U.S. GOVERNMENT PUBLISHING OFFICE

30–455 PDF WASHINGTON : 2019

GROWTH, OPPORTUNITY, AND CHANGE IN 

THE U.S. LABOR MARKET AND THE 

AMERICAN WORKFORCE: A REVIEW OF 

CURRENT DEVELOPMENTS, TRENDS, 

AND STATISTICS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH, 

EMPLOYMENT, LABOR, AND PENSIONS 

COMMITTEE ON EDUCATION 

AND THE WORKFORCE 

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD IN WASHINGTON, DC, JUNE 21, 2018 

Serial No. 115–22 

Printed for the use of the Committee on Education and the Workforce 

( 

Available via the World Wide Web: www.govinfo.gov 

or 

Committee address: http://edworkforce.house.gov 
(II) 

COMMITTEE ON EDUCATION AND THE WORKFORCE 

VIRGINIA FOXX, North Carolina, Chairwoman 

Joe Wilson, South Carolina 

Duncan Hunter, California 

David P. Roe, Tennessee 

Glenn ‘‘GT’’ Thompson, Pennsylvania 

Tim Walberg, Michigan 

Brett Guthrie, Kentucky 

Todd Rokita, Indiana 

Lou Barletta, Pennsylvania 

Luke Messer, Indiana 

Bradley Byrne, Alabama 

David Brat, Virginia 

Glenn Grothman, Wisconsin 

Elise Stefanik, New York 

Rick W. Allen, Georgia 

Jason Lewis, Minnesota 

Francis Rooney, Florida 

Tom Garrett, Jr., Virginia 

Lloyd K. Smucker, Pennsylvania 

A. Drew Ferguson, IV, Georgia 

Ron Estes, Kansas 

Karen Handel, Georgia 

Jim Banks, Indiana 

Robert C. ‘‘Bobby’’ Scott, Virginia 

Ranking Member 

Susan A. Davis, California 

Rau ́l M. Grijalva, Arizona 

Joe Courtney, Connecticut 

Marcia L. Fudge, Ohio 

Jared Polis, Colorado 

Gregorio Kilili Camacho Sablan, 

Northern Mariana Islands 

Frederica S. Wilson, Florida 

Suzanne Bonamici, Oregon 

Mark Takano, California 

Alma S. Adams, North Carolina 

Mark DeSaulnier, California 

Donald Norcross, New Jersey 

Lisa Blunt Rochester, Delaware 

Raja Krishnamoorthi, Illinois 

Carol Shea-Porter, New Hampshire 

Adriano Espaillat, New York 

Brandon Renz, Staff Director 

Denise Forte, Minority Staff Director 

SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS 

TIM WALBERG, Michigan, Chairman 

Joe Wilson, South Carolina 

David P. Roe, Tennessee 

Todd Rokita, Indiana 

Lou Barletta, Pennsylvania 

Rick W. Allen, Georgia 

Jason Lewis, Minnesota 

Francis Rooney, Florida 

Lloyd K. Smucker, Pennsylvania 

A. Drew Ferguson, IV, Georgia 

Ron Estes, Kansas 

Jim Banks, Indiana 

Gregorio Kilili Camacho Sablan, 

Northern Mariana Islands 

Ranking Member 

Frederica S. Wilson, Florida 

Donald Norcross, New Jersey 

Lisa Blunt Rochester, Delaware 

Carol Shea-Porter, New Hampshire 

Adriano Espaillat, New York 

Joe Courtney, Connecticut 

Marcia L. Fudge, Ohio 

Suzanne Bonamici, Oregon 
(III) 

C O N T E N T S 

Page 

Hearing held on June 21, 2018 ............................................................................... 1 

Statement of Members: 

Walberg, Hon. Tim, Chairman, Subcommittee on Health, Employment, 

Labor, and Pensions ..................................................................................... 1 

Prepared statement of ............................................................................... 2 

Wilson, Hon. Frederica S., a Representative in Congress from the State 

of Florida: ...................................................................................................... 3 

Prepared statement of ............................................................................... 5 

Statement of Witnesses: 

Farren, Dr. Michael, Research Fellow, Study of American Capitalism, 

Mercatus Center at George Mason University ........................................... 29 

Prepared statement of ............................................................................... 31 

Meyer, Mr. Jared, Senior Fellow, Foundation for Government Accountability ............................................................................................................. 53 

Prepared statement of ............................................................................... 55 

Moore, Mr. Stephen, Distinguished Visiting Fellow, Project for Economic 

Growth, The Heritage Foundation .............................................................. 8 

Prepared statement of ............................................................................... 17 

Spriggs, Dr. William, Professor of Economics, Howard University .............. 36 

Prepared statement of ............................................................................... 38 

Additional Submissions: 

Mr. Moore: 

Charts ......................................................................................................... 11 

Chairman Walberg: 

Prepared statement of Mercatus Center ................................................. 83 

Article: Mercatus On Policy ...................................................................... 88 

(1) 

GROWTH, OPPORTUNITY, AND CHANGE IN 

THE U.S. LABOR MARKET AND THE 

AMERICAN WORKFORCE: A REVIEW OF 

CURRENT DEVELOPMENTS, TRENDS, 

AND STATISTICS 

Thursday, June 21, 2018 

House of Representatives 

Committee on Education and the Workforce, 

Subcommittee on Health, Employment, Labor, and Pensions 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 10:05 a.m., in Room 

2175, Rayburn House Office Building. Hon. Tim Walberg [Chairman of the Subcommittee] presiding. 

Present: Representatives Walberg, Allen, Lewis, Estes, Banks, 

Wilson of Florida, Norcross, Blunt Rochester, Courtney, and Fudge. 

Also Present: Representatives Foxx and Scott. 

Staff Present: Marty Boughton, Deputy Press Secretary; Courtney Butcher, Director of Member Services and Coalitions; Michael 

Comer, Deputy Press Secretary; Rob Green, Director of Workforce 

Policy; Nancy Locke, Chief Clerk; John Martin, Workforce Policy 

Counsel; Kelley McNabb, Communications Director; James Mullen, 

Director of Information Technology; Alexis Murray, Professional 

Staff Member; Krisann Pearce, General Counsel; Benjamin Ridder, 

Legislative Assistant; Meredith Schellin, Deputy Press Secretary; 

Olivia Voslow, Legislative Assistant; Joseph Wheeler, Professional 

Staff Member; Lauren Williams, Professional Staff Member; 

Tylease Alli, Minority Clerk/Intern and Fellow Coordinator; 

Mishawn Freeman, Minority Staff Assistant; Ron Hira, Minority 

Labor Policy Fellow; Eunice Ikene, Minority Labor Policy Advisor; 

Stephanie Lalle, Minority Deputy Communications Director; Andre 

Lindsay, Minority Staff Assistant; Richard Miller, Director Labor 

Policy; Udochi Onwubiko, Minority Labor Policy Counsel; and 

Veronique Pluviose, Minority Staff Director. 

Chairman WALBERG. A quorum being present, the hearing will 

come to order. Good morning and welcome to today’s Subcommittee 

hearing. I would like to thank the members of the Subcommittee 

and our witnesses for being here today as we examine important 

and timely topics. Current trends in the U.S. labor market, their 

benefits for American workers, the Bureau of Labor Statistics—BLS—labor market economic information and methodologies. 
2 

On the 1st of June, BLS released its May 2018 Employment Situation Report, which detailed the most recent data on U.S. employment. The report found numerous encouraging developments in the 

American economy and workforce, including improvements to rates 

of unemployment, job growth, and wage growth. 

According to the report, the unemployment is down to 3.8 percent, the lowest rate of unemployment in nearly two decades. Since 

May 2017, the total number of unemployed workers has dropped by 

772,000, to 6.1 million people. And there has been a 28.6 percent 

drop in individuals experiencing long-term unemployment. 

As unemployment has fallen, the number of new jobs available 

across the country has risen. Since February 2017, a month after 

President Trump was sworn into office, the U.S. economy has 

added nearly 3 million jobs nationwide. In particular, health care, 

construction, manufacturing, retail trade, and mining have all experienced particularly robust job growth. This job upsurge has contributed to one of the most outstanding and astounding developments yet. 

For the very first time in BLS reporting history, the number of 

job seekers, 6.3 million Americans, has been eclipsed by the number of available jobs, 6.7 million job openings nationwide. We know 

that in addition to a strong job market, wage growth can help families achieve financial independence and security. According to the 

report, the workforce has experienced a rise in wages with average 

hourly earnings increasing by 71 cents over the last 12-month period. Much of this growth can be attributed to tax reform as well 

as efforts by Congress and President Trump to rein in regulatory 

burdens. 

The Tax Cuts and Jobs Act, which House Republicans delivered 

last year and President Trump signed into law in December, 2017, 

has lowered taxes for millions of Americans. Ninety percent of 

workers are seeing more in their take-home pay thanks to tax reform and the law has helped to spur powerful economic growth 

across the country. 

Strengthening the workforce and adding more jobs to the U.S. 

economy have been top priorities for House Republicans and the 

Trump administration. And tax reform has delivered bigger paychecks and greater opportunities for more Americans. 

Today’s hearing presents an opportunity to delve into BLS’s most 

recent information on the U.S. labor market. It recently published 

data on workers engaging in contingent and alternative forms of 

work and to gain a better understanding of BLS products and data 

to ensure we, as policy makers, and the public at large can best 

utilize this information. I look forward to hearing from our panel 

of witnesses and from other members of the Subcommittee today 

as we talk about these developments and ways to promote even 

greater growth for more American employers and workers. 

I now yield to today’s—I yield to today’s Subcommittee Ranking 

Member, Representative Wilson, for her opening remarks. 

[The statement of Chairman Walberg follows:] 

Prepared Statement of Hon. Tim Walberg, Chairman, Subcommittee on 

Health, Employment, Labor, and Pensions 

Good morning, and welcome to today’s subcommittee hearing. I would like to 

thank members of the subcommittee and our witnesses for being here today as we 
3 

examine important and timely topics – current trends in the U.S. labor market, 

their benefits for American workers, and a review of the Bureau of Labor Statistics’ 

(BLS) labor market economic information and methodologies. 

On the first of June, BLS released its May 2018 Employment Situation Report, 

which detailed the most recent data on U.S. employment. The report found numerous encouraging developments in the American economy and workforce, including 

improvements to rates of unemployment, job growth, and wage growth. 

According to the report, unemployment is down to 3.8 percent—the lowest rate 

of unemployment in nearly two decades. Since May 2017, the total number of unemployed workers has dropped by 772,000 to 6.1 million people, and there has been 

a 28.6 percent drop in individuals experiencing long-term unemployment. 

As unemployment has fallen, the number of new jobs available across the country 

has risen. Since February 2017, the month after President Trump was sworn into 

office, the U.S. economy has added nearly 3 million jobs nationwide. In particular, 

health care, construction, manufacturing, retail trade, and mining having all experienced particularly robust job growth. 

This job upsurge has contributed to one of the most astounding developments yet: 

for the very first time in BLS reporting history, the number of job seekers – 6.3 million Americans – has been eclipsed by the number of available jobs – 6.7 million 

job openings nationwide. 

We know that in addition to a strong job market, wage growth can help families 

achieve financial independence and security. According to the report, the workforce 

has experienced a rise in wages, with average hourly earnings increasing by 71 

cents over the last 12-month period. Much of this 

growth can be attributed to tax reform, as well as efforts by Congress and President Trump to rein in regulatory burdens. 

The Tax Cuts and Jobs Act, which House Republicans delivered last year and 

President Trump signed into law in December 2017, has lowered taxes for millions 

of Americans. Ninety percent of workers are seeing more of their take-home pay 

thanks to tax reform, and the law has helped to spur powerful economic growth 

across the country. Strengthening the workforce and adding more jobs to the U.S. 

economy have been top priorities for House Republicans and the Trump administration, and tax reform has delivered bigger paychecks and greater opportunities to 

more Americans. 

Today’s hearing presents an opportunity to delve into BLS’s most recent information on the U.S. labor market, its recently published data on workers engaging in 

contingent and alternative forms of work, and to gain a better a understanding of 

BLS products and data to ensure we, as policymakers, and the public at-large can 

best utilize this information. 

I look forward to hearing from our panel of witnesses and from other members 

of the subcommittee today as we talk about these developments and ways to promote even greater growth for more American employers and workers. 

Ms. WILSON of Florida. I want to thank Chairman Walberg for 

holding this hearing on current developments and trends in the 

U.S. labor market and the American workforce. 

Wage stagnation and inequality remain a burden on workers and 

a drag on the American economy. The top-level labor market indicators have all been moving in a positive direction since the Obama 

administration rescued us from the depths of the Great Recession. 

The number of jobs has steadily increased over the past seven 

years with more than 18 million jobs added. The national unemployment rate has declined from 10 percent in 2009 to 3.8 percent 

now. However, those positive numbers have not translated into 

higher wages. One key reason—for this is that link between pay 

and rising productivity is broken. From 1973 to 2016, the typical 

worker saw an increase in wages of just 13 percent despite overall 

productivity rising almost 75 percent. Between 1979 and 2016, the 

top 1 percent of earners saw nearly 150 percent cumulative gains 

and annual wages almost four times faster than average wage 

growth. 
4 

Wage stagnation has become worse under this administration. As 

you can see from this chart, President Trump inherited an economy 

that was beginning to show signs of modest wage growth. See the 

uptick between 2012 and 2017 on the left side. 

However, since President Trump took office, wages have been 

mostly flat. Over the last year, the average American has not gotten ahead. You can see how the trend lines have flattened out in 

the chart. Growth and average hourly earnings on an inflation, inflation adjusted basis was zero. And in the case of production and 

non-supervisory workers who represent four fifths of private employed Americans, these groups actually lost ground over the last 

year as their real average hourly earnings have fallen. 

These wage trends are more than just a line on the chart. This 

is a real blow to workers across the country who have been working hard and struggling to get by while healthcare and other costs 

go up. 

The tax cut has further exacerbated income inequality. According 

to the Tax Policy Center, by 2027 the top 1 percent of households 

will receive 83 percent of the benefits from their $1.8 trillion tax 

scam. Proponents claim that this bill would boost workers’ wages 

but we can see that since the tax bill was enacted, inflation adjusted wage growth has been zero. Meanwhile, wealthy corporations are on track to spend a record $1 trillion of this massive 

windfall from the Republican tax scam on dividends, and stock 

buybacks that benefit shareholders and executives. 

We know some of the reasons why workers’ wages are stagnant 

and income inequality continues to grow. For example, Congress 

and the administration have failed to update federal standards for 

the minimum wage and overtime. In addition, Congress has failed 

to strengthen workers’ rights to collectively bargain for better 

wages and the administration has appointed officials who are aggressively undermining the limited protections that do exist. 

Next week marks the 80th anniversary of the Fair Labor Standards Act. Landmark legislation that provided millions of working 

people with protection from substandard wages. In the absence of 

federal action, 18 states raised their minimum wage at the beginning of this year. Earlier this week, voters in the District of Columbia joined eight other states in phasing out the minimum wage for 

tipped workers. Yet many states have failed to act. 

And in Miami, where I live, legislation that would have provided 

many workers with a minimum wage of $13 an hour was vetoed 

by the mayor. That’s why we must act at the federal level to boost 

the minimum wage. Committee Democrats stand ready to pass 

policies that boost wages and combat income inequality. We should 

pass the Raise the Wage Act, H.R. 15, a bill to increase the minimum wage to $15 per hour by 2024 giving more than 41 million 

Americans a pay increase. We should enact the Restoring Overtime 

Pay Act, H.R. 4505, which codifies the Obama administration 2016 

overtime rule. The Trump Administration’s abandonment of this 

rule cost low and middle income salaried workers 1.2 billion per 

year in lost wages. 

Committee Democrats also support the WAGE Act, H.R. 4548, 

legislation to improve workers’ ability to bargain for better wages 

by strengthening workers’ rights to join a union free from retalia-
5 

tion, establish meaningful deterrents for unscrupulous employers 

who interfere with their, with these rights. 

I hope that we can have a serious discussion about these policies 

and how we can combat decades-long wage stagnation and income 

inequality. I thank the witnesses for joining us here today and I 

look forward to hearing their testimony. I yield back the balance 

of my time. 

[The statement of Ms. Wilson follows:] 

Prepared Statement of Hon. Frederica S. Wilson, a Representative in 

Congress from the state of Florida 

I want to thank Chairman Walberg for holding this hearing on current developments and trends in the U.S. labor market and the American workforce. 

Wage stagnation and inequality remain a burden on workers and a drag on the 

American economy. The top-level labor market indicators have all been moving in 

a positive direction since the Obama administration rescued us from the depths of 

the Great Recession. The number of jobs has steadily increased for over the past 

7 years, with more than 18 million jobs added. The national unemployment rate has 

declined from 10 percent in 2009 to 3.8 percent now. 

However, those positive numbers have not translated into higher wages. 

One key reason for this is that the link between pay and rising productivity is 

broken. From 1973 to 2016, the typical worker saw an increase in wages of just 13 

percent, despite overall productivity rising almost 75 percent. Between 1979 and 

2016, the top one percent of earners saw nearly 150 percent cumulative gains in 

annual wages—almost four times faster than average wage growth. 

Wage stagnation has become worse under this administration. As you can see 

from this CHART, President Trump inherited an economy that was beginning to 

show signs of modest wage growth – see the uptick between 2012 and 2017 on the 

left side. However, since President Trump took office, wages have been mostly flat. 

Over the last year, the average American has not gotten ahead. You can see how 

the trend lines have flattened out in the CHART— growth in average hourly earnings on an inflation adjusted basis was zero! And in the case of production and nonsupervisory workers, who represent four-fifths of privately employed Americans, 

these groups actually lost ground over the last year, as their real average hourly 

earnings have fallen. 

These wage trends are more than just a line on the chart. This is a real blow to 

workers across the country, who have been working hard and struggling to get by 

while health care and other costs go up. 

The tax cut has further exacerbated income inequality. According to the Tax Policy Center, by 2027, the top 1 percent of households will receive 83 percent of the 

benefits from their $1.8 trillion tax scam. The proponents claimed that this bill 

would boost workers’ wages, but we can see that since the tax bill was enacted, inflation adjusted wage growth has been zero. Meanwhile, wealthy corporations are 

on track to spend a record $1 trillion of this massive windfall from the Republican 

tax scam on dividends and stock buybacks that benefits shareholders and executives. 

We know some of the reasons why workers’ wages are stagnant and income inequality continues to grow. For example, Congress and the Administration have 

failed to update federal standards for the minimum wage and overtime. In addition, 

Congress has failed to strengthen workers’ rights 

to collectively bargain for better wages, and the Administration has appointed officials who are aggressively undermining the limited protections that do exist. 

Next week marks the 80th anniversary of the Fair Labor Standards Act, landmark legislation that provided millions of working people with protection from substandard wages. In the absence of federal action, eighteen states raised their minimum wage at the beginning of this year. Earlier this week, voters in the District 

of Columbia joined 8 other states in phasing out the subminimum wage for tipped 

workers. Yet many states have failed to act, and in Miami, legislation that would 

have provided many workers with a minimum wage of $13 an hour was vetoed. 

That’s why we must act at the federal level to boost the minimum wage. 

Committee Democrats stand ready to pass polices that boost wages and combat 

income inequality. We should pass the Raise the Wage Act (H.R. 15), a bill to increase the minimum wage to $15.00 per hour by 2024, giving more than 41 million 

Americans a pay increase. We should enact the Restoring Overtime Pay Act, H.R. 

4505, which codifies the Obama administration’s 2016 overtime rule. The Trump ad-
6 

ministration’s abandonment of this rule costs low and middle income salaried workers $1.2 billion per year in lost wages. 

Committee Democrats also support the WAGE Act, H.R. 4548, legislation to improve workers’ ability to bargain for better wages by strengthening workers’ rights 

to join a union free from retaliation and establish meaningful deterrents for unscrupulous employers who interfere with these rights. 

I hope that we can have a serious discussion about these policies and how we can 

combat decades-long wage stagnation and income inequality. 

I thank the witnesses for joining us today and look forward to hearing their testimony. I yield back the balance of my time. 
$10.90 

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*1982 -1984 Constant Dollars 

SOURCE: Bureau of Labor Statistics 

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Chairman WALBERG. I thank the gentlelady. Pursuant to Committee rule 7(c), all members will be permitted to submit written 

statements to be included in the permanent hearing record and 

without objection, the hearing record will remain open for 14 days 

to allow such statements and other extraneous material referenced 

during the hearings to be submitted for the official hearing record. 

It is now my pleasure to introduce our distinguished witnesses. 

Mr. Stephen Moore is a Distinguished Visiting Fellow with the 

Project for Economic Growth at The Heritage Foundation Institute 

for Economic Freedom and Opportunity. Welcome. 

Mr. Michael Farren, is a Research Fellow with the Project for the 

Study of American Capitalism at the Mercatus Center at George 

Mason University. Welcome. 

Dr. William Spriggs is a Professor of Economics at Howard University and is testifying on behalf of the AFL–CIO. Welcome. 

And finally, Mr. Jared Meyer is a Senior Fellow at the Foundation for Government Accountability. Welcome to all of you. 

I will now ask our witnesses to raise your right hand. 

[Witnesses sworn.] 

Chairman WALBERG. Thank you. Let the record reflect the witnesses all answered in the affirmative. Before I recognize you to 

provide your testimony let me just briefly remind you, I think all 

of you know the lighting system there. Just like on the highways, 

green, keep on going in your five-minute testimony. When you see 

yellow be prepared to stop, you have a minute left, and when red 

hits, conclude your remarks as quickly as possible. We would appreciate that. And the same will be true for our committee as we 

have the opportunity to ask questions. 

And so now I would recognize Mr. Farren first for—I am just 

reading as this was put here. Let’s look down there and read directly. Mr. Moore, starting from the left here and moving. We recognize you and thank you. 

TESTIMONY OF STEPHEN MOORE, DISTINGUISHED VISITING 

FELLOW, PROJECT FOR ECONOMIC GROWTH, THE HERITAGE FOUNDATION 

Mr. MOORE. Thank you, Mr. Chairman. I appreciate the opportunity to do this. I was thinking as I was preparing this testimony 

that I was in this room 10 years ago when things weren’t very good 

for the labor force and I have been doing this for a long time. I 

have been in this business 30 years. I am happy to report that the 

state of the American job market is as healthy as it has been probably in at least 20 years and maybe in 30 years. So it is good to 

report some really positive news. 

And we all know about the reduction in the unemployment rate, 

that it has hit—by the way, full employment. Economists have generally defined full employment as four to four and a half percent 

so when you have a 3.8 percent unemployment rate that means you 

have a labor shortage and that’s a good problem for a country to 

have. We—according to the latest labor department report, there 

are about 5 million more jobs than there are people to fill them. 

And by the way, I think that Congresswoman Wilson really 

raised the most important challenge we have right now is now how 
9 

do we get the wages up? Because boy, do we have the jobs. And 

so that is the challenge. 

But I thought I would just walk you through a few of the trends 

that are going on. I don’t know if we can put these up on the 

screen. But I just thought I would show you just a couple of quick 

things. 

Number one, this relates to what Congresswoman Wilson was 

talking about, about how do we get the wages up? I was one of the 

architects of the Trump tax plan. I worked very closely with my 

friend Larry Kudlow who is now the National Economic Council 

Chairman as a senior economic advisor to Trump, and we, I just 

wanted to make it very clear to all of you that the intention of that 

bill from the very first day we started, was not to help rich people. 

We love rich people. We want everybody to get rich in this country 

but that was not our intention. 

From the very first day we started working with Donald Trump 

about this is how do we get middle class wages up because Congresswoman Wilson is exactly right. We just have seen stagnation 

in middle income for at least the last 10 years and our goal was 

bring that number up. 

We have created the jobs. I think there is no question that the 

tax bill has been a job creator, but Ms. Wilson is right that we 

haven’t yet seen the wage growth and that is the big challenge. 

And the reason I show this chart is we do believe that the way you 

bring wages up is to increase the productivity of American workers 

and to increase investment by business. 

When businesses invest that’s when you get higher wages. You’re 

right, we haven’t seen. It’s too early to tell whether that effect is 

going to happen, but we are very hopeful that because you can see 

there is a very high correlation between the amount that businesses invest and the amount that wages go up. 

The next chart just shows you the unemployment data and I 

think, you know, you are all familiar with this. I just thought that 

one of the interesting things is that the U6 number which includes 

people who are forced into part-time jobs because they can’t find 

a full-time job or people who are just discouraged workers, that 

number has fallen a lot as well. And I think that is one of the most 

important indicators of health of the labor force. 

The next chart is, this is one of the most important ones. The big 

challenge that I see for your committee in terms of, you know, continuing with the healthy economy but also making sure that the 

gains are shared by everyone, is how do we get more people into 

the workforce? This is a problem that started, you know, with the 

recession and it still hasn’t been cured, which is too many people 

are sitting on the sidelines and are not in the labor force. And what 

is disturbing about this is that most people don’t understand this. 

Yes, it is obviously true that we have, you know, 10,000 people retiring every day. baby boomers are retiring and that is a challenge. 

But the big problem, if you look at this chart, is that actually older 

people are working more. We have actually increased the number 

of people or the percentage of people by age over 55 that are working. 

But look at the bottom, look at the young people. This is a big, 

big problem right now that Americans between the age of 16 and 
10 

25 are working less. And I am a big believer, I think the statistics 

are very clear on this that the—your future earnings are very related to when you start working. 

So someone who starts working at age 16 is a lot more likely to 

be successful later in life than someone who starts working at 20 

or 22 or 24. We do a real disservice when we have policies that discourage young people from working. And the good news is for 

young people the jobs are out there, we just have to get them into 

those jobs. So that’s an important one and I think there is one 

more chart I wanted to show. And this has to do with the minimum 

wage issue. 

And look, I’m not—I want the highest wages for American workers. I completely share what Ms. Wilson was saying. We need to 

raise wages. I just reject the idea that raising the minimum wage 

is a very good way of doing that. And I would submit to you if 

there were going to be more increases in the minimum wage, lets 

at least think about a policy that creates a teenage minimum wage 

that would be, you know, six or seven dollars an hour so you can 

get those young people into the workforce. It is one of the most important things we can do for future earnings and future employment. Thank you. 
11 

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~ ~ 0 ~ ~ ~ 0 0 0 0 

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N 

> 

.... 

til 

::s 

c: 

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u 

c: 

'iii 

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t>.O 

; -10.0% 

.t: 

u 

-

c: 

Cll 

u 

-20.0% -30.0% 

-40.0% 

Changes in Labor Force Participation since January 2000 

55 yrs and ol

20- 24 yrs, -9.1% 
14 

a3eM WOW!U!II\IIe<IH JOJ an1e/\ xapu1 

0 0 0 0 U) <t N 0 0 0 0 0 rl rl rl rl 00 U) <t N 0 

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0 0 o' 0 0 0 0 0 0 0 0 0 U) Ll) <t (Y) N rl 

sJeuoa GOOl pau1e4:> JO suO!IJ!S*% 
40.00% 

35.00% 

30.00% 

25.00% 20.00% 

15.00% 

10.00% 

5.00% 

0.00% 

Teen labor Force in High vs. low Minimum Wage States, 

2009-2013 

Teen LFPR Teen Unemployment 

$8/

Ill Fed
16 

[The statement of Mr. Moore follows:] 
17 

Testimony 

Stephen Moore 

Senior fellow in economics at the Heritage Foundation 

Before the House Committee on Education and the Workforce 

June 21,2018 

Trends in the U.S. Labor Market and Their Impact on Economic Growth 
18 

My name is Stephen Moore and l am a senior fellow in economics at the Heritage 

Foundation and a former Trump senior economic campaign advisor. In compliance with the 

Truth in Testimony rules, l wish to report that neither I nor the Heritage Foundation take any 

federal, state or local government funds. 

ECONOMY BOOMING 

I am happy to report that the economic situation today in the United States is in many 

ways healthier than it has been in nearly two decades. The latest forecast from the Atlanta 

Federal Reserve Bank is that economic growth will exceed 4% in the second quarter of2018 and 

may reach 5%. We haven't had growth that high in at least 15 years. The outlook for growth is 

strong for at least the next eighteen months. Tax cuts and deregulation policies have had a 

salutary effect on employment and growth. 

This growth spurt has created a very tight labor market. Bureau of Labor Statistics data 

tell us that today there are nearly 7 million jobs that are unfilled and fewer than that number of 

Americans looking for work to fill them. We are, in short, near full employment (4% 

unemployment rate), as economists conventionally measure things. 

I served as a senior economic advisor to the Trump campaign and helped draft the Trump 

tax plan with my colleague Larry Kudlow, now Donald Trump's National Economic Council 

chairman. Our mission was to help design policies that would get the U.S. economy back to a 

sustained 3 to 4% growth path and to help raise middle class wages and salaries, which have 

been flat since 2000. 

Many economists, such as Larry Summers, a former chief economist for President 

Obama, and Nobel-prize winner Paul Krugman, have argued that 3 to 4% growth will be 

impossible to achieve and that "'secular stagnation" will condemn America to at best 2% growth 

for the foreseeable future. 

That's clearly wrong. We are already at three percent growth, but the central challenges 

to sustaining and accelerating that growth rate is I) increasing the productivity of the workforce, 

which will raise wages, and 2) incentivizing more working-age Americans, who are sitting on the 

sidelines to enter the workforce. 

The Trump tax cut will help with that first goal. Worker productivity is a function of 

capital investment. Three features of the Trump tax cut- the new 21% corporate tax rate, the 

I 0% tax on most repatriated capital brought back to the United States, and the immediate 

expensing for capital purchases- encourage business capital investment. The rate of business 

investment has risen markedly over the past two years, more than 30%. The attached chart 

shows that business investment is about 99% correlated with higher wages over time. 
19 

99% Correlation Between Business Investment 

and Wages 

10,000 

9,000 

8,000 

7,000 

6,000 

5,000 

4,000 

3,000 

2,000 

1,000 

0 

,, ~"'"Gross domestic income: wages and salaries 

MINOR!TfES HAVE BENEFITTED THE MOST 

3,000 ~ 

E "' 

2,500 ~ 

> 

2,000 ~ ~ 

"'" x= 

1,500 ~ ~ ·;:; 0 

c "' 1,000 ~ ~ 

~::s 500 "- 0 

" ,!!! 

"' 0 

.~ 

t'i: 

Private nonresidential fixed investment 

The black and Hispanic unemployment rates have come down the most. For both blacks 

and Hispanics the unemployment rates hit an all-time recorded low in May of20!8. This 

suggests that the expansion of the last 18 months has benefited those at the bottom of the income 

ladder, not just those at the top. 
20 

Record Minority Unemployment Rates 

25.0 

20.0 

15.0 

10.0 

5.0 

0.0 N M ..,., ,... "' 0 N M ..,., ,... "" 0 N M ..,., ,... "' 0 N M "' ,... "' ~ ~ M "' ,... ,... r;- ,... ,... ,... "' "' "? "' "' "? "' "' 'l' 'l' "' 'l' ~ 0 

~ 9 9 9 rl rl rl 

~ c. > c 6. > ~ c. > c c. > ~ c. > 

~ c. c > c: a. > c 6. > 

a; :::: "' .!!; "' "' "' "' .!!; "' ~ "' "' "' ~ .!!; a; "' .!!; a; ~ .!!; "' ~ ~ "' :::: "' :::: "' "' 2 "' :::: "' ~·····~Black Unemployment Rate ~··Hispanic Unemployment Rate 

More good news is that we have seen an increase in the black labor force participation 

rate. This is a sign of economic health for minorities because the percentage of blacks outside 

the labor force soared during the 2008-09 recession and stayed high through the early stages of 

the recovery. Minority household incomes actually fell from 2009-!4, according to Census 

Bureau data. 

BLUE COLLAR JOBS COMING BACK 

President Trump made a priority bringing back middle-class jobs especially in Midwestern 

states where the recovery was tepid at best. The chart below shows the turnaround in three major 

areas of blue-collar, middle class jobs where employment had continued to decline or lag behind 

other industries. These are manufacturing, mining and construction. Between November 2016 

and May 2018, the number of new jobs in these industries has dramatically increased, with a net 

gain of almost 800,000 jobs. 
21 

X 

114,0 

112,0 

110,0 

108,0 

~ 106.0 

-" 104.0 

102,0 

100,0 

98.0 

Employment Increases Since Election 

,_,,~,Mining & Logging ,,,,,,Construction Manufacturing 

LABOR FORCE PARTICIPATION STILL WAY TOO LOW 

The major issue confronting this Committee is: How do we get more Americans who 

could and should be working, into the labor force? In 2015, we reached an unhealthy milestone 

with just under I 00 million Americans over the age of 16 out of the workforce. That number has 

dropped to closer to 95 million outside the workforce, but is still way too high to maximize our 

growth potential. The chart below shows the official "headline" unemployment rate, with the U6 rate, which includes discouraged workers and those who are in part time jobs but want a full 

time job. It also shows the differential between these two rates. 

The U6 rate went up much faster than the official unemployment rate during the 

recession and the slow recovery. But the U6 rate is still around 8% and there is room for 

improvement in bringing this number down. The chart below shows the good news that the gap 

between the U6 and headline unemployment rate (U3) has fallen from as high as 7.5% under 

Obama to about 4% today. Not only are we creating more jobs, but more full time jobs that pay 

a full time salary. 
22 

The Truth Behind Employment Data 1994-2018 

18.0 

16.0 

14.0 

12.0 

10.0 

8.0 

6.0 

4.0 

2.0 

0.0 ,. ,. "' "' " " 00 

"' 

~ B ~ "' "' 0. "' "' "' 0 <( .& g ~ 

"' "' <i 

<( 

0 0 ,.., N M M " 0 £ 9 9 0 £ 9 i: 

~ 0 ~ <( 

0. ~ 0 ~ 

U6 Unemployment 

U6-U3 Unemployment 

WHERE DID ALL THE WORKERS GO? 

"' "' 0 0 

<( 

<i ~ "' " 00 "' "' :::; ,.., :::; :::; 9 9 9 0 9 ,..; 

g ~ 0. ~ g ~ 0. ~ t <( <( 0 

·• U3 Unemployment 

U6-U3 Historical Average 

M 

'";' " '";' "' "' ,..; 

~ 0. i: B <( ~ 0 

"' .... 00 

'";' ,..; ,..; 

~ <i i: <( ~ 

This presents a conundrum. In the U.S. today, we still have very high numbers of 

working-age Americans out of the labor force at the same time we have businesses desperately 

trying to tind workers. For example, the Washington Post reported in April that in some areas of 

the country employers are offering signing bonuses of up to $25,000 for blue collar workers. 

According to the article: 

BNSF is <<fJering something rare in hlue-colfar America: signing 

bonuses up to 525.000 for hourly workers, including electricians, 

boilermakers and pipefitters. 

"We want to meet our customers· needs. and we're going to do 

what we need to do to hire for our company." said Amy Casas, the 

railroad's director of corporate comnlzmications. 

The American Transportation Research Institute estimated recently that there were about 

60,000 trucker jobs that could be filled tomorrow if workers would take these jobs: 

"We've prohahly never had a situation/ike we have today, where 

the demand ffbr workers] is strong and capacity is constrained," 
23 

says Bob Costello, chief economist of the American Trucking 

Associations (ATA). 

For skilled and reliable mechanics, welders, engineers, electricians, plumbers, computer 

technicians and nurses, jobs are plentiful. If you're good at a trade and are a reliable worker, in 

most areas of the country, you can often find a job in 48 hours. 

When Wal-Mart announced at the start of the year that starting wages for many workers 

would rise to $11 an hour- well above the federal legal minimum -they weren't being 

humanitarians. They were responding to a tightening labor market. Costco, another major 

employer has raised starter wages to attract and retain workers that are increasingly hard to find. 

Where did all the workers go? The labor force participation rate for those 16 +dropped 

from 65.8% at the start of the Obama presidency to just 62.9% at the end of the Obama 

presidency and is now just creeping up again. 

This is partially explained by baby boomers retiring at the pace of nearly I 0,000 a day. 

But this excuse masks the real and acute problem affEcting our economy. We've known for 

decades that some 75 million baby boomers would be retiring in the first two decades of this new 

century. But if we examine the age-adjusted retirement ages, there is good news with baby 

boomers. Their age-adjusted labor force participation rate has INCREASED. They arc MORE 

likely to be working past the age of 65 than previous cohorts. 

WE NEED MORE YOUNG AMERICANS WORKING 

The largest reduction in the workforce has been among the millennials. Under Obama 

the labor force participation rate for the 16 to 24 age group fell to 55.1% down from 60.8% a 

decade ago and more than 66% back in the late 1990s. We're headed toward Greece where half 

the young people don't work. Even workers in their prime working years, the 25 to 54 age 

group, have seen a slight downturn in work participation. 
24 

0 

0 

0 

"' 

~ 

"' " 

~ " 

~ c 

·v; 

.. 

.. 

30.0% 

20.0% 

10.0% 

Q,O% 

~ -10.0% 

.c 

u 

~ 

c 

~ 

Qj -20.0% 0. 

-30.0% 

-40.0% 

Changes in LFPR since January 2000 

55 yrs and older, 

20- 24 yrs, -9.1% 

16 19 yrs, -33.5% 

lfthe three younger age groups were still at their labor force participation rates from 

January of2000, there would be 2.56 million more people working in the 16 to 19 age group, 1.4 

million more people working in the 20 to 24 age group, and 3.18 million more people working in 

the 25 to 54 age group, for a total of more than 7 million more Americans that would be 

working. That would be more than enough to fill all available jobs, assuming these workers had 

the skills to take them. 

So why aren't Americans of working age tilling available jobs- or getting the skills 

necessary to fill them? l would posit several impediments to putting more Americans back to 

work: 

First, welfare is replacing work. Welfare consists of dozens of different and overlapping 

federal and state income support programs. A recent Census Bureau study found more than I 00 

million Americans collecting a government check or benefit each month. The spike in families 

on food stamps, Supplemental Security Income, disability, public housing and early Social 

Security remains very high even five years into this recovery. This should come as no surprise 

given the combination of the scaled-back welfare work requirements and the steep phase-out of 

benefits as a recipient begins earning income. Economist Casey Mulligan of the University of 

Chicago has shown that workers with modest incomes and qualifying for an array of welfare 
25 

programs can lose nearly 50 cents on the dollar for every additional dollar they earn from work. 

Professor Mulligan found: 

"a startling amount of work incentives eroded by the labyrinth of 

new and existing social safezv net program rules. Using prior 

results from labor economics and public finance, I estimate that 

the labor market contracted two to three times more than it would 

have if redistribution policies had remained constant, thus altering 

the path of the economy and making the recession one of the 

deepest and longest in decades. " 

Mulligan found that many workers would only "earn" about $2 an hour extra pay tor 

working rather than staying home. What is disturbing is that to this day, many of these welfare 

expansions remain in force. For many low-income Americans, work doesn't pay. 

Second, there is an ethic in America that young people should get more years of 

schooling and should not work. I believe that is a completely misguided concept. Yes, of 

course, more years of schooling is associated with higher lifetime earnings. But the earlier in life 

one begins working is also associated with higher lifetime earnings and economic success. The 

academic studies are clear on this point. Developing work skills at an early age may be as 

important as gaining more years of schooling. Working while in school delivers double benefits. 

It is especially counter-productive to have college age students completely outside the 

workplace. 

Third, our public school system often fails to teach basic skills. Whatever happened to 

shop classes? We have schools that now concentrate more on ethnic studies and tolerance 

training than teaching kids how to usc a lathe or a graphic design tool, or bookkeeping and 

personal finance. Charter schools can help remedy this. Universities are even more negligent. 

Kids are graduating commonly from four-year colleges with $100,000 or more of debt and little 

practical or vocational training. A liberal arts education is valuable, but it should come paired 

with some practical skills. 

Fourth, there is a pervasive over-emphasis on going to college and negative attitudes 

toward blue-collar work. I've talked to parents who say they are disappointed if their kids want 

to become a craftsman - instead of going to college. 

Fifth, higher minimum wage laws have a statistically negative effect on labor force 

participation, particularly among the young, and even more so among black teenagers. 
26 

Effect of Minimum Wage on Teenage Black labor 

Participation 

600,000 

~ 

13 

0 500,000 

Q 

g "'400,000 

'0 "' 

<II 

·~ 300,000 -C 

u 

~ 

~ 200,000 

" 

~ 

~ 100,000 

'$ 

0 N " "' 00 0 N " "' 00 0 N " " "' ,; M "' " "' rl M U) " " " " ";' '1' '1' '1' 00 00 "' "' '::; "' "' r 9 9 0 9 rl rl 

~ rl 

~ ,6 1, o_ > c ~ w, 6, g > 

~ ,6 o_ > i: ~ w, 6, > 

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~ .=; " a 0 

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160 

140 "' "' 3: "' 120 E 

" E 100 :s 

:;; 

80 " '" " 60 2 

"' " 40 " > 

)( 

20 "' '0 

= 0 

LFPR: Blacks, 16 19 {adjusted for economic growth)··· ·Minimum Wage (adjusted for inflation) 

I have conducted my own research on this subject and have followed the economic 

literature closely. From 2009 to 2013 (right after the federal minimum wage was raised) 8 states 

had a minimum wage averaging $8 or higher. In those states the teen labor torce participation 

averaged 35.6%. Teenage unemployment averaged 27.2%. In the 31 states which did not 

exceed the federal level, the labor force participation rate was nearly 4 percentage points higher 

(39.5%) while the unemployment rate was nearly 6 percentage points lower (21.3%). These are 

big statistical differences. 

A more complex analysis we conducted at Heritage for 2009-2013 for all 50 states and 

the District of Columbia shows a small negative correlation between labor force participation 

and minimum wage (-0.14) for those age 16 to 19. There is a larger positive correlation between 

teen unemployment and minimum wage (0.36). Over a longer period ( 1999 to 20 13), the 

correlations are nearly the same at -0.15 and +0.32, respectively. In short, higher minimum 

wages correspond with lower labor force participation and increased unemployment amongst 

teenagers. 
27 

40.00% 

35.00% 

30.00% 

25.00% 

20.00% 

15.00% 

10.00% 

5.00% 

0.00% 

Teen Labor Force in High vs. Low Minimum Wage 

States, 2009 - 2013 

$8/hr 

Ill Federal level 

Teen LFPR Teen Unemployment 

Texas A&M University Economists Jonathan Meer and Jeremy West recently published 

a 2014 study through the prestigious National Bureau of Economic Research (NBER) "indicating 

that job growth declines significantly in response to increases in the minimum wage ... " 

Additionally, the economists found this decline in jobs growth to be "primarily driven by a 

reduction in job creation by expanding establishments, rather than by an increase in job 

destruction by contracting establishments." The study by Meer and West concluded that "the 

effect on job growth is concentrated in lower-wage industries and among younger workers." 

My point is that one of the single greatest constraints on economic growth and prosperity 

for American families is the falling labor force participation rate. Some of this is due to rising 

affluence- that as Americans get richer, they work less. But some of it is due to poor policy 

decisions by Congress that inhibit work. If you tax something, you get less of it. If you 

subsidize something, you get more of it. We tax work and subsidize non-work and we are 

paying a price for these poor decisions. 

REFORMS IN LABOR POLICY TO ENCOURAGE WORK 

In closing, I would suggest the following reforms in labor policy: 

1) Reinstate the work for welfare requirements of 1996 that helped pull Americans 

out of welfare dependency and into the workforce. These helped reduce welfare caseloads in the 

late 1990s by half and those who moved into work, generally, moved up the economic ladder. 
28 

2) Impose work requirements on all welfare programs including Medicaid and food 

stamps for all able-bodied recipients. 

3) Create a new teen federal minimum wage at $5 to $7 an hour to encourage young 

workers to get job experience. 

4) Encourage apprenticeship programs that would give young Americans a "college 

degree equivalent" for successfully learning a useful trade. President Trump has proposed such 

changes. 

5) Make the Trump tax cuts permanent, especially the immediate expensing 

provisions that encourage business capital spending. 

6) Allow employers to "opt out" ofObamaCare mandates and requirements ifthey 

provide lower cost health insurance coverage to their workers. ObamaCare has corresponded to 

about a $3,000 rise in health insurance premium costs with more escalations expected in 2019 

and 2020. These higher insurance costs to employers are crowding out pay raises tor workers 

and thus reducing work incentives. 

The great American work ethic has not been lost, but it has been eroded by years of dumb 

government policies that could and should be corrected. 
29 

Chairman WALBERG. Thank you and now, Dr. Farren, I recognize 

you for your five minutes. 

TESTIMONY OF MICHAEL FARREN, RESEARCH FELLOW, 

STUDY OF AMERICAN CAPITALISM, MERCATUS CENTER AT 

GEORGE MASON UNIVERSITY 

Dr. FARREN. Good morning, Chairman Walberg, Ranking Member Wilson and distinguished members of the Subcommittee. I’m 

grateful for the invitation to discuss how the work done by the Bureau of Labor Statistics serves policymakers, researchers, and ordinary people. 

My name is Michael Farren. I am a research fellow in the 

Mercatus Center at George Mason University and my previous research has left me pretty well acquainted with a lot of the data 

used and distributed by the BLS. In particular the Current Population Survey, which provides a lot of the information that is used 

in the BLS’s monthly update on the state of the economy. 

The underlying goal of my testimony is to help members of Congress better understand the BLS and the information that it provides. The main takeaways from that are that the BLS, now and 

throughout the past, represents some of the best economics research available. Its data collection and analytical work are generally seen as the gold standard that other economists attempt to 

emulate. 

The weak link in the chain however, is how the BLS communicates the information it has developed. The BLS website is the 

primary platform through which data users interact with the BLS. 

But despite efforts to make it more user friendly, attempting to access the BLS data and actually understand it accurately can sometimes feel like wandering through a labyrinth. 

Thankfully though, the leaders at the BLS recognize the agency’s 

struggles in this area and are taking steps to improve. But improvements should include additional expanded outreach to noneconomists in additional—in addition to the outreach to researchers and policy wonks. 

So how can the BLS better connect with John Q. Public? And the 

unemployment rate is a good example of how it can do this better. 

Many Americans know a family member or a friend who once 

worked but grew discouraged and gave up looking for a job, especially during the Great Recession. But because these discouraged 

workers aren’t actively looking for work, the BLS doesn’t actually 

include them in its headline unemployment rate. 

That fact that the official unemployment measures families to account these people as jobless previously ignited some suspicion and 

distrust in the official estimates. The problem is that the definition 

used for unemployment by the BLS makes a great deal of sense to 

economists. It’s accurate for an economist to understand unemployment to be but it seems arbitrary to non-economist leading to a 

suspicion that policy makers are influencing the official statistics 

in favor of one political party or another. 

A better approach would be to appeal to both economists and to 

John Q. Public adding additional measures of unemployment that 

make more intuitive sense to ordinary people, like the comprehensive jobless rate. That way the BLS could engage with non-econo-
30 

mists and actually provide them with a starting point to understand the national economy better. 

The idea behind the comprehensive jobless rate is the result of 

previous Mercatus Winship by Scott Winship of the Joint Economic 

Committee and it represents the most holistic measure of unemployment possible. It simply counts all adults and adolescents who 

say they want a job as unemployed. And in doing so it provides an 

upper bound on the job—upper bound on the measure of joblessness. And therefore a comparison benchmark for the official BLS 

unemployment measures and in this way it is even useful to economists. 

In short, the comprehensive jobless rate could be one way for the 

BLS to more fully engage with the general public and help them 

understand the overall economic situation better. 

In conclusion, the BLS is rightfully regarded as an objective, 

data focused organization whose efforts are essential to a better 

understanding of the U.S. economy. Its data collection and analysis 

set the professional standard for many economists to follow. However, non-economists would have great difficulty using the BLS’s 

resources to actually answer their own questions about the economy. Now this might be unavoidable. We shouldn’t necessarily expect that deep economic understanding is commonplace and, in 

fact, some people might argue that deep economic understanding 

isn’t even commonplace among economists. Regardless though, a 

worthwhile endeavor would be to make the data curated by the 

BLS more useful and more easily accessible to ordinary people as 

well as the economists who use it on a regular basis. Thank you 

very much. 

[The statement of Dr. Farren follows:] 
31 

~~~ MERCATUS CENTER 

~~~ George Mason University 

HOW TO MAKE THE BLS BETTER 

Michael D. Farren, PE, PhD 

Pcscntch Study of iunerican Cap;ta/ism, Mercatus Centt:Y at George Mason Universrty 

TESTIMONY 

f louse Comm1tte0 on [duc-Jt!Ofl c.~nd thP Workforce. Subcommittee on flealth, Ernp!oyment, Labor. and Pcns10ns 

C1rov;th. Opportunity. and Change m tile U.S. LoUor ·~ark;ct and the An:cr:GJn Workforce:: A Hcvlew of Current 

Developments 1 rends. Jr:d St~ tiStiCS 

21.2018 

Good morning, Chairman Walberg, Ranking Member Sablan, and distinguished members of the House 

Committee on Education and the Workforce Subcommittee on Health, Employment, Labor, and 

Pensions. I am grateful for the invitation to discuss how the work done by the Bureau of Labor Statistics 

(BLS) serves policymakers, researchers, and ordinary people. I am a research fellow at the Mercatus 

Center at George Mason University, where my previous research has left me well acquainted with data 

provided by the BLS, particularly the Current Population Survey, which provides much of the 

information for the BLS's monthly updates on the state of the economy. 

The underlying goal of my testimony is to help members of Congress better understand the BLS and the 

information it provides. The main takeaways are as follows: 

1. The BLS, now and throughout the past, represents some of the best economics research 

available. Its data collection and analytical work often set the gold standard that other 

economists attempt to emulate. 

2. The weak link in the chain is in how the BLS communicates the information it has developed. 

The BLS website is the primary platform through which data users interact with the BLS, but 

despite efforts to make it more user friendly, attempting to access BLS data and understand it 

accurately can feel like wandering through a labyrinth. 

3. Leaders at the BLS recognize the agency's struggles in this area and are taking steps to 

improve. Improvements should include communicating not only to professional economists, 

but also average Americans. The St. Louis Federal Reserve Bank's work in this area might be a 

starting point. 

THE ORIGIN OF THE BLS 

The BLS has a more intriguing history than many government agencies. Its precursor, the Bureau of 

Labor, was created in 1884 amidst a surge in popular support for labor issues as workers' bargaining 

power diminished with increasing industrialization. The mission of this agency was to "collect 

information on the subject of working people and the 'means of promoting their material, social, 

intellectual, and moral prosperity."'1 

'Jonathan G•ossman, ""The Orrgin of the U.S. Department of Labor," Monthly Labor Review 96, no. 3 (1973): 3-7. 
32 

Early labor advocates envisioned the Bureau of Labor as an inside-government agent through which 

to advance their agenda. Indeed, this had been the case in Massachusetts, the first state to create a 

bureau of labor statistics. The initial directors of that agency invited severe criticism by publishing 

research biased by their pro-labor views, and in response opponents called for the bureau to be 

abolished. Instead Governor Washburn appointed CoL Carroll Wright to head the agency, arguing 

that the correct response was "not in discontinuing the investigation ... but in lifting it to a higher 

and broader leveL" 2 

Although CoL Wright was neither an economist nor a statistician, he brought a dedication to 

impartiality to the position and rebuilt the agency's reputation to be focused on objectivity.' He was so 

successful that President Chester A. Arthur, after a long struggle with labor advocates' attempts to 

hijack the newly created federal Bureau of Labor, appointed CoL Wright as the first Bureau of Labor 

commissioner. Wright continued to serve after the agency gained department-level status, establishing 

a reputation for even-handed analysis that continues to this day! 

DATA COLLECTED BY THE BLS 

In keeping with the objective nature ofBLS research, the modern mission statement is less labor 

focused, calling for the ilLS to "collect, analyze, and disseminate essential economic information to 

support public and private decision making."5 To this end, the BLS collects data on the following: 

Employment 

Unemployment 

Productivity 

Compensation 

Prices and Inflation 

Expenditures and Time Usage 

BLS-sourced data is considered to be of the highest quality by most economists, and BLS survey 

methodology and subsequent data processing generally set the "best practice" standard that other 

researchers aspire to.6 The most-used BLS data collections include the following: 

Current Employment Statistics (CES) 7 

o State- and metro-level monthly data from employer surveys on employment, hours 

worked, and worker earnings by industry 

Current Population Survey (CPS)8 

2 Grossman, "The Or:gm of the U.S. Department of Labor," 

3 Wnght sa1d that he administered the Massachusetts Bureau of Statistics of Labor "'as a scientific office, not as a Bureau of 

agitation or propaganda, but I always take the opportunity to make such recommendations and draw such conclusions from our 

investigations as the facts warrant' He stressed that the agency should be free of political influence." See Joseph P. Goldberg and 

William r. Moye. The Ftrst Hundred Years of the Bureau ofLabor Statistics (Washington. DC: US Department of Labor, 1985). 3. 4 The long history of regulatory capture iS ftl!ed with examples of special interest groups commandeermg the authority of 

government agencies, so Col. Wright's dogged embrace of objectivity-his conception of the Bureau's mandate was "the 

fearless pubhcation of facts"-offers a model for all policymakers. See Adam Thierer, ''Regulatory Capture: What the Experts 

Have Found," Technology Liberation Front. December 20, 2010; Bureau of labor Statistics, "About the U.S. Bureau of Labor 

Statistics." accessed June ;s, 2018. https://www.bls.gov/bls/infohome.htm. 

5 Bureau of Labor Statistics. "About the U.S. Bureau of Labor StatistiCs." 

0 Bernie Langer. "Why I love the Bureau of Labor Statistics," PolicyMap, June 13, 2017. 

7 Bureau of labor Statistics, "Current Employment Statistics¥ CES (National)," accessed June 15, 2018, 

https://www.bls.gov/ces/: Bureau of Labor Statistics, "State and Metro Area Employment, Hours, & Earnings," accessed June 

15. 2018, https:/ /www.bls.gov/sae/ 

8 Bureau of Labor Statistics, "Labor Force Stat!Stlcs from the Current Population Survey," accessed June 15, 2018. 

https:/ /www.bls.gov /cps/ 

2 
33 

o State- and metro-level monthly data from household surveys on employment, hours, 

earnings, and information on special considerations such as union affiliation and 

contingent workers 

Job Openings and Labor Turnover Survey (JOLTS)' 

o National monthly data on available jobs, new hires, and separations from employment 

Business Employment Dynamics (BDM)'0 

o Quarterly data reported by individual employers on the net change in employment at 

their establishments 

Quarterly Census of Employment and Wages (QCEW) 11 

o Industry-specific quarterly data on employment and earnings reported by employers as 

part of unemployment insurance program participation; available at the county level 

and covers nearly all (over 95 percent) of official johs 

Occupational Employment Statistics (OES)12 

o Annual data on employment and earnings for over 800 occupations available for 

metropolitan and nonmetropolitan areas 

National Longitudinal Surveys (NLS) 13 

o A set oflong-running surveys tracking the employment, schooling, and social situation 

of a given group of individuals throughout their lives 

American Time Use Survey (ATUS)14 

o Quarterly data from individual surveys available at the national level estimating the 

time spent by Americans in a variety of activities 

WHO USES THE BLS DATA? 

Although it can be argued that all Americans, to varying degrees, benefit from the data collected by the 

BLS, the primary users of the data are various researchers and media professionals who have the 

expertise to search out, engage, and digest the data. These primary users then deconstruct the raw data 

into usable information for policymakers and the public. 

In its current state, the average person-a prospective employee, business owner, or student choosing a 

future career-would be hard pressed to find, analyze, and fully understand most of the BLS data. The 

complexity of the underlying methodology, specificity of information definitions, and difficulty in 

access and analysis mean that in its current state the BLS data requires a clerical class (commonly 

known as "wonks") to interpret what seem like economic tea leaves. 

THE WEAK LINK IN THE CHAIN: COMMUNICATING THE DATA 

The greatest obstacle facing the BLS seems to be communicating information clearly and accurately. 

Despite my own relatively extensive experience using BLS data, I still encounter difficulty in either 

finding what I need or even knowing about the existence of data that would benefit my research. In 

fairness to the BLS, this difficulty occurs in part because it is the curator of an enormous amount of 

complex information, and there is naturally a steep-and long-learning curve to fully understand what 

data are available and where they are kept. To modify a metaphor, Rome wasn't built in a day, and it 

would probably take more than a week to read through the Library of Alexandria. 

9 Bureau of Labor Statistics, "Job Openings and Labor Turnover Survey," accessed June 15,2018, https://www.bls.gov/jlt/. 

Bureau of Labor Statistics, "Business Employment Dynamics." accessed June 15,2018, https://www.bls.gov/bdm/. 

:J Bureau of Labor Statistics, "Quarterly Census of Employment and Wages," accessed June 15, 2018, https://www.bls.gov/cew/. 

"Bureau of Labor Statistics, "Occupational Employment Statistics," accessed June 15,2018, https://www.bls.gov/oes/: Bureau 

of Labor StattStiCs, "Consumer Expenditure Surveys,'' accessed June 15,2018, https://www.b!s.gov/cex/. 13 Bureau of Labor Statistics. "National Longitudinal Surveys," accessed June 16,2018, https://www.bls.gov/nls/. 

14 Bureau of Labor Stattsttcs, "American Trme Use Survey," accessed June 15, 2018, https:/ /www.bls.gov/tus/. 
34 

However, the tools through which BLS makes its data available don't seem to make the task much 

easier. Searching the BLS website, for all of the effort to try to make it user friendly, often feels like 

wandering through a labyrinth. And upon finding the needed information, it's often in a format that 

requires subsequent modification in order to be usable. 

Perhaps most telling is the fact that intermediaries have emerged to offer researchers the raw BLS 

data in a more accessible fashion. For example, the Unicon Research Corporation previously offered 

the proprietary CPS Utilities software, which cleaned up the raw Current Population Survey data to 

allow for easier analysis. The Minnesota Population Center's Integrated Public Use Microdata 

Series (IPUMS) has now taken over as the go-to source for easily accessible CPS data. 15 Its website is 

substantially easier to navigate, and its presentation of the data allows it to be more readily usable 

and understandable. 

The good news is that the BLS seems to recognize that its website and data handling software make 

the task of finding, understanding, and using its data more difficult. BLS administrators acknowledge 

the difficulties facing users and are doing what they can within the constraints of their current 

system to make it better. This suggests, though, that perhaps what the BLS needs is to build a better 

mousetrap from the ground up. The success ofiPUMS and the Federal Reserve Economic Data 

(FRED) database maintained by the Federal Reserve Bank of St. Louis may offer some starting points 

for consideration. 16 

Lastly, the BLS should consider expanding its engagement to ordinary people in addition to 

professional economists. For example, the primary definition for unemployment used by the BLS (the 

U-3 estimate) makes a great deal of sense to economists-it is accurate for what economists consider 

unemployment to be. But requiring that a person have actively looked for work within the last four 

weeks and be currently available to take a job (the required characteristics to be considered officially 

unemployed) seems arbitrary to noneconomists, leading to suspicion that policymakers are influencing 

official statistics in favor of one political party or another. 

A better approach would appeal to both economists and John Q. Public. Adding additional measures of 

unemployment that make more intuitive sense to ordinary people, such as the Comprehensive Jobless 

Rate, could help the BLS engage with noneconomists and provide a starting point for ordinary people to 

understand the national economy better." 

The Comprehensive Jobless Rate is the most holistic measure of unemployment. It counts all adults and 

adolescents who say they want a job as unemployed. In doing so it provides an upper bound on 

joblessness and therefore a comparison benchmark for the official BLS unemployment measures (it's 

even useful to economists for this reason). 

The BLS has avoided similar unemployment measures in the past because of the "cheap talk" nature of 

such a response-it's easy for survey respondents to say they want a job, whereas actively pursuing 

employment signals a "revealed preference" that a person truly wants to be part of the labor force. But 

"IPUMS, ··what Is IPUMS?, .. accessed June 16,2018. https://www.ipums.org/whatlsiPUMS.shtml; IPUMS, .. What Is CPS?:· 

accessed June 16, 2018, https://cps.ipums.org/cps/collaboralion.shtrnl. 

16 Federal Reserve Bank of StLouis, Federal Reserve Economic Data home page, accessed June 16, 2018, https:/ /fred.stlouisfed.org/. 17 The Comprehensive Jobless Rate IS based on Mercatus Center research conducted by Scott Winship. See Michael D. Farren, 

"What's the Truth about Unemployment? Introducing the Comprehensive Jobless Rate (U-Sb)" (Mercatus on Policy, Mercatus 

Center at George Mason University, Arlington, VA, March 28, 2018): Michael D. Farren, "May Jobs Report Shows Strong 

Economic Growth despite Decline in Labor Force Participation," The Bridge, June 1, 2018, https:/ /www.mercatus.org/bridge 

/commentary/may-jobs-repo•t-shows-strong-economic-growth-despite-declme-labor-force; Scott Winship, "What's Behind 

Declining Male labor Force Partictpation: Fewer Good Jobs or Fewer Men Seeking Them?" (Mercatus Research. Mercatus 

Center at George Mason Univcrs1ty, Arlington, VA, 2017). 

4 
35 

ordinary Americans may know friends and family who are discouraged in their job search and have 

given up actively looking for work. The fact that the official unemployment measures fail to count these 

people as jobless ignites suspicions and distrust in the official estimates. The Comprehensive Jobless 

Rate could serve as a bridge to reengage with these people and therefore help them understand the 

overall economic situation better. 

CONCLUSION 

The BLS is rightfully regarded as an objective, data-focused organization whose efforts are essential to 

a better understanding of the US economy. Its data collection and analysis set the professional standard 

for many economists to follow. However, ordinary Americans would have great difficulty using the 

BLS's data resources to answer their own questions about the economy. 

This might be unavoidable-we shouldn't necessarily expect that deep economic understanding is 

commonplace (in fact, some people might argue that deep economic understanding isn't even 

commonplace among economists). Regardless, a worthwhile endeavor would be to make the data 

curated by the BLS more useful and more easily accessible to ordinary people, as well as to the 

economists who use them on a regular basis, in view of the important information the BLS provides. 

Sincerely, 

Michael D. Farren, PE, PhD 

Research Fellow 

Mercatus Center at George Mason University 

5 
36 

Mrs. FOXX. [Presiding] Thank you, Dr. Farren. Dr. Spriggs, you 

are recognized for five minutes. 

TESTIMONY OF WILLIAM SPRIGGS, PROFESSOR OF 

ECONOMICS, HOWARD UNIVERSITY 

Dr. SPRIGGS. Thank you very much, Mrs. Foxx, and I want to 

thank Chair Walberg and Ranking Member Wilson for inviting me 

and thank you to the members of the subcommittee who are here. 

As the Ranking Member mentioned, the great puzzle we have is 

to raise the wages of the American workers not just for the sake 

of the workers and for our families but for the sake of our economy. 

We need to have a recovery that is led by wages, not a recovery 

that is led by workers going into debt. 

The trends that started in 2010 have continued. They have not 

accelerated and so that’s good news that nothing has happened to 

slow down the rate at which we have been creating jobs, at the rate 

at which job openings have been coming relative to the number of 

unemployed persons, and the labor force participation rate for African Americans has continued to recover during this expansion, 

chasing the unemployment rate and the unemployment population 

ratio down and up for those communities. All that is good news. 

The puzzle for labor economists and what we all as policy makers 

have to answer is at this level of labor market tightness why aren’t 

wages going up? And labor economists have begun to look and challenge themselves and their theories on this point. What is becoming clear from that research is that institutions, in fact, matter. 

One reason economists are finding that institutions matter is 

that we have increased concentration of firms both at the local and 

at the national level. This creates an inordinate power in the hands 

of employers, what economists call monopsony, and it isn’t always 

this sort of textbook, ‘‘I’m the only coal mill in town or whatever 

and so I’m the only employer.’’ This is a broader sense of which employers have power over workers in their bargaining position. 

So if you look at what labor economists are doing now to look at 

that, Economist Benmelech, Bergman, and Kim have bothered to 

look at the local level, what is the concentration of firms and what 

does that mean for wages? And what they have found is what we 

would predict, that the increasing concentration of firms at the 

local level has lowered the wages of workers. 

What are the policies that can counterbalance that phenomenon? 

What is clear in their data is that when workers are unionized, 

they become that counterbalancing force. So they don’t observe the 

negative pressure on wages from monopsony where they see higher 

unionization rates. This is melded together with what we know 

over the broader horizon of U.S. economic history and the post— 

war era that when we had higher union density, wages did go up 

with productivity and we saw the wages of nonunion members go 

up as well as union members. 

In fact, when you decompose what has happened for nonunion 

members, researchers have been able to document that nonunion 

workers actually had more downward pressure on their wages from 

the decline in union density than wages going down from competition with Chinese imports. So this is an important factor to consider. 
37 

Over the longer span, research has now been able to document 

what happens to inequality broadly in our society and what happens to the link between wages and productivity because of our decline in union density. And it’s quite clear that having workers’ 

voice matters a lot. Raising the minimum wage is very important 

in this equation. That’s the other way in which we help low wage 

workers combat the type of monopsony that takes place particularly among low-wage workers. 

This October will be the second longest period we have failed to 

raise the federal minimum wage since 1938. June will be the longest. Since there is no pending law, we will probably break those 

records. Congress has the ability to change the institutions, put 

them back to where America had them, restore to workers the 

voice and power that they had. That’s in Congress’Congress’s 

power. Thank you. 

[The statement of Dr. Spriggs follows:] 
38 

Statement of William E. Spriggs 

"Trends in the U.S. Labor Market: Americans need a Raise" 

Testimony prepared for 

US House of Representatives Subcommittee on Health, Employment, Labor and Pensions 

llS'h Congress, Second Session 

Hearing on 

Growth, Opportunity, and Change in the U.S. Labor Market and the American Workforce: A 

Review of Current Developments, Trends, and Statistics 

June 21,2018 

Thank you, Chair Tim Walberg and Ranking Member Frederica S. Wilson and members of the 

Subcommittee, for the opportunity to provide testimony on policies and trends impacting the 

workforce. I am testifying today on behalf of the AFL-CIO. America's house oflabor, 

representing the working people of the United States; and based on my expertise as a professor in 

Howard University's Department of Economics and as the former Assistant Secretary of Policy 

in the U.S. Department of Labor. 

Today. I want to highlight that the labor market is continuing trends that began almost eight 

years ago. The primary focus of policy needs to be to continue the trends in job growth but to 

focus on raising wages, which is clearly emerging as the hurdle left to overcome. At this stage in 

the recovery, market forces alone cannot boost wages. There are nonmarket forces causing 

imbalances that need to be addressed to restore bargaining power to workers. 

Beginning in October 2010, the U.S. labor market started its greatest uninterrupted string of 

monthly job gains since records began in 1939. By January 2017, during a 76 straight month 

period. job growth increased workers on payrolls by a net of 15,331,000 jobs. During that 

period. the unemployment rate fell from 9.4 percent to 4.8 percent. Those trends in job creation 

and falling unemployment rates continue, though at a slightly slower rate since January 2017. 

The recovery was from the worst labor market since records began in 1939. Beginning in 

February 2008, the U.S. labor market suffered 21 straight months of job losses. The job losses 

Page 1 of 15 
39 

were so severe that in January 2009 fewer workers were on payroll than there had been on 

January 200 1--the first time that in over an eight-year period there was net job loss. Yet, by 

January 2017, the unemployment rate returned to its previous peak reached in 2007, as did the 

unemployment rate for men, women and the race and ethnic groups the U.S. Bureau of Labor 

Statistics measures. And, payroll employment was II ,641,000 higher in January 2017 than in 

January 2009. 

Figure I shows the trend in unemployment rates from October 2010 to January 2017, and a trend 

line with projections through June 2018. It also shows the actual unemployment rate from 

January 2017 to May 2018. So far, the unemployment rate is very close to the pre-2017 trend. 

Figure I 

S.t! 

Figure 2 shows the trend in payroll employment from October 2010 to the preliminary figures 

April and May 2018. The projected payroll numbers for the post 2017 data are on trend with the 

Page 2 of 15 
40 

figures from the October 2010 to January 2017 data. So, there is no appreciable change in the 

payroll data either. 

Figure 2 

The labor market recovery was driven by private sector employment. Public sector employment 

still lags behind it 2008 peak. Because a large part of the public-sector job deficit is in public 

school teachers, it means we are continuing our underinvestment in critical K-12 public 

education. To keep up with the growth in student population, local public education was short 

almost 327,000 jobs this past school year, and it was still shy almost 128,000 jobs compared to 

its pre-recession level in 2008, according to calculations by Elise Gould of the Economic Policy 

lnstitute. 1 This is unfortunate at a time demand for skills in the American workforce is growing. 

1 Elise Gould, Local public education employment may have weathered recent storms, but schools are still short 

327,000 public educators Economic Policy Institute: Washington, DC October 6, 2017 

Page 3 of 15 
41 

The approach to economic recovery taken in the American Recovery and Reinvestment Act to 

balance benefits across the income distribution was important. Policies that promote broad based 

income growth promote new firms because they maximize the number of potential new 

customers in the market. Private sector employment recovered because the positive dynamics of 

new firm formation recovered in 2010, and picked up in 2014 as incomes recovered, particularly 

for the bottom 80 percent of the income distribution. New firm formation lags income growth, it 

is most highly correlated with growth in income for the bottom four quintiles of income in the 

previous two years. This is shown in Figure 3. That is why policies that promote broad based 

income growth are important. The bias of the Tax Cut and Jobs Act (TCJA) toward high income 

earners is not likely to be as much a stimulus to business formation and job growth as a tax plan 

that was more equally shared by all, or one that was more slanted toward benefiting the bottom 

80 percent of the income distribution. 

Figure 3 

Bottom 20% lower 

Middle 

Middle Top20% 

Middle 

Page 4 of 15 
42 

Though net job growth from new finn formation and older firm exits-so called creative 

destruction, is only a small share of net job formation, still, during the economic downturn, in 

2008, the collapse of demand forced the closing of more firms and losses of jobs, than could be 

made up for by new firms creating jobs. The expansion from 20 I 0 returned dynamism to that 

part of growth. And, that trend continues to be a source of growth. This is shown in Figure 4. 

Figure 4 

Figure 5 shows a different perspective, which is to compare the number of finns that are 

expanding compared to the number of firms that are contracting. Again, when most firms are 

expanding employment it is a likely indicator that job search will be easier. During the 

expansion, this indicator clearly recovered. However, it has begun to falter in 2017. 

Page 5 of 15 
43 

Figure 5 

Number of Firms expanding minus firms contracting 

Despite the downturn in 2017, with more firms contracting in the third quarter than were 

expanding, the number of job openings continues to grow on pace so that the ratio of openings to 

job seekers continues to improve. This is shown in Figure 6. The trend of increasing job 

opportunities that began in October 2010 has continued. Current improvements in the ratio since 

2017, have closely followed the trend prior to 2017. 

Page 6 of 15 
44 

Figure 6 

rnemployed workers per P•·ivateJob Sector Job Oj>enings October2010toApril2018 

Though the major positive elements of the improving labor market that were put in place in 

October 2010 continue, there are still challenges for the labor market. The challenge will be the 

restoration of public sector job growth, especially given the headwind TCJA gives to local 

governments raising the revenue and sustaining investment by forcing potential double taxation 

on their citizens. The TCJA also exacerbates income inequality, when more equal income 

growth yields more new business formation. 

in the Labor 

The biggest challenge facing the labor market is wage growth. Wage growth has remained tepid 

throughout the recovery. In part, this reflected weakness in the labor market. In part, it reflected 

low inflation. Yet, now with the labor market continuing to tighten, it is becoming clear that 

non-market forces are slowing wage growth. Figure 7 shows that after a short spurt in wages in 

Page 7 of 15 
45 

2015 and early 2016, real wage growth has flattened. It includes the most recent data from the 

U.S. Bureau of Labor Statistics showing that in May, over the year, real wages fell 0.1 percent. 

There are two leading possibilities for the wage stagnation. 

Figure 7 

First, is growing evidence of monopsony power on the part of finns. One possible source, is the 

growing consolidation of market power. This is evidenced in agreements struck by major tirms 

in Silicon Valley to collude on wages and prevent competition for workers,2 combined with 

heavy lobbying by Silicon Valley firms to expand the H-1 B visa program-which is 

overwhelmingly used to hire computer programmers--despite the underutilization by Silicon 

Valley of the diversity of the American computer work lurce documented by the GAO in a report 

Page 8 of 15 
46 

requested by ranking member of the Committee, Congressman Bobby Scott. 3 Further evidence 

is mounting in the use of agreements in low wage sectors to limit labor mobility through the use 

of various non-compete clauses, as work by Alan Krueger and Or ley Ashenfelter have shown.4 

In the past, the U.S. made successful use of the National Labor Relations Act of 1935,5 and the 

minimum wage6 and overtime pay to counterbalance monopsony power in firms. For instance, 

economic research suggests a significant portion of wage inequality that grew in the 1980s 

between earners at the bottom ten percent of the wage distribution and median wage earners \vas 

because the federal minimum wage was unchanged between 1981 and 1990.7 Further, declines 

in the purchasing power of the minimum wage are also significant in explaining the growth in 

overall income inequality, as measured by the Gini coefficient, a broad measure of income 

inequality8 In October, the federal minimum wage will tie the second longest period it has gone 

unchanged since it was passed in 1938; and in June 2019, it will break the record the for the 

longest it has gone unchanged. Those states currently with the lowest minimum wages are those 

linked to the lowest levels of income mobility. And, those same states are among those who 

diminish the bargaining strength of workers by have very few or no inspectors to enforce wage 

and hour laws.9 This is further complicated by efforts at the U.S. Department of Labor to roll 

back key protections that help balance the voice of workers with employers, heard in testimony 

before this committee earlier this year. Proposals that roll back updating overtime pay rules, that 

let employers claim tip money earned by workers and failing to protect workers' interests in the 

management of their retirement accounts, weakening worker safety by speeding up hog slaughter 

3 §[IQ. DIVERSITY IN THl TECHNOLOGY SECTOR: Federal Agencies Could Improve Oversight of Equal E:nployment 

QQ..u..Qrtdrl~ty RequirPments, GA0-18-69: Pub!lshed: Nov 16, 2017 

4 0.!E.i2 Kruegee__?_n_Q_Qricy:A?c_henfeltcr. Theory and E:v1dcnce on Empioyer Collusion in the Franrhise Sect..Qr, 

Princeton Industrial Relations Section Working Paper 614, September 2017 5 National Labor Relations Act of 1935 (Wagner Act), 29 U.S.C. §§ 151-169 (2010). 

6 History of Federal Minimum Wage Rates Under the Fair Labor Standards Act, 1938-2009, DEP'T OF lABOR, WAGE 

AND HOUR D!V. 'rlTTPS://WI,VW.DOL GOV/WHJ/fV11NW~IGUCOVEr\J\G!: 1-iTM 

7. David H. Autor, Alan Manning & Christopher L. Smith, The Contribution of the Minimum Wage to US Wage 

Inequality over Three Decades: A Reassessment, 8 AM. ECON. J. APPLIED ECON. 58 (2016); John DiNardo, Nicole M. Fortin 

& Thomas Lemieux, Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric 

Approach, 64 ECONOMETRICA 1001 (2016); David 5. Lee, Wage Inequality in the United States During the 1980s: Rising 

Dispersion or Falling Minimum Wage?, 114 Q.J. OF ECON. 977 (1999). 

8. FlORENCE JAUMOTTE & (AROUNA OSORIO BUITRON, INT'l MONETARY FUND, INEQ. AND lAB. MKT. INST. (2015), 

http;:/ I www. i m f. o rg/ ext ern a I /pu bs/ft/ sd n /2 015 I sd n 1514. pdf 9 Marianne Levine, Behind the minimum wage fight, a sweeping failure to enforce the law, Politico, February 18, 

2018 lll!.Q_~ _ _;jj www. po! it i co. rom I sto 1·y/2 018/02/18/ rn 1 n i m urn -wqg_ e-not -en fo reed -1 nvest igat ion -409 6--14 

Page 9 of 15 
47 

lines and workers exposure to beryllium are examples of shifting the power balance between 

workers and employers. 10 

While there has been much buzz that American workers arc no longer in traditional work 

settings, the release by the Bureau of Labor Statistics clearly shows no big increase in workers 

relying on the "gig" economy as the primary source of their work. While the survey does not 

rule out workers' may have a growing reliance on "gig" jobs as their primary source of work, the 

idea that labor standards need to watered down to accommodate some new work style is very 

premature. 

The rise of monopsony power without a balancing force from labor is another key issue. 

Research points to the importance of unions in lowering inequality in the United States. Using 

data from the Gallup Poll researchers llenry S. Farber, Daniel Herbst, llyana Kuziemko and 

Suresh Naidu are able to identify the role of labor unions in fighting inequality from 1935 to 

1986. Covering the period before the 1970s is important, because it includes the period of rising 

union density through the peak in the early 1970s. With this new data they are able to show that 

despite changes in the skill of union members relative to non-members, and over a long period of 

rapid technological change and increasing productivity, unions are an important factor in why 

inequality was lower when density was high, and inequality has been rising since density began 

to fa11. 11 

Efraim Bcnmclech, Nittai Bergman and Hyunseob Kim show that local labor market 

concentration in the U.S. increased over the !997 to 2009 period, but at rates that varied by 

location. Their key findings arc that where concentration increased most, wages grew slower. 

And, that where unions were stronger, the negative effect on wages was attenuated. 12 

Using international data and a comparative approach, Florence Jaumotte and Carolina Buitron 

are also able to attribute a large increase in inequality in the United States from the decrease in 

10 Heidi Shierholz, Hearing on "Regulatory Reform: Unleashing Economic Opportunity for Workers and Employers," 

U.S. House of Representatives Committee on Education and the Workforce, Subcommittee on Workforce 

Protections, 1151

h Congress, 2"' Session (May 23, 2018) 

11 HenryS. Farber, Daniel Herbst, llyana Kuziemko and Suresh Naidu, UNIONS AND INEQUALITY OVER THE 

TWENTIETH CENTURY: NEW EVIDENCE FROM SURVEY DATA, NBER Working Paper 24587 (May 2018). 

12 Efraim Benmelech, Nittai Bergman and Hyunseob Kim, STRONG EMPLOYERS AND WEAK EMPLOYEES: HOW DOES 

EMPLOYER CONCENTRATION AFFECT WAGES?, NBER Working Paper 24307 (February 2018) 

Page 10 of 15 
48 

union density. 13 Jake Rosenfield, Patrick Denice and Jennifer Laird take a different approach to 

show the effect of union strength on raising the wages of non-union workers. They show that the 

decline in union density had a larger negative effect on wages than the increase oftrade with 

China between 1979 and 2013. 14 

The imbalance in current labor law frustrates the desire of Americans to belong to unions. Work 

by Tom Kochan, William Kimball, Duanyi Yang, and Erin L. Kelly points to the rising share of 

Americans who want to belong to unions. In a survey just completed this year, nonunion 

workers were asked if they would vote for a union at their work today if they could, and the 

response was so large that if nonunion workers were given a real chance to vote, union 

membership would be higher by almost 55 million members-increasing union membership 

back to above 20 percent density in the private sector. 15 

Legislation to raise the minimum wage and update labor laws would go a long way in boosting 

the health of the labor market. Rising wages would be a boost to increasing labor force 

participation. 

Second, it is possible that the raising of interest rates now by the Federal Reserve reconfirms 

expectations of employers that raising wages above the current level would be 

counterproductive. So, the firms are holding wages in check. And, given the state of household 

debt, that is not a wise policy for the Fed to pursue now. Instead, it needs to focus on getting 

wages and incomes to rise, and to have incomes outrun the household debt overhang that is 

slowing automobile sales and serving as a drag on employment in the automotive manufacturing. 

It is early on, but there are no indications so far that the TCJA is leading firms to raise wages. 

More firms have announced stock buy-backs than have announced wage increases. And, the size 

of the announced buy-backs, according to S & P Dow Jones, will come close to $1 trillion in 

20 18-virtually the price tag of the corporate tax cut. The Federal Reserve's monitoring of new 

13 Jaumotte and Buitron, op. cit. 14 Jake Rosenfield, Patrick Denice and Jennifer Laird, Union decline lowers wages of nonunion workers, Economic 

Policy Institute, Washington, DC: August 30,2016. ffitps://www,~i.org/files/odf/112811.pdf 

15 Tom Kochan, William Kimball, Duanyi Yang, and Erin L. Kelly, Worker Voice in America: A Current Assessment 

and Exploration of Options, http;L,Iiwermit.edu/wp-content/uploads/2018/01/worker-voice-paper1 16 18 tablesintext12pt.pdf 

Page 11 of 15 
49 

orders for non-defense capital goods has remained 11at since last summer, indicating there are not 

any new investments that would boost productivity and lead to wage increases later. 

Challenges in the Labor Market-Labor Force Participation 

The other puzzle of the labor market recovery is the slow recovery in labor force participation. 

Most marked is the labor force participation of prime age workers. Figure 8 shows the labor 

force participation rate for prime age workers over both the 200 I and 2008 recessions. It is 

clear, that participation has not recovered from the 200 I recession. Employment to population 

ratios, the share of people employed, cannot recover if labor force participation remains low. 

Labor force flow data is showing that people who are not in the labor market arc more likely to 

land a job in the following month than to simply end up in queue looking for work. That is a 

likely indication that many who are listed as "not in the labor force" are doing some type of job 

search activity. And, workers appear less discouraged. since it is now more likely that someone 

who is unemployed is more likely to find a job or remain looking than to drop out of the labor 

force. The latter point is a key reason that labor force participation rates have been slowly 

recovering, since the flow out of the labor market has slowed. 

Page 12 of 15 
50 

Figure 8 

Several studies looking at the U.S. in comparison to other labor markets in industrialized 

countries recovering from the Great Recession have found that the U.S. stands out for losing 

ground in women's labor force participation. The focus has been on women in a number of 

international studies. The decline in population growth rates, means national economies need to 

look at increasing labor force participation. And, this can mean trillions of dollars in a large 

economy the size of the United States. The U.S. is now surpassed by the United Kingdom, 

Germany and Japan, three nations which once had lower women's labor force participation. Key 

factors include greater access to free or affordable child care, paid maternity leave and greater 

certainty in scheduling for those working part-time. Another problem with the TCJA is that is 

squeezes out fiscal room to expand child care and pre-Kindergarten programs or assist states in 

establishing paid maternity leave or to implement paid maternity leave at the federal level. 

Page 13 of 15 
51 

Claims that demography is driving lower labor force participation point to the aging of the 

workforce. The potential workforce is defined as those over age 16. But, a higher share of 

people over age 16 are now at ages above 55 than before. So, that shifts the population to 

include a higher share of workers who are less likely to work. However, this explanation does 

not address the puzzle of prime age workers. Nor does it solve another puzzle. If a higher share 

of workers are flowing out of the labor force to retirement, then the net new jobs the economy 

must produce to satisfy new entrants is smaller. More new entrants can simply fill-in to those 

slots that are becoming open. So, that would make the job market even tighter. And, so it is a 

puzzle why more young people are not choosing work and school, and are instead choosing fulltime post-secondary education over part-time work and post-secondary education? 

A Key Opportunity, the Labor Force is showing increased diversity 

In several places, it has been noted that the unemployment rate for African Americans has 

reached new lows. But, as it is true tor the labor market as a whole, the trend of improvement 

for African Americans began during the recovery of the labor market. What has been less 

noticed is that the labor force participation rate for African Americans has been rising and is now 

almost equal to the labor force participation rate for whites. This is key, because even though 

African American women have nearly twice the unemployment rate of white women, because 

African American women have a much higher labor force participation rate, their employmentto-population ratio is higher than white women's. Because the African American labor Ioree 

participation rate has grown, the employment-to-population ratio is moving closer to its 2007 

level. The employment-to-population ratios are not on a similar clear path to return to 2007 

levels. 

figure 9 shows the clear path of decline for the African American unemployment rate that began 

falling in 20 I 0. The post 2017 downward trend simply follows the trend from 2010 to 2017. The 

implication is that the work force is growing more diverse. This is an opportunity to see how the 

nation can respond to insuring the proper investments are made to keep producing a modern 

workforce. In particular, both African American and Latino college students are more reliant on 

Pel! Grants than is true for college students as a whole. With tuitions at four-year schools still 

rising above the maximum Pell Grant it will be important to understand the barriers our new 

workforce will be facing in acquiring the skills needed to succeed. And, it will be important to 

Page 14 of 15 
52 

understand the supports needed for the colleges and universities that are leading in producing this 

skilled workforce. And, a growing reliance on Latino workers means we have to think ahout the 

Dreamers who can provide us with a ready pool of well educated workers already among us with 

the soft skills sensitivities needed in the American market place and on the job. 

Figure 9 

Unemployment Rate- African Americans 

Page 15 of 15 
53 

Mrs. FOXX. Thank you, Dr. Spriggs. Mr. Meyer, you are recognized for five minutes. 

TESTIMONY OF JARED MEYER, SENIOR FELLOW, 

FOUNDATION FOR GOVERNMENT ACCOUNTABILITY 

Mr. MEYER. Thank you very much, Mrs. Foxx, and I want to 

thank Chair Walberg and Ranking Member Wilson and other members of the Committee for the opportunity to testify today. My 

name is Jared Meyer and I’m a senior fellow at the Foundation for 

Government Accountability, which is a non-profit research organization that promotes work at both the state and federal levels. 

The American economy is generating more jobs outside of the 

traditional employee-employer relationship and implementing the 

right policies to accommodate this change is impossible if all of you 

don’t have access to comprehensive, up-to-date data. Imagine navigating an unfamiliar city when your smart phone is out of battery 

or getting married before meeting your future in-laws. Thankfully 

the Bureau of Labor Statistics recently released the Contingent 

Workers Supplement, or what I will refer to as the CWS, to survey 

the prevalence of these alternative work arrangements like independent contracting. While the Committee should applaud this release, here are three improvements to ensure that the survey 

doesn’t under estimate the workforce and give an incomplete picture of how Americans are working. 

First, the CWS needs to capture work arrangements that are 

used for supplemental income. Second, the survey needs a longer 

look-back period given the nature of flexible work. And third, the 

survey needs to be released regularly. 

So all of us constantly hear about these online platforms like 

Airbnb and Lyft. But the changes to the workforce, they extend far 

beyond transportation and travel. Consider my mom’s story. When 

I was growing up, my mom would go to Goodwill and buy old 

sweaters that she would then sew into mittens. I grew up in Minnesota, so mittens were pretty necessary. But then, during the holidays, she would go to local craft fairs and sell them and on a good 

weekend, maybe she would sell a dozen pairs to put towards 

Christmas gifts to the family. 

But imagine what my mom could do today. With just a few clicks 

of a mouse, and in a few minutes, she could have an online store 

on Etsy that could reach people all over the world, turning her 

hobby into a major source of income for our family. This is what 

technology has done for the labor force, opened more avenues for 

entrepreneurship. 

So the new CWS comes after a 13-year break from conducting 

the survey. During that time, there were many organizations that 

attempted to measure the technology-fueled change in the workforce. The consensus reached was that the number of people working as independent contractors has increased over the years. Most 

estimates place the share of workers who are working as freelancers, as independent contractors between about 15 percent and 

30 percent of the workforce. 

But according to the newly released CWS, independent contractors represent just 6.9 percent of the workforce. This is less than 

half the level of other estimates and less and lower from the levels 
54 

of the previous CWS which was released in 2005. Do any of us believe that there are fewer people freelancing today than in 2005, 

two years before the iPhone was first released? 

I don’t question the accuracy of the CWS but its design leads to 

an incomplete picture of the labor force because it doesn’t count 

most independent contractors. Its main shortcoming is that it only 

measures alternative work if these jobs are a respondent’s primary 

source of income. 

See, I earn about 20 percent of my income from independent contractor work, but I wouldn’t be counted as participating in an alternative work arrangement under the CWS because I earn more as 

a full-time employee at FGA. So this decision likely explains the 

dramatic difference between the CWS and other reputable estimates. But something needs to change when millions of Americans 

are working hard and to earn supplemental income, but this isn’t 

reflected in government data. 

To count independent contractors, I suggest that the CWS use an earnings threshold of $600 a year rather than a majority of income. 

This is the same threshold that the IRS uses to require firms to 

issue 1099 tax forms to workers. Many workers, especially 

millennials, desire these types of nontraditional jobs. Less than 10 

percent of independent contractors identified by the CWS would 

have preferred a traditional work arrangement and the data show 

that independent contractors are as educated as traditional workers. They earn just as much and they’re just as secure in their jobs. 

Workers also value flexibility, but the CWS only considers work 

done during the previous week. Given the nature of freelancing 

work, the CWS should ask about independent contractor jobs done 

over the previous year. For example, a teacher may freelance as a 

math tutor over the summer or a landscaper may work as a ski instructor over the winter. And rather than just being a sporadic survey, BLS should release an update to the CWS every two years as 

it did from 1995 to 2001 but with the additional updates to give 

a more broader and accurate picture of the labor market. 

When crafting policies to help your constituents, you need access 

to comprehensive, up to date labor market data. This is why, to 

summarize, the CWS should measure independent contractors 

based on a $600 a year earning threshold. Second, use a one year 

look back period instead of a one week and third, be released every 

two years rather than us having to wait another 13 years to see 

this data. 

Thank you again for the opportunity to testify and I look forward 

to your questions. 

[The statement of Mr. Meyer follows:] 
55 

TESTIMONY ON GROWTH, OPPORTUNITY, AND CHANGE IN THE U.S. LABOR MARKET 

U.S. House of Representatives 

Committee on Education and the Workforce 

Subcommittee on Health, Employment, Labor, and Pensions 

June 21, 2018 

Jared Meyer 

Senior Fellow 

Foundation for Government Accountability 
56 

Cha~rman Walberg, Rankmg Member Sablan, and members of the Subcommittee on Health, Employment, Labor, 

and Pensions, thenk you for the opportunity to testify on the changing Amencan workforce. My name is Jared 

Meyer, <:~nd 1 am a senior fellow at the Foundat1on for Government Accountablltty {FGA). FGA is a non~profit 

research organization that focuses on promoting work at both the state and federal levels. 

The Economic Trends Changing the U.S. Workforce 

The 21''-century American economy has been generating more jObs in which workers are self-employed. High· 

profile growth in online "sharing economy" platforms such as Airbnb, Lyft, and Thumbtack have brought increased 

attentron to this change in the workforce. While people working through online platform companies account for 

;, small percentage of the U.S. labor force,' the individualized work arrangements that these business models 

embrace make up a much lorger, and growing, percentage of overall work. 

The key to under~tanding the rise in the type of independent work seen in the sharing economy is the realization 

that the dnving force behind these changes is not flashy smartphone apps but lower trJnsaction costs.n Lower 

transactton costs affect every industry, not just for-hire transportation and travel lodging. 

The Nobel Prize-winning economist Ronald Coase's transaction cost theory of the firm helps explain these changes 

in the American workforce."' In the 20th century, the financial and time costs were too high for many f1rrns to 

benefit from contracting out work. Everything from finding the right provider and corning to an agreement on 

cost, to determrning quality and enforcing contracts, carried higher costs than they do today. As <1n example, high 

transactiOn costs meant that it would have made more financial sense for a company to hire a graphic des1gner 

as a full-time employee, even if it would have been ideal to find contract professionals with the specific expertise 

for each design task. 

But today, lower transaction costs, driven by advances in technology, have led to more opportunities for firms to 

use out:,ide workers rather than m-hou.se employees. Independent contractors are the driving force behind thts 

change. Working as an independent contractor allows someone to choose his or her hours and benefit from 

flexible work arrangements. 

Acros; all sectors of the economy, technology creotes entrepreneurial opportunities for anyone with productive 

resources. These resources can be anything from physical or intellectual services (such as handyman jObs, 

Jcndemic tutoring, and !ega! advice) to the use of property (be it a drill, car, or spare room). 

It 1s still difficult to start a business and work for oneself. But prior to the rise of peer+to-peer online interaction, 

growing a business was even more difficult. By catering to producers of niche products, online platforms like the 

craft shop Etsy help launch widely successful independent companies. These platform businesses allow 

independent workers to reach customers all over the world. eBay has provided a similar type of benefit to sellers 

since 1995. In other words, lower transaction costs make it easier for millions of Americans to work for themselves. 

Most U.S. labor policy is designed for a workforce that is comprised primarily of employees., Though the 

c>mployee·employer model of work is still the most common work relationship, further advances in technology 

Jnd chonging worker preferences should lead to steadily-rncreasrng levels of alternative work arrangements. 

FOUNDATION FOR GOVERNMENT ACCOUNTABILITY 
57 

Implementing the right policy changes to accommodate th1s change will require accurate data on workforce 

trends. Thankfully, the Bureau of Labor Statistrcs (BLS) recently released a survey that attempts to measure the 

prevalence of non-traditional work arrangements. While the committee should applaud BLS for taking th1s step, 

several changes would make the survey's results more comprehensive. 

The Findings of the May 2017 Contingent Worker Supplement 

To more clearly understand how these fundamental changes are affecting the labor market, BLS created the 

Contingent Worker Supplement (CWS) to the monthly Current Population Survey (CPS).·· The CPS surveys 60,000 

eligible households ond provides reliable employment data used by policymakers and the public. The most recent 

edit ron of the CWS was released on June 7, 2018. This followed a 13-year breok from BLS conducting the CSW, 

whrch was released previously in 1995, 1997, 1999, 2001. and 2005. 

The survey, based on May 2017 data, estimated the number of contingent workers and workers in alternative 

arrtmgements, with the two categories considered separately. As defined in the survey, contingent workers are 

comprised of those who do not expect their jobs to last or who work temporary jobs. Alternative work 

arrangernents include independent contractors, on-call workers, temporary help agency workers, and workers 

provided by contract frrrns. The survey's questions referred to the characteristics of respondents' jobs in whrch 

they worked the most hours and were based on work performed during the previous week. 

According to the results of the survey, independent contractors are the most common of the four alternative work 

arr;mgernents. Given the prevalence of mdependent contractors and the structural changes that are affecttng the 

U.S. IJbor rnarket, the CWS's measurement of this alternative work arrangement requires additional attention, 

and my testimony will focus primanly on the measurement of independent contrJctors. Independent contractors 

are defined as "Independent contractors, consultants, and freelance workers, regardless of whether they are selfemployed or wage and salary workers." 

According to the CWS, in May 2017, there were 10,6 million independent contractors, representing 6.9 percent 

of total employment. Independent contractors were 6.7 percent of the workforce in 1995, 6.7 percent of the 

workforce in 1997. 6.3 percent of the workforce in 1999. 6.4 percent oft he workforce in 2001. and 7.4 percent of 

the workforce in 2005. All previous surveys were conducted in February, but there is little evidence that 

conducting the survey in May rnnkes the most recent data not comparable. 

Only three percent of independent contractors were also classified as contingent workers, This is the .same 

percentage as workers in traditional arrangements and the lowest number among alternative work arrangement 

categories. This data point shows that most independent contractors are secure in their line of work, wh1ch should 

allay common concerns that workers outside of the traditional employer-employee relationship face JOb 

insecurity. 

!Vledran weekly earnings for full-time independent contractors were $851, which is similar to those for workers rn 

traditional arrangements ($884). Median weekly earnings for part-time independent contractors were $333. 

wh1ch IS higher than the average earnings for part-time workers in traditional arrangements {$255). Furthermore, 

educational attainment among independent contractors was ln line with workers in traditional work 

arrangerncnts, providing evidence that people of all education and skill levels can find work as independent 

FOUNDATION FOR GOVERNMENT ACCOUNTABILITY 
58 

controctors. Far from only encompassing some of the relatively low-paying JObs found in the sharing economy, 

the most common industry in which independent contractors work is professional and business serviCes. 

It should also be noted that, from 2005 to 2017, inflation-adjusted median eernings for full-time independent 

contractor::. decre<:~::.ed at a lower rate than the median for all full-time employed workers, While full~t1me 

independent contractor median earnings decreased by 0.5 percent over that time, all the median earnings for all 

full-t1rne employed workers fell by 1.5 percent. Similarly, from 1997 to 2005, full-time independent contractor 

median earnings Increased by an inflation-adjusted 1.6 percent while median earns for all full-time employed 

workers rose by 0.9 percent. A foetor outside of weekly pay that could affect this companson is the rising share of 

overall compensation that comes from employer-sponsored health insurance. 

Why the CWS's Independent Contractor Data Are low 

According to the CWS, 84 percent of workers with traditional arrangements hod health insurance coverage, and 

53 percent of these workers received health insurance benefits through their employers. Among independent 

contractors, 75 percent had health insurance coverage, which they obtained through another family member's 

policy, 3 government program, or purchasing it on their own. 

Employers are the principal source of health insurance in the United States, providing health benefits to about 

151 million non-elderly people. In 2017, the average annual premiums for employer-sponsored health insurance 

were $6,690 for single coverage and $18,764 for family coverage. For employer-sponsored health insurance, the 

average single premium increased four percent, and the average family premium increased three percent from 

2016 to 2017.'" 

Outside of the employer-sponsored health insuronce market, about 22 million people had individual health 

msurance coverage m 2017. For this mnrket, premiums per enrollee grew 22 percent over the prior year.'''~' 

Prem1ums for individual market coverage have more than doubled from 2013 to 2017." ThiS difference in health 

insurance costs is a contributing factor to the stagnation of people who are workmg primarily as independent 

contractor::.. 

Employer and employee contributions to employer-sponsored health insurance are excluded from federal and 

state income and payroll taxes. The estimated tax subsidy for this form of coverage was $250 billion in 2013.' 

Because this favorable t<'lx treatment is not available for independent contractors, there is an incentive for people 

to remain in employer~employee relationships to access more affordable health insurance. As health insurance 

costs continue to increase faster for the individual market, this incentive will grow larger. 

De:.pite the problems with affording individual health insurance, 79 percent of independent contractors identified 

by the CWS prefer their arrangement over a traditional job and only nine percent would prefer a traditional work 

arrangement. These preferences are in line with the data from the 1995 CWS release. Workers value flexibility, 

and this preference can be seen clearly in young workers' priorities. 

Deloitte's 2018 millennia! survey finds that 78 percent of people born from the beginning of 1983 to the end of 

1994 would consider short-term contracts or freelance work to supplement full-time employment Furthermore, 

57 percent would consider this type of alternative work instead of full-time employment'' Beyond the potential 

FOUNDATION FOR GOVERNMENT ACCOUNTABILITY 
59 

for higher Jncome, flexibility and work/life balance are the top reasons why young workers are interested 1n 

alternative work arrangements. 

The value of independent contractor work as supplemental income cannot be ignored. For the 70 percent of 

1\mericons ages 18 to 24 who experience nn average change of over 30 percent in their monthly incomes, the 

opportunity to smooth out earnings to meet rent, pay down student loans, or fund a new business venture is a 

clear benefit of alternative work arrangements.x'' 

The main shortcoming of the CWS is that it only measures alternative work arrangements if the jobs are the 

respondents' primary source of income. This decision likely explains most of the reason why the CWS results differ 

drastically from other reputable estimates. 

Another factor that lowers the CWS's estimates of overall independent work is the decision to exclude selfemployed people who are not independent contractors (such as shop or restaurant owners). While there is 

potential for confusion from some respondents if they owned an Etsy shop, for example, BLS's decision makes 

sense given that this group of self-employed people is captured under BLS's regular CPS survey. As the CWS's 

techn<cal note states, "Nearly 9 in 10 independent contractors are self-employed. Conversely, 3 in every 5 selfemployed workers are independent contractor~.''x!ll 

If BLS updates the CWS survey to capture those who use alternative work arrangements for supplemental income, 

then it should also ask respondents about work done over the previous year. The May 2017 CWS only asks about 

work in the previous week, and participation m part-time independent contr11ctor work can be seasonal. For 

example, those who work construction jobs may work as a math tutor over the slower winter, or college students 

may drive for a ndesharing firm during summer breaks. 

Other BLS numbers from the CPS could explain why the number of people who earn most of their income from 

alternative work arrangements has not risen. The seasonally-adjusted unemployment rate stands at 3.8 percent, 

a level that was last seen in 2000. Some scholars have suggested that alternative work arrangements are 

counter-cyclical 1 meaning participation increases when the labor market is weak. xv Given the tax-preferred 

treatment of health insurance for employees, it is understandable why someone would forego flexibility in favor 

of full·t<me employment when the job market is as strong as it is today. 

It should be noted that BLS added four new questions to the May 2017 CWS. These questions attempt to measure 

electronicolly-mediated employment, like those independent contractor jobs found through popular sharingeconomy compan1es. The data from these questions are yet to be relea.::.ed 1 though they are expected to be n1ade 

public later this year. While these results should be interesting, it is more important that the CWS captures 

supplemental independent contractor status work in future editions of the survey, regardless of if it was mediated 

by online platforms. 

Other Measures of Alternative Work Arrangements 

Dunng the 13-year gap between CWS releases, a variety of government, nonprofit, academic, and industry 

organizations attempted to estimate the growth in alternative work arrangements. While estimates vary 

depending on how alternative work is defined, the consensus reached is that the number of people working as 

FOUNDATION FOR GOVERNMENT ACCOUNTABILITY ... 4 
60 

independent contractors has increased over recent years. This conclusion differs from the conclusion one would 

reach frorn CWS's data, !ending further evidence to the claim that BLS's statistical picture of alternative work is 

incornpiPte. 

For example, a 2017 report from Upwork, the Freelancers Union, and Edelman Intelligence estimates that nearly 

60 million Americans are freelancing, which translates to 36 percent of the workforce.·~· From 2014 to 2017, the 

growth in freelancmg was three times faster than the growth of traditional work. Additionally, the Upwork report 

projects that a maJonty of the U.S. workforce will be freelancing by 2027. This estimate is based in part on the 47 

percent of millennrals who already freelance, the highest percentage of any generation. Oddly, the CWS finds that 

independent contractor work was rarer among young workers and most common for workers ages 45 to 64. These 

divergent deta suggest that young workers are the most likely to use independent contractor work for 

supplemental income. 

L1ke Upwork, the American Action Forum (AAF) found that the growth in alternative work arrangements far 

outpaced the growth of traditional work from 2002 to 2014. Between 2010 and 2014, growth 1n independent 

contractors alone accounted for nearly 30 percent of all jobs added. The AAF report also showed that workers in 

alternative arrangements are more likely to be part-time workers, and the prevalence of part-time work among 

alternative arrangement workers has increased since 2002. 

MBO Pertners finds that the number of American workers who work independently If regularly or sporadically, but 

do so at le3st once a month, increased to nearly 13 million in 2017. This represents a 23 percent increase from 

2016. "'' The report also finds that because of the strong job market, the number of people who work 

rndependently but would prefer traditional work fell to 24 percent, which is the lowest that the percentage has 

been 1n the study's seven-year history. Similar to the Upwork report, MBO projects that half of Amerrcan workers 

will be mdependent or have worked independently within the next five years. 

The Mercatus Center released a report m 2015 that mei1sures the growth in alternative work arrangements by 

evalu<1ting 1099-MISC forms issued by the Internal Revenue Service 1099-MISC forms are issued to individuals 

who received between $600 and $20,000 from an entity outside the traditional employment relationship. The 

number of 1099-MISC forms issued by the IRS increased by 22 percent from 2000 to 2014. Over that time, the 

number of W·2 forms issued by the IRS to employees fell by 3.5 percent. A single worker can be issued multiple 

1099-MISC forms, and there were 235 million W-2s issued in 2014 compared to 91 million 1099 MISCs, but the 

growth 10 this type of worker classification shows that companies and workers are taking advantage of lower 

transaction costs. 

This data on 1099-MISC forms follows the conclusions of a 2016 paper by Lawrence Katz and Al<1n Krueger, which 

frnds that 94 percent of the net U.S. job growth from 2005 to 2015 occurred in alternative work <1rrangements." 

The Katz ctnd Krueger paper relies on a survey that resembles the CWS with a smaller sample size, and the authors 

f~r1d that 16 percent of workers were primarily independent contractors in 2015. This result is more than double 

the level from the May 2017 CWS. 

The McKinsey Global Institute estrmates that 20 percent to 30 percent of the working-age population in the United 

States and the EU-15 countries are engaged in some form of independent work.u 1 This estimate is lower than the 

Federal Re,erve's Enterprisrng and Informal Work Activity survey, which estimates that 36 percent of workers 

took part in rnformal pard work in 2015. In its survey of around 8,000 U.S. and EU independent workers, 

FOUNDATION FOR GOVERNMENT ACCOUNTABILITY 
61 

McKinsey finds that 70 percent of Independent workers preferred their work arrangement and 56 percent of 

respondents use independent work to earn supplemental income. 

A Treasury Department report evaluates tax return records from 2014 and finds that nearly 17 million Americans 

filed returns thot showed the profitable operatron of a nonfarm sole propnetorship, an increase of a third since 

200llevels "''The report shows that essentially all the increase in self-employment came from a growing number 

of independent contrilctors, though some of the increase could be accounted for by misclossified employees, 

An additional reason besides different definitions of who counts as an independent contractor that could explarn 

the wide variation in the findings of the surveys and studies previously mentioned is that some survey respondents 

may not realize their worker classification status, For people who identify themselves as wage and salary workers, 

the CWS asks if last week they were working as "someone who obtains customers on their own to provide a 

product or service. 

Peop!e who work as Uber drivers, for example, could think that they do not obtain custorners on their own 

because they rely on the application as an intermediary. Additionally, there have been administrative changes 

from the Department of LHbor over how courts are supposed to interpret worker classification that could add to 

workers' confusion. <W These admini~trc1tive changes are possible because the FJir Labor Standards Act uses a 

definitron of employee that drffers from most other federal statutes, including the National Labor Relations Act, 

the Equal Pay Act, and the Social Secunty Act. 

Conclusion 

\/'v'hi!e conducting the CWS is a major undertaking, the data it provides can help policymakers better understand 

how work is changing, Rather than being a sporadrc survey, BLS should work to release an update to the CWS 

every two years, as it did from 1995 to 2001, However, the CWS's divergent findings on the prevalence of 

alternative work arrangements-especially for independent contractors-show that additional measures are 

needed to Ci!pture J complete picture of the changing Americt1n workforce. 

Alternative work arrangements are desirable to many workers, especially when they are used for supplementol 

income, Failing to capture this reality through the CWS leads to the impression that independent work is 

stagnating, a conclusion that is in d1rect opposrtron to other reputable estrmates ilnd what is expected from 

economic theory. 

! app1ec1ate this committee's continued interest in understJnding how the American workforce is changing and 

how federal policy can facilitate independent work for those who desire it, Thank you again for the opportunity 

to testify. I look forward to answering <.my questions from the committee. 

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to Succe:,:,,'' Corr;pctitlve Enterprise- Institute (2016), https://cei.org/changingnatureofwork; Michael Munger, Tomor'row 

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FOUNDATION FOR GOVERNMENT ACCOUNTABILITY 
62 

H.H Coa<;e, ''The Nature of the Finn," Eronomiw (1937), 

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Con1miltee (2016), https:/ /edworkforce.house.gov/tlploadedflles/r.leyer. pdf. 

"'Bureau of Labor Statistics, "Contingent and Alternative Employment Arrangements," U.S. Department of Labor (2018), 

https "/ jwww .bls.gov/news.releasP/pdf/conemp.pdf. 

' Ben G1t1s and Will H1nehart, "Making Senc;c Of The 2017 Contingent Worker Survey," American Action Forum (2018), 

11 tt ps :/I www. a me r1ca n Jet ion forum. o rgl research/making ·sense-of-the-2017- contingent -worker-survey/. 

V" Gary Claxton et ell., "Emrloyer Health Benefits Survey," Kaiser Family Foundation (2017}, https:/ /www.kff.org/report-

~ectlon/ellb~~2017 -surnmary-of-f1ndings/ 

v,' Cynthli'l Cox et al., "lndiv1duallnsurvnce Market Performance in 2017,'' Katser Family Foundat1on (2018), 

http:/ /fdcs kff org/attachnlentl!ssue-Brief -lndividual-b1sur ance-Market-Performance-in-2017 

'£(ln\Ulld HJislmaier and Doug Badger, "How Obamacare Rcmed Premiums,'' The Heritage Foundation (2018), 

h ttps:/ /www. heritage. org/ Sites/ d efa u I t/f i I es/2 018 ·03/BG 3291.pdf 

David Blumenthal, "The Decline of Employer-Sponsored Health Insurance," The Commonwealth Fund (2017), 

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FOUNDATION FOR GOVERNMENT ACCOUNTABILITY . 7 
63 

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FOUNDATION FOR GOVERNMENT ACCOUNTABILITY .. 8 
64 

Mrs. FOXX. Thanks to all of our witnesses for your excellent presentations. I will begin the questioning and yield myself five minutes. 

Mr. Moore, as you presented in your testimony, many economic 

trends for American workers are moving in very positive directions. 

Unemployment rate at the lowest rate we have seen in two decades, the number of unemployed workers dropped by nearly three 

quarters of a million people, wages are beginning to rise. In fact, 

for the first time on record, the number of job openings now 6.7 

million actually exceeds job seekers. Some have suggested President Trump was handed an economy that was already creating jobs 

and was primed for the sort of growth we are now experiencing. 

However, in your testimony you pointing to an economic forecast 

which suggests growth of more than 4 percent in the second quarter of this year, exceeding the growth rate seen as President 

Obama left office. Knowing of the positive impacts of the tax law 

passed by Congress, is there another recent policy change impacting the current economic boom which is significant in terms of its 

positive financial impact on the typical American household? 

Mr. MOORE. Well, first of all, I mean, I don’t think there is any 

question that the tax bill has had a very positive effect, I mean, 

if you look at the growth rates in the economy we have seen just 

unquestionably a bump up in growth and, you know, we had a recovery over the last seven years but it was the weakest recovery 

we had from a recession since the Great Depression. So it was an 

anemic recovery. It was a long recovery but it was very weak with 

very little wage growth and not enough growth. 

The average growth rate from 2009, June of 2009 when the recovery began though June of 2016 was less than 2 percent per 

year. We—the growth, you know, I have heard you all talking 

about how do we, you know, reduce income inequality. How do we 

reduce poverty? How do we get wages up? You have to have 

growth. You have to have economic growth. 

Now there is some really good news that just came out literally 

yesterday from the Federal Reserve Bank of Atlanta that the 

growth rate for the 2nd quarter is—looks like it’s going to come 

and 4 and a half to 5 percent. That’s a phenomenal number. Congratulations. I think that the—we are going to see I think another 

four or five quarters of very high growth rates. 

So the big issue now is, you know, why did it happen? I think 

the tax cut—why was the tax cut so related to growth? I think the 

two most important things you did in the tax cut was bringing 

down our business tax rates. You know, it has just made America 

more competitive. America is a great place to invest in. One of my 

favorite headlines of I think this was from last week, from the Wall 

Street Journal, U.S. economy is now the envy of the world. We are 

growing faster than virtually any other country. Europe is growing 

at half a percent right now, we are growing at four. 

So I think you guys should take a lot of—you deserve a congratulations for the tax cut but the work isn’t done because we are not— 

we still haven’t seen the wages rise enough. And we, I really am 

concerned about that we are not seeing enough young people getting into the workforce and we need to have that happen. 
65 

Mrs. FOXX. Thank you very much. I saw some very compelling 

statistics about young people not working in the summer for example, college students and high school students recently, phenomenally low numbers, very, very telling. 

Dr. Farren, as you state in your testimony, and I would agree the 

Bureau of Labor Statistics collects and publishes information that 

can be very helpful not only to policy makers but to business owners, perspective employees, and students choosing a future career. 

However, given that most people do not access BLS’s website on 

a daily basis, how do they learn about current economic and labor 

market conditions? And how can BLS make its products more accessible and understandable to non-economists who have an interest in this information? 

Dr. FARREN. Thank you very much for the question. The easiest 

way for the BLS to make the data more accessible to non-economists is to make it more accessible to economists in the first place. 

The people in this panel, the people in the media that actually use 

this data, the people in trade associations and union associations 

that actually use this data to communicate with their constituents 

and with the people that read what they write is the first way. 

The second way is there is some evidence of other websites like 

the Fed websites from the St. Louis Federal Reserve Bank and the 

IPUMS website that offer additional ideas of how to make the 

website more accessible. 

Mrs. FOXX. Thank you very much. I now recognize Ranking 

Member Scott for five minutes. 

Mr. SCOTT Thank you, Madam Chair. Mr. Moore, you indicated 

that the purpose of the tax bill is not to help the top 1 percent. 

What portion, when it finally passed, what portion of the tax benefits went to the top 1 percent and corporations? 

Mr. MOORE. So this is a key point, I’m so glad you asked about 

this, Representative. The—we believe that when you cut the corporate tax rate and the business tax rates that a big percentage of 

the benefits of that go to working class Americans. That’s why I 

showed you that chart about increasing productivity and increasing 

investment. 

Mr. SCOTT So you don’t disagree with the 80 percent went to the 

top 1 percent and corporations? 

Mr. MOORE. No absolutely not. We actually think that if you look 

at a Congressional Budget Office study that came out last, I believe 

it was in 2016 or ’17 and I can get you that data. The Congressional Budget Office sets a 70 percent of the benefit of cutting the 

business tax rate goes to workers. So the— 

Mr. SCOTT. Okay. So that is the trickledown effect. 

Mr. MOORE. Because you—the way you get wages to rise is to 

have number—two things you need. A tighter labor force, right. 

You need a tight labor force to have wages rise. And number two, 

you need workers to be more productive and workers are more productive when they have more computers and technology to work— 

Mr. SCOTT And how many jobs are projected to be created with the $1.5 trillion tax cut? 

Mr. MOORE. I’m sorry, I had a— 

Mr. SCOTT How many jobs did you—are you projecting will be 

created? 
66 

Mr. MOORE. From the tax bill or? 

Mr. SCOTT Yes. 

Mr. MOORE. It’s hard to say, I mean, I think we projected that 

the tax bill over 10 years could create an extra 10 million jobs. I 

mean, so far so good. The tax cut has only been in existence for 

less than six months. 

Mr. SCOTT And you have seen projections in the 300,000 range? 

Mr. MOORE. Sorry, monthly or? 

Mr. SCOTT No. No. Total. 

Mr. MOORE. I’m sorry, I’m not understanding your question. 

Mr. SCOTT Well, you said 10 million. Most of the projections have 

been in the 300 to 600,000 range. 

Mr. MOORE. The 300,000. 

Mr. SCOTT Yes. 

Mr. MOORE. I’m sorry, I’m not understanding your question. 

Mr. SCOTT Well, I guess not if you are guessing 10 million but— 

Mr. MOORE. You know, the numbers that have come in just in 

this last six months on the unemployment have been pretty robust. 

I mean, we got over 200,000 in the last month. It’s going to take 

a little. Look. This isn’t going to happen overnight. 

Mr. SCOTT That is right. 

Mr. MOORE. When you cut the business tax rates it is going to 

take maybe a year or two for the full impact of the tax cut to kick 

in. 

Mr. SCOTT Dr. Spriggs, can you say how much the jobs have been 

increasing since the passage of the tax bill? 

Dr. SPRIGGS. The creation of jobs has not accelerated since the 

passage of the tax bill. Wages have not accelerated. In fact, real 

wages have remained flat since the tax bill. So so far, the only 

thing that has happened is that the trend in wages has flattened 

but the trend in the terms of job creation haven’t accelerated. So 

in order to get 10 million jobs which would be 1 million jobs a year, 

we would have to see some marked acceleration in job creation because that is a projection above trend in order for this to have an 

effect. And so far we are not above trend. 

If you look from 2010 to today, we have been on the same path 

for the last eight years. So nothing has changed either in the last 

two years, nothing has changed since January in terms of job creation. 

Mr. SCOTT And can—we have heard about the effect of minimum 

wage. Can you say how minimum wage affects positive or negative 

job growth? 

Dr. SPRIGGS. So the best research we have done and labor economists have gotten far better at being able to identify the precise effects of the minimum wage are that it essentially doesn’t do anything on job growth. It changes the nature of jobs that will be created. They will tend to be higher wage which is the intent. When 

you look at the period when Congress made sure to keep the minimum wage going up with median wages, you see that, broadly 

speaking, wages went up and we had higher productivity. So the 

effect of raising the minimum wage isn’t so much on job growth as 

to the character of the jobs and the wages that go up for everyone. 

Mr. SCOTT What about youth employment? 
67 

Dr. SPRIGGS. Youth are the area that economists looked at first 

because the, in the old days they were the ones who predominately 

had those jobs. Today predominately people of the minimum wage 

are immigrants. That’s part of the reason why we haven’t found an 

effect on teenagers. 

Teenagers’ unemployment we have as many studies that say 

there is positive growth as there is negative growth. The net effect 

is zero when you look at all the studies, add them all up together. 

Mr. SCOTT Thank you, Mr. Chair. 

Chairman WALBERG. I thank the gentleman and I recognize myself for five minutes of questioning. I had markup votes in Energy 

and Commerce, I am sorry I had to leave. I wanted to hear the testimonies, glad we had a chance to read those. This is certainly an 

opportunity amongst many to see the difference between a formula 

that says increase taxes, spending, and regulation to grow the 

economy versus reduce taxes, spending, and regulation to grow the 

economy. And time will bear it out. I am betting on the last. It will 

work better because it has worked throughout the course of history 

in our country. 

Mr. Moore, as you highlighted in your testimony, the growth in 

the U.S. economy and prospects for workers now better than they 

have been in more than a decade. Much of this growth is due to 

our work with the President to update and modernize U.S. tax 

code. However, the tax code is not the only set of laws that have 

grown outdated and stifled workforce opportunity. Many federal 

labor and employment laws were written in the 1930s and 40s and 

have not been substantially updated in decades. 

In your view, what changes to our nations labor laws are needed 

to continue the growth and opportunity to begun under the Trump 

administration? 

Mr. MOORE. That’s a good question. I think we have a fundamental disagreement at this table about the effect of the minimum 

wage. I think that, you know, the evidence is pretty clear from the 

academic studies that when you raise the minimum wage the people are mostly—who feel the brunt of that are teenagers and especially minorities because they tend to have the lower skills. 

I mean, obviously, you know I have a 17 year old son, Congressman. I love him to death, but even I wouldn’t pay him $8 an hour, 

right. I mean, he just doesn’t know how to—he doesn’t have the 

skills. I mean, the importance of the starter job is so critical to getting people, I mean, when you—everyone remembers the first job 

they had. And I remember mine. Will give you a, you know, an indication of my age. My first job I was working for $2.10 an hour 

in a warehouse in Chicago, Illinois. 

Chairman WALBERG. I was working for a buck 50 at a gas station. 

Mr. MOORE. Okay, you’re a little older than I am. 

Chairman WALBERG. In Chicago. 

Mr. MOORE. In Chicago. So but my point is, you know, you learn 

a lot from your first job. You learn how to show up, work skills, 

maybe work with a cash register or equipment and so on. In fact, 

you know, and the evidence is very clear that people who are on 

the minimum wage, most of them, not all of them but most of the 

people on the minimum wage it’s a starter job and it’s after six to 
68 

nine months most of the employers pay them on increase once they 

get the skills and learn how to do things. 

You know, the interesting thing about this minimum wage issue 

because I think it is important because, remember what happened 

literally six weeks after you passed the tax cut. Two of the biggest 

employers in the United States, Walmart and Costco, what did 

they do? 

Chairman WALBERG. Raised the minimum wage. 

Mr. MOORE. They raised their minimum wage. And this is the 

argument we, you know, it was the argument I was making earlier. 

When you create a tighter labor market as we have right now, it 

benefits workers because if you don’t like your one job, you can go 

down the street and get another job. And that has helped and that 

is why Walmart and these companies are increasing their wages 

because they have to retain their workers. 

Chairman WALBERG. Right. 

Mr. MOORE. And that’s a great way to get wages up. 

Chairman WALBERG. Competition, yes. Dr. Farren, it’s clear a lot 

has changed since 2005, which was the last time the BLS completed the Contingent Worker Supplement. With the technology 

available today, hailing a ride, job sharing, the economy, et cetera, 

it is freelance work and flexibility is easier than ever. We need to 

know the statistics on that. How can BLS ensure this population 

of workers is captured in future studies in a more realistic way? 

Dr. FARREN. Thank you. So one of the ways that the BLS can do 

this is to make sure that they are targeting the right people with 

their surveys. 

Chairman WALBERG. Excuse me, Dr. Farren. I meant Dr. Meyer 

on that. We could get that on you but I think I probably Mr. Meyer 

is better set for that one. 

Mr. MEYER. Well, I’ll just continue on what Dr. Farren was responding to your question because you brought up that this is important. We don’t want people doing hard work, being left out of 

government data do I will just reiterate that first we need to measure independent contractors even if they’re not getting the majority 

of their income from this. And I just recommended a $600 threshold because it seems to be based on how we determine other tax 

law along independent contractors. But also consider—you unfortunately missed the story of my mom selling mittens in Minnesota 

at craft fairs. 

Chairman WALBERG. I heard about it yesterday. 

Mr. MEYER. Oh. Well, with this surgery that was currently done 

it was from May 2017 was when the respondents were asked. My 

mom wouldn’t be reflected in that because she wasn’t working the 

alternative work arrangement at that point. So I think bumping it 

back to a year and looking at over a year, that $600 threshold that 

would give us a much more complete picture. Though it should be 

noted that the BLS is releasing another supplement to the CWS 

that focuses just on technology mediated work so think of online 

platforms but I care about all independent work. We want to capture the self-employed, the entrepreneurial economy and I think by 

making those simple changes it—additionally additions rather than 

changes to the survey it would go a long way to providing you with 

better information. 
69 

Chairman WALBERG. It is an amazing growing economy with all 

sorts of diversity to it. Thank you. My time is expired and I now 

recognize the gentlelady from Florida, Ms. Wilson. 

Ms. WILSON of Florida. I ask unanimous consent that the chart 

I showed earlier—be entered into the record. 

Chairman WALBERG. Without objection. And hearing none it will 

be entered. 

Ms. WILSON of Florida. At this time I would also like to note that 

the mention of increased wages by Chair Walberg did not adjust 

for inflation. Real wages adjusted for inflation have not grown from 

May of last year. 

Dr. Spriggs, thank you so much for being here today. And I have 

a few questions. Why is it that wages aren’t rising even though the 

unemployment rate is at historic lows? What does this tell us about 

the state of our labor market institutions and what are the top 

three actions Congress should take to repair these institutions? 

Dr. SPRIGGS. Thank you, Congresswoman, and briefly before I 

answer your questions, Walmart raised wages at the same time 

they announced they were letting go of thousands of workers. At 

the same time they were announcing they were going to do a massive stock buyback. So the net effect for workers really was zero. 

The net effect for the Walton family was that they got a whole lot 

richer. 

So for labor economists, this is the exact market where our elementary theory should make wages go up because there are more 

job openings announced than there are people looking for work. 

The young people are entering the labor market are far better educated than the older workers who are retiring. Companies have had 

several years of record profits, they have just been given a tax cut 

that gives them billions of dollars. This is exactly the environment 

in which our textbooks say wages should go up if it was only the 

market. Wages aren’t going up. 

So it’s clearly that you have to look back at our economic history, 

the time period that most people think we want to get back to, 

meaning the period from 1946 to 1979, and when you look at that 

period what stands out is we relied on labor market institutions 

that Congress had established. Knowing the history of the Great 

Depression, they understood that labor markets on their own don’t 

work. We gave workers the right to bargain so we need to revisit 

and see what went wrong because workers have been losing the 

right to bargain and Congress could pass legislation as you mentioned that could restore that. 

We have not done the job to maintain the minimum wage. My 

first minimum wage job, we must be the same age, Chair, was 

$1.75 because Sears Roebuck told us we are going to pay you 25 

cents over the minimum wage. That was their incentive to make 

sure that we kept the job and didn’t go walking off. 

Today, that would be around $10 an hour. It would have been 

illegal. It would have been illegal to pay someone $8 an hour. 

Now I was a high school student. I don’t think, I think I’m pretty 

smart, but I don’t think that I’m that much smarter than today’s 

high school student that we can justify paying them less than I got 

paid for my starting job. And clearly they are more productive. 
70 

The third thing that Congress can do is not only is it just help 

with labor standards and organizing but when the balance of power 

turns against workers through labor market standards, that lowers 

the bargaining power of workers so when you roll back safety 

standards like the beryllium rule and exposure to beryllium, when 

you speed up hog slaughtering lines, when you do other actions 

that diminish the relationship between workers and management, 

you undermine the whole ability of workers to bargain. And that’s 

key to raising wages so Congress must watch these rollbacks and 

labor standards. 

Ms. WILSON of Florida. Quickly, how will the Tax Cuts and Jobs 

Act affect income inequality? 

Dr. SPRIGGS. Well, it’s weighted heavily towards those at the top. 

If the intent was that companies were going to use it to actually 

invest in capital which would improve the productivity of workers, 

so far we see no signs of that. The Federal Reserve’s forward looking orders for new equipment not in defense show no signs that 

companies are spending any more money on physical capital- the 

capital that increases the productivity of workers. Instead, companies have announced over a trillion dollars in stock buybacks. 

Ms. WILSON of Florida. Thank you. 

Chairman WALBERG. Thanks, gentlelady, and then I recognize 

the gentleman from Georgia, Mr. Allen. 

Mr. ALLEN. Thank you, Mr. Chairman and thank you so much 

for participating in this important hearing. You know I don’t know 

how it is in other districts, but in my district, obviously we have— 

everybody needs workers. Right now I’m meeting with companies 

and the wage issue is, I mean, you know, truck drivers for example. $70,000 a year and all their medical care paid for. Chemists 

or plant workers, $20 an hour, all their medical paid for. But yet 

we still have these shortages. The biggest restraint that we see, obviously that the tax reforms and tax cuts and the jobs act has done 

exactly what we had hoped it would do and that was grow the 

economy. We are looking at tremendous job growth throughout this 

country. 

But you cannot grow an economy without a workforce. And there 

is going to be a lot of pressure on all of our institutions to produce 

that workforce. We have got a lot of people that still aren’t in the 

workforce that need to be in the workforce. In fact the New York 

Times reported that Social Security disability benefits are plummeting which means we are getting folks into the work place. 

And so with that, Mr. Moore, you know, this article attributed 

this reduction as the latest evidence that a stronger economy is 

pulling people back into the workforce and keeping people into the 

workforce. Does this report surprise you given the strengthening in 

the labor market? 

Mr. MOORE. No, I saw that same report that you’re mentioning 

and it is such good news that because what happened in the last, 

after the last recession was that disability became a new form of 

welfare. So we saw a huge spike up in disability payments. It 

wasn’t because more people were injured on the job, it was because 

this is the way you got paid because you couldn’t find a job. 

As we have created, I mean, this is what I was just telling Chairman Walberg, I think this relates to your point is that there is so 
71 

many benefits to creating a tight labor market where, you know, 

there was a story in the New York Times a few months ago about 

employers literally waiting outside of the prisons so when people 

were released from prison they could get them into the workforce. 

I mean, this is a wonderful thing to see. 

I’ll mention one other quick thing that is related to this whole 

discussion. Just yesterday, the manufacturing numbers came out. 

As you know, manufacturing numbers did not grow virtually at all 

during the first seven years of the recovery. Manufacturing, over 

90 percent of manufacturers are positive and bullish and they expect to expand their operations. I mean, that is a wonderful thing. 

So those are high paying, blue-collar jobs in states like Michigan 

and Georgia and many of those states we went to on the campaign 

were frankly, look, we had a recovery but there were a lot of states 

like Michigan and Wisconsin and Pennsylvania and Ohio and West 

Virginia where people didn’t feel the recovery. Now they are starting to feel a recovery. 

Mr. ALLEN. Yes. Yes and again to my district, we are seeing that, 

we are seeing new businesses being created and I will tell you this. 

You know, my folks in the 12th district are very appreciative of the 

increase that they have gotten in their paychecks. The increased 

benefits, I mean, nationwide we are talking more than 4 million 

people, $6 billion, you know, that companies are putting out there. 

And again, you know, it’s to number one is to keep their folks 

because of the competiveness in the work place. How do you use 

us solving this problem, Mr. Moore, as far as, you know, we got 6.7 

million jobs out there? We have got to get, you know, we have lot 

of people that aren’t in the workforce back to work, give them the 

dignity and respect they deserve. 

Mr. MOORE. It’s a skills problem. It’s a skill problem. I mean, 

there are a lot of workers out there that could be and should be 

working but a lot of them just don’t have the basic skills that are 

necessary and I like what President Obama proposed and I think 

President Trump has reiterated this. I love the idea of apprenticeship programs. If you do—if you get an apprenticeship program 

and you’ve, you know, you learn how to be a plumber, or a, you 

know, an electrician or something like that, why shouldn’t we give 

those people the same equivalent of a four-year college degree? If 

they are getting the kind of skills they need. 

I do think one of the things you all have to think about in this 

committee, I think it’s a really important issue for the next 20 

years is what is the real valuation of a four-year college degree 

with somebody getting a sociology degree versus somebody who is 

getting a real skill? 

I mean, if you are a pipe fitter these days, my goodness, a pipe- fitter or a welder, you can get a job for $60, $70,000 a year, start 

your own business, you can be making $100,000. There is nothing 

wrong, Congressman, with working with your hands. And those are 

getting to be better jobs all the time. 

Mr. ALLEN. Right. Well, thank you so much and I yield back. 

Chairman WALBERG. I thank the gentleman. Now I recognize my 

friend from Connecticut, Mr. Courtney. 

Mr. COURTNEY. Thank you, Chairman Walberg, and thank you to 

all the witnesses for being here today. Again the timing given the 
72 

fact that it’s six months since passage of the Trump tax cuts is appropriate to begin the process of trying to understand better the 

impact. And again, I think, you know, it seems like pretty much 

everyone is pretty much unanimous about the value of having the 

Department of Labor, you know, have the tools to track data because otherwise we are just sort of stumbling around in the dark. 

So if you look historically at the Reagan tax cut, the Bush tax 

cut, and now the Trump tax cut, what is interesting is that in the 

first two cases, every single House Republican voted in favor of 

those bills. The Trump tax cut however, was kind of interesting is 

that there was a dozen House Republicans who voted no. Eleven 

were concentrated in states, New Jersey, California and New York. 

And the reason is because of one aspect of the bill which has not 

gone into effect yet really, which is the cap on state and local tax 

deduction which Mr. Moore giddily described as death to Democrats in the lead up to the vote which I’m sure those Republicans 

from those states would sort of ask themselves what am I, chopped 

liver? And as well as Governor Baker from Massachusetts. 

So you know, Dr. Spriggs, you did actually focus on this on page 

seven of your testimony about the fact that, you know, this shoe 

is going to start dropping with the next tax filing in 2018 where 

a lot of middle class families and frankly it isn’t just blue states, 

Mr. Moore, it’s going to impact states all across the country, are 

suddenly going to be in a totally, you know, no win situation in 

terms of, you know, how you pay for basic fundamental services 

like public schools, public safety, transportation, infrastructure, et 

cetera. Which again a large portion of that is paid for by state and 

local governments. 

So when we talk about the skills gap, the biggest vehicle is still 

the public school system and the career and technical schools which 

again I would say yes, apprenticeships. I can take you up to Electric Boat in Connecticut and show how successful that’s going but 

frankly, we need to go deeper into the tech schools and invest there 

but the bulk of that is going to come from state governments and 

local governments. So, Dr. Spriggs, could you talk about again that 

shoe which has still not dropped yet in terms of capping and crippling and handcuffing the ability of state and local governments to 

deal with labor market issues with education and job training? 

Dr. SPRIGGS. Thank you very much, Congressman Courtney, because that is the big gap that we have experienced. We have done 

the things to restore business dynamism, businesses have been created because we took a more balanced approach in terms of who 

benefitted from the recovery act—and you need balanced income 

growth to generate the most number of customers and that’s what 

gets you business creation. 

But we didn’t do the job in restoring public investment. And 

you’re exactly right, it’s not just the blue states. We saw teachers 

in Oklahoma and West Virginia- These are very much red stateswalk out because they have had their school starved for the necessary investment and they have seen their pupil-teacher ratios go 

up and up and up and they can’t do their jobs effectively. 

We are down 100 over 120,000 teachers just to get back to where 

we were in 2008 and then you have to think about the growth in 

the student population. We probably need close to another 200,000 
73 

local school teachers and you’re exactly right. The states that have 

been squeezing on public education the most are now going to find 

how do they catch up with the tax bill that is going to force them 

to double tax their citizens. And it’s that double taxation that creates the bind for the state and local governments and it will in 

many voters’ eyes appear to be unfair. Why am I paying taxes 

twice just to get the necessary things for my child to get educated? 

And if I’m an employer for the workforce I want to be educated. 

We have never in the history of the United States had this massive de-investment in K through 12. We are moving against the 

trend globally where everyone else is increasing their investment 

in education and this is just going to make it that much more difficult. 

Mr. COURTNEY. And again just to drive one last point again, we 

have still not seen the true effect yet of the SALT provision in the 

Trump bill which is going to really again start landing hard on 

middle class families in 2019 and years beyond. Isn’t that correct? 

Dr. SPRIGGS. That’s correct because it’s going to take a lot more 

revenue to get back to where we were because we are falling further behind. 

Mr. COURTNEY. Thank you. I yield back. 

Chairman WALBERG. I thank the gentleman. And I recognize the 

gentleman from Indiana, and glad to have you on our Subcommittee and the Committee as the newest member, appreciate 

that. Mr. Banks. 

Mr. BANKS. Thank you, Mr. Chairman. A pretty good first committee. I appreciate each of the panelists who are here today. 

Mr. Moore, when we passed the Tax Cuts and Jobs Act six 

months ago before the bill passed, all of the loudest voices in your 

field said we’ll never exceed 3 percent GDP. Why were they so 

wrong and how good can it get moving forward? 

Mr. MOORE. That’s a good question. You know, the economy for 

the last four quarters has been growing at about 3 percent so we 

are there now. And you’re right, most economists believe—who 

were skeptics of the tax and by the way, this growth isn’t just 

being driven by the tax cut. I mean, it’s being driven by pro-America energy policies, by the deregulations, by just being, by a probusiness kind of atmosphere. 

I mean, you saw literally the day after the election consumer and 

business confidence went through the roof. It didn’t happen by accident. This was a, the American had elected a pro-business president. 

It’s a, we will see if this is, look. I don’t want to read too much 

in short term data. It’s only been, you know, a year and a half 

since Trump has been president. The tax cut is only six months old 

so it’s a little early to make a big, you know, bold proclamations 

about the tax bill. All we can say so far, so good. You know, almost 

every economic indicator right now, almost every indicator is pointing straight north. And so this is a positive thing. 

One just quick thing on this SALT deduction because this is a 

big issue and I was one of the biggest advocates of eliminating the 

SALT deduction. And I just want to point out this because it is 

really important. Ninety percent of taxpayers around the country 

are not affected one iota by that because there is a $10,000 deduc-
74 

tion on their state and local tax deduction. That means for the bottom 90 percent they are completely unaffected. 

The top 1 percent pay half of the cost of the cost of getting—this 

is the—this was the most progressive if you want to use that term, 

feature we had in the tax bill. Is half of the cost of that was paid 

by the richest 1 percent. It is one of the reasons that the tax bill 

is not regressive because the, you know, it’s paid for by millionaires 

and billionaires, the very people that the people voted against the 

bill said they wanted to tax more. That’s what you did by getting 

rid of the state and local tax, right. 

You come from Indiana by the way. Indiana is a fairly modest 

spending state. Your taxes are pretty modest, your spending is 

pretty modest, it’s one of the reason people are coming to Indiana. 

Why should people in Indiana have to pay higher taxes, federal 

taxes to pay for high cost services in New York, New Jersey, Connecticut and California? It’s just not fair. People, if people in New 

York and California and New jersey ant high cost government services, they’re certainly entitled to do it but that should be paid for 

the by the people who live in those states, not a person who lives 

in Elkhart, Indiana. In my opinion. 

Mr. BANKS. I appreciate that. I have a couple of more questions 

for you. Dr. Spriggs has had me thinking a little bit when he 

talked about income equality, wage equality. Yet in your testimony 

you include a very compelling graph, a 99 percent correlation between business investment and wages. Could you perhaps expand 

on that for a moment? I have a very important question to ask you 

after that and have very little time so. 

Mr. MOORE. So it’s just a, you know, connecting the dots that for 

higher wages you have to have more productive workers, you know, 

why is an American worker paid more than a Mexican worker in 

Mexico? Because American workers are more productive. They 

produce more on the job. I don’t think any economist really disputes that. 

So how do you get workers to be more productive? Better education, better skills, certainly so that you have more human capital 

but also so they have more computers, more technology and things 

to work with. I mean, a worker works with a computer makes twice 

as much as one who doesn’t have the computer and, you know, I 

just disagree with this analysis that investment has an increase. 

If you look at the cap ex numbers what we call cap ex which is 

business capital expenditures, they have gone way up since the tax 

cut. And, I mean, look, if you tax something, you get less of it. If 

you tax something less, you get more of it. You reduced the taxes 

on business capital investment. That is why one of the most important things, Mr. Chairman, I think you did in this bill was the immediate expensing provision so that businesses could go out. 

I remember talking to Fred Smith who is the, you know, the 

chairman and CEO of FedEx, one of America’s, you know, most 

successful companies. And I think FedEx employs well over 

100,000—a couple hundred thousand workers. And, you know, I remember talking to him and he said, ‘‘Look, you pass this thing with 

the expensing and the lower corporate tax reduction, we are going 

to start, you know, purchasing planes, trucks, all of these things,’’ 

and it is happening. It’s a great story of revival. 
75 

Mr. BANKS. Yes, okay I have 10 seconds left. Either tonight or 

tomorrow we will be passing the Farm Bill which includes significant reforms for work requirements. 

Mr. MOORE. Absolutely. 

Mr. BANKS. Would you agree that is significant to fill our workforce gap? 

Mr. MOORE. We need to do that, right. I mean, look. In this day 

and age I think we all agree, anybody who wants a job and has 

basic skills can find a job. Let’s have, you know, for food stamps 

and other welfare programs work requirements. And this is a good 

way to get people into the workforce. You can’t get anybody out of 

poverty if they’re on welfare. Right. The first step to getting a person out of welfare is, I mean, out of poverty is to get them into a 

job. So we did this by the way in the mid-1990s, Congressman. 

Signed by Bill Clinton, a Democrat and a Republican Congress. 

And the work for welfare requirements were the most successful 

things we ever did. We saw the income of those people who moved 

off of welfare over the next five or six years rose. Get people into 

a job, it’s the most important thing you can do to help those families. 

Mr. BANKS. Thank you, my time has expired. 

Chairman WALBERG. I thank the gentleman and even as a Wolverine it gives me pleasure to recognize the Buckeye, the 

gentlelady from Ohio, Ms. Fudge. 

Ms. FUDGE. Thank you so very much, Mr. Chairman. Thank you 

all for being here. And just, Mr. Moore, just to be accurate, most 

people on food stamps who can work do work. So let’s start there. 

You know, we all have heard the statements that all politics is 

local. And I agree with that and so since my unemployment rate 

is nowhere near 3.8 percent, I just consider it fake news. It’s just 

all fake news. Just like a 4 percent GDP is also fake news. 

Mr. Moore, if it was not your intent to make the rich richer with 

the Trump tax scam, you absolutely failed miserably because that 

is exactly what the bill did. And for those people who have received 

a small reduction in their taxes, they are paying three to four times 

that just trying to get healthcare because my colleagues continue 

to try to do away with the Affordable Care Act. 

Mr. Spriggs, how much of the Republican tax cut has actually 

gone to workers? 

Dr. SPRIGGS. At the moment it’s not clear to see what went to 

workers. Again, if it was going to be in the form of investment at 

their job that gave them more equipment that would increase their 

productivity we haven’t seen it. Productivity hasn’t gone up, the investment in the equipment hasn’t gone up and so it’s not clear and 

their real wages haven’t gone up. 

Ms. FUDGE. So then since you don’t know then whatever numbers they keep telling us is just made up. Just more fake news, 

right? 

Dr. SPRIGGS. I— 

Ms. FUDGE. Tell me, who benefits from the billions in stock 

buybacks that the companies announced after the tax scam was 

passed? 

Dr. SPRIGGS. So, we know that the ownership of stocks is highly 

concentrated at the top 1 and 10 percent despite people wanting to 
76 

say it is in your 401(k) we have to remember that lots of workers, 

the majority don’t have 401(k)s. So the reality is this goes to a very 

few. And in the case of the Walmart example that I gave, this goes 

to one family, essentially. So this has been a, the effect has been 

a massive redistribution upward. 

Ms. FUDGE. Okay. Let me just ask because we were talking earlier about the concern that young people not working primarily because older people are working longer because they can’t afford to 

not work. This country knows that we are more than a billion dollars in debt as it relates to funding pensions. We compounded the 

problem when we passed the tax scam and put the country $2 trillion in debt. So now we come back and we say we are going to cut 

Social Security benefits and we are going to cut Medicare and Medicaid to pay for a tax cut for rich people. So if older people cannot 

afford to retire because they can’t, they don’t have the savings and 

or they don’t have the pension, what do we do from here? 

Dr. SPRIGGS. Well, we have a big problem for the generation that 

entered the labor market during the Great Recession. They didn’t 

get the job to start with that was typical. They weren’t able to pay 

into a retirement plan. We have left them in a very, very hard position. And employers have skipped over them and now want to hire 

new graduates so we have that problem. We have the— 

Ms. FUDGE. Mr. Spriggs, I don’t want to—my time is really running short so do you think it would be more effective if we put 

money into summer jobs instead of taking care of children at the 

border who we took their parents away from them. It would probably be less expensive I would guess to just give kids summer jobs 

or give them better training instead of creating a problem that is 

costing this country billions of dollars. 

Let me just ask this question of all of you. You were talking 

about vocational education. I think it’s great. I think there is absolutely nothing wrong with working with your hands. How many of 

you steered your kids into vocational education instead of college. 

Just raise your hand. Okay. I didn’t think so. 

Mr. Chairman, I would like to yield the last 30 seconds I have 

to the Ranking Member, Mr. Scott. 

Mr. SCOTT Thank you. Dr. Spriggs, can you tell me some of the 

challenges involved in the gig economy? 

Dr. SPRIGGS. Well, the challenges are that many of the jobs are 

an attempt to arbitrage labor market regulation. They attempt to 

find areas where we don’t do a good job of regulating and they attempt to create the myth that these aren’t employees when in fact 

they are employees. So think of Uber. Uber is really just Louis on 

Taxi. It’s just a dispatcher, except now it’s the phone. And they 

want to pretend that they don’t have employees. They have employees. So the biggest problem is it creates huge holes in our labor 

standards and that’s not good for workers or for the economy or for 

our tax system. 

Chairman WALBERG. I thank the gentleman and the gentlelady. 

I recognize the gentlelady from Delaware, Ms. Lisa Blunt Rochester. 

Ms. BLUNT ROCHESTER. Thank you, Mr. Chairman and thank 

you Ranking Member Wilson and thank you also to the panel. 
77 

I had the opportunity to serve as Secretary of Labor in the State 

of Delaware so the issue of labor market information is vital. I believe it is vital. We, as we already mentioned it is vital to policy 

makers, to economists, to students, to parents. And as Secretary of 

Labor, we had a lot of good partnerships and also products. Everything from working with schools to our workforce investment 

boards to the media. 

So one of my questions is about data itself and about the integrity and confidence and validity of it and I will start with Dr. 

Spriggs. 

Before becoming president, I know Mr. Trump talked about BLS 

unemployment data covered up massive unreported unemployment 

levels and used words like fake and phony and so I just want to 

get your impression. I know you worked for the Department of 

Labor. If you could talk a little bit about the data itself and the 

integrity of the data. Just share is it fake, is it phony? 

Dr. SPRIGGS. Well, like Dr. Farren, I sing high praises for the 

BLS and for the integrity and for the way that they are very careful to be as nonpartisan as possible in their work and to be focused 

and to be professional and as he mentioned the world recognizes 

them as the gold standard. They do provide many products. One 

of the most important is their quarterly census of employment in 

workers that allows local workforce boards to see the flow of work 

and to be able to better predict where are new jobs being created 

within both their WIB area and within their county so they do 

marvelous jobs. 

Ms. BLUNT ROCHESTER. Can I ask Dr. Farren and Dr. Meyer, you 

both mentioned it also in your testimony. Dr. Farren, you mentioned making it more useful and accessible to ordinary people. Mr. 

Meyer, you talked about updating the CWS. I guess my question 

is, do you support increased funding? Because I think we are seeing a decline in staffing so how can we provide great services and 

great products if we don’t have the people or the resources to do 

it? Oh, it’s just a yes or no question. Do you support increased 

funding? 

Dr. FARREN. I’m an economist, so I can’t give a yes or no question. 

Ms. BLUNT ROCHESTER. Okay. 

Dr. FARREN. But the answer is what is efficient, what are the 

tradeoffs for additional funding? What are the tradeoffs for spending money more better? 

Ms. BLUNT ROCHESTER. Okay, Mr. Farren, if you can’t because 

you’re an economist I will go to Mr. Meyer. 

Mr. MEYER. I would say yes if it would lead to better measurements that policy makers can use to put in place the best data— 

Ms. BLUNT ROCHESTER. Excellent. 

Mr. MEYER. If it’s just spending for the sake of spending, then 

no. 

Ms. BLUNT ROCHESTER. We don’t do that. Excellent. Okay. And 

then my last comment or question. I am actually my other committee is agriculture and so I get the opportunity to be a part of 

the Farm Bill discussions. One of my concerns I think all of us 

agree that we have these unfilled jobs and that we have a skills 
78 

mismatch and that we really want people to work whether you’re 

Democrat or Republican. 

My question is on the Farm Bill, we are—the proposal is basically to create a massive jobs program and I was around for welfare reform as well. This appears to be untested and underfunded. 

We are talking $30 per person per, you know, per month. Good jobs 

training programs cost more than that. 

Dr. Spriggs, can you talk a little bit about what you think would 

be the impact of instituting something like this, where people 

would be sanctioned off and not also have good job training programs. 

Dr. SPRIGGS. The work requirement changes the program into a 

subsidy for employers who do not raise wages. And that would be 

bad. So when you look at how much we subsidize Walmart and 

McDonalds, the two largest employers in the United States and in 

the world because they fail to pay their workers sufficient wages 

that they do not need food assistance, it is the most inefficient system of employment in the world. 

No one subsidizes, no one in the world subsidizes people going 

to fast food restaurants to make their nation fat but that’s exactly 

what this legislation would do because when you force a worker to 

accept a low wage in order to get the benefit that is what you are 

doing. And so no, this is a bad public policy. The far better public 

policy is to address why in the name of having shortages of workers these employers are not raising their wages. You would lower 

the use of food assistance if workers got paid a decent wage. 

Ms. BLUNT ROCHESTER. Thank you. 

Dr. SPRIGGS. Because already it is the case that workers are 

needing food assistance. 

Ms. BLUNT ROCHESTER. Thank you, Dr. Spriggs. I yield back. 

Chairman WALBERG. I thank the gentlelady and now I am 

pleased to recognize the gentleman from Minnesota, Mr. Lewis, for 

your five minutes of questioning. 

Mr. LEWIS. Thank you, Mr. Chairman, and thank you, panel, for 

your testimony today. Dr. Farren, I want to start with you if I may. 

In your testimony, you mentioned the research related to the current population survey and as we have seen, even in an economy 

with 3.8 percent unemployment, the lowest since 2000 I believe, 

even in an economy that may be growing at 4 percent, 4.2 percent 

GDP when in fact CBO predicted we would only grow 1.9 percent. 

Even in the economy this hot, we still have a problem with the 

sticky labor force participation rate. And I am just wondering your 

analysis of the March 2018 study by the American Action Forum 

that found that there was some relation to opioid dependency as a 

part of at least the absence of nearly a million prime-age workers 

from the labor force and with a reduction in that serious problem 

helped. 

Dr. FARREN. So looking at it from a purely economical standpoint, certainly if the workers who were ill and addicted and therefore not in the labor force were actually in the labor force, economic 

growth would even be larger and you wouldn’t even necessarily 

have to have them in the labor force for that to happen because addiction obviously hurts peoples performance and their families and 

taking care of their loved ones and that sort of thing as well. And 
79 

also, obviously it would be much better for the people engaged who 

are addicted to actually have better lives as a result. 

Mr. LEWIS. And between 1999 and 2015, this decline, this absence, results in about $700 billion loss in real GPD, real output. 

And that is consistent with your analysis? 

Dr. FARREN. That’s what I have seen other economists reporting, 

yes. 

Mr. LEWIS. Mr. Moore, I want to drill down a little bit on labor 

force participation rate. As someone who has studied macroeconomics for some time, you are quite familiar with this. The fact 

of the matter is we are still stuck back into the 70s era of cardigan 

sweaters and malaise when it comes to some of these labor force 

participation rate figures. Is it a matter, as one panelist said, of 

just merely not having a high enough livable wage or is it a matter 

of the wrong incentives from some of our other public assistance 

programs where we have a 3.8 unemployment rate which of course 

as everyone knows doesn’t take into account a denominator that 

drops people off when they no longer work, look for work. And so 

it doesn’t pay to get out from under some sort of dependency. 

Mr. MOORE. So there was a very good study that was done by 

Casey Mulligan who is one of the top economists in the country at 

the University of Chicago. And he is probably much more of an expert on this than I am so I will quote some of his research on this. 

He has shown that if you take someone who is receiving welfare 

benefits, a package of welfare benefits, that because of the various 

laws, the phaseouts of benefits, the taxes that they would pay, that 

in visual might be a mother or it might be an unemployed individual, they would lose about 50 cents of benefits for every dollar 

that they would earn. You know, that’s a high marginal tax, right. 

I mean, we don’t even charge wealthy people a 50 percent marginal 

tax rate. So— 

Mr. LEWIS. So we often talk about that marginal rate and that 

is the key in all of this. The marginal rate, the rate on the next 

dollar earned at the top end of the spectrum, but what you are saying and what that study says is in fact every one works for aftertax income. 

Mr. MOORE. Well, especially people who are on welfare and now 

are trying to get off of welfare. You know, if you, let’s say you are 

on welfare. If you get a job that say pays you $40,000 a year, but 

what Casey Mulligan is saying guess what, you know, you are 

going to lose $20,000 in benefits so you’re actual increase in your 

take home pay is only going to be half of that. That’s a high—so 

we should really investigate the phaseout of all of these benefits 

and also the work requirement basically because you have to work. 

Now look, if you had a situation right now like we had in 2008 

and 2009 where the unemployment rate went up to 9 and 10 percent, a work requirement probably wouldn’t work because, you 

know, there weren’t jobs for people. But now there are plentiful 

jobs for people and we just have, I mean, I just think you do a real 

service not just to the, it’s not just about reducing the cost of the 

programs. It is about getting, improving people’s lives by getting 

them into the workforce. And that is so critical. You can’t have a 

second and third and fourth job, you know, Mr. Lewis, until you 

have the first job. 
80 

Mr. LEWIS. And that is what this is all about and that is what 

work requirements are all about and that is moving from dependence to independence. We can subsidize dependence all day long 

but that doesn’t move people to a more productive job and a more 

productive life and I thank you for your testimony and I yield back. 

Chairman WALBERG. Thank you. I thank the gentleman for your 

questions and appreciate the Committee attentive to the issue 

today. As well as thank you so much for the witnesses for being 

here. In fact, I wish we had more members here today so we would 

have heard more from you on this important topic. We want to get 

things right so thank you for being here. 

Ms. Wilson, it is good to have you in the ranking member’s chair 

today. Doing an excellent job, and ask if you have any closing remarks? 

Ms. WILSON of Florida. Thank you, Chairman Walberg, for holding today’s hearing. I think it is vital that this committee examine 

the U.S. labor market trends. While strong job growth is important, 

we cannot neglect the fact that wage stagnation and income inequality are decades long problems that must be addressed. 

When we talk about wage stagnation and income inequality, we 

are talking about more than the line on a graph. Workers across 

the country are not getting a fair share of the wealth they helped 

create. This means some workers are struggling to buy groceries 

every week to feed their families. Struggling to pay rent, and to 

keep a roof over their heads and it means some workers are finding 

it almost impossible to save for their children’s education so that 

they may have a better life. 

I think we can all agree that we want workers to be able to earn 

wages that allow them to support themselves and their families. 

Unfortunately, despite what we have heard today, workers’ wages 

are not better off under this president. 

In fact, since President Trump took office, wages have been mostly flat and some workers lost ground over the last year. Workers 

across the country are feeling the impact of these trends in their 

daily lives and want us to step up and help fix the problem but 

rather than pass legislation to help all workers, President Trump 

and the Congressional Republicans passed a tax scam that only 

makes historically high levels of income inequality worse. 

The tax giveaway to the top 1 percent of American earners and 

corporations did not lift workers’ wages. It just gave wealthy corporations a massive windfall for stock buybacks that benefit shareholders and executives. We know that this is not the right approach. As we heard from Dr. Spriggs, when our policies promote 

broad wage growth, we are better off. When we strengthen wage 

protections and workers’ rights to collectively bargain for better 

wages, we combat wage stagnation and the income inequality that 

leaves workers behind. 

That is why Committee Democrats support bills to raise the minimum wage, update overtime protections and strengthen workers’ 

rights to join a union free from retaliation. 

I again want to thank our witnesses for joining us here today 

and I yield back the remainder of my time. 

Chairman WALBERG. I thank the gentlelady. In the words of the 

Northwest Ordinance and Article 8 Section 1 of the Michigan Con-
81 

stitution, that copied from the Northwest Ordinance, it says, ‘‘Religion, morality, knowledge, being necessary to good government and 

the happiness of mankind, schools in the means of education shall 

forever be encouraged.’’ 

And I am glad that in some of the conversation today, Mr. Moore 

and Mr. Banks touched on it as well. The primacy of preparing people for real world jobs through education opportunities that expanded beyond just the status quo normal of what we have done 

in the past and we are the Education and Workforce Committee. 

And I think aptly named that because they have to go together. We 

don’t just educate to educate. We educate to work. 

And in order to work today, you have to be educated. I don’t care 

what you are going to do. And I think this committee and this subcommittee it is important that we as we think of health, employment, labor, and pensions, the whole scheme of things that we take 

due diligence to prepare people to educate them early for jobs in 

the real world that will provide a certainty—to the best that we 

can humanly provide a certainty—that they are going to have a 

background in training experience or educational experience. Forgive me, Virginia, for using that word. But educational experience 

that prepares them to experience the happiness that we promote 

in this great country. 

So we need to talk more about the career options, the education 

options to prepare people in apprentice programs in short term 

educational certification programs, whatever it is necessary to find 

more opportunity for people to be in that sweet spot that is special 

to them becomes special to us because it grows our economy. It 

grows our security. It grows the desire of even other as we talk 

about immigration to look at America as still the place where all 

the best happens in the form of opportunity. 

And I appreciate the fact that in this committee we are able to 

pass a new CTE bill out of the House, even the PROSPER Act that 

goes unique directions compared to what we have done in the past 

by fostering the opportunity for educational experience that meets 

needs as opposed to meets institutions. And I am looking forward 

to see benefits of that come in a new approach to post-secondary 

education that challenges everyone to keep the needs of the future 

workers in mind. 

I as well think that today we had the opportunity to at least hear 

to some degree what needs to be done in keeping the statistics, putting reports in place that makes sense out of what is happening 

and what is available to be used in educational opportunities in our 

workforce experience. 

And I know we are going to disagree on approaches. I know we 

are going to do that. We have two parties here that have different 

points of view. I think that our approach will ultimately win out. 

I would like to be proven wrong or at least the opportunity for 

someone to prove that wrong but we need good statistics. And we 

need good, good researchers to point out this is what is happening 

in the workforce, this is where we are at in reality. This is where 

we need to move toward. These are the opportunities we have. 

And so your testimony today along with things that are—have 

actually happened by law and what the results will be has been 
82 

very helpful. So with that and seeing that there is no further business to come before this subcommittee I will declare it adjourned. 
83 

[Additional submissions by Chairman Walberg follow:] 

-~· MERCATUS CENTER -~-George Mason University TESTIMONY 

BRIDGING THE SKILLS GAP 

Michael D. Farren, PE, PhD 

Rcsi'<Jrch Fellow. Study of American Can;ta!isrn 

Small Bw;iness Ccrnr111ttee, Subcon:rn1ttee ~~n Eco:1cmic G'O\vth, T0x zmrl Capita! Access 

Scot\~nmE>r 7, 7011 

Good morning, Chairman Brat, Ranking Member Evans, and distinguished members of the House Small 

Business Committee's Subcotnmittee on Economic Growth, Tax, and Capital Access. 

My name is Michael Farren, and I am a research fellow at the Mercatus Center at George Mason 

University. I am grateful for the invitation to discuss issues facing small businesses in the labor market, 

especially the skills gap that some employers encounter. This issue parallels my forthcoming labor 

market research, as well as other research published by the Mercatus Center. 

There is some disagreement among labor market experts over which skills job applicants are lackingor if a skills gap even exists-but the discussion of this issue is a useful opportunity to enhance our 

understanding of the labor market and government policies affecting it. 

I offer two suggestions that may help address the skills gap affecting labor markets for small businesses: 

l. Revise the federal tax code to allow tax deductions for all forms of productivityenhancing investments, including investment in training workers to perform new jobs. 

The federal tax code encourages businesses to increase productivity by allowing tax deductions 

for investments in physical capital.' It also allows tax deductions for improvements to existing 

human capital through education or training. However, it does not allow tax deductions for 

investments that train a worker to do a completely new job. 

2. Revise government aid programs that might be lowering the supply of workers, thereby 

contributing to the lack of skilled workers available. 

There is evidence that participation in state and federal disability benefit programs has grown, 

even as jobs have become safer and the population on average has become healthier. The design 

of such programs may need to be reevaluated to ensure that they are accomplishing their 

important mission without creating unintended consequences. 

·Or stated more properly, such tax deductions lessen the tax burden discouraging capital investments. "Capital" in this case 

refers to assets or skills that increase the productive potentJa! of an enterprise. 
84 

IS THERE A SKILLS GAP? 

The first question that needs to be addressed is what is meant by a "skills gap" and whether one actually 

exists in the first place. This is important because the determination of what skills are missing depends 

on whom you talk to. The skills gap is often conceived of as being a lack of technical knowledge, such as 

familiarity with computer software or healthcare training. 2 For example, the National Federation of 

Independent Business reported that 45 percent of small businesses surveyed in early 2017 were unable 

to find qualified job applicants:1 In addition, a 2016 survey released by workplace analytics firm 

PayScale and executive development firm Future Workplace found that a majority of hiring managers 

believed that recent college graduates lacked functional skills, such as critical thinking and writing 

proficiency. 4 Furthermore, much discussion has revolved around a deficit in "soft" skills such as 

teamwork, communication, and work ethic. 5 

Responding to this, some researchers and commentators have suggested that the skills gap is actually an 

"awareness gap," because it is difficult for job applicants to communicate their talents and abilities to 

employcrs.6 Similarly, others propose the issue is best understood as a coordination problem between 

an employer's specific needs and workers' training.' Recent academic research supports this idea, 

finding that the skills gap is confined to a minority of companies needing workers with highly 

specialized skills, rather than a systematic skill deficiency across the entire workforce 8 

CAUSES OF THE SKILLS GAP 

It's possible that all these different perspectives are accurate. Newly graduated workers may have 

focused too much on excelling in their individual schoolwork, to the detriment of learning how to work 

effectively in a team environment. Furthermore, the teen employment rate began a precipitous decline 

around the year 2000, meaning that workers from the "millennia!" generation would tend to have less 

work experience than workers from previous generations. The shift toward additional schooling and 

away from early employment could contribute to the observed gap in "soft" skills. 9 

At the same time, schooling might not be teaching students the exact skills necessary for the work that 

employers need done. This would be especially true if the joh requires software expertise that rapidly 

changes every few years10 Some employers' hiring processes may contribute to the problem by being 

overly focused on applicants' technical skills, thereby screening out job candidates who have strengths 

in other areas or better-developed soft skills. 11 

Furthermore, because the modern economy tends to reward skill specialization rather than broadbased expertise, workers may seek a narrowly focused mastery rather than an expansive skill set. This 

would support the argument that manufacturers in particular are having a difficult time finding 

2 Jon Swartz, "Businesses Say They Just Can't Find the Right Tech Workers," USA Today, March 28, 2017. 3 Rob Kaplan, "America Has to Close the Workforce Skills Gap," Bloomberg, Aprill2, 2017. 4 Jonathan Berr. "Employers: New College Grads Aren't Ready for Workplace," Moneywatch, CBS News, May 17, 2016; Payscale 

and Future Workplace. "2016 Workforce-Skills Preparedness Report," May 17, 2016, http:/ /www.payscale.com/data-packages 

Lydia Dishman, "These Are the Biggest Sktlls That New Graduates Lack," The Future of Work, Fast Company, May 17, 2016; 

and Future Workplace, "2016 Workforce·Skills Preparedness Report." 

Ryan Craig and Troy Markowttz, "The Skitls Gap ls Actually an Awareness Gap·· And It's Easier to Fix," Forbes. May 17,2017. 7 Andrew Weaver. "The Myth of the Skills Gap," Business Impact, MIT Technology Review, August 25, 2017. 8 Andrew Weaver and Paul Osterman, "Sk1U Demands and Mismatch m U.S. Manufacturing,'' ILR Review 70, no. 2 (March 1, 

275-307. 

In defense of "m+llennJals," however, 1t should be considered whether every generation of managers might generally view the 

generation of youthful workers as being somewhat deficient compared to their own generation. 

James Bessen, "Employers Aren't Just Whining- the 'Sk!l1s Gap' Is Real," Harvard Business Review, August 25, 2014. 11 Ryan Cra1g, "Blame Bad Applicant Tracking for the Soft Skills Shortage at Your Company," TechCnmch, March 5, 2017. 
85 

workers who have the right combination of skills-practical, tool-using abilities; IT expertise; and 

teamwork aptitude-needed to be effective in modern manufacturing.12 

Unfortunately, other problems may also be contributing to the existence of a skills gap. Before workers 

choose to invest in schooling· or training to develop new skills, they need to have a reasonable 

expectation that the investment will pay off. Essentially, workers face a guessing game wherein they 

have to forecast what skills will be needed by employers in the future. In this case, guessing wrong can 

actually be worse than not playing the game at all. It might result in workers' time investment being 

wasted, squandering the earnings and the skills they could have developed at different jobs. Even 

worse, they may have financed the education with loans, leaving them with debt in addition to 

unmarketable skills. As a result, workers will tend to avoid investing in skill acquisition that doesn't 

have a high likelihood of paying off. 

There is some evidence that many younger workers have indeed "guessed wrong." Over the past 

decades there has been a rise in "underemployment"-highly trained or educated persons working in 

jobs that do not require the college degrees or training certifications they possess." This suggests that 

many workers have indeed paid for education investments that, to some degree, were wasted.14 

A contributing factor to the skills gap could be the declining labor force participation rate (LFPR). The 

national prime-age male LFPR has declined from around 96 percent in 1970 to 88.5 percent in 2016.1

s 

Most of the decrease corresponds to more men reporting problems with physical or mental disability 

and a corresponding inability to work. 16 If the men leaving the workforce are generally older and more 

experienced, especially in jobs that are increasingly technical-skill intensive like mining, 

manufacturing, and construction, then their absence might contribute to a skills gap, especially if they 

would have been responsible for training less experienced workers. 

Forthcoming research from the Mercatus Center suggests that increased participation in state and 

federal disability benefit programs is correlated with the number of prime-age men reporting that 

disability prevents them from working. The increased participation in disability benefit programs has 

occurred despite falling mortality and injury rates and general improvements in health status for primeage men17 If government aid programs have contributed to reduced labor force participation, and if 

those workers leaving the labor force are more likely to be experienced or otherwise higher skilled, 

then such programs may bear some responsibility for the skills gap that employers face. 

11 Jeffrey J. Selingo, "Wanted: Factory Workers, Degree Required," New York Times, January 30, 2017, Education Life. 13 Alexia Elejalde-Ruiz. "Nearly Half of U.S. Workers Consider Themselves Underemployed, Report Says," Chicago Tribune, June 

28. 2016. 14 This situation might simultaneously indicate that employers in general did not need the number of workers with the given 

degrees or traming certifications-that the skills were indeed valuable, but job seekers oversupplied the market. However, th1s 

explanation is essentially equivalent to saying that some workers, though not all, made the wrong education investment. On the 

other hand, it should be noted that advanced education, even if it is not relevant to the iob in question, may be a signal to the 

employer of a generally higher-quality worker, giving those candidates who invested "wrongly" an advantage over other 

who did not make the "wrong" dec1sion. 

Pnme-age men-those between the ages of 25 and 54-are generally expected to have the highest LFPR. Women's primeage LFPR peaked in the late 1990s and has slightly declined since that time. Scott Winship. "What's Behind Declining Male 

Labor Force Participation: Fewer Good Jobs or Fewer Men Seekmg Them?" (Mercatus Research, Mercatus Center at George 

Mason University, Arlington, VA, forthcommg), 

'

5 1t should be noted that some decrease in the prime-age male LFPR has been owing to men retiring early or leaving the 

workforce owing to family responsibilities, but increasing disability by far represents the largest dnver of declining LFPR; 

Winsh1p, "What's Behind Dedimng Ma!e Labor Force Participation?" 17 Winship, "What's Behind Dechnmg Male Labor Force Participation?" 

3 
86 

SOLUTIONS TO THE SKILLS GAP 

What, then, can government do to solve the skills gap in the labor market? The answer might be "Not 

much." This is because the modern American economy is continuously undergoing "creative 

destruction" in many industries, 18 The constant development of new technologies and introduction of 

information technology to established production processes results in a constant churn toward new 

methods of production. As a result of this process, workers in many industries must regularly update 

their skills to be able to use the next technological improvement. This kind of economy by its very 

nature creates an ongoing skills gap as producers need workers trained for the latest iteration of the 

production process. 

However, this kind of skills gap is actually a very good thing. The degree to which innovation and its 

corresponding technological development are driving the skills gap is an enconraging signal of the 

strength of the American economy. The last thing we should want is an economy which advances so 

slowly that most workers can go their entire careers without upgrading their knowledge and skills. This 

kind of economy would have fewer improvements in healthcare, communications, transportation, and 

manufacturing, leading to a country that is unhealthy, energy inefficient, and less environmentally 

sustainab !e. 

Agriculture represents a good example of how the application of increased knowledge and technology 

has revolutionized an industry and benefited the nation. In 1900, 41 percent of the US workforce 

worked in agriculture. By 2000 that share had fallen to 1.9 percent, even while productivity more than 

doubled in just the last 50 years of that time period. 19 And similar to the changes in technology in the 

modern economy, agriculture shifted from using 22 million work animals in 1900 to using 5 million 

tractors in 2000. 20 Now farmers are even using information technology to more accurately plant and 

water crops, as well as apply pesticide and fertilizer in more appropriate amounts, resulting in less 

waste and more sustainable farming practices21 All of this has required farmers to be open to 

continuous updates to their knowledge and training. 

However, there are several areas in which government policy can indeed help solve the skills gap. As I 

have illustrated, workers face a risky skills investment problem that inhibits them from investing in 

their "human capital."22 Reforming existing policy can help reduce the riskiness of this investment in 

several different ways: 

I. Current tax law allows employers and employees to deduct the cost of training and education 

that makes workers more productive in their current positions. This is similar to the deduction 

aJlowed for purchases of physical capital that enable higher productivity. However, this 

deduction is specifically prohibited for investments in human capital that prepare a person to 

take on a wholly new type ofwork. 23 This might help explain the fact that relatively few firms 

budget for employee training programs. 24 

13 The term "creative destruction" was popularized by Joseph Schurnpeter: "The opening up of new markets, foreign or 

domestic, and the organizational development from the craft shop to such concerns as U.S. Steel illustrate the same process of 

industrial mutation-if I may use that biological term-that incessantly revolutionizes the economic structure from withln, 

mcessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact 

capitalism."' Capitalism. Socialism, and Democracy (New York, NY: Harper and Brothers, [1942] 1950), 83. 

US Department of Agriculture, The 20th Century Transformation of US Agriculture and Farm Policy. June 2005. 20 Ibid. 

" Department of Agriculture, Farm Profits and Adoption of Precision Agriculture, October 2016. 

Human capital is a general term for mvestments in education or training that make a person more productive, in much the 

same way that investments in physical capital (e.g., machines) can make a factory more productive. 23 Internal Revenue Serv;ce, PublicatiOn 970, Chapter 12: Tax Benefits for Education, 2016. 

~ Udemy for Business, At the Breaking Point: The State of Corporate Training Programs in America, March 26, 2015. 

4 
87 

If tax laws were changed to allow either workers or employers to deduct the cost of training to 

perform a new job, then employers would have much greater incentive to offer the specific 

training their firm requires, rather than expecting the employee to start with all of the requisite 

skills.2

s 

2. To the extent that current government aid programs inappropriately reduce the supply of 

skilled workers, they should be reformed to remove the disincentives they create.26 

Importantly, the goal should be to ensure that those who are truly disabled are appropriately 

supported while encouraging those who can work to do so. 

CONCLUSION 

It seems indisputable that a skills gap does exist in the labor market, but importantly, this issue is 

probably best characterized as being unique to each company. And since each individual firm has the 

best information on what particular skills it needs, the best path forward from a government policy 

perspective would be to change tax laws to encourage companies to invest in worker training. 

Importantly, though, any tax code changes should be broadly based and available to all workers and 

employers, rather than favoring some industries or skills over others. Additionally, progTams and 

policies that reduce the potential workforce available to employers should be reformed. 

Lastly, policymakers should keep firmly in mind that a skills gap may not be entirely a bad thing, if it is a 

symptom of a robust and innovative economy. Among all economic problems, this is a good one to have. 

25 Importantly, such training programs, if provided using tax deductions, should not have stipulations attached to the training, 

such as minimum tenure requirements or noncompete contracts. Such conditions would result in a decreased dynamism in the 

labor force, meaning that workers would be inhibited from moving to the companies where they would be the most productive 

(and similarly, companies might inadvertently keep less productive employees). This would result in decreased economic 

growth. Furthermore, disallowing such stipulations for training increases the competitiveness of the labor market by reducing 

the bargaining power of employers. This means that they would have to focus more on keeping employees voluntarily through 

wage increases, benefits, and healthy working env1ronments. 

Additionally, cxistmg tax law generally requires that deductions for investments in physical capital be taken over time, 

rather than in the year m which the investment is made. This is reasonable for physical capital, which is property owned by the 

firm. However, mvestments in human cap1ta! cannot be owned by the firm and contain an inherent risk of loss if the employee 

leaves the firm. suggesting that human capital investments should be allowed to be fully deducted in the year in which they are 

Scott Winship, "How to Fix Disab!!ity Insurance," National Affairs, 2015. 
88 

THE UNEMPLOYMENT RATE IS PROBABLY THE 

single most quoted statistic that measures the 

health of the economy. Changes in the gross domestic product (GDP)-which signal the beginning and 

end of recessions-are also important, but the public 

understandably seems to care more about how difficult it is to find a job than how much the economy is 

actually producing·. 

For this reason, it's critical to have an accurate 

measure of"truc" unemployment. However, many 

politicians and political pundits have derided the 

unemployment rate reported by the Bureau of Labor 

Statistics (IlLS), arguing that it doesn't count everyone who actually wants a joh. 1 In fact, President 

Trump, while on the campaign trail, suggested that 

the actual level of unemployment might be as high as 

42 percent.' These sentiments represent a lack of confidence in official government statistics, and they're 

an important challenge to the economics profession. 

This paper addresses that challenge. 

WHAT IS THE "TRUE" UNEMPLOYMENT RATE? 

The first problem in measuring unemployment is 

actually defining unemployment. If simply not having a job were enough to be considered unemployed, 

then the average unemployment rate in 2017 would 

have been 52.9 percent. However, this absurdly 

high statistic counts everyone without ajoh as being 

unemployed, including children and infants, meauing that it doesn't really tell us anything about the 

strength of the economy or the difficulty in getting 

a job. Leaving out anyone below the age of 16 provides a somewhat more convincing number-39.9 

percent-but this measurement still counts people 

who arc retired, are staying at home with family, arc 

currently attending school, or have other reasons for 

not seeking employmcnt. 3 
89 

It seems reasonable to require that someone actually -want a job in order to be counted as unemployed. 

tinder this condition, the a\·eragc jobless rate in 2017 

would h~we been 7.5 

This measure nf unemployment can be called the 

comprehensive jobless rate (CJR) because it counts 

every adult or adolescent who(!) does not have a 

job currently, (2) says that they want job, and (3) 

capable of v,rorking. In effect, it's the most realistic 

measurement of the unemployment rate. s 

The CJR higher than the various unemployment 

rates calculated hy the BLS, and for a good reason, 

The official BLS measures of unemployment, labeled 

as U-1 through U-6, provide mon; nuanced understanding of the labor market, such as identifying tonunemployment (C-l) and discouraged job 

(U-4) (sec table 1). 

The CJR adds value to the existing BLS unemployment measures by providing an upper bound on 

the rate of joblessne::>s. It fits in bet-ween U-5, which 

nmnts those people who want jobs and vvho rnar~ 

ginally attached to the workforce,'' and U-6, which 

counts those people \vho arc employed part time but 

desire a full-tirnc job. Following the BLS's nmnin~ 

convention, the CJR could olso be referred to 

''U-Sh" unemployment rate. 

The critical difference hetween the U-5 rate and 

the CJR/C-5b is that the C-Sb counts everyone who 

says they wnnt a job, regardless of \Yht:ther they are 

currently available to start a joh and regardless of thelast time they <lctively searched for employment.1 In 

comparison, the U-5 does not count people \vho have 

not actively searched for \Vork in the bst 12 months 

or who not 'wailable to start a job when 

\Yere surveyed. This means that the U-5 doesn't coum 

people whose frustration has led to a long-term abandonment of their joh search, nor docs it count students 

who near graliuation and are actively seeking\vork 

Job losers and persons who completed temporary jobs, as a percentage of the civilian 

labor force 2.1% 

U-4. 

u-s 

U·Sb 

Total unemployed, as a percentage of the civilian labor force (official unemployment rate) 

Total unemployed plus discouraged workers, as a percentage of the civilian labor force 

plus discouraged workers 

Total unemployed, plus discouraged workers, plus all other persons marginally attached 

to the labor force, as a percentage of the civilian labor force plus aH persons marginally 

attached to the labor force 

Total unemployed, plus all other persons who say they want a job and are able to work, 

as a percentage of the civilian tabor force plus all persons who want a job and are able to 

work 

Total unemployed, plus all persons marginally attached to the labor force. plus total 

employed part time for economic reasons, as a percentage of the civilian labor force plus 

to the labor force 

4.4% 

4.6% 

5.3% 

7.5% 

8.5% 
90 

MERCATUS ON POLICY 

The CJR adds value to the existing BLS unemployment measures by providing an 

upper bound on the rate of joblessness. 

but are not immediately able to begin working. The 

CJR/U-Sb accounts for these groups who slip through 

the cracks of the other unemployment measures. 

Figure 1 compares the historical level of the CJR/ 

U-Sb with the primary BLS unemployment rates that 

focus on joblessness (U-3 through U-5). The C.TR follows the same general trends over time as the other 

unemployment rates and is, on average, around 3.3 

percent higher than the U-3, the official unemployment rate that is most often reported (see table 2). The 

fact that the various unemployment rates show the 

same trends over time sugg·ests that, while the official 

unemployment rate doesn't measure the full scope 

of joblessness, its fluctuations do provide relevant 

information on the overall health of the labor market. 

CONCLUSION 

The comprehensive jobless rate, or U-Sb, provides 

the highest possible realistic measurement of joblessness. The only way to achieve a higher measure 

of unemployment would be to include (1) people 

who don't actually want a job, (2) people who are 

physically or mentally unable to work as a result 

Figure 1. Historical Performance of Unemployment Measures, January 1994-December 2017 

16% 

14% 

12% 

~10% 

iii 

~ 8% 

a 

~ § 6% 

4% 

2% 
91 

MERCATUS ON POUCY 4 

SMAltEST 

DIFFERENCE 

of an illness or disability, and (3) people who are 

currently employed part-time but want full-time 

employment (which is an important issue, but is not 

the same as joblessness). 

The CJR offers a way to cut through partisan 

bickering and political pundit hand-wringing over 

not knowing the ''true" unemployment rate. As such, 

it provides a stable metric that can allow for more 

productive policy discussions and a better understanding of the economy for the general public. 

NOTES 

(t"iercatus RBse,"lrch. Her(atus Center f'vlason 

~·fliV21'51ty. Arii"Qton. VI\, 2017). 

6. A oerson ·s ··rnarg1noiiJ attached to ;he \'c'Ofkfo;ce" 1ft hey want a JOb 

were ;wadable to start u ;ob at the t;rn(' of 1.hr <:urvey. imd act1vely 

seorcned for emo!oyrnGnt w1th1n the last i2months (or s1nce leavng 
92 

[Whereupon, at 11:40 a.m., the Subcommittee was adjourned.] 

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