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    Wages May Not Be Inflation’s Cause, but They’re the Focus of the Cure

    While fear of a “wage-price spiral” has eased, the Federal Reserve’s course presumes job losses and risks a recession. Some see less painful remedies.As Covid-19 eased its debilitating grip on the U.S. economy two years ago, businesses scrambled to hire. That lifted the pay of the average worker. But as one economic challenge ended, another potential problem emerged.Many economic analysts feared that a wage-price spiral was forming, with employers trying to recover the higher labor costs by increasing prices, and workers in turn continually ratcheting up their pay to make up for inflation’s erosion of their buying power.As wages and prices have risen at the fastest pace in decades, however, it has not been an evenly matched back and forth. Inflation has outstripped wage growth for 22 consecutive months, as calculated by economists at J.P. Morgan.That has prompted economists to debate how much, if at all, pay has driven the current bout of inflation. As recently as November, the Federal Reserve chair, Jerome H. Powell, said at a news conference, “I don’t think wages are the principal story for why prices are going up.”At the same time, influential voices on Wall Street and in Washington are arguing over whether workers’ earnings growth — which, on average, has already slowed — will need to let up further if inflation is to ease to a rate that policymakers find tolerable.Wage growth has not kept up with inflationYear-over-year percentage change in earnings vs. inflation through February More

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    Job Openings Fell in February, JOLTS Report Shows

    The U.S. job market continues to ease off its red-hot pace, a government report shows, but there are still more openings than unemployed workers.Demand for workers in the United States eased in February, a sign that the red-hot labor market continues to cool off somewhat.There were 9.9 million job openings in February, down from 10.6 million on the last day of January, the Labor Department reported Tuesday in the Job Openings and Labor Turnover Survey, known as JOLTS.The drop in open positions is a signal that the labor market is slowing, but the report included data that points to a still-healthy environment for workers: Four million workers quit their jobs during the month, a slight increase from January, and the number of layoffs decreased slightly to 1.5 million.There were 1.7 jobs open for every unemployed worker in February, a decline from 1.9 in January. The Federal Reserve has been paying close attention to that ratio as it looks to slow hiring, part of its effort to contain inflation.Until recent months, the number of available jobs had risen substantially as the economy recovered from the pandemic recession, with companies rushing to hire workers after public health restrictions were rolled back.“The general trend in JOLTS in recent months has been a gradual movement back toward more normal labor market dynamics,” said Julia Pollak, the chief economist at ZipRecruiter. “This looks more like a rebalancing. Job openings were way up in the stratosphere.”The gradual slowing may be encouraging for policymakers. Fed officials worry that a tight job market is contributing to inflation, as employers may feel pressure to raise wages to compete for workers and then pass along price increases to consumers. The number of available openings has remained high in spite of climbing borrowing costs.The central bank has raised interest rates to about 5 percent, from near zero, over the past year, aiming to make it costlier for companies to expand and consumers to spend. But it also wants to avoid setting off widespread layoffs or causing lasting damage to the labor market.“We’re still in a market that is quite strong,” said Nick Bunker, economic research director for North America at the Indeed Hiring Lab. But, he added, “the cool-off is more apparent now.”One measure of inflation that the Fed watches closely — the Personal Consumption Expenditures index — showed that price gains slowed substantially in February, to 5 percent on an annual basis, down from 5.3 percent in January.Despite high-profile job cuts in the tech sector, layoffs overall have been historically low, a sign that employers may be reluctant to part with workers hired during pandemic-era spikes. The number of workers quitting their jobs voluntarily — a sign that they are confident they can find work elsewhere — rose slightly in February, to four million.“The layoffs we’re seeing all over the media in tech and finance are being more than offset by an absence of layoffs and discharges in the Main Street economy,” Ms. Pollak said. “Labor-market dynamics look pretty favorable to workers still,” she added.JOLTS is considered a lagging indicator, telling more about conditions in the recent past than offering information about what may come. On Friday, the Labor Department will release employment data for March. Economists surveyed by Bloomberg expect the report to show that employers added about 240,000 jobs, a slight slowdown from February but still a pace of hiring that reflects a robust labor market. More

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    Broadcast News Is at Center of Fight Over Noncompete Clauses

    Job-switching barriers are routine at TV stations, even for workers not on the air. A proposed federal rule would curb the practice across all fields.Of all the professions, perhaps none is more commonly bound by contracts that define where else an employee can go work than local television news.The restrictions, known as noncompete clauses, have been a condition of the job for reporters, anchors, sportscasters and meteorologists for decades. More recently, they’ve spread to off-air roles like producers and editors — positions that often pay just barely above the poverty line — and they keep employees from moving to other stations in the same market for up to a year after their contract ends.For that reason, there’s probably no industry that could change as much as a result of the Federal Trade Commission’s effort to severely limit noncompete clauses — if the proposed rule is not derailed before being finalized. Business trade associations are lobbying fiercely against it.“The vast majority of people who work in this country, if they find themselves in a bad situation and they don’t like it, they have options to leave, and they don’t have to move,” said Rick Carr, an agent who represents broadcast workers. “And TV doesn’t allow that.”The pending rule would most likely help people like Leah Rivard, who produces the 6 p.m. and 10 p.m. newscasts at WKBT in La Crosse, Wis.She was hired in the summer of 2021, at an hourly rate of $15. A year later, the station brought on a cohort of recent journalism school graduates as part of a new training program that promised to pay off a chunk of their student loans. Several longer-tenured producers left, and Ms. Rivard wanted to leave, too, since she ended up having to teach a bunch of inexperienced young people how to write scripts and edit video.When Ms. Rivard spoke to her managers, she was told that if she left for another station anywhere in the country before her contract expired this year, they could sue her. So she has continued to work for the station, an experience she’s called “absolute hell.” But even after her contract ends in June, a noncompete clause will prevent her from working for any of the other stations in La Crosse or Eau Claire, an hour and a half north, for a year after that.Ms. Rivard plans to look for work in Milwaukee, and since she doesn’t have much to tie her down in La Crosse, she’s eager to leave. But for plenty of older employees with children in school and mortgages to pay, a noncompete means there’s no easy way out.“If your station is so toxic that it’s affecting you, and you want to leave, you have to leave news altogether and find a public relations job,” Ms. Rivard said. “It leaves no accountability for the company to be a good company for employees.”Chris Palmer, WKBT’s general manager, said he believed noncompetes benefited both employers and employees.“We invest a lot of time and money training and publicly marketing an individual journalist, which, in turn, increases the value of that journalist in the local market,” he said. “These employees also have access to proprietary local research and strategic investments. It would be unfair for that to benefit a direct competitor without protection.”Noncompete clauses have become standard in many workplaces and cover about 18 percent of the U.S. labor force, according to research by economists at the University of Maryland and the University of Michigan.In broadcasting, though, noncompetes are ubiquitous. According to a survey of TV news directors by Bob Papper, an adjunct professor at the S.I. Newhouse School of Public Communications at Syracuse University, about 90 percent of news anchors, 78 percent of reporters and 87 percent of weathercasters were bound by noncompetes in 2022. Those numbers have been fairly stable for decades.Amy DuPont quit her job as an anchor at WKBT and went to work in public relations, knowing that she wouldn’t be allowed to work locally in broadcasting for another year.Narayan Mahon for The New York TimesIn recent years, however, noncompetes have grown to cover a far wider swath of the newsroom. About half of digital writers and content managers, 71 percent of producers and 86 percent of multimedia journalists have clauses restricting their ability to work elsewhere in the market after their contracts end. That’s up significantly from when Mr. Papper started tracking contract provisions in depth two decades ago.That growth has occurred despite a campaign by the one of the biggest labor unions in television, SAG-AFTRA, to limit noncompetes for broadcast employees. Since the mid-90s, the group has been successful in a handful of states — like Massachusetts and Illinois — while failing in others, like Michigan and Pennsylvania. Some states, most notably California, decline to enforce most noncompetes, regardless of the industry.In states that circumscribe noncompetes, where SAG-AFTRA also tends to have the most members, the union says workers enjoy higher wages and more freedom to escape bad workplace conditions — particularly important for women, in a field notorious for sexual harassment.“We have seen more flexibility within our membership, and also nonunion shops, for employees who decide at the end of their contract that they’d like to move on,” said Mary Cavallaro, the chief broadcast officer for SAG-AFTRA. But the National Association of Broadcasters — which signed on to a multiindustry letter opposing the federal government’s proposed ban — says that because stations promote their reporters and anchors to develop their local brand recognition, they should be able to prevent them from “crossing the street,” in industry parlance.“While there are certainly some cases where noncompete clauses are overly restrictive, we believe a categorical ban goes too far and that broadcasting presents a unique case for the use of reasonable noncompete clauses for on-air talent,” said Alex Siciliano, a spokesman for the association.Mr. Siciliano did not respond to a further inquiry about why noncompetes were needed for employees not appearing on air.To many broadcasting veterans, the main reason that stations impose noncompetes is clear: There’s a recruiting crunch in broadcast news, particularly for producers. It’s a difficult job, with either very early or very late hours and tight deadlines. It requires a college degree and sometimes a master’s degree in journalism, and pay is no longer competitive for people with media skills. The median salary for a producer is $38,000, according to Mr. Papper’s survey.“There is a belief on the part of non-news executives that working in TV news is still glamorous enough that people are lining up to go into the business,” Mr. Papper said. “But what I’m hearing is that they’re not lining up anymore. And the fact is that the skill set you learn in college that allows you to start in TV news also allows you entry into a whole lot of other, better-paying jobs.”The apparent disconnect between television news management and the pool of available talent has meant that job postings stay open longer. When an offer is extended, it comes with an almost inescapable time commitment.Beth Johnson, a television talent agent, says she had to move from exclusively representing clients to more training and consulting, since newsroom employees were no longer able to move around enough to negotiate significant pay raises. The rapid consolidation in local news, with major companies like Nexstar and Sinclair buying out smaller ownership groups, has further diminished the employees’ options.“It’s really hard for these journalists to make a good living, and it’s getting harder to leverage to make sure they can,” Ms. Johnson said. “So we wanted to pivot to say to journalists, ‘It doesn’t make sense for you to pay me for three years, because you’re not going to make enough to keep me for three years, but you’re really going to need help with that promotion for a year.’”Although reporters and anchors are paid slightly better than producers, they are routinely forced to move if they need to earn more. If they can’t leave town, they often leave the business. The docket for the Federal Trade Commission’s proposed noncompete ban is peppered with examples of reporters and producers whose careers had been constrained or cut short by the inability to leave their employer for similar work nearby.Take Amy DuPont, one of Ms. Rivard’s former colleagues at WKBT. After working as an anchor in San Diego and Milwaukee, she moved with her husband to La Crosse, her hometown, after he retired from the military. When Ms. DuPont felt she had reached a breaking point at the station, she quit for a job in public relations. Other stations in town asked if she was interested in switching over, but she didn’t even try.“Even if I wanted to, I’m not legally able to go there,” said Ms. DuPont, who now represents Kwik Trip, the Midwestern gas station chain. “For someone like me, who’s married and 43 years old with two children, and I own my home, it prevents me from doing my career, something I’ve spent 22 years doing.”Ultimately, when journalists have to switch cities to earn enough to keep up with the cost of living, local residents lose a trusted source of reporting.David Jones worked in broadcast news for 23 years, mostly in management roles that required him to recruit and hire. He quit in 2021 to join a public relations firm, and posted a long meditation on LinkedIn about how inhospitable the industry had grown for employees.Not mentioned, but under the surface, were noncompetes, which hurt the public as well as the people bound by them, he said in an interview.“You really want someone with market knowledge,” Mr. Jones said, “which isn’t to say that someone can’t come in and learn the market quickly, but there’s so much benefit to the community when you’re able to do that. With noncompetes, you almost never get to do that.” More

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    Jobs Report to Offer Fresh Reading on Labor Market’s Tenacity

    After a blockbuster opening to the year, economists expect the February data to show the return of a gradual slowdown in hiring.After an explosion in job growth at the start of the year, new data on Friday will show whether employers moderated their hiring in February — and whether any slowdown was enough to fundamentally upend the labor market’s momentum.Forecasters estimate that the economy added 225,000 positions last month, which would constitute a return to a gentle downward trend that January interrupted with an unexpected jump of 517,000 jobs. Labor Department surveyors have struggled to account for wildly varying seasonal factors, as well as whiplash from the pandemic, which is why revisions of data for December and January will be closely watched.On the surface, employment growth has reflected scant impact from a series of interest rate increases as the Federal Reserve works to contain inflation. Although goods-related industries have faded as consumers shift their spending back to traveling and dining out, backed-up demand and a reluctance to let go of scarce workers have prevented mass layoffs.And so far, the sharp cuts that have been announced in the technology industry haven’t spread widely.“There are sectors of the economy that have not recovered to prepandemic levels — especially leisure and hospitality — and they don’t care about higher interest rates,” said Eugenio Alemán, chief economist at the financial services firm Raymond James. “We have a scenario where the most interest-rate-sensitive sectors have already contracted, mainly housing, and those sectors have not been able to bring down the rest of the economy.”Analysts broadly expect the data to show little if any change in the nation’s unemployment rate, which last month reached a half-century low of 3.4 percent. Americans left the work force in droves at the outset of the pandemic and have been slow to return, helping to keep the job market exceptionally tight — there were still nearly two jobs for every unemployed person in January, the Labor Department reported Wednesday.Wage growth, which has been the Federal Reserve’s primary concern, is forecast to have sped up on a year-over-year basis, while remaining below last year’s blistering high.Since January, the persistent strength of the labor market appears to have fueled a renewed acceleration of economic indicators such as retail sales, as consumers continue to spend down piles of cash that accumulated during the pandemic. Even the housing market has recently shown signs of unfreezing, with new-home sales picking up as mortgage rates sank slightly (though they bounced back up in February).The brighter tenor of the data flow has prompted Fed officials — including Jerome H. Powell, the chair, during two days of testimony this week on Capitol Hill — to warn they may have to push interest rates higher than anticipated to suppress prices. More

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    Why Poverty Persists in America

    In the past 50 years, scientists have mapped the entire human genome and eradicated smallpox. Here in the United States, infant-mortality rates and deaths from heart disease have fallen by roughly 70 percent, and the average American has gained almost a decade of life. Climate change was recognized as an existential threat. The internet was invented.On the problem of poverty, though, there has been no real improvement — just a long stasis. As estimated by the federal government’s poverty line, 12.6 percent of the U.S. population was poor in 1970; two decades later, it was 13.5 percent; in 2010, it was 15.1 percent; and in 2019, it was 10.5 percent. To graph the share of Americans living in poverty over the past half-century amounts to drawing a line that resembles gently rolling hills. The line curves slightly up, then slightly down, then back up again over the years, staying steady through Democratic and Republican administrations, rising in recessions and falling in boom years.What accounts for this lack of progress? It cannot be chalked up to how the poor are counted: Different measures spit out the same embarrassing result. When the government began reporting the Supplemental Poverty Measure in 2011, designed to overcome many of the flaws of the Official Poverty Measure, including not accounting for regional differences in costs of living and government benefits, the United States officially gained three million more poor people. Possible reductions in poverty from counting aid like food stamps and tax benefits were more than offset by recognizing how low-income people were burdened by rising housing and health care costs.The American poor have access to cheap, mass-produced goods, as every American does. But that doesn’t mean they can access what matters most.Any fair assessment of poverty must confront the breathtaking march of material progress. But the fact that standards of living have risen across the board doesn’t mean that poverty itself has fallen. Forty years ago, only the rich could afford cellphones. But cellphones have become more affordable over the past few decades, and now most Americans have one, including many poor people. This has led observers like Ron Haskins and Isabel Sawhill, senior fellows at the Brookings Institution, to assert that “access to certain consumer goods,” like TVs, microwave ovens and cellphones, shows that “the poor are not quite so poor after all.”No, it doesn’t. You can’t eat a cellphone. A cellphone doesn’t grant you stable housing, affordable medical and dental care or adequate child care. In fact, as things like cellphones have become cheaper, the cost of the most necessary of life’s necessities, like health care and rent, has increased. From 2000 to 2022 in the average American city, the cost of fuel and utilities increased by 115 percent. The American poor, living as they do in the center of global capitalism, have access to cheap, mass-produced goods, as every American does. But that doesn’t mean they can access what matters most. As Michael Harrington put it 60 years ago: “It is much easier in the United States to be decently dressed than it is to be decently housed, fed or doctored.”Why, then, when it comes to poverty reduction, have we had 50 years of nothing? When I first started looking into this depressing state of affairs, I assumed America’s efforts to reduce poverty had stalled because we stopped trying to solve the problem. I bought into the idea, popular among progressives, that the election of President Ronald Reagan (as well as that of Prime Minister Margaret Thatcher in the United Kingdom) marked the ascendancy of market fundamentalism, or “neoliberalism,” a time when governments cut aid to the poor, lowered taxes and slashed regulations. If American poverty persisted, I thought, it was because we had reduced our spending on the poor. But I was wrong.A homeless mother with her children in St. Louis in 1987.Eli Reed/Magnum PhotosReagan expanded corporate power, deeply cut taxes on the rich and rolled back spending on some antipoverty initiatives, especially in housing. But he was unable to make large-scale, long-term cuts to many of the programs that make up the American welfare state. Throughout Reagan’s eight years as president, antipoverty spending grew, and it continued to grow after he left office. Spending on the nation’s 13 largest means-tested programs — aid reserved for Americans who fall below a certain income level — went from $1,015 a person the year Reagan was elected president to $3,419 a person one year into Donald Trump’s administration, a 237 percent increase.Most of this increase was due to health care spending, and Medicaid in particular. But even if we exclude Medicaid from the calculation, we find that federal investments in means-tested programs increased by 130 percent from 1980 to 2018, from $630 to $1,448 per person.“Neoliberalism” is now part of the left’s lexicon, but I looked in vain to find it in the plain print of federal budgets, at least as far as aid to the poor was concerned. There is no evidence that the United States has become stingier over time. The opposite is true.This makes the country’s stalled progress on poverty even more baffling. Decade after decade, the poverty rate has remained flat even as federal relief has surged.If we have more than doubled government spending on poverty and achieved so little, one reason is that the American welfare state is a leaky bucket. Take welfare, for example: When it was administered through the Aid to Families With Dependent Children program, almost all of its funds were used to provide single-parent families with cash assistance. But when President Bill Clinton reformed welfare in 1996, replacing the old model with Temporary Assistance for Needy Families (TANF), he transformed the program into a block grant that gives states considerable leeway in deciding how to distribute the money. As a result, states have come up with rather creative ways to spend TANF dollars. Arizona has used welfare money to pay for abstinence-only sex education. Pennsylvania diverted TANF funds to anti-abortion crisis-pregnancy centers. Maine used the money to support a Christian summer camp. Nationwide, for every dollar budgeted for TANF in 2020, poor families directly received just 22 cents.We’ve approached the poverty question by pointing to poor people themselves, when we should have been focusing on exploitation.Labor Organizing and Union DrivesA New Inquiry?: A committee led by Senator Bernie Sanders will hold a vote to open an investigation into federal labor law violations by major corporations and subpoena Howard Schultz, the chief executive of Starbucks, as the first witness.Whitney Museum: After more than a year of bargaining, the cultural institution and its employees are moving forward with a deal that will significantly raise pay and improve job security.Mining Strike: Hundreds of coal miners in Alabama have been told by their union that they can start returning to work before a contract deal has been reached, bringing an end to one of the longest mining strikes in U.S. history.Gag Rules: The National Labor Relations Board has ruled that it is generally illegal for companies to offer severance agreements that require confidentiality and nondisparagement.A fair amount of government aid earmarked for the poor never reaches them. But this does not fully solve the puzzle of why poverty has been so stubbornly persistent, because many of the country’s largest social-welfare programs distribute funds directly to people. Roughly 85 percent of the Supplemental Nutrition Assistance Program budget is dedicated to funding food stamps themselves, and almost 93 percent of Medicaid dollars flow directly to beneficiaries.There are, it would seem, deeper structural forces at play, ones that have to do with the way the American poor are routinely taken advantage of. The primary reason for our stalled progress on poverty reduction has to do with the fact that we have not confronted the unrelenting exploitation of the poor in the labor, housing and financial markets.As a theory of poverty, “exploitation” elicits a muddled response, causing us to think of course and but, no in the same instant. The word carries a moral charge, but social scientists have a fairly coolheaded way to measure exploitation: When we are underpaid relative to the value of what we produce, we experience labor exploitation; when we are overcharged relative to the value of something we purchase, we experience consumer exploitation. For example, if a family paid $1,000 a month to rent an apartment with a market value of $20,000, that family would experience a higher level of renter exploitation than a family who paid the same amount for an apartment with a market valuation of $100,000. When we don’t own property or can’t access credit, we become dependent on people who do and can, which in turn invites exploitation, because a bad deal for you is a good deal for me.Our vulnerability to exploitation grows as our liberty shrinks. Because undocumented workers are not protected by labor laws, more than a third are paid below minimum wage, and nearly 85 percent are not paid overtime. Many of us who are U.S. citizens, or who crossed borders through official checkpoints, would not work for these wages. We don’t have to. If they migrate here as adults, those undocumented workers choose the terms of their arrangement. But just because desperate people accept and even seek out exploitative conditions doesn’t make those conditions any less exploitative. Sometimes exploitation is simply the best bad option.Consider how many employers now get one over on American workers. The United States offers some of the lowest wages in the industrialized world. A larger share of workers in the United States make “low pay” — earning less than two-thirds of median wages — than in any other country belonging to the Organization for Economic Cooperation and Development. According to the group, nearly 23 percent of American workers labor in low-paying jobs, compared with roughly 17 percent in Britain, 11 percent in Japan and 5 percent in Italy. Poverty wages have swollen the ranks of the American working poor, most of whom are 35 or older.One popular theory for the loss of good jobs is deindustrialization, which caused the shuttering of factories and the hollowing out of communities that had sprung up around them. Such a passive word, “deindustrialization” — leaving the impression that it just happened somehow, as if the country got deindustrialization the way a forest gets infested by bark beetles. But economic forces framed as inexorable, like deindustrialization and the acceleration of global trade, are often helped along by policy decisions like the 1994 North American Free Trade Agreement, which made it easier for companies to move their factories to Mexico and contributed to the loss of hundreds of thousands of American jobs. The world has changed, but it has changed for other economies as well. Yet Belgium and Canada and many other countries haven’t experienced the kind of wage stagnation and surge in income inequality that the United States has.Those countries managed to keep their unions. We didn’t. Throughout the 1950s and 1960s, nearly a third of all U.S. workers carried union cards. These were the days of the United Automobile Workers, led by Walter Reuther, once savagely beaten by Ford’s brass-knuckle boys, and of the mighty American Federation of Labor and Congress of Industrial Organizations that together represented around 15 million workers, more than the population of California at the time.In their heyday, unions put up a fight. In 1970 alone, 2.4 million union members participated in work stoppages, wildcat strikes and tense standoffs with company heads. The labor movement fought for better pay and safer working conditions and supported antipoverty policies. Their efforts paid off for both unionized and nonunionized workers, as companies like Eastman Kodak were compelled to provide generous compensation and benefits to their workers to prevent them from organizing. By one estimate, the wages of nonunionized men without a college degree would be 8 percent higher today if union strength remained what it was in the late 1970s, a time when worker pay climbed, chief-executive compensation was reined in and the country experienced the most economically equitable period in modern history.It is important to note that Old Labor was often a white man’s refuge. In the 1930s, many unions outwardly discriminated against Black workers or segregated them into Jim Crow local chapters. In the 1960s, unions like the Brotherhood of Railway and Steamship Clerks and the United Brotherhood of Carpenters and Joiners of America enforced segregation within their ranks. Unions harmed themselves through their self-defeating racism and were further weakened by a changing economy. But organized labor was also attacked by political adversaries. As unions flagged, business interests sensed an opportunity. Corporate lobbyists made deep inroads in both political parties, beginning a public-relations campaign that pressured policymakers to roll back worker protections.A national litmus test arrived in 1981, when 13,000 unionized air traffic controllers left their posts after contract negotiations with the Federal Aviation Administration broke down. When the workers refused to return, Reagan fired all of them. The public’s response was muted, and corporate America learned that it could crush unions with minimal blowback. And so it went, in one industry after another.Today almost all private-sector employees (94 percent) are without a union, though roughly half of nonunion workers say they would organize if given the chance. They rarely are. Employers have at their disposal an arsenal of tactics designed to prevent collective bargaining, from hiring union-busting firms to telling employees that they could lose their jobs if they vote yes. Those strategies are legal, but companies also make illegal moves to block unions, like disciplining workers for trying to organize or threatening to close facilities. In 2016 and 2017, the National Labor Relations Board charged 42 percent of employers with violating federal law during union campaigns. In nearly a third of cases, this involved illegally firing workers for organizing.A steelworker on strike in Philadelphia in 1992.Stephen ShamesA protest outside an Amazon facility in San Bernardino, Calif., in 2022.Irfan Khan/Getty ImagesCorporate lobbyists told us that organized labor was a drag on the economy — that once the companies had cleared out all these fusty, lumbering unions, the economy would rev up, raising everyone’s fortunes. But that didn’t come to pass. The negative effects of unions have been wildly overstated, and there is now evidence that unions play a role in increasing company productivity, for example by reducing turnover. The U.S. Bureau of Labor Statistics measures productivity as how efficiently companies turn inputs (like materials and labor) into outputs (like goods and services). Historically, productivity, wages and profits rise and fall in lock step. But the American economy is less productive today than it was in the post-World War II period, when unions were at peak strength. The economies of other rich countries have slowed as well, including those with more highly unionized work forces, but it is clear that diluting labor power in America did not unleash economic growth or deliver prosperity to more people. “We were promised economic dynamism in exchange for inequality,” Eric Posner and Glen Weyl write in their book “Radical Markets.” “We got the inequality, but dynamism is actually declining.”As workers lost power, their jobs got worse. For several decades after World War II, ordinary workers’ inflation-adjusted wages (known as “real wages”) increased by 2 percent each year. But since 1979, real wages have grown by only 0.3 percent a year. Astonishingly, workers with a high school diploma made 2.7 percent less in 2017 than they would have in 1979, adjusting for inflation. Workers without a diploma made nearly 10 percent less.Lousy, underpaid work is not an indispensable, if regrettable, byproduct of capitalism, as some business defenders claim today. (This notion would have scandalized capitalism’s earliest defenders. John Stuart Mill, arch advocate of free people and free markets, once said that if widespread scarcity was a hallmark of capitalism, he would become a communist.) But capitalism is inherently about owners trying to give as little, and workers trying to get as much, as possible. With unions largely out of the picture, corporations have chipped away at the conventional midcentury work arrangement, which involved steady employment, opportunities for advancement and raises and decent pay with some benefits.As the sociologist Gerald Davis has put it: Our grandparents had careers. Our parents had jobs. We complete tasks. Or at least that has been the story of the American working class and working poor.Poor Americans aren’t just exploited in the labor market. They face consumer exploitation in the housing and financial markets as well.There is a long history of slum exploitation in America. Money made slums because slums made money. Rent has more than doubled over the past two decades, rising much faster than renters’ incomes. Median rent rose from $483 in 2000 to $1,216 in 2021. Why have rents shot up so fast? Experts tend to offer the same rote answers to this question. There’s not enough housing supply, they say, and too much demand. Landlords must charge more just to earn a decent rate of return. Must they? How do we know?We need more housing; no one can deny that. But rents have jumped even in cities with plenty of apartments to go around. At the end of 2021, almost 19 percent of rental units in Birmingham, Ala., sat vacant, as did 12 percent of those in Syracuse, N.Y. Yet rent in those areas increased by roughly 14 percent and 8 percent, respectively, over the previous two years. National data also show that rental revenues have far outpaced property owners’ expenses in recent years, especially for multifamily properties in poor neighborhoods. Rising rents are not simply a reflection of rising operating costs. There’s another dynamic at work, one that has to do with the fact that poor people — and particularly poor Black families — don’t have much choice when it comes to where they can live. Because of that, landlords can overcharge them, and they do.A study I published with Nathan Wilmers found that after accounting for all costs, landlords operating in poor neighborhoods typically take in profits that are double those of landlords operating in affluent communities. If down-market landlords make more, it’s because their regular expenses (especially their mortgages and property-tax bills) are considerably lower than those in upscale neighborhoods. But in many cities with average or below-average housing costs — think Buffalo, not Boston — rents in the poorest neighborhoods are not drastically lower than rents in the middle-class sections of town. From 2015 to 2019, median monthly rent for a two-bedroom apartment in the Indianapolis metropolitan area was $991; it was $816 in neighborhoods with poverty rates above 40 percent, just around 17 percent less. Rents are lower in extremely poor neighborhoods, but not by as much as you would think.Evicted rent strikers in Chicago in 1966.Getty ImagesA Maricopa County constable serving an eviction notice in Phoenix in 2020.John Moore/Getty ImagesYet where else can poor families live? They are shut out of homeownership because banks are disinclined to issue small-dollar mortgages, and they are also shut out of public housing, which now has waiting lists that stretch on for years and even decades. Struggling families looking for a safe, affordable place to live in America usually have but one choice: to rent from private landlords and fork over at least half their income to rent and utilities. If millions of poor renters accept this state of affairs, it’s not because they can’t afford better alternatives; it’s because they often aren’t offered any.You can read injunctions against usury in the Vedic texts of ancient India, in the sutras of Buddhism and in the Torah. Aristotle and Aquinas both rebuked it. Dante sent moneylenders to the seventh circle of hell. None of these efforts did much to stem the practice, but they do reveal that the unprincipled act of trapping the poor in a cycle of debt has existed at least as long as the written word. It might be the oldest form of exploitation after slavery. Many writers have depicted America’s poor as unseen, shadowed and forgotten people: as “other” or “invisible.” But markets have never failed to notice the poor, and this has been particularly true of the market for money itself.The deregulation of the banking system in the 1980s heightened competition among banks. Many responded by raising fees and requiring customers to carry minimum balances. In 1977, over a third of banks offered accounts with no service charge. By the early 1990s, only 5 percent did. Big banks grew bigger as community banks shuttered, and in 2021, the largest banks in America charged customers almost $11 billion in overdraft fees. Just 9 percent of account holders paid 84 percent of these fees. Who were the unlucky 9 percent? Customers who carried an average balance of less than $350. The poor were made to pay for their poverty.In 2021, the average fee for overdrawing your account was $33.58. Because banks often issue multiple charges a day, it’s not uncommon to overdraw your account by $20 and end up paying $200 for it. Banks could (and do) deny accounts to people who have a history of overextending their money, but those customers also provide a steady revenue stream for some of the most powerful financial institutions in the world.Every year: almost $11 billion in overdraft fees, $1.6 billion in check-cashing fees and up to $8.2 billion in payday-loan fees.According to the F.D.I.C., one in 19 U.S. households had no bank account in 2019, amounting to more than seven million families. Compared with white families, Black and Hispanic families were nearly five times as likely to lack a bank account. Where there is exclusion, there is exploitation. Unbanked Americans have created a market, and thousands of check-cashing outlets now serve that market. Check-cashing stores generally charge from 1 to 10 percent of the total, depending on the type of check. That means that a worker who is paid $10 an hour and takes a $1,000 check to a check-cashing outlet will pay $10 to $100 just to receive the money he has earned, effectively losing one to 10 hours of work. (For many, this is preferable to the less-predictable exploitation by traditional banks, with their automatic overdraft fees. It’s the devil you know.) In 2020, Americans spent $1.6 billion just to cash checks. If the poor had a costless way to access their own money, over a billion dollars would have remained in their pockets during the pandemic-induced recession.Poverty can mean missed payments, which can ruin your credit. But just as troublesome as bad credit is having no credit score at all, which is the case for 26 million adults in the United States. Another 19 million possess a credit history too thin or outdated to be scored. Having no credit (or bad credit) can prevent you from securing an apartment, buying insurance and even landing a job, as employers are increasingly relying on credit checks during the hiring process. And when the inevitable happens — when you lose hours at work or when the car refuses to start — the payday-loan industry steps in.For most of American history, regulators prohibited lending institutions from charging exorbitant interest on loans. Because of these limits, banks kept interest rates between 6 and 12 percent and didn’t do much business with the poor, who in a pinch took their valuables to the pawnbroker or the loan shark. But the deregulation of the banking sector in the 1980s ushered the money changers back into the temple by removing strict usury limits. Interest rates soon reached 300 percent, then 500 percent, then 700 percent. Suddenly, some people were very interested in starting businesses that lent to the poor. In recent years, 17 states have brought back strong usury limits, capping interest rates and effectively prohibiting payday lending. But the trade thrives in most places. The annual percentage rate for a two-week $300 loan can reach 460 percent in California, 516 percent in Wisconsin and 664 percent in Texas.Roughly a third of all payday loans are now issued online, and almost half of borrowers who have taken out online loans have had lenders overdraw their bank accounts. The average borrower stays indebted for five months, paying $520 in fees to borrow $375. Keeping people indebted is, of course, the ideal outcome for the payday lender. It’s how they turn a $15 profit into a $150 one. Payday lenders do not charge high fees because lending to the poor is risky — even after multiple extensions, most borrowers pay up. Lenders extort because they can.Every year: almost $11 billion in overdraft fees, $1.6 billion in check-cashing fees and up to $8.2 billion in payday-loan fees. That’s more than $55 million in fees collected predominantly from low-income Americans each day — not even counting the annual revenue collected by pawnshops and title loan services and rent-to-own schemes. When James Baldwin remarked in 1961 how “extremely expensive it is to be poor,” he couldn’t have imagined these receipts.“Predatory inclusion” is what the historian Keeanga-Yamahtta Taylor calls it in her book “Race for Profit,” describing the longstanding American tradition of incorporating marginalized people into housing and financial schemes through bad deals when they are denied good ones. The exclusion of poor people from traditional banking and credit systems has forced them to find alternative ways to cash checks and secure loans, which has led to a normalization of their exploitation. This is all perfectly legal, after all, and subsidized by the nation’s richest commercial banks. The fringe banking sector would not exist without lines of credit extended by the conventional one. Wells Fargo and JPMorgan Chase bankroll payday lenders like Advance America and Cash America. Everybody gets a cut.Poverty isn’t simply the condition of not having enough money. It’s the condition of not having enough choice and being taken advantage of because of that. When we ignore the role that exploitation plays in trapping people in poverty, we end up designing policy that is weak at best and ineffective at worst. For example, when legislation lifts incomes at the bottom without addressing the housing crisis, those gains are often realized instead by landlords, not wholly by the families the legislation was intended to help. A 2019 study conducted by the Federal Reserve Bank of Philadelphia found that when states raised minimum wages, families initially found it easier to pay rent. But landlords quickly responded to the wage bumps by increasing rents, which diluted the effect of the policy. This happened after the pandemic rescue packages, too: When wages began to rise in 2021 after worker shortages, rents rose as well, and soon people found themselves back where they started or worse.A boy in North Philadelphia in 1985.Stephen ShamesA girl in Troy, N.Y., around 2008.Brenda Ann KenneallyAntipoverty programs work. Each year, millions of families are spared the indignities and hardships of severe deprivation because of these government investments. But our current antipoverty programs cannot abolish poverty by themselves. The Johnson administration started the War on Poverty and the Great Society in 1964. These initiatives constituted a bundle of domestic programs that included the Food Stamp Act, which made food aid permanent; the Economic Opportunity Act, which created Job Corps and Head Start; and the Social Security Amendments of 1965, which founded Medicare and Medicaid and expanded Social Security benefits. Nearly 200 pieces of legislation were signed into law in President Lyndon B. Johnson’s first five years in office, a breathtaking level of activity. And the result? Ten years after the first of these programs were rolled out in 1964, the share of Americans living in poverty was half what it was in 1960.But the War on Poverty and the Great Society were started during a time when organized labor was strong, incomes were climbing, rents were modest and the fringe banking industry as we know it today didn’t exist. Today multiple forms of exploitation have turned antipoverty programs into something like dialysis, a treatment designed to make poverty less lethal, not to make it disappear.This means we don’t just need deeper antipoverty investments. We need different ones, policies that refuse to partner with poverty, policies that threaten its very survival. We need to ensure that aid directed at poor people stays in their pockets, instead of being captured by companies whose low wages are subsidized by government benefits, or by landlords who raise the rents as their tenants’ wages rise, or by banks and payday-loan outlets who issue exorbitant fines and fees. Unless we confront the many forms of exploitation that poor families face, we risk increasing government spending only to experience another 50 years of sclerosis in the fight against poverty.The best way to address labor exploitation is to empower workers. A renewed contract with American workers should make organizing easy. As things currently stand, unionizing a workplace is incredibly difficult. Under current labor law, workers who want to organize must do so one Amazon warehouse or one Starbucks location at a time. We have little chance of empowering the nation’s warehouse workers and baristas this way. This is why many new labor movements are trying to organize entire sectors. The Fight for $15 campaign, led by the Service Employees International Union, doesn’t focus on a single franchise (a specific McDonald’s store) or even a single company (McDonald’s) but brings together workers from several fast-food chains. It’s a new kind of labor power, and one that could be expanded: If enough workers in a specific economic sector — retail, hotel services, nursing — voted for the measure, the secretary of labor could establish a bargaining panel made up of representatives elected by the workers. The panel could negotiate with companies to secure the best terms for workers across the industry. This is a way to organize all Amazon warehouses and all Starbucks locations in a single go.Sectoral bargaining, as it’s called, would affect tens of millions of Americans who have never benefited from a union of their own, just as it has improved the lives of workers in Europe and Latin America. The idea has been criticized by members of the business community, like the U.S. Chamber of Commerce, which has raised concerns about the inflexibility and even the constitutionality of sectoral bargaining, as well as by labor advocates, who fear that industrywide policies could nullify gains that existing unions have made or could be achieved only if workers make other sacrifices. Proponents of the idea counter that sectoral bargaining could even the playing field, not only between workers and bosses, but also between companies in the same sector that would no longer be locked into a race to the bottom, with an incentive to shortchange their work force to gain a competitive edge. Instead, the companies would be forced to compete over the quality of the goods and services they offer. Maybe we would finally reap the benefits of all that economic productivity we were promised.We must also expand the housing options for low-income families. There isn’t a single right way to do this, but there is clearly a wrong way: the way we’re doing it now. One straightforward approach is to strengthen our commitment to the housing programs we already have. Public housing provides affordable homes to millions of Americans, but it’s drastically underfunded relative to the need. When the wealthy township of Cherry Hill, N.J., opened applications for 29 affordable apartments in 2021, 9,309 people applied. The sky-high demand should tell us something, though: that affordable housing is a life changer, and families are desperate for it.A woman and child in an apartment on East 100 St. in New York City in 1966.Bruce Davidson/Magnum PhotosTwo girls in Menands, N.Y., around 2008.Brenda Ann KenneallyWe could also pave the way for more Americans to become homeowners, an initiative that could benefit poor, working-class and middle-class families alike — as well as scores of young people. Banks generally avoid issuing small-dollar mortgages, not because they’re riskier — these mortgages have the same delinquency rates as larger mortgages — but because they’re less profitable. Over the life of a mortgage, interest on $1 million brings in a lot more money than interest on $75,000. This is where the federal government could step in, providing extra financing to build on-ramps to first-time homeownership. In fact, it already does so in rural America through the 502 Direct Loan Program, which has moved more than two million families into their own homes. These loans, fully guaranteed and serviced by the Department of Agriculture, come with low interest rates and, for very poor families, cover the entire cost of the mortgage, nullifying the need for a down payment. Last year, the average 502 Direct Loan was for $222,300 but cost the government only $10,370 per loan, chump change for such a durable intervention. Expanding a program like this into urban communities would provide even more low- and moderate-income families with homes of their own.We should also ensure fair access to capital. Banks should stop robbing the poor and near-poor of billions of dollars each year, immediately ending exorbitant overdraft fees. As the legal scholar Mehrsa Baradaran has pointed out, when someone overdraws an account, banks could simply freeze the transaction or could clear a check with insufficient funds, providing customers a kind of short-term loan with a low interest rate of, say, 1 percent a day.States should rein in payday-lending institutions and insist that lenders make it clear to potential borrowers what a loan is ultimately likely to cost them. Just as fast-food restaurants must now publish calorie counts next to their burgers and shakes, payday-loan stores should publish the average overall cost of different loans. When Texas adopted disclosure rules, residents took out considerably fewer bad loans. If Texas can do this, why not California or Wisconsin? Yet to stop financial exploitation, we need to expand, not limit, low-income Americans’ access to credit. Some have suggested that the government get involved by having the U.S. Postal Service or the Federal Reserve issue small-dollar loans. Others have argued that we should revise government regulations to entice commercial banks to pitch in. Whatever our approach, solutions should offer low-income Americans more choice, a way to end their reliance on predatory lending institutions that can get away with robbery because they are the only option available.In Tommy Orange’s novel, “There There,” a man trying to describe the problem of suicides on Native American reservations says: “Kids are jumping out the windows of burning buildings, falling to their deaths. And we think the problem is that they’re jumping.” The poverty debate has suffered from a similar kind of myopia. For the past half-century, we’ve approached the poverty question by pointing to poor people themselves — posing questions about their work ethic, say, or their welfare benefits — when we should have been focusing on the fire. The question that should serve as a looping incantation, the one we should ask every time we drive past a tent encampment, those tarped American slums smelling of asphalt and bodies, or every time we see someone asleep on the bus, slumped over in work clothes, is simply: Who benefits? Not: Why don’t you find a better job? Or: Why don’t you move? Or: Why don’t you stop taking out payday loans? But: Who is feeding off this?Those who have amassed the most power and capital bear the most responsibility for America’s vast poverty: political elites who have utterly failed low-income Americans over the past half-century; corporate bosses who have spent and schemed to prioritize profits over families; lobbyists blocking the will of the American people with their self-serving interests; property owners who have exiled the poor from entire cities and fueled the affordable-housing crisis. Acknowledging this is both crucial and deliciously absolving; it directs our attention upward and distracts us from all the ways (many unintentional) that we — we the secure, the insured, the housed, the college-educated, the protected, the lucky — also contribute to the problem.Corporations benefit from worker exploitation, sure, but so do consumers, who buy the cheap goods and services the working poor produce, and so do those of us directly or indirectly invested in the stock market. Landlords are not the only ones who benefit from housing exploitation; many homeowners do, too, their property values propped up by the collective effort to make housing scarce and expensive. The banking and payday-lending industries profit from the financial exploitation of the poor, but so do those of us with free checking accounts, as those accounts are subsidized by billions of dollars in overdraft fees.Living our daily lives in ways that express solidarity with the poor could mean we pay more; anti-exploitative investing could dampen our stock portfolios. By acknowledging those costs, we acknowledge our complicity. Unwinding ourselves from our neighbors’ deprivation and refusing to live as enemies of the poor will require us to pay a price. It’s the price of our restored humanity and renewed country.Matthew Desmond is a professor of sociology at Princeton University and a contributing writer for the magazine. His latest book, “Poverty, by America,” is set to be released this month and was adapted for this article. More

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    Jerome Powell Says Interest Rate Raises Likely to Be Higher Than Expected

    In light of recent strong data, Jerome H. Powell said the Federal Reserve was likely to raise rates higher than expected.Jerome H. Powell, the Federal Reserve chair, made clear on Tuesday that the central bank is prepared to react to recent signs of economic strength by raising interest rates higher than previously expected and, if incoming data remain hot, potentially returning to a quicker pace of rate increases.Mr. Powell, in remarks before the Senate Banking Committee, also noted that the Fed’s fight against inflation was “very likely” to come at some cost to the labor market.His comments were the clearest acknowledgment yet that recent reports showing inflation remains stubborn and the job market remains resilient are likely to shake up the policy trajectory for America’s central bank.The Fed raised interest rates last year at the fastest pace since the 1980s, pushing borrowing costs above 4.5 percent, from near zero. That initially seemed to be slowing consumer and business demand and helping inflation to moderate. But a number of recent economic reports have suggested that inflation did not weaken as much as expected last year and remained faster than expected in January, while other data showed hiring remains strong and consumer spending picked up at the start of the year.While some of that momentum could have owed to mild January weather — conditions allowed for shopping trips and construction — Mr. Powell said the unexpected strength would probably require a stronger policy response from the Fed.“The process of getting inflation back down to 2 percent has a long way to go and is likely to be bumpy,” he told the committee. “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.”Senator Elizabeth Warren suggested that the Fed was trying to “throw people out of work” and that millions of people stood to lose their jobs if unemployment rose as much as central bankers expected.Michael A. McCoy for The New York TimesFed officials projected in December that rates would rise to a peak of 5 to 5.25 percent, with a few penciling in a slightly higher 5.25 to 5.5 percent. Mr. Powell suggested that the peak rate would need to be adjusted by more than that, without specifying how much more.He even opened the door to faster rate increases if incoming data — which include a jobs report on Friday and a fresh inflation report due next week — remain hot. The Fed repeatedly raised rates by three-quarters of a point in 2022, but slowed to half a point in December and a quarter point in early February.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.Mislabeling Managers: New evidence shows that many employers are mislabeling rank-and-file workers as managers to avoid paying them overtime.Energy Sector: Solar, wind, geothermal, battery and other alternative-energy businesses are snapping up workers from fossil fuel companies, where employment has fallen.Elite Hedge Funds: As workers around the country negotiate severance packages, employees in a tiny and influential corner of Wall Street are being promised some of their biggest paydays ever.Immigration: The flow of immigrants and refugees into the United States has ramped up, helping to replenish the American labor force. But visa backlogs are still posing challenges.“If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” Mr. Powell said.Before his remarks, markets were heavily prepared for a quarter-point move at the Fed’s March 21-22 meeting. After his opening testimony, investors increasingly bet that the central bank would make a half-point move in March, stock prices lurched lower, and a closely watched Wall Street recession indicator pointed to a greater chance of a downturn. The S&P 500 ended the day down about 1.5 percent.While Mr. Powell predicated any decision to pick up the pace of rate increases on incoming data, even opening the door to the possibility made it clear that “it’s definitely a policy option they’re considering pretty actively,” said Michael Feroli, chief U.S. economist at J.P. Morgan.Mr. Feroli said a decision to accelerate rate moves might stoke uncertainty about what would come next: Will the Fed stick with half-point moves in May, for instance?“It raises a lot of questions,” he said.Blerina Uruci, chief U.S. economist at T. Rowe Price, previously thought the Fed would stop lifting interest rates around 5.75 percent but now thinks there is a growing chance they will rise above 6 percent, she said. She thinks that if Fed officials speed up rate increases in March, they may feel the need to keep the moves quick in May.“Otherwise, the Fed runs the risk of looking like they’re flip-flopping around,” Ms. Uruci said.While the Fed typically avoids making too much of any single month’s data, Mr. Powell signaled that recent reports had caused concern both because signs of continued momentum were broad-based and because revisions made a slowdown late in 2022 look less pronounced.“The breadth of the reversal along with revisions to the previous quarter suggests that inflationary pressures are running higher than expected at the time of our previous” meeting, Mr. Powell said.He reiterated that there were some hopeful developments: Goods inflation has slowed, and rent inflation, while high, appears poised to cool down this year.And Mr. Powell noted on Tuesday that officials knew it took time for the full effects of monetary policy to be felt, and were taking that into account as they thought about future policy.Still, he underlined that “there is little sign of disinflation thus far” in services outside of housing, which include purchases ranging from restaurant meals and travel to manicures. The Fed has been turning to that measure more and more as a signal of how strong underlying price pressures remain in the economy.“Nothing about the data suggests to me that we’ve tightened too much,” Mr. Powell said in response to lawmaker questions. “Indeed, it suggests that we still have work to do.”When the Fed raises interest rates, it slows consumer spending on big credit-based purchases like houses and cars and can dissuade businesses from expanding on borrowed money. As demand for products and demand for workers cool, wage growth eases and unemployment may even rise, further slowing consumption and causing a broader moderation in the economy.But so far, the job market has been very resilient to the Fed’s moves, with the lowest unemployment rate since 1969, rapid hiring and robust pay gains.Mr. Powell said wage growth — while it had moderated somewhat — remained too strong to be consistent with a return to 2 percent inflation. When companies are paying more, they are likely to charge more to cover their labor bills.“Strong wage growth is good for workers, but only if it is not eroded by inflation,” Mr. Powell said.Despite such explanations, some lawmakers grilled the Fed chair on Tuesday over what the central bank expected to do to the labor market with its policy adjustments.Senator Elizabeth Warren, Democrat of Massachusetts, suggested that the Fed was trying to “throw people out of work” and that millions of people stood to lose their jobs if unemployment rose as much as central bankers expected.“I would explain to people, more broadly, that inflation is extremely high, and that it is hurting the working people of this nation badly,” Mr. Powell said. “We are taking the only measures that we have to bring inflation down.”When Ms. Warren continued to press him on the Fed’s plan, Mr. Powell responded that the central bank was doing what policymakers believed was necessary.“Will working people be better off if we just walk away from our jobs and inflation remains 5, 6 percent?” Mr. Powell asked.He also underlined that the Fed does “not seek, and we don’t believe that we need to have,” a “very significant” downturn in the labor market, because there are many job openings, so it is possible that the labor market could cool quite a bit without outright job losses.“Other business cycles had quite different back stories than this one,” he said. “We’re going to have to find out whether that matters or not.”Joe Rennison More

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    You’re Now a ‘Manager.’ Forget About Overtime Pay.

    New evidence shows that many employers are mislabeling rank-and-file workers as managers to avoid paying them overtime.For four years beginning in 2014, Tiffany Palliser worked at Panera Bread in South Florida, making salads and operating the register for shifts that began at 5 a.m. and often ran late into the afternoon.Ms. Palliser estimates that she worked at least 50 hours a week on average. But she says she did not receive overtime pay.The reason? Panera officially considered her a manager and paid her an annual salary rather than on an hourly basis. Ms. Palliser said she was often told that “this is what you signed up for” by becoming an assistant manager.Federal law requires employers to pay time-and-a-half overtime to hourly workers after 40 hours, and to most salaried workers whose salary is below a certain amount, currently about $35,500 a year. Companies need not pay overtime to salaried employees who make above that amount if they are bona fide managers.Many employers say managers who earn relatively modest salaries have genuine responsibility and opportunities to advance. The National Retail Federation, a trade group, has written that such management positions are “key steps on the ladder of professional success, especially for many individuals who do not have college degrees.”But according to a recent paper by three academics, Lauren Cohen, Umit Gurun and N. Bugra Ozel, many companies provide salaries just above the federal cutoff to frontline workers and mislabel them as managers to deny them overtime.Because the legal definition of a manager is vague and little known — the employee’s “primary” job must be management, and the employee must have real authority — the mislabeled managers find it hard to push back, even if they mostly do grunt work.The paper found that from 2010 to 2018, manager titles in a large database of job postings were nearly five times as common among workers who were at the federal salary cutoff for mandatory overtime or just above it as they were among workers just below the cutoff.“To believe this would happen without this kind of gaming going on is ridiculous,” Dr. Cohen, a Harvard Business School professor, said in an interview.Under federal law, employers are required to pay time-and-a-half overtime to salaried workers after 40 hours if they make about $35,500 or less.Scott McIntyre for The New York TimesDr. Cohen and his co-authors estimate that the practice of mislabeling workers as managers to deny them overtime, which often relies on dubious-sounding titles like “lead reservationist” and “food cart manager,” cost the workers about $4 billion per year, or more than $3,000 per mislabeled employee.And the practice appears to be on the rise: Dr. Cohen said the number of jobs with dubious-sounding managerial titles grew over the period he and his co-authors studied.Federal data appear to underscore the trend, showing that the number of managers in the labor force increased more than 25 percent from 2010 to 2019, while the overall number of workers grew roughly half that percentage.From 2019 to 2021, the work force shrank by millions while the number of managers did not budge. Lawyers representing workers said they suspected that businesses mislabeled employees as managers even more often during the pandemic to save on overtime while they were short-handed.“There were shortages of people who had kids at home,” said Catherine Ruckelshaus, the general counsel of the National Employment Law Project, a worker advocacy group. “I’m sure that elevated the stakes.”But Ed Egee, a vice president at the National Retail Federation, argued that labor shortages most likely cut the other way, giving low-level managers the leverage to negotiate more favorable pay, benefits and schedules. “I would almost say there’s never been a time when those workers are more empowered,” he said. (Pay for all workers grew much faster than pay for managers from 2019 to 2021, though pay for managers grew slightly faster last year.)Experts say the denial of overtime pay is part of a broader strategy to drive down labor costs in recent decades by staffing stores with as few workers as possible. If a worker calls in sick, or more customers turn up than expected, the misclassified manager is often asked to perform the duties of a rank-and-file worker without additional cost to the employer.“This allows them to make sure they’re not staffing any more than they need to,” said Deirdre Aaron, a former Labor Department lawyer who has litigated numerous overtime cases in private practice. “They have assistant managers there who can pick up the slack.”Ms. Palliser said that her normal shift at Panera ran from 5 a.m. to 2 p.m., but that she was often called in to help close the store when it was short-staffed. If an employee did not show up for an afternoon shift, she typically had to stay late to cover.Gonzalo Espinosa said that he had often worked 80 hours a week as the manager of a Jack in the Box but that he had not received overtime pay.Max Whittaker for The New York Times“I would say, ‘My kids get out of school at 2. I have to go pick them up, I can’t keep doing this,’” said Ms. Palliser, who made from about $32,000 to $40,000 a year as an assistant manager. She said her husband later quit his job to help with their child-care responsibilities.She won a portion of a multimillion-dollar settlement under a lawsuit accusing a Panera franchisee, Covelli Enterprises, of failing to pay overtime to hundreds of assistant managers. Panera and representatives of the franchise did not respond to requests for comment.Gassan Marzuq, who earned a salary of around $40,000 a year as the manager of a Dunkin’ Donuts for several years until 2012, said in a lawsuit that he had worked roughly 70 hours or more in a typical week. He testified that he had spent 90 percent of his time on tasks like serving customers and cleaning, and that he could not delegate this work “because you’re always short on staff.”Mr. Marzuq eventually won a settlement worth $50,000. A lawyer for T.J. Donuts, the owner of the Dunkin’ Donuts franchise, said the company disputed Mr. Marzuq’s claims and maintained “that he was properly classified as a manager.”Workers and their lawyers said employers exploited their desire to move up the ranks in order to hold down labor costs.“Some of us want a better opportunity, a better life for our families,” said Gonzalo Espinosa, who said that in 2019 he often worked 80 hours a week as the manager of a Jack in the Box in California but that he did not receive overtime pay. “They use our weakness for their advantage.”Mr. Espinosa said his salary of just over $30,000 was based on an hourly wage of about $16 for a 40-hour workweek, implying that his true hourly wage was closer to half that amount — and well below the state’s minimum wage. The franchise did not respond to requests for comment.The paper by Dr. Cohen and his co-authors includes evidence that companies that are financially strapped are more likely to misclassify regular workers as managers, and that this tactic is especially common in low-wage industries like retail, dining and janitorial services.Still, lawyers who bring such cases say the practice also occurs regularly in white-collar industries such as tech and banking.When companies are financially strapped or in low-wage industries like retail and fast food, they are more likely to misclassify regular workers as managers, a recent report found.Max Whittaker for The New York Times“They have a job title like relationship manager or personal banker, and they greet you, try to get you to open account,” said Justin Swartz, a partner at the firm Outten & Golden. “They’re not managers at all.”Mr. Swartz, who estimated that he had helped bring more than two dozen overtime cases against banks, said some involved a so-called branch manager inside a big-box store who was the only bank employee on site and largely performed the duties of a teller.The practice appears to have become more difficult to root out in recent years, as more employers have required workers to sign contracts with mandatory arbitration clauses that preclude lawsuits.Many of the cases “are not economically viable anymore,” said Mr. Swartz, citing the increased difficulty of bringing them individually through arbitration.Some lawyers said only an increase in the limit below which workers automatically receive overtime pay is likely to meaningfully rein in misclassification. With a higher cutoff, simply paying workers overtime is often cheaper than avoiding overtime costs by substantially increasing their pay and labeling them managers.“That’s why companies fought it so hard under Obama,” said Ms. Aaron, a partner at Winebrake & Santillo, alluding to a 2016 Labor Department rule raising the overtime limit to about $47,500 from about $23,500. A federal judge suspended the rule, arguing that the Obama administration lacked the authority to raise the salary limit by such a large amount.The Trump administration later adopted the current cutoff of about $35,500, and the Biden administration has indicated that it will propose raising the cutoff substantially this year. Business groups say such a change will not help many workers because employers are likely to lower base wages to offset overtime pay. More

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    Inflation Cooled Just Slightly, With Worrying Details

    WASHINGTON — Inflation has slowed from its painful 2022 peak but remains uncomfortably rapid, data released Tuesday showed, and the forces pushing prices higher are proving stubborn in ways that could make it difficult to wrestle cost increases back to the Federal Reserve’s goal.The Consumer Price Index climbed by 6.4 percent in January compared with a year earlier, faster than economists had forecast and only a slight slowdown from 6.5 percent in December. While the annual pace of increase has cooled from a peak of 9.1 percent in summer 2022, it remains more than three times as fast as was typical before the pandemic.And prices continued to increase rapidly on a monthly basis as a broad array of goods and services, including apparel, groceries, hotel rooms and rent, became more expensive. That was true even after stripping out volatile food and fuel costs.Taken as a whole, the data underlined that while the Federal Reserve has been receiving positive news that inflation is no longer accelerating relentlessly, it could be a long and bumpy road back to the 2 percent annual price gains that used to be normal. Prices for everyday purchases are still climbing at a pace that risks chipping away at economic security for many households.“We’re certainly down from the peak of inflation pressures last year, but we’re lingering at an elevated rate,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives. “The road back to 2 percent is going to take some time.”Stock prices sank in the hours after the report, and market expectations that the Fed will raise interest rates above 5 percent in the coming months increased slightly. Central bankers have already lifted borrowing costs from near zero a year ago to above 4.5 percent, a rapid-fire adjustment meant to slow consumer and business demand in a bid to wrestle price increases under control.Moderating price increases for goods and commodities have driven the overall inflation slowdown in recent months.Casey Steffens for The New York TimesBut the economy has so far held up in the face of the central bank’s campaign to slow it down. Growth did cool last year, with the rate-sensitive housing market pulling back and demand for big purchases like cars waning, but the job market has remained strong and wages are still climbing robustly.That could help to keep the economy chugging along into 2023. Consumption overall had shown signs of slowing meaningfully, but it may be poised for a comeback. Economists expect retail sales data scheduled for release on Wednesday to show that spending climbed 2 percent in January after falling 1.1 percent in December, based on estimates in a Bloomberg survey.Signs of continued economic momentum could combine with incoming price data to convince the Fed that it needs to do more to bring inflation fully under control, which could entail pushing rates higher than expected or leaving them elevated for longer. Central bankers have been warning that the process of wrangling cost increases might prove bumpy and difficult.Inflation F.A.Q.Card 1 of 5What is inflation? More