Regulation and Deregulation of Industry

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    California Voters to Decide on Regulating Fast-Food Industry

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    Pre-empting a law signed last year, business groups forced a ballot initiative on state oversight of wages and working conditions.LOS ANGELES — A California law creating a council with broad authority to set wages and improve the working conditions of fast-food employees has been halted after restaurant and trade groups submitted enough signatures to place the issue before voters next year.Officials from the California secretary of state’s office announced late Tuesday that Save Local Restaurants, a broad coalition of small-business owners, large corporations, restaurateurs and franchisees, had turned in enough valid signatures to stop the law from taking effect.The group, which has raised millions of dollars to oppose the law, had to submit roughly 623,000 valid voter signatures by an early December deadline to place a question on the 2024 ballot asking California voters if the law should take effect.Legislation signed in September by Gov. Gavin Newsom, a Democrat, would set up a 10-member council of union representatives, employers and workers to oversee the fast-food industry’s labor practices in the state.The panel would have the authority to raise the minimum wage of fast-food workers to as much as $22 an hour — well above the statewide minimum of $15.50. In addition, the council would oversee health, safety and anti-discrimination regulations for nearly 550,000 fast-food workers statewide.More on CaliforniaA Wake of Tragedy: California is reeling after back-to-back mass shootings in Monterey Park and Half Moon Bay.Storms and Flooding: A barrage of powerful storms has surprised people in the state with an unrelenting period of extreme weather that has caused extensive damage across the state.New Laws: A new year doesn’t always usher in sweeping change, but in California, at least, it usually means a slate of new laws going into effect.Wildfires: California avoided a third year of catastrophic wildfires because of a combination of well-timed precipitation and favorable wind conditions — or “luck,” as experts put it.Opponents including the International Franchise Association and the National Restaurant Association argued that the measure, Assembly Bill 257, singled out their industry and would in turn burden businesses with higher labor costs that would be passed along to consumers in higher food prices.Matt Haller, president of the International Franchise Association, said the bill “was a solution in search of a problem that didn’t exist.”“Californians have spoken out to prevent this misguided policy from driving food prices higher and destroying local businesses and the jobs they create,” Mr. Haller said.Last year, the Center for Economic Forecasting and Development at the University of California, Riverside, released a study that estimated that employers would pass along one-third of labor compensation increases to consumers.But Mr. Newsom, in signing the measure, said it “gives hardworking fast-food workers a stronger voice and seat at the table to set fair wages and critical health and safety standards across the industry.”Mary Kay Henry, president of the Service Employees International Union, a staunch proponent of the measure, assailed fast-food corporations.“Instead of taking responsibility for ensuring workers who fuel their profits are paid a living wage and work in safe, healthy environments, corporations are continuing to drive a race to the bottom in the fast-food industry,” Ms. Henry said. “It’s morally wrong, and it’s bad business.”The effort to put the issue before voters follows a playbook used by large corporations to circumvent lawmakers in Sacramento. In 2019, state lawmakers passed a measure that required companies like Uber and Lyft to treat gig workers as employees. The companies opposed the measure and helped get a proposition on the 2020 ballot allowing them to treat drivers as independent contractors. The measure passed with nearly 60 percent of the vote.The fast-food law has been closely watched by the industry’s workers across California, including  Angelica Hernandez, 49, who has worked at McDonald’s restaurants in the Los Angeles area for 18 years.“We are undeterred, and we refuse to back down,” Ms. Hernandez said. “We can’t afford to wait to raise pay to keep up with the skyrocketing cost of living and provide for our families.”Alison Morantz, a professor at Stanford Law School who focuses on employment law, said what made the law unusual was “its holistic approach to addressing a wide range of problems in a traditionally nonunionized industry — not just low and stagnating wages, but also employment discrimination and poor safety practices.”“If it takes effect, it will be closely watched and could become a harbinger of similar efforts in other worker-friendly jurisdictions,” Ms. Morantz said. More

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    White House Aims to Reflect the Environment in Economic Data

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    The Biden administration has set out to measure the economic value of ecosystems, offering new statistics to weigh in policy decisions.Forests that keep hillsides from eroding and clean the air. Wetlands that protect coastal real estate from storm surges. Rivers and deep snows that attract tourists and create jobs in rural areas. All of those are natural assets of perhaps obvious value — but none are accounted for by traditional measurements of economic activity.On Thursday, the Biden administration unveiled an effort to change that by creating a system for assessing the worth of healthy ecosystems to humanity. The results could inform governmental decisions like which industries to support, which natural resources to preserve and which regulations to pass.The administration’s special envoy for climate change, John Kerry, announced the plan in a speech at the World Economic Forum, the annual gathering of political and business leaders in Davos, Switzerland. “With this plan, the U.S. will put nature on the national balance sheet,” he said.The initiative will require the help of many corners of the executive branch to integrate the new methods into policy. The private sector is likely to take note as well, given rising awareness that extreme weather can wreak havoc on assets — and demand investment in renewable energy and sustainable agriculture.In the past, such undertakings have been politically contentious, as conservatives and industry groups have fought data collection that they saw as an impetus to regulation.A White House report said the effort would take about 15 years. When the standards are fully developed and phased in, researchers will still be able to use gross domestic product as currently defined — but they will also have expanded statistics that take into account a broader sweep of nature’s economic contribution, both tangible and intangible.Those statistics will help more accurately measure the impact of a hurricane, for example. As currently measured, a huge storm can propel economic growth, even though it leaves behind muddied rivers and denuded coastlines — diminishing resources for fishing, transportation, tourism and other economic uses.“You can look at the TV and know that we’ve lost beaches, we’ve lost lots of stuff that we really care about, that makes our lives better,” said Eli Fenichel, an assistant director at the White House Office of Science and Technology Policy. “And you get an economist to go on and say, ‘G.D.P.’s going to go up this quarter because we’re going to spend a lot of money rebuilding.’ Being able to have these kinds of data about our natural assets, we can say, ‘That’s nice, but we’ve also lost here, so let’s have a more informed conversation going forward.’”John Kerry, the White House’s special envoy on climate, in Davos, Switzerland, this week. A Biden administration plan would incorporate the value of ecosystems into measurements of economic activity.Markus Schreiber/Associated PressTaking nature into economic calculations, known as natural capital accounting, is not a new concept. As early as the 1910s, economists began to think about how to put a number on the contribution of biodiversity, or the damage of air pollution. Prototype statistics emerged in the 1970s, and in 1994, the Commerce Department’s Bureau of Economic Analysis proposed a way to augment its accounting tools with measures of environmental health and output.But Congress ordered the bureau to halt its efforts until an independent review could be completed. States whose economies depend on drilling, mining and other forms of natural resource extraction were particularly worried that the data could be used for more stringent regulation.“They thought that anything that measured the question of productivity of natural resources was inherently an environmental trick,” a Commerce Department official said afterward. Five years later, that independent review was completed in a report for the National Academy of Sciences. The academy panel — led by the Yale economist William Nordhaus, who went on to win the Nobel Prize for his work on the economic impact of climate change — said the bureau should continue.“Natural resources such as petroleum, minerals, clean water and fertile soils are assets of the economy in much the same way as are computers, homes and trucks,” the report read. “An important part of the economic picture is therefore missing if natural assets are omitted in creating the national balance sheet.”While the United States lagged, other countries moved ahead with incorporating nature into their core accounting. The United Nations developed a framework for doing so over the last decade that supported decisions such as assessing the impact of shrinking peat land and protecting an endangered species of tree. Britain has been publishing environmental-economic statistics for several years as well. International groups like the Network for Greening the Financial System, which includes most of the world’s central banks, use some of these techniques for assessing systemic risk in the financial system.The proposed plan will take into account a broader sweep of nature’s economic contribution, both tangible and intangible.Chanell Stone for The New York TimesSkepticism about including environmental considerations in economic and financial decision-making remains in the United States, where conservatives have disparaged investing guidelines that put a priority on a company’s performance along environmental, social and governance lines. The social cost of carbon, another measurement tool for assessing the economic impact of regulations through their effect on carbon emissions, was set close to zero during the Trump administration and has been increased significantly under President Biden.Understand Inflation and How It Affects YouFederal Reserve: Federal Reserve officials kicked off 2023 by grappling with a thorny question: How should central bankers understand inflation after 18 months of repeatedly misjudging it?Social Security: The cost-of-living adjustment, which helps the benefit keep pace with inflation, is set for 8.7 percent in 2023. Here is what that means.Tax Rates: The I.R.S. has made inflation adjustments for 2023, which could push many people into a lower tax bracket and reduce tax bills.Your Paycheck: Inflation is taking a bigger and bigger bite out of your wallet. Now, it’s going to affect the size of your paycheck in 2023.Benjamin Zycher, a senior fellow at the right-leaning American Enterprise Institute, expressed concern Thursday that the new approach would introduce a degree of subjectivity.“I think there’s a real danger that if in fact they’re trying to put environmental quality values into the national accounts, there’s no straightforward way to do that, and it’s impossible that it wouldn’t be politicized,” Dr. Zycher said in an interview. “That’s going to be a process deeply fraught with problems and dubious interpretations.”Few economic statistics are a perfect representation of reality, however, and all of them have to be refined to make sure they are consistent and comparable over time. Measuring the value of nature is inherently tricky, since there is often no market price to consult, but other sources of information can be equally illuminating. The Bureau of Economic Analysis has undertaken other efforts to measure the value of services that are never sold, like household labor.“That’s exactly why we need this sort of strategy,” said Nathaniel Keohane, president of the Center for Climate and Energy Solutions, a research and advocacy group. “To really develop the data we need so that it’s not subjective, and make sure we are really devoting the same quality control and focus on integrity that we do to other areas of economic statistics.”The strategy does not pretend to cover every aspect of nature’s value, or solve problems of environmental justice simply by more fully incorporating nature’s contribution, particularly for Indigenous communities. Those concerns, said Rachelle Gould, an associate professor of environmental studies at the University of Vermont, will need to be prioritized separately.“There are a lot of other ways nature matters that can’t be accounted for in monetary terms,” Dr. Gould said. “It’s appropriately cautious about what might be possible.” More

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    U.S. Moves to Bar Noncompete Agreements in Labor Contracts

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    A sweeping proposal by the Federal Trade Commission would block companies from limiting their employees’ ability to work for a rival.In a far-reaching move that could raise wages and increase competition among businesses, the Federal Trade Commission on Thursday unveiled a rule that would block companies from limiting their employees’ ability to work for a rival.The proposed rule would ban provisions of labor contracts known as noncompete agreements, which prevent workers from leaving for a competitor or starting a competing business for months or years after their employment, often within a certain geographic area. The agreements have applied to workers as varied as sandwich makers, hairstylists, doctors and software engineers.Studies show that noncompetes, which appear to directly affect roughly 20 percent to 45 percent of U.S. workers in the private sector, hold down pay because job switching is one of the more reliable ways of securing a raise. Many economists believe they help explain why pay for middle-income workers has stagnated in recent decades.Other studies show that noncompetes protect established companies from start-ups, reducing competition within industries. The arrangements may also harm productivity by making it hard for companies to hire workers who best fit their needs.The F.T.C. proposal is the latest in a series of aggressive and sometimes unorthodox moves to rein in the power of large companies under the agency’s chair, Lina Khan.President Biden hailed the proposal on Thursday, saying that noncompete clauses “are designed simply to lower people’s wages.”“These agreements block millions of retail workers, construction workers and other working folks from taking a better job, getting better pay and benefits, in the same field,” he said at a cabinet meeting.The public will be allowed to submit comments on the proposal for 60 days, at which point the agency will move to make it final. An F.T.C. document said the rule would take effect 180 days after the final version was published, but experts said it could face legal challenges.The agency estimated that the rule could increase wages by nearly $300 billion a year across the economy. Evan Starr, an economist at the University of Maryland who has studied noncompetes, said that was a plausible wage increase after their elimination.Dr. Starr said noncompetes appeared to lower wages both for workers directly covered by them and for other workers, partly by making the hiring process more costly for employers, who must spend time figuring out whom they can hire and whom they can’t.The State of Jobs in the United StatesEconomists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.Retirees: About 3.5 million people are missing from the U.S. labor force. A large number of them, roughly two million, have simply retired.Switching Jobs: A hallmark of the pandemic era has been the surge in employee turnover. The wave of job-switching may be taking a toll on productivity.Delivery Workers: Food app services are warning that a proposed wage increase for New York City workers could mean higher delivery costs.A Self-Fulfilling Prophecy?: Employees seeking wage increases to cover their costs of living amid rising prices could set off a cycle in which fast inflation today begets fast inflation tomorrow.He pointed to research showing that wages tended to be higher in states that restrict noncompetes. One study found that wages for newly hired tech workers in Hawaii increased by about 4 percent after the state banned noncompetes for those workers. In Oregon, where new noncompetes became unenforceable for low-wage workers in 2008, the change appeared to raise the wages of hourly workers by 2 percent to 3 percent.Although noncompetes appear to be more common among more highly paid and more educated workers, many companies have used them for low-wage hourly workers and even interns.About half of states significantly constrain the use of noncompetes, and a small number have deemed them largely unenforceable, including California.But even in such states, companies often include noncompetes in employment contracts, and many workers in these states report turning down job offers partly as a result of the provisions, suggesting that these state regulations may have limited effects. Many workers in those states are not necessarily aware that the provisions are unenforceable, experts say.“Research shows that employers’ use of noncompetes to restrict workers’ mobility significantly suppresses workers’ wages — even for those not subject to noncompetes, or subject to noncompetes that are unenforceable under state law,” Elizabeth Wilkins, the director of the F.T.C.’s office of policy planning, said in a statement.The commission’s proposal appears to address this issue by requiring employers to withdraw existing noncompetes and to inform workers that they no longer apply. The proposal would also make it illegal for an employer to enter into a noncompete with a worker or to try to do so, or to suggest that a worker is bound by a noncompete when he or she is not.The proposal covers not just employees but also independent contractors, interns, volunteers and other workers.Lina Khan, the F.T.C. chair, has tried to use the agency’s authority to limit the power and influence of corporate giants.Graeme Sloan, via Associated PressDefenders of noncompetes argue that employees are free to turn down a job if they want to preserve their ability to join another company, or that they can bargain for higher pay in return for accepting the restriction. Proponents also argue that noncompetes make employers more likely to invest in training and to share sensitive information with workers, which they might withhold if they feared that a worker might quickly leave.A ban “ignores the fact that, when appropriately used, noncompete agreements are an important tool in fostering innovation,” Sean Heather, a senior vice president at the U.S. Chamber of Commerce, said in a statement.At least one study has found that greater enforcement of noncompetes leads to an increase in job creation by start-ups, though some of its conclusions are at odds with other research.Dr. Starr said that noncompetes did appear to encourage businesses to invest more in training, but that there was little evidence that most employees entered into them voluntarily or that they were able to bargain over them. One study found that only 10 percent of workers sought to bargain for concessions in return for signing a noncompete. About one-third became aware of the noncompete only after accepting a job offer.Michael R. Strain, an economist at the American Enterprise Institute, said that while there were good reasons to scale back noncompetes for lower-wage workers, the rationale was less clear for better-paid workers with specialized knowledge or skills.“If your job is to make minor tweaks to the formula for Coca-Cola and you’re one of 25 people on earth who knows the formula,” Dr. Strain said, speaking hypothetically, “it makes total sense that Coca-Cola might say, ‘We don’t want you to go work for Pepsi.’”He said that it might be possible to satisfy an employer’s concerns with a less blunt tool, like a nondisclosure agreement, but that the evidence for this was lacking.In a video call with reporters on Wednesday, Ms. Khan said she believed the F.T.C. had clear authority to issue the rule, noting that federal law empowers the agency to prohibit “unfair methods of competition.”But Kristen Limarzi, a partner at Gibson, Dunn & Crutcher who previously served as a senior official in the antitrust division of the Justice Department, said she believed such a rule could be vulnerable to a legal challenge. Opponents would probably argue that the relevant federal statute is too vague to guide the agency in putting forth a rule banning noncompetes, she said, and that the evidence the agency has on their effects is still too limited to support a rule.At the helm of the F.T.C. since last year, Ms. Khan has tried to use the agency’s authority in untested ways to rein in the power and influence of corporate giants. In doing so, she and her allies hope to reverse a turn in recent decades toward more conservative antitrust law — a shift that they say enabled runaway concentration, limited options for consumers and squeezed small businesses.Ms. Khan has brought lawsuits in recent months to block Meta, Facebook’s parent company, from buying a virtual reality start-up and Microsoft from buying the video game publisher Activision Blizzard. Both cases employ less common legal arguments that are likely to face heavy scrutiny from courts. But Ms. Khan has indicated she is willing to lose cases if the agency ends up taking more risks.Ms. Khan and her counterpart at the Justice Department’s antitrust division, Jonathan Kanter, have also said they want to increase the focus of the nation’s antitrust agencies on empowering workers. Last year, the Justice Department successfully blocked Penguin Random House from buying Simon & Schuster using the argument that the deal would lower compensation for authors.One question looming over the discussion of noncompetes is what effect banning them may have on prices during a period of high inflation, given that limiting noncompetes tends to raise wages.But the experience of the past two years, when rates of quitting and job-hopping have been unusually high, suggests that noncompetes may not currently be as big an obstacle to worker mobility as they have traditionally been. Partly as a result, banning them may not have much of a short-term effect on wages.Instead, some economists say, the more pronounced effect of a ban may come in the intermediate and long term, once the job market softens and workers no longer have as much leverage. At that point, noncompetes could begin to weigh more heavily on job switching and wages again.“Doing something like this is a way to help sustain the increase in worker power over the last couple of years,” said Heidi Shierholz, president of the liberal Economic Policy Institute, who was chief economist at the Labor Department during the Obama administration.David McCabe More

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    Michael Pertschuk, Antismoking and Auto Safety Crusader, Dies at 89

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    As an obscure but muscular congressional staffer and chairman of the Federal Trade Commission, he helped usher into law a raft of consumer protections.Few people outside Washington had ever heard of the consumer advocate Michael Pertschuk by the mid-1970s, but he was considered so influential in Congress that friends and foes alike anointed him “the 101st senator,” and the cigarette maker Philip Morris proclaimed him the company’s “number one enemy.”While he never held elective public office, Mr. Pertschuk occupied, as The Washington Post wrote in 1977, “the top stratum of an invisible network of staff power and influence in the Senate, with impact on the life of every citizen of the United States.”Probably more than any other individual, he was responsible for the government’s placing warning labels on cigarettes, banning tobacco advertising from television and radio, requiring seatbelts in cars and putting in place other consumer protections — all by helping to draft those measures into law as the chief counsel and staff director of the Senate Commerce Committee and later as the chairman of the Federal Trade Commission under President Jimmy Carter.“I spent a good part of my life making life miserable for the tobacco companies,” Mr. Pertschuk had said, “and I’m not sorry about that.”He died on Nov. 16 at his home in Santa Fe, N.M. He was 89. His wife, Anna Sofaer, said the cause was complications of pneumonia.Mr. Pertschuk, second from right in the foreground, and other appointees take the oath of office in a White House ceremony in April 1977. He was named F.T.C. chairman. His wife, Anna Sofaer, is at right. Justice William J. Brennan of the Supreme Court administered the oath, with President Jimmy Carter flanking him. Associated PressFor ordinary consumers who were vexed by the government’s lax oversight of the tobacco and auto industries beginning in the mid-1960s, Mr. Pertschuk was their unseen legal guardian.He helped draft the Natural Gas Pipeline Safety Act, the Recreational Boat Safety Act, the Federal Railroad Safety Act, the Consumer Product Safety Act, the Toxic Substances Act and the Safe Drinking Water Act. Decades later, he lifted the veil on government sausage-making in his book “When the Senate Worked for Us: The Invisible Role of Staffers in Countering Corporate Lobbies” (2017).“Few have done more to reduce tobacco use in the United States and to galvanize and empower the tobacco control movement than Mike Pertschuk,” Matthew L. Myers, the president of the Campaign for Tobacco-Free Kids, said in a statement.He added, “He arguably became the most aggressive Federal Trade Commission chair in history and pursued powerful preventive health measures, including a proposed ban on advertising targeted at children.”The consumer advocate Ralph Nader, with whom Mr. Pertschuk collaborated closely on auto safety and other issues, described him as “a brilliant strategist, organizer and human relations genius while he was reshaping the Commerce Committee into the ‘Grand Central Station’ of consumer protection.”“He also ignited the anti-tobacco industry movement on Capitol Hill and later traveled the world motivating other countries to do the same,” Mr. Nader said in a statement.Mr. Pertschuck in 1984. He remained an F.T.C. commissioner after Ronald Reagan became president. Stepping down, he said the administration’s “ideological blindness led to a new era of regulatory nihilism and just plain nuttiness.” George Tames/The New York TimesMichael Pertschuk was born on Jan. 12, 1933, in London to a Jewish family who had sold furs in Europe for generations but who fled in 1937 as Nazi Germany codified anti-Semitism and girded for war. His father, David, opened a fur store in Manhattan. His mother, Sarah (Baumgarten) Pertschuk, was a homemaker.He graduated from Woodmere Academy on Long Island, where he grew up, earned a bachelor’s degree in literature from Yale in 1954, served in an Army artillery unit from 1954 to 1956 and was discharged as a first lieutenant. He received his law degree from Yale Law School in 1959.After clerking for Chief Judge Gus J. Solomon of the U.S. District Court in Oregon, he was hired in Washington in 1964 as a legislative assistant to Senator Maurine B. Neuberger, an Oregon Democrat. About the same time, the United States surgeon general released his groundbreaking report linking smoking to cancer and probably heart disease, and a year later Mr. Nader published his book “Unsafe at Any Speed,” which labeled the compact Chevrolet Corvair, with its engine mounted in the rear, as a “One-Car Accident.” Emerging as the Senate’s leading staff expert on tobacco control legislation, Mr. Pertschuk was recruited by Senator Warren G. Magnuson, the Oregon Democrat who was chairman of the Commerce Committee. Mr. Pertschuk served as a counsel to the committee from 1964 to 1968 and as chief counsel and staff director from 1968 to 1977, when he was named chairman of the Federal Trade Commission.He relinquished the chairmanship after Ronald Reagan was elected president in 1980 but remained a commissioner until 1984. During his tenure he forced the funeral industry to itemize its charges, but as the climate for regulation cooled, he failed in his effort to ban TV commercials aimed at marketing sugary foods to children.On leaving office, Mr. Pertschuk blamed the Republican administration for fostering de-regulaton, he said, whose “extremism and ideological blindness led to a new era of regulatory nihilism and just plain nuttiness.”Mr. Pertschuk’s first marriage, in 1954, to Carleen Joyce Dooley, ended in divorce in 1976. He married Anna Phillips Sofaer in 1977.In addition to his wife, he is survived by two children from his first marriage, Amy and Mark Pertschuk; a stepson, Daniel Sofaer; and three grandchildren.He and his wife moved from Washington to Santa Fe in 2003.Asked what motivated Mr. Pertschuk to embark on his consumer crusade, Joan Claybrook, who headed another of his progenies, the National Highway Traffic Safety Administration, during the Carter administration, said in a phone interview: “The facts. The more he learned, the more adamant he became. The more he learned about tobacco, the more outraged he became and the more determined he was to do something about it. And he was in a position of enormous power to do something about it.”After leaving government, Mr. Pertschuk founded, with David Cohen, a former president of Common Cause, the Advocacy Institute, which trained social justice adherents in the United States and emerging democracies.Mr. Pertschuk explained why he hadn’t capitalized on his enormous congressional and commission experience by going to work for a law firm, or for corporate clients or for foreign governments.“There is a career to be made out of the craft of lobbying for things you believe in,” he told The New York Times in 1987. “You may lag behind your contemporaries in BMW’s, if not Cuisinarts, but it really is worth it.”“This is more fun,” he said. More

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    Gina Raimondo, a Rising Star in the Biden Administration, Faces a $100 Billion Test

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    WEST LAFAYETTE, Ind. — Gina Raimondo, the commerce secretary, was meeting with students at Purdue University in September when she spotted a familiar face. Ms. Raimondo beamed as she greeted the chief executive of SkyWater Technology, a chip company that had announced plans to build a $1.8 billion manufacturing facility next to the Purdue campus.“We’re super excited about the Indiana announcement,” she said. “Call me if you need anything.”These days, Ms. Raimondo, a former Rhode Island governor, is the most important phone call in Washington that many chief executives can make. As the United States embarks on its biggest foray into industrial policy since World War II, Ms. Raimondo has the responsibility of doling out a stunning amount of money to states, research institutions and companies like SkyWater.She is also at the epicenter of a growing Cold War with China as the Biden administration uses her agency’s expansive powers to try to make America’s semiconductor industry more competitive. At the same time, the administration is choking off Beijing’s access to advanced chips and other technology critical to China’s military and economic ambitions.China has responded angrily, with its leader, Xi Jinping, criticizing what he called “politicizing and weaponizing economic and trade ties” during a meeting with President Biden this month, according to the official Chinese summary of his comments.The Commerce Department, under Ms. Raimondo’s leadership, is now poised to begin distributing nearly $100 billion — roughly 10 times the department’s annual budget — to build up the U.S. chip industry and expand broadband access throughout the country.How Ms. Raimondo handles that task will have big implications for the United States economy going forward. Many view the effort as the best — and only — bet for the United States to position itself in industries of the future, like artificial intelligence and supercomputing, and ensure that the country has a secure supply of the chips necessary for national security.But the risks are similarly huge. Critics of the Biden administration’s plans have noted that the federal government may not be the best judge of which technologies to back. They have warned that if the administration gets it wrong, the United States may surrender its leadership in key technologies for good.“The essence of industrial policy is you’re gambling,” said William Reinsch, a trade expert at the Center for Strategic and International Studies, a think tank. “She’s going to be in a tough spot because there probably will be failures or disappointments along the way,” he said.The outcome could also have ramifications for Ms. Raimondo’s political ambitions. In less than two years in Washington, Ms. Raimondo, 51, has emerged as one of President Biden’s most trusted cabinet officials. Company executives describe her as a skillful and charismatic politician who is both engaged and accessible in an administration often known for its skepticism of big business.Ms. Raimondo’s work has earned her praise from Republicans and Democrats, along with labor unions and corporations. Her supporters say she could ascend to another cabinet position, run for the Senate or perhaps mount a presidential bid.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Battle Over Wage Rules for Tipped Workers Is Heating Up

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    A system counting tips toward the minimum wage is being fought in many places. Critics say it’s often abused. Defenders say workers benefit overall.With Americans resuming prepandemic habits of going out, eating out and traveling, leisure and hospitality businesses have scrambled to hire, sometimes offering pay increases that outpace inflation.But for many whose pay is linked to tips, like restaurant servers and bartenders, base wages remain low, and collecting what is owed under the law can be a struggle.In all but eight states, employers can legally choose to pay workers who receive tips a “subminimum” wage — in some places as low as $2.13 an hour — as long as tips bring their earnings to the equivalent of the minimum wage in a pay period. Economists estimate that at least 5.5 million workers are paid on that basis.The provision, known as the tip credit, is a unique industry subsidy that lets employers meet pay requirements more cheaply. And even in a tight labor market, it is often abused at the employees’ expense, according to workers, labor lawyers, many regulators and economists.“It’s baked into the model,” said David Weil, the administrator of the Wage and Hour Division of the Labor Department under President Barack Obama, referring to the frequency of violations. “And it’s very problematic.”Terrence Rice, a bartender from Cleveland who has worked in the bar and restaurant industry since 1999, chuckled at the notion that the law is consistently followed.“As long as I’ve been doing this, I have never, ever — not one time — met anyone that’s been compensated” for a below-minimum pay period, he said, adding that slow weeks with inadequate pay are viewed as the “feast or famine” norm in the industry. Busier seasons, weekends or shifts can bring a rush of a cash followed by slow weekdays, bad-weather weeks or economic turbulence.Now the yearslong arrangement is coming under increasing challenge.In the District of Columbia, a measure on the November ballot would ban the subminimum wage by 2027. A ballot proposal in Portland, Maine, would ban subminimum base pay and bring the regular minimum wage to $18 an hour over three years.Employers in Michigan are bracing for increased expenses in February, when the state tipped minimum of $3.75 an hour is set to be discontinued and the regular state minimum wage will rise to $12 from $9.87.Xander Gudejko, a district manager for Mainstreet Ventures Restaurant Group, which owns spots throughout Michigan, offered a common view in the local business community: “When I think of the potential positives for us, I can’t really think of anything.”Though tipped employees can include hotel housekeepers, bellhops, car washers and airport wheelchair escorts, most are in food and beverage service jobs. Perfect compliance may involve a complex dance of having workers clock in at the minimum-wage rate for setup work until opening, clock out, then clock back in at a tipped wage.Businesses using the two-tier system are prohibited from having tipped employees spend more than 20 percent of their shifts on side work like rolling silverware or cleaning. They also cannot include back-of-house employees, like kitchen workers, in tip pooling — the collection and redistribution of all gratuities at a certain rate, usually set by the employer.The last robust compliance investigation of full-service restaurants by the Labor Department is somewhat dated, having ended in 2012, but it found that 83.8 percent of the examined firms were in violation of labor law, with a large share of the infractions related to tips.The National Restaurant Association, which represents over 500,000 small and larger restaurants, argues that instances of illegal underpayment of tipped workers are overstated and that workers, customers and employers, in general, find the system workable.“There’s a reason people choose tipped restaurant jobs — they know the economics are in their favor,” said Sean Kennedy, the group’s executive vice president of public affairs. “For many servers, they’ve chosen restaurants as a career because their industry skills and knowledge mean high earning potential in a job that’s flexible to their needs.”Ryan Stygar, a labor lawyer and a managing partner at Centurion Trial Attorneys, whose practice mostly represents workers in wage-theft cases but also defends businesses accused of violations, called the network of laws surrounding tipped workers “so bizarre and obscure” that employers acting in good faith can still make legal mistakes.Even when the law is followed to the letter, Mr. Stygar said, the system is unfair to workers. “You are sacrificing your tips to meet the employers’ minimum-wage obligations,” he said.Employers are required to keep records of tips and usually do so through a mix of their own accounting, credit card receipts and self-reporting from staff members. Most involved in the system say the tracking works in murky ways.“In reality, who’s monitoring this complex two-tier system?” said Sylvia Allegretto, a former chair of the Center on Wage and Employment Dynamics at the University of California, Berkeley.“The onus is on you, the worker, to possibly enrage, or at least annoy, your boss, who also, coincidentally, controls your schedule,” she said.Talia Cella, a training manager at Illegal Pete’s, a fast-casual burrito spot in Boulder, Colo. The restaurant offers starting pay of $15 plus tips as well as health care coverage.Andrew Miller for The New York TimesIn many civil disputes, employment attorneys have successfully argued before courts that managers implicitly wield opportunities to work more lucrative shifts as a carrot for not rocking the boat on workplace abuse and as a stick to prevent retaliation.Sylvia Gaston, a waitress at a restaurant in Astoria, Queens, said her base wage is $7.50 an hour — even though New York City’s legal subminimum is $10, which must come to at least $15 after tips. Ms. Gaston, 40, who is from Mexico, feels that undocumented workers like her have a harder time fighting back when they are shortchanged.“It doesn’t really matter if you have documents or not — I think folks are still getting underpaid in general,” she said. “However, when it comes to uplifting your voices and speaking about it, the folks who can get a little bit more harsh repercussions are people who are undocumented.”Subminimum base pay for some tipped workers in the state, such as car washers, hairdressers and nail salon employees, was abolished in 2019 under an executive order by Gov. Andrew M. Cuomo, but workers in the food and drinks industry were left out.Gov. Kathy Hochul, Mr. Cuomo’s successor, said while lieutenant governor in 2020 that she supported “a solid, full wage for restaurant workers.” And progressive legislators plan a bill in January that would eliminate the two-tier wage system by the end of 2025.When The New York Times asked if she would support such changes, Ms. Hochul’s office did not answer directly. “We are always exploring the best ways to provide support” to service workers, it said.Proponents of abandoning subminimum wages say there could be advantages for employers, including less turnover, better service and higher morale.David Cooper, the director of the economic analysis and research network at the Economic Policy Institute, a progressive think tank, contends that when wage laws are changed to a single-tier system, business owners can have the assurance that “every single person they compete with is making the same exact adjustment,” reducing the specter of a competitive disadvantage.Still, he acknowledged, there would downsides. Restaurants and bars with less popularity and lower productivity could lose out in a substantially higher-wage environment, leading to higher prices and potentially closings.“This is not costless,” Mr. Cooper said. “But for a long time, we haven’t been internalizing the costs of paying workers less than they can live on.”Some employers who could use the two-tier wage system are taking a different approach.Talia Cella, 33, is a training manager at Illegal Pete’s, a burrito spot founded in Boulder, Colo., with locations throughout Arizona and Colorado. Those states have a subminimum wage under $10 an hour for tipped workers, and a regular minimum under $13. Illegal Pete’s offers starting pay of $15 plus tips as well as health care coverage.Before rising to her current position, Ms. Cella was hired as a server and trained as a bartender in 2016. She was previously making base pay of $5 an hour elsewhere as a waitress and hostess, unable to afford a car and biking to the bus stop in snow to make winter shifts.Even at what her company is paying, Ms. Cella said, recruiting and hiring are “more challenging than ever” because of labor shortages. But she said the business, with the help of a recent 10 percent price increase, remained profitable and was able to expand despite soaring food costs.She attributes this, in part, to “out-vibing” the competition.“Having work be a stable part of your life — where it’s like you go there, you’re getting paid a living wage, you have health insurance, you know this place cares about you — then you’re more likely to show up to work and give your best,” Ms. Cella said. “If you want people to give you more of themselves, more of their time, more of their effort, then you have to be willing to invest more of your company into the individual people as well.” More

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    Biden Proposal Could Lead to Employee Status for Gig Workers

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    A proposed rule, long awaited by labor activists, would make it harder for companies to classify workers as independent contractors.The Labor Department on Tuesday unveiled a proposal that would make it more likely for millions of janitors, home-care and construction workers and gig drivers to be classified as employees rather than independent contractors.Companies are required to provide certain benefits and protections to employees but not to contractors, such as paying a minimum wage, overtime, a portion of a worker’s Social Security taxes and contributions to unemployment insurance.The proposed rule is essentially a test that the Labor Department will apply to determine whether workers are contractors or employees for companies. The test considers factors such as how much control workers have over how they do their jobs and how much opportunity they have to increase their earnings by doing things like offering new services. Workers who have little of either are often considered employees.The new version of the test lowers the bar for that employee classification from the current test, which the Trump administration’s Labor Department created.The proposal would apply only to laws that the department enforced, such as the federal minimum wage. States and other federal agencies, like the Internal Revenue Service, set their own criteria for employment status. But many employers and regulators in other jurisdictions are likely to consider the department’s interpretation when making decisions about worker classification, and many judges are likely to use it as a guide.As a result, the proposal is a potential blow to gig companies and other service providers that argue their workers are contractors, though it would not immediately affect the status of those workers.Uber and Lyft have said in federal filings that having to treat drivers as employees could force them to alter their business models, and some gig economy officials have estimated that their labor costs would rise 20 to 30 percent. The companies have repeatedly fought similar efforts by regulators and legislatures in states across the country.Share prices for both companies dropped more than 10 percent Tuesday.In a statement, Uber sounded optimistic that the proposal would not endanger the gig-economy model, at least if the administration heeded additional input.“Today’s proposed rule takes a measured approach, essentially returning us to the Obama era, during which our industry grew exponentially,” said CR Wooters, the company’s head of federal affairs. “In a time of deep economic uncertainty, it’s crucial that the Biden administration continues to hear from the more than 50 million people who have found an earning opportunity with companies like ours.”Read More About the Gig EconomyWaiting for Action: The Biden administration’s plans to strengthen labor protections have been slowed by Congress, the courts and a lobbying blitz. The delay has frustrated gig workers.A Thriving Sector: Conventional employment opportunities abound, but gig work continues to be a popular choice for people seeking flexibility and additional income.Para App: A former Uber employee created an app to help gig workers maximize their earnings. But the platforms that hire them are fighting back.Covid Risks: New York City’s gig workers risked their lives during the pandemic. A survey illustrates the hazards they faced.Lyft likewise noted that the proposal would restore the approach under President Barack Obama, when drivers were generally classified as contractors, and emphasized that it would not force the company to alter its business model. The company said the proposal was merely the beginning of a longer process.Companies, unions, workers and other members of the public will have a month and a half to formally comment on the proposal before the department incorporates feedback into a final rule. After that, the department will have considerable discretion over whether or not to enforce the rule at particular companies.“While independent contractors have an important role in our economy, we have seen in many cases that employers misclassify their employees as independent contractors,” Labor Secretary Martin J. Walsh said in a statement. “Misclassification deprives workers of their federal labor protections, including their right to be paid their full, legally earned wages.”David Weil, who oversaw the Obama Labor Department’s approach to classifying workers, cautioned that just because the department didn’t bring an enforcement action against Uber and Lyft didn’t mean it couldn’t have. He noted that the Obama rule had been adopted late in that administration.“I think it is true that there are lots of gray areas in the platform world, but with the caveats that you always have to go deep into the facts, Uber and Lyft do not strike me as that difficult,” Mr. Weil said in an interview, adding: “There is a lot about the relationship that looks like one of employees.”The proposal helps defuse growing pressure from activists supporting gig workers, who complained that the administration had been too slow to intervene to protect ride-hail drivers and other app-based workers.Lorena Gonzalez Fletcher, a former leader on workers’ issues in the California Assembly who is now head of the state’s labor federation, said in an interview that the action demonstrated the Biden administration’s strong pro-worker stance but that the effect of the new rule would come down to how aggressively the administration enforced it.“Companies just continue to break labor law,” Ms. Gonzalez Fletcher said. “They break it at the local level, the state level and federally, and there are no consequences. Everything is about enforcement.”The Biden Labor Department delayed and then scrapped the Trump rule on worker classification before a federal judge reinstated it. The new proposal would formally rescind and replace the Trump rule when made final in the coming months.Opponents could ask a federal judge to block the new rule temporarily or strike it down, but administration officials expressed confidence that it would withstand judicial scrutiny. They said they were merely returning to a standard that federal courts had repeatedly upheld over the decades.Uber and other gig companies say changes to how some of their workers are classified could force them to change their business models.Jim Wilson/The New York TimesUnder President Donald J. Trump, the department argued that two factors should predominate in determinations of whether a worker is an employee or a contractor, even if other factors are relevant: the degree of control a company has over the worker, and the extent to which a worker can increase his or her income by taking entrepreneurial initiative, like marketing his or her services.The Trump Labor Department suggested that gig workers like Uber drivers would probably be considered contractors under these criteria. Proponents argued that the Trump approach was necessary so enforcement didn’t snuff out new ways of doing business, such as the gig economy.But in an interview, Seema Nanda, the Biden Labor Department’s top lawyer, said the Trump rule “threatens to actually increase rather than decrease misclassification.”The proposal by the Biden Labor Department argues that several factors must be weighed when assessing whether a worker is a contractor or an employee, and that none of them are necessarily more important than the others. Among the additional factors are whether the work being performed is central to a company’s business, and what kind of investments workers make to do their jobs, such as buying equipment.Administration officials cautioned that determining whether or not gig workers like Uber drivers are employees would hinge on applying the test laid out in the proposal to individual cases and that they were not prejudging the outcome of any one of them. They also emphasized that the proposal did not target a particular industry.“We make a determination based on the specific facts in any case that we look at,” Ms. Nanda said. “Misclassification harms workers across a wide range of industries.”Gig companies like Uber and Lyft have sought for years to influence laws and regulations on worker classification. After the California Legislature passed a bill proposed by Ms. Gonzalez Fletcher that effectively classified gig drivers as employees in 2019, gig companies spent roughly $200 million helping to pass a ballot measure that would exempt their workers from employee status while granting them limited benefits.A state judge later ruled that the measure was unconstitutional. The decision is being appealed.Gig companies have tried and failed to enact similar measures in other liberal states, like New York and Massachusetts, but did help pass a contractor measure in Washington State.Uber and Lyft have often argued that drivers prefer the flexibility that independent contractor status affords them, such as the ability to work when, where and however long they choose to. They have cited polling data that appears to affirm this.Legal scholars point out that there is nothing inherent about employment status that would forbid companies to grant workers similar flexibility.Mr. Walsh, the labor secretary, has sometimes appeared open to the idea that gig workers could be classified as independent contractors.But when asked in an interview this summer whether he thought drivers would prefer to be independent contractors or employees if the trade-offs were made clear, he argued that “95 percent of people would say yes” to being classified as employees. More

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    As Warehouses Multiply, Some California Cities Say: Enough

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    From the front yard of her ranch-style home, Pam Lemos peered out on the vast valley of her childhood.She can still picture the way it looked back in the 1980s — citrus groves blanketing hillsides, dairy farms stretching for acres and horses grazing under a bright blue sky. These days, when she looks toward the horizon, she mainly sees the metal roofs of hulking warehouses.“Now it’s all industrial,” said Ms. Lemos, 55, who has lived in Colton, 60 miles east of Los Angeles, her entire life. “We are working to change that and starting with these warehouses.”Ms. Lemos is part of a growing coalition of residents and leaders in Colton and neighboring cities — a logistical hub for the nation — who are increasingly frustrated with the proliferation of warehouses in the region, as well as the side effects of the rapid expansion.As warehouse construction has ballooned nationwide, residents in communities both rural and urban have pushed back. Neighborhood apps like Nextdoor and Facebook groups have been flooded with complaints over construction. In California, the anger has turned to widespread action.Several cities in this slice of Southern California, known as the Inland Empire, have passed ordinances in recent months halting new warehouse projects so officials can study the effects of pollution and congestion on residents like Ms. Lemos. Similar local moratoriums have cropped up in New York and New Jersey in recent years, but on a much smaller scale.Labor groups and business coalitions have entered the fray, warning that the new ordinances — along with a push in the state Legislature to widen the restrictions — will cost the region tax revenue and needed jobs and could further disrupt a shaky national supply chain.The Inland Empire, where the population has quadrupled to 4.6 million in the last 50 years as people were priced out of places closer to Los Angeles, is a critical storage-and-sorting point because of its proximity to rail lines that are a short jaunt from the ports of Los Angeles and Long Beach, global hubs that handle 40 percent of the nation’s seaborne imports.In the early 1990s, there were about 650 warehouses in the region, according to a data tool from Pitzer College in Claremont, Calif. By last year, there were nearly 4,000.Pam Lemos has lived in Colton her entire life. “Now it’s all industrial,” she said. “We are working to change that.”Amazon is a major presence, with more than a dozen warehouses in the Inland Empire. Although it is slowing its warehouse expansion nationally and has closed or mothballed some buildings, it is constructing a five-story, four-million-square-foot facility in the city of Ontario. The warehouse, which is scheduled to be completed in 2024 and expected to be one of the company’s largest in the nation, will provide jobs for roughly 1,500 people.Susan Phillips, a professor of environmental analysis at Pitzer who has studied the growth of warehouses in the Inland Empire, says the only way to regulate construction is through the municipal planning process.“Warehouse growth is totally demand-driven,” Ms. Phillips said. “Developers and many municipalities do not want any regulation on this, and at this point warehouses are growing at many times the rate of population growth.”Since 2020, elected officials in a half-dozen Inland Empire cities, including Riverside, its most populous, have imposed moratoriums on warehouse construction. The timeouts are meant to assess, among other things, the effects of pollution, the appropriate distances between homes and warehouses, and the impact of heavy truck traffic on streets.Tucked in the shadow of the San Bernardino Mountains, Colton has long been known as “Hub City” because it is a crossing of two railroads — BNSF and Union Pacific — that shuttle cargo to and from the ports. Today, the city of 54,000 is home to 58 licensed warehouses.Isaac Suchil, a councilman in Colton, was a sponsor of his city’s moratorium, which was recently extended through May 2023. While he stresses that he is not “anti-warehouse,” Mr. Suchil said he would like to see buffer zones requiring that new facilities be at least 300 feet from schools and residential areas. The current requirements vary and are applied differently from project to project, he said.“The moratorium gives us time to address future projects,” he said.Residents have grown increasingly frustrated with the proliferation of warehouses in the region.Isaac Suchil, a councilman in Colton and a sponsor of the city’s moratorium on warehouses.Colton, a city of 54,000, is home to 58 licensed warehouses.Assemblywoman Eloise Gómez Reyes, who represents several Inland Empire cities, including Colton, has taken the fight to Sacramento, the state capital. She sponsored a bill this year that would require new logistics projects in Riverside and San Bernardino Counties that are 100,000 square feet or larger to be at least 1,000 feet from homes, schools and health care centers.“The warehouses bring with them trucks producing diesel particulate matter,” Ms. Gómez Reyes said, noting an American Lung Association report this year that found that those counties were among the worst for annual particulate pollution.Ms. Gómez Reyes, who withdrew her bill from consideration after struggling to find votes, even among fellow Democrats who dominate the Legislature, said she planned to reintroduce the measure next year.The efforts to suspend and regulate warehouse construction have faced staunch opposition from groups including the Laborers’ International Union of North America, which represents construction workers in the United States, and the California Chamber of Commerce.Jennifer Barrera, chief executive of the California Chamber of Commerce, said a measure like the one put forth by Ms. Gómez Reyes would hurt job growth and apply a one-size-fits-all approach that would strip local jurisdictions of necessary freedom around land-use decisions.In the first half of 2022, there were roughly 135,400 warehouse jobs in the Inland Empire, according to the Inland Empire Economic Partnership, a group that works with business and government leaders. In 2010, there were roughly 19,900 warehouse jobs in the region.“A warehouse ban would only exacerbate the goods movement and logistics backlogs California consumers are facing,” Ms. Barrera said. “With more people ordering goods online and wanting quick delivery, the need for storage space is growing.”But some local residents are tired of feeling that their region is losing out on more than it is gaining.This summer, a deal was reached to relocate an elementary school in Bloomington, Calif., to make space for a warehouse, and earlier this year, the City Council in Ontario approved the construction of a warehouse on the site of an area that was once home to a dairy farm. In both instances, residents voiced their frustration on social media and at public meetings.“For too long it’s been build, build, build, with no repercussions,” said Alicia Aguayo, a member of the People’s Collective for Environmental Justice, a group that has pushed for some of the moratoriums.Ms. Aguayo, a lifelong resident of the Inland Empire, says that in recent years she has met more and more people in her community who have asthma and cancer. She would like to see more resources dedicated to studying the health impacts of pollution in the region.“It’s environmental racism and hitting mostly Latino communities,” Ms. Aguayo said.Last year, Southern California officials adopted rules for warehouses that aim to cut truck pollution and reduce health risks.Morris Donald has witnessed the warehouse boom from his backyard in San Bernardino, Calif.The regulations from the South Coast Air Quality Management District require large warehouses to curb or offset emissions from their operations or pay fees that go toward air-quality improvements.In San Bernardino, where a proposed effort last year fell one council vote shy of establishing a 45-day moratorium on the construction of new warehouses, Morris Donald has witnessed the warehouse boom from his backyard.For 11 years, he has rented a three-bedroom home in a neighborhood now surrounded by four warehouses. In recent years, he said, most of the neighbors he knew have moved away and several landlords have sold to developers.“It’s taken away the neighborhood feel,” Mr. Donald said. “Kids don’t play outside. No one is in their yards.”But he sees the benefits as well — he works as a forklift mechanic at a Quiksilver warehouse, his wife is a manager at another and his son works as a security guard at a third facility.“If you want jobs,” Mr. Donald said, “they’re out here in the warehouses, and that’s a fact.”In Colton, Ms. Lemos spends some of her free time volunteering for groups that work closely with the People’s Collective for Environmental Justice. The moratorium, she said, could not have come soon enough.“How did this get so out of control?” Ms. Lemos said, noting that in the months before the moratorium was enacted, the city approved a pair of warehouses with a combined square footage of 1.8 million.On a recent afternoon, Ms. Lemos twisted her Jeep Wrangler along a winding two-lane road, which was pockmarked with potholes left behind, she said, from the semi trucks that shuttle goods from warehouses. The air was thick, and a line of smog hovered along the horizon. A horn from an incoming train pierced the air.“There is always something going on here — trucks, trains, construction from warehouses,” she said. “It’s like we’re living in this logistical bubble while trying to raise our families.” More