U.S. employment growth was much weaker than most estimates expected in December, according to the latest Employment Situation Summary by the U.S. Bureau of Labor Statistics. Data collected the first half of December and released today shows the U.S. economy added 199,000 jobs—well below the previous three-month average of 425,000 jobs gained. Notably, this data represents employment data from immediately before the extreme rise in U.S. COVID-19 cases fueled by the highly contagious omicron variant of the coronavirus in mid-December.
The overall unemployment rate continued to decline to a new pandemic low, falling from 4.2 percent in November to 3.9 percent in December. The country’s labor force participation rate, however, remained at 61.9 percent, and has experienced little improvement since mid-2020.
For some groups of workers the recovery has been much slower than for others. Black workers were the only group of workers to see their unemployment rate rise, climbing from 6.5 percent in November to 7.1 percent in December. Latino workers are experiencing an unemployment rate of 4.9 percent, Asian American workers of 3.8 percent, and White workers of 3.7 percent. (See Figure 1.)
Figure 1
Some workers also are experiencing especially longer periods actively looking for jobs without success. Unemployed Black workers and Asian American workers are experiencing an average of 33 weeks of unemployment, compared to 25 weeks for Latino workers and White workers.
Across industries, the now 18-month-long economic recovery remains uneven. Employment in the financial activities and transportation and warehousing sectors, for instance, is now above its pre-pandemic levels. But employment in the leisure and hospitality industry—one of the largest major sectors in the country—continues to be more than 7 percent below where it was in February 2020. (See Figure 2.)
Figure 2
Indeed, no other industry has experienced as much volatility during the coronavirus pandemic as leisure and hospitality. Most jobs in the industry cannot be done remotely, and many establishments closed or saw a sharp reduction in business at the onset of the health and economic crises. The leisure and hospitality industry lost almost half of its total jobs in early 2020 as employment plummeted from almost 17 million jobs in February 2020 to less than 9 million jobs in April 2020, while the sector’s unemployment rate skyrocketed to 39.3 percent.
Recovery within the leisure and hospitality industry is still uneven, as different subsectors are affected by changing consumer behavior and public health safety measures amid the ongoing pandemic employment in the food services and drinking establishments subsector initially fell by almost half, but since mid-2020 recovered at nearly pre-pandemic levels. Likewise, the amusements, gambling, and recreation subsector of the industry experienced the steepest decline in employment at the outset of the pandemic, but now has recovered most of its lost jobs. The performing arts and spectator sports subsector was slow to recover from its initial dramatic losses, but has largely rebounded in recent months.
One area where employment remains farthest below pre-pandemic levels is museums and historical sites. This subsector did not experience as dramatic a loss in initial employment as other areas, but today it has yet to regain half of the jobs it lost during the pandemic—potentially due, in part, to a decline in donations and revenue from ticketing combined with greater additional operation costs due to new safety measures. (See Figure 3.)
Figure 3
Even these dramatic employment trends do not fully capture the level of volatility that leisure and hospitality workers continue to experience. Many workers suffered through sudden losses of income due to pandemic-related closures even when employed. For instance, in May 2020—the first month such data is available—more than 40 percent of leisure and hospitality workers were unable to work at some point in the past month because their employer closed or lost business due to the pandemic, with the vast majority (89 percent) reporting they did not receive pay for the lost hours.
Before the pandemic, many leisure and hospitality industry workers already faced low pay and bad working conditions
These pandemic-related disruptions faced by many leisure and hospitality workers only compounded already low pay and bad working conditions in the industry. This is a problem for the U.S. economy because the leisure and hospitality industry employs about 1 in 10 workers. And the industry disproportionately employs women and workers of color, especially in accommodation, where 59 percent of workers are women, 26 percent are Latino, and 17 percent are Black.
With average hourly earnings of only $19.20 an hour for an average 26.4 hours per week, leisure and hospitality is the worst paying industry in the U.S. economy. These low wages are accompanied by poor job quality across the board, including unpredictable schedules, high rates of labor law violations such as wage theft, and a lack of benefits. Only one-third (32 percent) of wage and hour employees in this sector, for example, have access to employer-sponsored health care, and just half (50 percent) have access to paid sick leave—even in the midst of a global pandemic. Unpredictable schedules and low pay also make it difficult for workers to secure child care and navigate transportation challenges.
Because of this poor job quality, and the sensitivity of leisure and hospitality firms to seasonal fluctuations and shifts in economic conditions, job turnover has typically been significantly higher in leisure and hospitality (79.0 percent annually in 2019) compared to the overall private industry (45.1 percent).
But there are signs that leisure and hospitality industry’s workers are improving their livelihoods by switching jobs or exiting the industry amid the pandemic
Amid the ongoing coronavirus crisis, the leisure and hospitality industry became even more volatile—and dangerous—in turn sparking workers to seek better pay and working conditions outside of the industry. As the pandemic hit, those who kept their jobs had to work in high-risk conditions, often without employer-provided personal protection equipment. A study using data from the California Department of Public Health, for example, found that cooks, maids and housekeepers, and bartenders were among the occupations in which mortality rose most during the coronavirus pandemic.
While employment levels overall in the U.S. economy have not yet rebounded to pre-pandemic levels, nominal wages have risen over the past few months for workers in low-wage industries, among them leisure and hospitality workers. The Job Openings and Labor Turnover Survey, another government survey, shows that both the number of quits and job openings in the industry broke previous record highs this summer and are substantially above their pre-pandemic levels, which typically is also considered a positive sign for workers’ confidence in the U.S. labor market.
Some leisure and hospitality workers appear to be moving into higher-paying jobs within leisure and hospitality, and others are exiting the industry for other opportunities. Such moves were already common among food and accommodation workers (a subsection of leisure and hospitality workers): A pre-pandemic analysis of U.S. Census Bureau data by Indeed.com’s Hiring Lab found that in early 2018, about half of food and accommodation workers who switched jobs stayed in food and accommodation, and about half moved to a job in another industry. The most common destination for those who left food and accommodation was retail trade, accounting for 13.0 percent of all job-switchers from that industry.
The present historic rate of jobs churn the industry is experiencing likely reflects both a continuation of pre-pandemic dynamics within this volatile low-wage industry and new labor market movements as workers seek more livable wages and working conditions after nearly two years of heightened uncertainty and stress. As employers in the leisure and hospitality industry report struggling to hire and retain their staff, dynamics in this industry may change as the recovery continues.
Ultimately, however, both poor pay quality and high turnover are the result of national policy choices. Research shows that low-wage workers in the United States lack bargaining power over wages, and as such are only able to raise their wages by quitting their jobs for a higher-paying ones elsewhere.
Greater worker power and access to social insurance programs such as Unemployment Insurance are essential for a robust and broadly shared economic recovery
The coronavirus pandemic highlights both how bad-quality jobs put U.S. workers at risk and the how the country’s social insurance system often fails to protect workers from sudden income losses, particularly those in vulnerable service sectors with low levels of unionization. The leisure and hospitality industry is a stark case in point.
A Bureau of Labor Statistics analysis of 2018 data found that most unemployed people who worked in the past year had not applied for Unemployment Insurance benefits, and that those who had worked in leisure and hospitality were among the least likely to apply. Only 12 percent of unemployed people who last worked in leisure and hospitality had applied for benefits since their last job, compared with 26 percent across all industries. The most common reason unemployed workers gave for not applying for Unemployment Insurance benefits was that they did not think they were eligible—a pattern that held during the early months of the pandemic even as the Coronavirus Aid, Relief, and Economic Security, or CARES Act of 2020 expanded eligibility.
Outsized employer power may also reduce Unemployment Insurance benefit usage among low-wage workers in service industries. A recent working paper by Marta Lachowska at the W.E. Upjohn Institute for Employment Research, Isaac Sorkin at Stanford University, and Stephen A. Woodbury at Michigan State University shows that low-wage workers are less likely to claim benefits, but more than half of this relationship between wages and UI take-up can be explained by the firms themselves: Low-wage workers are clustered in firms that have low rates of take-up.
This is especially true for workers in service industries, the authors find. Service workers not only tend to have lower Unemployment Insurance take-up rates compared with workers in the more unionized goods-producing sectors, but also are more likely to have their claims challenged by their employers, likely deterring future claims by workers at those firms. Low-road firms can also affect employee-claiming behavior by failing to notify workers of potential eligibility, actively discouraging claim filing, or structuring employment arrangements so workers are less likely to qualify for benefits.
In contrast, greater worker power can support access to unemployment benefits and reduce disparities in Unemployment Insurance take-up. Unions and other labor organizations can help workers learn about Unemployment Insurance, navigate the UI process, protect them from employer responses, and improve job quality conditions around hours and work schedules that can increase UI eligibility. The 2018 Bureau of Labors Statistics data shows that among unemployed workers, unionized workers were twice as likely to apply for UI benefits as nonunion workers—and even more likely to receive them, with 43 percent of unionized workers saying they had received UI benefits compared to only 16 percent of nonunion workers. (See Figure 4.)
Figure 4
Worker power can improve access to benefits, but Unemployment Insurance can also in turn strengthen worker power. Alexander Hertel-Fernandez at the U.S. Department of Labor and Alix Gould-Werth at the Washington Center for Equitable Growth document the power of the “virtuous circle” connecting unemployment supports to worker voice during the coronavirus pandemic. During April and May 2020, they found that workers who had greater access to UI felt more comfortable participating in collective action to demand better safety and health standards at their workplaces.
To be sure, legislative action at the national and state level expanded eligibility and benefit amounts for unemployed workers in the early months of the pandemic. But a working paper from Eliza Forsythe at the University of Illinois, Urbana-Champaign finds that the share of all unemployed workers who received Unemployment Insurance benefits in the previous two weeks was only 16 percent in April 2020, and peaked at only 32 percent in October of that year. And as state unemployment offices were overwhelmed by the sudden rise in applications, millions of workers faced long delays in receiving their jobless benefits, leaving them without much-needed income for weeks or months.
Conclusion
Amid disappointing employment numbers, the U.S. economy continues to face a 3.6 million jobs deficit compared to its pre-pandemic levels. Moreover, the latest Employment Situation Summary reflects data from the first half of December, meaning that these numbers do not capture the full extent to which the massive surge in COVID-19 cases affected workers and industries.
The challenges that low-wage workers face both receiving jobless benefits and with bad-quality and unsafe working conditions amid the ongoing coronavirus pandemic underlines the urgent need for Unemployment Insurance reform. Job displacement leads to lasting effects on workers’ careers and wages, particularly for Black workers and other workers of color. But extended Unemployment Insurance and other income support programs can help displaced workers find better jobs that better match their skills, with the greatest benefits for women, workers of color, and workers with lower levels of formal education.
Meanwhile, other existing income supports such as the Temporary Assistance for Needy Families are too difficult to access, with intentionally restrictive eligibility requirements and benefit amounts that are inadequate for families’ needs. These dynamics highlight the need to remove barriers that keep the nation’s social infrastructure programs from functioning effectively for workers, families, and the entire economy. Investments in the rest of the country’s social infrastructure are also needed so that workers and families can reach accessible and high-quality caregiving services, as well as paid leave. These policies will be key for a broadly shared and thus more resilient economic recovery.
On January 7, the U.S. Bureau of Labor Statistics released new data on the U.S. labor market during the month of December. Below are five graphs compiled by Equitable Growth staff highlighting important trends in the data.
Total nonfarm employment increased by 199,000 in December, as the employment rate for prime-age workers rose from 78.8 percent to 79.0 percent.
The unemployment rate for Black workers rose to 7.1 percent in December. The overall unemployment rate declined to 3.9 percent, and fell or remained steady for Latino workers (4.9 percent), Asian American workers (3.8 percent), and White workers (3.2 percent).
The number of unemployed workers fell by 483,000 in December. Workers who are new to the labor force (8.1 percent) or re-entering the labor force (32.0 percent) made up a greater share of unemployed workers in December, while a smaller share of unemployment was due to job loss.
The proportion of unemployed U.S. workers facing long-term unemployment declined in December but remains elevated, as fewer than half (44.0 percent) of unemployed workers have been out of work for more than 15 weeks. A quarter (24.8 percent) have been out of work for 5-14 weeks, and almost a third (31.2 percent) for fewer than five weeks.
At the end of a volatile year, nominal earnings (not accounting for inflation) continued to rise, as average hourly earnings rose from $31.12 in November to $31.31 in December, while rising 4.7 percent year over year.
Every month the U.S. Bureau of Labor Statistics releases data on hiring, firing, and other labor market flows from the Job Openings and Labor Turnover Survey, better known as JOLTS. Today, the BLS released the latest data for November 2021. This report doesn’t get as much attention as the monthly Employment Situation Report, but it contains useful information about the state of the U.S. labor market. Below are a few key graphs using data from the report.
The quits rate rose in November to 3.0 percent as 4.5 million workers quit their jobs, an increase of 370,000 since October, while the job openings rate fell to 6.6 percent.
The vacancy yield increased to 0.63 in November from a series low of less than 0.59 in October, as job openings decreased to 10.6 million.
The ratio of unemployed-worker-per-job-opening fell further, from 0.67 unemployed workers per job opening in October to 0.65 in November.
The Beveridge Curve continues to be in an atypical range compared to previous business cycles, as the unemployment rate declined to 4.2 percent and the rate of job openings decreased to 6.6 percent.
The quits rate rose in November and remains elevated in a number of industries relative to pre-pandemic levels, including construction, education and health services, and leisure and hospitality.
Students, union activists, and fast-food workers marched in Manhattan’s Upper West Side to demand a $15/hour federal minimum wage, April 2015.
In 1912, textile workers in Lawrence, Massachusetts—mostly immigrant women from countries including Cuba, Ireland, Italy, Syria, and elsewhere—went on strike in response to wage cuts. This strike is sometimes referred to as the Bread and Roses strike, a reference to the slogan and demand inscribed on picket signs, “We Want Bread and Roses Too.” These striking workers produced enough pressure to lead to the passage of the first minimum wage law in the United States, which established wage boards to set wage standards by industry. After 16 states followed suit in response to worker organizing and legal battles over the ensuing two decades, the Fair Labor Standards Act of 1938 mandated a federal minimum wage.
Yet as City University of New York sociologist Stephanie Luce points out, the nationwide minimum wage law did not contain a formula for actually setting a national minimum wage and lacked a mechanism for adjusting it in the future. Any increase to the minimum wage had to be enacted by Congress. Since then, the federal minimum wage has been raised 22 times, most recently in 2009 to reach its current level of $7.25 per hour.
Twelve years is the longest time by far that the federal minimum wage has remained unchanged. What’s more, congressional discourse on increasing it has stalled due to pressure from the business community regarding wage costs borne by companies, including small businesses. The consequences are most telling for women of color, a group that already registers the lowest levels of both earnings and wealth by race, ethnicity, and gender in the United States. Furthermore, the purchasing power of the federal minimum wage has decreased by nearly 20 percent since 2009 and approximately 40 percent since its peak value in 1968, which would be the equivalent of $12.27 in today’s dollars.
This lack of an increase in the federal minimum wage hurts all workers, but it particularly affects Black women and Latinas. Due to occupational segregation, Black women are more likely to be sorted into lower-paying jobs, meaning that Black women are overrepresented among minimum wage workers. A recent analysis by the U.S. Bureau of Labor Statistics finds that even though Black women make up 8 percent of all hourly workers, they represent 14.1 percent of workers with wages at the federal minimum and 12.1 percent of those below it. About 46 percent of Latinas and 39 percent of Black women still earn less than $15 an hour. And one recent estimate finds that almost 1 in 4 people who would benefit from an increased federal minimum wage to $15 per hour is a Black woman or a Latina.
Minimum wage inequities are not new, but they are part of the larger legacy of racial disparities and exclusions in U.S. history that continue to reverberate today. Early manifestations of minimum wage laws—including at both the state and federal levels—excluded Black women. These laws encapsulated, reaffirmed, and produced White supremacist notions of domesticity and labor, in which Black women were conceptualized as neither mothers nor breadwinners.
When the Federal Labor Standards Act was eventually amended in 1967 to cover a larger share of the U.S workforce, the positive effect of the minimum wage expansion was almost twice as large for Black workers than for White workers, according to economists Ellora Derenoncourt at Princeton University and Claire Montialoux at the University of California, Berkeley. They estimate that this expansion of the minimum wage to include more industries can explain more than 20 percent of the decline in the racial earnings gap during the late 1960s and early 1970s.
These reforms did not have any significant adverse effects on overall employment levels. Indeed, the broader sweep of the federal minimum wage had the dual effect of reducing the racial earnings gap—the difference in earnings by race for employed individuals—and the racial income gap—the difference in income between Black and White individuals, whether working or not. This can be explained, in part, because the newly covered sectors—agriculture, nursing homes, laundries, hotels, restaurants, schools, and hospitals—employed about one-fifth of the U.S. labor force and almost a third of all Black workers.
Minimum wage laws are a crucial tool for addressing racial equity. There is strong evidence that raising and expanding the federal minimum wage today would help alleviate poverty for Black and Latinx workers, address pay gaps, and bolster the economic stability of those Black and Latinx workers and their families particularly affected by the coronavirus recession of 2020 and the continuing economic volatility caused by the ongoing pandemic. This is all the more reason to continue expanding minimum wage laws broadly, as well as the enforcement of these laws.
Recent research by economist Anna Stansbury at Harvard University suggests that the current system of penalties companies face for violating minimum wage laws offers very little financial incentive for businesses to comply. In practice, the financial penalties that firms face are diminutive, compared to the profits they can earn through noncompliance. Stansbury also finds that due to constrained resources for federal investigation and inspection, the probability of an inspection by the U.S. Department of Labor in any given year may be as low as 2 percent—even in sectors with a high risk of noncompliance.
There are less overt ways for businesses to bypass minimum wage laws as well. Companies can avoid paying the minimum wage by misclassifying workers as “independent contractors” rather than employees. Independent contractors traditionally are those who run their own professional operations, contract with many different businesses, and negotiate mutually agreeable contract terms, but the designation more recently is being used by so-called gig economy companies when they hire low-wage workers. The result of this misclassification is that these workers—who are disproportionately Black—are not entitled to many health and safety protections, are unable to join a union, are not eligible for benefits such as health insurance or the right to earn sick leave or other forms of leave, and are not covered by minimum wage or overtime laws.
The need for movement on raising the federal minimum wage has been long recognized by policymakers and activists alike. As outlined by Equitable Growth’s Director of Labor Market Policy and interim chief economist Kate Bahn, the “Fight for Fifteen” movement starting in 2012 and “OUR Walmart” movement starting in 2010 exemplify worker-led labor organizing efforts to demand increased wages. The efforts of Fight for Fifteen directly affected New York state’s minimum wage increase to $15 per hour several years ago, and these efforts provide a path for movements to agitate for a higher federal minimum wage.
OUR Walmart led walkouts and Black Friday protests in the years leading up to Walmart Inc.’s decision to increase its workers’ hourly wages. New York City recently enacted new pay standard laws with the intent of providing app-based ride-hail drivers a minimum level of pay per trip equivalent to $15 per hour after expenses by taking into account time spent on the road, distance traveled, and the extent to which drivers are utilized and spend time with passengers. And at the federal level, an executive order increasing the minimum wage to $15 an hour for federal contractors was enacted in the beginning of the Biden administration’s tenure in 2020.
Expanding minimum wage laws are essential for the growth of our economy, for racial, ethnic, and gender equity, and for the dignity of workers. The demand made by workers more than a century ago reverberates today, and the words on their banner still ring true: “We Want Bread and Roses Too.”
The Washington Center for Equitable Growth has long prioritized the generation of new research on the economic effects of paid family and medical leave in the United States. This line of research shapes our understanding of how family economic security is critical to fostering both short- and long-term economic growth.
As such, Equitable Growth seeks to translate and connect this academic evidence directly with the policymakers and stakeholders contemplating a national paid family and medical leave system. Over the years, through a series of blog posts, research reports, and factsheets, as well as expert convenings, we have been a bridge between the academic and policymaking communities looking to bolster U.S. family economic security.
This commitment culminated in 2020 and 2021 when Equitable Growth awarded more than $380,000 in funding to scholars seeking to fill in existing paid leave research gaps and answer emerging questions prompted by the coronavirus pandemic—including a new report on private-option paid leave plans, published by researchers at Boston College Center for Retirement Research today.
Equitable Growth is proud of the long history of research contributions our network of grantees and scholars have made to the area of paid family and medical leave policy. Some highlights from recent years include funding research that fills gaps on caregiving and medical leave and the response of employers, examines the role paid leave as a public health and economic support during the coronavirus pandemic, and details policy design options and a blueprint for future research on paid leave. Let’s look at each area in turn.
Filling research gaps on caregiving and medical leave and employer responses
In 2019, Equitable Growth released its first ever Request for Proposals on a specific issue area, seeking research on medical leave, caregiving leave, and employer responses to paid leave programs. This RFP resulted in approximately $250,000 in grant funding awarded to four research teams, including:
In their paper, “The association of paid medical and caregiving leave with the economic security and wellbeing of service sector workers,” Julia Goodman of Portland State University School of Public Health and Daniel Schneider of Harvard University find that service-sector workers who could take needed paid medical or caregiving leave experienced significantly lower rates of economic insecurity and reported better personal well-being than those who could not take needed leave. Importantly, workers who took unpaid leave reported similar levels of economic insecurity and well-being as workers who took no leave at all.
Temple University’s Catherine Maclean, Stefan Pichler of ETH Zurich, and Cornell University’s Nicolas Ziebarth continued to develop their research agenda on sick leave with the paper “Mandated Sick Pay: Coverage, Utilization, and Welfare Effects.” In addition to finding only small costs associated with providing sick leave, which are potentially offset by gains in productivity, the authors find no evidence that sick leave policies “crowd out” or otherwise discourage employers from providing family leave, medical leave, or voluntary benefits.
In a paper titled, “The Role of Paid Family Leave in Labor Supply Responses to a Spouse’s Disability or Health Shock,” George Mason University’s Priyanka Anand, Texas A&M University’s Laura Dague, and Marquette University’s Kathryn Wagner explore how access to caregiving leave can impact an individual’s labor supply decisions in the aftermath of a spouse’s disability or health shock. They find that spouses of people with serious health conditions living in states with paid caregiving leave programs reduce their work hours less than similar spouses in states without these programs, suggesting that paid leave can mediate the long-term labor effects of negative health shocks among family members.
All the recipients of these paid leave research grants, including those teams still finalizing their results, are filling in critical research gaps in the literature around medical and caregiving leave—two highly used but understudied benefits—as well as employer responses to such programs.
Examining paid leave as a public health and economic support during the COVID-19 pandemic
The rapid spread of the novel coronavirus and COVID-19, the disease caused by the virus, as well as the resulting school and child care closures, employment furloughs, and caregiving disruptions, placed renewed emphasis on paid family and medical leave as a tool for preserving families’ economic stability and managing unexpecting caregiving and health crises.
Motivated by the early spikes in state paid leave applications at the start of the pandemic, along with the first-ever federal emergency paid leave program, enacted through the Families First Coronavirus Response Act, Equitable Growth awarded $100,000 in research grants to study how these programs addressed the needs of workers and affected the U.S. economy during this public health crisis.
Equitable Growth looks forward to disseminating these results to policymakers and stakeholders seeking to learn from the nation’s first emergency paid leave program and the experience of state programs in this unique public health and economic crisis.
Exploring policy design options and providing a blueprint for future paid leave research
Equitable Growth supported the Boston College Center for Retirement Research and authors Laura Quinby and Robert Siciliano on the release of a new report, “Implications of allowing U.S. employers to opt out of a payroll-tax-financed paid leave program.” This paper sets the stage for empirical research on a more specific, but no less important, paid leave policy design question: Should employers be allowed to opt out of a national paid leave system (and related payroll tax) if they provide workers with private benefits at least as generous as the national program?
This report prepares for future research on a payroll-tax-funded program, as opposed to one funded by general revenue. Indeed, the authors consider the questions posed in the report as largely moot under a general revenue model, as employers will have little incentive to opt-out without the tax. The report does not offer predictions about policy proposals that are currently under consideration, but it is an important resource for researchers interested in understanding the economic forces that, theory predicts, can affect employers’ decisions around opting out of payroll-tax-financed programs, including paid leave.
Using insights from economic theory, the report proposes a conceptual framework for predicting which employers would tend to opt out of a national payroll-tax-financed program. The authors then apply the framework to the heuristic example of temporary disability insurance for unanticipated medical conditions to illustrate the circumstances under which employers may choose to opt out of a public paid leave program.
The report’s authors present several factors that complicate the application of this framework to real-world comprehensive paid family and medical leave programs, presenting a series of puzzles for researchers that are as interesting as they are complex. First, why have existing state paid leave systems not experienced the level of opt-out that the framework might predict? Second, what are the basic economic forces driving low employer provision of paid family and medical leave—particularly parental leave—absent a government policy?
The paper closes with a roadmap for future researchers interested in studying these questions and more. The authors lay out promising data sources and methods that could help unravel some of the questions posed in the report. Altogether, the report is poised to generate conversation among economists and social scientists curious about public-private interactions in a federal paid leave system.
Supporting new research in 2022 and beyond
Equitable Growth is proud to support these researchers and others in generating much-needed evidence for the policymakers considering these issues. To review paid leave research we have supported and browse additional resources on this topic, please see the Paid Leave page on our website. The Washington Center for Equitable Growth is always eager to support high-quality and novel research on paid family and medical leave, but in 2022 we are turning our focus to some new research priorities, including child care and early education, income supports, and the economic consequences of climate change and racial and gender discrimination. Researchers interested in learning more about these and other funding priorities are encouraged to review Equitable Growth’s 2022 Request for Proposals or contact grants@equitablegrowth.org for more information.
Almost six decades ago, the U.S. government enacted a series of landmark laws and regulations that advanced equal pay protections, protected against workplace segregation, and made it illegal for employers to discriminate against workers on the basis of sex, race, color, national origin, or religion. In addition, it created what continue to be the two main agencies responsible for the enforcement of federal anti-discrimination efforts—the independent U.S. Equal Employment Opportunity Commission and the Office of Federal Contract Compliance Programs within the U.S. Department of Labor.
These two agencies are charged with removing barriers to employment opportunities, promoting the creation of fair and equitable jobs ladders, and pushing against workplace segregation—primarily through the enforcement of anti-discrimination protections. Historically, both the new commission and the new agency played key roles in improving the labor market standing of historically marginalized workers, especially between the late 1960s and early 1980s, when affirmative action and federal anti-discrimination laws led to the better representation of women workers and workers of color in both the overall U.S. workforce and in well-paying occupations. These groups of workers were able to access more and better jobs while gender and racial earnings divides narrowed.
Yet even as anti-discrimination laws and U.S. labor market institutions led to important progress toward more fair and equitable labor market outcomes, employment discrimination continues to be a pervasive feature of the U.S. economy today. Insufficient funding and vulnerability to political whims often keep these two federal agencies from protecting workers against unfair treatment at work, and structural power imbalances in the country’s employment relations severely inhibit the effective enforcement of civil rights.
Workplace discrimination harms the workers who experience it, exacerbates structural and longstanding inequities in the U.S. labor market, and holds back economic growth and dynamism. As a result of these continuing practices by employers, millions of workers continue to face discrimination and remain vulnerable to unfair, inequitable, and often illegal workplace practices. Especially at risk are mostly low-income U.S. workers who must deal with employers who flout U.S. labor market laws and regulations, and engage in harassment, taking advantage of structural racism and sexism that limit outside options and economic security for workers of color, women workers, and, in particular, women workers of color such as Black women and Native American women. This due to racial and ethnic and gender economic stratification stretching back centuries. Until this “double gap” is closed, the U.S. economy will remain inequitable, and equitable economic growth that is sustainable will remain out of reach.
This issue brief reviews the academic research on how anti-discrimination policies affect the life and economic outcomes of these historically marginalized groups of workers, the barriers that prevent government agencies from effectively protecting workers against unfair treatment in employment, and the policy solutions that can advance compliance with civil rights to achieve a more equitable labor market. Briefly, those policy solutions are to:
Increase compliance with anti-discrimination laws and regulations by substantially increasing funding for the federal enforcement agencies so they can do their jobs
Address gaps in anti-discrimination laws that exclude some of the most vulnerable workers and undermine their effectiveness, particularly for those who work for employers with fewer than 15 employees and are excluded from anti-discrimination enforcement
Expand protected traits under anti-discrimination protections to include more characteristics associated with protected racial and religious groups
Invest in robust income support infrastructure that improves outside options of finding new employment to ensure workers and families are protected against negative income shocks, including the loss of jobs or forms of retaliation in the face of employment discrimination
But first, let’s turn to the history of anti-discrimination laws and practices to understand how policy solutions to today’s illegal practices are embedded in our existing U.S. labor laws and labor market institutions. The tools to create more equitable and safe workplace environments for all U.S. workers are already crafted, albeit with limitations at their inception—they just need to be updated for 21st century workplaces and wielded again for the good of all workers to achieve a more robust and equitable economic growth.
The creation of the two federal government agencies responsible for enforcing anti-discrimination laws and regulations
Throughout the 1960s and 1970s, the U.S. Congress passed a number of landmark pieces of legislation with the objective of advancing anti-discrimination protections in employment.1 The Equal Pay Act of 1963 made it illegal for employers to pay men and women different wages for equal work, including safeguards against retaliation for anyone who filed an equal pay claim. The following year, Title VII of the Civil Rights Act of 1964 outlawed workplace segregation and discrimination by race, color, religion, sex, or national origin.2
In addition, Title VII introduced the principle of equal opportunity to all phases of employment, banning discrimination in hiring, firing, promotions, training, wages, and benefits. A year after the enactment of the Civil Rights Act, the federal government created the independent Equal Employment Opportunity Commission to oversee compliance with Title VII.
Although the Equal Employment Opportunity Commission originally did not have the authority to sue employers for civil rights violations, it could investigate and mediate charges of employment discrimination. The commission also issued guidelines, made technical studies, and required larger employers to submit annual reports on the racial, ethnic, and gender composition of their workforce.
That same year, President Lyndon Baines Johnson signed Executive Order 11246, which established the Office of Federal Contract Compliance Programs at the U.S. Department of Labor and banned federal contractors and subcontractors from discriminating against applicants or employees. The mandate also required contractors to “take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex, or national origin.”
Specifically, Executive Order 11246 required federal contractors to develop affirmative action plans, set goals, and make good-faith efforts to address any underrepresentation of women and people of color in their workforces and among higher-level positions.
Over the following decades, both of these federal agencies were given greater enforcement powers.3 In addition to overseeing compliance with Title VII, the Equal Employment Opportunity Commission is now responsible for enforcing the Equal Pay Act, as well as for enforcing the laws that ban discrimination on the basis of disability, age,4 or genetic information.5 The commission’s key responsibilities include investigating and mediating charges of discrimination, filing lawsuits against employers or labor organizations thought to be in violation of Title VII, securing compensation for victims of unfair treatment at work, and conducting outreach to educate both workers and employers about their rights and responsibilities under federal anti-discrimination law.
Likewise, in the late 1970s, the responsibility for enforcing affirmative action obligations among federal contractors was consolidated in the Office of Federal Contract Compliance Programs. The agency, which currently covers about 25 percent of the U.S. workforce, is in charge of ensuring that employers doing business with the federal government comply with anti-discrimination laws by reviewing contractors’ affirmative action plans, investigating discrimination claims, conducting audits, and obtaining financial relief for employees and job-seekers who have suffered unfair treatment.
Affirmative action and anti-discrimination laws initially led to a more integrated U.S. labor market by race, ethnicity, and gender
Federal anti-discrimination laws and regulations played an important role in improving the employment and occupational standing of historically marginalized workers between the late 1960s and the turn of the 21st century. When examining the effect of equal opportunity protections on the private sector, a team of scholars found that U.S. workplaces were extremely segregated in the mid-1960s. In 1966—the first year the Equal Employment Opportunity Commission collected data on the employment and occupational composition of U.S. workplaces by race, ethnicity, and gender—about half of reporting establishments did not have any Black men as employees.6 More than 70 percent did not employ any Latino men or Black women, and 85 percent did not employ any Latina women. At least 90 percent of reporting business establishments did not employ Asian American men or women.
But in the decades that followed, this kind of segregation fell. Donald Tomaskovic-Devey at the University of Massachusetts Amherst and Kevin Stainback at Purdue University demonstrate that as the enactment of the Civil Rights Act increased political and social pressure to integrate workplaces, many workers were able to hold jobs in establishments from which they had previously been excluded. As such, by the early 2000s, almost 80 percent of reporting establishments employed Black men, 72 percent employed Black women or Latino men, 65 percent employed Latina women, and 55 percent employed Asian American men or women.
Overall, then, by 2002, nearly all establishments that report data to the Equal Employment Opportunity Commission employed at least one worker of color.
Affirmative action also helped reduce segregation in employment. The evidence shows, for instance, that especially during the 1970s and early 1980s, the share of Black and Native American workers increased more in firms subject to affirmative action obligations than in otherwise-similar firms. In addition, when studying the effects of the policy, Conrad Miller at the University of California, Berkeley’s Haas School of Business found that 5 years after an establishment becomes a federal contractor or subcontractor, the share of its employees who are Black rises by an average of 0.8 percentage points.
Miller shows, moreover, that the Black share of employment continues to rise even as a firm stops being a federal contractor, proposing this happens because employers makes investments and changes to their screening and hiring practices that persist even after they are no longer subject to affirmative action regulations.
As the anti-discrimination legislation of the mid-1960s removed most formal barriers to education and employment opportunities, many historically marginalized workers also were able to access higher-paying jobs. Research by Fidan Ana Kurtulus at the University of Massachusetts Amherst shows that affirmative action played a role in the occupational advancement of Black men and women, Latina women, and White women by creating new pathways for these workers to move up the career ladder and access managerial, professional, and technical positions.
Access to more and better jobs, in turn, contributed to narrowing wage divides in the U.S. labor market. There is evidence, for example, that as the 1972 Equal Employment Opportunity Act extended coverage of anti-discrimination protections under Title VII of the Civil Rights Act to businesses with 15 or more employees instead of the previous 25 or more employees, the share of Black men in well-paying jobs rose, and the earnings gap between Black and White men narrowed.7
Similarly, a team of scholars finds that the Equal Pay Act of 1963 and the Civil Rights Act of 1964 set in motion the passage of other anti-discrimination laws and protections that, together, narrowed the pay gap between men and women. Yet amid these advancements in more equitable workplaces across the nation, there also were signs that progress was slowing in the last two decades of the 20th century.
Progress toward a more fair and equitable U.S. labor market slowed beginning in the 1980s
What’s more, the Equal Employment Opportunity Commission and the Office of Federal Contract Compliance Programs responsible for enforcing anti-discrimination laws and affirmative action mandates became less and less effective at driving workplace integration and fostering employment opportunities for protected classes. There is evidence, for example, that the positive effect of affirmative action in the employment and career advancement of workers of color and women workers weakened substantially during President Ronald Reagan’s two terms in office.
The reason, several scholars argue, is that the political commitment to affirmative action dwindled as the Office of Federal Contract Compliance Programs came under new leadership. Indeed, the Reagan administration tried and failed to revoke Executive Order 11246 and, amid the effort and afterward, continued to oppose serious enforcement of the affirmative action statutes and regulations. And so, during the 1980s there was a decline in the number of sanctions issued for noncompliance, fewer firms were required to adopt affirmative action plans, and compliance reviews rarely found that women workers or workers of color were unfairly underrepresented in contractors’ workforces.
Something similar happened with the oversight of civil rights under Title VII. The Equal Employment Opportunity Commission was given greater enforcement powers and responsibilities throughout the 1970s.8 But in the 1980s, the agency was overwhelmed by both a massive increase in the number of charges it needed to process and a budget shortfall that forced it to reduce its staff.
To be sure, the Equal Employment Opportunity Commission has struggled with capacity constraints and a backlog of unresolved charges through most of its history. But the early 1980s marked an inflection point for the agency, after which it experienced a consistent decline in personnel that continued unabated over the past 40 years.
Federal anti-discrimination enforcement agencies often lack the tools to protect workers against employment discrimination
The work of the Equal Employment Opportunity Commission and the Office of Federal Contract Compliance Programs definitely allowed many workers to hold jobs that they were previously kept from holding due to discrimination, as well as to have stronger protections against unfair treatment at work. Yet insufficient funding, understaffing, and issues embedded in the institutional design of the two federal anti-discrimination enforcement agencies often keep them from ensuring compliance with anti-discrimination laws and regulations.
A large share of U.S. workers today report facing employment discrimination. According to a recent survey by the job search-and-evaluation company Glassdoor Inc., more than 60 percent of employees have either experienced or witnessed discrimination at work. Similarly, the 2016 General Social Survey found that just less than 20 percent of U.S. adults had faced discrimination in a job application, a pay bump, or a promotion in the previous 5 years.
By one estimate, 26 percent of Black workers and 15 percent of Latino workers are treated unfairly at work because of their racial or ethnic background. An AARP study found that 64 percent of older women and 59 percent of older men experience workplace discrimination because of their age. Just less than half of LGBT workers have experienced unfair treatment at work, according to a recent study by the Williams Institute at the University of California, Los Angeles.
The vast majority of cases of workplace discrimination, however, are not reported. Very few cases of discrimination are brought forth within workplaces, and even fewer are reported with government enforcement agencies. By one estimate, less than 1 percent of the workers who experience any kind of unfair treatment on the basis of sex, race, or another protected characteristic file a formal charge.
And according to the Center for Employment Equity at the University of Massachusetts Amherst, of the 5 million employees who experience sexual harassment at work every year, fewer than 10,000—or about 0.2 percent—file charges with either the federal Equal Employment Opportunity Commission or state Fair Employment Practices Agencies. (See Figure 1.)
Figure 1
One important reason why workers do not report cases of employment discrimination is the threat of retribution or retaliation, where a worker is fired, demoted, or harassed for opposing discrimination or filing a complaint. This fear is far from unfounded. An analysis of charges filed with the Equal Employment Opportunity Commission between 2012 and 2016 found, for instance, that almost 2 in 3 workers who filed a complaint with the agency eventually lost their jobs.
Then, there’s the official data that show in fiscal year 2019, more than half of all discrimination claims received by the Equal Employment Opportunity Commission—54 percent—were charges of retaliation.9 The next most common types of discrimination claim were for disability, race, or sex-based discrimination. (See Figure 2.)
Figure 2
For those relatively few cases that are reported to a federal or state government enforcement agency, the probability that the worker receives some form of relief is also small. According to an analysis by The Washington Post and the Center for Public Integrity, out of the more than 1 million discrimination complaints workers filed with the Equal Employment Opportunity Commission or state Fair Employment Practices Agencies between fiscal years 2010 and 2017, only in 18 percent of the cases did these workers either receive a monetary compensation or experience a change in work conditions. Claims of racial discrimination have the lowest success rates—15 percent end with the claimant receiving some form of relief.
These failures are, in large part, because the Equal Employment Opportunity Commission and the Office of Federal Contract Compliance Programs have long suffered from inadequate funding and staffing, hurting the agencies’ capacity to effectively protect workers against discrimination. A 2018 survey of federal workers found, for instance, that 45 percent of Equal Employment Opportunity Commission staff do not think they have enough resources to do their job, compared to 36 percent of employees across federal agencies.
Indeed, while the U.S. workforce had 60 million more employees in February 2020 (before the coronavirus recession began) than it did in 1980, the Equal Employment Opportunity Commission receives roughly the same resources, after adjusting for inflation, as it did four decades ago. In fiscal year 2020, the agency employed only 1,939 workers—a 43 percent drop from fiscal year 1980. (See Figure 3.)
Figure 3
The effective enforcement of anti-discrimination laws is essential to foster equitable U.S. labor market outcomes and promote broadly shared economic growth
Here is what research shows about discrimination in hiring, firing, and promotions, as well as how harassment affects workers’ labor market outcomes.
Hiring
By outlawing discrimination in hiring, the Civil Rights Act of 1964 put the brakes on some of the most egregious forms of employment discrimination. Prior to the enactment of Title VII, job vacancy ads could be—and often were—explicitly discriminatory. Yet there is a robust academic literature finding that hiring discrimination on the basis of protected traits, such as age, sexual orientation, religion, gender, race, and ethnicity, continues today.
Here’s just one case in point: Field experiments—studies in which researchers send fictitious job applications to real job openings—conducted for several studies find that resumes with distinctively Black-sounding names are much less likely to be contacted by an employer than otherwise-identical resumes with White-sounding names. And then, there’s a meta-analysis of all field experiments conducted between 1989 and 2015, which found that White workers received, on average, 36 percent more callbacks than Black workers and 24 percent more callbacks than Latino workers.
Alarmingly, the authors of this meta-analysis also found that racial discrimination in hiring is about as prevalent now as it was in the late 1980s. Their study found no evidence that rates of hiring discrimination against Black workers had waned over the 26-year period, while hiring discrimination against Latinx workers fell only slightly.
Firing
Being fired is one of the most disruptive events a worker can experience. Workers who lose their jobs face lower job-finding rates when seeking new employment, are less likely to work as many hours as they did before, and experience a sharp drop in earnings that persists even after reemployment. Research also shows that while unemployed job-seekers in general are evaluated harshly when applying for a job, candidates who have been laid off are perceived as less competent than otherwise-similar unemployed job-seekers.
Some groups of workers are especially vulnerable to being laid off as general economic conditions deteriorate or businesses face trouble. There is compelling evidence that Black workers tend to be fired first as the economy contracts, as well as being more closely monitored than their White counterparts and therefore more likely to be fired for making a mistake.
Similarly, immigrant workers are more likely than U.S. citizens to involuntarily lose their jobs when a recession hits. A recent study using Equal Employment Opportunity data finds that—like other forms of discrimination—age-related firing and hiring claims increase during economic downturns. As such, discrimination in firing sets in motion a negative feedback loop in which workers belonging to one or more protected classes may be at higher risk of being laid off and therefore more likely to experience the negative consequences of losing a job.
Promotion
Discrimination in promotions keeps workers from moving up career ladders and holding positions that are a good match for their interests and skills. For the broader economy, one of the greatest contributors to the country’s racial, gender, and intersectional wage divides is the U.S. occupational structure that continues to be deeply segregated along the lines of race, ethnicity, and gender, and leaves some groups of workers especially exposed to economic shocks. Further, because occupational segregation sorts women and people of color—and women of color in particular—into lower-paying occupations, there is a persistent “double wage gap” faced by these women.
Scholars also find that Asian American women are less likely to reach positions of institutional power or to supervise big teams than otherwise-similar White women, and a team of researchers found that Black men are more likely to work in low-wage occupations and less likely to work in high-wage occupations than White men with the same level of formal education.
Discrimination in promotion also finds that these promotion divides have implications for broad economic dynamics. A team of researchers at the University of Chicago’s Booth School of Business and Stanford University find that as Black workers and women workers were increasingly able to pursue careers in professional and technical occupations, the better allocation of talent became a key driver of economic growth.
Harassment
Experiencing harassment—unwelcome conduct based on race, gender, sexual orientation, or another protected trait—is associated with worse mental and physical health outcomes, lower levels of job satisfaction, a decline in organizational commitment, and a drop in productivity. The Equal Employment Opportunity Commission considers workplace harassment illegal when “enduring the offensive conduct becomes a condition of continued employment, or the conduct is severe or pervasive enough to create a work environment that a reasonable person would consider intimidating, hostile, or abusive.”
The largest number of sexual harassment claims to the Equal Employment Opportunity Commission are filed by workers in the accommodation and food services and retail industries—sectors in which women of color are overrepresented and which are among the lowest-paying in the U.S. economy. Women are also especially likely to be victims of sexual harassment in men-dominated sectors such as construction.
Further, research by Matthew Knepper at the University of Georgia and Gordon Dahl at the University of California, San Diego find that during recessions, victims are less likely to report instances of sexual harassment with the Equal Employment Opportunity Commission. They argue this is the case because workers are more reluctant to face the threat of employer retaliation when the labor market is experiencing a downturn.
Policies to promote the effective enforcement of federal anti-discrimination laws
In the decades since the creation of the Equal Employment Opportunity Commission and the Office of Federal Contract Compliance Programs, progress against discrimination at work has been both real and uneven. Workplaces and occupations are much less segregated now than prior to the passage of the Civil Rights Act of 1964. In general and by most measures, gender and racial wage divides are narrower today than in the 1950s.
Yet historically marginalized workers continue to face both systemic employment discrimination and unfair treatment at work that ultimately contribute to economic inequality, lost talent, and constrained economic growth. Effective enforcement of anti-discrimination protections is a first step toward challenging systems that maintain racial and gender economic divides.
A first step to increase compliance with anti-discrimination laws and regulations is to substantially increase funding for federal enforcement agencies. The large number of discrimination complaints filed with the Equal Employment Opportunity Commission, its charge backlog, and its data collection responsibilities all highlight the need for Congress to allocate more resources for the agency. Doing so would not only prevent further personnel cuts but also ensure the commission’s budget is appropriate for the agency to effectively enforce the country’s anti-discrimination laws by, for example, hiring and training staff,modernizing its data-collection processes, and addressing pending complaints.
Second, policymakers should address gaps in anti-discrimination law that exclude some of the most vulnerable workers and undermine its effectiveness. Title VII does not apply to employers with fewer than 15 employees. Self-employed workers are also excluded from federal anti-discrimination laws. As a result, some of the most vulnerable workers in the U.S. economy—many domestic and agricultural workers, who are often employed as independent contractors or may not be currently documented—are excluded from Title VII protections.
The federal government could also follow states and municipalities that have expanded protected traits under anti-discrimination protections. For instance, New Jersey, California, New York City, and the District of Columbia all have expanded protections for workers based on hairstyle, which further protects U.S. workers based on mutable characteristics associated with a protected racial and religious group, such as dreadlocks or cornrows, where workers may be subject to additional scrutiny and discrimination based on racialized characteristics beyond a binary category of racial identity.
Third, enforcement agencies should use their resources to monitor industries and employers especially likely to violate anti-discrimination laws. Workplace discrimination is especially prevalent in lower-paying industries, among a relatively small number of employers, and tends to increase during economic downturns. This highlights the need for what Janice Fine, Jenn Round, and Hana Shepherd of Rutgers University and Daniel Galvin of Northwestern University call strategic enforcement—the targeting of high-violation sectors and the ramping up of enforcement powers during recessions to increase the cost of noncompliance.
Fourth, a robust income support infrastructure that improves outside options is a key complement to anti-discrimination policies. Social infrastructure programs, such as Unemployment Insurance, Temporary Assistance for Needy Families, and Medicaid, are essential to ensure workers and families are protected against negative income shocks, including the loss of jobs or forms of retaliation in the face of employment discrimination. These programs give workers facing unfair treatment—whether it be a hostile work environment or additional difficulty finding adequate employment due to discrimination—the economic security and time necessary to make decisions that are in their long-term interests, including reporting cases of discrimination.
In the case of sex discrimination, for instance, evidence suggests that workers facing less generous Unemployment Insurance benefits are less likely to report experiencing workplace sexual harassment. This suggests that fear of retaliation and the threat of economic insecurity play an important role in victims’ decisions to not raise instances of discrimination. Economic security outside of employment improves workers’ position to proactively address workplace discrimination.
Finally, few employers are held responsible for workplace discrimination, which is both a byproduct and a reflection of fundamental power imbalances in U.S. employment relationships, making policies that support organized labor and boost worker power essential for the effective enforcement of anti-discrimination protections. Labor unions often protect workers against discrimination by bargaining for pay transparency and fairness in promotions and hiring, narrowing gender and racial wage gaps, and establishing grievance processes.
More broadly, unions help foster and institutionalize norms of fairness and equity. Recent research by Paul Frymer at Princeton University and Jacob Grumbach at the University of Washington shows, for example, that when White workers become part of a union, their support for affirmative action, as well as for policies that benefit Black communities in general, increase.
By hurting the workers who experience it, employment discrimination deprives the overall economy of talent and dynamism. Federal anti-discrimination efforts were essential in creating a more fair, equitable, and dynamic labor market after the passage of the Civil Rights Act of 1964. Today, the effective enforcement of affirmative action and equal opportunity provisions can help narrow persistent and longstanding inequities in U.S. workers’ labor market outcomes that have diminished allocation of talent and held back workers from sharing in the economic growth to which they contribute. Lessening discrimination against workers is a basic building block of an equitable labor market.
—Carmen Sanchez Cumming is a senior research assistant at the Washington Center for Equitable Growth.
As technological advances seemingly reshape every aspect of how U.S. workers and their families live and work, a persistent question in research and policy discussions is how these advances will affect employment and the U.S. labor market in the years and decades to come. Employers could use automation and other advanced technologies to displace human labor or augment it to different degrees, replacing human labor or changing the nature of jobs without becoming a future without workers.
Ultimately, many factors affect how employers integrate technology into work, including the policy landscape and economic incentives. Likewise, many factors affect what impacts technology will have on the U.S. labor market, on working conditions, and on worker power. There remains more work to be done to understand how policymakers can shape the future of the U.S. labor market to ensure gains from technological integration can foster broadly shared growth.
This issue brief will first examine the factors shaping employers’ use of new technologies in workplaces, which is often driven by factors other than clear-cut efficiency and productivity gains. Then, it will look at the expanding role of automation technologies in workplaces and what that means for workers. The issue brief then closes with a look at how employers’ use of automation, artificial intelligence, and other advanced technologies could have different impacts on workers and society, and even improve working conditions and worker power.
How policy shapes employer decisions around the implementation of automation technologies
Many studies attempt to quantify how exposed different kinds of jobs are to technologies such as automation, computerization, or artificial intelligence. These predictions are often based on whether physical or cognitive tasks are “routine” and can be replicated by robots, digital processes, or increasingly sophisticated prediction algorithms. For instance, one commonly cited 2013 report from the University of Oxford suggested that almost half—47 percent—of jobs in the United States were at “high risk” of automation in the near future, “perhaps over the next decade or two.”
Researchers often estimate these possible outcomes by using data on tasks within occupations, as categorized by the Occupational Information Network, or O*NET, database. They use this database to label different tasks as more or less automatable or otherwise vulnerable to technological displacement, and then examine levels or trends within and across occupations over various time horizons.
Much more often than not, the focus on how exposed jobs are to new technologies may carry with it the implicit assumption that automation provides an incontrovertible business advantage—that automation will always produce an equivalent product, or even a superior one, and at a lower cost—and that displacement of human workers is ultimately inevitable. These assumptions are tied to what data journalist Meredith Broussard describes as technochauvinism, or “the belief that technology is always the solution.” Yet in many cases, the role of technology in these scenarios is not to produce a higher-quality product or service, or to increase efficiency. Rather, automation—the replacement of human labor with machines—becomes an end in itself.
As economists Daron Acemoglu at the Massachusetts Institute of Technology and Pascual Restrepo at Boston University discuss in a 2019 paper, the development of technologies that replace rather than complement humans is ultimately a choice. They posit that over the past 20 years in particular, automation technologies—those designed to replace human labor completely—were developed relatively faster, compared to technologies that complement human labor or create new labor-intensive tasks.
Acemoglu and Restrepo write that “our results suggest that it is the combination of adverse shifts in the task content of production—driven by accelerated automation and decelerating reinstatement—and weak productivity growth that accounts for the sluggish growth of labor demand over the last three decades and especially since 2000.”
The automation of human labor is not new, and it has had varying effects on U.S. employment and the U.S. labor market. For instance, a working paper examining the effects of electrification on U.S. manufacturing from 1890 to 1940 shows that electrification drove significant and long-lasting labor productivity gains, but employment effects were mixed. The researchers find that employment grew only in counties with small firms, but not in counties with large firms. They find the types of jobs changed, too. Within manufacturing, more complex craftsman occupations declined, and more routine production jobs rose. Within office work, routine clerical jobs declined, and professional and technical occupations increased.
Employment effects can also change over time. A working paper by economists James Feigenbaum at Boston University and Daniel P. Gross at Duke University on AT&T’s adoption of mechanical switching technology between 1920 and 1940 finds that the then-current telephone operators not only lost their jobs due to this automation, but also were more likely to be in lower-paid occupations or to have left the labor force entirely a decade later. But the two researchers also find that for new cohorts of workers who otherwise may have entered into this profession, “the decline in demand for operators was counteracted by growth in both middle-skill jobs like secretarial work and lower-wage service jobs, which absorbed future generations.”
Is today’s technological moment different? And if so, why? Researchers have come to different conclusions on this point, but Acemoglu and Restrepo’s analysis suggests that in recent decades, the labor-saving shifts from automation are no longer offset by new task creation or other impacts that increase demand for labor elsewhere. In addition, and in contrast to previous eras of technological change, they find that this accelerating shift to automation has not been accompanied by a similarly large rise in productivity.
Instead, employers have displaced workers with “so-so” technologies—such as automated customer service options or self-checkout kiosks—that provide a similar, or even inferior, service, compared to the human labor they displaced, and deliver only minor savings to the employers, if any. In Redesigning AI, Acemoglu writes that the current path of innovation in automation and artificial intelligence harms not only the displaced workers but also society as a whole, both through these labor market effects and through other negative externalities, such as the focus on AI-driven mass surveillance technologies.
This kind of research into the future of work provides further evidence that employer decisions around how to implement new technologies and their broader effects on individual workers and labor markets are not predetermined, but rather are intertwined with the policy, regulatory, and economic environment in which these jobs exist. Acemoglu and Restrepo, in their analysis, posit that this trend to “excessive” automation may be due to more structural factors that incentivize automation, such as a system that taxes capital such as machines and software at a much lower rate than labor.
The ‘human infrastructure’ underlying automation
Another complication in discussions of automation is that employers often use technology not simply to replace human input, but also to reorganize work and shift costs and risks away from their firms. In a report for the nonprofit research organization Data & Society, researchers Alexandra Mateescu and Madeleine Clare Elish explain that, crucially, employers often reconfigure work in ways in ways that render the labor invisible.
One example they discuss is the use of self-service kiosks in grocery stores, a common example of a labor-reducing technology. These kiosks, however, actually shift much of the labor from previously paid workers to current unpaid customers and yet, at the same time, create a new role for some employees to monitor, assist with, and troubleshoot the customer’s work.
As with many seemingly automated technologies, this “human infrastructure” is often invisible to customers, even though it is vital for the automation to function. Indeed, as Mateescu and Elish write, “the intelligence or autonomy of machines is made possible through the obfuscation of attendant human labor.”
This erasure is present in the very labor that makes artificial intelligence possible. Anthropologist Mary L. Gray and computational social scientist Siddharth Suri at Microsoft Research discuss this dynamic in their book, Ghost Work. They describe how workers all over the world perform “high-tech piecework” on Mechanical Turk and other distributed microwork platforms that invisibly shape and guide seemingly “autonomous” systems, often under poor working conditions and for extremely low pay.
Human workers play many roles in these seemingly automated processes. Some of them produce the training data that AI systems learn from, and others are often used as a final step of quality control. Some of these human workers may be even used to substitute for AI output altogether.
Associate professor at Georgetown Law Brishen Rogers explains that employers use data-driven technologies, including artificial intelligence and algorithmic management, both to de-skill work and undermine worker power, driving down job quality but also often resulting in a less efficient processes or lower-quality outputs. As a result, employers often use technology to reduce demand for cognitive skills and redistribute tasks among multiple, lower-paid workers. This happens despite claims that the use of advanced technologies necessarily leads to a higher demand for college-educated workers—and that the United States and other countries are now facing a “skills gap” and an inadequately educated workforce.
This redistribution and reorganization of work and tasks has had harmful effects on low-wage workers through declining job quality and economic mobility. And while many automation discussions focus on potential future impacts on production and service roles, automation processes are already widespread in many industries in the form of algorithmic management. In “Data and Algorithms at Work: The Case for Worker Technology Rights,” Annette Bernhardt, Lisa Kresge, and Reem Suleiman at the University of California, Berkeley Labor Center explain that employers’ use of data-driven systems can significantly harm workers through a variety of channels, including enabling discrimination and through health and safety harms from intense rates of work, along with losses of privacy and autonomy.
The use of data and algorithms can also harm workers and job quality through de-skilling and fissured work arrangements, leading directly and indirectly to job loss and lower wages. Algorithmic management and workplace surveillance are also used to reduce worker power, or to explicitly undermine employee attempts to organize.
Though automated processes are often seen as “neutral” or “data-driven,” algorithms actually codify management decisions—but in a way that makes them both inflexible and opaque. The introduction of AI and other technologies in management, in the words of Pauline Kim at the Washington University in St. Louis School of Law and Matthew T. Bodie at the Saint Louis University School of Law, “may bring employees a vortex of massive information collection, data vulnerability, and seemingly whimsical decision-making.”
Workers thus find themselves evaluated by a faceless system they can neither see nor challenge, as Aiha Nguyen describes in a recent report for Data & Society. And these workers often cannot appeal if they are punished or fired as a result. In addition to the more immediate harms to workers, Nguyen says this dynamic “creates a tremendous and invisible power imbalance between workers and companies.”
The use of technology in managing workers also introduces new avenues to deepen discrimination and differential harms throughout workplace processes. Though technology is often viewed as a way to reduce or eliminate discrimination, all technology is created by and within existing structures of power, as Princeton University African American studies professor Ruha Benjamin writes in her 2019 book, Race After Technology. “These tech advances are sold as morally superior because they purport to rise above human bias,” she writes, “even though they could not exist without data produced through histories of exclusion and discrimination.”
For instance, many companies use technology to monitor, measure, and predict workers’ performance and output, as well as to prevent and audit security or safety concerns. Technologies that incorporate facial recognition, voice recognition, so-called emotional recognition, and other technologies related to worker biometrics can treat workers differently based on race, ethnicity, gender, age, disability status, or other factors.
Another avenue of algorithmic discrimination with potentially far-reaching impacts on labor markets and economic inequality is in hiring processes. Employers increasingly use digital hiring technologies and third-party platforms to recruit, filter, evaluate, and process large volumes of applications. Within the “black box” of an employers’ hiring process, the use of predictive and automated processes “both facilitates and obfuscates employment discrimination,” as described by Ifeoma Ajunwa, professor of law at the University of North Carolina School of Law.
Rather than treating algorithmic bias in hiring processes as a purely technical issue that can be addressed through better data and algorithms, Ajunwa explains that these technologies expose how the hiring process is already vulnerable to bias “due to an American legal tradition of deference to employers, especially allowing for such nebulous hiring criterion as ‘cultural fit.’”
As employers use digital hiring technologies to process large volumes of applications, these “nebulous” hiring criteria can even become systematically elevated or codified, such as requiring unnecessary degrees or disqualifying respondents based on personality tests. These often unexamined practices not only create and deepen discrimination and bias, but also advance credentialism and hinder effective job matches.
Automation technologies could improve working conditions and worker power, but the policy landscape needs to change
The process of technological innovation and job displacement has always been part of labor markets, but today, as in the past, this process does not have a “natural” or preordained endpoint. Researchers and policymakers can learn from the past and examine the policy and economic contexts of the present to help build future workplaces where workers and society at large benefit. Technological integration that allows for—and encourages—broadly shared growth can allow for improved social welfare, alongside increased productivity and innovation.
Equitable Growth’s 2022 Request for Proposals highlights some of the key research areas that can inform this path going forward. For instance, while automation’s presence is often more visible and more studied in the context of industrial robots and manufacturing, employers’ use of technology is affecting workers in a wide variety of ways, including through algorithmic management. Yet these types of uses—and their impacts—can be more difficult to observe and quantify, making them less visible in economic research and in policy debates.
New research in economics, sociology, and other fields can explore the various ways that automation and other technologies affect workers, from job quality to bargaining power, and ensure workers’ experiences are present in policy discussions. Research can also explore how employers make decisions about how to use technology in work processes, both historically and in the present, and how factors such as worker power and regulatory and policy landscapes affect these decisions.
Employers’ actions around integrating technology can, in turn, have broader effects on labor market dynamics and labor market flows, as well as the organization of work and the workplace. Future research can explore these impacts and whether employers are adopting technology to increase productivity or to entrench power dynamics. In short, automation technologies, better understood and supported by a shift in the policy landscape, could improve working conditions and worker power.
There is a growing recognition among policymakers in Washington that something must be done to address the ever-widening U.S. wealth divide, which is especially dramatic when broken out by race. The average White household’s wealth is 10 times greater than that of the average Black household. The Build Back Better Act, currently pending before the U.S. Senate, attempts to address these disparities by investing in social infrastructure and climate mitigation while raising taxes on millionaires. (See Figure 1.)
Figure 1
But without a tax that gets at accumulated wealth, today’s robber barons—those ultra-wealthy Americans who saw their assets balloon during the coronavirus recession and current economic recovery—will largely escape the more traditional tax increases included in the current version of the Build Back Better Act (as well as the otherwise-progressive U.S. tax system more generally). A new proposal from Sen. Ron Wyden (D-OR), dubbed the Billionaires Income Tax, seeks to rectify this oversight by targeting unrealized capital gains, or the millions (and sometimes billions) of dollars’ worth of stocks and other assets—such as real estate, cryptocurrency, and artwork—that these individuals hold. These assets are heavily concentrated among high-income households in the United States, while labor earnings are more common for less well-off families. (See Figure 2.)
Figure 2
The Billionaires Income Tax is estimated to raise $557 billion over 10 years, which means it could pay for a substantial amount of the $1.7 trillion worth of economic growth-enhancing programs in the Build Back Better Act.
The rich also use several mechanisms and loopholes written into the tax code to cement their socioeconomic status for generations. A study published earlier this year exposed the many ways in which the ultra-wealthy avoid paying their fair share in taxes. They are able to do this because the tax code treats income from wealth differently from wage income. This enables the richest Americans to evade taxes—for decades or even forever—by holding onto their assets indefinitely, borrowing against those assets tax-free, and then passing them on to their heirs, also largely tax-free.
So, how would the proposed Billionaires Income Tax work? Sen. Wyden’s plan would use mark-to-market accounting to tax roughly 700 of the wealthiest people in the country, only covering those individuals with more than $1 billion in assets or $100 million in annual income for 3 consecutive years.
Mark-to-market, or accrual, taxation, is akin to a wealth, or net worth, tax since the tax is based on the value of a taxpayer’s total assets, though calculated by looking at the change in value of those assets each year rather than the total value. The tax would ensure that investors pay taxes on the increase in the value of their investment income, such as stocks, each year—rather than the current system in which investors only pay tax when they sell the underlying asset, otherwise known as deferral.
This means that all affected taxpayers would have to report investment gains as income for the year in which the gains accrue; conversely, they would also be able to take tax deductions for investment losses. For hard-to-value, nontradable assets such as real estate or artwork, the tax bill would still only come due upon sale, but the taxpayer would face a “deferral recapture charge,” which amounts to interest on the tax that was deferred prior to selling the asset—a way to ensure the delay in taxation is not financially advantageous.
Mark-to-market taxation essentially eliminates the preferential treatment that capital gains receive under the current tax code, compared to wage income or interest income, though under Sen. Wyden’s proposal the long-term capital gains rate that billionaires would pay—23.8 percent—would still be lower than the top ordinary income rate of 37 percent. (See Figure 3.)
Figure 3
Importantly, Sen. Wyden’s proposal includes efforts to ensure there is no avoidance or abuse of the policy, so that those affected will not be able to game the system as they currently do.
Several studies already document the various economic benefits of imposing a tax on wealth, in addition to raising revenue to finance government investments and curbing ever-expanding inequality, which constricts economic growth. One study shows that wealth taxes can increase efficiency and aggregate productivity across the U.S. economy. Research also shows that lowering the top tax rates can actually slow overall income growth and decrease U.S. labor supply, contrary to neoclassical economic theory. Another study finds that high top tax rates are correlated with higher economic growth for most Americans.
A tax on wealth boasts the support of many economists and legal experts, several hundred of whom recently signed onto a letter in support of the Billionaires Income Tax proposal. A total of 219 economists and law professors—including Equitable Growth’s Director of Labor Market Policy and interim chief economist Kate Bahn and several of our grantees—detailed why they are in favor of this proposal and the constitutionality of implementing it. They write that:
Letting billionaires skip out on the income tax is unjust to the ordinary taxpayers who must ultimately foot the bill … undermines perceptions of fairness, weakens the public’s faith in the overall tax system, and erodes the public’s confidence in government. Beyond that, [it] causes serious harm to the economy.
Policymakers in Washington should heed the evidence. The Billionaires Income Tax would provide funding for essential social infrastructure programs that will work to ensure strong, stable, and broad-based economic growth and support working families in the United States, and begin to address the vast disparities in income and wealth that pervade the U.S. economy and society today.
Equitable Growth is committed to building a community of scholars working to understand how inequality affects broadly shared growth and stability. To that end, we have created the monthly series, “Expert Focus.” This series highlights scholars in the Equitable Growth network and beyond who are at the frontier of social science research. We encourage you to learn more about both the researchers featured below and our broader network of experts. If you are looking for support to investigate the intersection of technological change and economic inequality and growth, please see ourcurrent Request for Proposals.
The adoption of new technologies always affects how people work, but the possibilities posed by increasingly advanced artificial intelligence, automation, and robotics is spurring new questions about whether new technologies will lead to a seismic shift in the landscape of jobs and work in the United States and abroad. The choices employers make over how to implement new technologies could lead to an array of benefits for workers, such as higher wages, new occupations and industries, and safer working conditions—or various harms, such as lost jobs, weakened worker agency, and dangerous paces of work.
How employers are implementing new technologies will be shaped by the U.S. policy, regulatory, and economic landscape, which will in turn influence the effect of these technologies on workers’ lives and whether those effects will be different for different types of workers.
In this installment of “Expert Focus,” we highlight scholars across disciplines who are helping to advance our understanding of the adoption of new technologies and the future of work. This scope of work includes technological change, worker surveillance, privacy, automation, algorithmic bias, and discrimination. These scholars’ findings can help guide policymakers, business leaders, and advocates who are interested in addressing structural racial, gender, and other inequalities in the U.S. labor market and in labor markets abroad to create a more equitable future for all workers.
Daron Acemoglu
Massachusetts Institute of Technology
Daron Acemoglu is an Institute Professor in the department of Economics at the Massachusetts Institute of Technology. Acemoglu has published a vast amount of research on topics ranging from economic growth and inequality to economic development and labor economics. A subset of Acemoglu’s research includes technological innovation and change on the future of work. In particular, he has written about the implications of new technology—such as AI, automation, and robotics—and the changes they can bring on the economy and the way people work and live.
Recently, Acemoglu published a working paper about the harms of AI, discussing how it can produce various social, economic and political harms, but stating that these harms are not due to the underlying nature of the technology itself, but rather in how it’s being currently used and developed by firms and governments in workplaces. In another working paper with his MIT economist colleague and Equitable Growth Research Advisory Board member and grantee David Autor, Acemoglu and his co-authors study the impact of AI on labor markets using online job vacancies, finding that while AI is currently substituting for humans in a subset of tasks, it is not yet having detectable labor market consequences.
Ifeoma Ajunwa
University of North Carolina at Chapel Hill
Ifeoma Ajunwa is an associate professor of law at the University of North Carolina at Chapel Hill as well as the founding director of the AI Decision-Making Research (AI-DR) Program, a training program for students interested in law and technology. Ajunwa is an expert on the intersection between law and technology, with a focus on the governance, impact, and ethics of new and emerging workplace technology. Often interweaving diversity and inclusion in the labor market into her work, she has written extensively about employment discrimination, worker surveillance, and genetic data and civil rights, and has published op-eds in major outlets such as TheWashington Post, and The Atlantic. In 2019, she wrote an op-ed in TheNew York Times on how more adequate safeguards are needed to prevent unlawful employment discrimination in automated hiring platforms.
In 2020, Ajunwa testified before the U.S. Congress Committee on Education and Labor on protecting workers’ civil rights in the age of technology. Her forthcoming book, The Quantified Worker: Law and Technology in the Modern Workplace (Cambridge University Press, 2022), will examine the role of technology in the workplace and its effects on management practices.
Bo Cowgill
Columbia University
Bo Cowgill is an assistant professor in the Management Division at Columbia University’s Business School whose interests lie in microeconomics, specifically technology information and labor markets. Cowgill writes extensively about artificial intelligence and algorithms, and their intersection with decisionmaking within labor markets and the workplace. His findings have been cited in media outlets such as Forbes, The New York Times, and in scientific and economic journals.
A large part of Cowgill’s research covers bias and fairness, which is the subject of his 2020 paper in which Cowgill develops an economic perspective on algorithmic bias and fairness, stating that algorithms can be used to bring about positive change, but more guidance is needed about how to deploy and regulate algorithms to minimize the potential harmful side effects of their use and implementation. At the Allied Social Science Associations annual meeting in 2020, Cowgill also presented a field experiment of his research on why algorithmic bias occurs, which Equitable Growth featured in a roundup.
Pauline T. Kim
Washington University in St. Louis
Pauline T. Kim is the Daniel Noyes Kirby Professor of Law at the Washington University in St. Louis and the co-director of its Center For Empirical Research, which promotes, supports, and enhances research about law and legal institutions. Kim specializes in employment law and has published her research and findings in numerous Law Journals. Much of Kim’s research focuses on how the adoption and use of new technologies such as artificial intelligence, algorithms, and big data in the workplace legally intersects with employee privacy, discrimination, equality, and fairness.
In a recent Virginia Law Reviewarticle, Kim explores the concept of “manipulating opportunity,” where predictive algorithms control what information is delivered to whom, resulting in the potential of creating inequality and discriminatory effects in opportunity markets such as employment, housing, and credit. Her work “AI and Inequality” looks at the social consequences of AI-powered tools and their threat to worsen class inequality. Currently, Kim, along with her co-authors, publishes Work Law: Cases and Materials, a multi-edition textbook that takes a comprehensive view on employment law. Be on the lookout for her forthcoming article in the California Law Review that explores the extent to which designers can and should take race into account in order to mitigate or remove bias when building predictive algorithms.
Steve Viscelli
University of Pennsylvania
Steve Viscelli is a faculty fellow at the Kleinman Center for Energy Policy at the University of Pennsylvania and a lecturer in the Department of Sociology who studies work, automation, public policy, and energy and climate change. Much of Viscelli’s research and consulting expertise focuses on the freight transportation industry, which is the subject of his 2016 book, The Big Rig: Trucking and the Decline of the American Dream, in which he takes an ethnographic approach to exploring how the deregulation of trucking and the rise of independent contracting transformed the trucking industry in the United States.
In 2020, Viscelli received an Equitable Growth grant to examine how last-mile delivery workers experience new technological and outsourcing practices within the package delivery industry. Recently, Equitable Growth was excited to have Viscelli as a panelist during “A future for all workers: Technology and worker power,” a virtual event held in February 2021 where he discussed how workers can use technology to exercise their voice at work. Viscelli is set to release a book in 2022 based on his 2018 report titled “Driverless? Autonomous Trucks and the Future of the American Trucker,” which explores the potential impacts of self-driving trucks on labor, workers, and the environment, and the role public policy will play in shaping them.
Equitable Growth is building a network of experts across disciplines and at various stages in their career who can exchange ideas and ensure that research on inequality and broadly shared growth is relevant, accessible, and informative to both the policymaking process and future research agendas. Explore the ways you can connect with our network or take advantage of the support we offer here.
