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A few days after print publication, Knight's syndicated newspaper column, which moves twice a week, will be posted. The most recent will appear at the top.

Thursday, August 27, 2015

Guaranteed ‘basic income’ idea renewed

Bill Knight column for Mon, Tues., or Wed., Aug. 24, 25 or 26

It may seem foolish or contradictory to “free enterprise” ideals, but the most effective way to eliminate “entitlements” may be to guarantee everyone a minimum income.

(Of course, “entitlement” is increasingly used as a disparaging description rather than something for which people are eligible, like Social Security or veterans benefits. What some really criticize are entitlements that help people other than themselves.)

A “basic income” is a universal, unconditional grant that’s been studied for years in Canada, Switzerland, the World Bank and Uganda. The idea is decades old. Conservative economist Milton Friedman in 1962 proposed a Guaranteed Minimum Income by means of a “negative income tax,” and 46 years ago this month, President Richard Nixon recommended a version of Friedman’s plan, which the Republican named a Family Assistance Plan.

“Family Assistance recognizes a need and establishes a responsibility,” Nixon said. “It provides help to those in need and, in turn, requires that those who receive help work to the extent of their capabilities.”

Elsewhere, adaptations exist. France implemented a minimum income in 1988; Brazil and more than a dozen European nations have versions. Arguably, the United States already has variations, too, including Social Security Disability Insurance, a payroll tax-funded, federal insurance program intended to aid people physically limited in finding work, and Supplemental Security Income for low-income people who are either aged or disabled. (It’s also administered by Social Security, but its money come from the U.S. Treasury, not Social Security revenues).

Now, however, it’s scheduled to be enacted in earnest in a year-long experiment in Utrecht, Netherlands, where welfare payments will be replaced by “living incomes.”

People work more effectively “after they have been lifted out of poverty,” the World Bank reported.

In 2013, a study looked at two groups in Uganda: one had received a no-strings-attached grant equal to the country’s annual income – about $400 – and a second group received nothing. The group receiving the grant worked on average an extra 17 hours in comparison to the other group, and showed a 41-percent increase in earnings years after receiving the grant.

One problem is the negative attitude about victims of poverty.

Just before his 1936 re-election, President Franklin D. Roosevelt talked about the rich and powerful trying to persuade everyday Americans to vote against their own interests through divisive claims.

“It is an old strategy of tyrants to delude their victims into fighting their battles for them,” FDR said.

Instead of “humiliating and patronizing” the jobless, minimum-income grants could empower the needy to volunteer with seniors or kids or help beautify public lands, wrote Rutger Bregman in De Volkskrant.

It’s not just poor countries or European societies that could benefit. After all, many Americans are one crisis – a health emergency, divorce, etc. – away from financial catastrophe.

Nobel laureate Joseph Stiglitz, chief economist with the Roosevelt Institute, recently reported in “Rewriting the Rules of the American Economy” that the economy is dysfunctional, writing, “We pride ourselves on being the land of opportunity and creating the first middle-class society, yet profound and largely overlooked changes have put the middle-class life increasingly out of reach for the majority of Americans.”

Examining policies that over recent decades created the situation where “the benefits of economic growth have disproportionately gone to the top 20 percent of the population while the share of national income going to the bottom 99 percent has fallen,” Stiglitz added, “The American economy no longer works for most Americans.”

Some say that’s no coincidence.

Sasha Abramsky in her book “The American Way of Poverty,” shows that poverty in the United States isn’t an accident, but a result of the nation’s political and economic systems.

A minimum income would turn those systems on their heads – and save money

“The current rules in welfare are bureaucratic and, in a way, based on mistrust,” said Jacqueline Hartogs, a spokeswoman for Utrecht alderman Victor Everhardt.

The Dutch program would more than pay for itself socially, counting “billions saved” on bureaucracy, health care and policing, Bregman said.

It should appeal to conservatives – and it has. Conservatives including U.S. Rep. Paul Ryan (R-Wis.), U.S. Sen. Marco Rubio (R-Fla.) and American Enterprise Institute Fellow Charles Murray all have suggested wrapping up most welfare programs into means-tested minimum incomes.

A minimum income could cut welfare spending and remove its stigma, help the needy advance, and encourage service by and also empathy with the less fortunate.

That doesn’t seem foolish, contradictory or against genuine free enterprise.

[PICTURED: Photo is of Jacqueline Hartogs of Utrecht, Netherlands; illustration from bluedandelionnews.com.]

Sunday, August 23, 2015

(Hot) air war rewrites history on ISIS

Bill Knight column for Thurs., Fri., or Sat., Aug. 20, 21 or 22

For all the hot air, August 6’s Republican debates didn’t really address many key issues, from income inequality and the Trans-Pacific Partnership trade deal to climate change and campaign finance (although Donald Trump hinted at contributors’ expectations from their donations). Instead, a key refrain was blaming President Obama for “losing” Iraq and letting the Islamic State (ISIS) emerge from the remnants of al-Qaida.

The assertions were flawed or false.

Two days later, Obama expressed some surprise. Asked if he regretted withdrawing U.S. troops from Iraq in 2011 given how fast ISIS took over parts of the nation, he said, “What I just find interesting is the degree to which this issue keeps on coming up – as if this was my decision.

“Under the previous administration, we had turned over the country to a sovereign, democratically elected Iraqi government,” Obama said. “In order for us to maintain troops in Iraq, we needed the invitation of the Iraqi government, and we needed assurances that our personnel would be immune from prosecution if, for example, they were protecting themselves and ended up getting in a firefight with Iraqis, that they wouldn’t be hauled before an Iraqi judicial system.”

True, Obama wanted a withdrawal (campaigning on it), but it really was less his choice than Iraq’s – and George W. Bush’s.

Three days after Obama’s comment, Jeb Bush doubled down on GOP presidential candidates’ phony claims about Obama (and his Secretary of State, Hillary Clinton, of course.)

“That premature withdrawal was the fatal error, creating the void that ISIS moved in to fill,” Bush said.

Reality check: By 2006, three years after U.S. troops toppled Saddam Hussein, Iraq was a mess. A mostly Sunni uprising against Americans and the governing Shiite Muslims the U.S. installed sparked widespread sectarian bloodshed. By that December – almost two years before Obama was elected – the “Iraq Study Group,” including Republican stalwarts such as James Baker, Ed Meese and Alan Simpson, criticized Bush’s strategy in the region. The group called for withdrawing almost all U.S. troops from Iraq by 2008, starting dialogue with Iran, and stepping up work on Arab-Israeli peace.

The next month, President Bush – who misled the United States into war in Iraq in 2003 – changed the strategy, sending 30,000 more troops there (“the surge”) to focus on protecting civilians rather than killing rebels. The new goal: reconcile Muslim sects to stabilize the country. After Sunni leaders increasingly opposed to al-Qaida were paid to fight those terrorists, Iraq quieted some. There was even a ceasefire with Shiite rebel Moqtada al-Sadr’s forces.

Then Iraq’s internal politics sabotaged reconciliation. Prime Minister Nouri al-Maliki, a Shiite, attacked Sunnis, driving them into the ragtag army of Syrian Sunni insurgents that became ISIS. Maliki also wanted the United States out, refusing to extend the Status of Forces Agreement to keep U.S. troops deployed there. Also, with renewed oil revenues, he was less dependent on the U.S. for armaments or other aid. By August of 2008 – five months before Obama’s inauguration – security analysts warned of “a gathering storm… the country may spiral back into chaos.”

All that matters little to GOP candidates. Trump pledged to use the military (to cut off the oil ISIS sells). Bush was slightly less warlike, not advocating for more troops (like Sen. Lindsey Graham’s call to send up to 20,000 U.S. troops to Iraq and Syria) but proposing a “no-fly” zone on the Iraqi-Syrian border, closer partnerships with Sunni, Turk and Kurd allies, and increased defense spending.

“We do not need – and our friends do not ask for – a major commitment of American combat forces,” Bush said. “But we do need to convey that we are serious, that we are determined to help local forces take back their country.”

That’s not much different than Obama, whose similar ideas ran into opposition on Capitol Hill, where Republicans insist on reducing the Pentagon along with all government spending (and oppose almost everything Obama proposes).

On the other hand, the relatively independent Rand Paul criticized “knee-jerk reactionaries” in the Republican Party who think “war is always the answer.” Paul told MSNBC’s “Morning Joe” program hosted by former Republican Congressman Joe Scarborough that the GOP’s hawks, not President Obama, are the ones responsible for the current turmoil in the Middle East and the creation of the Islamic State.

The rewriting of history is starting to mirror 2003’s fallacy, that deposing Saddam would be a bloodless breeze.

More hot air.

Thursday, August 20, 2015

Renewable can be sustainable for budgets, jobs

Bill Knight column for Mon, Tues., or Wed., Aug. 17, 18 or 19

Tens of thousands of jobs could result from a new measure sponsored by State Rep. Elaine Nekritz (D-Buffalo Grove), and though Illinois Clean Jobs co-sponsor Sen. Dave Koehler (D-Peoria) concedes that some workers are worried about losing jobs in converting from fossil-fuel to renewable energy, a downstate building-trades leader agrees that such legislation can work.

Speaking at a “Solar Social” event last week in downstate Farmington – where one of the nation’s largest solar projects at a K-12 school was installed last year – Koehler praised such efforts while recognizing occasional anxiety about job loss.

“I know that some union members – especially those tied to fossil-fuel industries – are concerned,” said Koehler. “However, we helped convene labor and environmentalists in the Central Illinois Alliance for Healthy Communities, and everyone agreed that, one, we all want clean air, and, two, we want to protect or create jobs.

“That’s indisputable,” he added. “The question is: How do we get there?”

The Illinois Clean Jobs Act is a possible approach.

Introduced in February, the proposal would promote sustainable energy and new jobs by directing the state Environmental Protection Agency to develop a market-based approach to comply with federal carbon standards and let market forces find the most cost-effective emission-reduction strategies.

Paul Flynn, Business Manager of Local 34 of the International Brotherhood of Electrical Workers, which represents workers from Quincy and Peoria to Galesburg, says rank-and-file workers appreciate the possibilities of dealing with climate change while promoting jobs in sustainable and renewable energy work.

“Absolutely we do,” Flynn said. “The technology to clean coal is installed by us, and wind and solar is installed by our members. It is win-win.”

Shannon Fulton of the Illinois Solar Energy Association, based in suburban Chicago, said employment will result from such measures.

“The bill will save money and strengthen local tax bases,” she said. “If passed, it would result in a net gain of 32,000 jobs year.”

Furthermore – despite a lack of action in Springfield on issues such as the state budget, and the bill’s sitting in the Rules Committee since late March – something like the Illinois Clean Jobs Act is feasible, Flynn said.

“We have friends that are Republicans and vote for what we stand for,” Flynn said. “Let's face it. The business track record of protecting the environment is not a good one. If it is not for the role of government intervention, we would have places like Love Canal all over again. The Illinois River would still be a chemical dumping ground like it was in the ’50s, ’ 60s and ’70s. Thankfully, forward-thinking politicians said ‘Enough. You cannot poison the water.’ Now it's time to clean the air.”

IBEW members are comfortable with innovations in technology, too, Flynn said.

“Of all the trades, electricians are one of the youngest around,” he said. “Only 100 years ago, most people did not have electricity in their home. The electrification of cities and towns was an amazing new technology. We have always been the guys and gals who embrace new technology and methods of making it safer to use. It just comes natural to us to be forward thinkers who try and stay ahead of the curve.”

Staying ahead of the curve is necessary for policymakers, too, Koehler noted.

Koehler, who chairs the Senate’s Environment and Conservation Committee, said, “It’s important [as global summits discuss climate change] that the United States walks the talk [and] demonstrates that we, too, will make changes.”

Apart from employment, the experience at Farmington’s schools shows that investing in renewable energy can be cost-effective, too. A $1.9 million solar project with hundreds of 300-watt solar panels built with assistance from a $1.15 million grant from the Illinois Clean Energy Foundation, it’s saved $24,500 just since mid-April 16, said superintendent John Asplund.

“What we’ve generated is the equivalent of planting 16,000 trees,” he said, “and taking 281,000 kilograms of carbon dioxide emissions out of the atmosphere.”

The solar array should meet about one-third of the school’s power needs and could save the district about $1.5 million in five years, he added.

Such successes don’t mean progress will be easy, Koehler warned.

“One thing I’ve learned about sustainable energy [issues],” Koehler said. “There’s nothing that’s not controversial.”

[PICTURED: Graphic from the Union of Concerned Scientists from its 2015 study advocating for greater Energy Efficiency Portfolio and Renewable Portfolio standards.]

Sunday, August 16, 2015

Municipal bankruptcies could backfire

Bill Knight column for Thurs., Fri., or Sat., Aug. 13, 14 or 15

Republican Gov. Bruce Rauner wants Illinois to let municipalities go bankrupt, and State Rep. Ron Sandack (R-Oak Grove) has introduced such a measure in the legislature. But neither has spoken about the financial consequences to people who own municipal bonds if Illinois communities go bankrupt like Detroit, Stockton, Calif., Harrisburg, Pa., or Jefferson County, Ala.

Bondholders who lent money to municipalities would be hurt, as well as the insurers who guaranteed those bonds, and many of those bonds are owned by regular people, directly or indirectly.

This month, Puerto Rico’s default shows that such actions could be a much bigger problem for investors than Greece’s meltdown. Everyday Americans own Puerto Rico bonds, and 20 percent of bond mutual funds own some Puerto Rico bonds, according to Morningstar. Puerto Rico Gov. Alejandro Garcia Padilla has asked Congress for permission to go bankrupt. (Interestingly, Puerto Rico last month made all its scheduled debt payments EXCEPT its Public Finance Corporation obligations, possibly because those are mostly owned by credit unions and other ordinary people, not Big Banks with armies of lawyers to fight back.)

Such government or municipal bonds are usually tax-exempt, and some are attractive, if risky. For instance, Chicago issued $347 million in tax-exempt bonds in July that yield up to 5.69 percent returns. And a T. Rowe Price tax-free muni fund, according to a U.S. News analysis, “has returned 5.11 percent over the past year, 5.05 percent over the past three years, 6.53 percent over the past five years, and 4.82 percent over the past decade.”

Bonds are sold because they’re backed up by government funds – or the power to raise money. That would change dramatically under the bill from Sandack – a former Oak Grove mayor, incidentally.

Fortunately, it faces a fight.

Municipal Market Analytics partner Matt Fabian told The Bond Buyer, “In Illinois, it’s unlikely that a bankruptcy law would be passed, and even more unlikely that what might be passed would protect bondholders over employees. The cost of capital would very likely rise.”

Still, Rauner’s “turnaround agenda” – which also proposes cutting state revenues to municipalities by half – contains his “Taxpayer Empowerment and Government Reform Package” proposing to “extend to municipalities bankruptcy protections,” an idea the Illinois Municipal League has pushed.

Of course, bankruptcies can modify or erase long-term debt, such as promised pensions or bonds, but the maneuver can be more treacherous than four-time bankrupt billionaire Donald Trump makes it sounds.

Federal bankruptcy law has many chapters. The most familiar are Chapter 7, which wipes out most debt; Chapter 11, which lets usually large companies reorganize finances; and Chapter 13, which protects the indebted party while repayments are planned. Chapter 9 lets municipalities go bankrupt – if their states permit it. Twelve states authorize Chapter 9 bankruptcies for municipalities; 12 more allow it under some circumstances, and 26 prohibit it. Since 2010, 37 local governments have gone bankrupt, just 8 municipalities, according to the National Conference of State Legislatures. In the last 60 years, only 63 municipalities have filed for bankruptcy.

Even when possible, insolvent municipalities are supposed to provide evidence of their financial plight AND show they have no other options – like raising additional revenues to pay their obligations. (However, judges can’t compel municipalities to raise taxes or cut spending.)

Illinois already has a way to help – offering assistance through 1990’s Financially Distressed City Act, which was used to aid East St. Louis in 2013.

Is Rauner thinking Detroit is a good model for, say, Rockford? Chicago? In Detroit – despite Michigan’s constitution protecting pensions – a federal judge overrode that pledge, and pensions there weren’t even the main problem. Detroit was hurt far worse by the Great Recession and by the state legislature severely cutting funding.

“At a time when other cities were starting to recover [from the 2008 financial crisis], Detroit’s revenue was cut sharply by the state,” said Carrie Sloan of the Roosevelt Institute’s ReFund America Project. “That was what pushed the city over the edge.”

Does Rauner really want to push cities over the edge – and take investors with them?

In Detroit, which initially proposed paying 10 percent of what it owed, “creditors really took it on the chin,” commented bankruptcy lawyer Lee Bogdanoff, who assisted with Jefferson County’s bankruptcy.

San Bernadino offered to pay a penny on the dollar.

Some turnaround.

[PICTURED: Editorial cartoon by Rick McKee from the Augusta Chronicle via carbonated.tv.]

Wednesday, August 12, 2015

Joblessness, wage levels offer promise, pessimism

Bill Knight column for Mon, Tues., or Wed., Aug. 10, 11 or 12

The old saying “Two steps forward one step back” may sound like the approach of Illinois’ government, but it also has come to apply to economic progress for everyday working people, especially downstate.

New applications for unemployment benefits fell in July, according to the U.S. Labor Department. But it also reported that wages and benefits this spring grew at the slowest rate in 33 years – more proof that even supposedly stronger hiring isn’t improving paychecks for most of us.

The government’s Employment Cost Index – which tracks wages, salaries and benefits, together – rose just 0.2 percent in the quarter ending June 30, the Labor Department said on July 31. Wages and salaries alone also went up the scant 0.2 percent. Both figures were the smallest quarterly gains since the second quarter of 1982.

As far as downstate Illinois, the area continues to struggle, according to the state Department of Employment Security (IDES). In fact, metro Peoria was found to have the nation’s second-largest decline in employment in May, the Labor Department added last month, losing 2,500 jobs that month – one of 36 U.S. markets that declined. Five areas were unchanged but 346 of 387 metro areas studied showed improved unemployment rates.

Nationally, initial claims for jobless benefits fell 26,000 to 255,000 for the week ending July 18, Labor’s Bureau of Labor Statistics (BLS) reported – the lowest unemployment level since 1973. The most recent U.S. unemployment rate was 5.3 percent – an improvement from May of 0.2 percent (again, that whopping two-tenths of 1 percent).

But, again, many downstate counties’ jobless rates aren’t very good. For example, Fulton’s is 6.9 percent, Henry 5.2, Knox 5.2, Livingston 4.9, McDonough 6.5, Mercer 5.0, Peoria 6.2, Tazewell 5.5, Warren 4.8 and Woodford 4.3, IDES reports.

“Collar counties gained more net jobs than the total statewide gain,” explained IDES Director Jeff Mays. “Given the statewide gain of 44,500 jobs total, the rest of the state had a net loss. The need for a full statewide recovery remains.”

Economist Dean Baker of the Center for Economic and Policy Research said all of the the statistics hide – maybe reveal – a sluggish recovery.

“The job growth [in June] was almost entirely in the service sector,” he said. “Construction employment was flat. The mining sector has lost 51,000 jobs over the last year largely due to the plunge in energy prices. Manufacturing has added just 37,000 jobs through the first six months of 2015, due to the impact of the stronger dollar.

“The retail sector continues to be strong,” he added.

“One positive is that the number of people voluntarily working part-time rose sharply even as involuntarily part-time employment fell,” he continued. “At the same time, involuntary part-time employment is down by 1.6 million (20.0 percent) over this period. This is undoubtedly due in large part to the Affordable Care Act, which freed workers from the need to get insurance through their employer.”

Meanwhile, those wage numbers are disappointing, if not alarming. Median weekly earnings, when taking inflation into account, on June 30 were $308 in what the BLS calls its “constant” or “real” dollar figure, which considers the Consumer Price Index’s effect since 1982, based on a $100 wage then.

The $308 figure also was the median weekly earnings level on June 30, 2013 – a measly dollar better than Dec. 31, 2009. Big whoop.

“This report gives little hope for an uptick in wage growth,” Baker said. “Among major industry groups, the only one that shows much evidence of an acceleration in wage growth is restaurants. This is likely to due to the effect of minimum wage hikes in many states and cities.”

Employers are hiring people who are so desperate to work, companies need not boost pay to attract or keep workers.

So people get jobs but still struggle.

The economy’s not working any better than Springfield politics.

[PICTURED: Great Depression billboard from the early 1930s.]

Sunday, August 9, 2015

Treaties and trades must be win-win

Bill Knight column for Mon, Tues., or Wed., Aug. 3, 4 or 5

The anti-diplomacy crowd in Washington is making demands about Iran and Cuba that seem like unrealistic baseball fans at Major League Baseball's recent trading deadline: “Get a better deal!!”

Some who cry that negotiators were “bamboozled” or “fleeced” sound like some desperate caller on sports radio demanding the White Sox trade disappointing pitcher John Danks for Cy Young favorite Zack Greinke of Los Angeles.

Not only is such a deal not that simple; it’s a one-sided, fanciful dream (or nightmare, if you’re a Dodgers fan).

Of course, heroic diplomats aren’t as common as professional athletes in popular culture. There are very few movies or video games about great treaties, peace deals or ambassadors. However, that’s no excuse for continuing to criticize better relations with Cuba or Iran – whether the GOP or Israeli Prime Minister Benjamin Netanyahu. That’s selfish short-term politics, not long-term concern with stability.

Still, last week, as Secretary of State John Kerry, Treasury Secretary Jack Lew and Energy Secretary Ernest Moniz testified on Capitol Hill early in Congress’ 60-day review of the July 14 agreement on Iran’s nuclear program between the United States and Iran – plus China, the European Union, France, Germany, Russia and the United Kingdom – the Cabinet members had to repeatedly explain the obvious positives of lifting sanctions in exchange for verifiable limits on nuclear development.

“If Congress does not support the deal, we would see this deal die, with no other options,” Kerry said. “Nothing in this deal is built on trust.”

Thawing frozen relations is a plus.

Concerning Cuba, Ted Mottaz, an Illinois farmer, in June was part of a delegation that traveled to Havana to open up communications and discuss people-to-people ways to improve relations.

“It’s over 50 years,” said Mottaz, a District Director with the Illinois Corn Growers Association who’s also been active with the Farm Bureau and Knox County’s Soil and Water Conservation District.

“It’s time to let bygones be bygones,” Mottaz continued. “They’re ready.”

A U.S. embassy opened in Havana July 20, following President Obama’s December announcement re-establishing relations with Cuba.

Of course, Iran is less dependent on a foreign power like Cuba was with the former Soviet Union, and it has more resources than Cuba, from oil to people. However, distrust and hostility can be short-sighted.

Mottaz, a former combat infantryman who served in Vietnam, added that it’s been 20 years since the United States normalized relations with Vietnam after a 10-year war where thousands of Americans were killed or wounded.

“We lost 50,000-some lives in Vietnam,” said “but we trade with them. It’s time to trade with Cuba, too.”

It’s not just progressives like Kerry, either. Conservative U.S. Sen. Rand Paul (R-Ky.) last week told a South Carolina meeting of Concerned Veterans of America, a group financed by the right-wing Koch brothers, that he opposes war in the Middle East.

“Is it really something we want to do, to put a million American soldiers back there?” Paul said, adding that most Republicans “would have us at war with Nigeria, Libya, and 10 other countries” to fight terrorism.

(And, it should be pointed out, Iran is one of the nations actually fighting the Islamic State throughout the region.)

In downstate Illinois, Mottaz said he didn’t know what to expect in Cuba but was pleasantly surprised.

“We had a lot of face-to-face talks, and everyone was very friendly,” he said. “They’re people like us. Once in a while if a conversation lagged, someone would bring up baseball, and everybody got animated about players and so on.”

Most people today realize that improving relations with Cuba is long overdue. Whether Cuba or Iran, better ties are good, but they won’t stem from lopsided agreements, like the notorious baseball swap 50 years ago, when the Cincinnati Reds traded future Hall of Famer Frank Robinson to the Baltimore Orioles for pitchers Milt Pappas and Jack Baldschun, and outfielder Dick Simpson.

Fifty years from now, it’s likely Americans also will look back at the selfish squawking about better international relations and wonder what all the fuss was about.

[PICTURED: Ted Mottaz, right, of downstate Illinois talks with an organic farmer during a recent trade mission to Cuba.]

Wednesday, August 5, 2015

Crackdown on misclassified ‘independent contractors’

Bill Knight column for Thurs., Fri., or Sat., Aug. 6, 7 or 8

If your company says you’re an “independent contractor” or temp, it may be misclassifying you, and it could be less of an error or impulse than a strategy.

It also could be illegal, according to the government.

Employers that knowingly misclassify workers as “independent contractors” commit fraud, cost taxpayers billions of dollars, and contribute to a decline in labor standards, according to the Economic Policy Institute (EPI).

In a report written by Francoise Carre, EPI exposes a troubling trend touching many industries, from construction to food processing, It’s a practice that’s a growing issue in Illinois in spite of the Employee Classification Act, a law passed in 2008 to curtail the scheme. The statute says workers are considered employees unless they pass several tests, including being free from control or direction by their companies.

Nevertheless, employers here and nationwide continue to misclassify workers or artificially arrange work to be performed by so-called third parties, dubbed “subcontractors,” “temporaries” or “contingent” staff even though they use employer equipment, follow management instructions and are, really, employees.

Employers with independent contractors don’t have to pay those workers’ payroll taxes, companies’ half of Social Security and Medicare taxes (FICA), state and federal unemployment taxes, workers’ compensation insurance premiums, or disability insurance, or complying with either the Fair Labor Standards Act or the Immigration Reform and Control Act, meaning companies may not be subject to paying minimum wage or overtime, or could hire undocumented workers without verifying their immigration status.

It’s difficult to know the exact number of misclassified workers, but some research indicates that 10 to 20 percent of employers misclassify at least one worker as an independent contractor, EPI says. Studies also show the ruse has increased over the last 20 years.

Adam Kader, director of Arise Chicago Worker Center, said that in the last two years that group has noticed more service workers paid as independent contractors. Elsewhere, warehouse workers and truckers who perform all of their work for one trucking firm or major retailer say they’re misclassified. Other disputes involve Uber and Lyft drivers; some Nissan autoworkers in Mississippi and Tennessee earn half as much as full-time employees because they’re categorized as temporary; and the National Labor Relations Board last year ruled that FedEx Home Delivery drivers in Connecticut may be called independent contractors, but they’re actually employees and therefore eligible to vote to unionize.

On the West Coast, misclassification of truck drivers by Pacific 9 Transportation last month sparked a strike at the Los Angeles-Long Beach port, where drivers demanded recognition as employees. That would give them the right to unionize.

“I’m tired of misclassification and abuse,” said Fariborz Rostamian, a misclassified Pac 9 driver for 10 years. “I won’t keep paying for that truck because it’s too dangerous.”

Also last month, the Labor Department reminded businesses and workers how to determine whether workers are employees or independent contractors. Its 15-page document notes that federal law defines most workers as employees because it defines “employ” as “to suffer or permit to work.” The department says employers should use the “economic realities test,” which focuses on whether a worker is economically dependent on the employer.

“The practice can constitute fraud; it violates tax and employment laws,” EPI’s Carre writes. “Misclassification results from either ignorance or criminal misconduct.”

Besides exploiting workers, the practice hurts local, state and federal treasuries in lost revenues and higher costs for social services to workers made eligible by employers that won’t provide insurance or other benefits. The loss of such tax revenue can be huge. Carre shows misclassification in the construction industry in the South annually costs Florida $400 million, North Carolina $467 million, and Texas $1.2 billion.

A 1984 IRS study found 15 percent of employers misclassified 3.4 million workers, resulting in an estimated loss of $1.6 billion in FICA taxes alone. Adjusted for inflation for the year 2014, the loss in FICA taxes last year would be $3.5 billion.

Further, misclassification lets employers unfairly compete against companies that don’t violate the law.

Chicago attorney Alejandro Caffarelli – who represents 41-year-old truck driver Lucio Barrera in a misclassification lawsuit against DNJ Intermodal Services – told the Chicago Tribune that the scheme lets companies shift the cost of doing business onto workers.

“The employer reaps all the rewards,” Caffarelli said.

[PICTURED: Editorial cartoon by Keith Tucker/What Now Cartoons.]

Sunday, August 2, 2015

Anti-union idea about power, not economics

Bill Knight column for Thurs., Fri., or Sat., July 30, 31 or Aug. 1

When Illinois Gov. Bruce Rauner proposed local “empowerment zones,” he not only endorsed so-called Right-To-Work as an economic booster, but also pitted business against working people, according to scholars, activists and nonpartisan government research.

Rauner says that Right-To-Work (RTW) – which means that workers in unionized workplaces don't have to join their union or pay their share of the costs of bargaining for wages, hours and working conditions – would strengthen Illinois’ economy and raise citizens’ standard of living.

“Rauner and other anti-union politicians claim that, if weaker unions lead to lower wages, this just makes Illinois more attractive to business and investment,” said author Richard C. Longworth, a researcher at the Council on Global Affairs in Chicago. “Maybe so, but they can't argue that it's good for the state's workers.”

Half of all U.S. states have RTW laws, but that’s one of many factors in their economies, including infrastructure, location, natural resources and education systems. Plus, those state economies range from good to lousy. Apart from their overall economic shape, RTW states’ wages are lower, according to the nonpartisan Congressional Research Service.

“The Congressional Research Service concluded in a 2012 report that states permitting ‘fair-share’ or ‘union-security’ provisions showed sharply higher median wages: $50,867, compared with $43,641 in Right-To-Work states, a 16.5 percent differential,” said University of Illinois labor education professor Roger Bybee.

Conversely, the 12 states with the highest wages, including Illinois, are all non-RTW states. Of the 12 states with the lowest wages, eight — including Indiana and Iowa — are RTW states.

Further, six of the 10 states with the highest unemployment rates are RTW states: Nebraska, North Dakota, Utah, Iowa, South Dakota and Idaho. Also, business groups often talk about “business friendly” states, which include some RTW states, but such lists – such as Forbes magazine’s – also include states such as Alaska, Montana, New Hampshire and Washington, which haven’t prohibited unions from recovering their costs from those who benefit from their resources.

Now, it’s true that unions affect business; organized workplaces agree to pay more to employees. That arguably takes money from companies’ revenues or executive compensation. It’s also true that unions affect politics, because collective political action – whether campaign contributions, phone banks or canvassing – is a small balance against the monetary might of billionaires.

“The National Right to Work Legal Defense Foundation bills itself on its website as ‘Defending workers’ rights since 1968’,” wrote the late columnist Judith Gorman. “Exactly which rights are they defending? Not the right to organize. Not the right to bargain collectively for wages and benefits. Not the right to file grievances, nor the right to seek recourse for unfair termination, nor the right to demand a safe and healthy work environment, nor the right to be compensated for on-the-job injuries.

“So what rights are they defending?” she added. “The right to work longer hours for less money with no benefits and no job security. ‘Right to Work’ only defends the rights of employers.”

So attacking unions’ ability to collect fees to meet their expenses is not about economics or standards of living, but about politics and power.

In Illinois, the “empowerment zone” scheme would weaken all unions and, ultimately, all workers.

RTW proponents argue that people shouldn’t have to fund an organization they disagree with just to provide for their family. Would they also suggest not paying electric bills to monopoly power companies that want to put transmission lines through their areas, or withhold taxes that help send youngsters to fight in overseas wars?

Indeed, would such a “something for nothing” climate tempt struggling workers to opt out? Would “something for nothing” ordinances extend to hotels, Moose lodges, tollways, etc.?

A Wisconsin woman married to a Steamfitter defended the logic of having those who benefit from union negotiations contribute to expenditures.

“Fees for services are a norm in our society,” Jennifer Hall testified to a Wisconsin legislative committee. “If you want the services of a gym club, a country club, or even the Boy Scouts, you have to pay a fee. So why would you stop unions from doing this? Did you really think hurting unions and pushing down wages would be good for the state?”

Longworth scoffed at Rauner’s claim of empowerment for anything other than power and politics.

“Any governor who claims that Right-To-Work legislation will improve a state's economy is ignoring history and the facts,” he said. “RTW has nothing to do with a state's economy and everything to do with breaking unions.”

[PICTURED: Infographic from the National Education Association.]