Decent Work, Living Wages, and Government's Hidden Leverage

Demos

Decent work living wages

‌ and Government’s Hidden Leverage

special report contents Decent Work

by Robert Kuttner A2

Broken Laws, Unprotected Workers

by annette Bernhardt, Ruth Milkman, and Nik Theodore A3

Which Side Is Government On?

by David Moberg A4

Dark and Bitter

by Nancy Cleeland A7

Good Jobs, Healthy Cities

by Peter Dreier A10

Stuck on the Low Road

by David Bensman A14

This report was made possible through the generous support of the Panta Rhea Foundation.

Forgotten Corners of the Economy

illustration by david plunkert

by Paul Sonn and Annette Bernhardt A21

by Stephen Franklin A16

The Good War and the Workers

by Steve Fraser A18

Government Paves the Way

Decent Work How government can get back on the side of promoting good jobs

by Robert Kuttner

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uring World War II and the postwar boom, when unions had more influence and labor laws from the New Deal era were enforced, increasing numbers of Americans enjoyed a regularized working life. This included predictable earnings and benefits that increased with the productivity of the economy as well as a regular relationship with an employer who was subject

to laws governing wages, hours, and working conditions.

Thanks to these laws and the power of the labor movement, during the first decades after the war, more and more workers joined what economists call the primary labor market— regular jobs with reliable wages, benefits, and terms of employment. The expectation was that casual jobs would gradually take on the characteristics of primary ones.

Instead, more and more jobs today are becoming casualized.

The informal economy is encroaching on the formal. Supposedly, this shift reflects mainly the technical changes in the information economy. But temporary and contract employment is being used far beyond technological imperatives or the necessity of employers for flexibility—because it helps employers avoid unions and evade legal obligations.

Millions of workers who report to the same job at the same employer every day are disguised as contract or temporary workers. Millions of others who may have more than one employer are denied basic rights under the law.

But it doesn’t have to be that way, even with the existing strucpublisher George W. Slowik Jr. special report editor Robert Kuttner ture of industry. Between governdirector of external relations ment’s power as a contractor and Dorian Friedman, (202) 776-0730 x111 government’s ability to start syssubscription customer service 1-888-MUST-READ (687-8732) temically enforcing laws already subscription rate $24.95 on the books, millions of bad jobs could be turned into good ones.

There is no good reason why government could not once again play a more assertive role in regularizing the rights of workers and the conditions of work. What’s missing is the political will and the political coalition to demand these actions of government. Some of this would take legislation, but much of it could be done by executive order and enforcement. Actions are already being taken by progressive city governments, such as Los Angeles’, to improve the conditions of private-sector jobs over which the city has some leverage. this special report includes several articles by distinguished labor writers that survey labor abuses across a wide spectrum of occupations and industries; initiatives being taken by state, a2 october 2009

federal, and local government; and a review by labor historian Steve Fraser of the leverage of government contracting during World War II. The report closes with an agenda-setting piece by Paul Sonn and Annette Bernhardt of the National Employment Law Project.

In addition to the example of wartime contracting as a force for dramatically improving the conditions of work, one other piece of American history is worth invoking. The first executive orders on affirmative action in hiring and promotion, issued in the 1960s, were based entirely on government’s power as a contractor. Indeed, the very concept of affirmative action was invented by the Kennedy administration in 1961, using government’s power as a contractor to make progress on civil rights at a time when legislative action was blocked by the power of racist committee chairmen.

The original Kennedy order, issued March 6, 1961, required government contractors to “take affirmative action to ensure that applicants are employed, and employees are treated during employment, without regard to their race, creed, color, or national origin.” The Kennedy and Johnson executive orders required affirmative measures to desegregate employment opportunities, not just on government contract work but in the entire employment practices of any company seeking a federal contract. Today, the federal government could similarly hold contractors to high standards with regard to wages, working conditions, and compliance with other labor laws. As Peter Dreier writes in this report, some city governments have begun enforcing contractor decent-work practices throughout their entire work force.

In the quest for good jobs, the spotlight has been on such strategies as using green energy as a source of new industries and employment opportunities and increasing access to education to create a better trained work force. Passage of the Employee Free Choice Act, likewise, would safeguard the right to join a union and help the labor movement organize a new generation of often abused workers.

Collective bargaining continues to be central to a decently paid workforce, and government’s enforcement of other worker rights works in tandem with union organizing. With a new administration, and the creation of the vice president’s task force on middle-class working families, this is a moment to think creatively about all the ways that government can contribute to regularized, decent work. tap w w w. p ro s p ect. o rg

good jobs

Broken Laws, Unprotected Workers

By Annette Bernhardt, Ruth Milkman, and Nik Theodore

■ More than one-fourth of the workers in our sample (26 percent) were paid less than the minimum wage.

■ Of those who worked more than 40 hours in a week, 76 percent were not paid the legally required overtime.

■ Of workers asked to report early or stay late, 70 percent had an “off the clock” violation—they received no pay for work they performed outside their regular shift.

■ Of those entitled to a meal break, 69 percent received no break at all, were interrupted by their employer, or worked during the break—all violations of mealbreak laws.

■ Over half (57 percent) of all workers in our sample did not receive the legally required statement of their earnings and deductions.

■ Altogether, 68 percent experienced a pay-related violation in the week prior to the survey.

Other illegalities ranged from tip stealing by employers to illegal pay deductions to workers’ compensation

violations. When workers complained or tried to organize a union, 43 percent experienced illegal retaliation (such as being fired or having their hours cut).

These problems are not limited to unauthorized immigrants. All workers are at risk, although women, immigrants, and workers of color had especially high violation rates.

Stolen Wages

Minimum-wage violation rates by gender, nativity, and legal status, 2008 50% 40%

■ male ■ female

30% 20% 10% 0

Fo rei g au n-b tho orn riz ed Fo rei un gn au -b tho orn riz ed

We think of this landmark 2008 survey as a census of the invisible, because from the standpoint of public policy and government regulation, these jobs and workers too often are off the radar screen. Our findings describe a world of work where core protections that many Amer­ icans take for granted are failing significant numbers of workers:

U. S bo .rn

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ast February, a chain of gourmet groceries in New York City paid nearly $1.5 million in wages owed to 550 workers. In the same month, the Los Angeles city attorney charged two owners and a manager of several car washes with paying workers a flat daily rate of $35 to $40 for shifts that lasted eight hours or longer. Also this year, a Chicago-area temp agency settled a class-action suit for nearly half a million dollars; when workers accumulated more than 40 hours a week at different client companies, the agency “split” their checks to avoid triggering mandatory overtime pay.

These cases are part of a growing stream of abuses reported by community organizers, unions, legal-services offices, and even government agencies. But until now it has been impossible to know the scale of the problem. Are violations of workplace laws confined to a few peripheral employers affecting small numbers of workers—or a larger trend reshaping the American workplace?

To find out, we and our colleagues undertook a systematic study to measure the prevalence of employmentand labor-law violations. Using an innovative methodology designed to reach people often missed in conventional surveys (including unauthorized immigrants and people working for cash), we interviewed 4,387 workers in low-wage industries in Chicago, Los Angeles, and New York City.

source: authors’ analysis of 2008 unregulated work survey

The best predictors of violations were industry and occupation. Minimum-wage and overtime violations were especially common in garment manufacturing, nail salons, and domestic work, but we also found them in construction, retail, restaurants, warehousing, and home health care. We found more violations in small companies, but even in big com-

panies (with 100 employees or more) nearly one worker in six had a minimum-wage violation in the previous week.

Responsible employers still do exist in the low-wage labor market—violations were much lower in firms that offered their workers health coverage and paid vacations, for example. But such employers are becoming an endangered species, increasingly unable to compete with firms whose business model depends on systematically violating the law.

The sheer breadth of the violations we documented is a national call to action. We estimate that every week, about 1.1 million workers in Chicago, Los Angeles, and New York City experience a minimum-wage, overtime, or other pay violation, resulting in more than $56.4 million in wage theft. Rebuilding our economy on the back of these illegal working conditions is morally untenable—and it is bad economics. Unscrupulous employers who break the law rob families of badly needed money to put food on the table. They rob communities of spending power. They rob state and local governments of vital tax revenues.

And they rob the nation of the good jobs and workplace standards needed to compete in the global economy. tap

The full report, Broken Laws, Unprotected Workers: Violations of Employment and Labor Laws in America’s Cities, is co-authored with Douglas Heckathorn, Mirabai Auer, James DeFilippis, Ana Luz Gonzalez, Victor Narro, Jason Perelshteyn, Diana Polson, and Michael Spiller, and is available at www.unprotectedworkers.org.

the american prospect

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Which Side Is Government On? Millions of contract workers whose salaries are ultimately paid by government live in poverty. Uncle Sam should demand high standards, not pay as little as possible.

By David Moberg

a4 october 2009

co-workers’ fears of being fired if they support a union and supervisors’ admonitions that a union could never win benefits for part-time workers. “The school awarded this contract to the company because they give cheap labor,” Iglesias says.

“Who is really responsible for not awarding benefits? It goes back to the contractor. This needs to be fixed. Something is horribly wrong.” something indeed is horribly wrong, but much of the responsibility stretches back to the federal government, the ultimate source of the money for Iglesias. Starting in 1931 with the passage of the Davis-Bacon Act to make sure federal construction contracts did not depress local wages, Congress and various administrations have taken steps to make the federal government, through its contracting out of work, raise or at least protect the employment standards at private companies doing public work. In 1965, for example, Congress passed the Service Contract Act (SCA), which requires federal service contractors to pay the prevailing, or median, local wage, plus a standard amount for benefits ($3.35 an hour this year).

Yet there are large loopholes and exemptions. Iglesias, for example, is not protected because the contracting agency is a local institution and SCA rules do not “flow down” with the money. The law is poorly enforced, even when it does apply.

In 2007 the Labor Department found in 80 percent of its SCA investigations that employers underpaid wages or benefits or both. And wages are so low in many service jobs, especially where few workers belong to unions, that prevailing wages are often only sub-poverty wages.

The problems have worsened over the past decades. The federal government accelerated contracting out under the Clinton administration, but Vice President Al Gore’s initiative to reinvent government eventually imposed some labor standards for federal contractors. Then George W. Bush quickly cancelled the standards and more than doubled federal contracting to more than $500 billion annually by 2008, bringing in its wake cost overruns, poor performance, scandals, and deteriorating conditions for many workers.

The government does not systematically compile data on the contract work force, but the varied authoritative estimates agree: The federal contract work force is huge, growing fast, and disproportionately underpaid. For example, the Economic Policy Institute (EPI) concludes that there are now about 2 million contract workers, up from 1.4 million in 2000, compared to 2.7 million direct federal employees in 2007, and that one-fifth of w w w. p ro s p ect. o rg

t y l e r b i s s m e y e r / t h e n e w yo r k t i m e s / r e d u x

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da Iglesias relies on her job as a cafeteria worker at Paramus High School in New Jersey to put food on the table for three hungry, preteen children. It’s not easy.

She makes $8 an hour, works only 24 hours a week, and while out of work over the school’s summer recess, does not qualify for unemployment compensation. Her construction-worker husband, out of work for more than six months, also draws no unemployment insurance.

Then, after having put off seeing a doctor for seven years, Iglesias, 35, found that she needed major surgery that she might have avoided with regular check-ups. Neither Iglesias nor her husband get health insurance through their work, nor do they qualify for New Jersey Family Care, the state- and federally funded insurance program for low-income families—although some of her co-workers do.

Now she faces huge additional bills—$10,000 for the doctor alone, though her physician will reduce his fee, and she is applying for charity care from the hospital. “It’s really rough,” she says. “The kids’ first sentence is, ‘I’m hungry.’ God knows, I hope to feed them healthy.”

Indeed, feeding kids healthy meals is her job as well as her mission as a mother. Iglesias works for a company named Pomptonian, which contracts with the local school district to deliver the free and reduced-price lunches that are provided through the Child Nutrition Act. Federal funding through the Department of Agriculture provides most of Iglesias’ paycheck.

But like many service workers with poorly paid, precarious jobs, her family still struggles with poverty even as she works for a federal program designed to fight poverty and hunger.

Most of the nation’s 420,000 school cafeteria workers are directly employed by school districts, but a growing number— approximately 50,000—work for private companies, often giant global “multiservice companies” like Aramark, Compass, or Sodexho, that contract to deliver food services. Driven by fiscal pressures, school boards in states like New Jersey, with the nation’s second-highest contracting-out rate, have turned to these contractors to save money.

But a study from the Rutgers University Center for Women and Work concluded that “the majority of cost savings derive from the significant cuts in wages and benefits for food service workers who previously were employed by the school district—as much as $4.00 to $6.00 an hour” plus elimination of health insurance.

Iglesias now hopes that joining the Service Employees International Union (SEIU) will help win improvements, despite

good jobs all contract workers earned poverty wages or less and 40 percent less than a livable, or roughly median, wage. New York University professor Paul Light, who estimates that there were 5.4 million federal service contract workers in 2005, says that 80 percent earn low wages. And an industry consultant told The Wall Street Journal that 40 percent receive no health insurance.

These estimates do not include many workers, such as Iglesias, working on state and local contracts funded by federal dollars or on projects benefiting from federal grants, leases, subsidies, or payments such as Medicaid and Medicare.

taurants, to put further downward pressure on wages by expecting vendors to share revenue with the agencies. ‘There’s ever-increasing velocity since Bush came in,” Boardman says.

“The bidding process ends up putting huge pressure on people producing the product.”

Just before President Barack Obama took office, the Pentagon put its entire food service out to bid. Workers, many who had worked for decades in the food services, went from making around $14 an hour with a hefty benefit package to making $8 an hour with few benefits. “Ultimately, they take jobs that are life-sustaining and convert them to poverty crap,” Boardman says. “We go through this every time the contract changes.”

The dynamic is similar, but with distinct variations, for other federal service contractors in building services, security guards, and laundries: Despite some protection from the SCA , federal contracting often lowers conditions for workers, even beyond the contracted jobs themselves.

In most big cities, like Washington, large majorities of janitors in big private-sector buildings, unlike food servers, are unionized, making the SCA more meaningful for contract-building service Food For Thought: It’s a false economy to outsource government jobs such as those in public schools. workers and making it easYet the ultimate economic impact of the federal government ier for them to unionize. But nationally, less than a fifth of contracting is—or could be—even larger. At least 26 million building cleaners are unionized, so contract workers in smaller people—22 percent of the private work force—work for the cities and nonunion regions are more vulnerable. companies that contract with the federal government. If the “With the economic downturn, we’ve seen an increase government uses its power as a contractor effectively, it could in contracting out,” says Mitch Ackerman, SEIU executive improve the lives of that bigger universe of workers as well. vice president and property services division director. “So Now it often does just the opposite. increased use of outsourced work puts downward pressure on wages, benefits, and staffing levels.” In many cases, he adds, thirty years ago when John Boardman, UNITE HERE Local “spillover [from federal low-wage contracting] is entrenching 25 executive secretary treasurer, started working at the District poverty,” when more pay for such workers would stimulate of Columbia region of the hotel and restaurant union, most food economic growth.

Even in a union stronghold like New York, with 90 percent workers in federal buildings worked under a master contract with a nonprofit company running the cafeterias. But President of janitors and half of security guards unionized, the president Ronald Reagan ordered individual agencies to seek the low- of SEIU Local 32BJ, Mike Fishman, says “the public sector is est bidder, undermining the master contract, the union, and pulling down wages in private-sector work.” workers’ wages and benefits.

George W. Bush’s administration set up shorter cycles of after september 11, federal demand for security guards bidding, so “vendors compete on the price of labor,” Board- surged. This is an industry with a few giant multinationals (like man says. Agencies encourage fast-food contractors, whose British Group4Securicor and its U.S. acquisition, Wackenhut) SCA–mandated wages are below those of cafeterias and resand many smaller companies. In most parts of the country, the american prospect

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security guards are less unionized and often even worse paid than janitors. The same contracting process that ignores wages and recruitment of highly motivated workers is also likely to ignore training and professionalism. A key issue for federal contracts is guard performance, as illustrated by a recent Government Accountability Office critique of sleeping and ineffective contract guards for the Federal Protective Service or earlier failings of Wackenhut guards at nuclear plants.

Commercial laundries, like food processors, recyclers, and certain other service providers, often work on government and private client contracts in the same facility, but under the SCA they are supposed to segregate the work to meet SCA standards on the government work, or, better yet, pay at least the SCA rate for all the workers’ hours. Since the SCA requires the health-care payment, its rates can actually be higher than in many union contracts—a potential positive spillover of federal contract rules.

But Workers United/SEIU research coordinator Jason Oringer says that most businesses ignore the rule, as did the Bush Labor Department. In one promising victory in Hayward, California, state courts ruled last year that laundry-industry leader—and labor-rights scofflaw—Cintas owed $1.4 million for not paying its workers the local living wage, which it owed since it had a contract with the city. The case shows in a small way how high public standards can extend their influence on the work force.

Even in industries where federal contracting is less prevalent, government policies often drive down wages and working conditions for service workers. Airline deregulation, for example, has promoted a boom-and-bust cycle for carriers, which responded first with contracting out less-skilled jobs, like cleaners, ramp workers, and baggage handlers, then moved up the skill scale to mechanics. Contract workers typically earn much less—cleaners for one previously unionized airline dropped from $15 to $20 an hour with benefits to $8 to $9 an hour without benefits—and a less stable, trained, and experienced work force operates in airport areas affecting safety and security, says Teamster union campaign coordinator Bernadette McCulloch.

man says. “That’s the bottom line.” And that bottom line should not be limited to the contract work but to the contractor’s broader behavior. SEIU director of global organizing Christy Hoffman asks, “How do you build systems that give credit for good employers, not subsidize bad actors?” And how do you make sure companies doing government business are good employers everywhere, not just on public contracts?

The federal government has a stake in creating good jobs.

First, there are hidden costs, such as Medicaid, Earned Income Tax Credits, and various social services when bottom-feeding companies win contracts and impoverish workers. One way or another, government pays. Roughly extrapolating from state studies, Change to Win analyst George Faraday estimates that state and federal governments pay $16 billion yearly in the hidden costs of poverty-wage federal contracts. And that doesn’t include the social costs of poverty and inequality.

Beyond elementary questions of justice, creating good jobs also strengthens society and stimulates the economy.

State and local governments that have passed living-wage laws or reward contract bidders for good behavior (including good treatment of workers) have also found that services are better, costly worker turnover is reduced, and there is even more competition for the contracts. European governments subcontract less than the U.S. government does. Even when they do, the problems are not as great. Everyone has health insurance; more worker rights—such as a minimum four weeks paid vacation—are guaranteed by law; and either minimum wages are high ($12.54 an hour in France) or unionnegotiated wage standards are extended to the entire industry by law (as in Germany and the Nordic countries).

With Barack Obama now in office, progressive reformers have raised their sights. Instead of seeking lowest-cost contracts, the federal government could pursue “best value” contracts with companies that win points on their bid for being law-abiding, socially responsible businesses that treat workers well. Unions can also have a better chance of organizing workers when contractors are required to obey labor laws generally and don’t follow a race to the bottom.

Ideally, an Office of Working Americans in the White House with representatives in every agency could promote a presidential agenda of using the federal government’s actions at every turn to promote good jobs. Previous administrations have used such offices to advance their goals—Republicans to impose costbenefit obstacles to regulation or promote faith-based groups, Democrats to promote environmental justice. Obama, who ordered a review of procurement in March, can do a lot through executive orders, but legislation could also be useful. There is no excuse for workers like Ada Iglesias, whose employers are paid with federal funds, to live in poverty. tap

Government should award contracts only to those socially responsible businesses that treat their workers well.

clearly the american economy has not been working well for most low-wage, moderately skilled service workers. As President Obama said at a Chicago fundraising event in July 2009, “Even before the crisis hit, we had an economy that was not doing everything it needed to be doing. It was not firing on all cylinders. It was good at creating a great deal of wealth for folks at the very top but not a lot of good-paying jobs for the rest of America.”

Unfortunately, federal policies, including the vast reach of government contracting, have worsened social inequality and fostered poverty and insecurity of the growing service sector.

“Government shouldn’t create poverty jobs,” SEIU leader Fisha6 october 2009

David Moberg is a senior editor at In These Times. w w w. p ro s p ect. o rg

good jobs

Dark and Bitter Food workers increasingly exist in a legal limbo with no protections for wages, benefits, job security, or life and limb. Why are employers like Hershey off the hook?

By Nancy Cleeland

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n the morning of July 8, a temporary worker in Camden, New Jersey, slipped and fell into an 8-foot-deep vat of liquid chocolate, where he was struck by a large mechanical mixer and killed. His name was Vincent Smith II and he was 29 years old. He’d recently moved to Camden from rural Pennsylvania in search of work and soon learned that the only way into the local warehouses and factories was through a temp agency. The chocolate plant was his first assignment.

He’d been on the job two weeks.

The batch that Smith was mixing up that day was destined for the Hershey Company, which no longer makes its own chocolate.

Since 2002, the iconic brand has gradually outsourced all its production to U.S. contractors and new facilities in Mexico, closing its own factories and eliminating some 3,000 union jobs.

The relationship between Vincent Smith and the Hershey Company was at once clear and tenuous. He was, after all, doing the company’s work. On the other hand, he was hired by the Heads Up Staffing Service to report to warehouse owner Lyons & Sons, which provided him to Cocoa Services, Incorporated, the processor doing business with Hershey.

Each step in the chain served to separate Smith from Hershey, erasing responsibility, and making it easier to squeeze costs in a way that did not visibly reflect badly on the Hershey Company.

Smith was a day-to-day worker making barely more than minimum wage, with no health insurance, sick time, or promise of future work. His union counterparts at Hershey factories were far more expensive. hershey was not alone in seeking savings by having others do its work. In fact, it was relatively late to the game. Much of the food-processing sector, like manufacturing in general, has embraced outsourcing as a way to cut costs in the face of global competition. This often includes a combination of subcontractors and temporary employees.

“There was phenomenal growth in the ’90s,” says Nik Theodore, who directs the Center for Urban Economic Development at the University of Illinois at Chicago and has extensively studied temporary labor agencies. “For certain occupations, like hand packers, temp employees have become a substantial segment of the work force.”

In this new world, workers are paid only when needed. There are no more messy layoffs—merely the end of an assignment. All the risks are shifted to workers. Staffing agencies often tout their services as giving employees flexibility and variety, but Theodore’s research shows they are worse off by many measures.

“The agencies generally operate on very thin margins, so one of the first things to go is any kind of safety training,” he adds. “And health benefits become a cost that is just too high to bear.”

Wages aren’t so hot either. Using 2004 Bureau of Labor Statistics data, Theodore and colleagues found that of the top 20 occupations supplied by temp agencies, all but three paid less than direct employers. The three exceptions were in different types of nursing, the result of a chronic shortage of skilled nurses.

In all the rest, the difference between the average national wage and that paid to temps was substantial. On average, temps like Smith working in assembly and fabrication jobs earned about $4.66 less per hour than their permanent counterparts; for every dollar paid to a permanent staffer, a temp received about 50 cents.

With the recession, labor conditions have only worsened.

“These days you have a very large work force that basically has to take the job on offer,” Theodore says. “You take what’s available, even if it’s dangerous and even if it’s low paid.”

Safety is of particular concern in food-processing plants, which often feature slick floors, powerful machinery, and raised platforms. Any one of those features can be deadly.

Falls are the second leading cause of death on the job in the U.S., after highway accidents, according to the Bureau of Labor Statistics. Even as the overall occupational death rate has dropped, the toll from falls has been steadily rising for 15 years—with 847 reported fatalities in 2007.

“In many of these plants you have bits of food flying everywhere, and it gets on the floor,” says Jackie Nowell, occupational safety and health director of the United Food and Commercial Workers union (UFCW), which represents workers in beef- and poultry-processing plants, among others. “That makes it very dangerous. Employers struggle with this issue all the time. And it’s a very big concern for workers.”

Worries about safety have driven many organizing campaigns and contract negotiations in food processing. Unions representing workers in the industry invest in health and safety research and advocacy and include safety language in contracts. “There’s a great history of it,” Nowell says. “I’ve got old contracts from the ’40s that talk about safety committees. It was important that there be a system that workers could go through. They learned to look for hazards and felt comfortable reporting them.”

But without job security or the support of a union, temp workers are seldom forthcoming with their concerns, she adds.

And when accidents do happen, the victim’s interests sometimes languish as blame is passed around. “There has to be a the american prospect

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the explosion of food-work outsourcing­—either to foreign operations or third-party domestic suppliers—has been devastating to membership of UFCW and other unions, making it far more difficult to pursue safety work.

“We lost 1,500 people at Hershey in a two-year period,” says Ray Scannell, research and education director for the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union. “A total of 3,000 [Hershey] union workers are gone in the United States and Canada, including the Teamsters and the Steelworkers in California. Kraft and Nabisco are outsourcing and closing factories as we speak.”

Once lost, those union jobs are probably gone for good, because temps and contract workers are almost impossible to organize. Under a 2004 ruling by the Bush-era National Labor Relations Board, such workers can join a worksite union only if the employment agency and the worksite employer agree to allow it. The ruling reversed a 2000 Clinton-era decision that gave that power to the workers.

Scannell recounts numerous attempts to break through the requirements without success. “We tried to organize a potatochip plant in Michigan. The workers came to us and we went to organize it, but there was no employer to organize. Each department was with a different [temp] agency. There was a bakery in L.A., same thing. Packaging, baking, etc., all reported to different agencies. And many of the workers themselves were undocumented. ... How do these workers protect themselves?”

The death of Vincent Smith can be understood as the consequence of a determined effort by corporations to minimize responsibility for the workers who make their products. Without a government response that allows contingent workers to organize, strongly enforces health and safety standards in contract factories, and holds the ultimate employers liable for the behavior of their subcontractors, such workers will continue to be vulnerable. as smith learned when he arrived in Camden in search of employment, the options are limited for a 29-year-old black man with no college education, especially during the worst recession in half a century. He came to Camden to live with an aunt, hoping the industrial parks that surround this port city on the Delaware River would offer a better shot at a job than he was finding in Northumberland County. “He was just trying to make an honest living,” Teresa Smith says of her nephew.

“He just wanted to work, and he couldn’t find it.”

Vincent Smith dreamed of a permanent, full-time job with security and benefits, but his aunt knew what he was up against: She herself had gone through a temp agency to find her current job, on the graveyard shift at another local factory.

“That’s the only way to get work around here,” she says.

Her nephew eventually signed up with Heads Up Staffing, one of more than a dozen labor providers in the area. On his first assignment, he was sent to a sprawling brick warehouse a8 october 2009

on the eastern edge of Camden where Campbell’s Soup was once made. Now the warehouse smelled of chocolate from bags of imported cocoa beans and dried cakes of processed unsweetened chocolate. Camden is a leading port of entry for cocoa products, and the region is dotted with such warehouses and processing plants.

Though the Lyons & Sons warehouse was enormous, the food-processing operation was small. It was staffed by two permanent and four temp-agency workers who moved back and forth between warehouse work and the chocolate-melting tank, according to spokesperson Kevin Feeley, who was hired in the aftermath of the fatality. Feeley added that the temp label was “a bit of a misnomer. Some temps have been there five, six, seven years.”

The melting tank was a tiny part of the operation, Feeley says. It involved melting industrial-sized bars of pressed, unsweetened chocolate into liquid for delivery to factories in tankers. It’s a procedure that would not exist at an integrated chocolate maker, where the liquid—known as chocolate liquor, made from the pressed inner kernels of cocoa beans—would go directly into the mixing and molding process.

The batch that killed Vincent Smith was a special order from Hershey, which delivered the blocks of chocolate to be melted. Because the blocks were unusually small, the normal procedure for melting them had to be altered, Feeley says.

They had to be hand-tossed into the vat through an unprotected hole in the floor of the platform, rather than being fed through the usual grinder.

According to Feeley, this is what happened that morning: At 10:30, the workers returned from their morning break. Smith was the first up on the platform, getting ready for the shift and talking with co-workers on the floor. As he chatted, Smith seemed to take a step forward and fell through the opening, the workers told Feeley. “I looked at that hole and was surprised that a man could fit through it,” Feeley says. w w w. p ro s p ect. o rg

c h r i s k n i g h t / t h e pat r i o t- n e w s / l a n d o v

better definition of who’s the employer,” Nowell says. “There has to be a closing of the loop.”

good jobs shey, Pennsylvania, but a world away from “the sweetest place on Earth,” an image cultivated by the company’s paternalistic founder. Milton Hershey built a town with street names like Cocoa and Chocolate and touted his good deeds, including the creation of a fully subsidized school for orphans. The folklore—along with an amusement park and factory tours—is now part of the brand. A town brochure greets visitors: “Welcome to Hershey, Pennsylvania, home of the world’s largest chocolate factory. This is where HERSHEY makes its famous chocolate.” But in fact, little chocolate is made here anymore.

Dennis Bomberger is business manager of Local 464, the Chocolate Workers Union at the original Hershey plant. He notes that, in a back building, about 60 workers at a time would be sorting, roasting, hulling, and grinding cocoa beans, in the process turning them into the rich chocolate “liquor” that would later be combined with sugar and milk for Hershey’s Kisses, bars, and other familiar sweets.

“It’s empty now,” he says of the building. “Well, not completely. They still keep a couple of folks on back there, just to receive the tankers.”

Many in the town that Hershey built trace the unwanted change back to the hiring of a new CEO in 2001, when Richard Lenny, a former Kraft Foods executive, became the first outsider to run the insular company. From the beginning, he made clear his intentions to outsource work. Friction with the union spilled over into a 44-day strike in 2002. The union declared victory in that fight, which revolved around wages and health benefits, but it was the beginning of a steady decline in its membership and influence.

Lenny relentlessly outsourced pieces of production, starting with the creation of the chocolate liquor. His plans culminated with the Global Supply Chain Transformation program announced in 2006, which got rid of almost all remaining production.

From the beginning, Lenny had to address the risks of outsourcing all chocolate production to the company’s image, but he insisted the savings in labor costs justified the gamble. So far, he has proved his critics wrong. The past fiscal year—the final year of the outsourcing plan—saw an increase in sales and earnings.

During a July 23 conference call to discuss second-quarter results, market analysts congratulated the CEO on the betterthan-expected profits and on his progress in outsourcing.

Although it had happened just two weeks earlier, the death of Vincent Smith was not mentioned in the call. tap

Endangered Species: The union hall in Derry Township, PA.

The liquid below was heated to 120 degrees. Smith floated on its surface. He was probably killed by a blow to the head from a mechanic paddle, city investigators said. Still, co-workers grabbed his arm and clothes and tried repeatedly to pull him out of the vat. But Smith was a large man, and they couldn’t get enough leverage. One fellow temp was still holding on to his belt when firefighters arrived 10 minutes later.

A federal Occupational Safety and Health Administration investigation is underway, and production at Cocoa Services has been halted pending discussions with federal, state, and local officials. The city’s own investigation found that Lyons & Sons was operating under an expired business license and that Cocoa Services had never informed officials of its melting operation. John Lyons is listed as the president of both businesses. “They were zoned for cocoa-bean storage in 1996,” Camden’s code-enforcement director, Iraida Afanador, told The Philadelphia Daily News. “My concern is that they are obviously operating a plant.”

Teresa Smith says her family has retained an attorney. “We don’t want another family to go through what we’ve had to go through,” she says. “We understand that people need work, but we don’t want his death to be swept under the carpet.”

On the day of the accident, she and other relatives stood outside the gates of the warehouse for hours, barred from entry and confused about which company they should even be talking to. The dead worker’s father, Vincent Smith Sr., rambled to television cameras as he tried to absorb the sudden and incomprehensible change in his life. How could his son have been killed this way? “He went to a staffing service and, you know, got the job here and, um, he died,” he said.

The Camden warehouse is only two hours east of Her-

In this new world, workers are paid only when needed. No more messy layoffs—all the risks are shifted to workers.

Nancy Cleeland is a Pulitzer Prize–winning journalist who covered organized labor and low-wage workers for a decade with the Los Angeles Times. She now works with the Economic Policy Institute in Washington, D.C. the american prospect

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Good Jobs, Healthy Cities Some city governments are using their economic muscle to promote good jobs.

by Peter Dreier

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raditionally, most city officials concerned with fostering development have focused on economic growth, allowing private investors and developers to dictate the terms. Even those sympathetic to social justice have worried that efforts to raise wages or regulate business practices would only scare away private capital, increase unemployment, and undermine a city’s tax base. Developers have relentlessly exploited those fears—which turn out to be misplaced.

Lately, more and more city governments, prodded by local activists, have been using their gatekeeper powers to successfully promote growth with equity, starting with wages. The movement began in the early 1990s in Baltimore, where a community-labor coalition called BUILD mobilized a successful grass-roots campaign to pass the nation’s first “living wage” law in 1994, requiring companies with municipal contracts and subsidies to pay employees decently. Since then, more than 100 cities have followed suit. The living-wage movement’s success has led to other local government tools to induce private companies to create middle-class jobs and upgrade low-wage work.

This approach calls for greater community participation, transparent standards, a clearer understanding of how businesses make investment and location choices, and public benefits proportional to public subsidies for developers. It means redefining a “healthy business climate” to mean prosperity shared by working people—a more enlightened view of business’ responsibility to the broader community.

“Cities have this incredible economic power that they tend to squander,” explains Leslie Moody, executive director of the Partnership for Working Families, an umbrella federation of local community and labor coalitions in 17 cities. “A lot of our success is about developing relationships with city officials and staff and changing their views about local government’s role.

We’re reteaching local governments how to govern.”

In high-tech boomtowns, troubled Rust Belt cities, and immigrant ports, progressive coalitions—some among unlikely partners—have been successful at persuading local officials to adopt proactive policies.

Community Benefit Agreements. Los Angeles is the pioneer of Community Benefits Agreements (CBA s), through which local governments require developers to address community concerns like good jobs, affordable housing, and neighborhood parks. In 1997, Los Angeles’ labor unions supported construction of the Staples Center, home of the Lakers, Clippers, and Kings professional sports teams. In return, the developer pledged to pay a living wage and remain neutral if unions sought to organize. But the promise wasn’t in writing. After a 10 o c t o b e r 2 0 0 9

the developers got their subsidies and variances, they reneged.

A coalition of unions, community organizations, immigrantrights groups, churches, tenant activists, and environmental organizations—led by the Figueroa Corridor Coalition for Economic Justice and the Los Angeles Alliance for a New Economy (LAANE)—were ready when the developers pursued a second phase that included a 250,000-square-foot expansion of the convention center, two hotels, a 7,000-seat theater, restaurants, nightclubs, retail shops, and two apartment buildings.

The project required city approvals, new land-use rights, and municipal subsidies. Activists used what LAANE director Madeline Janis-Aparicio called “the carrot of potential support and the stick of potential opposition” to win unprecedented concessions as part of the 2001 CBA . These included a “first source” hiring policy with preference to people whose home or job was displaced by the development and low-income people in the surrounding area. The CBA specified that 70 percent of the 5,500 permanent jobs would pay a living wage or be covered by a collective-bargaining agreement. The developers signed card-check neutrality agreements with five unions and agreed to abide by the city’s worker-retention law (which protects workers if a company changes ownership).

The CBA required the developer to guarantee public open space and set aside $1 million to create and improve parks near the development, pay for a residential street-parking permit system, and make 20 percent of housing units affordable to working-class residents. In addition, the developer provided $100,000 in seed money for community job training. The Los Angeles Community Redevelopment Agency incorporated the agreement into the project’s contract, making it enforceable by the city as well as by community groups.

LAANE has subsequently forged CBA s with other developers, improving provisions and strengthening enforcement.

Developers now understand that these agreements are part of the process. Denver, Milwaukee, Pittsburgh, Atlanta, Seattle, Oakland, San Diego, New Haven, and San Francisco have followed Los Angeles’ lead with their own CBA s.

In Denver, the Campaign for Responsible Development in 2006 won a CBA with the developer of a $1 billion mixed-use project on the 50-acre former Gates Rubber factory near a lightrail transit line downtown. The developer sought $126 million in public subsidies and taxing authority to support cleanup and redevelopment. The CBA included prevailing wages for more than 1,000 construction jobs; extension of Denver’s living-wage law to include parking lot attendants and security personnel; a “first source” local hiring system, with priority to residents of w w w. p ro s p ect. o rg

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lu c y n i c h o l s o n / r e u t e r s / l a n d o v

Decent Pay: Workers on the Staples Center expansion project benefit from a city-negotiated contract with the developer.

adjacent low-income neighborhoods; mixed-income housing; and community oversight of the cleanup. The developer also agreed to exclude big-box employers like Wal-Mart that paid poverty wages and inadequate health care.

Last year, Pittsburgh United—a union-community coalition— won that city’s first CBA , which was tied to the construction of a new arena for the Penguins hockey team. It included pledges to help improve the Hill District, an area destroyed by urban renewal in the 1950s and 1960s and made famous in several August Wilson plays. The CBA requires that the jobs pay area wage standards ($12 to $30 per hour with benefits). The agreement includes a card-check procedure and neutrality during any union-organizing effort. In addition to hiring preferences for local residents and ongoing community involvement in implementing the plan, the developer agreed to attract a full-service grocery and funding for neighborhood social programs.

In 2003 and 2004, the Milwaukee City Council rejected a proposal by a coalition of labor, community, and environmental groups to adopt a CBA for the redevelopment of a large former factory site called the Park East corridor. Activists then took their campaign to the County Board of Supervisors, which passed the CBA in 2005, overriding the city’s decision.

It requires any development on the site to meet job-quality

standards and hire local residents and establishes a separate fund to finance affordable housing.

In 2005, Georgia Stand-Up got the Atlanta City Council to attach community-benefits language to the $1.7 billion BeltLine project, a 25-year development that will include a 22-mile transit system, 1,200 acres of green space and trails, 30,000 permanent jobs and 48,000 construction jobs, and a predicted $20 billion in private development. The CBA includes provisions that guarantee prevailing wages for construction work (rare in Georgia) and “responsible” labor standards for contractors. Fearful that the new transit line will raise home prices and displace the poor, Georgia Stand-Up successfully pushed to have the CBA include the construction of 5,600 affordable housing units near transit stops, downpayment assistance for homebuyers, and funds to preserve existing affordable housing.

Living Wages. Living-wage laws vary from city to city. (One state, Maryland, has its own policy.) The first local living-wage laws covered employees for firms with municipal contracts or subsidies. Some living-wage requirements apply to citysubsidized development projects, often including developers’ contractors (janitorial, security, and parking companies, for example) as well as future tenants, such as stores that lease space from the developer.

In 2007, Los Angeles made a breakthrough by extending the city’s living-wage law ($9.39 an hour with health benefits or $10.64 an hour without benefits) to cover over 3,500 employees at 13 private hotels near Los Angeles International Airport.

Initiated by LAANE and UNITE HERE , with widespread support from faith and community groups and local progressive politicians, the proponents argued that the hotels benefit from billions of dollars of public investment at the nearby airport.

Since the law was adopted, workers at four of the hotels have won union campaigns. In each case, the employers—under pressure from community groups and politicians—agreed to remain neutral during the union-organizing effort.

Big-Box Ordinances. One way for cities to promote good jobs is to keep out bad jobs. For years, environmental and community groups, labor unions, and others waged campaigns around the country to stop Wal-Mart, the world’s largest employer, from building mega-stores that specialize in low-priced goods sold by low-wage, often part-time, employees who earn too little to afford health insurance. Wal-Mart’s efforts to open supercenters in Los Angeles were stymied by union and community organizing.

In 2002, Inglewood—a mostly minority city near Los Angeles— banned giant big-box stores like Wal-Mart that sold groceries.

In Los Angeles itself, LAANE successfully pushed for an ordinance that required big-box retailers to pay for a cost-benefit analysis, on a store-by-store basis, to prove that their stores would not have a negative impact on the surrounding community. The analysis included sales-tax revenues, jobs, and hidden costs, such as downward pressure on local wages, the cost of government subsidies (such as food stamps and health care) for low-wage, big-box workers, and the cost of increased traffic and the american prospect

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police. Other California cities, including San Diego, Long Beach, Santa Clara, and Santa Ana, have adopted similar policies.

In 2006, the Chicago City Council voted 35-14 to require bigbox retailers to pay at least $10 per hour and provide another $3 per hour in benefits, primarily health care, but Mayor Richard Daley vetoed the bill. Also in 2006, the Maryland General Assembly passed a law—officially the Fair Share Health Care Fund Act but widely known as the Wal-Mart bill—to require all companies with over 10,000 employees to spend at least 8 percent of their payroll on health care, by offering it directly to employees or by contributing to a state-funded program.

Unions even got Giant Stores, Maryland’s largest grocery chain that already paid health insurance for its unionized work force, to support the bill. The Maryland law was overturned in 2006 by a federal court, but it so frightened Wal-Mart that its top executives started making statements in favor of some federal version of universal health insurance.

Disclosure Requirements and Public-Benefit Analysis. The battle against Wal-Mart shows that cities can set high standards for private investment and use disclosure requirements and cost-benefit analysis to provide the necessary ammunition. Local planners and policy-makers, much less neighborhood groups and unions, are usually at a disadvantage when reviewing proposals for new business investments. When companies and business lobby groups warn that union payscales, environmental provisions, or inclusionary housing requirements are burdensome “deal killers,” it is hard to know whether they are bluffing.

So in 2007 San Jose adopted a “sunshine” policy that requires companies to provide publicly available information so that city officials and community groups can evaluate a project’s costs and benefits. It requires all projects seeking public funding over $1 million to submit to a cost-benefit analysis. It includes the net fiscal impact (whether tax revenues generated are greater than those lost), job impact (the number of jobs created categorized by salary ranges and whether they include health insurance), housing impact (the number and affordability levels of housing units demolished and built), and neighborhood impacts (such as traffic, the environment, libraries, parks, community centers, and other public services).

“Without these answers,” concluded a memo by City Council Members Nancy Pyle and Nora Campos, “there is no fiscally sound, publicly defensible rationale for subsidy decisions.” The policy, they argued, “removes the secrecy that gives low-wage businesses an unfair competitive advantage, allowing them to appear just as valuable to the community as companies that provide high-paying jobs. Taxpayers should know what kind of jobs their investment is producing.”

Hiring, Training, and Job Standards. Municipal governments have the authority to regulate training, hiring, and labor standards, especially on projects that require city approvals, use

municipal land, or get local subsidies. One tool is a “local hire” provision that guarantees that local residents get their fair share of both construction and permanent jobs, as well as training and referrals so that they are qualified for skilled, well-paying jobs.

Another instrument is a project labor agreement (PLA).

A PLA establishes the ground rules on a particular construction project. PLAs establish the wages, benefits, work hours, hiring process, and dispute-resolution process for all workers and contractors on a project. Unions can agree not to strike during construction.

A PLA for a Port of Oakland construction project mandated that at least 50 percent of the work hours be covered by local workers. In Seattle, Kansas City, and Detroit, PLAs have required set-asides to make sure that construction crews on publicly funded projects reflect the racial diversity of the local work force.

The major expansion of the Los Angeles International Airport includes a PLA that mandates card-check and neutrality agreements to allow the security, restaurant, and retail workers to decide whether to unionize without management interference.

PLA s give city officials confidence that developments will be completed on time, on budget, and with labor peace.

Some cities favor contractors with a track record of responsible labor practices to weed out those that regularly violate occupational safety and health, minimum wage, and other laws. Municipalities can require bidders to demonstrate that they meet certain standards—for example, that they work with a highquality union-affiliated apprenticeship program or have a strong record of hiring women and people of color.

In 2001, a New York City communitylabor coalition persuaded the city’s housing authority to include apprenticeship affiliation and local hiring requirements as threshold standards for contractors who wanted to bid on five large development projects.

In April, at Mount Olive Baptist Church in Newark, New Jersey, Gov. Jon Corzine addressed the first graduating class of 22 participants in a program to train local residents for the likely surge of green construction jobs. The program—a collaboration between the city, the Laborers Union, and the Garden State Alliance for New Economy—hires and trains residents to weatherize homes of needy households, which reduces energy consumption, cuts costs, and creates well-paying, career-track jobs. The program uses private contractors, and the trainees get paid while becoming apprentices and, eventually, unions members.

Los Angeles boasts the nation’s boldest job-training and hiring plan, opening up new middle-class career paths for low-income residents. Last year the City Council unanimously approved the Construction Careers Policy, a plan designed by LAANE , the UCLA Labor Center, the Building Trades Council, and the County Federation of Labor.

The policy applies to all projects that get funding from the Community Redevelopment Agency. One component, a PLA ,

More and more cities are redefining “healthy business climate” to mean prosperity shared by working people.

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w w w. p ro s p ect. o rg

good jobs guarantees middle-class wages, health care, and safety. The other component, local hire, requires that 30 percent of the total work force comes from the community most directly affected by the development, 10 percent of them disadvantaged workers who face high barriers to employment, including extreme poverty, lack of a high school diploma, or a criminal conviction. People who were previously unable to enter the building trades—particularly African Americans—can now join union apprenticeship programs, which provide lifelong skills. Union-sponsored job-training programs at churches and community centers prepare people to pass the exams that are gateways for these well-paying high-skill jobs. A UCLA report estimates that in the next five years, the policy will cover 15,000 jobs, 5,000 of which will target areas of high unemployment and 1,500 of which will target disadvantaged workers.

Working Families and Partners. San Francisco not only has a living-wage law (now $11.54 per hour) covering firms with government contracts and subsidies. It also has a citywide minimum wage for all private employers, passed in a November 2003 referendum by a 60-40 margin. Initially pegged at $8.50 per hour, it is now $9.79 per hour. Santa Fe, New Mexico, and Madison, Wisconsin, have also passed municipal minimum-wage laws.

San Francisco also has a working-families credit (a $100 wage supplement for families eligible for the federal Earned Income Tax Credit that includes public-transit discounts and other benefits) and mandatory paid leave for all private employees (including part-time and temporary workers) when they are sick, need medical care, or need to care for their family members.

San Francisco may be the only city with its own cardcheck policy, called the Employee Signature Authorization Ordinance. Adopted in 1997, the law applies to hotels and restaurants in which the city has a proprietary interest— as landlord, lender, or loan guarantor. It permits unions to become a collective-bargaining voice for workers if more than half of them sign pro-union authorization cards. The law forbids either unions or employers from intimidating or coercing employees during the process, which is supervised by a neutral third party. According to Ken Jacobs of the University of California, Berkeley, Labor Center, more than 1,000 hotel and restaurant workers have chosen union representation utilizing this ordinance. The ordinance has its own ripple effects. During the same period, another 2,000 workers have won union representation through card-check neutrality agreements with hotels not covered by the city law.

Several studies conclude that these policies have not had a negative impact on overall employment levels. Most of San Francisco’s low-wage jobs are “sticky” in the relatively immobile tourism and retail sectors.

San Francisco also has the first municipal health plan that requires employers (with more than 20 workers) to provide health insurance and that creates a municipally funded comprehensive health program for uninsured city residents. Many cities now offer health insurance and other benefits to domes-

tic partners of municipal employees. But in 1996 San Francisco extended the policy to private companies with city or county contracts. The ordinance has had a huge impact. Several firms decided, on their own, to carry out the policy throughout their entire work force. A 2002 report by the city’s Human Rights Commission estimated that more than 50,000 people in at least 39 states received health insurance offered to domestic partners by companies that contract with San Francisco.

City Contracting and Purchasing. Each year, cities purchase billions of dollars worth of uniforms, shoes, boots, and other clothing items for police officers, firefighters, janitors, security guards, airport personnel, and other municipal employees.

Most of this apparel is made in overseas sweatshops—with low wages, long hours, unsafe machinery, little ventilation, blatant mistreatment and firing of workers trying to unionize, sexual harassment of women, and, in some cases, mandatory use of birth control. A few cities (Portland, San Francisco, Los Angeles, Berkeley, and Milwaukee), Allegheny County (Pittsburgh), and the state of Maine have followed the lead of college campuses and adopted “anti-sweatshop” policies, using the leverage of each city’s purchasing power.

Vendors must disclose the location of factories where their subcontractors produce clothing for municipal employees.

Cities hire human-rights monitors, like the Workers Rights Consortium, to monitor working conditions. Cities can cancel contracts if the factories violate labor standards. The Los Angeles law, passed in 2006, has already helped improve conditions in factories in Cambodia and China.

Major Public Facilities. Cities also own airports, ports, utilities, convention centers, hospitals, and other operations that employ millions of people, and provide contracts to private firms (including airlines, shipping companies, hotels, and others) totaling billions of dollars. Some cities have used this leverage to improve working and environmental conditions, adopting policies around wages, hiring, training, collective bargaining, workplace health and safety, and other initiatives to generate good jobs.

In San Jose, for many years, the municipal convention center was losing money, causing a drain on the city’s coffers. In 2004, Working Partnerships and the South Bay Labor Council joined forces with private hotels, arts groups, and the convention and visitors bureau to create a nonprofit corporation, Team San Jose, that manages the city’s Convention Center, Civic Auditorium, California Theatre, Center for the Performing Arts, Montgomery Theater, and Parkside Hall. Each partner has a voice on the Team San Jose board. The facilities are unionized and all the affiliated hotels have union contracts, too.

In all of these initiatives, cities have taken the lead. The federal government needs to follow. tap Peter Dreier is E.P. Clapp Distinguished Professor of Politics and director of the Urban & Environmental Policy program at Occidental College. He is co-author of Place Matters: Metropolitics for the Twenty-first Century and The Next Los Angeles: The Struggle for a Livable City. the american prospect

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Stuck on the Low Road Deregulation turned truck driving from a good job into a bad one.

Now, thanks to local organizing and government action, there’s a better road.

By David Bensman

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otterdam, Europe’s largest port, is a marvel of efficiency.

More than 7,000 container ships visit its docks annually, most stopping for barely more than a day. New terminal facilities, built on landfill where the river meets the sea, handle 10 million containers with a minimum of congestion and pollution.

The freight—Chinese clothing and electronics, American pharmaceuticals, Spanish automobiles—seamlessly flows to warehouses, distribution centers, rail yards, and barges surrounding the port, on time and on schedule. The tightly integrated freight-movement system at the port makes it possible to operate a just-in-time logistics system in which goods arrive at their destination 15 minutes before they are moved to their next spot on the supply chain. This allows shippers to operate with minimal inventory, a must on a continent where most retail shops have minimal space to store goods. Lean logistics means lower interest costs on merchandise, lower insurance costs, less theft, and less need to discount unsold goods.

By comparison, American ports and the logistics and distribution systems they feed are old world. Trucks clog the overwhelmed highways and roads leading to the ports. Thick diesel pollution fouls the air not only in the ports and neighboring communities but in inland warehouse districts under siege from container trucks and freight trains. Stacks of containers form walls around residential communities. Traffic congestion slows commuting time and wastes fuel. Rates of asthma as well as lung and heart disease are climbing. And just-in-time delivery is impossible in a system where old, worn-out container trucks, without digital communication, spend half their days waiting.

Port trucking—the industry segment that carries containers to and from ports, warehouses, and railroad yards—is one of the most extreme cases of abuse. Competition for work is intense.

Instead of a computerized system advising a driver to pick up a container at a designated loading dock at a particular time, drivers sit and wait, engines on. Since the drivers bear the costs, there is no incentive for trucking companies to modernize. Freight rates paid to drivers are so low that the median age of the trucks driven by the nation’s 70,000 port truckers exceeds 11 years.

How is this possible when the Environmental Protection Agency adopted diesel engine standards in 2001 that required trucks to meet stringent standards for emissions by 2007? Simple—the EPA bowed to the reality that the U.S. has chosen a low-road freight transport policy, and grandfathered all used trucks that were on the road when the standards went into effect. By contrast, Rotterdam’s trucks—indeed all trucks in Holland, are a 14 o c t o b e r 2 0 0 9

tested regularly to ensure compliance with strict emission standards. Nearly all the trucks working in Rotterdam’s just-in-time logistics system are owned by trucking companies that employ their drivers, and all the trucks are less than five years old. americans chose this low road for freight movement in 1980, when Congress deregulated the trucking industry, disbanding the Interstate Commerce Commission. Advocates ranging from consumer advocate Ralph Nader and Sen. Ted Kennedy to the nation’s retailers and the agricultural freight-hauling industry predicted that deregulation would bring market-competition, lower rates, and economic growth. Instead, we got a system that shifts business costs onto the public and onto truck drivers, suppresses private investment in innovation and new technology, and forces trucking companies into competing by cutting corners, like carrying overweight containers, or depriving drivers of fuel surcharges.

The rise in drivers misclassified as “independent contractors” is symptomatic of the low road on which American freight transport policy has been stuck for more than a quarter-century.

Whereas trucking was once a stable job, with industrial wages and benefits, deregulation meant that hundreds of thousands of truck drivers had to give up their employment contracts, union representation, and the protection of labor legislation. Today these owner-operators must provide their own trucks, pay for their own employment taxes, maintain their equipment, buy fuel and insurance, and directly bear the risk of economic downturns, health emergencies, and equipment failures. Twelve-hour days without compensation for overtime have become the norm.

Drivers skimp on maintenance, which causes their engines to emit excessive cancer-causing diesel particulates. An owneroperator may gross around $80,000, minus costs averaging $52,000, and take home perhaps $28,000 before taxes. All the risks are the driver’s.

A classic case is FedEx Ground operations. FedEx saves money and resists unionization by disguising its drivers as contractors or temps—something that is illegal under labor law. A California court found (in Estrada v. FedEx Ground, 2004) that delivery drivers were employees in everything but name. They were made to buy or lease trucks that met company specifications, were required to pay for the company logo to be painted on their trucks, and were dressed in company uniforms, down to the color of their socks and shoes. They made pick-ups and deliveries on routes assigned by the company, were barred from using their trucks to haul loads for other compaw w w. p ro s p ect. o rg

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Green Organizing: An independent truck driver prepares to join a convoy of diesel trucks in support of the Port of Long Beach’s “Clean Trucks Program.”

nies, and had to park their trucks in company-assigned spaces.

The Court found that FedEx Ground misclassified its drivers as independent contractors as an illegal means to avoid paying state unemployment insurance and workers’ compensation insurance. It levied a $17.6 million fine against the company.

A class-action suit consolidating suits against FedEx Ground’s misclassification is supposed to be heard in northern Indiana in the fall. In 2007, the Internal Revenue Service fined FedEx $319 million for its misclassification of workers.

FedEx also used its political muscle to change which labor law it is subject to, in order to deter unionization. In 1996, as Congress cleared the decks for a summer recess, FedEx lobbyists had friendly legislators insert into a transportation bill two words—“express carrier”—which had the effect of excluding the employees of FedEx from coverage by the National Labor Relations Act (NLRA). Instead, the revised bill put these workers in the same category as airline and railroad workers, who are covered by the provisions of the Railway Labor Act. That act, unlike the NLRA , requires system-wide bargaining units.

Thus, when Massachusetts FedEx employees voted for union representation by the International Brotherhood of Teamsters in an election conducted by the National Labor Relations Board, a federal district court panel voided the election on the grounds that FedEx employees, unlike the employees of other express delivery companies, were governed by the Railway Labor Act. That meant they could not organize one work center at a time. In May, the House of Representatives voted to end FedEx’s exemption from the NLRA . In retaliation, the company threatened to cancel its orders for new planes from Boeing, jeopardizing the Obama administration’s recovery plans. Soon thereafter, FedEx announced a multimillion-dollar advertising campaign, attacking the House vote as a “bailout” of rival UPS, which is largely unionized. The legislation, part of an omnibus transportation bill, is still pending.

is there any hope that the Obama administration and Congress will place America’s freight-transit system back on the high road with enforceable environmental and labor standards making possible modern, just-in-time logistics? There are some positive indications. As a senator, Barack Obama sponsored legislation aimed at ending misclassification of independent contractors who are employees in everything but name. As a presidential candidate, he endorsed the Port of Los Angeles’ Clean Trucks Program, championed by environmental groups and the Change to Win Federation. The Program sets emissions standards for trucks and requires companies to classify their drivers as employees. And the House’s transportation bill, shepherded by Transportation Committee Chair James Oberstar of Minnesota embraces the vision of a freight-transport system with cleaner fuel, more modern freight-hauling equipment, and better infrastructure. Legislation aimed at tightening the rules against misclassification of employees is pending (House Bill 09-1310), and there is much that the administration could do with better enforcement of existing laws.

But it won’t be easy. In July, Transportation Secretary Ray LaHood announced that the administration would support delaying consideration of the House bill’s ambitious transportation policy reform, in order to keep Congress focused on health-care and energy legislation. The trucking industry has tied up the Los Angeles reform program in court. On April 28, 2009, Christina A. Snyder, U.S. District Judge of the Central District of California, issued a preliminary injunction against those parts of the Los Angeles and Long Beach plans that are not directly related to safety, on the grounds that the Federal Aviation Administration Act of 1994 preempts local regulations. She did permit the Los Angeles Harbor Commission to phase out the oldest trucks on safety grounds. A full hearing won’t begin until December. The delay could cripple a plan that has already succeeded in forcing hundreds of the worst trucks the american prospect

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to be retired and induced companies to put almost 5,000 new trucks on the road.

Furthermore, because of the ambiguities in the federal legislation governing classification of employees and independent contractors, there is no guarantee that the FedEx Ground class-action suit set to open this fall will eliminate misclassification. Instead, it could uphold independent contracting as standard practice in the industry.

All current proposals to move freight transport off the low road stop short of establishing the sort of regulatory authority that disappeared when the Interstate Commerce Commission was eliminated in 1980. Since then, there has been no effective authority ensuring that containers are not overweight, that leasing agreements conform to the law, and that the rigs are safe. in the absence of decisive federal leadership, states and cities have been at the forefront, motivated by a desire to find new revenue sources as well as to eliminate diesel pollution. California, suffering from both budget distress and lethal smog, is in the lead. In addition to the efforts by the Los Angeles Harbor Commission to regularize port trucking, the state attorney general’s office has been looking into misclassification of port truckers at the ports of Los Angeles and Long Beach since October 2008. In July, an official with the California attorney general’s office reported that five cases have been filed, but investigators have looked at dozens of companies because the problem is “pervasive,” and more suits will be filed soon as a part of the ongoing crackdown. Taking their cue from California, attorneys general from eight states announced in June that they would work together to investigate FedEx Ground’s classification of its drivers as “independent contractors.”

“State and local governments in Ohio are being cheated out of hundreds of millions of dollars each year as a result of employee misclassification,” said Attorney General Richard Cordray of Ohio. “We are committed to aggressively pursuing these misclassification cases to level the playing field for businesses that play by the rules and to protect Ohio’s workers.”

While the Los Angeles Harbor Commission’s Clean Air Plan, the California attorney general’s investigation, the Estrada decision, and the eight attorneys general’s joint investigation of FedEx Ground are all promising signs that cities and states are recognizing their stake in moving American freight transport onto the high road, federal leadership is necessary. The aviation and transportation bill points the way, with its emphasis on alternative fuels, expanding rail capacity, modernizing infrastructure, reducing diesel emissions, and recognizing workers’ rights to organize under the NLRA . More leadership is necessary if America’s freight-movement system is ever to change to a lean logistics model like the one that already exists in Rotterdam. tap David Bensman is professor of labor studies and employment relations at Rutgers University. His study, “Port Trucking Down the Low Road: A Sad Story of Deregulation,” was published by De¯mos in July 2009. a 16 o c t o b e r 2 0 0 9

Forgotten Corners of the Economy As unemployment rises, the illegal treatment of day laborers only worsens.

Where’s the government?

By Stephen Franklin

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nother dead day on the street corner and Gonzalo Mejia is wondering how he will get by. He’s been finding work just one or two days a week lately. Worse yet, a contractor recently stiffed him out of $400 worth of pay.

“All the time there is less work,” grumbles Mejia, a short, muscular man in his mid-50s. His pals nod in agreement as they wait like hawks, ready to swoop down on the next contractor who pulls up. But it’s well past 9 A.M., only three cars have trolled by in search of workers, and hardly anyone has budged off the street.

Yet it is not just the disappearance of work that troubles him and the 150 or so men killing time at Milwaukee and Belmont, once Chicago’s busiest street corner for day laborers.

Everything has become so difficult, so frustrating, so dangerous. For workers with minimal protections against employers who steal from their wages or sometimes leave them dead or maimed, life has lately become bare existence.

Before the housing bubble burst and the economy collapsed, the day laborers here tried to hold the line with employers at $10 an hour for basic work. Nowadays the going rate has dropped to $8 an hour, and some more desperate workers have grabbed $5-an-hour offers, saying it beats waiting around.

Day laborers here and across the U.S. have long suffered from employers who cheat them out of their wages. But there are more complaints recently about employers who give them bad checks or hire them at one rate and then pay less when the work is done or who vanish when it comes time to pay up.

“They say the job is for two or three days and they’ll pay you when it’s done. And then they disappear. Most of the guys have the same problems,” explains Mejia, who was earning $18 an hour as a carpenter when there was work. Nowadays, he takes $12 an hour if he can get it.

Latino immigrants dominate this and nearly all of Chicago’s day-labor street corners. But there has also been a rush of U.S. citizens, many of them newly unemployed or low-wage workers, as well as other immigrant groups.

Some day laborers will even continue working for weeks when they have not been paid. “They need money so desperately; they keep working, hoping to get paid. But they don’t, and that’s sad,” says Kasia Tarczynska, a Polish-speaking worker with the Latino Union of Chicago, which serves day laborers. w w w. p ro s p ect. o rg

good jobs She works with the Eastern European day laborers—Poles, Russians, Ukrainians, Bosnians, Albanians, and others—who have been showing up increasingly on Chicago’s street corners and who suffer from roughly the same problems and abuses as the rest of the day laborers. Many are also undocumented immigrants and because of their limited English skills and the street corner’s pack mentality, they stick to themselves.

The flood of new workers has worsened conditions, say the men and workers from the Latino Union, because the increased supply has driven down the wages that the day laborers had struggled to maintain. But some also have made the work dangerous for themselves and others. “They face the greatest dangers because [many of them] have not done day labor before, and they don’t have the training,” explains Eric Rodriguez, executive director of the Latino Union.

The arrival of new groups of increasingly desperate workers threatens to wipe out a decade of efforts to set pay and safety standards on the nation’s street corners, says Nik Theodore, a University of Illinois at Chicago expert on day laborers. He is a co-author of a 2006 national study of day laborers, the first and only one of its kind. It is a grim accounting of what takes place on more than 500 street corners across the U.S. where day laborers gather early each morning to catch the best jobs.

On any single day, about 117,000 day laborers are out looking for work or are on the job, the study said. Three out of four of these workers, according to the study, are undocumented immigrants.

But because workers often float in and out of the street-corner job market, it is estimated that as many as half a million people do day labor during the year.

The West Coast accounts for the greatest number of the nation’s day laborers, over 40 percent, followed by the East, the Southwest, the South, and the Midwest.

About 43 percent of the employers are construction contractors. Another 49 percent are either homeowners or renters. This makes the worker situation even more hazardous, since these employers are unlikely to have safety equipment or know about safety rules.

because he is willing to file workers’ compensation cases against shady contractors with the likelihood of minimal rewards for his clients. It is not uncommon for contractors to file bankruptcy or simply vanish or to threaten workers against taking them to court or reporting them to officials, Rivero adds.

But he has been getting fewer calls lately and doesn’t think that is because the work has suddenly become safer. The injuries he sees are “as horrible” as ever. “I think the economy is a big factor,” he explains. Workers know that they will be “blackballed” by contractors if they talk to a lawyer, he says. Because they are desperate to hang on to the work, they don’t take such risks.

But the day laborers’ biggest day-to-day worry, according to the 2006 survey, is getting paid. Nearly half said they had not been paid by an employer in the months just prior to the survey, and another 48 percent told of being underpaid. There has been no comprehensive survey since 2006, but my reporting suggests that these trends are worsening.

Chris Newman, Legal Programs Director for the National Day Labor Organizing Network, which links together several dozen groups that serve day laborers, says the level of wage theft “has been amplified by the [financial stresses] downtown. Before, you would be owed $200, but now it is more likely $2,000.” Theodore of the University of Illinois at Chicago adds, “I can’t tell if you have unscrupulous employers taking advantage of what’s happening or it’s the financial problems facing those higher up in the contracting chain.”

Day laborers across the U.S. have long suffered from employers who cheat them out of their wages.

the danger of their work is a reality to the day laborers who reel accounts of falling off buildings, getting hit by falling construction supplies, and being trapped while digging ditches.

Their stories help explain the 125 percent spike in the number of Latinos killed in construction jobs between 1992 and 2005, a figure that Secretary of Labor Hilda L. Solis called “unbearable” in a June speech to safety engineers in Texas. Seventy-five percent of the day laborers contacted in the 2006 survey said their work is dangerous, and one worker in five reported being injured on the job in the last year. But more than half of those injured did not get any medical care for their injuries, mostly because they couldn’t afford it or the employer refused to cover them under workers’ compensation, according to the survey.

Day laborers often turn to Chicago attorney Jose Rivero

as the ranks of the workers on the streets have swollen in the last decade, day labor activists like Newman have steadily complained about the federal government’s failure to stop the wage theft or to halt the unsafe conditions the workers face. Now, they say the Obama administration should take these steps: First, the Labor Department should increase the ranks of investigators in its Wage and Hour Division, the office responsible for making sure employers do not cheat workers out of their wages. Kim Bobo, author of the recent book Wage Theft in America and head of Interfaith Worker Justice, a Chicago-based group organization, praises the administration’s plans to hire several hundred more investigators. “But that’s not enough. They need double the number of investigators,” she says.

Second, employers need to live in fear that will they face stiff fines for violating federal wage and worker-safety laws. They should not be allowed to negotiate down the penalties so that overworked federal bureaucrats can clear the cases. The likelihood of serious penalties should increase for employers with repeat violations. “Every time we file a case, [the Labor Department] settles it for 50 cents on the dollar, and that means workers don’t get what they are owed,” says Bobo, whose organization operates a network of worker centers around the U.S. She adds that the government should make employers’ violation records more “transparent” and accessible so businesses can be tracked. the american prospect

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Third, the government should develop direct ties with daylabor and worker centers, creating a system that will regularly inform workers of their rights and educate them on safe workplace practices. Theodore says the government should use the locations as worker development centers, where they can train and improve workers’ skills. By authorizing the centers to directly file workers’ complaints, the government can also expand its investigative outreach to the workers, he says.

Fourth, federal offices serving day laborers should be more accessible to workers, especially in the case of undocumented immigrants who are both fearful of visiting government buildings and who usually cannot enter them because they lack proper identification. “The agencies are designed to serve bankers, not low-wage workers who cannot make a 3 P.M. meeting,” Bobo says. So, too, she says there need to be more government workers able to communicate with the largely Latino day-laborer work force. After the Katrina disaster, the government was hard-pressed, she recalls, to cope with the number of Spanish-speaking day laborers drawn to the recovery work in New Orleans.

To Newman, however, the most important step is “harmonizing” the government’s immigration and labor-enforcement policies. “If undocumented immigrants are unable to come forward and form unions and file complaints and get redress from unscrupulous practices, then the bad guys will continue on,” he says.

As for prospects of the Labor Department improving its day-to-day performance, he is quite upbeat about Solis. “The team that she is assembling is fantastic,” he says. “There are all the indications that the U.S. will get its Labor Department back after eight years of self-mutilation.”

Solis, the daughter of Latino farmworker immigrants, tells me her agency is hiring 250 investigators, some of whom will be bilingual. She wanted more, “but we didn’t have the money.”

Besides “looking at increasing penalties” against employers who break the laws, she also plans to create a strike force to focus on firms with the “most egregious abuses.” If the companies cooperate, the agency will offer them training and assistance, she says. And if they don’t want to comply, “we are not going to sit around,” she adds.

The agency will closely investigate how employers who use the government’s recovery funds treat their workers. “They better know we are taking a different approach here,” she says.

As for workers’ fears of dealing with a government agency, she vows to increase the agency’s links with organizations that “have the trust of the community.” help dealing with abusive employers or those who put him in dangerous situations could not come fast enough for Guillermo Caicero. Not long ago he got into an argument with a contractor who promised him $15 an hour but paid him only $10 an hour when the work was done. He complained and the employer called the police. But the police “didn’t do anything,” he says.

Four years ago he tumbled off a roof and broke a leg, he says.

Several months ago, the 50-year-old day laborer dislocated an a 18 o c t o b e r 2 0 0 9

arm on the job. Not long ago a pipe also fell and hit his head, sending him to a hospital. But the contractor refused to pay for treatment or time lost, and Caicero was not covered by workers’ comp. He went to a county hospital and was able to get free care, Caicero says.

Despite it all, here he is, on the corner, waiting and waiting. tap Stephen Franklin is a former labor writer for the Chicago Tribune and author of Three Strikes: Labor’s Heartland Losses and What They Mean for Working Americans (2001).

The Good War and the Workers World War II defense contracts raised labor standards. Government could use the same leverage in peacetime.

By Steve Fraser

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he era of Franklin D. Roosevelt transformed the power of workers to achieve a better life. The New Deal facilitated the mass organization of the industrial working class into militant unions and also relied on the state through measures such as the Fair Labor Standards Act and Social Security. But though the New Deal of the 1930s is often remembered as the zenith of progressivism, in many ways World War II marked the high point of this collaboration. Ironically, the war’s strengthened military-industrial complex also proved its undoing.

Deficit spending required by war mobilization rapidly produced full employment. The nation’s gross national product soared from $91 billion in 1939 to $166 billion in 1945. The military and civilian sectors together saw the creation of 17 million new jobs, mainly high-wage positions in new industries powered by new plants, equipment, and technologies. It was the egalitarian nature and consequences of that growth, however, that was most striking. Progressive-minded public officials and representatives of the labor movement honeycombed newly created agencies charged with manpower mobilization and labor relations, price stabilization, and conversion to military production.

The National War Labor Board (NWLB), for example, consisted of equal numbers of representatives of labor, business, and the public. Because labor exercised substantial political muscle and because the public members of the board wanted to insure continuous production, the board usually supported unionization. In return for a “no strike” pledge from the labor movement for the duration of the war, the board established a principle of w w w. p ro s p ect. o rg

good jobs “maintenance of membership.” Essentially this meant that the millions of new workers flooding into war industries would almost automatically become union members. It also encouraged new organizing efforts both in war industries and at firms producing civilian goods. Membership in trade unions grew from 9 million to 15 million by the end of the 1940s.

Organizers openly circulated membership cards on the factory floor during working hours and unions won nine out of 10 National Labor Relations Board elections. When Sewell Avery, the right-wing head of Montgomery Ward, refused to

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Traction For Workers: Defense production lifted millions out of poverty.

comply with NWLB rulings, he was hauled out of his office by uniformed soldiers. Rulings by the National Labor Relations Board, backed by Attorney General Francis Biddle, consistently found that corporations engaging in unfair labor practices were not eligible for government contracts.

Spectacular union growth was decisive in eliminating the gross inequalities characteristic of the old order. Under the NWLB regime, regional wage differentials narrowed considerably, particularly in the South. Vacation pay and sick leave became commonplace. Grievance procedures and seniority rules mandated by the NWLB extended the rule of law to an industrial terrain once governed by the whims of management.

Two million women joined the labor movement. In a landmark ruling against General Motors in 1942, the NWLB mandated equal pay for equal work. At least for some African Americans and white women, that principle became a reality.

All of this tended to compress the income hierarchy by raising up those at the bottom, making the decade of the 1940s the most economically egalitarian of the 20th century. The Fair Employment Practices Commission (created by FDR to ward off a threatened March on Washington in 1941 led by A. Phillip Randolph to demand war jobs for African Americans) outlawed discrimination in defense-industry hiring. Outside political pressure, plus the government’s enhanced leverage

as a dispenser of military contracts, meant that open racism would no longer be tolerated.

So when Gerald Tuttle, head of the Vultee Corporation who announced that “it is not the policy of this company to employ people not of the Caucasian race,” or executives of North American Aviation, a major maker of warplanes, let it be known that the company’s new plant in Fairfield, Kansas, would not employ Negroes, the government insisted that they change their policies or lose war production contracts. Both plants were opened to blacks.

At the beginning of the 1940s, black income was 40 percent of white income; by the end of the decade it was 60 percent. In highly unionized, industrial states like Michigan, it reached an astounding 90 percent. When white transit workers in Philadelphia wildcatted to prevent the promotion of eight blacks to the position of motormen, the local branch of the War Manpower Commission (another agency with considerable labor-movement presence) deployed 8,000 federal troops to end the walkout and enforce the law. Women, African Americans, and other minority workers would suffer from serious inequalities for decades to come, but these wartime accomplishments were real. the war production Board (WPB), meanwhile, possessed broad powers to direct the flow of capital investment, allocate war contracts, spur regional economic development, and subsidize technological innovation. Pressured to refuse contracts to firms who were in violation of the nation’s labor laws (and these included some of the biggest corporations like Ford, Bethlehem Steel, and International Shoe), the WPB often waffled but finally ordered the War Department to award a $10 million contract to Chrysler rather than Ford even though Ford’s bid was lower. It insisted, although sometimes without following through, that its contractors comply with the Walsh-Healey Act, which mandated that private companies receiving government work meet prevailing regional standards regarding wages, hours, and working conditions.

To assure a steady supply of labor in the shipbuilding and construction industries, the WPB helped negotiate stabilization agreements between the relevant unions and industry representatives covering wages, hours, grievance procedures, work rules, overtime, limits on production, and premium pay.

The shipbuilding agreement was policed by members of the Congress of Industrial Organizations (CIO), the American Federation of Labor, corporate delegates from the main shipyards, and representatives from the Navy and U.S. Maritime Commission. When the Federal Shipbuilding and Drydock Company in Kearny, New Jersey, refused to comply, the Navy seized the shipyard and imposed “maintenance of membership” and the other provisions of the stabilization concord.

Employment in the low-wage, autocratic Southern textile industry dropped precipitously as workers streamed northward into the defense plants. But the demand for military and civilian fabric was insatiable. Consequently, a WPB report concluded that the Southern industry’s “wage structure must be brought back into line with wage trends in industry generally.” Soon thereafter the WPB the american prospect

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ordered an increase in Southern textile wages and fringe benefits.

Diversification of supply was also a goal of the WPB. The Smaller War Plants Corporation within the WPB made heroic efforts to direct government contracts to medium-sized and smaller manufacturers and offered subsidies to make that feasible. Manned by New Dealers, the idea was to resist the trend to industrial concentration and oligopoly. It was also a way to equalize the country’s industrial geography, to encourage the industrialization of declining regions like the Appalachian highlands, the Ozarks, the Great Lakes “cut over” region, and the old cotton South. But this, along with other progressive objectives would wither and die.

Other agencies connected to the war effort also helped improve the lot of workers. The Office of Price Administration, in charge of price control, protected the day-to-day living standards of millions of working-class families. Led by labor-friendly administrator Chester Bowles, the OPA fought price gouging during a period of severe shortages of civilian goods. Its fight against inflation included dozens of specific orders to cap the prices of everyday commodities. Five hundred CIO members sat on OPA advisory boards, and thousands of volunteers, mainly urban housewives, helped the OPA enforce its regulations, checking on local prices and the quality of goods; their enemies in the business community labeled these women “the kitchen Gestapo.”

Instances of war profiteering and price gouging were exposed by congressional committees, in particular a Senate investigation presided over by then-Sen. Harry Truman.

Though war invariably produces labor shortages and often raises wages, the use of government’s wartime emergency powers to broadly improve the lives of American workers did not just happen as a byproduct of war. It required deliberate, and often contested, policy— the fruit of the Roosevelt coalition.

greater than those prevailing during the period from 1937 to 1940. They even allowed corporate purchase of governmentfunded new plants and equipment at 10 percent of cost. Big business found ways around the excess-profits tax, while wage increases were sharply curtailed by the NWLB. As demands for full production increased, the War Production Board too often turned a blind eye to labor-law violators in issuing its contracts. Labor-management committees, initially created to address housing, health, and safety matters, soon enough concerned themselves mainly with speeding up production, a kind of patriotic sweating. Daring proposals by labor leaders like Walter Reuther of the United Auto Workers and Phillip Murray, head of the CIO, to establish tripartite councils of labor, management, and public officials to plan the conversion of civilian to war production (and later the re-conversion of war plants to peacetime uses) were briefly debated and then ignored.

Military Keynesianism increased wages and union power but ultimately became a monumental public-works project on behalf of corporate America, shifting the power balance against labor. A conservative Republican resurgence in the 1942 elections killed off the New Deal’s left-leaning National Resources Planning Board and its program for a postwar regime of enlarged Social Security including national health insurance. The Republican revival inspired anti-union legislation to limit the political as well as the economic leverage of the labor movement. Business members of the NWLB grew more aggressive about blocking the extension of unionization to the newer retail and service sectors of the economy and into the South. The political and social consequences of that defeat haunt us today.

In sum, war enormously enlarged the capacities of the state; it also made the state fiercely contested terrain. A liberal-labor coalition accomplished a great deal in using this government apparatus to impose a more equitable distribution of the national wealth and more democratic protocols to govern the work lives of millions of citizens. But by war’s end, it succumbed to the power of the military-industrial complex. And because the labor movement had grown accustomed to relying on the state’s assistance, it demobilized a once active rank and file, eventually leaving it disarmed to face a less labor-friendly future.

Yet the wartime use of government contracting to insist on decent standards for workers shows what is possible when a political coalition is mobilized to take back democratic governance from control by a corporate elite. And that should not require a war. tap

National War Labor Board policies made the 1940s the most economically egalitarian decade of the 20th century.

from the outset, however, the wartime labor-progressive coalition was bitterly and successfully confronted by corporate America—by what Dwight Eisenhower would later call the military-industrial complex. For a brief moment the WPB was run by two co-directors who embodied the nation’s delicate political equilibrium: William Knudsen, the head of General Motors, and Sidney Hillman, a founder of the CIO, the nation’s social-democratic-minded and most militant labor federation.

But Hillman’s ouster early in 1942 was an ominous sign of a shift in the balance of power.

Increasingly the war-mobilization apparatus came to be dominated by big business in league with the defense establishment. The military, itself run by “dollar a year” refugees from Wall Street, preferred to rely on the major corporations to fulfill its needs for munitions and equipment. The top 100 companies received 70 percent of all military contracts. War contracts were heavily subsidized, cost-plus arrangements that assured profits ranging from 233 percent to 350 percent a 20 o c t o b e r 2 0 0 9

Steve Fraser is the author of Labor Will Rule: Sidney Hillman and the Rise of American Labor and the co-editor of The Rise and Fall of the New Deal Order. He is editorat-large for the journal New Labor Forum. w w w. p ro s p ect. o rg

good jobs

Government Paves the Way A decent work agenda for the Obama administration

By Paul Sonn and Annette Bernhardt

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he trends described in this special report paint a picture of an economy that was in trouble long before the current recession took hold—at least from the standpoint of the American worker. Whether their distress is measured by stagnant wages or contingent jobs or violations of core labor laws, today’s workers face a daunting labor market likely to provide them with fewer opportunities than their parents had.

Unless, of course, we do something about it. It took years to dismantle the good-jobs framework that this country tried (however imperfectly) to put together from the 1930s until the 1970s, and it will take years to build it back up. But someone needs to pave the way, and we nominate government for the job.

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 and cannot carry the burden alone. Community organizing has proved surprisingly robust (witness the living-wage movement and immigrant worker centers), but the larger promise of sustained civic engagement in things economic has yet to materialize.

What we need is more scale and power, and government has both. Government’s levers on the private sector are plentiful— but underused. Public money touches millions of privatesector jobs, whether by purchasing goods and services for the government or by funding the public goods that make our economy run—everything from roads and bridges and the new green economy, to health care, education, and social services.

Tens of millions more jobs are touched by employment and labor laws, and government’s willingness to enforce them.

That means there’s potentially an entire toolbox of policies that flow from government contracts and funding and from regulatory and enforcement authority that we should be activating. Though these tools have sat idle for the past eight years, we can revive them to restore an economy based on decent work. a laborer paving an Atlanta highway, a home aide caring for a Detroit senior, and a cafeteria worker serving meals at a Tucson veterans’ hospital share one thing in common: All three work in federally funded jobs that pay $10 an hour or less with limited benefits. They are examples of the millions of jobs across our economy financed by the roughly $1 trillion that the federal government spends each year on the combination of federal contracting and grant-in-aid programs to the states.

The federal government’s vast and diverse economic footprint gives it a powerful tool for promoting a decent work

agenda. Already, living-wage laws and community-benefits agreements in states and cities across the country have established the principle that employers that seek government funding should in return be asked to pay decent wages and benefits. If the Obama administration is to achieve its goal of rebuilding middle-class jobs, it should do the same at the federal level. Promoting good jobs not only helps working families, it provides one of the most sustained forms of economic stimulus, as workers spend their higher wages—not just once but paycheck after paycheck.

Prevailing Wage Reforms. A decent work agenda should start with modernizing the prevailing wage laws: the 1931 Davis-Bacon Act for construction, the 1936 Walsh-Healey Act for goods, and the 1965 Service Contract Act for services. On paper, all three laws require that federal contractors mirror the wages and benefits that are provided by the better-paying employers operating in their industry and labor market. However, the prevailing wage laws are currently falling well short of that goal. For example, Reagan-era regulations that watered down the wage-setting methodology under Davis-Bacon need to be reversed. Exemptions that exclude a range of service jobs from the Service Contract Act’s coverage need to be repealed. And Walsh-Healey’s prevailing wages for contractors that sell goods to the government—not implemented since the 1960s—should be resuscitated to promote good jobs in industries as diverse as the meatpacking plants that supply veterans’ hospitals and the garment factories that produce U.S. military uniforms.

Responsible Contractor Requirements. Prevailing wage laws alone can do little to promote good jobs in industries and regions that are overwhelmingly low-wage or that have little union presence. The federal government should therefore turn to a second set of tools: responsible contracting reforms and living-wage policies of the kind that states and cities have pioneered over the past decade. These policies employ rigorous screening to weed out violators of minimum wage, proper classification of regular workers, overtime, workers’ compensation, and tax laws. They also have requirements or incentives for employers to provide decent wages, affordable health insurance, and other benefits like paid sick leave. States across the country have found that these reforms not only create better jobs but also attract a better pool of contractors, resulting in better highways and bridges and more reliable security and maintenance services.

Wage Standards in Federal Grants-in-Aid. The policy framework for promoting good jobs through federal grant programs the american prospect

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is far less developed than for federal contracting—even though begun to do). Not only is direct federal employment the most grant-in-aid programs under which federal funds flow to states dependable source of good jobs, but experience suggests that and cities touch broad swaths of our economy. Prevailing wage many functions that were outsourced during the Bush years requirements “flow down” to state and local construction jobs (when federal contracting doubled in scale) can more accountfinanced with federal funds. But there are no corresponding ably and efficiently be performed by federal employees. job standards for service jobs created at the state and local levels with federal dollars. As a result, many federal grant-in- of all the policies needed to rebuild an economy based on aid programs and tax incentives are financing the creation of decent work, none is more straightforward than having govpoverty-wage jobs across the nation. Women bear the brunt of ernment simply enforce the laws that are on the books. Last this omission because they are disproportionately represented October, a federal judge in New York ordered the Saigon Grill in the service sector.

One solution is to ensure that the Service Contract Act’s prevailing wage and benefits standards are applied to state and local projects receiving federal funds. A good first candidate would be the proposed Rubbish to Renewables Act, which would create new federal subsidies to finance (among other things) modern recycling centers. Without standards, many recycling jobs are highly casualized, paying $9 or $10 per hour with no benefits.

Service Contract Act standards would boost pay to $19.12 in Los Angeles and $14.96 in Houston, for example.

Federally Funded Human-Service Work. By far the industries in which federal grant programs are creating the largest number of substandard jobs are health care and human services. Your Stimulus In Action: Good jobs, with federal wage standards, repaving a Washington state highway Through Medicaid, for example, Washington finances much of the nation’s home health-care services. restaurant chain to pay an astonishing $4.6 million to its delivEvery day, more than a million home-care workers in the U.S. ery workers, revealing a grim set of business practices that had (the overwhelming majority of them women, immigrants, and gone unchecked for years. The delivery men earned as little as people of color) provide the vital care that allows seniors and $1.60 an hour, for working up to 13 hours a day, six or seven days persons with disabilities to live in their own homes with dignity a week. Illegal deductions were taken from their pay, in the form when they can no longer care for themselves. Home care is one of fines and kickbacks. When they tried to organize, they were of the nation’s fastest-growing fields but also one of the lowest summarily fired.

The scale of the wage theft in this case is astonishing—some paying, trapping the workers in poverty and causing serious workers were owed as much as $328,000—but the practice itself labor shortages and high turnover (which in turn undermines the quality of services). A similar story holds for day-care jobs is not an outlier. As the other articles in this special report have subsidized by the Child Care and Development Block Grant, described, growing numbers of workers are not being paid the and school cafeteria positions financed by the National School minimum wage or overtime, health and safety violations are on Lunch Program. the rise in industries like residential construction, and employers Here, prevailing wage standards will not help because in are misclassifying their employees as independent contractors or these jobs virtually all employers pay poverty wages. Instead, outsourcing work to unscrupulous contractors. the federal government needs to establish living-wage and More Funding for Investigators. Reactivating these agenbenefits standards to upgrade these industries. Doing so will cies will require that we restore funding levels to increase the entail some cost—but the cost of continuing to operate these number of investigators on the ground. By our calculations, programs on poverty wages is simply too high to ignore. between 1980 and 2007, the number of inspectors enforcing Reversing Outsourcing. Finally, a decent work agenda should federal minimum-wage and overtime laws declined by 31 perinclude re-evaluating the scale of federal outsourcing and bring- cent and the number of enforcement actions fell by 61 percent. ing back “in house” many functions that today are performed by By contrast, the labor force grew by 52 percent during this same federal contractors (as the Obama administration has already time period. Similarly, the AFL-CIO reports that the budget of

good jobs the Occupational Safety and Health Administration (OSHA) has been cut by $25 million since 2001; at its current staffing and inspection levels, it would take the agency 133 years to inspect each workplace under its jurisdiction just once.

Robust Enforcement of Workplace Laws. But numbers alone aren’t enough; how agencies enforce the law needs a complete overhaul as well. A good illustration here is the Labor Department, which can become much more aggressive in enforcing minimum-wage and overtime laws, simply by changing the way it implements existing laws.

First, the Labor Department should move toward proactive, “investigation driven” enforcement in low-wage industries, rather than waiting for complaints to come in. This means taking the initiative, identifying industries where violations are systemic, conducting strategic and repeated workplace audits, and cracking down on employers who misclassify their workers. Employers must be held responsible for their workers— especially in cases where subcontracting is being used as an evasion strategy. The goal is to send industry-wide signals that the government will pursue violations and that there is a tangible likelihood of inspection.

Second, the department needs to increase its reach and effectiveness by partnering with immigrant worker centers, unions, service providers, and community groups, as well as responsible employers that understand the need to ensure full compliance in their industry. Government alone will never have enough resources to monitor every workplace in the country; partnerships can provide the vital “ears on the ground” to identify where workplace violations are most concentrated.

Third, the Labor Department needs to better protect workers who file complaints, especially those who are vulnerable because of their immigration status. This will mean re-establishing a strong firewall between workplace and immigration inspections, so that information gathered during a wage-and-hour case, for example, is kept confidential and not shared with immigration authorities. Otherwise, undocumented workers will be driven further underground, too scared to come forward and assert their right to basic workplace protections like the minimum wage. And when workers aren’t able to complain (regardless of whether they’re born in the U.S. or abroad), labor standards suffer.

Leveraging Regulatory Powers. The Labor Department can also strengthen workplace standards by issuing or clarifying regulations pursuant to authority that Congress has already given it. For example, the nation’s home-care workers not only receive poverty wages but are excluded from even basic minimum wage and overtime protections under an outdated exemption. The Labor Department can end this improper and unfair exclusion by reissuing a regulation that was proposed by the Clinton administration (but withdrawn by the Bush administra-

tion) clarifying that most home-care workers are indeed covered.

By implementing these and other strategies to fully harness the power of federal regulatory agencies (the Department of Labor, OSHA , the Equal Employment Opportunity Commission), the Obama administration can make giant strides in reestablishing decent work as the baseline standard in our labor market. On the spectrum of strategies to regularize work, this really is low-hanging fruit.

Stronger Laws. Simply doing a better job at enforcement, however, won’t be enough; the laws have to be strengthened as well. Weak standards in employment and labor law send the wrong signal, inviting low-road business strategies to cut labor costs. When the bar is set too low, the incentive is to ratchet down to it. Raising the minimum wage, updating health and safety standards, expanding overtime coverage, and strengthening the right of workers to organize—all are key improvements that will raise standards in the workplace and improve the competitive position of employers who play by the rules. even during the current recession, many employers are showing that it is possible to compete using a business model based on providing stable employment and decent wages. Government policies need to reinforce their good behavior, not undermine it. In cities and states across the country, innovative policies are being developed every day to harness public resources to create and sustain good jobs. And in low-wage service industries, unions and community groups are organizing workers and winning important policy changes (showing that there is nothing inherently contingent or low-wage about these jobs).

It is time to lift these lessons to the federal policy arena and for the administration to lead with a strong and resounding vision for decent work— and then to put it into action. This is not just feel-good public policy (though many workers will feel better as a result of it). It’s about the concrete costs of workers being misclassified as independent contractors, robbing federal and state governments of billions of dollars in tax revenues.

It’s about the very real pressure that responsible employers feel when unscrupulous employers break the law and set off a race to the bottom. And it’s about how to use public dollars wisely and efficiently to create the jobs our communities need. The tools stand ready: job-quality standards on government contracts and program funding as well as robust labor laws that are fully enforced. All that remains is to use them. tap

It took years to dismantle the goodjobs framework started in the 1930s, and it will take years to build it back up.

Paul Sonn is legal co-director of the National Employment Law Project (NELP). He has worked for 15 years promoting living-wage jobs. Annette Bernhardt is policy co-director of NELP. Her most recent book is the co-edited The GlovesOff Economy: Workplace Standards at the Bottom of America’s Labor Market. the american prospect

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