United States Postal Service Pension Obligation Recalculation and Restoration Act of 2011: Rep. Loretta Sanchez co-sponsored this legislation.  See Action by Loretta Sanchez for more information.

Key Members of Congress

Representative Darrell Issa (CA-49): Chairman of the House Oversight and Government Reform Committee since 2011. As leader of the committee that oversees any legislation related to postal reform, he holds a lot of sway with how the legislation is formed or completed. He introduced the Postal Reform Act of 2011 and Postal Reform Act of 2013. He has been talked about wanting to privatize the Postal Service. While the Postal Reform Act of 2013 has some concessions from the Postal Reform Act of 2011. His bills have been criticized by almost all interest groups related to postal reform as not doing enough to stop the pre-funding requirements, as well as trying to end the the six-day delivery of mail.  It remains to be seen if his legislation tackles any of the key priorities of postal service reform.

Key legislation: H.R. 2748 Postal Reform Act of 2013, H.R. 2309 Postal Reform Act of 2011

Representative Stephen Lynch (MA-09): Member of the House Oversight and Government Reform Committee, ranking member of the Federal Workforce, U.S. Postal Service, and the Census Subcommittee. Lynch’s top contributors to his campaign are interest groups for the postal service, including the APWU, NAPS, NPMHU, and NRLCA. Lynch’s legislation that he has introduced on postal reform has been praised by various postal interest groups. They have been extremely popular with all of the major groups. Rep. Loretta Sanchez has co-sponsored the bills that Lynch. He has worked on legislation that preserves the viability of the Postal Service, including six-day delivery of mail. Lynch has also put legislation out there to recalculate pension overpayment and a way to re-pay some of the debt that the Postal Service has racked up.

Key legislation: H.R. 961 United States Postal Service Stabilization Act of 2013, H.R. 1351 United States Postal Service Pension Obligation Recalculation and Restoration Act of 2011

Representative Elijah Cummings (MD-7): Ranking member of the House Oversight and Government Reform Committee. Cummings has done work to compromise between Republicans and Democrats to help produce legislation that might get passed. Cummings legislation in postal reform focuses on more revenue production for the postal service, trying to focus on flexibility. But interest groups generally do not completely support his legislation because he also talks about workforce realignment and does not focus on the pension or RHBF.

Key legislation: H.R. 2690 Innovate to Deliver Act of 2013, H.R. 2967 Innovate to Deliver Act of 2011

Action during the 113th Congress by Rep. Loretta Sanchez

H.R. 262, the Multinational Species Conservation Funds Semipostal Stamp Reauthorization Act was introduced by Representative Michael Grimm (NY-11) on January 15, 2013. Rep. Loretta Sanchez signed as cosponsor when it was introduced.  H.R. 262 would reauthorize the Multinational Species Conservation Funds Semipostal Stamp and has been referred to the House Natural Resources and the House Oversight and Government Reform Committees.

H.R. 630 Postal Service Protection Act of 2013 was introduced by Representative Peter DeFazio (OR-4) on February 13, 2013.  Rep. Loretta Sanchez signed as co-sponsor on 03/07/13.  H.R. 630 recalculates and restores retirement annuity obligations of the United States Postal Service, eliminates the requirement that the United States Postal Service pre-fund the Postal Service Retiree Health Benefits fund, place restrictions on the closure of postal facilities, and creates incentives for innovation for the United States Postal Service.  Or as the NALC puts it, it includes all key provisions to return the Postal Service to financial health in both the short and long terms.  H.R. 630 has been referred to the House Oversight and Government Reform and House Judiciary Committee.

H.R. 630 is supported by the following groups:  PRC, APQU, NALC, NPMHU, NARLCA, NAPUS, and NAPS.

H.R. 376 Universal Right to Vote by Mail Act was introduced on January 23, 2013 by Representative Susan Davis (CA-53).  Rep. Loretta Sanchez signed as cosponsor on 04/24/13.  H.R. 376 allows all eligible voters to vote by mail and allows any citizen to request a ballot through the mail in a federal election.  H.R. 376 has been referred to the House Administration Committee.

H.R. 376 is supported by the NALC.

H.R. 961 United States Postal Service Stabilization Act of 2013 was introduced by Representative Stephen Lynch (MA-9) on 03/05/13 and Rep. Loretta Sanchez signed as cosponsor on 04/23/13.  It has been referred to the House Oversight and Government Reform Committee.  H.R. 961 re-calculates postal surplus in the FERS pension fund using salary and demographic assumptions.  Surplus funds would be used to pay down USPS debt.

H.R. 961 is supported by the following groups: NAPUS, APWU, NALC, NPMHU, and NRLCA.

H.R. 2459, the Protect Overnight Delivery Act was introduced on 06/20/13 by Rep. Rosa DeLauro (CT-3) and Rep. Loretta Sanchez signed as an original cosponsor.  H.R. 2459 has been referred to the House Oversight and Government Reform Committee.  H.R. 2459 would reinstate overnight delivery standards for market-dominant products.

H.R. 2459 is supported by APWU, NALC, and NRLCA.

Postal Reform Act 2013

Major Points:

  • Modifies the Saturday Delivery Schedule. The Postal Service maintains Saturday delivery for packages and medicines, for at least five years, but phases out delivery of mailing bills and advertisements.
  • Phases out “to the door” delivery. The Postal Service will begin to stop delivering to the door mail and focus on delivering to clusterboxes and curbside delivery.
  • Brings new managers to manage the Postal Service. Brings in a panel of 5 full-time executives that have a clearly stated goal to turn around the postal service. Once the postal service is able to earn a profit, the panel is then eliminated in favor of the current set-up of the Board of Governors.
  • Changes some rates. Changes rates of postage to cover the cost of postal delivery.
  • Pay and benefits. Requires postal workers to pay the same premium contribution for health and life insurance benefits that other federal workers now pay.
  • Revenue. Allows the Postal Service to sell advertising space on vehicles and facilities.  Also allows the Postal Service to offer state and local services, such as the sale of fishing or hunting licenses.
  • Retiree Health Care Benefits. Starting in 2014, all future payments to the Retiree Health Care Benefits will be based on an actuarial calculation designed to achieve full funding by 2056.
  • Pension Accounts. Stops projected surpluses in the Postal Service’s pension system from going to pay for the operating losses of the Postal Service, but allows it to be used to pay for other benefits.

Changes from 2011:

  • No BRAC- there will not be a BRAC commission to ensure closure of postal service facilities that are losing money or to ensure that area and district facilities are consolidated. In 2011, there was a commission similar to BRAC to decide if postal service facilities should be closed.
  • Changes the Retiree Health Care Prefunding way of calculating to fully prefund the retiree health care benefit in 2056. In 2011, the bill would have deferred some payments but not set it up for an actuarial calculation.
  • Saturday Package Delivery is Protected. For at least 5 years, the Postal Service would maintain package and medicine delivery on Saturdays.  Other Saturday mail is not protected. In 2011, there was no such protection.
  • Pension surpluses. There would be an annual schedule to use projected pension surpluses to pay the retiree health care benefits, as opposed to a one time change.


The Postal Service, with its median pay of $53,090/year for postal service workers has allowed many workers to be able to reach middle class status even for non-college graduates.  Most jobs for the postal service require only a high school diploma.  According to the Bureau of Labor Statistics (BLS), in 2010, the Postal Service employed 522,144 career employees nationwide and over 8 million total, including 66,356 in California (with 2,637 in CA-46 alone).  Over the years from 2010-2020, BLS estimates a growth rate of -26% for Postal Service workers, which they classify as declining rapidly.  BLS estimates that the Postal Service will lose 138,600 career jobs over the years of 2010-2020.  BLS estimates that that the U.S. economy will add 20.5 million jobs in the same timeframe.  Out of 749 detailed occupations, 657 are projected to grow while only 92 are projected to decline.

The biggest decrease in revenue by the postal service came from 2008 to 2009.  In 2008, USPS generated $74.9 billion but in 2009, that had fallen to $68 billion.  This was partially caused by the recession while it had started in December 2007, did not take a sharp downturn until September of 2008.  Comparing 2008 to 2009, total mail volume fell by 25 billion, first class mail fell by nearly 4 billion, and advertising mail volume had fallen by 16.5 billion.  During the same time, nearly 40,000 career jobs were lost.  Since 2009, revenue has fallen from $68 billion to $65.2 billion and 100,000 career jobs have been lost.

In 2006, H.R. 6407 the Postal Accountability and Enhancement Act (PAEA) was passed by the House and Senate and became law.  The PAEA established the Postal Service Retirement Health Benefit Fund (RHBF) and shifted away from the “pay as you go” model of paying for retirement benefits.  The Postal Service was required to prefund the health benefits of current and future postal retirees.  The RHBF was funded with $17 billion from the Civil Service Retirement System (CSRS) and $3 billion that had been put in escrow from the suspension of the annual CSRS payment.  The PAEA required the Postal Service to make annual payments into the RHBF over a ten year period and to pay off the rest of its liability in the years 2017 to 2056.  The Government Accountability Office (GAO) in a recent report titled “Status, Financial Outlook, and Alternative Approaches to Fund Retiree Health Benefits”, stated that the payments to the RHBF were significantly frontloaded.  The fixed payments in the first 10 years exceeded what actuarially determined amounts would have been using a 50-year amortization schedule.  Due to these large upfront payments, the Postal Service has gotten deeper into debt.  Out of the $41 billion that the Postal Service owes, about $33 billion is because of this frontloaded payment schedule.  Taking the RHBF payments out of the equation, the Postal Service operates at a profit in 2007 and 2008, while managing less than $3 billion in the years of 2009 and 2010.  In 2011 and 2012, the debt is $5 billion in each of those years.  Without the payments to the RHBF, the Postal Service lost just over $8 billion from the year 2006-2012.

Postal reform seems unlikely without dealing with the scheduled pre-funding payments for the RHBF.  Almost all union groups agree that the PAEA’s scheduled pre-funding requirements need to be repealed.  Unfortunately, at this time, any legislation concerning the scheduled pre-funding requirements would not pass either the House of Representatives or the Senate.  The Postal Reform Act of 2013 addresses the RHBF by basing it on actuarial calculations designing it to achieve full funding by 2056.  The draft letter for the Innovate to Deliver Act of 2013 cuts pre-funding costs by less than six percent over the next 10 years.  The Office of the Inspector General (OIG) and the USPS have announced a proposal that they call the Seal and Grow Approach.

The Seal and Grow Approach is a variation of the “pay as you go” method.  The USPS would stop prefunding and pay its share of premium payments for retirees as they become due.  The existing fund would be left to grow with interest until the USPS’s liability was fully funded.    The OIG estimates that it would grow from $44 billion to $90 billion in 21 years.  The OIG also stated in a 2009 report that the USPS could pay about $1 billion per year to prefund its retiree health benefits and still achieve the same level of funding.  The OIG found that 38 percent of Fortune 1000 companies prefund retiree benefits at a median level of 37 percent.  The Department of Defense prefunds its retiree health benefits.  While the Department of Defense has a 100 percent target funded percentage, it was funded at just 38%.  The OIG thinks it would be sufficient to prefund at just 30%.

Easing on the pre-funded requirements for the RHBF is unlikely to pass Congress.  Even if it did pass Congress, there is still a need for the Postal Service to make money to maintain its viability.


Ensure the appointment of those with extensive large business experience to the Board of Governors of the United States Postal Service.  Move away from the practice of Senate leaders recommending appointees to the board and instead focus on those who have proven track records working in large businesses, non-profits, or with working with unions.  Work with the Board of Governors to nominate a Chief Innovation Officer (as called for in the Innovate to Deliver Act of 2013) from the Board of Governors.  Finally, make sure that the Board of Governors does not have a vacancy on the Board of Governors for any more than 90 days.

  •   Allow for the shipping of beer, wine, and spirits as long as it is in accordance with state law. The general guidelines for shipping alcohol via FedEx would be applied here.  There would need to be an alcohol shipping agreement and identify alcohol shipments.  Some state laws require that there has to be an adult signature at the time of delivery for every package containing alcohol.  Alcohol that is illegal in states (i.e. Everclear) to purchase should not be shipped to states where they are illegal to purchase.  States that have laws prohibiting out of state beer, wine, alcohol would not be shipped to.
  • Allow for the sale of hunting and fishing licenses at Post Offices (as stated in the Postal Reform Act of 2013)
  • Advertising. With over 1 million visitors to the USPS’s website per day and 72,000 visitors per day for the USPS’s mobile website, it would be beneficial to allow for the sale of advertisements on their website.  Advertisements on vehicles could also be beneficial.  Advertisements in facilities could also be added to the list of beneficial revenue streams.
  •  Allow for postal service employees who work at postal facilities to be trained to be public notaries. In addition to being trained, public notary services will be offered at a competitive fee for the area at postal facilities.
  • Postal service facilities that have extra computers and access to internet can charge for use of the computer and internet such as printing, e-mail, etc.
  •      Postal service facilities can charge for the use of a fax machine at the postal service facilities.
  • Change the charge for delivery of mail to match the charge in CPI for private sector delivery charges.  Doing so would tie postage rates to cost trends in the Postal Service’s industry.
  • Based the payment for the RHBF on an actuarial calculation that is intended to fund the RHBF at 50% over the next 40 years.  Additionally, delay payments to the RHBF until 2017.  Adopt a modified Seal and Grow Approach.    Calculate payment into the FERS pension fund using postal demographics.  Surplus payments into the FERS pension fund can be used by the Board of Governors however they see fit. Surplus payments in the CSRS can be transferred to any way that the Postal Board of Governors sees fit.
  • Study over the next 90-120 days how the impact of subsidizing payments from political parties, political mailings, etc. will impact the revenue of the postal service.

Personal take:

After watching the markup in the committee of H.R. 2748, the Postal Reform Act of 2013, I think it’s fair to say that actual postal reform is unlikely at this point in time.  It’s possible in the future but there are too many issues where the parties are too far apart on to even agree to simplistic reforms. In the past two Congress sessions, there has not been a bill that emerged from committee to actually voted on by the House.  The bills that got brought to the floor for a vote, somewhat related to Post Office services, were the bills that were naming post offices.

When I first took on this project, I thought that the only reason that we’ve not come to a postal reform is because we were looking at the reform much too broadly.  There are going to be obvious disagreements, especially since the Democratic Party is focusing on the overpayment of the RHBF, especially the pre-funding requirements of the PAEA.  This is being taken apart by the Republican Party because this issue is the one that is brought up by every union when discussing the reform of the Postal Service.

Unfortunately, the disagreements between the two political parties or the two sides of the argument, we’re looking at a much bigger gap.  In the Innovate to Deliver Act of 2013 that will be introduced by Representative Elijah Cummings, ranking member of the House Committee on Oversight and Government Reform, it will allow for the shipment of beer, wine, and spirits through the Postal Service.  This type of shipping might be able to add marginal revenue to the United States Postal Service.  Two private shipping companies, UPS and FedEx, allow for the shipping of alcohol based on agreements with the company.  They’re allowed to be shipped if they comply with all of the state laws.  For instance, some states do not allow for the shipment of wine.  Both companies require that someone who is over 21 signs for the alcohol.  Representative Blake Farenthold (TX-27) was appalled at such a suggestion during the markup of H.R. 2748.  He claimed that his daughters would have used mail service alcohol to drink underage.

Representative Farenthold also claimed that the shipping of alcohol was unconstitutional, claiming that part of the repeal of prohibition would prohibit the transport of alcohol across state lines.  Representative Jason Chaffetz (UT-03) is concerned that Utah would be importing too much alcohol into the state that is not in accordance with state laws.  Representative John Mica (FL-07) made the claim that everyone was actually thinking.  He stated that there was no need for the USPS to ship alcohol because there were already private businesses that offered that service.  Unfortunately, there was not a hearing about the shipping of alcoholic beverages by the private shipping companies.  The Postal Service because it is a quasi-government entity has to go through Congressional oversight.  This is just an example of the problems I see with even trivial postal reform.  Obviously, shipping beer, wine, alcohol, and spirits is not going to solve the problems of the Postal Service.

On the left side of the political spectrum, there has been claims that Representative Darrell Issa is trying to privatize the Postal Service.  This might be true, it might not.  The way he thinks about the Postal Service was made clear during the markup of his Postal Reform Act of 2013 bill.  He stated that the Postal Service was one of the least creative, least flexible organizations in the government.  He went on and claimed that the Postal Service should not offer any service that private businesses already offer.  Representative Jason Chaffetz echoed this claim adding that the reason for this was because the Postal Service enjoys special tax breaks or because they are allowed to subsidize how they ship packages.  But let’s imagine that the Postal Service actually became privatized.  What steps might they take to maintain financial viability?

My guess is that the first step they would take is to deunionize as much as they can.  Most career employees for the United States Postal Service are members of a union.  Largely, because of the union ties, career employees are able to make more money than they would with similar education and work experience.  Deunionizing the postal service would allow those who want to privatize the Postal Service to pay less in actual wages to employees, not to mention benefits.  Also, because of the unions, there are clauses in their contracts to prevent being laid off.  Without the unions, this would also be gone.  Next step, would be to find a way to stop overpaying into a retirement pension fund or to move the money from the pension fund to cover the debt.  The RHBF would likely have been replaced or removed when they deunionized the workforce.  If it was not, they would probably do what other Fortune 1000 companies do and fund the RHBF to about 30-35%.  Then they would look to compete with other private businesses.  They would add advertisements on their websites.  They would sell advertisements on vehicles and facilities.  They would likely sell facilities to the highest bidder (unlike what is happening now) after they were consolidated or closed.  They would likely do most of my recommendations.  But they would definitely try everything they can to make as much money as possible.  I doubt a privatized postal service would not deliver on Saturday.  That is a competitive advantage.  The real question in all of this is, if you want the Postal Service to run like a business, why are you not allowing them to run like a business?

Quick Facts:

  • 522,144 career employees for the USPS
  • 108,000 career employees who are veterans
  • -26% expected growth from 2010-2020, meaning over 100,000 career jobs lost
  • 0- number of bills that have been brought to the House floor related to postal reform
  • $787 million, online revenue for USPS in 2012
  • 160 billion total mail volume
  • 68.7 billion, total first-class mail volume
  • $85 billion, value of USPS real estate portfolio
  • $46 billion, remaining obligation in the RHBF
  • $22 million/day payments into the RHBF
  • $5 billion, amount required per year for the first 10 years by the PAEA to pay into the RHBF
  • $31.9 billion, payments into the RHBF from 2007-2012, out of $40.9 billion in debt
  • $34 million, debt accrued by the Postal Service without RHBF payments
  • $500 million, amount projected to save under POStPlan by replacing 10,000 career postmasters with part-time workers
  • 4.3%, amount first-class volumes are down in first quarter of FY2013
  • 4.8% amount periodicals are down in first quarter of FY2013
  • 10.3% amount that First-class single-piece volumes would fall in the first year of new service standards according to one study.  A later study showed it would be a 2.8% drop
  • 19.7%, amount that periodicals would fall in first year of new service standards according to one study, a later study showed it would be a 2.1% drop

Raising the floor

On April 30, 2014, the U.S. Senate tried to bring a bill that would raise the federal minimum wage to $10.10 per hour.  Republican Senators filibustered the bill.  54 Senators voted to proceed with final consideration and 42 Senators opposed going to final consideration so the filibuster was successful and the bill was not voted on in its final form. The vote proceeded on party lines with the only Democrat not voting being Mark Pryor and the only Democratic Senator voting against moving the bill forward was Harry Reid, which was done with procedural reasons.  Republicans and other conservatives have largely been upset about efforts to raise the minimum wage instead, relying mainly on the claims of fast food workers and labor organizations to attempt to raise the minimum wage to $15 hour as opposed to efforts to raise the minimum wage that are politically viable.  The raise to the minimum wage to at least $10 per hour is inevitable but the raise to $15 per hour is not politically viable at this point.

Fast food organizers and various labor organizations have been calling for a significant increase to the minimum wage to $15 per hour.   The criticism against raising it is frequently subpar and if taken to their logical conclusion would have disastrous results.  I don’t really want to spend too much time taking apart the criticism because I don’t believe that the raise to $15 per hour minimum wage is something that could be implemented at the federal level for several years.  It seems pretty clear that the argument to raising the wage to $15 per hour is a negotiating tactic intended to highlight the wage disparity that is currently happening and to instigate action to raise the minimum wage.  Once the wage is raised to $10 per hour both sides can claim a partial victory which is what both sides want.  I really want to focus on why the minimum wage hike is a political inevitablity, why it is probably a good thing, and why most of the arguments against it are bananas.  I may generalize the arguments that I have read or seen from other people but I am hoping not to strawman any of the arguments.

The Congressional Budget Office (CBO) produced an analysis of the effect of implementing a $10.10 per hour minimum wage.  According to the CBO, low wage workers would see a total increased income of $31 billion.  19% of that $31 billion would go to families at or below the poverty level with 29% going to families earning up to three times the poverty threshold.  There would be decreases in income for those who lost their jobs due to the raise in the minimum wage, business owners, and consumers facing higher inflation prices.  The CBO estimates that after accounting for all of this, overall income would increase by $2 billion.  More importantly, real income would increase by $5 billion among families at or below the poverty level.  This would move 900,000 people out of poverty.  Families whose income would be between one and three times the poverty level would receive $12 billion in additional real income.  Families between three and six times the poverty level would receive an additional $2 billion in additional real income.  Business owners and those making over six times the poverty level will see their incomes decrease only as much as their profits decrease.

A brief history of the minimum wage

Some arguments about the minimum wage tend to focus on the idea that the minimum wage was never intended to be a living wage.  It was always intended to be a wage that was for those looking to supplement their income.  Of course, this is incorrect.

The minimum wage was established by the Fair Labor Standards Act (FLSA) at $0.25/hour.  This bill was signed by President Franklin Delano Roosevelt.  The bill created overtime pay, a minimum wage, banning most child labor and established a 44 hour work week.  President Roosevelt, speaking to Congress prior to the bill being created said, “a self-supporting and self-respecting democracy can plead no justification for the existence of child labor, no economic reason for chiseling worker’s wages or stretching workers’ hours.”  President Roosevelt tried to convince Congress that the bill was a pro-business bill.  Labor historian Erik Loomis notes in his “This Day in Labor History” post linked above, that the “Commissioner of Labor Statistic Isador Lubin told Congress that the businesses surviving the Depression were not the most efficient, but the ones who most ruthlessly exploited labor into longer hours and lower wages.”  The establishment of these standards would attempt to halt these practices and allow businesses to compete on a somewhat more even playing field.

The minimum wage was supported by some leaders in the labor movement.  Others “supported it only for the lowest wage workers, fearing a minimum wage would become a maximum wage for better paid labor.”  This fear has been somewhat realized as commentators and business leaders often compare the wages of workers to the minimum wage when negotiating wages. The fear of resorting to the minimum wage for their labor has hindered some employees from exploring new jobs and limited their bargaining power with their employers.  That’s a subject for a different time, though.

Predictably, executives and business owners were livid about the minimum wage.  They predicted that they would not be able to afford employees, which coming at the heels of the Great Depression was fairly scary and reminiscent of what many critics of raising the minimum wage, now.  Roosevelt addressed these concerns in a fireside chat, saying “do not let any calamity-howling executive with an income of $1,000 a day…tell you…that a wage of $11 a week is going to have a disastrous effect on all American industry.”  As Loomis points out the FLSA has greatly expanded over the years.  He points out that Harry Truman expanded the FLSA to cannery and airline workers and John F. Kennedy expanded the protections to retail and service employees.  The 1963 Equal Pay Act, as Loomis, notes expanded the FLSA to “require equal pay for equal work for women and men.”

The effects of raising the minimum wage on employment

The conventional analysis of raising the minimum wage, to put it simply, (I am not an economist) states that there are two long-term effects on employment from raising the minimum wage. The first is known as the scale effect.  The scale effect is the one oft cited by critics of minimum wage hikes, albeit, they do not call it that. Essentially, higher wages raise the costs to businesses and the businesses pass this higher cost to consumers.  Due to the higher prices, consumers will buy less from the business and so there is less of a need to hire more workers. This has the effect of both raising consumer prices and decreasing employment among both low and high income workers.

The other long-term effect is known as the substitution effect. The substitution effect is where the cost of low-wage workers are increased compared to machines, technology, and more productive higher-wage workers.  To offset the costs, the business will shift to more machines, more technology, and try to increase productivity of higher-wage workers.  With this effect, you would not see a dramatic increase in price but you would see lower employment of low-wage workers but an increase of higher-wage workers.

As the CBO points out, though, conventional analysis might not be correct in all circumstances.  After an increase in the minimum wage, employers need to increase the pay to retain their original workers regardless of if new employees are hired.  Since the cost of hiring new employees as decreased there are some economists that argue that this will lead to increased employment.  In addition to that, an increase in the minimum wage could increase employment by raising the demand for goods and services.  A higher minimum wage tends to shift income from higher-wage employees and business owners to low-wage workers. Low-wage workers are more likely to spend a larger portion of their income on goods and services which would increase employment for low-wage workers and higher-wage workers alike.  As the CBO notes, “[this] effect is larger when the economy is weaker, and it is larger in regions of the country where the economy is weaker.”

A raise in the minimum wage would not only affect those wage-earners who earn the minimum wage but also though who earn slightly more than the minimum wage.  This should be a self-evident point but it’s often forgotten. Employers may also increase pay to keep pay differentials between positions consistent.  Some positions that are collectively bargained are tied to the federal minimum wage and those positions may see a pay increase, as well.

Employers whose businesses are more sensitive to price increases are more likely to see a higher decrease in employment than businesses that do not face this challenge.  Employers who cannot follow the substitution effect by replacing low wage workers with technology, machines, or more productive higher-wage earners are also more likely to decrease their employment in greater numbers.  Finally, businesses that rely heavily on low-income wage earners may see a decrease in their employment numbers.  Of course, they might not, if there are fewer jobs available for low-income wage earners, they may increase their productivity and that reaction combined with the lower cost of hiring new applicants, there might be a slight increase in employment or at least a net zero gain in employment. Finally, employers that do not employ very many low-wage employees that compete against employers that do employ many low-wage employees will see demand rise as the costs rise at the employers with many low-wage employees. These employers tend to hire more low-wage workers, boosting employment.  This last example portends well for Costco compared to Wal-Mart. We may yet have a law school at Costco.

For higher-wage workers, there is some good news for employment prospects according to the CBO.  Once the minimum wage stabilizes, higher-wage employees are slightly less expensive to hire.  Employers noticing that they can hire higher-wage employees to replace less productive low-wage employees for just a little bit more will hire more higher-wage workers.  This combined with the increased demand will increase employment for higher-wage workers.

The CBO’s central estimate found that raising the minimum wage would reduce employment by 500,000 workers.  The CBO points out that is “the net result of two effects: a slightly larger decrease in jobs for low-wage workers (because of their higher cost) and an increase of a few tens of thousands of jobs for other workers (because of greater demand for goods and services).”  Those who would lose their jobs would center on those making less than $10.10 per hour currently. Workers earning between $10.10 and $11.50 per hour may see a pay raise which could reduce their employment but employers may hire more of those employees to make up for those workers who were scheduled to make less than $10.10 per hour.  The CBO believes that the “number of such workers who were employed would probably not change significantly.”  The analysis by the CBO found that there is a two-thirds chance that the employment would be reduced between a slight reduction and a decrease of 1.0 million workers.

Who would be affected by raising the minimum wage?

Often critics of raising the minimum wage will couch their criticism behind the idea that minimum wage earners are high schoolers or senior citizens and the wages are used to supplement their income.  The Bureau of Labor Statistics found that this is more or less accurate.  Minimum wage jobs are mostly for young people.  In their study for workers who work for $7.25/hour or less, they found that 50.6% of them are ages 16-24.  30.9% of those who are working at exactly minimum wage are age 16-19 years old.  Of course, this study is only looking at workers earning the federal minimum wage or less but is not looking at workers who are working for slightly more thanks to their state or local municipality raising the minimum wage or for workers who would be directly affected by a raise in the minimum wage.

A liberal think tank, the Economic Policy Institute, tried to look at who would be directly affected by a raise in the minimum wage to $10.10 per hour.  In doing so, they looked at everyone who earned less than $11.10 per hour.  The assumption is that those making a little more than $10.10 would also receive a slight boost (as we discussed above).   According to them, 12.5% of workers directly affected are less than 20 years old.  Beyond that, they found that 13.7% of workers are 55 or older.  36.5% of those who would be directly affected are 20-29 years old.  Nearly three-quarters (73.7%) of those affected by a raise of the minimum wage are between the ages of 20-54.  The average age for those making less than $11.10 per hour is 35 years old.  The report’s author told PolitiFact that when he changed the numbers to those earning within 3% of the state’s minimum wage that the average was 31.  The CBO looked at workers who would earn less than $11.50 per hour under current law in 2016 and found that 88% of them would be 20 or older with only 12% being 16-19.

The assumption that these jobs are used primarily for supplemental income are created to make sure that people don’t feel bad when they state that they don’t want to raise the minimum wage.  If you can convince people that they don’t really need the money then you can paint those arguing for a minimum wage hike as selfish.  The Economic Policy Institute found that only 14.2% of workers who would be affected by the minimum wage hike work fewer than 20 hours per week.  About 54 percent work full time, as defined as 35 or more hours per week and 32 percent work 20-34 hours per week.  This is also consistent with what the CBO found. They found that 53% of low-wage (earning less than $11.50) would be working 35 or more hours per week.  Those workers affected by the raising of the minimum wage earn on average 50% of their family’s income.  Not surprisingly, the vast majority of those affected by this raise (68.9%) have total family incomes of less than $60,000 per year.  About a quarter (23.1%) of those affected have family incomes below $20,000 per year.  Only 4.5% of those affected have a total family income of over $150,000.  $144,000 is six times the poverty level for a family of four which is where we start to see real income decline because of the wage increase.  Over a quarter (26.1%) of those who would see their wages rise from a minimum wage raise are parents.  Some critics of raising the minimum wage state that those earning minimum wage or just a little more should know that their incomes are not enough to raise a family. Nearly three-quarters of them are not parents showing self-restraint and practicing safe sex even while these same critics advocate for cutting spending on family planning services such as Planned Parenthood, favoring abstinence only sex education (which has proven to be ineffective), praising the decision in the Hobby Lobby case that stopped some coverage of health insurance and contraception, and criticizing health insurance plans that provide free contraception.  That’s probably not relevant, though.

The education of workers

A frequent argument against raising the minimum wage is that those working minimum wage jobs are for those with less education. If these workers were willing to educate themselves, they would find better jobs.  The CBO projects that 58% of all workers without a high school diploma will be low-wage workers (earning less than $11.50/hour in 2016), 30% of all workers with a high school diploma/some college will be low-wage workers, and 7% of workers who earned a bachelor’s degree will be low-wage workers.  Perhaps they have a point.  That is, if you forget that 87% of workers aged 16 to 19 will be low-wage workers and that 12% of low wage workers are under 20.  You know most of those years are spent GOING TO HIGH SCHOOL. You can’t have it both ways; you can’t claim that the vast majority of low-wage workers are young and then say they are also uneducated.

Projecting out to 2016 with the CBO, 70% of low-wage workers have a high school diploma and/or some college and 10% of low-wage workers have a Bachelor’s degree. That leaves about 20% of low-wage workers who have not graduated high school.  That doesn’t leave many uneducated people out there working low-wage (less than $11.50/hour) jobs  who are not younger than 20.  Knowing that, is it possible that raising the minimum wage could help educate these workers?

This is a crazy thought but college is significantly expensive and can be out of reach for those workers who are earning minimum wage.  College is significantly more expensive than in any time in history.  The National Center for Education Statistics (NCES) houses education statistics since 1969 including the price of tuition until the 2011-2012 school year.  For a public four-year institution, the tuition was an average of $7,701.  For someone making the exact federal minimum wage ($7.25/hour) and working 40 hours per week, this tuition would be over 50% of their total income (even if you don’t include any taxes).  Since low-wage workers on average earn half of their family’s income, that’s unfeasible, without taking significant student loans.  Even at California’s current minimum wage ($9/hour), a four year public university would take up 41% of the worker’s income which is still a significant amount of income.  If the worker wants to go to a trade school or a two year college, a public two-year college costs on average $2.647.  How can we compare this against the number of years?  The next table compares how many hours one would have to work at the minimum wage to cover a year of tuition at a four year public university using in-state tuition. The first column is the year followed by the wage, the tuition in its non-inflation adjusted dollars and finally the number of hours it would take at this wage to pay for the tuition.

Year Wage Tuition ($) Hours
1969 1.6 358 223.75
1970 1.6 394 246.25
1971 1.6 428 267.5
1972 1.6 503 314.375
1973 1.6 514 321.25
1974 2 512 256
1975 2.1 542 258.0952
1976 2.3 617 268.2609
1977 2.3 655 284.7826
1978 2.65 688 259.6226
1979 2.9 738 254.4828
1980 3.1 804 259.3548
1981 3.35 909 271.3433
1982 3.35 1031 307.7612
1983 3.35 1148 342.6866
1984 3.35 1228 366.5672
1985 3.35 1318 393.4328
1986 3.35 1414 422.0896
1987 3.35 1537 458.806
1988 3.35 1646 491.3433
1989 3.35 1780 531.3433
1990 3.8 1888 496.8421
1991 4.25 2117 498.1176
1992 4.25 2349 552.7059
1993 4.25 2537 596.9412
1994 4.25 2681 630.8235
1995 4.25 2848 670.1176
1996 4.75 2987 628.8421
1997 5.15 3110 603.8835
1998 5.15 3229 626.9903
1999 5.15 3349 650.2913
2000 5.15 3501 679.8058
2001 5.15 3735 725.2427
2002 5.15 4046 785.6311
2003 5.15 4587 890.6796
2004 5.15 5027 976.1165
2005 5.15 5351 1039.029
2006 5.16 5666 1098.062
2007 5.85 5943 1015.897
2008 6.55 6312 963.6641
2009 7.25 6695 923.4483
2010 7.25 7136 984.2759
2011 7.25 7701 1062.207

From that table, we can see that it now takes about 1000 hours of minimum wage work to be able to afford one year of tuition at a public four year institution.  To kind of tease out the variable of college tuition, the next table shows how many hours it would take if the minimum wage remained at $7.25 in 2012 dollars for each of those years.  The first column is the year, the wage column is what the wage was in comparable dollars to $7.25 in 2012.  So, for instance, $7.25 in 2012 adjusted for inflation was $1.16 in 1969.  The final column is the difference in total number of hours that would have needed to be worked with the real wages compared to the wages with the 2012 minimum wage in inflation adjusted dollars.  The final column is the total number of hours needed to work at the year’s minimum wage compared to the total number of hours needed to work for the 2012 inflation adjusted wage.

Year Wage Tuition Hours Difference in hours
1969 1.16 358 308.6207 -84.87068966
1970 1.23 394 320.3252 -74.07520325
1971 1.28 428 334.375 -66.875
1972 1.32 503 381.0606 -66.68560606
1973 1.4 514 367.1429 -45.89285714
1974 1.56 512 328.2051 -72.20512821
1975 1.7 542 318.8235 -60.72829132
1976 1.8 617 342.7778 -74.51690821
1977 1.91 655 342.9319 -58.14932848
1978 2.06 688 333.9806 -74.35794101
1979 2.29 738 322.2707 -67.78798374
1980 2.6 804 309.2308 -49.87593052
1981 2.87 909 316.7247 -45.38145509
1982 3.05 1031 338.0328 -30.27159286
1983 3.15 1148 364.4444 -21.75787728
1984 3.28 1228 374.3902 -7.823079723
1985 3.4 1318 387.6471 5.785776997
1986 3.46 1414 408.6705 13.41903201
1987 3.59 1537 428.1337 30.67226541
1988 3.74 1646 440.107 51.23633171
1989 3.92 1780 454.0816 77.26165093
1990 4.13 1888 457.1429 39.69924812
1991 4.3 2117 492.3256 5.792065663
1992 4.43 2349 530.2483 22.45757536
1993 4.56 2537 556.3596 40.58152735
1994 4.68 2681 572.8632 57.96028155
1995 4.81 2848 592.0998 78.01785496
1996 4.95 2987 603.4343 25.40776183
1997 5.07 3110 613.4122 -9.528733651
1998 5.15 3229 626.9903 0
1999 5.26 3349 636.692 13.59924693
2000 5.44 3501 643.5662 36.23964877
2001 5.59 3735 668.1574 57.08529448
2002 5.68 4046 712.3239 73.3071243
2003 5.81 4587 789.5009 101.1787511
2004 5.96 5027 843.4564 132.660129
2005 6.17 5351 867.2609 171.7681862
2006 6.37 5666 889.4819 210.7122281
2007 6.55 5943 907.3282 108.5691916
2008 6.8 6312 928.2353 35.42882802
2009 6.77 6695 988.9217 -65.47343758
2010 6.89 7136 1035.704 -51.42805665
2011 7.1 7701 1084.648 -22.44099077

This table produces more of a need to cut the costs of colleges more than an increase in the minimum wage.  But there are a number of years where the employee would need to work about 2 more weeks of minimum wage to be able to afford a year of tuition with the wage that was constructed compared to the current wage (minimum wage was really stagnant in the 1990s, though).  Although, again, many critics of raising the minimum wage are trying to make it harder for those making minimum wage to be able to afford school by cutting state budgets to schooling, cutting aid programs (such as SNAP, TANF, etc.) or want to make it harder to be able to get those programs.  Finally, many are trying to block Medicaid expansion which would allow these workers to get health insurance and having a greater chance of attending school.

Food service, income inequality, and the minimum wage

Restaurants and food services employ nearly half of all American workers who earn the federal minimum wage or less while restaurants employ nearly 10% of all American workers.  The National Restaurant Association found that there will be nearly $683.4 billion in sales in 2014.   It’s not surprising that thanks to these sales restaurant CEOs are very well compensated.  The average top restaurant CEO was paid $10,872,390 in 2013.  This was more than 721 times what a worker earning minimum wage would make in a year.  To put it into more context, within the first half-day of working, a CEO will have earned as much as a minimum wage worker will earn in a whole year (provided that they work full-time).

The National Restaurant Association has frequently opposed a raise in the minimum wage.  They state that restaurants would “limit hiring, increase prices, cut employee hours or implement a combination of all three to pay for the wage increase.”  Congress last voted to increase the minimum wage in 2007.  In 2006, the top CEO’s made 609 times what a minimum wage worker made.  While denying a raise in the minimum wage to millions of workers, CEO’s were able to line their own pockets with cash.

In 1965, a CEO made 20 times more than a typical worker in 1965, growing to 29.1 in 1978, 58.7 by 1989 and reached a peak of 383.4 by the end of the 1990s.  Right now, the average CEO makes 295.9 times more than the typical worker.  All these statistics are courtesy of the Economic Policy Institute.

It’s a good thing that the CEO’s and others at such corporations, like McDonald’s, produced a handy budget to help those who are unfortunate enough to be stuck working a minimum wage job.  Of course, it assumes that you are working two jobs.  One job is at McDonald’s at minimum wage which gives you $1105 per month and the second job is basically a full time job (over 30 hours a week) if you are working at the minimum wage.  Good luck working those two jobs with your McDonald’s schedule that probably is not very consistent.  The annual compensation for the CEO of McDonald’s, Donald Thompson is $9.5 million.   McDonald’s Corporation spent over $2 million lobbying in 2013.

The budget that McDonald’s posted was taken down after criticism from many organizations. 

Because of the number of teenagers and high school aged teenagers who are working at restaurants and in the food service industry, many people cite that as the fact that these jobs are only supposed to be for them.  Unfortunately, the hours of operation of these restaurants significantly disproves this.  For some reason they are open late at night and during the day when children are at school.

Obviously, not all restaurants are comparable to large corporations to McDonald’s or other franchises.  There are many mom and pop restaurants and other small businesses that could be hurt by raising the minimum wage. Of course, they should look at other factors including whether or not additional buying power by their consumers can help alleviate some of the damage.

The political inevitability

Raising the minimum wage to $10.10 per hour (or close to that amount) is inevitable. The question is just a matter of when.  In a poll released in March of 2014 by ABC News/Washington Post, 50% of Americans stated that they would be more likely to vote for a candidate who supported raising the minimum wage.  Nearly every poll conducted on the issue shows overwhelming support for raising the minimum wage.   Just a quick rundown on some nationwide polls: Bloomberg found that 69% of Americans favored raising the minimum wage to $10.10 over the next three years.   In June, CNN found that 71% of Americans favored an increase in the federal minimum wage and the New York Times found in September of 2014 that 70% of Americans supported raising the minimum wage to $10.10 per hour.

Support for raising the minimum wage hovers around 70%.  The only poll asking respondents what the minimum wage should be raised to, the CNN poll, found that 52% of Americans supported raising the minimum wage to $10.10 per hour or higher.  19% favored raising the minimum wage but to less than $10.10 per hour.

The polls also indicate what talking points will be used to lower this support.  The Bloomberg poll misrepresented the CBO report and stated that only 16.5 million Americans will see their incomes increase while 500,000 jobs would be eliminated.  Both of these are misrepresentations as we will discuss later.  57% of Americans found this tradeoff to be unacceptable.  This is not surprising since both of the statements are incorrect.   As long as you focus on the total number of jobs lost and lie about who will see their incomes increase, people will not support raising the minimum wage.

We see that the vast majority of Americans support raising the minimum wage, who does not support raising the minimum wage?  To answer this question, I looked at cross-tabs for 10 statewide polls from Public Policy Polling (PPP).  The nine states that I looked at were Connecticut, Louisiana, Kansas, Florida, North Carolina, Michigan, Kentucky, Mississippi, and Minnesota.  PPP asked if voters would support or oppose a raise in the minimum wage to $10/hour.  I looked at the percentage that stated they opposed the minimum wage.  Then I looked at the percentage of each of the cross tabs that opposed the minimum wage hike.  I subtracted those in the cross tab from the overall percentage who opposed the minimum wage hike.

If there is a negative in the column it means that there are less people in that cross tab who oppose the minimum wage hike.

State Female Male
Connecticut -6 7
Louisiana -8 9
Kansas -9 10
Florida -6 8
North Carolina -7 8
Michigan -5 6
Kentucky -8 8
Mississippi -8 11
Minnesota -7 7
Average -7.1 8.2

So on average, women were less likely to oppose a minimum wage hike and men were more likely to oppose the minimum wage hike.  Women are more likely to be making minimum wage (or close to minimum wage) than men.  Next table is by political party.

Note: Independent also means other in this table

State Democrat Republican Independent
Connecticut -21 24 9
Louisiana -23 25 2
Kansas -22 15 -9
Florida -14 18 -4
North Carolina -19 23 3
Michigan -24 24 6
Kentucky -15 20 -2
Mississippi -28 24 4
Minnesota -26 29 4
Average -21.3 22.4 1.4

Not even close to surprising is that Republicans are much more likely to oppose a minimum wage hike.  It also gives the appearance that the minimum wage hike is largely a partisan issue.

The next table was going to be a table looking at racial demographics.  Unfortunately, due to choosing less racially diverse states such as Louisiana, Kansas, Mississippi, and Minnesota PPP lumped racial categories together into an “other” category which makes crossracial comparisons not as accurate.  Whites are more likely to oppose a minimum wage hike at 5.3, meaning that in the average state, whites opposed a minimum wage hike by 5 percentage points above how the state felt.  Blacks opposed the minimum wage hike at about the rate as Democrats (meaning almost none at all).

The last table is an age comparison:

State 18-29 30-45 46-65 65+
Connecticut -14 4 -1 3
Louisiana -10 2 0 2
Kansas -12 5 1 -3
Florida -15 -4 7 3
North Carolina -5 -1 3 -2
Michigan -4 4 1 -2
Kentucky -3 2 1 -3
Mississippi -14 -3 0 12
Minnesota 3 5 -2 -8
Average -8.2 1.6 1.1 0.2

Younger voters are less likely to oppose a minimum wage hike.  This is not surprising but gives us another opportunity to show how millenials are changing politics.  If we take out the outlier in Mississippi, we see that senior citizens are less likely to oppose a minimum wage hike, as well, although it is only by 1.25 points.  Although if you take out Minnesota, as well, it is essentially zero for senior citizens.

After looking at the data, those who oppose a minimum wage hike are primarily white, male, Republicans between the ages of 30-65.  The strongest correlation between opposing a minimum wage hike, though, is political party (it would then be followed by race), then gender, then age.

Characteristics of minimum wage workers

I wrote a lot about the projections of the CBO for what the minimum wage workforce will look like in 2016.  The BLS data on minimum wage workers is an extremely valuable resource for those who want to discuss the current minimum wage intelligently.  Some of the highlights include that workers who make exactly the minimum wage ($7.25/hour) or less now represents less than 5% of the total workforce.  The data is self-reported and is asked about their income.  Of course, many states have a state minimum wage above $7.25, as do cities, counties, and municipalities.  Because of that and my focus on workers who are earning below $11.50 for the most part, I did not include much of the data that was found in the report.

This section will just give some more information on those working at exactly the minimum wage or lower.  All information can be found in the BLS data linked above.  About half of those who earn the minimum wage or lower are under 25.  5% of all women who are paid hourly wages make the minimum wage or less compared to 3% of men.  5% of all hourly paid Black workers, 4% of White workers and Latino workers, and 3% of Asian workers earned the federal minimum wage or less.  10% of hourly paid workers without a high school diploma earn minimum wage or less, 4% who have a high school diploma, and about 2% of college graduates do the same.


What are we to do in the face of all this knowledge?  One thing that we definitely will do is argue about raising the minimum wage while building strawmen because we like to do that.  The minimum wage is almost certain to be raised to $10 per hour at some point in the near future.  At some point in the future, we may see the minimum wage even be raised to $15/hour but that is more likely due to inflation and there are not bills on the horizon with this type of provision.

I remain unconvinced by arguments by critics of the law that it would hurt work ethic to raise the wage, just as pay raises at other jobs do not hurt work ethic, there is not sufficient proof that this will happen.  I did not even address this in the post as I believe the very thought is laughable.

When discussing any policy, there are multiple things that you have to weigh, I do so with a utilitarian bent on most policy issues.  The evidence suggests that there will be a minimal job loss, minimal-moderate increase on consumer price, and a minimal loss of income for those making more than 6 times the poverty level.  For the last point, even if there was a substantial loss of income, I would still probably be ok with it as I believe in a larger redistributive society.  I believe all of that pales into comparison to lifting hundreds of thousands of families out of poverty, increasing educational opportunities for more people, and increasing real income for millions of individuals.  In my mind, I weigh it fairly favorably to raising the minimum wage.

Obviously, raising the minimum wage is not going to be a cure-all for poverty and I don’t believe that anyone is suggesting that.  In my ideal world, we would have an increased Earned Income Tax Credit (EITC) and we would expand it to include more individuals.  Additionally, we would spend more state funding on both two-year public universities and for four year public universities.  As everyone suggests, the best way to avoid poverty is to increase educational opportunities.  Unfortunately, many state budgets have been slashed much to the detriment of four-year and two-year public universities.  I have written about the scourge of for-profit universities who have worked to take their place, in the past.  I believe that the expansion of the EITC in both the amount that is paid out and who it goes to is critical, as well.  If I had to bet on one or the other to happen, it would be on an increased and expanded EITC.

For-profit not for help

For-profit universities and colleges educate about 12% of the postsecondary population.  They attempt to appeal to potential students by highlighting how their school adapts to youhow school can fit around your schedule, and in general how returning to school can change your life, specifically your financial situation.. A for-profit university business model was essentially created in 1992, when the House Committee on Education created the 90-10 rule.  The 90-10 rule allowed students to receive federal student aid eligibility for the universities, if the education from the university is valuable enough that the student would be willing to pay up to 10% of the total cost of the education out of pocket.  Only veterans are exempt from the rule that prohibits students receiving more than 90% of financial student aid from the federal government.  But for profit universities have succeeded in the years immediately following the recession as more and more people were looking to go back to school or attend college for the first time.
The Institute for Higher Education Policy issued a press release stating that “low-income students-between the ages of 18 and 26 and whose total household income is near or below the poverty level-are more likely to be overrepresented at for-profit institutions and are underrepresented at public and private four year institutions.”  Possibly even more troubling is that this has been a part of a trend, from “2000 to 2008, the percentage of low-income students enrolling in for-profits increased from 13 to 19 percent, while the percentage enrolling public four-year institutions declined from 20 percent to 15 percent.”
There are two ways to look at this.  One is that you can believe what these institutions are saying.  For-profit universities and colleges have long stated that the reason for their colleges to exist is to allow those in the lower socioeconomic statuses to be able to create a way for them to move up to the middle class.  One of the ways that they claim they are doing this is to offer free GED courses at some of the universities.  This has taken place at a number of Everest College locations.  Everest College is a property of Corinthian Colleges, Inc., based in Santa Ana, California. The other way of looking at this is that they are trying to prey on those in the lowest socioeconomic status.  They do this by putting commercials on during times to attract those who are unemployed, by being on during Jerry Springer, Maury, and other daytime shows.  The commercials attempt to sell people on the idea that the lifestyle that they want is just a matter of choice of going to this college.  Many of these students are the first in their families to attend college and are simply unprepared for determining the difference between attending a for-profit university and a more rigorous educational institution.  It’s easy to assume the worst in people instead of thinking the best.  But, for-profit universities and institutions might be even harder to assume the best.
A major for-profit university group puts a job listing through a staffing agency, encouraging people with customer service experience to apply.  But primarily, what they are looking for are people who have experience in sales.  The job is for a student services associate.  When these colleges/universities show their commercials, there is a 1-800 number listed to find out how you can begin your new career today.  This 1-800 number is connected to a call center.  These student services associates are the first points of contact for potential students.  Company documents for the for-profit university and the job listing reiterate the point that the job is primarily selling the school/product.  Despite the job title role, the primary role of the student services associate is to sell the product and to delay any answers to questions that potential students have, for the local institution.  Not surprisingly, this job role is listed as being in the marketing department.
Student service associates are trained to be a combination of salesperson and PBX Operator as the goal for each phone call is for the prospective student to visit the campus.  They do this by speaking to an admissions representative at the local campus or scheduling an appointment with the call center representative.  The trainer for one of the for-profit universities frequently mentions that besides buying a car and a home, education will be the most expensive purchase for these students and that people don’t buy these expensive things by reading about it online or talking about it on the phone.  They have to come and experience it before they buy it.
Most of the money that for profit universities “earn” are from federal financial aid programs.  The share of federal funds going to for-profit universities doubled from 2001 to 2010 increasing from 12.2% to 24.8% from 2001 to 2010, according to a Senate report by Senator Tom Harkin (D-IA).  In terms of dollars, there was an increase of funds $5.4 billion to $32.2 billion during the same time period.  In 2010, the company college mentioned above received 81.9% of its revenue from federal financial aid programs.  The 30 companies that the Senate Education Committee examined received 79% of their total revenue from federal financial aid programs.  The Pell Grant program which is one of the largest federal programs to assist economically disadvantaged students has also increased the revenues for for-profit universities.  According to the Senate Education Committee’s report, from 2001 to 2010, Pell Grant funds collected by for-profit universities increased from $1.4 billion to $8.8 billion.  The share of Pell Grants received by for-profit universities has also increased from 14 to 25 percent.  We’re able to explain a small amount of of this increase as Congress increased the amount of Pell Grant funds available in the four years prior to 2010.  For the 2009-2010 and 2010-2011 years, Congress allowed students who attended year-round school to receive two Pell Grants in an academic year.  Additionally, with the Great Recession, there has been an increase in the number of students eligible for Pell Grants attending for-profit universities.  In 2009, the company that I am using as the basis for this, allocated 9.1% of its revenue, $119.2 million to profit, and 22.5% of its revenue, $294.7 million to marketing.  All told, these companies that the Senate Education Committee investigated used 23% of its revenue to marketing in 2009, that is $3.7 billion.
According to an internal document obtained during one of the lawsuits against them, the target demographic for these schools are “isolated, impatient individuals with low self-esteem, who have few people in their lives who care about them and who are stuck and unable to see and plan well for [the] future.”  During the new hire training, student services associates are told by the marketing director that they intentionally put commercials and advertisements to target those who are poorer or unemployed.  This is not necessarily a problem, as colleges should be reaching out to these individuals.
The training for student services associates mostly consists of trying to overcome objections, giving non-answers, and keeping the prospective student on the phone long enough to complete the lead information. According to one job aide given to employees, student service associates are told that they cannot answer any questions.  An example from a company document about staying within the company’s compliance while responding to the prospective student is found below:
Caller: How much does all of this cost?

Associate: Cost is important to many of our students and we have trained professionals at the campus who can go over cost with you. Make sure when you go in for your tour that you ask to speak to ou r financial services department.

Most prospective students do not ask additional questions when this answer is given and even if more questions were asked, more non-answers would be given.  The student services associate’s goal is to keep prospective students on the phone while they get your information.  They are, in fact, graded on their ability to get this information and their performance at the job depends on it.  Another internal document states that “if the prospective student’s information is entered without any contact information it will be scored as a zero by quality.”  The most important pieces of information to gather by these associates are the phone number and e-mail address.

To save you the trouble of having to call one of these institutions and have your contact information on file for them to call you an excessive amount (we’ll get to that later), I will let you know what information is asked and how the associate attempts to keep you on the phone to get this information.

Most prospective students when they call have a program that they are most interested in and that is the first thing they say.  Associates are required to cross-sell to online courses, if they are offered online, as soon as the program is mentioned.  This is because, as the trainer of the company states, it is much cheaper for the company to run online classes and they can have more students in them.  If the college/university does not offer the program at all, for instance philosophy, they are also required to say that they don’t offer that program. But associates are not allowed to list programs that they offer, only ones that are considered “core programs” and have been cleared by the company’s legal team.  If it’s related, even slightly, the associate is supposed to mention the field that it relates to. The examples on the company documents obtained by the author are Ultra Sound (associate is to mention the medical field), Web Design (computers), and Legal (Criminal Justice).  In 2010, the company was found to have a little over a third of its students enrolled online.
The student services associate asks for the prospective student’s name so that the information can properly be stored.  After receiving the name, most associates go onto the next screen, which will hold the information for the student’s address.  This serves two purposes.  The first of which is to find out the closest campus location for the student.  The campus location is determined by a combination of the address and the program of interest. The second purpose is to have the student’s information to mail them out information on the university group. Student service associates are encouraged to get the mailing address but if that is not possible, student service associates need the zip code to populate the school.  So, after the address and the program of interest, the school should populate.  But associates are told not to give out the school, just yet.  The best practices taught in training is to explain to the student that it takes a few moments to load up the school and to proceed with receiving the rest of the contact information from the student.

The associate tends to ask for the phone number, next.  At, at least one, prominent for-profit university group the phone number is captured by a caller id system and automatically populated into this lead generator tool.  If the student does not want to give out their phone number, the associate enters in a dummy phone number and selects it as the main contact.  The student believes that by not giving out their phone number they will not be inundated with phone calls asking them to attend this school.  One former employee of this university group does not believe this work.  As the former employee recalls an outbound phone campaign with the dummy phone number listed as an alternate contact.  Finally, after the phone number is collected, the student is asked to provide an e-mail address.

At this point, the prospective student is usually upset that the school that they originally asked for has not been given to them yet. But there’s still two more questions to ask.  The first is to ask if they have served or are currently serving in the military.  Employees are led to believe that this question is asked to help veterans, but as we’ll see below, this is used for fairly nefarious purposes.  The last question to finish out the phone call is to ask the highest level of education.  In order to qualify for federal financial aid, you have to, at least, have a high school diploma or GED.  As we saw above, this is very important to for-profit university groups.  After receiving all of that information and following the job aide to not answer any questions, the associate could now give out the information for the school to the prospective student.

But there are other requirements for the student services associate. The first of these requirements is that the associate is to deliver an experience to match up with the students’ key items.  The idea is that the student associates need to sell the student on this particular for-profit university group.  Some of these experiences is financial aid/services, accelerated courses, small class sizes, hands on training, instructors with real-world experience, career services, ongoing counseling, and flexible schedules.  All of these are taken directly off a company document provided to student services associates.  But even these services/experiences are intentionally left vague and most of them will eventually be passed onto someone else at the campus.

One of the biggest questions students have about for-profit universities is about whether their education will even mean anything. Almost every student wants to know if the school is accredited.  From the job aide given to new hires, “it is absolutely imperative that you not attempt to answer the question [about accreditation] with a ‘yes’ or ‘no’ or to provide any information at all about what type of accreditation our schools have.” (Emphasis mine).  New hires are told that when accreditation is mentioned in a phone call, the call is automatically listened to for quality purposes.  The job aide for new hires tells them to deflect the answer by saying the following:

Accreditation is important to many of our students, so I’m going to try to get you in touch with a campus so they can answer all of your questions for you.

The boards that are responsible for accrediting these for-profit colleges, very often, have members or are chaired by people who also serve in cushy executive positions.  In the case of Corinthian Colleges, the chair of one of two boards that accredits the universities serves as the executive vice president of operations.
If the student asks a point blank question, such as, is there a campus in my area and they give the state, it is the responsibility of the associate to still ask for the contact information before they answer this question.  It should be noted that these associates are given the information where campuses are located.  The easiest way to do this, as a best practice that associates are trained in, is to explain that the company opens campuses up all the time and this way we have the information, in case one is to open up.  Another way is to offer online classes.  But the point remains the same; students are seen as leads, and not students.

Part of the reason student services associates are asked to make sure they get the contact information is so that the aggressive outbound calling campaign can begin.  Outbound dialing to prospective students is very aggressive.  Reports from one for-profit university group indicate that they only call leads that have been in the system for over 90 days without enrolling in the school.  Other university groups contact the prospective student almost immediately after filling out the interested in attending school information.  Some university
groups claim that they are not buying/selling students’ information and they may be telling the truth.  Other university groups do, seem at least, to buy/sell student information.  Prospective students have told me that they have signed up for information regarding one school and had a totally different school contact them.  Anyway, prospective students are bombarded with phone calls.  There are not exact figures provided by the company in the company documents that have been obtained by A More Perfect Union.  I have seen students contact more than 5 times in a given day.  I have also seen the same name pop up through the dialing process every day.  I’m not asking you to trust my memory but if you know of someone who signed up to receive information on a for-profit university, for the most part, they will agree with me.

Associates go through a quick training process to prepare for outbound dialing.  The training is fairly narrow and is designed to overcome objection.  The main goal of the training is for the associate to either instill fear to the prospective student or to try to stump the student so they agree to the transfer to the school.  Again, the associate is told that they cannot answer any question but encourage the student to accept the transfer to the school.

Not surprisingly, for-profit university groups’ executives are paid much more than leaders at public and non-profit colleges and universities.  The CEO’s of for-profit universities studied by the Senate Education Committee earned on average $7.3 million in fiscal year 2009.  The highest paid public college president in 2011 was Gordon Gee, who made about $2 million.  This is about 3.5 times less than the AVERAGE CEO of a for-profit university group.
Some companies, in order to stay within the 90/10 rule, have raised tuition.  These companies have been fairly upfront about it.  At least to students. Well, once they’re already enrolled.  The script for student services associate is found above, but that’s nothing compared to admissions representatives who are actually at the campus.  Admissions representatives are asked to deflect questions of cost by using the following script obtained by the Senate Education Committee:
“The cost of the program will vary depending on several factors.  Is your question really how much is it going to cost you in out of pocket dollars?  In order for me to answer the question, first we would have to determine the right program for you.  Second, we would have to determine what time-frame you expect to complete the program; and finally the Student Finance office would determine the types of financial assistance you may be eligible for.  Could you tell me why you are asking about the cost?”
To help pay for the recruiting and high executive compensation, for-profit universities charge more for their classes than a comparable traditional four-year institution.  The medical assistant program at one of the universities costs about $22,000 compared to$1.650 at a community college in the same city.  An associate’s degree in paralegal studies costs just over $41,000 compared to just over $2,000 at a nearby community college.  A bachelor’s degree in business costs over $80,000 compared to $55,000 at a local 4 year university.  In part because of these high costs, it is nearly impossible for people enrolled in these for-profit universities to live the prosperous lives that they imagined, when they picked up the phone to call to improve their lives.
Because of these high costs, almost every student who attends a for-profit university takes out loans, 98% of students enrolled in a two-year program and 96% of students enrolled in a four-year program.  The Senate Education Committee found that among the 30 for-profit university groups that they examined, the average withdrawal rate was 54%.  Meaning that over half the students who enrolled in a for-profit university withdraws before finishing their program.  Nearly two-thirds of students enrolled in one of the major for-profit university groups’ associates program withdrew before completing their program.  The median student withdrew after just over 120 days.  But certificate programs, such as medical assistant is another major draw for for-profit universities.  Nearly 40% of students enrolled in certificate programs at a for-profit university will withdraw before they have completed the program.  Many of them doing so within 100 days of enrolling.

Because of the high withdrawal rate for students prior to completing their program, students attending for-profit colleges are much more likely to default on their student loans.  The Department of Education tracks and reports the number of students who default on student loans.  A default on student loans means that the student has not made a payment in 360 days within 3 years of entering repayment.  About 22 percent of students who attend for-profit colleges default on their student loans.  About 9% of students who attended public or non-profit colleges defaulted on student loans.  Students who attend for-profit colleges default three times more than students who attend non-profit or public colleges.  Almost half of all student loan debt in the United States is held by students who attended for-profit universities.  Beginning this year, any school will lose federal financial aid eligibility if its default rate exceeds 40% in a single year, or if the default rate is higher than 30% for each of the most recent three years.  If this had been in place in 2011, Corinthian Colleges would have lost federal financial aid eligibility.
For-profit universities have been trying aggressive strategies to make sure that their students default within the window that would penalize them.  The strategy is to place students who are facing these problems into temporary deferments or forbearances. But this is not in the best interest of the students.  As the Senate Education Committee notes in their report, “during forbearance of Federal loans, as well as deferment of unsubsidized loans, interest still accrues.  The additional interest accrued during the period of forbearance is added to the principal loan balance at the end of the forbearance, with the result that interest then accrues on an even larger balance.  Thus, some students will end up paying much more over the life of their loan after forbearance or deferment.”
The most money that a for-profit university group spent per student on instruction in 2009 was Corinthian Colleges, who spent $3,969 per student.  By comparison, they also spent $2,465 on marketing per student, and $998 on profit per student.  Public and non-profit 4-year colleges spend a lot more per student on instruction.  Community colleges spend about the same as for-profit institutions but they offer tuition at a much lower cost.  University of California at Los Angeles spent $30,331 per student on instruction.  The University of Southern California spent $35,920 per student on instruction.  Orange Coast College spent $3,272 per student on instruction.  In 2010, one major for-profit university had one student services staffer (i.e. tutor) for every 160 students.  Meanwhile, there was one recruiter for every 40 students.  Guess we know where the priorities are.
For profit university groups routinely mislead prospective students about how the students will fare once they leave the school.  One major for-profit university has 1 career counselor for every 145 students and that is one of the best rates out of all of the for-profit university groups studied by the Senate Education Committee.  One for-profit university group was found to inflate the numbers for every program by 37%.  In 2010, the same for-profit university group falsified employment records of 288 graduates over four years.
The Government Accountability Office (GAO) attempted an undercover investigation to see the practices of for-profit colleges firsthand.  They attempted to enroll at 15 of the for-profit university groups.  12 GAO employees successfully enrolled. While attending class, all of the enrolled students began to perform in a “substandard” level.  At three of the schools, the instructors acted consistent with the policies and standards of the school.  One student received points for assignments that they did not complete and ended up passing the class.  The full report can be found here.
One college never acknowledged one student’s request to withdraw before ultimately expelling the student for failure to attend.  This may be a violation of federal regulations that state that a college needs to use the date that a student attempts to start the withdrawal process as the date of withdrawal.  Federal laws and regulations require that students who have federal loans be given exit counseling about the risk of default among other things.  Three of the students involved in the investigation never received their exit interviews.
Military students at for-profit universities are highly sought after.  This is because they are exempt from the 90/10 rule.  Even better for these schools, is that money for military veterans counts on the 10 side of the 90/10 rule.  One for-profit university group produced a 56 page strategy document to help recruit new military students.  The first objective for this strategy was to increase military enrollment fourfold in two years.  They advocated for spending $30 million on marketing in key military publications and key military installations.  Another for-profit university group stated that the most important targets for them was the 800,000 military spouses who were authorized a one-time entitlement of $6,000.  The memo stated that they should reach out to these spouses “at the military bases with various career fairs, direct communications, and visibility with the Office of Military Families in Washington would be very important.”
In August of 2009, the post 9/11 GI Bill was implemented.  Veterans who serve 90 days or more in active duty after September 10, 2001, are eligible for up to 36 months of educational benefits.  Veterans can transfer this credit to their spouse or their children. The Department of Defense expanded aid available to active duty soldiers through the tuition assistance program.  This program provides up to $4,500 a year to a soldier’s classes.  In 2009, Congress also created the Military Spouse Career Advancement Accounts designed to help military spouses by giving them up to $4,000 over three years.  Because of this, military recruiting was amped up by the for-profit education sector.
One for-profit university group created a training manual specifically designed to target U.S. soldiers, to “utilize fear, uncertainty, and doubt in the sales process.”
One military recruiter told The New York Times “there is such pressure to simply enroll more vets- we knew that most of them would drop out after the first session.”
One military man in charge of education and development at a military base explained that these schools prey on marines, calling all day and night.  They take advantage of the fact that the nobody in the marines’ families attended college.
Senator Harkin called these practices disgraceful.  He noted that “out of the $640 million in Post-9/11 GI Bill benefits that flowed to for-profit schools in 2009-10, $439 million went to 15 publicly traded companies.  This amount is equal to 69 percent of the military money flowing to for-profit schools, and 25 percent of all Post-9/11 GI Bill benefits.  Eight of the ten top recipients of VA dollars see more than half of their associate degree students they enroll drop out within one year.  At some of the schools, more than 60 percent of military veterans default on their student loans for for-profit universities.
Military veterans are actively recruited to attend these schools, as opposed to public four or two year institutions.  If a military veteran puts in their information for a non-profit institution, they’re unlikely to get calls and e-mails back.  But if they do it for a for-profit institution, then recruiters will call them everyday until they sign up to attend the classes.  These types of tactics certainly seem predatory.  Especially when you consider the fact that, for the most part, credits received from these institutions do not transfer because the schools are not rigorous enough or even are accredited.  Military veterans who expect the GI Bill to help further their education face predatory tactics from for-profit institutions and wind up in debt pursuing a dream that will not in all likelihood, come true.
For-profit universities serve an integral part of our society, today, unfortunately. People who are poor, who underperformed in high school, former convicts, etc. need to be able to find a job. We place an increased importance on being properly educated to have the job but we don’t explain to people how to properly pursue this education.  State government budgets are increasingly slashed because government spending is ridiculed in the public eye.  With the budgets being slashed, public four year universities are having to go through drastic reductions in staff to maintain their budget sheet.  Community and junior colleges, places that have traditionally been there to help the poor and underserved, are seeing their budgets decrease in dramatic fashion.  It’s no wonder that we see the rise of for-profit colleges and universities.  It’s no wonder that we see these colleges thrive in economic recessions, charging exorbitant tuition for a diploma, certificate, degree that is ultimately worth about as much as the paper it’s printed on.  But I’m not here to hate the player, but hate the game.  Junior colleges and community colleges need to ramp up their recruiting efforts.  States need to recognize this as a problem and fund junior and community colleges.  Ultimately, these people will see that this education can be done better for a much lower cost.  People who graduate from community and junior colleges make more money than those who graduate from these for-profit institutions.  People need to be made aware of this, instead of having thousands of commercials for ITT Technical Institute and University of Phoenix on for every commercial break.  But, oh well. I can’t be too mad at for-profit colleges as they are just taking advantage of a system that has seriously betrayed those who need it most.  Instead of laughing off the commercials for Kaplan or any other of these colleges, we need to address the systemic problems and help those who need it most.