Contracting Out Public Services Worsens Inequality and Lowers Wages


Contracting out public services—which aims to help state and local governments save tax dollars—often has a harmful effect on the community, including worsening inequality and lowering wages.

A recent study, “The Decision to Contract Out: Understanding the Full Economic and Social Impacts,” finds that the savings of outsourcing varies widely and often diminish over time. The study, by Daphne T. Greenwood of the Colorado Center for Policy Studies at the University of Colorado at Colorado Springs, concludes that contracting out undermines our democratic principals by leading to corruption and less control over public funds.

“While reducing costs is most often the motive for outsourcing, a growing body of research documents that savings are minimal, on average,” the report says. “It is also not unusual for total costs to be greater when performed by private contracting firms than they were in-house.”

Studies show that contracting out typically leads to short-term savings of 5 to 10 percent. Over time, the savings often diminish because of a lack of competition and other factors.

Governments cite insufficient savings 52 percent of the time when they explain their decision to abandon contracts. In 61 percent of cases, governments cancel contracts because of inadequate services.

The Economic and Social Costs of Contracting Out

The savings of contracting out are usually achieved by lowering the wages and benefits of workers. That occurs at a great cost for the community, including:

• a decline in retail sales

• a worsening of the wage disparity between men and women, and between blacks and whites

• a reduction middle-class jobs and

• an increase in the dependency public services.

The push for contracting out began decades ago. The Reason Foundation, a libertarian think tank, was one of the earliest proponents of shifting public assets and spending to the private sector.

States and municipalities picked up the practice in the late 1970s and the 1980s.

Municipalities contact out an estimated 35 percent of services. The federal government has doubled the amount it spends on contracts since 2000, with most of the spending on services.

While contractors reduce costs by paying front-line workers less, their administrative costs are typically higher than in the public sector, where managers often earn less. But the managers of private companies tend to spend less in the community, leading to a siphoning off of profits and taxes elsewhere.

“More money usually flows out of the local economy,” the report says. “That means less spending, especially in retail and dining establishments.”

In many instances, contractors pay their workers so little that they must rely on public assistance for housing, food and medical care. In California, for instance, school cafeteria workers employed by contractors receive an average of $1,743 in public benefits each year.

The report describes a number of indirect effects of outsourcing on government, the economy and the workforce.

Historically, the public sector has provided a ladder into the middle class for women and minorities. They are disproportionately hit by the contracting out of public-sector work.

“Women of all races, along with African-American males, sought out public employment for more equal treatment than they often found in the private sector,” the study says. “Outsourcing public jobs often lowers wages, takes away benefits and reduces opportunities for advancement up the job ladder—and disproportionately affects the groups who have struggled most to get a foothold in the labor market and the middle class. Maintaining ladders of opportunity is an important part of the promise of America that public decisions can help to maintain.”

Private sector companies have spent decades attacking unions, cutting back on health-care benefits and eliminating pensions. Now contracting out has become a weapon for eliminating “good jobs”–jobs with decent pay and benefits–in the pubic sector.  Indeed, city officials in Colorado Springs described escaping long-term pension obligations as one of the reasons for contracting out there.

Comprehensive information about the workplace safety and health record of state and local contractors is not available, but substantial documentation exists on the record of federal contractors.

A recent U.S. Senate inquiry found that nearly 30 percent of the top violators of federal wage and health laws were federal contractors. The violations resulted in the deaths of 42 workers between 2007 and 2012.

One instance involved a worker who died after being sucked into an industrial dryer at a Cintas Corp. facility in Tulsa. The worker got caught in the dryer while he tried to untangle stuck clothes; he was spun around inside the dryer for 20 minutes at 300 degrees. Cintas had $3.4 million in federal contracts in 2012.

Weakening Accountability

Decades ago, the civil service system was established to combat nepotism, cronyism and corruption. Contracting out undermines civil service by funneling tax dollars to the private sector, where there is less transparency and accountability of tax dollars.

“In addition to having rights to privacy that collide with traditional expectations of transparency and accountability, private providers are generally not subject to conflict-of-interest laws, nepotism statues or ordinances, ethics codes or whistleblower protection for their employees, or restrictions on political involvement,” the study says.

Three examples of these problems:

• When Chicago considered contracting out its parking meter service for 75 years at a possible cost of $2 billion, it held three days of evaluation without public discussion.

• Denver awarded a company a contract to run a parkway for 99 years. The contract allows the company to object to mass transit projects and new and improved roads even though the life spans of streets are 45 years.

•  The online posting of a contract for a Texas charter school contained blacked-out paragraphs in 100 of its 393 pages, according to a New York Times article cited by the study.

“The evidence for public control just keeps on piling up,” said Donald Cohen, executive director of In The Public Interest, a resource center on privatization and responsible contracting, commenting on the University of Colorado report. “What we need now at every level of government are policies that reflect what the evidence makes clear and that helps us prevent economic and social harm to our communities.”

Posted in Economics, Income Inequality, Labor Issues, Taxes | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

College Football Players Win Right to Unionize


Last week’s regional National Labor Relations Board ruling that college football plays are workers opens up the possibility for a wave of organizing in collegiate sports.

The ruling that players at Northwestern University with athletic scholarships have the right to vote on whether they want a union challenges the “student-athlete” principle whereby players receive scholarships in exchange for competing in sports on behalf of their schools.

“The NCAA invented the term student-athlete to prevent the exact ruling that was made today,” said Ramogia Huma, president of the College Athletes Players Association, after NLRB Region 13 Director Peter Sung Ohr issued his ruling on March 26. CAPA filed the case along with Kain Colter, a former quarterback of the Northwestern Wildcats football team.

“The reality is players are employees, and today’s ruling confirms that,” Ramogi said. “The players are one giant step closer to justice.”

The unionization vote of the 87 players with scholarships will likely be sealed while the case is appealed to the national board. Under the ruling, the players without scholarships are ineligible to be union members.

The ruling only applies to private universities. Collective bargaining at public universities is governed by state law.

“This ruling is a tremendous victory, not just for the athletes at Northwestern, but ultimately for all college athletes, many of whom generate tens of millions of dollars each year for their institutions, yet still are in constant danger of being out on the street with one accident or injury,” said Leo W. Gerard, president of the United Steelworkers union, which backed Colter in his case.

The possibility that the decision could open up organizing drives by college athletes throughout the country sparked criticism from Sen. Lamar Alexander (R-Tenn.), a former president of the University of Tennessee.

“Imagine a university’s basketball players striking before a Sweet Sixteen game demanding shorter practices, bigger dorm rooms, better food and no classes before 11 a.m.,” Alexander said in a statement. “This is an absurd decision that will destroy intercollegiate athletics as we know it.”

Long workweeks

In his ruling, Ohr said that the Northwestern players “all squarely fall within the [National Labor Relations] Act’s broad definition of ‘employee’ when one considers the common law definition of ‘employee.’” As employees, the players have the right to union representation, according to the ruling.

Ohr concluded that the players are employees because through their scholarships they are compensated for doing a week’s worth of work. The National Collegiate Athletic Association limits athletes to 20 hours of practice and games each week. But the players in reality put in as many as 40 to 50 hours a week throughout the season once additional football-related such as training and travel are added to their practices and games, according to the regional NLRB decision.

The NCAA criticized the decision.

NCAA chief legal officer Donald Remy said in a statement, “While not a party to the proceeding, the NCAA is disappointed that the NLRB Region 13 determined the Northwestern football team may vote to be considered university employees. We strongly disagree with the opinion that student-athletes are employees.”

The NCAA’s response certainly isn’t surprising since the decades-old student-athlete principle has allowed the NCAA and universities to profit handsomely from the labor of their athletes.

The NCAA faces a class-action federal lawsuit from former players who seek to be compensated for the billions of dollars in earnings from television broadcasts, video games and merchandise sales of college sports. The NCAA faces additional lawsuits charging that it failed to protect players from head injuries.

In his decision, Ohr noted that scholarship players at Northwestern are required to sign releases that allow the university and the Big Ten Conference to use their name, likeness and image for any purpose. The terms and conditions of the players’ conduct is governed by a contract-like “tender” that allows the university to cancel their scholarship if they engage in misconduct, commit a criminal act, abuse team rules or agree to be represented by an agent.

The Need for Health Care Coverage

“The key issue at Northwestern is negotiating better protections against concussions and improving medical coverage following graduation,” USW President Gerard said.

“Our belief all along was simply that these athletes have a right to expect the same fair treatment that all Americans should expect, and that when they work hard and devote years of their lives in service to an institution, they deserve certain basic protections in return. None of them should live in fear of losing their scholarships in an instant, nor should they be left without health care after debilitating injuries.”

Posted in AFL-CIO, Economics, Labor Issues, News | Tagged , , , , , , , , , , , | Leave a comment

College Graduates Face a Permanent Income Loss


The payoff of college isn’t what it used to be.

These days, many college-educated workers are struggling to get by with stagnating and falling wages.

This is not to suggest that an “education premium” no longer exists.

But the reality of the country’s educated workforce nevertheless is looking more and more like that of blue-collar workers, who have faced an attack on their living standards for decades.

Media reports abound about how liberal arts degrees—in English, philosophy, anthropology and sociology, to name some—don’t translate into solid jobs. That’s why you can talk to a barista at Starbucks about Hegel’s “Philosophy of Right.”

And sadly, students are graduating with substantial college loan debts, which society-wide amount to more than our collective credit-card debt.

The advantage of a college degree–being able to count on a good job with a solid and growing paycheck—seems to be slipping away as our country becomes more unequal.

A report by the Center for College Affordability and Productivity in January shows that 48 percent of recent college graduates have jobs that don’t require a college degree. And 38 percent are working in jobs that don’t even require a high-school degree.

So, what’s going on?

This trend is another part of the story of the decline of our living standards—disappearing unions, soaring inequality, declining and stagnating wages, the loss of job security, and the erosion of pension and health benefits.

Since the end of Great Recession, the ultra-rich snatched up virtually the entire income gain. Just about everyone else is running in place or falling down. Even college graduates with advanced degrees can no longer be sure that they will be reasonably insulated from the falling and stagnate wages that have hit workers without college degrees for so many years.

The De-skilling of the Workforce

During the 1980s and 1990s, demand was high for college graduates with technological skills. But the demand fell off as the technological revolution evolved, according to a report, “The Great Reversal in the Demand for Skill and Cognitive Tasks,” by economists Paul Beaudry, David A. Green and Benjamin M. Sand.

“In this maturity stage having a B.A. is less about obtaining access to high paying managerial and technology jobs and more about beating out less educated workers for the barista or clerical job,” Beaudry, Green and Sand explain.

The three economists say that, “in response to this demand reversal, high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditional performed by lower-skilled workers. This de-skilling process, in turn, results in high-skilled workers pushing low-skilled workers even further down the occupational ladder and, to some degree, out of the labor force all together.”

Globalization has, of course, also pushed down the wages of skilled information technology workers, who have seen their jobs shipped off to Bangalore, India.

Rising Underemployment, Dwindling Good Jobs

So, what’s happened to wages of college graduates?

A New York Times editorial in March pointed out that the average pay of workers with bachelor’s degrees rose modesty from 1979 to 1995. Their wages went up an average of 0.46 percent each year, while the pay of workers without college degrees—the majority of workers—declined. The wages of everyone increased from 1995 to 2000. But since 2000, the pay of non-college educated workers has dropped while that of college-educated workers has stagnated.

One third of college-educated workers are working in jobs that don’t require a college degree, according to a recent study by the Federal Reserve Bank of New York.

The January report, “Are Recent College Graduates Finding Good Jobs?,” found that the percentage of recent graduates who are unemployed or underemployed (working a job that does not require a bachelor’s degree) has increased, particularly since the 2001 recession. What’s more, the quality of jobs accepted by underemployed graduates has worsened, leading many of them to accept low-wage jobs or part-time work.

Among the key findings of the report:

• the underemployment rate of recent college graduates is higher than that of college graduates as a whole

• the underemployment rate has been on the rise since 2001.

While the underemployment rate in 2012 (44 percent) is roughly the same as the rate (46 percent) during the 1990-91 recession, the quality of the available jobs has deteriorated over the past couple decades.

Years ago, college graduates working below their educational level could at least reasonably count on finding a good “non-college” job, perhaps as a dental hygienist, mechanic or electrician, with a typical wage equivalent to $45,000 in 2012. The share of underemployed recent graduates with jobs like those has dropped from about half in the early 1990s to 36 percent in 2009 according to the Fed report.

Today, the share of underemployed recent graduates with low-wage jobs is on the rise. This group accounted for 20 percent of the underemployed new graduates in 2009 compared to 15 percent in 1990, according to the Fed report, whose authors are Jaison R. Abel, Richard Deitz and Yaqin Su. The low-wage jobs filled by the college-educated workers include bartenders, food servers and cashiers, whose wages averaged under $25,000 in 2012.

Among 22-year-old graduates, more than half, or 56 percent, were underemployed in 2009-2011, according to the Fed report. For many, it will take years to find a job that matches their educational background. But by then, the damage will have been done.

As the report notes, “recent research suggests that those who begin their careers during such a weak labor market recovery many see permanent negative effects on their wages.”

So, the prospects for the Class of 2014 look bleak. Recent graduates with degrees in business and science face a tough labor market, and the future is less bright for graduates with majors in the humanities.

Tragically, the devaluation of the humanities also means that our educated workforce increasingly lacks analytical and critical thinking skills, a trend that worries business schools, not merely those who appreciate the value of a liberal arts education. But that’s another story.

What’s clear now is—to borrow the title of the 1996 book by former AFL-CIO President John Sweeney—America needs a raise.

Posted in Economics, Income Inequality, Labor Issues, News | Leave a comment

Wage Theft at McDonald’s


The fast-food business model is based on wage theft.

That’s the thrust of seven lawsuits that hit McDonald’s in three states last week.

Employees are cheated out of overtime.

They are forced to clock out when a computer monitoring program determines that profits are at risk because not enough customers showing up.

And the exploited workers’ pay falls below the minimum wage because they are forced to pick up the tab for cleaning their uniforms.

The lawsuits seek class-action status, which means thousands of workers could be covered.

An Escalation of the Fast-Food Workers’ Campaign

Filed in New York, Michigan and California, the legal suits mark a new stage in the campaign of fast-food workers to boost their salary to $15 an hour and win the right to unionize without retaliation.

They launched their mobilization with a one-day strike in New York City in November 2012. That was followed by nationwide work stoppages in 100 cities this past December.

The lawsuits strike at the heart of the business model of McDonald’s and the fast-food industry. McDonald’s maintains that it is not liable for workplace abuses because its franchises are independent businesses and the direct employers of the workers. But the lawsuits contend that McDonald’s is a joint employer and shares the liability of franchises for illegal employment practices. About 90 percent of McDonald’s restaurants are franchises.

“We’ve uncovered several unlawful schemes, but they all share a common purpose—to drive labor costs down by stealing wages from McDonald’s workers,” said Michael Rubin, an attorney who represents California workers, where four lawsuits were filed. Attorneys, organizers and workers announced the lawsuits during a conference call and news releases on March 13.

“Our wages are already at rock bottom,” said Sharnell Grandberry, a McDonald’s workers in Detroit, in a news release on the two Michigan lawsuits quoted by The New York Times. “It is time for McDonald’s stop skirting the law to pad profits. We need to get paid for the hours we work.”

The Rip-off Schemes

The lawsuits describe employer schemes to underpay their workers:

• In New York, workers allege that they are not reimbursed for the cost of washing their uniforms, as required by law. Because they are paid at such a low hourly rate, the loss is enough to drive down their actual pay below the minimum wage, which violates federal labor law.

“With $28 billion in revenue in 2013 alone, McDonald’s can certainly afford to provide its minimum-wage workers with this money to clean their uniforms, as required by law, instead of making them pay for the privilege of wearing McDonald’s advertising,” Jim Rief, the attorney who represents the New York workers, said in a statement.

• In California, workers report that restaurants have a computer system provided by McDonald’s that allows managers to monitor a “labor number” that shows how much a store is spending on workers compared with how much money is coming in from customers. When the labor number gets too high, employers temporarily pull workers off the job.

Besides getting ripped off because of the computer system, California workers allege that they are cheated out of pay because they don’t receive proper overtime compensation and employers alter pay records.

• In Michigan, workers are told to report to work at a certain time. But they then may remain idle—and unpaid—if not enough customers show up.

The claims in the lawsuits are violations of the federal Fair Labor Standards Act. The act establishes the minimum wage and it determines the standards for overtime pay, record keeping and other employment practices.

A McDonald’s spokesperson said the company would investigate the allegations.

Poverty Wages

Fast-food workers are typically paid $9 an hour, which amounts to $18,500 a year, according to CNN. That is $4,500 below what the U.S. Census Bureau’s considers the poverty income threshold for a family of four–$23,000.

The University of California, Berkeley’s Labor Center and the University of Illinois released a report in October that found that half of the families of fast-food workers rely on public assistance at an annual cost of $7 billion to taxpayers.

In 2012, seven publicly owned fast-food companies earned $7.4 billion in profits, according to a report by the University of California at Berkeley’s Labor Center and the University of Illinois. That year, McDonald’s awarded their top executives $53 million in salaries and distributed $7.7 billion to shareholders, according to another report by the National Employment Law Project.

Posted in Economics, Income Inequality, Labor Issues, News | Tagged , , , , , , , , , , , , | Leave a comment

Corporate Fat Cats Become the Nation’s Richest “Government Employees” by Leaching Off Taxpayers


Budget hawks squawk about bloated bureaucracies and excessively paid public employees to justify their calls for slashing government services.

In recent years, their drumbeat about government waste has contributed to a political climate that has allowed for layoffs of hundreds of thousands of public employees and the imposition of salary freezes and paltry pay raises, as well as reductions of pension, health-care and other benefits.

But public employees like sewage treatment workers, teachers and social workers are far from being fat cats. Arguably, the most compensated “government” employees are actually the corporate bosses and administrators who line their pockets with taxpayer dollars for shoddy contracted-out work.

“Exposed: America’s Highest Paid Government Workers,” a report by the Center for Media and Democracy (CMD), shows how just six of those corporate chieftains have earned $100 million in recent years. But their track record for delivering services is often abysmal.

While the Center for Media and Democracy’s report focuses on only a few contractors, its message is more far-reaching, suggesting that government would generally be better off keeping work in house.

Indeed, two years ago, POGO, the Project on Government Oversight, took a look at federal contracting, which mushroomed from over $200 billion in fiscal year 2000 to more than $530 billion in fiscal year 2011.

POGO’s report, “Bad Business: Billions of Taxpayer Dollars Wasted on Hiring Contractors,” found that contractors cost 83 percent more than federal employees. The study showed that federal government employees were less expensive than contractors in 33 of the 35 occupational classifications reviewed by POGO.

In one of the greatest municipal government scandals in U.S. history, former New York City Mayor Michael R. Bloomberg’s contracted-out CityTime project, which automated the city’s payroll system, resulted in the theft and waste of hundreds of millions of dollars and the indictment more than 10 consultants. Besides helping to expose CityTime, a project on contracting out and revenue by District Council 37, which represents municipal employees, has documented how New York City’s annual $10 billion in procurement spending is marred by waste, corruption and union busting.

Poor Services and Excessive Costs

“Given these astronomical salaries, and evidence of higher prices, poor service, and at times outright malfeasance, taxpayers have every right to be concerned about how their outsourced dollars are spent,” said Lisa Graves, executive director of the Center for Media and Democracy, when the watchdog group released its report in February.

The top executives—described as the most highly compensated government employees in their fields—are:

• George Zoley, the country’s highest paid “corrections officer.” Zoley is the CEO of the private prison firm GEO Group. Between 2008 and 2012, his compensation was $22 million.

The Center for Media and Democracy estimates that GEO Group makes 86 percent of its revenue from taxpayers. Its contracts include clauses that require governments to keep prisons full or pay for empty beds. GEO Group has faced hundreds of lawsuits over prisoner deaths, assaults, and excessive force.

• David Steiner, the country’s highest paid “sanitation worker,” is president and CEO of Waste Management. He earned $45 million in compensation from 2006 to 2012. Government contracts account for 50 percent of Waste Management’s revenue, according to Goldman Sachs.

• Ron Packard, head of K12 Inc., is the country’s highest paid “teacher.” Between 2009 and 2013, he earned $19 million. He enjoyed that compensation even though only 12 percent of K12 Inc. cyber schools met state standards in 2010-2011, compared to 52 percent of public schools. CMD estimates that 86 percent of K12 Inc.’s revenue comes from taxpayer dollars.

• Jeffry Sterba, the country’s highest paid “water worker,” is president and CEO of American Water Works Co. During his three years as the company’s top executive, he has earned $8.3 million. American Water is the largest for-profit provider of water and wastewater treatment services in the country. CMD estimates that 89 percent of its revenue comes from taxpayers.

• Richard Montoni, the country’s highest paid “caseworker,” is CEO of Maximus, which provides Medicaid and government-funded welfare services for the poor. Between 2008 and 2012, Montoni enjoyed a compensation of $16 million. Wisconsin charged Maximus with improper billing in 2013. In 2007, Maximus paid the U.S. Justice Dept. $30 million after a government investigation uncovered widespread overbilling.

• Nicholas Moore, managing director and CEO of the Australian infrastructure firm Macquarie, is the country’s highest paid “road worker.” He made $8.8 million in compensation in fiscal year 2013. He has promoted the privatization of public services as a member of the American Legislative Exchange Council, which helps conservative politicians to craft legislation to privatize and reduce government services and undermine the power of public- employee unions. Macquarie has long-term contracts to run Chicago’s Skyway, Indiana’s Toll Road and the Dulles Greenway in Virginia.

Public Investment, Private Profit

These instances of privatization and contracting outstanding are disturbing for a number of reasons beyond the fact that corporate executives are profiting handsomely from taxpayer dollars.

Privatization allows companies to profit from government investments in infrastructure—roads, information technology and sewage treatment plants—without bearing the risk of making their own capital investment. Consultants often have far higher salaries than civil servants.

The takeover of government services by private companies is a form of union busting that typically replaces workers who have decent benefits with lower-paid and non-union front-line workers. And contracting out often leads to a lack of accountability, creating conditions that allow for theft and inefficiencies.

Research by Paul C. Light, a professor at New York University, shows that the total cost of federal contract employees is twice that of civil servants. The cost of military contractors is three times higher.

If only the politicians who determine how taxpayer dollars are spent would listen to credible analysts like Light instead of budget hawks whose agenda is to whack away at government services.

Posted in Economics, Labor Issues, News, Politics, Safety Net, Taxes | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

A Quarter Century Without a Raise


Wouldn’t it be just lovely to go nearly a quarter century without a raise?

Astonishingly, that’s what restaurant servers–whose wage floor is set by the federal government–face.

Despite opposition from Republicans and business groups, President Barack Obama is picking up his campaign for an increase of the minimum wage. Largely lost in the debate over Obama’s initiative, the need to raise the subminimum wage for tipped workers, a group that also includes bartenders and busboys, is finally getting some attention.

“Somehow the subminimum wage has fallen through the cracks,” said Dean Baker, co-director of the Center for Economic and Policy Research, noting that the U.S. Congress failed to boost the subminimum wage in the latest instances in which it hiked the minimum wage.

“Now at least the subminimum wage is receiving a little more attention,” he said.

The so-called tipped wage has been stuck at $2.13 an hour since 1991. The federal minimum wage is $7.25 an hour.

A bill proposed by Sen. Tom Harkin (D-IA) and Rep. George Miller (D-Calif.) would raise the minimum wage to $10.10 an hour by 2016. The bill calls for an increase in the subminimum wage to at least $7.10 an hour by 2019.

The subminimum wage for tipped workers was created in 1966. That year, the Federal Fair Labor Standards Act was amended to extend wage protections to restaurant, hotel and other service workers. The change created a “tip credit” that allows employers to use customer tips as a credit toward the regular minimum wage.

Employer Abuse

When the tipped minimum wage was created, it amounted to 50 percent of the minimum wage. Because it was frozen in 1991, the subminimum wage is now worth only 29 percent of the minimum wage.

Theoretically, employers are supposed to make up for any shortfall when tips and the base pay fall below the minimum wage. But in practice, workers cannot count on that because abuses are common. In fact, tipped workers cannot even count on receiving the $2.13 minimum pay.

In an editorial on Feb. 17, the Boston Globe noted that a 2009 study of restaurants in Chicago, Los Angeles and New York found that 25 percent of the workers didn’t even receive the tipped minimum, and 12 percent reported that their employer or supervisor stole their tips. In 2012, a Massachusetts federal appeals court ordered Starbucks to pay baristas $12 million in tips pocketed illegally by managers.

Nowadays, the notion of the subminimum wage seems a bit peculiar, even absurd. In what other business besides restaurants do employers expect their customers to pick up the wages of their employees? When the subminimum wage was created in the 1960, restaurant jobs were perceived by many to be the work of teenagers who weren’t the breadwinners of families.

But Amy Traub, a senior policy analyst at the research institution Demos, points out that today many restaurant employees come from low-income families.

“Many of the tipped workers tend to be women and that makes it easier to overlook their situation,” Traub said.

About 70 percent of restaurant workers are women, according to Katie McGinty, a Democratic candidate for governor in Pennsylvania, who is the daughter of a restaurant hostess. They earn an average of 50 cents less per hour than their male counterparts, according to federal figures.

McGinty believes the subminimum wage should be scrapped.

“Tipped workers, who often work several jobs to support their families, should be paid at least a minimum wage for the hard work they do,” McGinty said, when she called for an end to the subminimum wage last month.

Many states have chosen not to wait federal action and have gone ahead to raise their subminimum wage. And seven states have prohibited a separate tipped minimum wage.

All told, 26 states have higher subminimum wages than what’s mandated by the federal government according to Sylvia A. Allegretto of the Institute for Research on Labor and Employment at the University of California, Berkeley. For instance, the tipped minimum is more than $9 an hour in Oregon and Washington.

The National Restaurant Association is fighting the increase of the subminimum wages.

Scott DeFife, the group’s executive vice president for policy and government affairs, says tipped employees at restaurants “are among the highest-paid employees in the establishment, regularly earning $16 to $22 an hour.” He adds, “Nobody is making $2.13 an hour.”

Besides ignoring the evidence that employers often shortchange workers, the association is exaggerating and misrepresenting what typical restaurant workers earn, according to advocates.

Nearly 40 percent of restaurant workers earn at or below the minimum wage, even when tipped wages are included in their pay, according to a study by the Aspen Institute. The median income for food and beverage serving workers was $8.84 an hour in 2012, according to the U.S. Bureau of Labor Statistics.

Stagnant and Falling Wages

The plight of tipped workers is yet another story about how most workers are being wacked by stagnating and falling wages in the country. Low-wage jobs, including restaurant work, make up the fast-growing sectors in the economy. Since 1991, full-service restaurant employment grew by 72 percent, while employment in the private sector increased by 22 percent, Allegretto points out.

More than 10 million workers are employed in the restaurant industry, according to Restaurant Opportunities Centers United, which is lobbying for a higher tipped minimum wage. Many servers cannot afford to feed their families, according to ROC. Servers rely on food stamps at twice the rate of other workers, and they are three times as likely to live in poverty.

“The National Restaurant Association has been writing itself exemptions from fair wages for decades, subjecting millions of workers to poverty,” said Saru Jayaraman, co-founder and co-director of ROC.

“The corporate restaurant industry can absolutely afford to pay its workers better, but won’t do so voluntarily. Tipped workers are counting on their government to hold the private sector accountable to livable wages.”

Posted in Economics, Income Inequality, Labor Issues, News, Politics, Safety Net | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Queens Public Library Head Under Fire for Perks and Pay Worthy of a Corporate Fat Cat


The head of the Queens Public Library in New York City—which has one of the largest circulations in the world—faces criticism for his excessive compensation package.

Patrons, politicians and the library’s front-line unionized workers are outraged over revelations about the high pay and perks of President and CEO Thomas Galante.

Galante is paid about $400,000, and he is under attack for spending $140,000 for office renovations, including a private second-story outside lounge at the central library where he enjoys smoking cigars, while repairs of damage from Hurricane Sandy more than a year ago continue.

The revelations are a public relations disaster for the library system.

Queens Public Library has downsized its staff and struggled with budget reductions for years, screaming poverty while appealing to patrons to pressure politicians to restore cut funds.

Betrayed Workers

Each year, members of Local 1321 Queens Library Guild faithfully participate in a vigorous budget fight-back campaign as they face the trauma of possibly losing their livelihood and deal with less resources to serve patrons. Their union is pushing for legislation that would guarantee steady funding for the library by linking municipal budget support to a percentage of the city’s property tax base. But with public disclosure about management fat, the workers now feel betrayed.

“We worry about our jobs and the cuts every year,” said a librarian, who requested anonymity. “How are we supposed to go to the public for support when information like this comes out?”

Galante found himself hit with stinging criticism in February after an expose by Daily News columnist Juan Gonzalez sparked a City Council hearing and led New York City Comptroller Scott Stringer to announce his plan to audit the library system.

New York State Sen. Tony Avella demanded Galante’s resignation after Gonzalez reported in a subsequent article that the tone-deaf library head earned $287,000 over 22 months as a consultant for a Long Island school district, according to an audit by New York State Comptroller Thomas DiNapoli. At the City Council hearing, Galante waffled when questioned about outside income.

“We are deeply disturbed by this excessive spending and compensation,” said John Hyslop, president of Local 1321 Queens Library Guild , a local in the municipal employees union District Council 37, an affiliate of the American Federation of State, County and Municipal Employees. “This has done a tremendous damage to the reputation of the library.”

A clerical worker said staffers were long aware of Galante’s high pay and perks before the news reports–and that knowledge tempered their outrage somewhat. What angers workers, she said, is that the controversy has hurt the library’s reputation. Disillusioned by their frozen pay and the constantly worry about funding, employees are anxious to be treated fairly and want the system to be funded properly, she said.

New York City has three public library systems. The other two are Brooklyn Public Library and New York Public Library, which serves Manhattan, the Bronx and Staten Island.

Layoffs and Contracting-Out

Over the past five years, Galante reduced the library staff by nearly 130 positions—and that included 44 layoffs.

In addition, Galante contracted out custodian jobs; cut the pay of many workers by imposing a new work schedule that reduced their nighttime differential; employed new well-paid administrators, and handed out big pay raises to managers.

Meanwhile, branch libraries have dealt with frozen book budgets, and Local 1321 members have gone four years without a raise.

Local 1321 has responded to the controversy by stepping up its on-going fight-back campaign. The local is demanding:

·an end to the contracting out of custodian services,

· the rehiring hiring of let-go employees,

· additional staffing, and

· greater support for library services.

Hyslop created an on-line petition addressed to New York City Mayor Bill de Blasio and Queens Borough President Melinda Katz on that asks Queens Library to hire additional full-time staff, including the 44 laid-off Local 1321 members and new custodians and librarians.

The petition, which is at, also calls for Queens Public Library to cancel its contract with the Busy Bee, which employs the contracted custodians.

Responding to Galante’s appearance at the Feb. 5 City Council hearing, Hyslop also wrote the Queens City Council delegation to express the union local’s concerns.

A Low-Wage, Anti-Union Employment Model

At the City Council hearing, Galante testified that in-house custodians are paid $35 an hour, though their hourly pay, including benefits, actually ranges from $21.17 to $26.25. By using contracted custodians—who don’t receive benefits and are paid between $14.95 to $15.75—the local says the library is embracing the low-wage, anti-union employment model that is eroding the living standards of workers throughout the country.

In his letter to the Queens delegation, Hyslop noted that he received a letter from a donor who decided to stop contributing to the library after reading about Galante’s public relations debacle. Hyslop criticized the library’s plan to waste money on an administrative office that will eliminate space now used by the public.

Gonzalez’s expose detailed Galante’s generous compensation package and his questionable spending of library funds.

Galante drives a $37,000 luxury Nissan 370Z provided by the library. His salary jumped to $391,594 after he received a $12,000 raise. The 250-square-foot rooftop deck attached to his office– which includes two dozen evergreens and wrought-iron furniture–cost $27,000. He also spent $110,000 for two new executive conference rooms.

The reports on management fat by themselves are an embarrassment. But Galante also faces criticism because he made the expenditures before completing the renovations of branch libraries devastated by Hurricane Sandy.

At the City Council hearing, Galante justified his salary, saying it was comparable to what the heads of non-profit organizations earn. Gonzalez pointed out that Galante earns more than the mayor ($225,000), the schools chancellor ($220,000) and the MTA chair ($350,000).

At the hearing, Public Advocate Letitia James said Galante’s salary should be similar to those of the library heads of the Chicago and Los Angeles library systems. They earn around $200,000.

City Council member Elizabeth Crowley said Galante’s salary should be in line with that of city commissioners.

“It seems that your management is getting compensated more and more, but I don’t think that’s fair to the taxpayers,” she said. “Your compensation package is way too large. You make twice as much as the mayor.”

Galante also cited the pressure of his children’s college expenses as a justification for his salary. That outraged City Council members and library staffers. They, of course, also cope with college tuition and mortgages or rents—but they earn lower salaries.

City Council Majority Leader Jimmy Van Bramer, who chairs the Cultural Affairs, Libraries & International Intergroup Relations Committee and used to work at Queens Public Library, pressed Galante to agree to stop contracting out custodian work.

Galante said that he would like to keep the work in-house, but he would only agree to do that when the library’s fiscal health stabilizes. The in-house custodian staff has dropped from 72 to 105, according to Galante.

Taxpayers Deserve Better

When he announced his audit of Queens Public Library, Comptroller Stringer said it would examine executive pay, capital improvements and the use of city tax dollars. The library keeps its private funds and public monies in separate funding streams, according to Galante.

“Taxpayers deserve to know that public money is spent appropriately,” Stringer said on WCBS 880. His office will also audit the city’s two other library systems.

“My auditors will assess whether the spending practices of our library systems follow rules and business practices that ensure that taxpayer money goes to where it’s supposed to go. We want our libraries to maximize the value of the public funds they receive.”

Stung by the disclosure of his management excesses and a backlash to hurtful remarks about custodians, Galante felt compelled to issue a public apology to library employees.

“I want to apologize for comments that I made recently that were insensitive,” he said.

“I am deeply appreciative and proud of the work done by the hard-working employees of Queens Library at all levels of the organization and especially our custodial team who keep our libraries safe, clean and running smoothly day after day. They do a great job serving thousands of people every day.”

Posted in Culture, Income Inequality, Labor Issues, News, Politics, Taxes, Unemployment | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

The Foreclosed Dreams of African Americans


The housing crisis has led to the foreclosure of the homes of 10 million people–equivalent to the population of Michigan. The foreclosures have particularly devastated the African-American community, which lost over half its wealth because of the housing and jobs crisis that followed the 2008 financial crash.

A powerful book, “A Dream Foreclosed: Black America and the Right for a Place to Call Home” by Laura Gottesdiener (Zuccotti Park Press, 2013, 208 pages), details the human wreckage of this crisis while also chronicling how the victims of predatory lending, misguided public policies, and callous profit-seeking banks are fighting back.

“A Dream Foreclosed” does a marvelous job of telling the stories of four families while weaving in the history of the struggle of American Americans to own their homes in the face of housing discrimination, redlining, unscrupulous banking practices and excessive mortgage rates. Gottesdiener discusses how the families’ fight to avoid homelessness and impoverishment is part of a larger nationwide grassroots movement—largely ignored by the mainstream media—that is challenging the banks that profited from unfair and often illegal lending practices and are now profiting more by buying up foreclosed properties at rock-bottom price.

The Costs of the Housing Crisis

Gottesdiener, a journalist from Brooklyn who participated in the Occupy Wall Street movement, lays out the broad costs of the housing crisis:

• the destruction of $19.2 trillion in U.S. household wealth has driven millions deeper into debt and poverty, according to the U.S. Treasury Dept.,

• as many as 25 percent of the African-American families who purchased homes during the predatory lending frenzy face the possibility of losing their homes, the Center for Responsible Lending estimates,

• the collapse of property values has undermined the fiscal health of municipalities like Detroit, which is marred by bankruptcy, and

• millions of Americans continue to be threatened by eviction or foreclosure despite talk of a housing recovery.

Gottesdiener convincingly argues that today’s housing crisis is only the latest chapter of racist property practices in the United States.

“Because of the deep and enduring connection between property and personhood, today’s ongoing wave of racially tilted displacement is part of a long history of denying full human citizenship rights to African Americans and other people of color,” she writes. “It’s a history, often suppressed or ignored, that began the moment Europeans set foot on North America and Africa, and continues to the present day.”

Shortly after the Civil War, the government reneged on a land redistribution plan that would have benefited former slaves. After World War II, the Federal Housing Administration lending program favored whites and the development of suburbs that excluded African Americans.

Grassroots and political pressure led to the passage of the Fair Housing Act in 1968 and the Community Reinvestment Act in 1977. But the laws failed to end housing and lending discrimination. Today, homeownership for African Americans too often means debt that can’t be met.

Tragedy and Hope

The stories of the families poignantly show the tragic consequences of housing crisis. The families’ upended lives include dealing with bankruptcy and insensitive and unresponsive politicians, intimidation by police, scrambling to meet high interest rates, sleeping in cars, harassment by mortgage holders and bankers, giving up their children to child and family services and the shame of seeking temporary shelter from relatives.

But their success in fighting back offers hope.

Bertha Garrett, a 65-year-old grandmother of six children in Detroit, worked with housing activists to prevent New York Bank of Mellon from evicting her from her home of 22 years. Hundreds gathered to block her eviction, and she was eventually offered an affordable rate to buy the home.

Martha Biggs, a mother of four from Chicago, struggled with a decade of homelessness. The trauma of the experience led her daughter Jajuanna Walker to attempt suicide. Biggs finally managed to settle down when she and her family rehabbed a foreclosed home with the help the Chicago Anti-Eviction Campaign and Take Back the Land national advocacy group.

Michael Hutchins of Chattanooga, Tenn., was involved in a successful fight to prevent the local housing authority from evicting hundreds of tenants and demolishing a public housing complex.

Griggs Wimbley fought off lenders for years after building his own home in Sanford, N.C., and trying to move forward on a plan to develop housing on 100 acres of land. Describing the impact of Wimbley’s experience on his political outlook, Gottesdiener writes, “What had first appeared to be an isolated incident of crime and deception now seemed to have enveloped the entire country. It wasn’t just that he had been a victim of corruption; it was that he was living in a corrupt society.”

In the concluding chapter, Gottesdiener notes, “No banker, lawyer, or Wall Street executive has gone to prison for the industry’s widespread illegal practices—not to mention for crashing the global economy.”

But despite that outrage, she remains hopeful.

“…the heroes of the story are the people in the middle, those like Griggs, Bertha, Michael, Martha and millions of others who refuse to have their dreams foreclosed, people who fight not only to save their own homes, but to create a more just and sustainable system for everyone,” Gottesdiener writes. “Their struggle is ours. And for the sake of all of us, it is one that we must win.”

Posted in Books, Economics, Safety Net | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Public-Employee Unions Targeted in Right-wing Case before the Supreme Court


A case before the U.S. Supreme Court threatens to cripple the power of public-employee unions and lower the living standard of the workers they represent.

The anti-union National Right to Work Legal Defense Foundation is behind the legal case, arguing that unionized home-care workers in Illinois should not be obligated to pay dues for collective bargaining services.

The court heard arguments from both sides in the case, Harris v. Quinn, on Jan. 21. A decision is expected in June.

The AFL-CIO, the American Federation of State, County and Municipal Employees, the Service Employees International Union, and the White House are supporting Illinois in the case.

“The Supreme Court’s willingness to take up this case despite the fact that two lower courts very forcefully rejected the arguments being made is a cause for grave concern,” AFSCME Roberta Lynch, deputy director of AFSCME Council 31 in Illinois. “Obviously the labor movement in the public sector would be profoundly damaged if it is required to represent employees who are not required to contribute anything toward that representation.”

The origin of the case dates from Illinois’ 2003 decision to classify home-care workers as state employees for collective bargaining purposes since they are paid with Medicaid dollars administered by the state. Pamela Harris, a home-care worker, agreed to be the lead plaintiff in the lawsuit bankrolled by the National Right to Work Legal Defense Foundation.

The lawsuit, which was turned down by two courts before reaching the Supreme Court, challenges the precedent established in Abood v. Detroit Board of Education, which affirmed the right of public employee unions to collect a “fair-share fee,” or dues from members.

Federal law allows workers to be reimbursed for the portion of their dues devoted to politics. The “fair share” rule buttresses the unions’ contention that workers who seek to avoid paying dues are “free loaders” who want to shirk their responsibility to pay for services.

In the lower courts, the foundation argued that mandatory union dues violate workers’ free-speech rights guaranteed under the 1st Amendment. The foundation raised the stakes in the case when it reached the Supreme Court by also challenging the right of unions to be the collective bargaining agents of workers.

Attacking Unions for Decades

Since it was set up in 1968, the National Right to Work Legal Defense Foundation has slowly chipped away at the legal basis of unionism. It has taken nearly 20 cases to the Supreme Court aimed at undermining the right of unions to represent workers and collect dues.

The foundation is the legal arm of the National Right to Work Committee, which on its website describes its agenda as combating “compulsory unionism through an aggressive program designed to mobilize public opposition to compulsory unionism and, at the same time, enlist public support for Right to Work legislation.”

The National Right to Work Legal Defense Foundation is clear about its anti-unionism.

In a section on its website called “How Can I Help?” the foundation says, “No force is inflicting more damage on our economy, citizens, and cherished democracy than the union bosses.”

Between 1991 and 2005, the foundation received 85 grants totaling $4.54 million from conservative foundations, including the Castle Rock Foundation, John M. Olin Foundation, Inc., and the Walton Family Foundation, according to Media Transparency. The foundation also has links to the Koch brothers.

Currently, the foundation is involved in nearly 300 legal actions nationwide in courts and administrative agencies, including the National Labor Relations Board, according to its website. It has a full-time staff of 11 attorneys, who are working with hundreds of local attorneys throughout the country.

Will Public-Employee Unions be Crippled?

At the Jan. 21 Supreme Court hearing, Associate Justice Elena Kagan underscored the far-reaching implications of Harris v. Quinn, noting that the discussion ultimately is about “a radical restructuring of the way workplaces are run” throughout the country. Associate Justice Samuel A. Alito Jr. and Associate Justice Anthony Kennedy were clearly sympathetic to the foundation’s arguments that the case raises legitimate questions about public employee unionism, including the right of unions to speak on behalf of workers and affect public policy, as well as their impact on the size of government.

Predicting the outcome of Supreme Court cases is never easy. But court watchers have mentioned a number of possible decisions.

The first, of course, would be that the court would let precedent stand, leaving the status quo in place. A narrow ruling would only affect home health care workers.

But if the court decides that fair share is unconstitutional, unions would be forced to devote resources to representing workers who refuse to pay dues.

Under current practice, unions are able to collect dues through automatic payroll deductions from “agency fee payers,” workers who have not signed up. Unions would need to recruit those workers to avoid losing substantial dues funding.

A ruling in favor of the National Right to Work Legal Defense Foundation would, of course, hurt the Democratic Party by defunding unions and further undermining their political activities.

The Quality of Home Care is Threatened

Together, AFSCME and SEIU represent 600,000 home care workers.

A decision against the unions would also undermine the quality of home care.

“Home care workers in Illinois have formed a union and bargained improvements in wages, health care benefits and training,” Christine Senteno writes on a log on SEIU’s website.

“These kinds of improvements have been shown to help states reduce turnover and make it easier for their citizens to recruit and retain home care workers,” Senteno says. “Reducing turnover and improving recruitment and retention can vastly improve quality of care for seniors and people with disabilities, and allow them to remain in their homes to live with dignity, rather than being forced into institutionalized care.”

Keith Kelleher, president of SEIU Healthcare Illinois and Indiana, told the Los Angeles Times that unionization has not only improved the lives of employees and the people for whom they care, but it has also saved the government billions of dollars in administrative expenditures.

Worsening Inequality

Washington Post columnist Harold Meyerson suggests in an op-ed on the court hearing that the home-care workers (and more broadly, low-wage workers) stand to become the ultimate victims if the ruling comes down in favor of the National Right to Work Legal Defense Foundation, which argues that home care workers are independent contractors and therefore should not be treated as public employees. He points out that “a ruling that neuters the organizations that poor, working women have joined to win a few dollars an hour more would put a judicial seal of approval on the United States’ towering economic inequality.”

Before they unionized, home-health care workers in Illinois earned $7 an hour without benefits. Now that they are covered by a union contract, they earn $11.65 per hour and enjoy health-care and other benefits.

“The eight workers who brought the lawsuit the court hearing Tuesday don’t want to pay dues to the union that won them their raises, though I’ve seen no reports suggesting they’ve volunteered to give back this additional money and forgo health insurance,” Meyerson writes, in a jab at Harrison and the seven other workers.

Whatever the outcome of Harris v. Quinn, the case is another sad example of how Americans workers sometimes stupidly act against their own economic interests.

Posted in AFL-CIO, Economics, Income Inequality, Labor Issues, News, Politics | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Inequality Gone Wild


We have a winner-take-all global economy, a malady that undermines democracy, distorts economic development and fuels inequality.

Timed to coincide with the meeting of the global economic elite at the World Economic Forum in Davos, Switzerland, a report released by Oxfam on Jan. 20 shows how the wealthy have rigged the economic and political rules in their favor. So much so that the 85 richest people in the world own as much wealth as the 3.5 billion poorest people.

“It is staggering that in the 21st century, half of the world’s population own no more than a tiny elite whose numbers could all sit comfortably in a single train carriage,” said Winnie Bryanyima, executive director of Oxfam, an international confederation of 17 organizations that work together to try to find solutions to injustice and poverty.

“We cannot hope to win the fight against poverty without talking inequality. Widening inequality is creating a vicious circle where wealth and power are increasingly concentrated in the hands of a few, leaving the rest of us to fight over crumbs from the top table.”

Concentration of Wealth and Power

Today, nearly half of the world’s wealth is concentrated in the hands of just 1 percent of the population, according to the 32-page report, “Working for the Few,” which is available at the organization’s website at  The wealth of the world’s richest 1 percent amounts to $110 trillion, which is 65 times what the bottom half of the global population owns.

According to the report:

• Seven out of 10 people reside in countries where inequality has risen in the last 30 years

• an estimated $1 trillion is held secretly in off-shore accounts

• From 1980 to 2012, the top 1 percent increased their share of wealth in 24 out of the 26 countries with available data, and

• The wealthiest 1 percent in the United States captured 95 percent of the post-financial crisis growth after 2009, while the bottom 90 percent became poorer.

Rigging the Rules

How did we get to this state of extreme inequality?

Over three decades, the global elite has shaped the economic and political rules of the game to stuff their pockets.

Privatization of public assets, the crippling the power of labor unions, free-trade policies, austere economic policies, the easing of financial regulations, the proliferation of tax havens, and tax breaks for the rich have allowed a tiny elite to accumulate vast wealth.

“Concentration of wealth in the hands of the few leads to undue political influence, which ultimately robs citizens of natural resource revenues, produces unfair tax policies and encourages corrupt practices, and challenges the regulatory powers of governments,” the report says. These policies have coincided with the greatest concentration of wealth since before the Great Depression.

In the United States, deregulation has allowed executives in the banking and financial sectors to become fabulously wealthy while creating the financial instability that led to the economic crisis that began in 2008. President Barack Obama signed the Dodd-Frank banking reform bill three years ago, but so far only 148 of its 398 rules have been implemented.

The growth in the power of corporations has coincided with the declining power of unions, the falling value of the minimum wage, lower tax rates for the wealthy and the suppression of wages and benefits. The decline of unions is correlated with the rising income of the 1 percent in the United States. “Had the share of income going to the richest one percent stayed the same as in 1980, the rest of America would have an additional $6000 at their disposal in 2012,” the report says.

In Europe, austerity has walloped public employees, the rest of the middle class and the poor. The richest 10 percent have seen their income grow, while the remaining population copes with unemployment, reduced pensions, and slashes in public services, such as health care and education.

In India, the number of billionaires has increased from about five to 61 in the last decade. The share of national wealth held by this tiny elite skyrocketed from 1.8 percent in 2003 to 26 percent in 2008.

Pakistan is a case study of how the rich and powerful rig the rules to allow for tax avoidance and a regressive tax system.

The landowners who control Parliament avoid taxes by exempting agriculture. Few parliamentarians pay taxes, even though their average income is $900,000. Only 2.5 million out of the 10 million people who should pay taxes actually do.

In Mexico, Carlos Slim has accumulated an estimated $73 billion through his control of the telecommunications industry, which was privatized two decades ago. A study by the Organisation for Economic Co-operation and Development says the monopolistic practices of Slim’s America Movil have hurt the economy by forcing citizens to pay inflated prices for phone service and siphoning away money that could be used for combating poverty.

A Beacon of Hope

Mexico stands in contrast to the rest of Latin America, which has become a beacon of hope in our polarized world as fiscal policy and social spending there have succeeded in reducing poverty over the past decade. The progress has come as the region makes the transition from the military dictatorships of the Cold War era to democracy.

“The reduction of inequality is the result of the right mix of government policies that focus on poor people by increasing social public expenditures,” the report says.

Social spending as a percentage of GDP throughout Latin America has increased by as much 66 percent over the past 20 years. Between 2002 and 2011, income inequality dropped in 14 of 17 countries, and 50 million people moved into the middle class.

“Without a concerted effort to tackle inequality, the cascade of privilege and of disadvantage will continue down the generations,” said Oxfam’s Bryanyima. “We will soon live in a world where equality of opportunity is just a dream. In too many countries economic growth already amounts to little more than a ‘winner takes all’ windfall for the richest.”

To combat inequality, Oxfam calls upon governments to crack down on financial secrecy and tax dodging. And it has made a moral appeal (however futile) to those gathered at the World Economic Forum at Davos to support progressive taxation, provide a living wage for their employees, publicly disclose all their investments and refrain from using their wealth to seek political favors.

“The large and rising concentrations of income and wealth in many countries represent a global threat to stable, inclusive societies for one simple reason: the unbalanced distribution of wealth skews institutions and erodes the social contract between citizens and the state,” the report says.

“Rising inequality, a trend that has grown apace over the past 30 years, must be reversed.”

Posted in Economics, Income Inequality, Labor Issues, News, Taxes | Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment