The Role of Labor Market Regulation in Rebuilding Economic Opportunity in the United States

Abstract

In the search for policy solutions to rising inequality and precariousness in the United States, this essay argues for the central role of labor market regulation. It presents research and policy evidence for a three-pronged approach: (a) strengthening the floor of labor standards (wages, health and safety, and right to organize chief among them); (b) vigorously enforcing that floor; and (c) leveraging government contracting and grants to build a base of good jobs on top of that floor. The essay concludes that getting to scale in the current political climate will require ratcheting up from state and local policy campaigns to federal reform.

Keywords

wage inequality precarious work public policy employment and labor laws minimum wage overtime immigrant workers FLSA OSHA NLRA federalism labor market regulation

Having struggled through the worst economic crisis in nearly a century, the United States is now back to confronting trends that were underway long before the financial crash and collapse of the housing bubble in 2008. In particular, America’s low-wage problem is resurfacing with a vengeance. During the Great Recession, job losses were concentrated in midwage occupations such as paralegals, health technicians, administrative assistants, and bus drivers making US$15 to US$20 an hour. But so far in the weak recovery, employment growth has come disproportionately from low-wage occupations such as retail workers, office and stock clerks, restaurant staff, and child care aides, most making US$8 to US$10 an hour. Moreover, paychecks in those low-wage jobs are shrinking. Real wages for the average worker have been essentially stagnant since the start of the recession, but have actually declined, and significantly so, in lower-wage occupations (National Employment Law Project, 2011a).

These trends are exacerbating the polarization that unfolded across three decades of economic restructuring, well summarized by Arne Kalleberg (2011) in his book Good Jobs, Bad Jobs. Since the mid-1970s, globalization, technological change, financialization, deunionization, and a deteriorating social contract have reshaped how and where work is performed, and what it is paid. In industries that span the U.S. economy, researchers have identified a pronounced shift in firms’ competitive strategies, with growing numbers of employers focused on cutting labor costs, achieving greater flexibility in the organization of work, and maximizing shareholder value. The symptoms of this shift are well documented. The U.S. wage distribution has grown more unequal. Workers increasingly find themselves stuck in contingent, nonstandard jobs. Employers are reducing their provision of health and pension benefits, and investing less in the skills of their workers. Nor are these trends likely to reverse anytime soon. In new estimates from the Bureau of Labor Statistics, 7 of the top 10 occupations projected to generate the most jobs by 2020 are low-wage service and laborer jobs (Lockhard & Wolf, 2012).

In short, at the start of the 21st century, millions of Americans face a daunting labor market that, absent coherent and sustained policy intervention, will very likely provide them fewer career opportunities and less economic security than their parents enjoyed.

The important question, of course, is what that policy intervention should look like. While the broad goals are well established at this point—we need good jobs, skilled workers, and a strong safety net—the specific mix of policies is still very much in play. In his book, Kalleberg argues for a new social contract to address the consequences of growing inequality and precarious employment, drawing on lessons from the New Deal as well as European models of flexicurity. He fleshes out a robust agenda around social insurance programs, training and lifelong learning, and workers’ right to organize, and highlights the need for government, business, and labor to each play their role in implementing the social contract.

In this essay, my goal is to complement the broad policy sweep of Good Jobs, Bad Jobs with a deeper development of the central role of labor market regulation in rebuilding economic opportunity in the United States. This is not to downplay the importance of supply-side strategies or the need for a stronger safety net and universal access to health insurance and retirement security. Nor is it to claim that government policy alone is enough—far from it. But my reading of several decades of labor market research is that the main source of America’s low-wage problem lies in domestic service industries not impacted by globalization, where the key driver of precariousness is the growing evasion and violation by employers of both legal and normative standards, facilitated by the withdrawal of government’s hand in the labor market (Bernhardt, Boushey, Dresser, & Tilly, 2008). That hand must become visible again. Business may have once engaged in a form of self-regulation during the heyday of managerial capitalism, but those days are long gone. Unions are struggling just to maintain their current share of the work force (down to 6.9% of the private sector) and cannot on their own deliver strong labor standards. Community organizing has proved surprisingly robust in recent years (more on that below), but has not yet reached the scale required to significantly move the needle on job quality.

The success of a renewed social contract, then, will need to include a renewed commitment to labor market regulation, by which I mean government’s role in setting a framework of baseline labor standards and incentives for upgrading, preserving, and creating good jobs through legislation and administrative action. In what follows, I lay out three ways government can do that: by establishing a strong floor of labor standards; by vigorously enforcing that floor; and by helping to build a base of good jobs on top of that floor. I conclude with thoughts on the problem of getting to scale, based on my experience as both a social science researcher and a policy advocate.

Strengthening the Floor of Labor Standards

In the absence of a European-style “social partners” industrial relations system, employment and labor laws are the main anchors of the employment relationship in the United States. But for many of those laws—the minimum wage, health and safety regulations, and the right to organize chief among them—standards have either stagnated or weakened over the past thirty years. At the same time, outdated loopholes continue to exclude low-wage workers in growing industries such as restaurants and home health care from legal protection. And changes in the organization of work have made it more difficult to legally hold employers accountable for their employees. This multidimensional weakening of labor standards has been one of the key shifts opening the door to low-road business strategies to cut labor costs.

Stronger Legal Standards

The real value of the federal minimum wage currently sits 30% below its high water mark in 1968, the result of four decades of policy neglect. The falling of the legal wage floor has directly impacted pay for millions of workers at the bottom of the labor market, contributing to the overall rise in wage inequality (Lee, 1999). But there are also important indirect effects. For example, the steep decline of the minimum wage created strong incentives for employers to subcontract frontline jobs to outside bidders, allowing them to reap the benefits of the lower wage floor while at the same time protecting their internal wage structure.

The story of health and safety standards is one of stagnation: OSHA regulations for many occupations were written in the 1970s and have not been updated for new hazards, machines, and toxic chemicals. Recent administrative actions have not helped. During its first term, the Bush Administration repealed newly crafted ergonomics standards, even though musculoskeletal disorders account for about one third of all workplace injuries; advocates are still waiting for the current administration to act (American Federation of Labor and Congress of Industrial Organizations [AFL-CIO], 2011). More generally, analysts argue that the rulemaking process (by which health and safety standards are set) has essentially ground to a halt, with the agency dropping more standards from its regulatory agenda than it finalized during the last decade (McGarity, Steinzor, Shapiro, & Shudtz, 2010).

Inadequate standards are also undermining the right to organize. The root of the problem is that the National Labor Relations Act (NLRA) does not adequately account for the power imbalance between employers and employees (Compa, 2004). For example, although the NLRA technically prohibits employers from threatening employees about the repercussions of unionization, under current interpretations of the law the definition of “threat” is too narrow and easily obscured. The law also permits employers to hold mandatory antiunion meetings, to control the agenda of these meetings, and to designate the attendees without giving similar access to organizers. As a result, researchers have documented a marked weakening in compliance with the NLRA over the past several decades, which has had a direct impact on unionization rates (Bronfenbrenner, 2000).

On all three fronts, the policy solutions are straightforward: raise the minimum wage, update health and safety standards, and strengthen the right of workers to organize. The NLRA needs comprehensive overhaul—including reforms to expand legal coverage, to strengthen the means for unions to establish majority support, and to help certified unions achieve a first contract (Craver, 2010). On the health and safety front, a host of standards in different industries and occupations require updating, and new ones are needed for new hazards. Increased agency funding is critical here, because setting new standards is a resource-intensive process requiring scientific research to demonstrate the need for regulation (McGarity et al., 2010). But on both fronts, chances for action look dim in the current Congress.

Prospects for raising the minimum wage appear better. In part, this is because a new research consensus has emerged over the last 15 years finding that modest increases in the minimum wage do not cause significant job loss (Dube, Lester, & Reich, 2010). And in part, this is because many states (and some cities) are able to set their own minimum wage standards above the federal floor. For example, currently 18 states and the District of Columbia have higher minimum wages than the federal level of US$7.25 an hour, and a half dozen state campaigns are planned over the next several years. Moreover, 10 states currently index their minimum wage to increases in the cost of living, a relatively new development that has had significant impact (e.g., on January 1 of this year, workers in eight states saw a minimum wage increase because of indexing). But state action alone is not enough, since many states (especially in low-wage regions of the United States) either do not have their own minimum wage or do not have the political will to raise it. The value of the federal minimum wage needs to be increased back to its historic level (roughly half the average wage), and it needs to be indexed to avoid future erosion of the wage floor.¹

Gaps in Legal Coverage

Several groups of workers that are legally considered employees and that are at risk of substandard working conditions are nevertheless exempted from coverage by employment and labor laws. The most important examples under federal law are the partial or wholesale exclusion of home care workers, agricultural workers, and some domestic workers from minimum wage and overtime protection. Both domestic and agricultural workers are also exempt from the National Labor Relations Act. And tipped workers in a wide range of industries are only covered by a “tipped worker” minimum wage, which at the federal level is much lower (only US$2.13 an hour) than the regular minimum wage. At the state level, these gaps and other gaps in legal coverage are sometimes copied from federal law or sometimes closed; the result is a highly uneven and often quite complicated patchwork of legal coverage (National Employment Law Project, 2011b).

In the home health care industry, the impact of the “companionship” exemption has been to drive down job quality, in the process increasing turnover and causing staffing shortages in the industry. Most directly, the lack of minimum wage coverage has meant suppressed wages and subminimum pay in some segments of the industry. But the exemption has also meant that employers are not required to pay workers for time spent traveling from one client’s home to another, or reimburse travel costs, which further drives down the effective hourly wage. And the lack of overtime coverage has encouraged a high-hours staffing model for patients requiring round-the-clock care, further deteriorating working conditions (Howes, Leana, & Smith, 2012).

There is movement to close coverage gaps on many of these fronts. For home care workers, the U.S. Department of Labor is considering regulatory action to end the companionship exemption for many of the nation’s estimated 1.7 million home care workers (Sonn, Ruckelshaus, & Leberstein, 2011). At the state level, a Domestic Worker Bill of Rights was passed in the New York State legislature in 2010 and is currently under consideration in California; provisions include full overtime and minimum wage coverage, coverage by antidiscrimination laws, and paid leave days. And for tipped workers, advocates are focusing on raising the subminimum wage for tipped workers to 60% of the full minimum wage, at both the federal and state level. While closing these exemptions under employment and labor laws will not lead to living wages, they will significantly impact millions of workers, many of them immigrants and women of color.

Employers’ Legal Responsibility for Their Employees

There is growing consensus among legal scholars that U.S. employment and labor law is struggling to catch up with the realities of the 21st-century workplace. Traditional definitions of employer and employee increasingly are being challenged by a host of nonstandard ways of organizing work and production—contingent work, subcontracting, and misclassification of workers as independent contractors. Some of these strategies truly reflect new ways of producing goods and services, while others are the result of explicit employer strategies to evade legal obligation for their workers. But both scenarios challenge a body of law that was put into place more than a half a century ago and that was built around long-term employment relationships (one worker, one employer, one workplace).

The ambiguous legal status or wholesale exclusion of subcontracted workers, independent contractors, temporary workers, and day laborers is one of the central factors opening the door to lower wages and poor working conditions (Zatz, 2008). For example, janitorial and security services, food services, and industrial laundries are all sectors that have grown significantly over the last several decades, as large firms and public institutions externalized those functions to lower-wage subcontractors.

Note that subcontracting is not always driven by the desire to cut labor costs, and the impact on workers is not predetermined (Abraham & Taylor, 1996). For example, in the case of janitorial contractors, the industry looks increasingly bifurcated between corporate contractors that serve large employers like financial firms and pay decent wages, and fly-by-night contractors that serve low-margin industries like retail and that pay substandard wages (Nissen, 2004). Moreover, many frontline and low-wage workers are still in traditional employment relationships. But the trend line is clear: growing numbers of employers are creating legal distance between themselves and their employees by using strategies such as subcontracting that are permissible under current law.

In response, researchers and advocates have identified a range of reforms to hold employers responsible for the workplace standards they control, whether directly or indirectly. Some fixes are available under existing laws. Most important is the determination of who is an employee—a process which is currently guided by different legal tests. Legal experts propose shifting to the broader test, which focuses on the extent to which the worker is economically dependent on the employer, rather than the more narrow test, which focuses on just the employer’s control over the production process (Goldstein, Linder, Norton, & Ruckelshaus, 1999).

Other fixes require new law. An important area of emerging scholarship is focused on devising legal tools for making firms liable for violations of minimum wage, overtime, and other laws by their subcontractors. Zatz (2008) provides several innovative examples along these lines, such as two California laws that, in specific industries, hold firms responsible for their subcontractor’s wage-and-hour practices without needing to establish an employment relationship. But production chains (for both goods and services) increasingly feature multiple layers of subcontractors, making it almost impossible to establish legal accountability for violations that occur at the end of the chain. Rogers (2010) and others are therefore developing new legal models in which end-user firms are held liable for failing to exercise reasonable care in preventing wage and hour violations in their domestic supply chains, regardless of whether they have a contractual relationship with the specific subcontractor committing the violation.

A third and final strategy is to find new ways of establishing “employers of record” for occupations that have been externalized and classified as independent contractors. An important new trend concerns home health care and child care services that are funded at the state level. In recent years, a number of states have created “public authorities” that pay workers and serve as the legal entity with which workers can bargain. The best known example is Los Angeles, where the establishment of this type of public authority created an employer of record for over 70,000 home care workers, who then voted to unionize and join the SEIU in 1999. This model is now spreading to other states and also to publicly funded family day care providers (Dresser, 2008).

Enforcing the Floor of Labor Standards

Across the United States, growing numbers of workers are paid less than the minimum wage, are denied overtime pay, are forced to work in hazardous workplaces, and face routine retaliation for speaking up. Their ability to seek recourse is often constrained—by lack of legal status, by lack of access to legal services, and by lack of effective government enforcement of workplace laws. In a landmark study, Broken Laws, Unprotected Workers, researchers surveyed more than 4,000 workers in low-wage industries in Chicago, Los Angeles, and New York, and found that 26% had been paid less than the minimum wage in the preceding week, 76% had been underpaid for their overtime hours, and 70% did not receive any pay at all when they came in early or stayed late after their shift. Moreover, of respondents who complained about their working conditions, 43% experienced illegal retaliation from their employer or supervisor. And while immigrants, women, and people of color were particularly hard hit, all workers were at risk of wage theft (Bernhardt et al., 2009).

Broken Laws confirms a growing body of research suggesting that wage theft and other workplace violations are on the verge of becoming common business strategy in low-wage industries, impacting millions of workers—from hotel room cleaners, dishwashers, retail sales workers, and home health aides to garment factory workers, taxi drivers, janitors, and construction laborers. Key drivers include economic restructuring, the growing focus on cutting labor costs, and associated practices such as subcontracting which facilitate violations. But weak public enforcement of workplace regulations has compounded these trends. Between 1980 and 2007, the number of federal wage and hour inspectors declined by 31% and the number of enforcement actions fell by 61%; by contrast, the civilian labor force grew 52% during this same period (Bernhardt, Spiller, & Theodore, in press). And while the U.S. Department of Labor has added wage and hour investigators under the Obama administration, the current federal staffing level of 1,006 is still below its 1980 peak.

The picture looks even worse for enforcement of health and safety laws (AFL-CIO, 2011). In 1975, federal OSHA had a total of 2,435 staff responsible for the safety and health of 67.8 million workers at more than 3.9 million establishments. In 2010, the agency had about the same number of staff (2,335), but for double the number of workers (128.6 million) and establishments (8.8 million). And in the case of enforcement of the right to organize, official data show increases in both illegal and legal coercive tactics by employers stemming back to the 1980s. Researchers have documented that extensive delays in the government’s investigation of retaliation and illegal firings by employers significantly reduce the chances of successful petitions for union representation. Moreover, authorized remedies for impacted workers are widely regarded as insufficient, and are rarely fully pursued by the National Labor Relations Board (Compa, 2004).

Public policy must recognize the significant resources and power that reside with the various agencies responsible for enforcing workplace laws. Tapping the often unrealized potential of these agencies will require increased staffing but, just as important, stronger penalties and new enforcement strategies.

Funding

While funding alone is not enough to guarantee effective public enforcement, current agency staffing levels clearly do not suffice to deter violations of U.S. employment and labor laws. For example, Ji and Weil (2010) estimate the probability that a national fast food chain restaurant will be inspected by a wage and hour investigator at about 0.008 in a given year. Similarly, in a frequently cited statistic, it would take federal OSHA 129 years to inspect each workplace under its jurisdiction just once, given its staffing levels (AFL-CIO, 2011). These are estimates for federal resources; resources for enforcing state-level laws are lower and often nonexistent (Schiller & DeCarlo, 2010). The upshot is that substantial increases in enforcement agency budgets are needed; even a 50% rise in the number of wage and hour investigators would only make up the ground that was lost over the past several decades, never mind meet growing need.²

Penalties for Violations

Under many workplace laws, penalties for violations are so modest that employers might easily calculate, for example, that the gains from paying less than the minimum wage outweigh the costs of getting caught—or in the case of OSHA, that there is no incentive in addressing hazards, much less developing precautionary health and safety programs. The problem is that penalties are weak, and that enforcement agencies often do not pursue the maximum amounts allowed under law. For example, Weil (1995) estimated that for a typical apparel contractor, the potential cost of not complying with minimum wage and overtime laws was US$121, compared with a potential benefit of US$12,205. In a similar vein, OSHA penalties are generally regarded as some of the weakest in employment law, and criminal penalties are rarely pursued, even in cases where violations caused workers’ deaths. Estlund (2005) reports that the maximum fine for a serious OSHA violation is US$7,000 and for a willful violation is US$70,000—compared to, for example, fines of up to US$250,000 per day for violations of the Clean Water Act. In short, enforcement agencies need to fully pursue existing penalties for workplace violations; but even more important, those penalties at both the federal and state level need substantial strengthening, to better ensure compliance and deterrence.

Proactive Enforcement and Partnering With Stakeholders

Even with recent improvements, enforcement of workplace laws in the United States has typically been described as passive and “complaint driven”; agencies wait for workers to come with complaints, and then investigate (Ruckelshaus, 2008). But simply relying on workers to come forward with cases of violations is not enough; the threat of employer retaliation is too great to depend on individual workers to carry the weight. This means that enforcement agencies need to take the initiative, proactively identifying industries where workplace violations are systemic and conducting strategic, repeated, and unannounced workplace audits so that there is a tangible likelihood of inspection. The goal is to send industry-wide signals that the government will pursue violations, even if workers are dissuaded from filing complains. But even with increases in staffing, government agencies alone will never have enough resources or expertise to monitor each and every workplace in the country. One critical way to increase the reach and effectiveness of enforcement is to partner with immigrant worker centers, unions, service providers, and other community groups, as well as responsible employers that understand the need to ensure full compliance in their industry. Such partnerships can deliver vital information about common employer evasion strategies and information where workplace violations are most concentrated, as well as access to established networks for worker outreach and public education (Fine & Gordon, 2010).

Protecting Immigrant Workers

While in theory, unauthorized workers in the United States are covered by most employment and labor laws, in practice, exercising those rights can be near impossible given lack of legal status and the very real fear of deportation. The result is significantly higher rates of workplace violations among unauthorized immigrants compared to documented immigrants (Bernhardt et al., 2009). Comprehensive immigration reform will need to tackle a wide range of policy goals, but a key element must be to guarantee equal protection and equal status for immigrants in the workplace (Gordon, 2007). In addition, agencies enforcing employment and labor laws must maintain a strong firewall between themselves and immigration authorities, so that workers do not fear deportation when bringing a wage claim or workplace grievance.³ Without this firewall, unauthorized workers will be driven further underground—as happened in North Carolina in 2005, when U.S. Immigration and Customs Enforcement (ICE) conducted a sting operation to apprehend undocumented workers by advertising a mandatory workplace safety meeting purportedly sponsored by OSHA (Rathod, 2010).

Good Jobs Above the Floor: Government Paves the Way

The above agenda to strengthen and enforce basic labor standards is already daunting, but alone will not be enough. For example, while research suggests that we can expect some ripple effects from raising the minimum wage, that increase won’t create family-supporting jobs with health and pension benefits and opportunities for upward mobility. So is there a labor market regulation agenda to grow the number of living wage jobs in the U.S. economy?

The key insight is that government’s levers on the private sector are plentiful, but underused. Public money touches millions of private sector jobs, whether by purchasing goods and services for the government or by funding the public goods that make our economy run—everything from schools and bridges to health care, education, and social services. For example, the federal government spends more than US$500 billion annually on purchasing goods and services, and roughly the same amount again on grant-in-aid programs to the states. State and local governments themselves spend an estimated US$50 billion a year on direct subsidies, tax exemptions, and targeted infrastructure improvements to benefit private businesses (Sonn & Gebreselassie, 2009). And there is the potential for significant new funding streams to spur growth in the green economy and rebuild and update the nation’s aging infrastructure.

Government currently taps only a small amount of this leverage for creating good jobs. For example, Edwards and Filion (2009) estimate that nearly 20% of all federal contract workers in 2006 earned less than the federal poverty level, 40% earned less than a living wage, and many did not receive employer-provided health benefits. As a result, researchers and policy analysts have been developing a broad program of legislative, administrative, and regulatory action to attach job standards, as well as local hiring and training requirements, to expenditures of public funds.⁴ These strategies have the potential to both improve existing jobs and raise the bar on job creation programs at the federal, state, and local level.

Wage and Benefit Standards

A range of policies—responsible contracting, prevailing wage, and living wage—are increasingly being used by federal, state, and local governments to ensure that government contracts for goods and services are directed toward employers that follow the law and create quality jobs (Sonn & Gebreselassie, 2009). Prevailing wage laws are the most established, but can do little to promote good jobs in industries and regions that are overwhelmingly low wage or that have little union presence. Therefore, states like California, Massachusetts, Oregon, Connecticut, and Illinois and cities like El Paso, Orlando, and Los Angeles have adopted “responsible contracting” policies that ask prospective bidders for government contracts to provide information on their legal compliance records in workplace safety, employment law, and environmental protection, and to provide details on wages, benefits, apprenticeship training, and use of independent contractors. Local governments then use these data in determining which bidders to select for the contracts. Similarly, more than 140 cities and one state (Maryland) have adopted living wage standards for businesses performing government contracts in the form of requirements or incentives for employers to provide decent wages, affordable health insurance, and other benefits such as paid sick leave.

A closely related trend is state and city policies that mandate similar standards on publicly funded economic development projects—an important expansion of the living wage strategy that significantly increases the number of jobs impacted. In exchange for tax breaks and other public subsidies, private developers are required to agree to a series of job and benefit standards. Early versions of this model were Community Benefits Agreements, legally binding contracts developed in Los Angeles between community groups, unions, and developers on specific projects, setting forth a range of requirements such as living wage jobs and affordable housing (Parks & Warren, 2009). The more recent trend is to shift from project-by-project agreements to institutionalizing them in citywide policy. In some cases, this can take the form of city officials simply prioritizing good jobs in economic development projects. The oft-cited example is Los Angeles where, under Mayor Antonio Villaraigosa, no major subsidized development project has gone forward without a living-wage standard as a matter of city policy.⁵ But the best strategy is to use legislation. For example, Pittsburgh in 2010 enacted a local law that guarantees living wages for building service, food service, hotel, and grocery workers on all city-subsidized development projects, and New York City is currently considering similar legislation.

These examples point to the political viability of applying wage and benefit standards to government contracts and subsidy programs, and in those cases where impact research has been conducted, studies have documented positive economic outcomes.⁶ In my mind, significantly expanding the use of such policies at the city, state, and federal level will be one of the key strategies going forward for rebuilding the stock of good jobs in the U.S. economy. This is especially true at the federal level, where advocates have called for the Obama administration to adopt strong responsible contracting policies that would review bidders at the beginning of the selection process and establish preferences for employers that comply with employment and labor laws, pay living wages, and provide health benefits and paid sick days.⁷

Local Hiring and Training

Beyond wages and benefits, a second important strategy to address growing economic inequality is to ensure that low-income communities and communities of color have access to good jobs. This has been a key focus of the Community Benefits Agreement movement, which often includes targeted hiring programs in its agreements with developers. Such programs can take the form of percentage goals in the developers’ hiring for the project or the creation of a “first source” hiring system, in which the developer is required to interview workers from local job training centers. Targeted populations can be defined in any number of ways: residents displaced by the development, residents of low-income neighborhoods, public assistance recipients, ex-offenders, veterans, and so forth. In the case of construction jobs, community groups have worked with unions and developers to specify access to apprenticeship slots for local residents, along with funding for preapprenticeship programs to get workers up to speed (Gross, 2005).

This model will be especially important in the emerging national policy discussion on the future of U.S. competitiveness. Analysts point to the decades-long backlog of infrastructure repair and upgrading (bridges, tunnels, roads, mass transit, schools) and the need to invest in energy efficiency and the development of green technologies and alternative energy sources. The promise—and at this point it is largely a promise—is that these projects, when publicly funded via vehicles such as infrastructure banks, could be harnessed to help bring good jobs to low-income communities and communities of color (the American Recovery and Reinvestment Act of 2009 was a small step in this direction).

Two recent examples are illustrative. Portland’s 2009 Clean Energy Works is a residential retrofitting program that integrates energy efficiency into the city’s long-term economic development strategy. The program’s Community Workforce Agreement mandates job quality measures such as living wages and hiring from designated training programs, while providing incentives for other measures such as health insurance and labor force diversity. As of March 2011, median wages for the program’s predominantly local workers were US$18 per hour, and nearly two-thirds received health benefits. Fully 84% of the workforce are local residents, and nearly half of the work is done by people of color. The city program has spawned a similar statewide initiative aimed at retrofitting 6,000 homes over the next 3 years and creating or retaining 1,300 jobs (Christman & Riordan, 2011).

In a similar vein, Los Angeles recently announced a large-scale Construction Careers Project. Over the next 30 years, the Los Angeles Metropolitan Transportation Authority plans to invest over US$67 billion to improve public transit, creating more than 257,000 construction jobs in the process. The project has a Community Workforce Agreement between building trades unions and developers that sets out wage and benefits standards, and a targeted hiring program that increases access to construction jobs for local residents and low-income communities. The policy is based on similar programs developed by the Port of Los Angeles and the Los Angeles City Department of Public Works, and is seen as a national model for other cities hoping to build a local green energy sector.

Going forward, local hiring and training policies will be critical to address the severe economic crisis that continues to grip communities of color across the country. In Milwaukee, for example, Levine (2012) reports that the employment rate for working-age Black men dropped to 45% in 2010, the lowest ever recorded. But the implementation challenge is significant (Gross, 2005) and examples of stalled training programs and unmet hiring targets are not hard to find (see Osterman & Chimienti, 2012). The problem is that the United States has very little history of collaborative training and placement between government, employers, and unions, meaning there is no institutionalized knowledge to easily replicate and disseminate best practices. But in my mind, it is hard to conceive of a good jobs policy agenda that does not include a local hiring and training component on publicly funded projects to gain traction on continued labor market exclusion in communities of color.

Harnessing Federal Grants Programs

A final and less explored source of government’s leverage on job quality resides in the care work sector. Care work industries that depend on public funding streams, such as home health care, nursing homes, and child care, are strongly influenced by budgetary decisions made by the public sector. Analysts have long documented that public funding for these services (in the form of Medicaid, Medicare, and Child Care Development Block Grants) is insufficient, both by failing to meet the demand for these services and by providing insufficient funds to enable living wages for these jobs (Dresser, 2008). Further complicating the picture, as we saw above, is that some forms of care work are either partially or wholly exempt from U.S. employment and labor laws. As a result, workers in these industries are some of the lowest paid in the U.S. economy, with median wages of less than US$10 an hour, and are at increased risk of wage and hour violations. This is true even when they are employed by formal employers (such as home care agencies, nursing homes, and day care centers).

In addition, the chronic underfunding of these public goods creates unregulated markets. The “gray market” in home health care is by some accounts as large as the publicly funded market; families who are not eligible for Medicaid or who have exhausted their Medicaid coverage turn to the gray market to hire workers directly. The resulting wage rates vary widely and often fall below legal standards (Dawson & Surpin, 2001). Another example is publicly subsidized child care, which has seen significant growth in recent years, especially in the home-based segment. Lack of sufficient funds has meant that government agencies are increasingly treating home-based child care providers as independent contractors. Payment is generally a flat sum based on the number of children cared for and categories of hours worked, and reimbursement rates in New York City for these workers often fall below the statutory minimum wage (McGrath & DeFilippis, 2009).

Caregiver industries are among the fastest growing in the U.S. economy and disproportionately employ African American and immigrant women. Addressing the acute job quality problem in this sector will have a significant impact on reducing economic inequality, as well as boosting the quality of the care provided (researchers have consistently shown a strong link between higher wages, lower turnover, and the quality of care that workers can provide). There are short-term policy steps in this direction, such as finding more money in the system to pass on to workers’ wages—either by reducing the high overhead taken by home care agencies under contract with states or by reducing fraud and controlling costs (the latter strategy is currently being tested in New York). But ultimately, the solution is to increase federal funding for Medicaid, Medicare, and Child Care and Development Block Grants at a high enough level to allow for living wages, as well as to meet growing demand for elder care and child care. The price tag will be steep—but the cost of continuing to operate these programs on poverty wages is simply too high to ignore.

The Question of Scale

To say that the United States has struggled to respond to thirty years of rising inequality and economic insecurity would be an understatement. The political dysfunction of the current Congress has arguably put the country even further behind, starting with the 2008 failure to pass a strong enough stimulus package, continuing through endless fights simply to reauthorize unemployment benefits, and peaking in the debt ceiling debacle last summer. The result is that 4 years after the start of the Great Recession, Washington has yet to develop anything even approaching a viable job creation policy, never mind one focused on job quality.

Even in the best of times, it is difficult in the U.S. to leverage public policy—legislative, administrative, and regulatory—to improve wages and working conditions. In the current political context, the policy trend has actually been to try to weaken labor standards, not raise them. Early last year, the Wisconsin protests shed light on a coordinated strategy to roll back or eliminate collective bargaining rights at the state level, one that is continuing unabated this year. Less in the public eye have been similar attempts to dismantle and undermine the minimum wage. There have been efforts to either lower or altogether repeal state minimum wage standards (in five states), to repeal cost of living increases in the minimum wage (four states), and to broaden exemptions from minimum wage laws or otherwise dilute the strength of the standard (a half dozen states). And worth mentioning for sheer brazenness, legislation in three states attempted to weaken or outright repeal child labor protections. For advocates on the ground, the past several years have felt something like a stampede of wildebeest, trampling long-established pillars of labor market policy with abandon.

There are reasons, however, to think that a renewed commitment to strong labor standards is politically viable. First, many of the policies outlined in this article are popular with the public—not just the minimum wage, which consistently polls in the 70% to 80% range, but also policies such as community control over local development and restoring the right to organize. Second, even as unions continue to hemorrhage membership, alternative forms of organizing have been surprisingly robust. The Occupy Wall Street movement is of course the signal populist event of the last year. But while those protests opened up the public arena for voice at an unimaginable scale, it is important to recognize that advocates in cities and towns across the country have been organizing around economic justice issues for decades.

The living wage movement is the best known, growing from a single campaign in Baltimore in 1993 to the present, where scores of cities across the country have adopted living wage policies and where the term itself has entered the popular lexicon (Pollin & Luce, 2000). Immigrant worker centers have grown from a handful of scattered organizations a decade ago to a nationwide movement with close to 200 centers and five national networks (Fine, 2006; Theodore, 2011). In the current anti-immigrant climate, the big surprise is that this movement scored major victories in 2010 and 2011, winning city and state antiwage theft laws and helping to recover millions of dollars in stolen wages. And in the economic development battlegrounds of our cities, low-income communities and communities of color have steadily laid down a track record of regional equity campaigns over the last decade (Parks & Warren, 2009).

Until recently, all three movements have focused largely on winning reforms at the state and local level, and this is no accident. There is a long history of states as “laboratories of innovation” in the United States, where progressive policy reforms are developed and tested at the state level and sometimes, adopted by the federal government. Freeman and Rogers (2007) review examples from a wide range of policy areas and make the case for a progressive federalism: the critical component is that policy “floors” are set at the federal level, below which states cannot fall but above which they can build higher standards. The minimum wage has effectively taken on this policy structure since 1979, where federal inaction has resulted in a number of states raising their own minimum wages, which in turn has mounted pressure on federal lawmakers to follow suit. Indeed, the question of preemption—which labor standards can be set by states and especially cities—has become contested political terrain, with conservative legislation and litigation challenging, for example, the right of cities to pass living wage laws.

To be clear: a state and local strategy is not inherently progressive, as demonstrated by the history of segregation in the United States. Nor will state and city policies suffice to address the labor market polarization of the past three decades. We need the scale of federal resources, the breadth of federal standards, and the coordination and dissemination that only a national good jobs policy agenda can deliver.

But progressive power is built from the ground up, and given the current political environment in Washington, I would argue that going to scale on labor standards in many cases will mean ratcheting up from state and local policy to federal reforms, institutionalizing best practices along the way. And we should be careful not to underestimate the impact of local successes on their own terms. It would be significant progress if over the next 5 years, for example, 30 states created infrastructure banks; 20 states passed stronger wage theft laws and raised their minimum wage; dozens of cities approved paid sick days ordinances; 15 states adopted clean energy standards creating demand for green jobs; and employers, unions, and workforce development agencies learned to implement targeted hiring and training programs.

Obviously all of this takes political will. So the question becomes how to harness what is arguably a pivotal moment—with a public focused on income inequality, unions that still have political clout, and a small but growing grassroots base—and translate that into the level of power needed to win strong and inclusive labor standards in the workplace. The answer to this question has enormously high stakes for the long-term project of building a competitive, sustainable, and just America.

Footnotes

Declaration of Conflicting Interests

The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This article was written with the support of the Russell Sage Foundation.

Notes

Bio

Annette Bernhardt is policy co-director of the National Employment Law Project. Her most recent book is the coedited The Gloves-Off Economy: Workplace Standards at the Bottom of America’s Labor Market (Cornell University Press).

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