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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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    Less Turnover, Smaller Raises: Hot Job Market May Be Losing Its Sizzle

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    Unemployment is low, and hiring is strong. But there are signs that frenzied turnover and rapid wage growth are abating.Last year, Klaussner Home Furnishings was so desperate for workers that it began renting billboards near its headquarters in Asheboro, N.C., to advertise job openings. The steep competition for labor drove wages for employees on the furniture maker’s production floor up 12 to 20 percent. The company began offering $1,000 signing bonuses to sweeten the deal.“Consumer demand was through the roof,” said David Cybulski, Klaussner’s president and chief executive. “We just couldn’t get enough labor fast enough.”But in recent months, Mr. Cybulski has noticed that frenzy die down.Hiring for open positions has gotten easier, he said, and fewer Klaussner workers are leaving for other jobs. The company, which has about 1,100 employees, is testing performance rewards to keep workers happy rather than racing to increase wages. The $1,000 signing bonus ended in the spring.“No one is really chasing employees to the dollar anymore,” he said.By many measures, the labor market is still extraordinarily strong even as fears of a recession loom. The unemployment rate, which stood at 3.7 percent in August, remains near a five-decade low. There are twice as many job openings as unemployed workers available to fill them. Layoffs, despite some high-profile announcements in recent weeks, are close to a record low.But there are signs that the red-hot labor market may be coming off its boiling point.Major employers such as Walmart and Amazon have announced slowdowns in hiring; others, such as FedEx, have frozen hiring altogether.Americans in July quit their jobs at the lowest rate in more than a year, a sign that the period of rapid job switching, sometimes called the Great Resignation, may be nearing its end. Wage growth, which soared as companies competed for workers, has also slowed, particularly in industries like dining and travel where the job market was particularly hot last year.More broadly, many companies around the country say they are finding it less arduous to attract and retain employees — partly because many are paring their hiring plans, and partly because the pool of available workers has grown as more people come off the economy’s sidelines.The labor force grew by more than three-quarters of a million people in August, the biggest gain since the early months of the pandemic. Some executives expect hiring to keep getting easier as the economy slows and layoffs pick up.“Not that I wish ill on any people out there from a layoff perspective or whatever else, but I think there could be an opportunity for us to ramp some of that hiring over the coming months,” Eric Hart, then the chief financial officer at Expedia, told investors on the company’s earnings call in August.Taken together, those signals point to an economic environment in which employers may be regaining some of the leverage they ceded to workers during the pandemic months.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.August Jobs Report: Job growth slowed in August but stayed solid, suggesting that the labor market recovery remains resilient, even as companies pull back on hiring.Factory Jobs: American manufacturers have now added enough jobs to regain all that they shed during the pandemic — and then some.Missing Workers: The labor market appears hot, but the supply of labor has fallen short, holding back the economy. Here is why.Black Employment: Black workers saw wages and employment rates go up in the wake of the pandemic. But as the Federal Reserve tries to tame inflation, those gains could be eroded.That is bad news for workers, particularly those at the bottom of the pay ladder who have been able to take advantage of the hot labor market to demand higher pay, more flexible schedules and other benefits. With inflation still high, weaker wage growth will mean that more workers will find their standard of living slipping.But for employers — and for policymakers at the Federal Reserve — the calculation looks different. A modest cooling would be welcome after months in which employers struggled to find enough staff to meet strong demand, and in which rapid wage growth contributed to the fastest inflation in decades.Too pronounced a slowdown, however, could lead to a sharp rise in unemployment, which would almost certainly lead to a drop in consumer demand and create a new set of problems for employers.Leila and David Manshoory have struggled for months to recruit workers for their fast-growing skin care and beauty brand, Alleyoop. In recent weeks, however, that has begun to change. They have begun to get more applications from more qualified candidates, some of whom have been laid off by other e-commerce companies. And notably, applicants aren’t demanding the sky-high salaries they were last spring.“I think the tables are turning a little bit,” Mr. Manshoory said. “There are people who need to pay their bills and are realizing there might not be a million jobs out there.”Alleyoop, too, has pared its hiring plans somewhat in preparation for a possible recession. But not too much — Mr. Manshoory said he saw this as a moment to snap up talent that the three-year-old company might struggle to hire in a different economic environment.“You kind of want to lean in when other people are pulling back,” he said. “You just have more selection. There’s a lot of, unfortunately, talented people getting let go from really large companies.”The resilience of the labor market has surprised many economists, who expected companies to pull back on hiring as growth slowed and interest rates rose. Instead, employers have continued adding jobs at a rapid clip.Klaussner Home Furnishings, which has about 1,100 employees, is testing performance rewards to keep workers happy rather than racing to increase wages.Eamon Queeney for The New York Times“There are some signs in the labor market data that there’s been a bit of cooling since the beginning of the year, or even the spring, but it’s not a lot,” said Nick Bunker, director of North American economic research for the career site Indeed. “Maybe the temperature has ticked down a degree or two, but it’s still pretty high.”But Mr. Bunker said there was evidence that the frenzy that characterized the labor market over the past year and a half had begun to die down. Job openings have fallen steadily in Indeed’s data, which is more up to date than the government’s tally.And Mr. Bunker said the decline in voluntary quits was particularly notable because so much recent wage growth had come from workers moving between jobs in search of better pay.Recent research from economists at the Federal Reserve Banks of Dallas and St. Louis found that there had been a huge increase in poaching — companies hiring workers away from other jobs — during the recent hiring boom.If companies become less willing to recruit workers from competitors, and to pay the premium that doing so requires, or if workers become less likely to hop between jobs, that could lead wage growth to ease even if layoffs don’t pick up.There are hints that could be happening. A recent survey from another career site, ZipRecruiter, found that workers had become less confident in their ability to find a job and were putting more emphasis on finding a job they considered secure.“Workers and job seekers are feeling just a little bit less bold, a little bit more concerned about the future availability of jobs, a little bit more concerned about the stability of their own jobs,” said Julia Pollak, chief economist at ZipRecruiter.Some businesses, meanwhile, are becoming a bit less frantic to hire. A survey of small businesses from the National Federation of Independent Business found that while many employers still had open positions, fewer of them expected to fill those jobs in the next three months.More clues about the strength of the labor market could come in the upcoming months, the time of year when companies, including retailers, traditionally ramp up hiring for the holiday season. Walmart said in September that this year it would hire a fraction of the workers it did during the last holiday season.The signs of a cool-down extend even to leisure and hospitality, the sector where hiring challenges have been most acute. Openings in the sector have fallen sharply from the record levels of last year, and hourly earnings growth slowed to less than 9 percent in August from a rate of more than 16 percent last year.Until recently, staffing shortages at Biggby Coffee were so severe that many of the chain’s 300-plus stores had to close early some days, or in some cases not open at all. But while hiring remains a challenge, the pressure has begun to ease, said Mike McFall, the company’s co-founder and co-chief executive. One franchisee recently told him that 22 of his 25 locations were fully staffed and that only one was experiencing a severe shortage.A Biggby Coffee store in Sterling Heights, Mich. Until recently, staffing shortages at some locations were so severe that many of the chain’s 300-plus stores had to close early some days.Sarah Rice for The New York Times“We are definitely feeling the burden is lifting in terms of getting people to take the job,” Mr. McFall said. “We’re getting more applications, we’re getting more people through training now.”The shift is a welcome one for business owners like Mr. McFall. Franchisees have had to raise wages 50 percent or more to attract and retain workers, he said — a cost increase they have offset by raising prices.“The expectation by the consumer is that you are raising prices, and so if you don’t take advantage of that moment, you are going to be in a pickle,” he said, referring to the pressure to increase wages. “So you manage it by raising prices.”So far, Mr. McFall said, higher prices haven’t deterred customers. Still, he said, the period of severe staffing shortages is not without its costs. He has seen a loss in sales, as well as a loss of efficiency and experienced workers. That will take time to rebuild, he said.“When we were in crisis, it was all we were focused on,” he said. “So now that it feels like the crisis is mitigating, that it’s getting a little better, we can now begin to focus on the culture in the stores and try to build that up again.” More

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    New Inflation Developments Are Rattling Markets and Economists. Here’s Why.

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    Inflation is less about pandemic and war surprises and more about economic momentum. That could make the solution more painful.When inflation began to accelerate in 2021, price pressures were clearly tied to the pandemic: Companies couldn’t produce cars, couches and computer games fast enough to keep up with demand from homebound consumers amid supply chain disruptions.This year, Russia’s war in Ukraine sent fuel and food prices rocketing, exacerbating price pressures.But now, as those sources of inflation show early signs of fading, the question is how much overall price increases will abate. And the answer is likely to be driven in part by what happens in one crucial area: the labor market.Federal Reserve officials are laser-focused on job gains and wage growth as they quickly raise interest rates to constrain the economy and slow rapid price increases. Officials are convinced that they must sap the economy of some of its momentum to wrestle the worst inflation in four decades back down to their goal of 2 percent.The way they do that is by slowing spending, hiring and wage gains — and they do that by raising the costs of borrowing. So far, a pronounced cool-down is proving elusive, suggesting to economists and investors that the central bank may need to be even more aggressive in its efforts to temper growth and bring inflation back down.As data this week showed, prices continue to soar. And, while the job market has moderated somewhat, employers are still hiring at a solid clip and raising wages at the fastest pace in decades. That continued progress seems to be allowing consumers to keep spending, and it may give employers both the power and the motivation to increase their prices to cover their climbing labor costs.As inflationary forces chug along, economists said, the risk is rising that the Fed will clamp down on the economy so hard that America will be in for a rough landing — potentially one in which growth slumps and unemployment shoots higher.It is becoming more likely “that it won’t be possible to wring inflation out of this economy without a proper recession and higher unemployment,” said Krishna Guha, who heads the global policy and central bank strategy team at Evercore ISI and who has been forecasting that the Fed can cool inflation without causing an outright recession.Rising wages could become a more primary driver of higher prices.Hiroko Masuike/The New York TimesThe challenge for the Fed is that, more and more, price increases appear to be driven by long-lasting factors tied to the underlying economy, and less by one-off factors caused by the pandemic or the war in Ukraine.Consumer Price Index data from August released on Tuesday illustrated that point. Gas prices dropped sharply last month, which many economists expected would pull overall inflation down. They also thought that recent improvements in the supply chain would moderate price increases for goods. Used car costs, a major contributor to inflation last year, are now declining.Yet, in spite of those positive developments, quickly rising costs across a wide array of products and services helped to push prices higher on a monthly basis. Rent, furniture, meals at restaurants and visits to the dentist are all growing more expensive. Inflation climbed 8.3 percent on an annual basis, and picked up by 0.1 percent from the prior month.The data underscored that, even without extraordinary disruptions, so many products and services are now increasing in price that costs might continue ratcheting up. Core inflation, which strips out food and fuel costs to give a sense of underlying price trends, reaccelerated to 6.3 percent in August after easing to 5.9 percent in July.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    California Senate Passes Bill to Regulate Fast-Food Industry

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    If signed by Gov. Gavin Newsom, the measure would create a state council to establish minimum pay and safety conditions on an industrywide basis.The California State Senate passed a bill on Monday that could transform the way the service sector is regulated by creating a council to set wages and improve working conditions for fast-food workers.The measure, known as A.B. 257, passed by a vote of 21 to 12. The State Assembly had already approved a version of the measure, and it now requires the approval of Gov. Gavin Newsom, who has not indicated whether he will sign it. The bill was vehemently opposed by the fast-food industry.The bill could herald an important step toward sectoral bargaining, in which workers and employers negotiate compensation and working conditions on an industrywide basis, as opposed to enterprise bargaining, in which workers negotiate with individual companies at individual locations.“In my view, it’s one of the most significant pieces of state employment legislation that’s passed in a long time,” said Kate Andrias, a labor law expert at Columbia University. “It gives workers a formal seat at the table with employers to set standards across the industry that’s not limited to setting minimum wages.”While sectoral bargaining is common in Europe, it is rare in the United States, though certain industries, like auto manufacturing, have arrangements that approximate it. The California bill wouldn’t bring true sectoral bargaining — which involves workers negotiating directly with employers, instead of a government entity setting broad standards — but incorporates crucial elements of the model.The bill would set up a 10-member council that would include worker and employer representatives and two state officials, and that would review pay and safety standards across the restaurant industry.The council could issue health, safety and anti-discrimination regulations and set an industrywide minimum wage. The legislation caps the figure at $22 an hour next year, when the statewide minimum wage will be $15.50. The bill also requires annual cost-of-living adjustments for any new wage floor beginning in 2024.Restaurant chains with at least 100 locations nationwide would come under the council’s jurisdiction — including companies like Starbucks that own and operate their stores as well as franchisees of large companies like McDonald’s. Hundreds of thousands of workers in the state would be affected.The council would shut down after six years but could be reconvened by the Legislature.Mary Kay Henry, the president of the nearly two-million-member Service Employees International Union, which pushed for the legislation, said it was critical because of the challenges that workers have faced when trying to change policies by unionizing store by store.“The stores get closed or the franchise owner sells or the multinational pulls the lease for the real estate,” Ms. Henry said. Franchise industry officials say it is extremely rare to close a store in response to a union campaign. Starbucks recently closed several corporate-owned stores across the country where workers had unionized or were trying to unionize, citing safety concerns like crime, though the company also closed a number of nonunion stores for the same stated reasons. Industry officials argue that the bill will raise labor costs, and therefore menu prices, when inflation is already a widespread concern. A recent report by the Center for Economic Forecasting and Development at the University of California, Riverside, estimated that employers would pass along about one-third of any increase in labor compensation to consumers.“We are pulling the fire alarm in all states to wake our members up about what’s going on in California,” said Matthew Haller, the president of the International Franchise Association, an industry group that opposes the bill. “We are concerned about other states — the multiplier effect of something like this.”Ingrid Vilorio, who works at a Jack in the Box franchise near Oakland, Calif., and who pressed legislators to back the bill during several trips to Sacramento, the state capital, said she believed the measure would lead to improvements in safety — for example, through rules that require employers to quickly repair or replace broken equipment like grills and fryers, which can cause burns.Ms. Vilorio said she also hoped the council would crack down on problems like sexual harassment, wage theft and denial of paid sick leave. She said she and her co-workers went on strike last year to demand masks, hand sanitizer and the Covid-19 sick pay they were entitled to receive. Jack in the Box did not respond to a request for comment.Mr. Haller said state agencies were already authorized to crack down on employers who violate laws governing the payment of wages, safety, discrimination and harassment.“The state has the existing tools at its disposal,” Mr. Haller said. “They should be more fully funded rather than put a punitive target on a subsection of a sector.”Mr. Haller and other opponents have cited a critique by the state’s Department of Finance arguing that the bill “could lead to a fragmented regulatory and legal environment for employers” and “exacerbate existing delays” in enforcement by increasing the burden on agencies that oversee existing rules. The bill does not provide additional funding for enforcement agencies.David Weil, who under President Barack Obama oversaw the agency that enforces the federal minimum wage, said that, while funding is critical for labor regulators, the new council could benefit a broad swath of workers even without additional funding. For example, he said, raising the minimum wage for fast-food workers could increase wages for workers in other sectors, like retail, that compete with fast-food restaurants for labor.But Dr. Weil agreed that creating new standards in the fast-food industry could end up drawing resources away from the enforcement of labor and employment laws in other industries where workers may be equally vulnerable.Opponents managed to secure a number of concessions in the State Senate, such as preventing the council from creating sick-leave or paid-time-off benefits, or rules that restrict scheduling.The Senate also eliminated a so-called joint liability provision, which would have allowed regulators to hold parent companies like McDonald’s liable for violations by franchise owners. More

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    U.S. income growth slowed in July, and consumer spending barely grew.

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    Americans’ incomes rose more slowly last month — but, for once, those gains weren’t swallowed up by higher prices.Personal income, after taxes, rose 0.2 percent in July, the Commerce Department said Friday. That was slower than the 0.7 percent gain in June. But while the gains in June were more than offset by sharply higher prices, in July, Americans saw their inflation-adjusted incomes rise 0.3 percent as lower gas prices led to a respite from inflation.Consumer spending also cooled in July, as Americans pulled back on purchases of goods. Overall consumer spending rose 0.1 percent, the weakest showing since a decline in December and down from a 1 percent gain in June. Spending on services, which has rebounded sharply as the pandemic has ebbed, continued to rise, but more slowly than in prior months.The moderation in spending could be welcome news for policymakers at the Federal Reserve, who have been trying to tamp down demand without pushing the recovery into reverse.Income and spending, adjusted for inflation, are also among the indicators that economists at the National Bureau of Economic Research use to determine when a recession has begun. The gains in July are the latest evidence that the economy, though slowing, is not in a recession.Economists warn that the reprieve from inflation may prove temporary. But they say households should be able to keep spending as long as employers keep hiring and pay keeps rising. Income from wages and salaries rose 0.8 percent in July, the biggest gain since February. The Labor Department will provide data on employment and wages for August at the end of next week.Diane Swonk, chief economist at the accounting firm KPMG, said the underlying strength of the consumer economy reflected a handoff from the government, which helped support households and businesses with record spending earlier in the pandemic, to the private sector, which has roared back over the past year and a half.“We have seen the private sector really pick up that baton, which has been amazing,” she said. More

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    Starbucks Illegally Denied Raises to Union Members, Labor Board Says

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    Federal labor regulators have accused Starbucks of illegally discriminating against unionized employees by denying them wage and benefit increases that the company put in place for nonunion employees.In a complaint on Wednesday, a regional office of the National Labor Relations Board accused the company of breaking the law when its chief executive, Howard Schultz, “promised increased wages and benefits at U.S. stores if its employees rejected the union as their bargaining representative,” and when it withheld raises and benefits from unionized workers.The labor board is seeking, among other things, that affected employees be made whole for the denial of benefits and wage increases. It is also asking that Mr. Schultz read a notice to all employees informing them that some had been unlawfully denied benefits and pay increases and explaining their rights under federal labor law. Alternatively, a board official could read this material to employees in Mr. Schultz’s presence.The labor board’s case is scheduled for a hearing on Oct. 25 before an administrative law judge, unless Starbucks settles with the agency beforehand. Starbucks could appeal any ruling by an administrative judge to the full board.In a statement, Starbucks said that it was required under federal law to negotiate changes in wages and benefits with the union and that it was therefore not allowed to make such changes unilaterally, as it can in nonunion stores. “Wage and benefits are ‘mandatory’ subjects of the collective bargaining process,” the statement said.Workers United, the union representing the company’s newly organized workers, said the complaint affirmed its contention that Starbucks was discouraging union activity.“He claims to run a ‘different kind of company,’ yet in reality, Howard Schultz is simply a billionaire bully who is doing everything he can to crush workers’ rights,” Maggie Carter, a worker who helped unionize her store in Knoxville, Tenn., said in a statement.More than 225 out of roughly 9,000 corporate-owned Starbucks locations in the United States have voted to unionize since last fall.Mr. Schultz began indicating that the company would roll out new benefits, but only for nonunion workers, shortly after he began his third tour as the company’s chief executive in April.The next month, the company announced a series of new benefits — including additional career development opportunities, better tipping options and more sick time — but only for stores that hadn’t unionized or weren’t in the process of unionizing. The benefits were to begin in the coming months.The company unveiled wage increases as well, some of which had already been announced and which the company said would apply to all workers. But other increases were new and would apply only to nonunion workers.For example, according to Reggie Borges, a Starbucks spokesman, all employees stood to benefit from a companywide $15-an-hour minimum wage, but nonunion workers hired by May 2 would get a 3 percent raise if that proved higher than $15.The wage policy appears to have sown confusion, with some employees briefly receiving a pay increase that was then withdrawn. Colin Cochran, a worker at a store near Buffalo that initially voted to unionize and then voted against the union in a rerun election decided this month, provided pay stubs showing that his $16.28 hourly wage had increased to $16.77 the first week of August, when Starbucks began the pay increases nationwide. But Mr. Cochran’s pay stub for the second week of August showed his hourly pay dropping back to $16.28. (The union is challenging the election loss at this store.)Mr. Borges said that the reversion to the previous wage had resulted from an inadvertent error and that unionized stores would get wage increases in September.Workers involved in union campaigns at other Starbucks locations said the denial of pay and benefit increases to unionized stores had slowed their organizing efforts.Kylah Clay, a Starbucks worker in Boston who helped organize several stores in the area, said inquiries from employees at other stores who were interested in unionizing had dropped off substantially not long after the company’s pay and benefits announcement in May. But they picked up recently after the pay and many benefit changes took effect, she said. More

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    What Will Happen to Black Workers’ Gains if There’s a Recession?

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    Black unemployment fell quickly after the initial pandemic downturn. But as the Federal Reserve fights inflation, those gains could be eroded.Black Americans have been hired much more rapidly in the wake of the pandemic shutdowns than after previous recessions. But as the Federal Reserve tries to soften the labor market in a bid to tame inflation, economists worry that Black workers will bear the brunt of a slowdown — and that without federal aid to cushion the blow, the impact could be severe.Some 3.5 million Black workers lost or left their jobs in March and April 2020. In weeks, the unemployment rate for Black workers soared to 16.8 percent, the same as the peak after the 2008 financial crisis, while the rate for white workers topped out at 14.1 percent.Since then, the U.S. economy has experienced one of its fastest rebounds ever, one that has extended to workers of all races. The Black unemployment rate was 6 percent last month, just above the record low of late 2019. And in government data collected since the 1990s, wages for Black workers are rising at their fastest pace ever.Now policymakers at the Fed and in the White House face the challenge of fighting inflation without inducing a recession that would erode or reverse those workplace gains.Decades of research has found that workers from racial and ethnic minorities — along with those with other barriers to employment, such as disabilities, criminal records or low levels of education — are among the first laid off during a downturn and the last hired during a recovery.William Darity Jr., a Duke University professor who has studied racial gaps in employment, says the problem is that the only reliable tool the Fed uses to fight inflation — increasing interest rates — works in part by causing unemployment. Higher borrowing costs make consumers less likely to spend and employers less likely to invest, reducing pressure on prices. But that also reduces demand for workers, pushing joblessness up and wages down.“I don’t know that there’s any existing policy option that’s plausible that would not result in hurting some significant portion of the population,” Mr. Darity said. “Whether it’s inflation or it’s rising unemployment, there’s a disproportionate impact on Black workers.”In a paper published last month, Lawrence H. Summers, a former Treasury secretary and top economic adviser to Presidents Bill Clinton and Barack Obama, asserted with his co-authors that the Fed would need to allow the overall unemployment rate to rise to 5 percent or above — it is now 3.5 percent — to bring inflation under control. Since Black unemployment is typically about double that of white workers, that suggests that the rate for Black workers would approach or reach double digits.In an interview, Mr. Summers said that outcome would be regrettable and, to some extent, unavoidable.“But the alternative,” Mr. Summers argued — “simply pretending” the U.S. labor market can remain this hot — “is setting the stage for the mistakes we made in the 1970s, and ultimately for a far larger recession, to contain inflation.”The State of Jobs in the United StatesEmployment gains in July, which far surpassed expectations, show that the labor market is not slowing despite efforts by the Federal Reserve to cool the economy.July Jobs Report: U.S. employers added 528,000 jobs in the seventh month of the year. The unemployment rate was 3.5 percent, down from 3.6 percent in June.Slow Wage Growth: Pay has been rising rapidly for workers at the top and the bottom. But things haven’t been so positive for all professions — especially for pharmacists.Care Worker Shortages: A lack of child care and elder care options is forcing some women to limit their hours or has sidelined them altogether, hurting their career prospects.Downsides of a Hot Market: Students are forgoing degrees in favor of the attractive positions offered by employers desperate to hire. That could come back to haunt them.“These arguments have nothing to do with how much you care about unemployment, or how much you care about the unemployment of disadvantaged groups,” he continued. “They only have to do with technical judgment.”Many progressive economists have been sharply critical of that view, arguing that Black workers should not be the collateral damage in a war on inflation. William Spriggs, an economist at Howard University, cautioned against overstating the Fed’s ability to bring inflation under control — especially when inflation is being driven in part by global forces — and underestimating the potential damage from driving interest rates much higher.Black workers will suffer first under a Fed-induced recession, Mr. Spriggs said. When that happens, he added, job losses across the board tend to follow. “And so you pay attention, because that’s the canary in the coal mine,” he said.In a June 2020 essay in The Washington Post and an accompanying research paper, Jared Bernstein — now a top economic adviser to President Biden — laid out the increasingly popular argument that in light of this, the Fed “should consider targeting not the overall unemployment rate, but the Black rate.”Fed policy, he added, implicitly treats 4 percent unemployment as a long-term goal, but “because Black unemployment is two times the overall rate, targeting 4 percent for the overall economy means targeting 8 percent for blacks.”The Fed didn’t take Mr. Bernstein’s advice. But in the years leading up to the pandemic, Fed policymakers increasingly talked about the benefits of a strong labor market for racial and ethnic minorities, and cited it as a factor in their policy decisions.After Mr. Biden took office, he and his economic advisers pushed for a large government spending bill — which became the $1.9 trillion American Recovery Plan — in part on the grounds that it would avoid the painful slog that job seekers, particularly nonwhite workers, faced after the 2007-9 recession and would instead deliver a supercharged recovery.Federal pandemic relief provided a cushion for Ms. Jordan, at her home near Atlanta with her husband and children. Rita Harper for The New York Times“It’s been faster, more robust for African Americans than any other post-recessionary periods since at least the 1970s,” Cecilia Rouse, the chair of Mr. Biden’s Council of Economic Advisers, said in an interview. Black workers are receiving faster wage gains than other racial and ethnic groups, and have taken advantage of the strong job market to move into higher-paying industries and occupations, according to an analysis of government data by White House economists shared with The New York Times.Menyuan Jordan is among them. Ms. Jordan, who has a master’s degree in social work and was making a living training child care providers in February 2020, saw her livelihood upended when Covid-19 struck.“The money was based off face-to-face professional development that went to zero almost immediately overnight,” she said. “I couldn’t afford the rent.”But pandemic relief packages from the federal government helped cushion the blow of lost earnings. And by last winter, Ms. Jordan had landed a job as a mental health clinician near her home in Atlanta — one that offered training and paid roughly $13,000 more than her prepandemic role, which she estimates brought in $42,000 annually.Administration officials say they are optimistic that Black workers can continue to see higher wages and improving job opportunities even if the labor market cools. But Goldman Sachs analysts, echoing a common view, recently concluded that average wage gains for workers would need to fall much further to be consistent with the Fed’s inflation goals.Fed policymakers are still somewhat hopeful that they can bring down inflation without causing a recession or undoing the gains of the past two years, in part because of a hope that the labor market can slow down mainly through reductions in job openings rather than layoffs.Jerome H. Powell, the Fed chair, has made the case that only by bringing inflation under control can the central bank create a sustainably strong labor market that will benefit all workers.“We all want to get back to the kind of labor market we had before the pandemic,” Mr. Powell said in a news conference last month. “That’s not going to happen without restoring price stability.”Some voices in finance are calling for smaller and fewer rate increases, worried that the Fed is underestimating the ultimate impact of its actions to date. David Kelly, the chief global strategist for J.P. Morgan Asset Management, believes that inflation is set to fall considerably anyway — and that the central bank should exhibit greater patience, as remnants of pandemic government stimulus begin to vanish and household savings further dwindle.“The economy is basically treading water right now,” Mr. Kelly said, adding that officials “don’t need to put us into a recession just to show how tough they are on inflation.”Michelle Holder, a labor economist at John Jay College of Criminal Justice, similarly warned against the “statistical fatalism” that halting labor gains is the only way forward. Still, she said, she’s fully aware that under current policy, trade-offs between inflation and job creation are likely to endure, disproportionately hurting Black workers. Interest rate increases, she said, are the Fed’s primary tool — its hammer — and “a hammer sees everything as a nail.”Reflecting on a dinner she recently attended in Washington with “really high-level, all-white progressive economists,” Ms. Holder, who is Black, said there was a “resigned attitude” among many of her peers, who want positive near-term outcomes for people of color overall but remain “wedded to the use of mainstream tools” and ask, “What else can we do?”Mr. Darity, the Duke professor, argued that one solution would be policies that helped insulate workers from an economic downturn, like having the federal government guarantee a job to anyone who wants one. Some economists support less ambitious policies, such as expanded benefits to help people who lose jobs in a recession. But there is little prospect that Congress would adopt either approach, or come to the rescue again with large relief checks — especially given criticism from many Republicans, and some high-profile Democrats, that excessive aid in the pandemic contributed to inflation today.“The tragedy will be that our administration won’t be able to help the families or individuals that need it if another recession happens,” Ms. Holder said.Morgani Brown, 24, lives and works in Charlotte, N.C., and has experienced the modest yet meaningful improvements in job quality that many Black workers have since the initial pandemic recession. She left an aircraft cleaning job with Jetstream Ground Services at Charlotte Douglas International Airport last year because the $10-an-hour pay was underwhelming. But six months ago, the work had become more attractive.Morgani Brown returned to an employer she had left in Charlotte, N.C., when the hourly pay rose. Damola Akintunde for The New York Times“I’d seen that they were paying more, at $14,” she said, “so I went and applied for Jetstream again.” She remains frustrated with some work conditions, but said the situation had “ended up being better.”With rents rising, she saves money rooming with her boyfriend and another friend, both of whom work at an Amazon fulfillment center. Ms. Brown, who has a baby on the way, is aware that the e-commerce giant has recently cut back its work force. (An Amazon official noted on a recent earnings call that the company had “quickly transitioned from being understaffed to being overstaffed.”)Ms. Brown said she and her roommates hoped that their jobs could weather any downturn. But she has begun hearing more rumblings about people she knows being fired or laid off.“I’m not sure exactly why,” she said. More