Contents

Over the past two years, state legislators across the country have launched an unprecedented series of initiatives aimed at lowering labor standards, weakening unions, and eroding workplace protections for both union and non-union workers. This policy agenda undercuts the ability of low- and middle-wage workers, both union and non-union, to earn a decent wage.

This report provides a broad overview of the attack on wages, labor standards, and workplace protections as it has been advanced in state legislatures across the country. Specifically, the report seeks to illuminate the agenda to undermine wages and labor standards being advanced for non-union Americans in order to understand how this fits with the far better-publicized assaults on the rights of unionized employees. By documenting the similarities in how analogous bills have been advanced in multiple states, the report establishes the extent to which legislation emanates not from state officials responding to local economic conditions, but from an economic and policy agenda fueled by national corporate lobbies that aim to lower wages and labor standards across the country.

In 2011 and 2012, state legislatures undertook numerous efforts to undermine wages and labor standards:

Four states passed laws restricting the minimum wage, four lifted restrictions on child labor, and 16 imposed new limits on benefits for the unemployed.

States also passed laws stripping workers of overtime rights, repealing or restricting rights to sick leave, undermining workplace safety protections, and making it harder to sue one’s employer for race or sex discrimination.

Legislation has been pursued making it harder for employees to recover unpaid wages (i.e., wage theft) and banning local cities and counties from establishing minimum wages or rights to sick leave.

For the 93 percent of private-sector employees who have no union contract, laws on matters such as wages and sick time define employment standards and rights on the job. Thus, this agenda to undermine wages and working conditions is aimed primarily at non-union, private-sector employees.

These efforts provide important context for the much-better-publicized moves to undermine public employee unions. By far the most galvanizing and most widely reported legislative battle of the past two years was Wisconsin Gov. Scott Walker’s “budget repair bill” that, in early 2011, largely eliminated collective bargaining rights for the state’s 175,000 public employees. Following this, in 2011 and 2012:

Fifteen states passed laws restricting public employees’ collective bargaining rights or ability to collect “fair share” dues through payroll deductions.

Nineteen states introduced “right-to-work” bills, and “right-to-work” laws affecting private-sector collective bargaining agreements were enacted in Michigan and Indiana.

The champions of anti-union legislation often portrayed themselves as the defenders of non-union workers—whom they characterized as hard-working private-sector taxpayers being forced to pick up the tab for public employees’ lavish pay and pensions. Two years later, however, it is clear that the attack on public employee unions has been part of a broader agenda aiming to cut wages and benefits and erode working conditions and legal protections for all workers—whether union or non-union, in the public and private sectors alike.

This push to erode labor standards, undercut wages, and undermine unions has been advanced by policymakers pursuing a misguided economic agenda working in tandem with the major corporate lobbies. The report highlights legislation authored or supported by major corporate lobbies such as the Chamber of Commerce, National Federation of Independent Business, and National Association of Manufacturers—and by corporate-funded lobbying organizations such as the American Legislative Exchange Council (ALEC), Americans for Tax Reform, and Americans for Prosperity—in order to draw the clearest possible picture of the legislative and economic policy agenda of the country’s most powerful economic actors. To make the most clear-eyed decisions in charting future policy directions, it is critical to understand how the various parts of these organizations’ agenda fit together, and where they ultimately lead.

This report begins by examining the recent offensive aimed at public-sector unions in order to point out the tactics commonly employed by corporate lobbies such as ALEC and the Chamber of Commerce; it establishes that their agenda is driven by political strategies rather than fiscal necessities. The paper then examines the details of this agenda with respect to unionized public employees, non-unionized public employees, and unionized private-sector workers. Finally, the bulk of the report details the corporate-backed agenda for non-union, private-sector workers as concerns the minimum wage, wage theft, child labor, overtime, misclassification of employees as independent contractors, sick leave, workplace safety standards, meal breaks, employment discrimination, and unemployment insurance.

Contextualizing the legislative efforts to undermine wages and labor standards

Before analyzing the legislative measures recently promoted to undermine U.S. wages and labor standards, it is useful to understand where the measures come from, and why they have appeared where they have. Using the recent attacks against public employee unions as a case study, the following subsections show how model legislation has been written by the staffs of national corporate-funded lobbies and introduced in largely cookie-cutter fashion in multiple states across the country. The most aggressive actions have been concentrated in a relatively narrow group of states that, though they did not necessarily face the most pressing fiscal problems, offered the combination of economic motive and political possibility to warrant the attention of the nation’s most powerful corporate lobbies.

Anti-unionism: A broad national agenda

When Wisconsin Gov. Scott Walker proposed sharply curtailing union rights in 2011, he presented his legislation as a response to the particular fiscal conditions facing Wisconsin. Indeed, in each state where anti-union legislation was advanced, voters typically perceived it as the product of homegrown politicians and a response to the unique conditions of their state. In fact, however, broadly similar legislation was proposed simultaneously in multiple states, whose fiscal conditions often had little in common.

As depicted in Figure A, in 2011 and 2012, 15 state legislatures passed laws restricting public employees’ collective bargaining rights or ability to collect “fair share” dues through payroll deductions (or, in one state, restricting the collective bargaining rights of private-sector employees who are nonetheless covered under state labor law). Beyond Wisconsin, for instance, collective bargaining rights were eliminated for Tennessee schoolteachers, Oklahoma municipal employees, graduate student research assistants in Michigan, and farm workers and child care providers in Maine. Michigan and Pennsylvania both created “emergency financial managers” authorized to void union contracts. New Jersey’s and Minnesota’s legislatures both voted to limit public employees’ ability to bargain over health care. Ohio legislators adopted a law—later overturned by citizen referendum—largely imitating Wisconsin’s, prohibiting employees from bargaining over anything but wages, outlawing strikes, and doing away with the practice of binding arbitration (the only impartial means of settling a contract dispute without a right to strike) in favor of the state agencies’ right to set contract terms unilaterally. Indiana, which had already eliminated most collective bargaining rights for state employees in 2006, adopted new legislation that prohibits even voluntary agreements with state employee unions.

Figure A States that passed laws mandating permanent, statutory restrictions on public employees’ collective bargaining rights, 2011–2012 State Legislation Alabama N/A Alaska N/A Arizona N/A Arkansas N/A California N/A Colorado N/A Connecticut N/A Delaware N/A Florida N/A Georgia N/A Hawaii N/A Idaho 2 Illinois 1 Indiana 1 Iowa N/A Kansas N/A Kentucky N/A Louisiana 1 Maine 1 Maryland N/A Massachusetts N/A Michigan 1 Minnesota 2 Mississippi N/A Missouri N/A Montana N/A Nebraska 1 Nevada N/A New Hampshire 1 New Jersey 1 New Mexico N/A New York N/A North Carolina N/A North Dakota N/A Ohio 2 Oklahoma 1 Oregon N/A Pennsylvania 1 Rhode Island N/A South Carolina N/A South Dakota N/A Tennessee 1 Texas N/A Utah N/A Vermont N/A Virginia N/A Washington N/A West Virginia N/A Wisconsin 1 Wyoming N/A Chart Data Download data The data below can be saved or copied directly into Excel. The data underlying the figure. Note: This figure does not take account of states that enacted laws concerning public employees' wages and benefits, restrictions on public employees' union dues deductions, or restrictions on teachers' rights to tenure or seniority. In the case of Maine, the state legislature passed laws restricting the collective bargaining rights of certain private-sector employees who are covered under state labor law (see endnotes 3 and 4 for more detail). Source: Author's analysis of data from National Council of State Legislatures, Collective Bargaining and Labor Union Legislation Database, http://www.ncsl.org/issues-research/labor/collective-bargaining-legislation-database.aspx Share on Facebook Tweet this chart Embed Copy the code below to embed this chart on your website. Download image

Thus the most striking feature of the pattern of state legislation—relating not just to union rights but also to a wide range of labor and employment standards, as will be outlined in greater detail later in this paper—is the extent to which similar legislation has been introduced, in largely cookie-cutter fashion, in multiple legislatures across the country.

Furthermore, the pattern of which states adopted which laws suggests that legislation was driven by politics rather than economics. While similar laws were proposed and adopted in many states, the states that adopted these laws are not necessarily those where problems were most severe. The most sweeping public employee pension reforms, for instance, did not occur in the states with the greatest unfunded liabilities. Wisconsin, Florida, and North Carolina all had among the best-funded and most solvent public employee pension funds at the start of 2011, yet all enacted dramatic cutbacks in pension benefits. So too, laws restricting the collective bargaining rights of schoolteachers were not targeted at states with the highest dropout rates or lowest achievement scores. As shown in Table 1, a majority of the states that passed legislation restricting teachers’ collective bargaining rights in 2010–2011 scored in the top half of states, as measured by the share of fourth- and eighth-graders performing at or above basic achievement levels in reading and math. Only two of the 11 states passing such laws scored in the lowest-performing third of the nation.

Table 1 Educational performance in states that restricted teachers’ collective bargaining rights in 2010 or 2011 State Rank among 50 states on test score achievement* in 2011 New Jersey 4 New Hampshire 10 Ohio 15 Michigan 21 Nebraska 23 Idaho 23 Wisconsin 24 Indiana 26 Minnesota 26 Oklahoma 39 Tennessee 41 * The states were ranked based on the share of fourth- and eighth-graders performing at or above basic achievement levels in reading and math. Source: Author's analysis of National Assessment of Educational Progress, NAEP Data Explorer [database], 2011, http://nces.ed.gov/nationsreportcard/naepdata/ Share on Facebook Tweet this chart Embed Copy the code below to embed this chart on your website. Download image

Perhaps most strikingly, the largest cutbacks in public services and layoffs of public employees did not take place in the states with the largest budget deficits. In 2011, state employment fell more sharply than in any year since the government began keeping track in 1955. Yet these cuts were not correlated with where state officials faced the largest fiscal challenges. From January through December 2011, 230,000 jobs were eliminated in state and local government. Texas alone cut 67,900 jobs, accounting for 31.3 percent of the total. An additional 87,900 positions—40.5 percent of the total—were eliminated in the 11 states that in November 2010 had newly put Republicans in control of all branches of state government. These 11 newly “all-red” states—Alabama, Indiana, Kansas, Maine, Michigan, Ohio, Oklahoma, Pennsylvania, Tennessee, Wisconsin, and Wyoming—laid off an average of 2.5 percent of their government employees in a single year; by comparison, the other 39 states together averaged cutbacks only one-fifth as large. As depicted in Figure B, these 11 states plus Texas accounted for 71.8 percent of the public jobs eliminated in 2011, yet in that same year, these 12 states accounted for just 12.5 percent of the aggregate state budget shortfall. Thus, the relationship is exactly the opposite of what one would expect if decisions were based on economics: More than two-thirds of total job cuts came from states that accounted for just one-eighth of the total state budget shortfall.

Figure B Share of aggregate state budget gap and state public employee job cuts accounted for by newly red states* plus Texas, 2011 12 all-red states Share of aggregate state job cuts 71.8% Share of aggregate state budget gap 12.5% Chart Data Download data The data below can be saved or copied directly into Excel. The data underlying the figure. Note: "Newly red states" refers to the 11 states that in November 2010 had newly put Republicans in control of all branches of state government. They include Alabama, Indiana, Kansas, Maine, Michigan, Ohio, Oklahoma, Pennsylvania, Tennessee, Wisconsin, and Wyoming. Source: Bryce Covert and Mike Konczal, The GOP’s State Project of Slashing the Public Workforce, Roosevelt Institute, March 27, 2012, http://www.rooseveltinstitute.org/sites/all/files/GOPProjectSlashingPublicWorkforce.pdf; Elizabeth McNichol, Phil Oliff, and Nicholas Johnson, States Continue to Feel Recession’s Impact, Center on Budget and Policy Priorities, January 9, 2012, http://www.cbpp.org/cms/index.cfm?fa=view&id=711 Share on Facebook Tweet this chart Embed Copy the code below to embed this chart on your website. Download image

These data suggest that legislation was driven by a national agenda, and that the pattern of which laws were passed was based not on where they were economically necessary, but on where they were politically feasible.

Understanding national legislative patterns

The state-by-state pattern of public employment cuts, pension rollbacks, and union busting makes little sense from an economic standpoint. But it becomes much more intelligible when understood as a political phenomenon.

As previously noted, in November 2010, 11 states gave Republicans new monopoly control over their state government, putting them in charge of both houses of the legislature as well as the governor’s office. These historic gains were part of the Tea Party–inspired “wave” election that, at the federal level, saw the GOP regain control of the U.S. House of Representatives. They also reflected the impact of unlimited corporate spending, as the Supreme Court’s Citizens United decision overturned restrictions on campaign spending at the state as well as federal levels. In Wisconsin, for instance, long-standing restrictions that limited corporate political spending were ruled invalid. As a result, the 2010 elections were the most expensive in the state’s history, with money flooding in from out-of-state business interests. The officials who took office in January 2011 represented the first crop of legislators elected under the new rules of unlimited spending.

Much of the most dramatic legislation since 2011 has been concentrated in these 11 states. Particularly in states such as Michigan, Wisconsin, Ohio, and Pennsylvania, which have traditionally upheld high labor standards, the 2010 election provided a critical opportunity for corporate lobbies to advance legislative goals that had long lingered on wish lists. Where Republicans found themselves in total control of states whose statutes had been shaped by a history of strong labor movements, employer associations and corporate lobbyists were eager to seize on this rare and possibly temporary authority to enact as much of their agenda as possible.

Who is behind this agenda?

Former U.S. Speaker of the House Tip O’Neill once famously quipped that “all politics is local” —suggesting that even U.S. senators and representatives ultimately run for election based on their reputation for solving local problems. The past few years, however, have stood this axiom on its head: Local politics has become nationalized, with state legislation written by the staffs of national lobbies, funded in a coordinated effort by national and multinational corporations.

The attacks on labor and employment standards have been driven by a powerful coalition of anti-union ideologues, Republican operatives, and corporate lobbies. Republican strategists such as Grover Norquist have long identified public employees, labor unions, and trial lawyers as three “pillars” of the Democratic Party—unions and lawyers providing campaign funds and public employees providing the army of volunteers making phone calls and knocking on doors in support of “big-government” Democrats. It is no accident that the hardest-fought anti-union campaigns have been waged in so-called battleground states. If Republicans cut off union funds and campaign volunteers in tossup states such as Michigan, Indiana, Pennsylvania, and Ohio, they could conceivably alter control of the federal government.

But behind the Republican operatives, the most important force spurring this agenda forward is a network of extremely wealthy individuals and corporations. The anti-union campaigns have been primarily funded by a coalition of traditional corporate lobbies such as the Chamber of Commerce and National Association of Manufacturers, along with newer and more ideologically extreme organizations such as the Club for Growth and the Koch brothers–backed Americans for Prosperity.

Recent trends have conspired to endow this coalition with unprecedented political leverage. As the U.S. economy has grown dramatically more unequal over the past few decades, it has produced a critical mass of extremely wealthy businesspeople, many of whom are politically conservative. At the same time, elections for public office have become more expensive than ever, leaving politicians increasingly dependent on those with the resources to fund campaigns. Finally, the Citizens United decision abolished longstanding restrictions on corporate political spending. In this way, the dramatically unequal distribution of wealth has translated into similarly outsized political influence for those at the top. The 2010 elections saw record levels of spending by business political action funds. In large part, the series of anti-union attacks launched in 2011 reflects the success of that strategy.

Local politics has become nationalized, with state legislation written by the staffs of national lobbies, funded in a coordinated effort by national and multinational corporations.

Perhaps the most important organization facilitating the work of this coalition is the American Legislative Exchange Council (ALEC). ALEC is a national network that brings state legislators together with the country’s largest corporations—including Wal-Mart Stores Inc., The Coca-Cola Company, FedEx, Amway, Exxon Mobil Corp., Koch Industries Inc., and leading tobacco and pharmaceutical firms —to formulate and promote business-friendly legislation. Due to a recent exposé by a disgruntled member, the inner workings of the organization have been brought to light. ALEC’s 2,000 member legislators include a large share of the country’s state senate presidents and house speakers. Legislators are invited to conferences—often at posh resorts—where committees composed of equal numbers of public and private officials draft proposals for model legislation. ALEC’s staff then drafts the legislative language and produces supporting policy reports. Thus state legislators with little time, staff, or expertise are able to introduce fully formed and professionally supported legislation. Ultimately, the key “exchange” that ALEC facilitates is between corporate donors and state legislators: The corporations pay ALEC’s expenses, contribute to legislators’ campaigns, and fund the state-level think tanks that promote legislation; in return, legislators carry the corporate agenda into their statehouses. Over the past decade, ALEC’s leading corporate backers have contributed more than $370 million to state elections, and over 100 laws a year based on ALEC’s model bills have been adopted.

In many cases, ALEC pursues initiatives that directly benefit the bottom line of its corporate partners. For instance, ALEC receives money from energy companies and lobbies against environmental controls; it receives money from drug companies and advocates prohibiting cities from importing discounted drugs from Canada; and it received money from Coca-Cola and lobbied against taxes on sugary soft drinks. Likewise, it receives money from private prison operators and advocates for policies that would raise prison occupancy rates, such as the detention of undocumented immigrants and the restriction of parole eligibility. It even received money from “payday loan” companies and opposed a law that prohibited such firms from charging more than 36 percent interest.

But ALEC also promotes a broader economic and deregulatory agenda that is not directly tied to the profitability of specific donors—including advocating for cuts to Social Security, unemployment insurance, and food stamps; supporting more trade treaties on the NAFTA model; and cutting public funding for schools, as well as supporting efforts to block union organizing and restrict union participation in political debates. Virtually all of the initiatives described in this report—including forced privatization, “right to work,” and abolishing minimum-wage and prevailing-wage laws—reflect model statutes developed by ALEC and promoted through its network. This dimension of ALEC’s work is not aimed at immediately enhancing specific donors’ revenues, but at reshaping the fundamental balance of power between workers and employers.

A common strategy ALEC employs to advance its agenda is to develop multiple model bills addressing the same issue. The bills do not represent alternative ways of thinking about policy; rather, ALEC seems to be gauging how far lawmakers in a given state are willing to go toward the organization’s end goal. ALEC and its legislative partners then calibrate their bills to what they believe is politically feasible in a given place at a particular time.

For instance, as a policy goal ALEC calls for complete abolition of the minimum wage, arguing that such laws “represent an unfunded mandate on business by the government.” For states that may not be ready to completely repeal the minimum wage, however, ALEC offers a model bill that simply blocks any minimum-wage increase. For yet more-moderate legislators, ALEC has model legislation that, while perhaps allowing a one-time increase in the minimum wage, opposes tying the wage to annual increases in inflation.

In this sense, when evaluating any given piece of corporate-promoted legislation, it is important to examine not only the immediate bill itself, but to understand the end goal of the agenda it is part of. Bills to prohibit inflation adjustment of the minimum wage are not really about inflation, for instance; they are simply the step that ALEC-allied legislators believe they can accomplish in this given session toward the ultimate goal of eliminating the minimum wage altogether.

Thus, the balance of this report will evaluate specific laws both on their own terms and as contributions toward broader economic goals. It first spells out the details of the corporate-backed legislative agenda with respect to public employees and public services, and then situates this agenda within the broader effort to lower wages and employment standards for all American workers—particularly the 93 percent of private-sector employees who are not represented by a union.

The legislative offensive against public employees and public services

Having outlined the origin of recent legislative measures aimed at undermining unions, wages, and labor standards—as well as the strategies employed to enact these measures—the report now spells out the details of this agenda, beginning with an examination of the recent attacks on public employees and public services. The sections below provide additional evidence that these attacks are not a response to fiscal crises, but rather reflect a political agenda unrelated to budget deficits. Further, the effort to undermine public services extends to attacks on even non-unionized government workers. Finally, this broad agenda is likely to have spillover effects that undermine wages, benefits, and labor standards for private-sector as well as public employees.

Wisconsin and beyond: Attacks on public employee unions

In Wisconsin, Ohio, and elsewhere, attacks on public employee unions were justified as a necessary response to the fiscal crises facing state governments. Commentators regularly suggested that budget deficits were the fault of unions that used their political clout to extract above-market wages and exorbitant benefits from hard-working taxpayers. In advocating a bill largely eliminating public employee bargaining rights, Wisconsin Gov. Walker argued that the law was needed because “our people are weighed down paying for a larger and larger government” and “we can no longer live in a society where the public employees are the haves and taxpayers who foot the bills are the have-nots.” Likewise, when Ohio Gov. John Kasich enacted a similar statute, he insisted that he was “empowering taxpayers.” Thus the debate—in Wisconsin, Ohio, and elsewhere—was framed as a contest between the demands of unionized government employees and the needs of hard-pressed taxpayers in the private sector.

But as alluded to previously, this characterization does not fit the economic reality. Rather than extorting above-market wages, an apples-to-apples comparison suggests that public employees generally make slightly less than similarly skilled private-sector employees. Furthermore, the timing of the budget crises that swept the nation in 2010–2011 makes clear that these crises were not the product of excessively generous employee compensation.

The budget shortfalls came on suddenly. As recently as 2007, 40 of the 50 states enjoyed budget surpluses. As shown in Figure C, three years later, the states faced a combined shortfall of almost $190 billion, by far the largest on record. Whatever caused the crisis, then, must have occurred in 2008–2009. There was certainly no dramatic increase in employee compensation in these years. On the contrary, as seen in Figures D and E, both the number of public employees per capita and the proportion of state and local budgets devoted to employee compensation have largely been flat for the past decade.

Figure C Total state budget shortfall in each fiscal year, 2002–2005, 2009–2013 (billions) Total budget shortfall 2002 -$40 2003 -$75 2004 -$80 2005 -$45 2009 -$110 2010 -$191 2011 -$130 2012 -$107 2013* -$55 Chart Data Download data The data below can be saved or copied directly into Excel. The data underlying the figure. * Reported to date Source: Adapted from Figure 2 in Phil Oliff, Chris Mai, and Vincent Palacios, States Continue to Feel Recession’s Impact, Center on Budget and Policy Priorities, June 27, 2012, http://www.cbpp.org/cms/index.cfm?fa=view&id=711 Share on Facebook Tweet this chart Embed Copy the code below to embed this chart on your website. Download image

Figure D State and local government workers per 1,000 residents, 1990–2010 State and local employees Local employees 1990-01-01 60.51661 43.433 1990-02-01 60.55613 43.4438 1990-03-01 60.63965 43.4999 1990-04-01 60.64034 43.5048 1990-05-01 60.76173 43.5878 1990-06-01 60.9328 43.6063 1990-07-01 61.11173 43.8409 1990-08-01 61.02484 43.7711 1990-09-01 61.02069 43.7645 1990-10-01 61.05785 43.7829 1990-11-01 61.03936 43.7604 1990-12-01 61.03503 43.7554 1991-01-01 61.04276 43.7415 1991-02-01 61.02286 43.7424 1991-03-01 60.9933 43.7212 1991-04-01 60.95162 43.7218 1991-05-01 60.89841 43.6791 1991-06-01 61.04887 43.7547 1991-07-01 61.0076 43.8474 1991-08-01 60.85727 43.734 1991-09-01 60.68643 43.6122 1991-10-01 60.76994 43.6929 1991-11-01 60.84768 43.7386 1991-12-01 60.87134 43.7709 1992-01-01 60.93318 43.822 1992-02-01 60.94391 43.825 1992-03-01 60.98481 43.8712 1992-04-01 61.02534 43.8998 1992-05-01 61.0024 43.8457 1992-06-01 60.973 43.8016 1992-07-01 61.1147 43.9247 1992-08-01 61.32208 44.1158 1992-09-01 61.04493 43.8287 1992-10-01 61.03288 43.8337 1992-11-01 61.04274 43.8587 1992-12-01 61.05343 43.86 1993-01-01 61.11435 43.9038 1993-02-01 61.11178 43.9056 1993-03-01 61.107 43.8932 1993-04-01 61.17249 43.9298 1993-05-01 61.17529 43.9194 1993-06-01 61.17024 43.937 1993-07-01 61.4359 44.1951 1993-08-01 61.26663 44.0196 1993-09-01 61.2726 43.9956 1993-10-01 61.27591 44.007 1993-11-01 61.32543 44.0624 1993-12-01 61.41993 44.1389 1994-01-01 61.44648 44.1969 1994-02-01 61.43681 44.193 1994-03-01 61.54708 44.2688 1994-04-01 61.64162 44.3284 1994-05-01 61.76653 44.4352 1994-06-01 61.77798 44.4382 1994-07-01 61.84424 44.4207 1994-08-01 61.82221 44.3608 1994-09-01 61.87102 44.429 1994-10-01 61.84994 44.385 1994-11-01 61.9257 44.4324 1994-12-01 61.95148 44.448 1995-01-01 61.96707 44.4455 1995-02-01 61.96328 44.4302 1995-03-01 62.00493 44.4754 1995-04-01 61.97437 44.4808 1995-05-01 61.87641 44.4289 1995-06-01 61.9146 44.4924 1995-07-01 61.85544 44.4895 1995-08-01 61.78165 44.4643 1995-09-01 61.76634 44.4691 1995-10-01 61.80456 44.5045 1995-11-01 61.81947 44.5474 1995-12-01 61.81539 44.5617 1996-01-01 61.71896 44.5197 1996-02-01 61.78176 44.544 1996-03-01 61.92222 44.6993 1996-04-01 61.82189 44.6341 1996-05-01 61.84134 44.6735 1996-06-01 61.78495 44.6571 1996-07-01 61.81698 44.7218 1996-08-01 61.60177 44.5743 1996-09-01 61.79056 44.7936 1996-10-01 61.7523 44.811 1996-11-01 61.7252 44.8098 1996-12-01 61.71323 44.828 1997-01-01 61.71875 44.8519 1997-02-01 61.7118 44.8589 1997-03-01 61.70237 44.8935 1997-04-01 61.69808 44.8834 1997-05-01 61.64308 44.837 1997-06-01 61.78885 44.9927 1997-07-01 61.95404 45.0621 1997-08-01 61.63148 44.8658 1997-09-01 61.80521 45.0772 1997-10-01 61.88379 45.1412 1997-11-01 61.8876 45.1581 1997-12-01 61.87585 45.1905 1998-01-01 61.89509 45.2106 1998-02-01 61.92011 45.2776 1998-03-01 61.91669 45.2723 1998-04-01 61.98239 45.3244 1998-05-01 62.10173 45.4051 1998-06-01 62.05499 45.3675 1998-07-01 62.1444 45.3941 1998-08-01 62.1631 45.4095 1998-09-01 62.20502 45.4404 1998-10-01 62.17622 45.4472 1998-11-01 62.22658 45.5032 1998-12-01 62.31488 45.5561 1999-01-01 62.34566 45.5812 1999-02-01 62.48741 45.6812 1999-03-01 62.54898 45.7336 1999-04-01 62.64657 45.8142 1999-05-01 62.66213 45.8314 1999-06-01 62.74529 45.9461 1999-07-01 62.92272 46.0767 1999-08-01 62.95377 46.0977 1999-09-01 63.01469 46.1017 1999-10-01 63.13637 46.1844 1999-11-01 63.21153 46.2436 1999-12-01 63.29885 46.3315 2000-01-01 63.36128 46.4025 2000-02-01 63.31306 46.3672 2000-03-01 63.42725 46.4626 2000-04-01 63.52143 46.5395 2000-05-01 63.51352 46.5593 2000-06-01 63.38657 46.458 2000-07-01 63.47717 46.5428 2000-08-01 63.57265 46.6119 2000-09-01 63.58418 46.6048 2000-10-01 63.58382 46.6206 2000-11-01 63.58373 46.618 2000-12-01 63.65617 46.6873 2001-01-01 63.68695 46.7632 2001-02-01 63.89171 46.8612 2001-03-01 63.97046 46.907 2001-04-01 64.08369 47.02 2001-05-01 64.15154 47.0349 2001-06-01 64.39652 47.2003 2001-07-01 64.49849 47.2505 2001-08-01 64.56561 47.2879 2001-09-01 64.62289 47.2882 2001-10-01 64.7051 47.3614 2001-11-01 64.84227 47.4609 2001-12-01 64.91957 47.4962 2002-01-01 64.92949 47.4776 2002-02-01 64.9247 47.5132 2002-03-01 65.03012 47.5817 2002-04-01 65.02504 47.5718 2002-05-01 65.17559 47.6596 2002-06-01 65.24261 47.6544 2002-07-01 65.20886 47.6215 2002-08-01 65.28992 47.7112 2002-09-01 65.06178 47.6616 2002-10-01 65.00848 47.6547 2002-11-01 65.02805 47.6538 2002-12-01 65.00918 47.637 2003-01-01 65.06331 47.6758 2003-02-01 65.01239 47.6435 2003-03-01 64.91303 47.5905 2003-04-01 64.88927 47.5967 2003-05-01 64.79855 47.5467 2003-06-01 64.84528 47.6489 2003-07-01 64.89581 47.7684 2003-08-01 64.60601 47.514 2003-09-01 64.37916 47.2846 2003-10-01 64.5325 47.4288 2003-11-01 64.45013 47.3566 2003-12-01 64.40235 47.3446 2004-01-01 64.36179 47.3695 2004-02-01 64.36751 47.3786 2004-03-01 64.45493 47.4568 2004-04-01 64.4206 47.4351 2004-05-01 64.45117 47.4851 2004-06-01 64.35716 47.3803 2004-07-01 64.32497 47.3484 2004-08-01 64.337 47.365 2004-09-01 64.31247 47.355 2004-10-01 64.34422 47.3745 2004-11-01 64.40472 47.4316 2004-12-01 64.35489 47.4051 2005-01-01 64.45269 47.4342 2005-02-01 64.43808 47.4441 2005-03-01 64.36789 47.3912 2005-04-01 64.39812 47.4128 2005-05-01 64.41239 47.4292 2005-06-01 64.30444 47.3109 2005-07-01 64.58442 47.5681 2005-08-01 64.5392 47.5442 2005-09-01 64.41708 47.4306 2005-10-01 64.29562 47.3344 2005-11-01 64.33227 47.3576 2005-12-01 64.37123 47.3555 2006-01-01 64.23717 47.3279 2006-02-01 64.27646 47.3252 2006-03-01 64.31591 47.3428 2006-04-01 64.3219 47.3446 2006-05-01 64.29567 47.3038 2006-06-01 64.22329 47.2553 2006-07-01 64.32528 47.3518 2006-08-01 64.41825 47.4299 2006-09-01 64.59603 47.5741 2006-10-01 64.49214 47.4928 2006-11-01 64.49313 47.4985 2006-12-01 64.45362 47.4795 2007-01-01 64.4234 47.4991 2007-02-01 64.49093 47.4897 2007-03-01 64.50713 47.505 2007-04-01 64.54022 47.5413 2007-05-01 64.54759 47.5616 2007-06-01 64.55248 47.5477 2007-07-01 64.38325 47.4331 2007-08-01 64.4728 47.5672 2007-09-01 64.59183 47.6126 2007-10-01 64.60551 47.6574 2007-11-01 64.64194 47.6912 2007-12-01 64.6912 47.7469 2008-01-01 64.74337 47.7816 2008-02-01 64.76552 47.8251 2008-03-01 64.79285 47.837 2008-04-01 64.76126 47.804 2008-05-01 64.81929 47.857 2008-06-01 64.87477 47.8697 2008-07-01 64.96434 47.9334 2008-08-01 64.91173 47.8192 2008-09-01 64.75079 47.7713 2008-10-01 64.72506 47.7657 2008-11-01 64.6923 47.7066 2008-12-01 64.64295 47.6791 2009-01-01 64.64233 47.6376 2009-02-01 64.56877 47.6237 2009-03-01 64.46436 47.5655 2009-04-01 64.40299 47.5118 2009-05-01 64.35189 47.4487 2009-06-01 64.35421 47.5121 2009-07-01 64.03872 47.3818 2009-08-01 64.03627 47.2334 2009-09-01 63.75144 47.0537 2009-10-01 63.8407 47.1172 2009-11-01 63.84841 47.1373 2009-12-01 63.67757 46.9878 2010-01-01 63.53596 46.8862 2010-02-01 63.42164 46.7597 2010-03-01 63.35459 46.7252 2010-04-01 63.35145 46.7333 2010-05-01 63.27862 46.6735 2010-06-01 63.23152 46.6427 2010-07-01 63.02583 46.4445 2010-08-01 62.80891 46.2614 2010-09-01 62.50363 45.9935 2010-10-01 62.6039 46.0412 2010-11-01 62.52938 45.977 2010-12-01 62.4087 45.8822 Chart Data Download data The data below can be saved or copied directly into Excel. The data underlying the figure. Source: Sylvia Allegretto, Ken Jacobs, and Laurel Lucia, Wrong Target: Public Sector Unions and State Budget Deficits, Center on Wage and Employment Dynamics, Institute for Research on Labor and Employment, University of California-Berkeley, October 2011, http://www.irle.berkeley.edu/research/state_budget_deficits_oct2011.pdf

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Figure E Public employee compensation as a share of total state and local expenditures, 1992–2011 Year Employee compensation as a share of total state and local expenditures 1992 59.0% 1993 59.1% 1994 59.0% 1995 58.6% 1996 58.4% 1997 58.4% 1998 58.1% 1999 57.4% 2000 56.8% 2001 55.9% 2002 56.0% 2003 56.8% 2004 56.3% 2005 55.7% 2006 55.9% 2007 55.1% 2008 55.1% 2009 54.7% 2010 53.8% 2011 53.3% Chart Data Download data The data below can be saved or copied directly into Excel. The data underlying the figure. Source: David Madland and Nick Bunker, State Budget Deficits Are Not an Employee Compensation Problem, Center for American Progress, March 10, 2011, http://www.americanprogressaction.org/issues/labor/report/2011/03/10/9206/state-budget-deficits-are-not-an-employee-compensation-problem/ Share on Facebook Tweet this chart Embed Copy the code below to embed this chart on your website. Download image

What occurred in that short timespan was not any increase in state spending, but rather, as shown in Figure F, a dramatic falloff in revenues, caused by the collapse of the housing market and the onset of the Great Recession. Budget deficits struck nearly every state, regardless of their public employees’ union status. Statistical analysis shows no correlation whatsoever between the presence of public employee unions and the size of state budget deficits. Indeed, Texas—which prohibits collective bargaining for nearly all public employees—faced a massive, two-year budget shortfall of $18 billion, or 20 percent of state expenditures.

Figure F State tax revenues, 2005–2011 (billions of 2011 dollars) Year State tax revenues 2005 $784.8848 2006 $816.7534 2007 $829.914 2008 $804.0113 2009 $723.7031 2010 $745.6857 2011 $769 Chart Data Download data The data below can be saved or copied directly into Excel. The data underlying the figure. Note: Data are inflated using the CPI-U-RS. Source: Lawrence Mishel, We're Not Broke, Nor Will We Be, Economic Policy Institute, Briefing Paper #310, May 19, 2011, https://www.epi.org/publication/were_not_broke_nor_will_we_be/ Share on Facebook Tweet this chart Embed Copy the code below to embed this chart on your website. Download image

Because unions did not cause the deficits, it is clear that undermining unions’ bargaining power was not undertaken as a strategy for solving states’ fiscal problems. There may be times when employee concessions are needed to help close budget gaps, but such concessions in no way require curtailing bargaining rights. Nowhere was this made clearer than in Wisconsin itself. Indeed, at the start of 2011, Wisconsin was one of the few states not facing a budget crisis; on the eve of Gov. Walker’s inauguration, the state’s nonpartisan legislative research office announced that Wisconsin would start 2011 with a surplus of $121 million. The budget went into the red only after the governor, as one of his first acts in office, enacted large new tax cuts for the business community.

The disconnect between union-busting and fiscal necessity became painfully clear during debate over the governor’s budget proposal. When Wisconsin unions announced they had agreed to all of Gov. Walker’s economic proposals—including significant benefit reductions—Walker declared that, despite having been granted everything he claimed was needed to close the budget gap, no deal would be acceptable as long as workers retained the legal right to bargain. Under questioning by members of the U.S. Congress two months later, Walker conceded that some of the most draconian provisions in his legislation would not save the state anything. So too, the governor of Ohio—which adopted a law similar to Wisconsin’s, only to see it overturned by a subsequent voter referendum—conceded that his proposed law “does not affect our budget.”

In short, as noted earlier, the attack on collective bargaining rights was not a fiscal strategy, but a political agenda unrelated to budget requirements.

The effort to diminish public services

The efforts to undermine public employee unions are part and parcel of a broader strategy to diminish public services.

Legislators faced truly stark budget shortfalls in 2011, forcing them to contemplate drastic cuts to essential services. In Arizona, for instance, the governor proposed cutting off health insurance for nearly 300,000 people—including some in the middle of chemotherapy or dialysis treatments. Texas eliminated over 10,000 teaching jobs; cut funding that supported full-day pre-kindergarten programs for 100,000 at-risk kids; and announced plans to consider Medicaid cuts that could lead to the closing of 850 of the state’s 1,000 nursing homes, potentially forcing frail, low-income elderly residents into the streets. The city of Camden, N.J.—one of the most dangerous in the country—laid off half its police force.

Budget cuts were particularly widespread—and particularly devastating—in the country’s school systems. In 2010–2011, 70 percent of all U.S. school districts made cuts to essential services. Despite widespread evidence of the academic and economic value of preschool education, 12 states cut pre-K funding that year, including Arizona, which eliminated it completely. Ohio repealed full-day kindergarten, and cut its preschool program to the point that the number of four-year-olds enrolled in state-supported preschool is now 75 percent less than in 2001. Pennsylvania also cut back from full-day to half-day kindergarten in many districts—including Philadelphia, which also eliminated 40 percent of its teaching staff, cut its English-as-a-second-language program in half, and increased elementary school class sizes from 21 to 30. More than half the nation’s school districts have changed their thermostat settings—making classrooms hotter in summer and colder in winter—to reduce energy costs. In Florida, the Seminole County school board proposed raising thermostats to 78 degrees, the maximum allowed by law. The Tuscon, Arizona, school district eliminated geometry, art, drama, and photography classes, increased class sizes to up to 40 students, and was still fined $1.9 million for failing to provide the minimum required instruction hours for seventh and eighth graders. North Carolina cut its textbook budget by 80 percent.

Yet it is striking that even in the face of such drastic cuts, lawmakers often treated retrenchment not as an undesirable, temporary necessity, but rather as an opportunity to make what they perceived as overdue cuts. It would have been easy, for instance, to structure these cuts as temporary measures, with services set to be restored when economic growth reached a given level or state coffers were replenished. But no legislature took this route.

Indeed, if elected officials were simply concerned with closing budget gaps, they had many alternative methods for achieving this end without cutting essential services. For instance, in 2011 the deficits in all 50 states could have been erased entirely through two simple policy changes: effectively undoing the Bush tax cuts for the top 2 percent of income earners by imposing an equivalent income tax at the state level, and taxing capital gains at the same rate as ordinary income. Both of these policies are within the power of states to enact, without waiting for Congress to act. Yet none of the states even seriously explored this road to fiscal balance.

On the contrary, many legislatures enacted new tax giveaways to corporations and the wealthy while simultaneously slashing funding for schools, libraries, and health care. Twelve different states that enacted dramatic service cuts in 2011 also provided large new tax cuts. Michigan, for example, adopted a bill, authored by an ALEC member, that eliminated the state’s primary business tax and substituted a flat 6 percent corporate tax—costing the state $1 billion per year in lost revenue—even while cutting K–12 funding by $470 per student. Despite the dire impact on education, the corporate tax cut was vigorously supported by the Chamber of Commerce, National Federation of Independent Business, and Michigan Restaurant Association. Likewise, Florida eliminated its corporate income tax for nearly half the state’s businesses, adopting a bill co-sponsored by a quartet of ALEC legislators and hailed by the Chamber of Commerce as the first step toward a complete phase-out of corporate income taxes. And Ohio phased out its inheritance tax—which had only ever affected the wealthiest 7 percent of estates—forgoing almost $300 million a year in funds that had been primarily dedicated to local government services. This bill, too, received the avid support of the Chamber of Commerce (which hailed the bill as “the culmination of a decade-long advocacy effort”), National Federation of Independent Business (celebrating it among its “key victories”), and Americans for Prosperity (which applauded legislators’ “political courage” in abolishing inheritance taxes).

Similarly, several states that enacted drastic cuts maintained significant “rainy day” funds that they chose to leave untouched, including Louisiana, South Carolina, and Iowa—whose rainy day fund was more than three times as large as its 2012 budget deficit. Texas’s $18 billion budget gap could have been partially offset by tapping a portion of the state’s $6 billion rainy day fund, but the governor left those reserves intact even while imposing steep cuts to education, health care, and other public services.

Finally, rather than seeking paths to eventually restore essential services, corporate lobbyists sought to lock in these cuts and guarantee that services would never be restored to a more robust level. Corporate-funded lobbies such as ALEC and Americans for Prosperity have long advocated measures, such as a so-called taxpayer bill of rights (TABOR), that constitutionally limit future state spending to the rate of population growth plus inflation. There are multiple concerns with such formulae. For example, they prevent states from effectively aiding those in need or adopting countercyclical measures during economic downturns. Additionally, because the cost of core public services such as health care and education increases faster than the general rate of inflation, spending limits tied to the consumer price index force real (inflation-adjusted) reductions in service levels over time. Colorado is the only state to have adopted a TABOR provision to date, and its impacts were so troubling that the state’s citizens voted in 2005 to suspend the TABOR formula. But to enact such measures in the depths of recession would entail even greater pain. TABOR-style proposals would take cuts made in response to record budget deficits caused by the worst economic downturn in 70 years, and lock these in as the new high-water mark of public services that could never be exceeded, even after economic recovery. Yet this is exactly what the nation’s most active corporate lobbies advocated, and what several states pursued.

In Michigan, legislators adopted a ballot referral asking voters to amend their state’s constitution to require a two-thirds supermajority approval for any future tax increases. The proposal was strongly supported by the National Federation of Independent Business (NFIB), which explained that it wanted to “lockdown … some pretty substantive tax reforms” that the legislature had recently made. “We’re concerned that things will change,” NFIB State Director Charles Owens explained, “and over a period of time we’ll have a new makeup in the legislature and … we will see some of the progress that we’ve made on tax policy here will be eroded.” Grover Norquist’s Americans for Tax Reform likewise deemed it an “important measure” that would “help keep the growth of state government in check.”

In New Hampshire, the Chamber of Commerce celebrated the legislature’s 2012 decision to advance a referendum that would add a constitutional amendment prohibiting the state from ever adopting an income tax.

Florida’s constitution already caps tax increases, with maximum increases set by a moving five-year average of personal income growth. Yet legislators asked voters to approve an even stricter standard, limiting revenue growth to the TABOR formula of population growth plus inflation. The Chamber of Commerce strongly promoted this proposal, arguing that “the less government takes, the more Floridians will keep.” The bill’s prime sponsor—ALEC member and Florida Senate President Mike Haridopolos—championed TABOR as a route to “less government, less taxes and more freedom.” Florida voters, however, were unconvinced, rejecting the proposal by a 58 percent to 42 percent margin.

Perhaps the most dramatic example of the corporate lobbies’ priorities in action comes from Arizona, a state often touted as a model for conservative policy. As described previously, Arizona lawmakers called for drastic cuts to both education and health services in 2011. Rather than conserving revenue in order to minimize these cuts, however, legislators enacted significant new cuts to both the state’s commercial property tax and its corporate income tax rates, at an annual cost set to reach $538 million within five years. The law—co-sponsored by 23 ALEC members including the Speaker of the House—was strongly championed by the National Federation of Independent Business and the Chamber of Commerce, which celebrated it as “historic legislation.” Nationally, the cost of pre-kindergarten averaged just over $4,100 in 2011. Thus, for $538 million, Arizona could have kept nearly 130,000 low-income four-year-olds in school. Legislators preferred to instead give the money to business owners. Finally, the same legislature voted to enact a TABOR statute—later vetoed by the governor—that would have made it nearly impossible to ever restore preschool funding in the future.

The budget crises of recent years were greeted not as tragedy, but as opportunity—a chance to advance long-held agendas and to lock in new restrictions on public services and workers’ rights.

The desire to lock in budget cuts rather than restore services as revenues rebound was recently evident in Texas, a state frequently touted as a national model by both the Chamber of Commerce and ALEC. Texas enacted draconian cuts in 2010–2012. But by January 2013, the economy had rebounded, state revenues had increased by 12.4 percent, and budget officials were projecting an $8.8 billion surplus. Rather than restoring cut services, however, Gov. Rick Perry insisted the state had “[brought] in more than we need” and used his State of the State address to call for a constitutional amendment allowing “excess tax receipts” to be rebated to taxpayers.

Thus, for the corporate lobbies that constitute the single most powerful force driving conservative politics, the budget crises of recent years were greeted not as tragedy, but as opportunity—a chance to advance long-held agendas and to lock in new restrictions on public services and workers’ rights.

Undermining public employees—union or not

Beyond undermining public employee unions and reducing public services, corporate lobbies are also attempting to remove civil service protections and reduce public employee pay even in states with no government worker unions.

Starting in the late 1990s, ALEC began promoting model legislation calling for the elimination of civil service protections and the conversion of public employees to at-will status. In 2012, this goal was achieved in Arizona, when the state adopted a law—authored by ALEC Task Force member Rep. Justin Olson—that largely abolishes the state’s civil service system. Arizona public employees have no right to collective bargaining; thus, the attack on public employees there has nothing to do with union contracts.

The Arizona governor’s office projects that within four years of the law’s passage, over 80 percent of state employees will be stripped of civil service protections and converted to at-will status. The bill eliminates the system of regular across-the-board raises for employees, making raises instead dependent on supervisors’ discretion. It also abolishes the requirement that job openings be widely advertised and that a wide range of qualified applicants be given an opportunity for consideration—practices designed to avoid political favoritism and facilitate affirmative action. It instead allows supervisors to simply pick their favorites with minimal procedural requirements. Gov. Jan Brewer trumpeted the fact that abolishing civil service protections would allow state managers to proceed with additional measures that accelerate work requirements and decrease employee compensation. The law “will usher in a host of HR practices modeled after those that are commonplace in the private sector,” the governor’s office stated, including “changes … in administrative leave; overtime and compensatory leave; workers’ compensation; and hiring practices.”

As public employee compensation is cut back, it is likely that the new law will have a negative ripple effect in the private-sector labor market. The State of Arizona is the single largest employer in both Phoenix and Tucson, the state’s two largest cities. Where public employment plays a leading role in local labor markets, it influences wage and benefit standards in the broader private economy. If secretaries at the University of Arizona get overtime pay and reasonable family leave rights, for instance, this increases pressure on private employers to approach those standards—if not match them—if they hope to attract the most skilled employees. Conversely, cutting state employee compensation reduces the competitive pressure on private-sector employers. Thus, at least in those areas where the state is a leading employer, the degradation of public-sector labor standards will weaken workers’ bargaining leverage in the labor market as a whole.

Beyond its impact on compensation, the abolition of civil service protections threatens to undermine the ability of public servants to independently administer and enforce state law without fear of retribution from politically connected corporations. Many Arizonans spoke out against this bill, noting that civil service protections were created as a response to the long history of corrupt patronage practices and cronyism in government hiring and administration. But the bill was strongly supported by the business community, with the Chamber of Commerce designating it a top legislative priority. The National Federation of Independent Business likewise explained, in an editorial titled “Rewarding the Worth, Removing the Worthless,” that much of “business owners’ frustrations with the bureaucracy” stems from “entrenched middle managers in state employ who use and abuse their discretion within a regulatory environment.” Stripping these bureaucrats of civil service protections will make government “more responsive,” the NFIB argued. However, the civil service was established, in part, precisely to avoid the type of “responsive” government in which a wealthy supporter’s phone call to the governor’s office can result in regulatory staff overlooking violations, going light on fines, or approving questionable practices. For the corporate lobbies, it appears that a return to past practice may be a welcome change.

In this sense, the Arizona statute sheds important light on the extent to which corporate lobbies’ attacks on public-sector unions are not necessarily driven by anti-unionism per se, but by a broader agenda of freeing business owners from public regulations and lowering labor standards for non-union and union workers alike.

From the public sector to the private

The attacks on public employees that have become so commonplace since 2011 have largely been framed as a call for fiscal austerity, insisting that government live within its means and not overburden taxpayers. However, when one pulls back from these particular battles to examine the full agenda of the leading corporate lobbies, it becomes clear that restricting the rights and compensation of public employees is only one component of a much broader agenda aimed at transforming labor standards across the economy. Most of this agenda has little to do with unions and nothing to do with public budgets.

In state after state, the same corporate lobbies that have played leading roles in fighting public employee unions have also launched equally vigorous attacks against the union rights of private-sector workers—an issue utterly unrelated to budget deficits or the size of government.

Scott Walker himself famously confided to an investor that his attack on public employee unions was part of a “divide and conquer” strategy that would ultimately enable him to undermine private-sector unions as well, through so-called “right to work” legislation.

In 2011–2012, 19 states introduced legislation mandating “right to work” laws, and both Indiana and Michigan adopted such laws in 2012. Virtually all the major employer associations and corporate lobbies embraced “right to work” as a top legislative priority. The Orwellian-named “right to work” laws do not guarantee anyone a job. Rather, they make it illegal for a union to require that employees who benefit from a collective contract contribute their fair share of the costs of administering that contract. By weakening unions’ ability to sustain themselves financially, such laws aim to undermine the bargaining power of organized workers, and ultimately to drive private-sector unions out of existence.

The corroding effects of “right to work” are the same for unions as they would be for any other type of organization. Under federal law, unions are required to provide all services to any worker covered by a union contract, for no charge—regardless of whether that person chooses to pay dues. Inevitably, when “right to work” laws guarantee employees can benefit from union contracts with no requirement to pay their share of the costs of producing that benefit, some will choose to avoid paying. Indeed, the Chamber of Commerce itself would not agree to live by the rules it seeks to impose on unions through “right to work” laws. Thus, when one former member of the Owensboro, Kentucky, Chamber of Commerce chose to stop paying dues—perhaps out of disagreement with the Chamber’s political advocacy—the member asked if it would be possible to continue to receive member benefits without paying dues. Absolutely not, the Chamber replied. “It would be against Chamber by-laws and policy to consider any organization or business a member without dues being paid,” the Chamber explained. “The vast majority of the Chamber’s annual revenues come from member dues, and it would be unfair to the other 850+ members to allow an organization not paying dues to be included in member benefits.” The Chamber’s logic is irrefutable: If it provided services without requiring dues, it could not sustain itself as a viable organization. This, then, is the goal of “right to work” laws—to make unions financially unviable, so that corporations can avoid having to negotiate with their own employees.

Case study: An offensive aimed at both union and non-union private-sector workers—Lowering labor standards in the construction industry In addition to the “right to work” assaults on private-sector unions as a whole, the past two years have brought a series of attacks aimed specifically at lowering labor standards in the construction industry. Although these are often framed as attacks against unionized workers, the actual legislative proposals aim at non-union as well as union workers. Construction plays a critical role in the U.S. labor market as one of the most important sources of skilled, decently paying jobs that do not require a college degree and that cannot be shipped abroad. In addition, construction is projected to be one of the fastest-growing industries during the current decade, second only to health care. Efforts to lower wages, benefits, and working conditions in this industry are likely to have far-ranging impacts on working- and middle-class communities across the country where—particularly as manufacturing jobs have disappeared—construction is an increasingly critical source of work for those looking to support their families at a minimally decent living standard. The organizations representing anti-union construction owners and investors—including the Chamber of Commerce, Business Roundtable, and Associated Builders and Contractors—have sought for decades to lower labor standards and diminish workers’ bargaining power in the industry. The elections of 2010 and subsequent state fiscal crises provided a political opening for advancing these longstanding goals. For the past two years, these organizations have focused on restricting or prohibiting both project labor agreements and prevailing wage laws. Project labor agreements A project labor agreement (PLA) is an agreement established at the start of large, complex construction projects involving multiple types of contractors that sets the terms of employment for all contractors’ employees. PLAs were first used on the big public works projects of the 1930s. At Grand Coulee and Hoover dams, project managers sought to avoid a potentially endless series of labor negotiations as one contract after another came up for renewal, causing expensive delays and generating a steady threat of strikes. The elegant solution to the problem was to put all workers under a single, umbrella contract that was tailor-made for that specific project. In recent years, government agencies have also negotiated cost-saving concessions, such as no-strike clauses or reduced premium pay, as part of the terms of a PLA. Any contractor—union or non-union—can work on projects under a typical PLA, as long as it abides by the established terms of employment. For example, 30 percent of the contractors on Boston’s Central Artery/Tunnel project—the “Big Dig”—were non-union. Generally, workers are hired for these projects through a union hiring hall, but both union and non-union workers may be hired through the hall, and non-union contractors are often specifically authorized to bring their core employees with them onto a PLA project. Nevertheless, because they perceive that PLAs benefit unions, non-union contractors generally want the law to prohibit PLAs. PLAs ensure a steady flow of highly trained construction labor, and agencies typically look to them as a mechanism for achieving cost savings on complex projects. New York State’s School Construction Authority, for instance, was estimated to have saved $44 million over a five-year period through the use of PLAs. PLAs also often serve as a mechanism for boosting local hiring and community development. Over the past two decades, more than 100 PLAs have been implemented that include requirements for local hiring, establishment of local apprenticeship programs, and preferential job access for women and minorities. One such example is the construction of Nationals Park in Washington, D.C., which was built under a PLA, was completed in record time, and achieved the distinction of being the first professional sports facility certified as “green.” Roughly 600 District of Columbia residents worked on the ballpark project, and 91 percent of all new apprentices brought onto the job were District residents. Thus, the PLA enabled the District to leverage its construction dollars into nurturing the city’s skilled workforce of the future. Further, the Nationals Park PLA fostered a commitment of over $200 million in contracts to local, minority-owned firms. None of this would have occurred without a PLA. PLAs are not limited to the public sector; a significant number of private corporations—including Boeing, Disney, General Motors, Inland Steel, ARCO, Pfizer, and Yale University—have chosen to use PLAs because they see them guaranteeing high quality craftsmanship and timely, safe, and cost-efficient construction. Toyota has used a PLA on every plant it has constructed in the United States. Despite these advantages, 10 states passed laws outlawing or restricting the use of project labor agreements in 2011–2012. PLAs have never been required by statute; rather, they are an available option that state agencies may use if desired. Each of the bills passed, then, does not overturn a government mandate but, on the contrary, imposes one by prohibiting public agencies from using PLAs even if those responsible for the project think a PLA is warranted. Furthermore, the statutes adopted in the past two years generally prohibit local governments—towns, counties, school districts, and other local entities—as well as states from using PLAs. For example, Arizona’s SB 1403—passed with strong support from the state chapter of the Associated General Contractors—prohibits any public entity from using PLAs. Many of these laws mandate harsh penalties for violations—public agencies in Idaho, for instance, face fines of up to $100,000 for using PLAs. Thus, legislators have stripped from both state and local officials the right to use one tool of construction management that private corporations as well as public agencies have historically found to increase efficiency. Hypocritically, the ALEC-affiliated Associated Builders and Contractors attacks laws that enable PLAs, such as one in California that prohibits local government bans on PLAs, because they “interfere with local control” even as ALEC and ABC promote bans on PLAs that constitute much greater interference with the rights of local governments. The real issue is hostility to collective bargaining as a route to higher wages. The attack on prevailing wage laws Prevailing wage laws were first adopted by state legislatures in the late 19th and early 20th centuries as a means of guaranteeing that publicly funded construction does not undermine wage standards in local communities. Thirty-two states plus the District of Columbia now uphold some form of prevailing wage law. Such laws require that states survey construction employers to determine the wages and benefits provided for various skilled occupations. The typical rate for each occupation is deemed the “prevailing” wage for that local area. Publicly funded construction projects are then required to pay these wage levels to all workers employed on the project. Prevailing wage laws in no way require that work be performed by union members or under a union contract. Rather, by establishing a level playing field regarding employee compensation, such laws encourage a constructive competition—based on high skills, effective management, and business acumen—rather than a destructive competition based on cutting wages to the lowest level possible. Perhaps unsurprisingly, non-union contractors whose primary competitive advantage lies in low wage rates have long advocated the repeal of prevailing wage laws. In 2011–2012, five states passed laws that significantly scaled back prevailing wage standards, ranging from complete repeal to modifying the extent of the law’s coverage or the method of calculating mandated wage rates. In Louisiana, Arizona, Iowa, and Idaho—all states that have no prevailing wage laws—legislators adopted statutes proactively prohibiting cities, counties, or school districts within the states from adopting their own local wage standards. Even where prevailing wage laws were modified rather than repealed, this action appears to have been taken as a first step toward the ultimate goal of repeal. ALEC’s explicit goal is to abolish all prevailing wage laws in all jurisdictions, and it promotes model legislation to that end. Where that is not politically possible, however, the organization embraces half-measures as steps along the way toward the end goal. For example, Wisconsin retained its prevailing wage law, but legislators in 2011 raised the threshold at which wage requirements apply, insisted that private projects built with public funding are not required to pay prevailing wages, and prohibited localities from enacting their own wage standards—including retroactively striking down a Milwaukee ordinance that established local prevailing wages and gave local contractors preference in bidding on large projects. The broad pattern of legislation across the states suggests that such half-measures do not constitute true alternative policy solutions, but merely rest stops and halfway houses on the road to a future where construction workers will bid against each other, with no wage floor and no public standards defining fair pay. Economic impact of repealing prevailing wage laws It is critical to note that prevailing wage laws are not strictly a union issue. They benefit both union and non-union employees as well as their broader communities, as affected workers’ increased purchasing power leads to expanded consumer demand in the local economy. There is no central data source that measures the share of state and local construction performed by union and non-union workers. Data from the Bureau of Labor Statistics show that, in the states with prevailing wage laws, unions represent an average of 18.8 percent of the construction workforce. This estimate is likely low because it includes administrative and managerial employees employed by firms in this industry. The union share of actual construction workers is thus likely closer to 25 percent. As a conservative estimate, one might project that unionization on public works is double the rate in the industry as a whole, which would mean that 50 percent of publicly funded construction work in these states is done by non-union workers. Collectively, the states with prevailing wage laws include a total of just over 800,000 unionized construction workers. If prevailing wage work were equally spread out across this workforce, along with an equal number of non-union workers, this would mean that state prevailing wage laws affect over 1.6 million construction workers across the country—half union, half non-union. Based on estimates from the conservative Mackinac Center, whose report serves as one of corporate advocates’ primary measures of prevailing wage impacts, the effect of these state laws would be to increase annual earnings by over $2,800 for each of those 1.6 million workers. Thus, if the Mackinac Center’s methodology is accurate, those who call for repeal of prevailing wage laws are advocating a wage cut amounting to nearly $3,000 per year for hundreds of thousands of non-union as well as union construction workers, spread all across the country in communities that look to this industry as a key source of decently paying jobs. If attacking prevailing wage laws is not simply an anti-union strategy, what explains the vehemence of corporate lobbies’ activism on this issue? The campaign to dismantle prevailing wages doubtless reflects non-union contractors’ desire to drive higher-wage competitors out of business. In addition, prevailing wages threaten to raise the economic expectations of the non-union workforce. One conservative think tank explains that “many contractors who are paying market wages to their employees are reluctant to bid on public works construction projects. It is difficult to explain to an employee why he or she is making more money one day working on a public works project than the next day, doing exactly the same work on a private job.” The difficulty is doubtless increased by employees’ realization that union workers get paid the higher wage every day of the year, while they—as soon as the public works project is over—will go back to earning much less. By eliminating prevailing wage laws, non-union employers may hope to muffle their own employees’ demand for improved treatment. In addition, the attacks on PLAs and prevailing wage laws must be seen in the context of broader efforts to dismantle labor market protections for both union and non-union employees in the construction industry—beginning with eliminating state licensing requirements for electricians and plumbers. Licensing requirements limit the supply of skilled labor and enable licensed tradespeople to command higher wages. Thus, ALEC promotes the “Professional Licensure and Certification Reform Act,” which bans occupational licenses that “protect a particular interest group from economic competition.” The organization—whose membership includes the Associated Builders and Contractors—likewise argues that occupational licensing violates “the fundamental civil right… [of] individuals to pursue a chosen business or profession”; ALEC’s “Economic Civil Rights Act” prohibits any and all occupational licenses unless they are “demonstrably necessary … to legitimate public health, safety, or welfare objectives.” Finally, the Associated Builders and Contractors and Associated General Contractors are both members of the Chamber of Commerce–sponsored “Essential Worker Immigration Coalition” (EWIC), which advocates for the right of construction contractors to import large numbers of temporary “guest workers” to serve as a low-wage construction workforce. In testimony before Congress, the EWIC specifically identified construction as one of the key industries in which, contractors claim, they cannot find sufficient domestic labor. The danger of this proposal is not the presence of immigrant workers in the construction industry, but that immigrants would be forced to work under conditions of intimidation and without the labor rights afforded citizens. The proposal favored by EWIC would import temporary workers with a visa not to the United States but to a specific employer—who could deport employees at will. Under such conditions, wages in the construction industry would be driven down by locking low-wage immigrants into a legal status where they will be afraid to ever complain, write a letter to the editor, speak to a politician, organize a protest, or join a union. They are thus more likely to accept wages and working conditions that citizens would not tolerate, and in this way will serve to depress labor standards across the industry. Therefore, as with the attacks on public-sector employee unions, it appears that the assaults on union standards in the construction industry are not part of an agenda to improve life for non-union workers, but are rather the leading edge of an agenda that, if fully realized, would drive down labor standards for millions of non-union employees across this industry.

The corporate-backed legislative agenda for non-union private-sector workers

The paper now turns to an examination of the corporate-backed legislative agenda for the 93 percent of private-sector workers not represented by a union. As discussed previously, legislative attacks on public employee unions have often been presented as actions motivated by a desire to help hard-working private-sector employees. The track record of the past two years, however, shows that the same corporate lobbies that play such a central role in the attack on public-sector unions are also engaged in a broad assault on the employment standards and labor rights of non-union private-sector workers, far beyond the construction industry.

In 2011–2012, four states passed laws restricting the minimum wage, four lifted restrictions on child labor, and 16 imposed new limits on benefits for the unemployed. With the support of the corporate lobbies, states also passed laws stripping workers of overtime rights; repealing or restricting rights to sick leave; and making it harder to sue one’s employer for race or sex discrimination, and easier to deny employees’ rights by classifying them as “independent contractors.” These efforts have the practical effect of undermining workers’ ability to earn a decent living. The following sections provide an overview of the corporate assault on the laws that define labor standards for the vast majority of Americans, who work without the protection of a union contract.

Minimum wage

There are few institutions that affect the lives of low-income workers more directly than the minimum wage. Because the federal minimum wage is not indexed to inflation, American workers endure wages significantly below those of their counterparts in past decades. In real terms, the federal minimum wage peaked in 1968; if that wage had kept pace with inflation, it would now be set at $9.96—37 percent above its actual level. As of 2011, more than 20 percent of American workers made less than this amount. Corporate lobbies’ success, year after year, in defeating efforts to adjust the minimum wage for inflation means that the country’s lowest-wage workers are collectively earning tens of billions of dollars less per year than their counterparts were 45 years ago. Yet ALEC, the Chamber of Commerce, and other corporate lobbies remain steadfastly opposed even to adjusting existing minimum wages for increases in inflation.

While the minimum wage has failed to increase in line with overall inflation, it has fallen even further behind the costs of critical needs such as education and health care—as these costs have risen faster than the general inflation rate. Indeed, the number of hours low-wage workers must toil in order to meet their basic needs has expanded to an untenable point. In 1979, for example, a college student had to work 254 hours at minimum wage in order to pay one year’s tuition at a public university; by 2010, an equivalent student had to work more than three times as long—923 hours—to achieve the same goal. A single parent earning minimum wage in 1979 needed to work 329 hours to pay for his or her family’s annual health insurance policy; by 2010 the equivalent parent needed to work 2,079 hours—40 hours a week, 52 weeks a year—to pay for family health insurance, with nothing left over for any other need.

The inadequacy of current minimum wages is even more stark when compared with increases in worker productivity. Over the past five decades, productivity has steadily increased, and according to standard economic theory, wages should increase roughly on par with productivity increases—indeed, this was the case until the 1970s. But in recent decades, wages have largely remained flat even while productivity and profits have increased, as workers have proved increasingly unable to secure raises through either collective bargaining in the workplace or progressive measures in state legislatures. If the federal minimum wage had kept pace with productivity increases since 1968, it would now be set at $18.67—two-and-a-half times its current value.

Multiple academic studies show that states can increase minimum wages without risking job loss. At the country’s 50 largest low-wage employers, times are good for those at the top: Executive compensation averaged $9.4 million in 2011, and firms returned nearly $175 billion to shareholders in dividends and share buybacks. Wal-Mart—the country’s largest low-wage employer with a long record of participation in ALEC—remained profitable throughout the Great Recession, paying its CEO $18.1 million and spending $11.3 billion on dividends and share buybacks in 2011. Yet the inability of the company’s million-plus employees to support their families without public assistance poses an ongoing and growing danger both for these families and their communities.

Unsurprisingly, the minimum wage is one of the few areas of bipartisan consensus, with support from a strong majority of voters in both political parties. Yet the corporate lobbies have been fierce, and largely successful, in their opposition to any increase in the minimum wage. In fact, they have sought every possible opportunity to lower existing minimum wages, or to create loopholes that exempt increasing numbers of employers from the requirements of the law.

ALEC promotes model legislation that calls for complete abolition of the minimum wage, arguing that such laws “represent an unfunded mandate on business by the government, and … make it difficult for small business … to hire new employees due to artificially high wage rates.” The free market “forces of supply and demand,” the bill’s preamble insists, “are more capable than the government” of determining fair wages.

For states not ready to repeal the minimum wage, ALEC offers a model bill to block any increase in the wage rate, as well as a separate resolution opposing any attempt to link minimum wages to the Consumer Price Index. The resolution opposing inflation adjustment argues that the “minimum wage is … an opportunity to learn valuable on the job training skills” that would be lost if adjusted upward for any reason, and reasserts that “the best government policies to aid low wage workers … leave employers free to make wage decisions based on market conditions.”

Finally, ALEC calls on states to actively ban localities from adopting their own minimum-wage standards. In many states, big cities are more progressive than the state as a whole. As a result, as of 2010, 123 cities or counties had adopted ordinances mandating minimum wages, living wages, or prevailing wages higher than the state standard. To combat such initiatives, ALEC’s minimum-wage repeal bill abolishes any existing local minimum-wage laws in addition to the state statute itself, and forbids localities from enacting wage laws in the future.

The U.S. Chamber of Commerce similarly opposes even the federal minimum wage, arguing that the law “is counterproductive to job growth” and asserting that, as a matter of principle, “we don’t think the government ought to be in the business of setting wages.” The Chamber likewise opposes any increase to the minimum wage, or any states or localities setting minimum-wage rates higher than the federal rate. Indeed, the Chamber’s ranking of state employment policies marks down any state that does not actively prohibit localities from enacting living-wage laws.

In the past two years, a series of laws were adopted advancing this agenda. New Hampshire legislators repealed their state’s minimum wage, overriding a gubernatorial veto. Although the state already had the lowest minimum wage in New England, House Speaker (and ALEC member) Bill O’Brien argued that maintaining a state minimum wage sent “exactly the wrong message to employers that New Hampshire is going to make it harder to create jobs.”

Other states stopped short of outright repeal, but took steps in that direction by enacting new exemptions or creating subminimum wages for new categories of workers. In a bill sponsored by former House Majority Whip Shantel Krebs, and heavily promoted by the Restaurant Association, South Dakota repealed the minimum wage for much of its summer tourism industry, exempting any “amusement or recreational establishment” that operates for less than seven months out of the year.

Maine made it easier for employers to classify workers as disabled and thus pay them a subminimum wage. Previously, a disabled person could apply for a state certificate permitting them to work for less than minimum wage for a period of one year. The new law allows employers, rather than employees, to apply for the certificate, provides certificates for multiple employees, and doubles the length of time employees can be paid subminimum wages. Further, rather than the state setting the subminimum wage, the new statute allows employers themselves to determine how disabled employees are, and therefore how low a wage each deserves.

The minimum wage is one of the few areas of bipartisan consensus. Yet the corporate lobbies have been fierce, and largely successful, in their opposition to any increase in the minimum wage.

Indiana heeded ALEC’s call and passed legislation—strongly supported by the state Chamber of Commerce—that prohibits local governments from adopting a minimum wage higher than the state’s; Indiana followed the model set earlier by Florida legislators, who adopted a similar ban in 2003. In 2013, Mississippi—which has no state minimum wage—went even further, adopting a law that bans cities and counties within the state from adopting any minimum wage, living wage, or paid or unpaid sick leave rights for local workers.

In other states, the business lobbies tried but failed to advance legislation repealing or restricting state minimum-wage laws. However, these attempts serve to some degree as guideposts for the continuing campaign of the corporate lobbies, and we may expect to see these efforts resurrected in coming years. Most tellingly, in Nevada, Missouri, and Arizona, legislators sought to undo the will of voters who, in previous ballot initiatives, had approved indexing their state minimum wage to the inflation rate. In Nevada, the Retail Association joined the Las Vegas and Reno Chambers of Commerce in promoting a bill that would have removed minimum-wage standards—previously established by popular referendum—from the state constitution. In Missouri, the Chamber of Commerce and other corporate lobbyists presented Republican leaders with a six-point plan that included capping minimum-wage increases, effectively cancelling a 2006 referendum that linked the minimum wage to the CPI. In Arizona, 71 percent of voters supported a 2004 proposal indexing their state minimum wage, but in 2012 legislators attempted to abolish this requirement. This time, despite the vocal support of the Restaurant Association, legislators were forced to relent when the move generated broad popular criticism.

Minimum wage for tipped employees

The failure of minimum wages to keep pace with inflation has had particularly stark consequences for the 3.3 million Americans who work as waiters, waitresses, bartenders, and bussers. In 1966, the federal government established a subminimum wage for tipped employees, on the theory that tips would bring them up to the level of the standard minimum wage. At the time, the tipped wage was set at 50 percent of the regular minimum. However, the tipped wage has been frozen at $2.13 per hour for more than 20 years, and now amounts to just 29.4 percent of the regular minimum wage.

The country’s tipped employees are overwhelmingly female, and nearly half are 30 years old or older. How these employees are treated varies by state. In 18 states, tipped workers are entitled only to the federal subminimum wage of $2.13 per hour. Twenty-five states have established a tipped wage below the regular minimum wage, but higher than the federal subminimum. Only seven states mandate that tipped employees be paid the regular minimum wage.

The economic impact of subminimum wages is dramatic for these employees and their families. The poverty rate for waiters and waitresses—who comprise the bulk of all tipped employees—is 250 percent higher than that of the workforce as a whole. Furthermore, the share of waitstaff in poverty is directly related to state wage laws. In states where waitstaff receive the full minimum wage, 13.6 percent are poor; in states with a tipped wage set somewhere between $2.13 and the federal minimum, waitstaff poverty is 16.2 percent; and in states that apply the federal subminimum wage of $2.13, waitstaff poverty rises to 19.4 percent.

Furthermore, even the subminimum wage for tipped employees is often extremely difficult to enforce. By law, if the combination of an employee’s tips and wages do not add up to the regular minimum wage, the employer must make up the difference. However, responsibility for monitoring compliance typically rests with employees, who must record exactly how much they receive in tips during a workweek and how many hours they work, and then petition their employer to make up the difference if they are short. In the normal disorder of everyday life, most employees are unlikely to maintain records that would stand up to legal challenge. This is all the more true for non-native English speakers and those with limited education. Even for those who do keep exact records, however, this simply enables them to make a request of their employers, who regularly reject such claims. Enforcing workers’ rights even with proper documentation becomes a laborious, costly, and uncertain process. For this reason, a 2008 survey suggests that as many as 30 percent of tipped employees do not receive even the subminimum wage from their employer.

Yet corporate lobbies routinely resist attempts to increase the tipped minimum wage or strengthen employees’ ability to effectively enforce their rights under law. In the past two years, two states sought to lower the tipped minimum wage, two others worked to redefine “tips” in ways that weaken employees’ right to keep what they earn, and one state, while insisting that tips count as wages for income tax purposes, attempted to declare that they must not be counted for purposes of calculating workers’ compensation benefits for waitstaff who are injured on the job.

Legislators in both Arizona and Florida sought to lower their states’ tipped minimum wage. Both states maintain tipped minimum-wage standards below the regular minimum wage but higher than the federal tipped rate; the objective of legislators in both cases was to push tipped wages closer to the federal tipped rate. Neither state presented evidence that the current wage levels create economic harm. On the contrary, the National Restaurant Association identified Florida as having the third fastest-growing restaurant industry in the country, with record sales projected for 2012. Furthermore, legislators in both states acted in direct contradiction to the will of voters, who had established state tipped minimum wages by popular referendum.

In 2006, 65 percent of Arizonans voted to raise their state minimum wage to $6.75, with future increases based on the CPI. Since pre-existing law set the tipped rate at $3 per hour below the regular minimum wage, the 2006 vote set a floor of $3.75 for tipped wages. Yet in 2012, House Majority Leader and ALEC member Rep. Steve Court introduced a bill that would have cut that rate by one-third, to $2.53—in effect transferring $1.22 of hourly earnings from employees to owners. Ultimately the bill proved too unpopular and was withdrawn.

In Florida, the Restaurant and Lodging Association—whose national parent organization is an active ALEC member—worked with legislative allies to introduce a bill that would have effectively cut the state’s tipped minimum wage from $4.65 to $2.13. This would appear to have been a violation of the state constitution, which was amended in 2004 when voters approved by 72 percent to 28 percent a clause setting the state’s tipped minimum wage at $3.02 less than the state regular minimum wage, which itself is indexed to inflation. Nevertheless, the Restaurant Association protested that the state’s $4.65 tipped wage was “very unfair,” insisting that “it’s just going to be a matter of time before the back of this industry breaks. Minimum wage is killing them.” Thus, with the avid support of both the Florida Chamber of Commerce and Associated Industries of Florida, the Restaurant Association set out to contravene both the voters’ will and the state constitution.

While neither state’s bill was enacted, they both provide a measure of how far employer associations may go to cut employee wages, and perhaps serve as a warning of future legislative offenses that should be anticipated.

A different strategy was attempted in Wyoming and Maine, where legislators sought to revise the legal definition of wages in order to divert tip income from employees to employers. In Wyoming, a bill co-sponsored by a group of ALEC-affiliated legislators and backed by the Restaurant Association would have given employers the right to force employees to pool their tips. While employees may have previously pooled tips, this was done voluntarily. In many restaurants, bussers, who are legally considered tipped employees, in fact receive little tip income. In such cases, employers are required to pay them the regular minimum wage. By forcing more highly tipped wait staff to pool earnings, employers may avoid this obligation—essentially cutting the take-home pay of wait staff by making them pay the bussers’ wages, with employers pocketing the difference as increased profits.

In 2011, Maine legislators adopted a new law declaring that “service charges” do not legally constitute tips, and that they are therefore not the property of wait staff and may be taken by the employer. The statute—sponsored by an ALEC task force member and supported by the Restaurant Association—does not require restaurants to notify customers that the “service charge” does not go to servers; many patrons likely believe this charge constitutes the gratuity, and therefore provide little if any additional tip. As in Wyoming, then, the Maine law constitutes a direct transfer of income from employees to owners, accomplished through the latter’s political power.

Finally, Montana’s legislature passed a law mandating that tips could not be counted as wages for purposes of workers’ compensation claims. This law—supported by the Montana Chamber of Commerce and celebrated as “historic” by the Restaurant Association but ultimately vetoed by the state’s Democratic governor—would have thus allowed employers to pay subminimum wages on the grounds that tips constitute wages; then, if waitstaff are injured, it would have prevented customary tip income from being counted when calculating workers’ compensation benefits. The bill would additionally have made it nearly impossible for tipped employees to qualify for permanent, partial disability benefits unless they suffered a particularly severe injury. Legislators had earlier adopted a more far-reaching bill that declared minimum-wage workers ineligible for permanent, partial disability payments if they suffered only minor injuries; the bill reasons that they would still be able to find minimum-wage employment and thus could not have suffered any wage loss from the injuries. By declaring that tips could not be counted in workers’ compensation calculations, the new law would have designated all tipped employees as minimum-wage workers and thus ineligible for permanent, partial compensation for minor workplace injuries.

Wage theft

While low wages pose a critical problem, millions of Americans face an even more elemental challenge: the inability to obtain even those wages they have legally earned. The country suffers an epidemic of wage theft, as large numbers of employers violate minimum-wage, overtime, and other wage and hour laws with virtual impunity.

An extensive multi-city survey in 2009 revealed alarming patterns of illegally withheld earnings. Fully 64 percent of low-wage workers have some amount of pay stolen out of their paychecks by their employers every week, including 26 percent who are effectively paid less than minimum wage. Fully three-quarters of workers who are due overtime have part or all of their earned overtime wages stolen by their employer. In total, the average low-wage worker loses a stunning $2,634 per year in unpaid wages, representing 15 percent of their earned income. Indeed, the amount of money stolen out of employees’ paychecks every year is far greater than the combined total stolen in all the bank robberies, gas station robberies, and convenience store robberies in the country, as shown in Figure G. It is hard to imagine an employment policy that would have a greater impact on hard-working, low-wage Americans than rigorously enforcing already-existing laws.

Enforcement of wage and hour laws has long been strikingly lax. When the federal minimum-wage law was first established in 1941, there was one federal workplace inspector for every 11,000 workers. By 2008, the number of laws that inspectors are responsible for enforcing had grown dramatically, but the number of inspectors per worker was less than one-tenth what it had been in 1941, with 141,000 workers for every federal enforcement agent. With the current staff of federal workplace investigators, the average employer has just a 0.001 percent chance of being investigated in a given year. That is, an employer would have to operate for 1,000 years to have even a 1 percent chance of being audited by Department of Labor inspectors.

Budget cuts and political choices have exacerbated this crisis even further at the state level. A majority of states have reduced the number of staff dedicated to enforcement of wage and hour laws over the past five years. In some states, this has been a consequence of broader budget cuts, while in others, enforcement of workplace laws has been singled out for defunding. Ohio’s General Assembly, for instance, voted to completely eliminate funding for labor inspectors in 2011, leaving no staff to enforce state minimum-wage, overtime, child labor, or prevailing wage laws. Funding was subsequently restored by the state’s Controlling Board, but even so, the state was left only six inspectors for the entire workforce. A seventh inspector was slated to begin work later in 2011, at which point each agent would have responsibility for 616,000 private-sector workers. Yet in that same year, the Ohio House adopted a budget that would cut the workplace enforcement budget by 25 percent over the next two years.

Missouri House Speaker Steven Tilley likewise called for the complete elimination of funding for the state’s nine labor investigators. In 2010, Missouri’s labor department collected $200,000 in restitution for minimum-wage violations and $500,000 for prevailing-wage violations, and issued 1,714 citations for child-labor violations. Yet Tilley charged that investigators were being “overzealous,” particularly in prosecuting complaints of employers cheating on prevailing wages. Ultimately, Tilley compromised with the state’s Democratic governor, and the adopted budget eliminated only two of the Division of Labor Standards’ nine investigators rather than the entire staff. In either case, meager enforcement staff means there is little meaningful protection for employees’ rights under law.

Indeed, because the enforcement mechanisms are so weak and the penalties for stealing wages are generally so modest, even employers who have been found guilty and forced to pay penalties for wage theft are often undeterred from continuing these practices. A 2009 U.S. Department of Labor investigation found that one-third of employers who had previously violated wage and hour laws continued to do so.

The battle over wage theft ordinances

The Progressive States Network—a national organization of state legislators—has identified the key elements of effective policy for combating wage theft. These include requirements that employers keep detailed pay records and allow employees to receive a thorough explanation of how each paycheck was calculated; the right of state authorities to inspect employers’ records; workers’ private right of action to sue for unpaid wages as individuals or in class actions; protection of complainants against retaliation by their employers; and the provision of attorney fees, damages, and penalties as part of the enforcement process. Yet corporate lobbies have been working hard to prohibit enforcement mechanisms such as these. In the past two years, these efforts were most highly visible in Florida.

A recent study from Florida International University estimates that $60–90 million per year is stolen out of Florida workers’ paychecks. Yet since Florida’s legislature abolished the state’s Department of Labor in 2002, there are no state enforcement personnel to combat this problem. Further, the state attorney general has failed to bring a single case of wage theft in recent years. Thus, the only means for seeking enforcement under current law is for employees to turn to the Legal Aid Society, which relies entirely on volunteer attorneys.

In 2010, Miami-Dade County responded to this crisis by instituting the nation’s first broad municipal wage theft law. Enfo