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S. HRG. 110–711

THE EMPLOYMENT SITUATION: MAY 2008

HEARING

BEFORE THE

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

JUNE 6, 2008

Printed for the use of the Joint Economic Committee

(

(II)

JOINT ECONOMIC COMMITTEE

[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

SENATE

CHARLES E. SCHUMER, New York, Chairman

EDWARD M. KENNEDY, Massachusetts

JEFF BINGAMAN, New Mexico

AMY KLOBUCHAR, Minnesota

ROBERT P. CASEY, JR., Pennsylvania

JIM WEBB, Virginia

SAM BROWNBACK, Kansas

JOHN SUNUNU, New Hampshire

JIM DEMINT, South Carolina

ROBERT F. BENNETT, Utah

HOUSE OF REPRESENTATIVES

CAROLYN B. MALONEY, New York, Vice Chair

MAURICE D. HINCHEY, New York

BARON P. HILL, Indiana

LORETTA SANCHEZ, California

ELIJAH CUMMINGS, Maryland

LLOYD DOGGETT, Texas

JIM SAXTON, New Jersey, Ranking Minority

KEVIN BRADY, Texas

PHIL ENGLISH, Pennsylvania

RON PAUL, Texas

MICHAEL LASKAWY, Executive Director

CHRISTOPHER J. FRENZE, Minority Staff Director

(III)

C O N T E N T S

MEMBERS

Hon. Charles E. Schumer, Chairman, a U.S. Senator from New York ............... 1

Hon. Maurice D. Hinchey, presiding, a U.S. Representative from New York .... 2

WITNESSES

Statement of Philip L. Rones, Deputy Commissioner, Bureau of Labor Statistics, U.S. Department of Labor, Washington, DC ............................................. 3

Statement of Dr. Heidi Hartmann, president, Institute for Women’s Policy

Research, Washington, DC .................................................................................. 17

Statement of Dr. Eileen Appelbaum, director, Center for Women and Work,

Rutgers University, New Brunswick, NJ ........................................................... 21

Statement of Diana Furchtgott-Roth, director, Center for Employment Policy

and senior fellow, Hudson Institute, Washington, DC ..................................... 24

SUBMISSIONS FOR THE RECORD

Prepared statement of Senator Charles E. Schumer, Chairman ......................... 38

Prepared statement of Representative Maurice D. Hinchey ................................ 40

Prepared statement of Carolyn B. Maloney, Vice Chair ...................................... 42

Prepared statement of Philip L. Rones, Deputy Commissioner, Bureau of

Labor Statistics, U.S. Department of Labor, Washington, DC ........................ 44

Prepared statement of Dr. Heidi Hartmann, president, Institute for Women’s

Policy Research, Washington, DC ....................................................................... 48

Prepared statement of Dr. Eileen Appelbaum, director, Center for Women

and Work, Rutgers University, New Brunswick, NJ ........................................ 62

Prepared statement of Diana Furchtgott-Roth, director, Center for Employment Policy and senior fellow, Hudson Institute, Washington, DC ................. 69

Historical employment data on the goods-producing and service-producing

industries submitted by Philip L. Rones, Bureau of Labor Statistics, in

response to questions from Representative Hinchey ......................................... 87

Chart entitled, ‘‘Annual Change in Real Earnings: May 2007 – May 2008’’ ...... 89

(1)

THE EMPLOYMENT SITUATION: MAY 2008

FRIDAY, JUNE 6, 2008

CONGRESS OF THE UNITED STATES, JOINT ECONOMIC COMMITTEE, Washington, DC.

The Committee met at 9:30 a.m. in room SD–562 of the Dirksen

Senate Office Building, the Honorable Charles E. Schumer (Chairman of thd Committee) and Maurice D. Hinchey presiding.

Senators present: Schumer.

Representatives present: Hinchey.

Staff present: Christina Baumgardner, Heather Boushey,

Tanya Doriss, Chris Frenze, Tamara Fucile, Gretta Goodwin, Rachel Greszler, Colleen Healy, Bob Keleher, Jeff Schlagenhauf,

Christina Valentine, and Colm Willis.

Representative Hinchey [presiding]. We are ready to start the

hearing. I want to thank you all very much for being here, and I

would now like to call upon Senator Schumer, the Chairman of the

Joint Economic Committee, to address us.

OPENING STATEMENT OF HON. CHARLES E. SCHUMER,

CHAIRMEAN, A U.S. SENATOR FROM NEW YORK

Chairman Schumer. Well thank you, and I want to thank you

for chairing this, Congressman Hinchey.

These numbers are very, very troubling. The spike in the unemployment rate to 5.5 percent, up half a percentage point in just 1

month, is like a tsunami hitting our economy and our jobs.

This is the biggest single month’s surge in unemployment since

1986, and along with the last 5 months of job losses, it should put

the economy front and center on the White House agenda. And

numbers like this will ensure that the economy will be the number

one issue in the Presidential campaign.

In 2008 our economy shed 324,000 jobs, including 49,000 that we

just lost last month. Just about every sector of our economy shed

jobs in May. Sadly, more than three-quarters of a million newly unemployed workers are now looking for jobs.

If you count those who are working part-time, but want to work

full-time, or have fallen off of the unemployment rolls entirely, the

total under-employment rate is an awful 9.7 percent.

Some groups were particularly hard hit in May: Black unemployment was up from 8.6 to 9.7; and students from 15.4 to 18.7. The

new numbers make very troubling the President’s refusal to sign

an Unemployment Insurance extension.

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Between January and June in 2008, nearly 1.5 million workers

will exhaust their Unemployment Insurance benefits. In the first

quarter of 2008, 732,000 people exhausted their benefits—36.4 percent of all UI recipients.

We hope these numbers will cause the President to re-think his

opposition to an extension of unemployment benefits. The bottom

line is not pretty for American workers, their family, or our economy.

Today’s Jobs Report is just another wake-up call for this Administration to quit its threats to veto additional Unemployment Insurance for hard-hit workers and to actively work with Congress to address the more systematic problems dragging down our economy.

Thank you to the witnesses, and thank you to Chairman Hinchey.

[The prepared statement of Senator Schumer appears in the Submissions for the Record on page 38.]

OPENING STATEMENT OF HON. MAURICE D. HINCHEY, A U.S.

REPRESENTATIVE FROM NEW YORK

Representative Hinchey. Mr. Chairman, thank you very much.

I appreciate you joining us.

I want to express my appreciation to Chairman Schumer, Chairman of the Joint Economic Committee, and Carolyn Maloney, the

Vice Chair, for arranging this particular hearing because I think it

is a great opportunity for us to have information that you can provide to us, Mr. Rones, as well as the two people that you have with

you here, Mr. Galvin and Mr. Layng. We very much appreciate it.

As Senator Schumer was just saying, the economic circumstances

that we are confronting here as a Nation are continuing to get

worse and worse. Many of the situations that we are confronting

are reminiscent of those that we confronted as a Nation back in the

1970s when we had both a declining economy which was exemplified by increasing unemployment, and the downgrading of economic

circumstances for working people; but also an increase in inflation.

That is very much similar to the circumstances that we are confronting today. This new information that we have just learned this

morning shows the increase in unemployment has jacked up to 5.5

percent. As Senator Schumer was saying, if you include the people

whose Unemployment Insurance has run out, who have been unemployed for more than 26 weeks, people who are struggling along

to find a job, they’re only working 1, or 2, or 3 days a week; if you

put those people into the numbers of Unemployment, it gets up

close to 10 percent.

With the rising cost of gasoline, home heating oil, fuel generally,

and the rising cost of food, we are seeing a complex set of economic

circumstances that are confronting median income people.

As we know, most of the Gross Domestic Product of our economy

is driven by the spending of median-income people. As their circumstances decline, then the circumstances of the economy generally will continue to decline.

So we are deeply troubled about the set of circumstances that we

have to confront here, and we are very much obliged to you, Mr.

Rones, and the others who are with you today for the testimony

that you are about to give to us.

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And so, Mr. Rones, I turn it over to you and thank you very

much.

[The prepared statement of Representative Hinchey appears in

the Submissions for the Record on page 40.]

STATEMENT OF PHILIP L. RONES, DEPUTY COMMISSIONER,

BUREAU OF LABOR STATISTICS, U.S. DEPARTMENT OF

LABOR, WASHINGTON, DC

Commissioner Rones. Thank you for the opportunity to address the Committee and to discuss fully the employment and unemployment data we released this morning.

The labor market continued to weaken in May. The——

Representative Hinchey. You need to turn the microphone on.

Commissioner Rones. OK. I’m sorry. The labor market continued to weaken in May, as you mentioned. The unemployment rate

increased by 1⁄2 a percentage point to 5.5 percent, and jobless rates

rose for most of the major demographic groups.

Over the month, non-farm payroll employment continued to

trend down by 49,000. Thus far in 2008, job losses have totaled

324,000. In May, employment declined in construction, manufacturing, retail trade, and temporary help services, and health care

continued to add jobs.

Within the goods-producing sector, employment in construction

declined by 34,000. Job losses in this industry continued to be

widespread, and since its peak in September of 2006, construction

employment has fallen by 475,000. Two-thirds of that decrease,

however, has occurred in just the past 7 months.

Manufacturing employment also continued to decline in May by

26,000. Thus far this year, monthly job losses have averaged

41,000, about twice the average monthly decline of 2007 and 3

times the decline in 2006. Over the month, jobs declines continued

in two construction-related manufacturing industries: wood products and nonmetallic mineral products.

Within the servicing providing sector of the economy, retail trade

employment continued to decline, by 27,000 jobs. Since peaking in

March 2007, the industry has lost 184,000 jobs. Over the month,

job declines continued in department stores.

Temporary help services shed 30,000 jobs in May. Job losses

have totaled 110,000 over the past 4 months and 193,000 since the

industry’s most recent employment peak in December of 2006.

Health care employment expanded by 34,000 in May, with continued growth throughout that industry. Employment in food services continued to edge up over the month. Since last fall, job

growth has slowed markedly in that industry.

Average hourly earnings for production and nonsupervisory

workers in the private sector rose by 5 cents, or 0.3 percent in May

and by 3.5 percent over the past 12 months. From April 2007 to

April 2008, by comparison, the CPI for Urban Wage Earners and

Clerical Workers (CPI–W) rose by 4.2 percent.

Turning now to the data from our survey of households, the jobless rate, as we mentioned, rose sharply in May to 5.5 percent. Unemployment rates increased for adult men, adult women, teens,

whites, and blacks. The number of unemployed persons grew by

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861,000 to 8.5 million, with the increase disproportionately large

among 16- to 24-year olds.

The over-the-month jump in unemployment reflected additional

workers who had lost their jobs, as well as an upsurge in new and

returning job seekers.

In May, the number of newly unemployed persons—those who

have been jobless less than 5 weeks—increased substantially by

760,000. The number of long-term unemployed continued to rise.

The number of persons who had been unemployed for 27 weeks

or more totaled 1.6 million in May, up from 1.1 million a year ago.

Over the month, the number of persons in the labor force increased by 577,000, primarily among youth. The labor force participation rate edged up to 66.2 percent.

In May, 62.6 percent of the population was employed, down 4⁄10

of a percentage point from a year earlier. Since May of last year,

the employment-population ratio for adult men has declined by a

full percentage point, while the rate for adult women has been

about unchanged.

The number of persons working part time who would prefer fulltime employment was essentially unchanged in May at 5.2 million,

but has increased by 764,000 over the past 12 months.

I would note that large over-the-month changes in the seasonally

adjusted estimates from the household survey can occur between

April and July. There is a substantial flow of workers, particularly

young workers, into the labor force during these months. The interaction of several factors, including the underlying state of the economy, the timing of our survey reference week, and school schedules

can impact the month-to-month in our Labor Force measures.

While we always caution against reading too much into a single

month’s data, that is particularly the case at this time of the year.

So to summarize May’s labor market developments, the jobless

rate rose to 5.5 percent, which is the highest since October of 2004.

And nonfarm payroll employment continued to trend downward.

My colleagues and I would of course now be happy to answer

your questions.

[The prepared statement of Commissioner Rones appears in the

Submissions for the Record on page 44.]

Representative Hinchey. Well thank you very much.

The long-term unemployment rate seems to have gone up significantly. In other words, the number of people who find themselves

unemployed for long times even beyond the 26 weeks that Unemployment Insurance provides benefits for.

How significant is that, Mr. Rones?

Commissioner Rones. Well obviously it is significant. We actually see increases both in the newly unemployed and the long-term

unemployed. We have—excuse me, I have the numbers here—18.3

percent of the unemployed had been jobless for more than half the

year as of May of 2008. That number had been as high as 23.4 percent as we were recovering from the last recession, and that goes

back to March of 2004.

Representative Hinchey. It was that high back in 2004?

Commissioner Rones. Yes. But again, that is after the recession had played out. And generally long-term unemployment takes

5

a while to peak. Obviously those newly unemployed from this

month won’t reach that point for another 5 or 6 months.

So, you know, obviously we have seen an increase in long-term

duration unemployment, but we have seen an increase in unemployment across the board.

Representative Hinchey. And part-time unemployment, you

said went up by 7 million? Part-time?

Commissioner Rones. The number of people part-time who

would prefer full-time work?

Representative Hinchey. Yes.

Commissioner Rones. That number was up—excuse me just a

second while I get that.

Representative Hinchey. If I remember correctly, I think it

was that the number of people that were employed part-time, has

gone up by 7 million?

Commissioner Rones. No, I don’t think that’s right, but just

give me 1 second, please.

Yeah, it’s 764,000 over the last 12 months. It’s now 5.2 million.

Representative Hinchey. There’s another interesting set of circumstances with regard to the way in which people are employed.

I understand that the service sector now is something like 80

percent of employment; is that correct?

Commissioner Rones. It’s actually 84 percent of jobs in our

payroll survey, are in the payroll—in the service sector, and that

includes Government.

Representative Hinchey. That includes Government?

Commissioner Rones. Right.

Representative Hinchey. What is the recent history of that?

Say, over the course of the last two decades, with regard to the

changes in manufacturing, as opposed to service employment?

Commissioner Rones. Obviously, over the decades, we’ve shifted from a goods-producing to service-producing economy, and that’s

been a steady increase, and the 84 percent is an all-time high.

In recent months, while the economy has started losing some

jobs, generally, we’re at a point now where service-producing sector

is fairly flat, that it’s neither gaining nor losing, but the goods-producing sector—and we’re talking about, particularly, manufacturing and construction, as you know—continue to decline.

Representative Hinchey. It would be interesting to take a look

at the history of that, say, over the course of the last two or three

decades. I know you may not have that handy right now, but if you

wouldn’t mind, if you could come up with those numbers and give

them to us at some point?

Commissioner Rones. We’ll be glad to do that.

[The historical data referred to appears in the Submissions for

the Record on page 87.]

Representative Hinchey. We appreciate that. As you mentioned, a large part of the service, or a significant—at least, part

of the service sector is Government employment and a significant

part of Government employment, is employment by the States.

But I understand that, given the set of circumstances that a

number of States have to deal with, that the likelihood is service

employment for the States will decline.

Is that true or not? Do you know, offhand?

6

Commissioner Rones. Well, I have books of information about

what is and what has been. Obviously, we can’t look into the future.

I read the same reports that you read about tax takes for the

State. Generally speaking, we haven’t seen declines in Government

employment yet.

As for the future, I just don’t know.

Representative Hinchey. What we have seen is actual increases in Government employment.

Commissioner Rones. That’s correct.

Representative Hinchey. In fact, the main increases in employment have been Government employment.

Commissioner Rones. Right, Government and, particularly,

healthcare, as well, but, yes, you’re right.

Representative Hinchey. But private-sector employment has

either been stagnant or declining recently.

Commissioner Rones. That’s exactly right.

Representative Hinchey. So now we’re confronting a situation

where the economic circumstances facing both the Federal Government and State governments is going to make it, I think, increasingly difficult for them to continue to engage in employment.

For example, the National Debt here now is something in the neighborhood of $9.4 trillion. That National Debt has gone up very

substantially over the course of the last several years.

And many of the States, especially the ones that are significant

in terms of employment, like California, New York, and others, are

looking at situations where the employment rate is not likely to increase; it’s likely to decline.

It seems to me that that is going to make perhaps a significant

contribution to the unemployment rate.

Commissioner Rones. When we look at our state data, it’s interesting that some of the larger declines in employment, so far,

have been in the States where there have been well-publicized runups over the last decade in housing prices, and we’ve seen those

really fall off.

Places like California, Florida, Arizona, Nevada, are States that

have been often cited in the press as States with particular problems in the areas you’ve mentioned, and, in fact, we’re seeing those

effects in our employment data.

Obviously, the employment declines reduce income, reduce taxes,

so, yes, I agree with that assessment.

Representative Hinchey. Well, I think that’s troubling, because part of the debate that we’ve been having in the context of

the hearings by the Joint Economic Committee over the course of

the last year or so, actually, is the question about recession.

Is this economy approaching recession? Are we actually involved

in a recession? That’s a question where there are still differences

of opinion.

But I don’t think there’s any question that the economy is receding. It is receding and has been receding for some time.

And based upon the information that we have, including the information that you’ve provided us this morning, the likelihood is

that receding of this economy is likely to continue, and it’s likely

to continue, perhaps even at an accelerating rate.

7

And I wonder if you might have any insight with regard to that

at the moment?

Commissioner Rones. Well, again, I have no insight as to what

might happen next month or 6 months from now. When employment is declining, generally that’s associated with a recession, but

one thing I would say about that is, if you look at the pace of job

loss over the last 5 months, which is since employment peaked in

December, we’ve lost about 2⁄10 of 1 percent of employment over

those months.

If you take the first 5 months of the last two recessions, the job

losses have been about double that, so, obviously, I won’t try to add

to that debate as to whether there’s a recession or whether there

isn’t.

What we can do is provide the data that says this is what’s going

on in our part of the economy, which is the job market. And it’s

clear that almost everything we measure has shown some deterioration, not the level of deterioration that’s typically associated with

a recession.

And as I think you know, generally, recessions are viewed or

even named after the fact, after you get a lot of data, and in hindsight, you can say that looks like a recession. The National Bureau

of Economic Research, is actually responsible for the recession dating.

Representative Hinchey. I wonder if Mr. Galvin or Mr. Layng

had any comments on that? No? Nothing additional? No?

Someone else does, however. We see that the funding level available in the President’s budget proposal will require BLS, for example, to eliminate the American Time Use Survey.

Commissioner Rones. That’s correct.

Representative Hinchey. Now, this survey explores how Americans spend their time, how much time they spend with their families, at their jobs, doing housework.

It also shows that over the past two decades, families have had

less time together, less time for each other, but have put in more

time at work.

And we know that to be the case. Can you tell us more about the

importance of the American Time Use Survey, what that indicates?

Commissioner Rones. When we began the Time Use Survey,

there were some people who thought, well, why is the Bureau of

Labor Statistics involved in what is more a social than an economic

measure? Actually, for us and for many economists who encourage

us to do this, it actually rounded out our view of the economy.

What the Time Use Survey allows you to do is to take the thing

that we always measure—work—and put it in the context of your

entire life.

And so you can look at, within the family structure, the tradeoffs

that people make between labor supply, that is, providing themselves—offering themselves to the job market and taking care of

other family responsibilities. It’s the only way to measure those

things.

The reason the Administration has proposed to cut this, is not

specifically any comment on the value of the Time Use Survey, but

in this budget environment, for us to maintain our core programs,

including the Current Population Survey and Current Employment

8

Statistics Survey, which we’re reporting on today, we had to offer

up some cuts.

I would add to that,that while the loss of the Time Use Survey

would be important to a group of data users, right now, with our

budget situation, we will cut next year $50 million worth of programs, including 25 percent of the sample from our Household Survey that gives you the unemployment statistics, that gives you the

duration of the employment data that you use to deliberate on extension of benefits, as you mentioned earlier.

We will not be able to do the improvements to the CPI that we

would normally do every decade, that we have not been able to get

funding for, and even beyond those two cuts, there will be $30 million additional worth of cuts that we will have to take.

The money to support the BLS, outside of the Time Use Survey

and some other minor cuts, that money is in the President’s budget, as it was in 2008, but we have not been able to get funding

through Congressional appropriations.

I’d argue, and I’ll make this argument and will either ring true

or it won’t, but much of what you do here in Congress and what

the Administration does, absolutely requires statistics. As I said,

with the unemployment extensions, the discussion is based on the

data that comes from the statistical system.

You are escalating half a trillion dollars a years of Social Security payments, based on the CPI, which has a housing component,

which is almost a third of the CPI. It has a housing sample that

was selected based on the 1990 Decennial Census, and we have no

way of updating it.

I could give you a long list, but that will give you an idea of

where we are within our budget situation.

Representative Hinchey. Well, I very much appreciate that. I

mean, the job of this Joint Economic Committee, you know, one of

those unusual Committees made up of both Houses, is to understand the set of circumstances, the economic set of circumstances

that we are confronting as a Nation, and to make recommendations

to both Houses as to how we might deal with those set of circumstances.

And without the facts, without the statistics that you’re talking

about, obviously will make those recommendations, or even a basic

understanding, increasingly more difficult.

So, BLS is considering eliminating that survey.

Commissioner Rones. The Time Use Survey.

Representative Hinchey. Pardon me?

Commissioner Rones. The Time Use Survey?

Representative Hinchey. Yes.

Commissioner Rones. Yes, that is in the President’s budget,

that that will be cut in order to preserve, particularly, the Household Survey.

But, again, if the President’s budget itself isn’t funded, we have,

instead of $4 million worth of cuts for the Time Use, we have $50

million worth of cuts.

Representative Hinchey. So who has been responsible for

these cuts? This is something that the Administration has recommended, that the funding be continued, but the Congress has

cut them back?

9

Commissioner Rones. I’m afraid that is the case.

Representative Hinchey. That is the case?

Commissioner Rones. We had what—in 2008, the President’s

budget essentially funded all of BLS’s core activities. In the end,

the House mark that we had last year was actually also fully funded, if the Senate mark didn’t, but it was $14 million short.

In the end, with the Omnibus Appropriation, we were cut $30

million a day, and so our 2008 budget is actually absolutely below

the 2007 budget, and yet we still have to pay all the normal cost

increases.

So we’re at a $30 million deficit now. What the President’s budget in 2009 does, is restores those cuts and gives us funding for the

mandatory increases in 2009, as well.

Representative Hinchey. So your budget basically has been

declining over the course of the last several years?

Commissioner Rones. This year, it absolutely declined. In the

years prior to that, it’s gone up some with inflation, but not enough

to keep up with costs, so we’ve had to do actually a series of cuts.

In 2006 for instance, we had to make cuts, smaller cuts, but cuts

in eight of our different programs. So we’ve had a situation even

before that where we get—and this is very typical across the Government—that the increase in wages for our employees is not fully

funded, so you have to absorb the difference, so you’re absorbing

a percent a year, year after year after year.

But the big cut, really—it all hit the fan, if we can speak that

way, in 2008.

Representative Hinchey. Right.

Commissioner Rones. And you know how difficult those deliberations were over that final 2008 budget. To fund some other priorities that the Congress had, they looked in places where they

thought they could cut, and BLS somehow was on that list.

One other thing that I’d say is we distribute hundreds of billions

of dollars to the States and localities based on our statistics, our

local area unemployment statistics. The Child Health Insurance

Program distributes—it’s a $40 billion program over 10 years, I

think.

Those funds are all distributed, based on our data, whose quality

will erode year after year. In some cases, some of the data will disappear. When I think of the size of the commitments made on the

basis of our data, the hundreds of billions of dollars, it’s hard for

me to think of making really bad judgments, because you have bad

data.

Representative Hinchey. Well, I appreciate that. And I’m awfully glad that this subject has come up, so that we understand it

more clearly than we have in the past.

How much has your budget gone down over the course of the last

couple of years? You’re saying that it hasn’t gone down very much?

It’s only in the last year that it’s declined.

Commissioner Rones. Right. You would normally get—in our

case, we might normally get, let’s say, a $15- or $20-million increase, just to cover the increased cost of your rent and your salaries and such.

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So for instance, in 2006, we took a 1-percent rescission at the end of the budget process, so to us, 1 percent at the time, was $5 million and we cut $5 million worth of activities.

In 2007, we cut about $7 million, and we did that largely—we

stopped training; we stopped travel; we limited hiring. By 2008,

with that $30-million cut, we still are doing virtually no training;

no travel we’re not replacing equipment, and we’ve had a virtually

complete hiring freeze, except for our data collection, and temporarily cut some data products.

If you don’t get the data in, you don’t get anything, right? So, again, the shortfall in 2008 was $30 million and the shortfall that

the President’s budget is looking to address in 2009, is almost $50

million.

Representative Hinchey. [presiding]. OK, well, this is obviously something that we’re going to have to address here in the

context of this budget situation that we’re dealing with now.

We need to have accurate information here, and your presentation of it is crucial. So, we very much appreciate what you’re

doing and we’ve got to make sure that that continues to be accurate.

Commissioner Rones. Thank you.

Representative Hinchey. Last month, we were talking about

the unemployment rate, which has gone from 5 to 5.5 percent unemployment.

How many people were unemployed? What’s the actual number

there? Do you have that handy?

Commissioner Rones. The total number of unemployed, seasonally adjusted, was just about 8.5 million, and it was 7.6 million

in April.

Representative Hinchey. OK, so there’s a trend here or maybe

there’s a trend here of increasing unemployment, with the numbers

going up.

One of the things that people were talking about in terms of a

positive aspect of the economy, was productivity. Productivity was

talked about over the course of the past few days, saying that, well,

while some people are saying the economy is suffering, the fact is

that productivity went up.

But if productivity is going up while employment is going down,

how is that happening? Do you have any insight into that, how the

productivity rate is going up while the number of people who are

employed is going down, and while such a large percentage of the

people who are employed are involved in the service sector, including employment in Government?

Commissioner Rones. The calculation of productivity is affected by two things: First, it’s output, and the other is the amount

of labor that goes into that output. That essentially is what our

measure of productivity is.

So, if the labor going into it goes down, if the output is not going

down as fast, productivity will actually go up, and so that looks like

a positive thing, I guess, by itself, but we don’t look at the statistics—any one statistic by itself.

In the context of a short-term indicator of the broader economy,

you see that probably the most important thing that we’re looking

at, is not whether productivity is up a little, or down a little in a

11

particular quarter, but the labor market data that we’re presenting

today and that we present each month, are probably much more

important than those productivity statistics.

Representative [presiding]. Right, and the level of productivity

may, at least in part, depend upon how many people are employed.

Commissioner Rones. Well, it does, arithmetically, it does.

What happens—let’s say—and this is just hypothetically—that

the people who are losing jobs are in jobs that are more labor-intensive, let’s say, in the service sector, retail trade, some of these

areas that are, you know, pretty labor-intensive.

Productivity actually tends to go up in that situation, so it’s one

thing to look at whether productivity is up or down; it’s another to

try to interpret, well, why is it going up or down? Is it because—

is the problem on the output side or is it on the labor side?

And so it’s—you know, there are no simple explanations for productivity increases and decreases.

Representative Hinchey. OK, well, thanks very much.

One of the issues about unemployment that I find among the

most troubling is the long-term unemployment rate, the fact that

we’ve had such a significant number of people who are long-term

unemployed.

When we look at the situation in specific States, for example,

with the State that I represent, New York, the number of longterm unemployed is about 36 percent of the unemployed, and that

number has been increasing, so the percentage of long-term unemployed has continued to go up.

Commissioner Rones. Right. Let’s see, now, there are differences from State to State on each of these measures. I think

you’re right; these figures are fairly high for New York.

The problems that we’re seeing in the job market, are not showing up in any particular region of the country. Any measure you

ask me for, and you say, well, where are you seeing this problem,

you see States on the worst-hit list, all across the country.

So each economic cycle tends to have its unique geographic pattern. This is one where housing, in particular, is really important.

Many of those areas that have been hard-hit by housing, are being

hard-hit by job loss, employment decline, unemployment, and eventually long-term unemployment.

Representative Hinchey. One of the issues that we’re attempting to deal with here is the issue of long-term unemployment and

the way in which stimulating the economy should be addressed.

One of the things that a number of us have been suggesting is that

a way in which we can provide economic stimulation, is to deal

with long-term unemployment and the effect that that’s having on

the economy.

More and more people are experiencing long-term unemployment

beyond the 26 weeks.

Commissioner Rones. Right.

Representative Hinchey. And if you’re—I think, and I’d be interested in the actual numbers here, but it seems to me that the

percentage of long-term unemployment now is higher than it was

in the context of the most recent two recessions—one in 2001 and

the other in the early 1990s.

Do you have the figures on that handy?

12

Commissioner Rones. Yes, we do. What’s actually going on is

the starting point is higher.

Representative Hinchey. The starting point is higher?

Commissioner Rones. Yes, and so long-term unemployment as

a share of the unemployed never came down to where it had come

down in the past expansions.

So the peak—and I had given you the figures earlier, where, you

know, the peak had been, let’s say, 23.4 percent in March 2004,

we’re not at that point or close to that point yet, but the starting

point is higher than the starting point had been in past recessions.

Representative Hinchey. What was that? Twenty-four percent?

Commissioner Rones. The 24 percent was the peak for the

long-term unemployed as a share of the total unemployed.

Representative Hinchey. OK. So, do you have any information

with regard to long-term unemployment now, as opposed to longterm unemployment, say, in 1991?

Commissioner Rones. Yes, if you’d just give me 1 minute.

[Pause.]

Commissioner Rones. The problem of having so much information, is finding precisely what you need.

[Pause.]

Commissioner Rones. There we go. All right, so the current

share of the total unemployed who have been jobless for 17 weeks

and over is 18.3 percent. If you go back to the early 1990s—now

again, this is a series that tends to peak well after the beginning

of a recession, but the peak actually was—let’s see now, in 1994,

it peaked at a little over 21 percent, so we’re not there yet, but

again, we’re starting at a point that’s not that far from that level.

Prior to the recession in 1990, we were starting at a point that

was around 9 percent, and again, here we’re starting at a level

more around 16 percent and it’s gone up to 18 percent.

Representative Hinchey. OK. All right, well, all of that is very

interesting and very critical to our understanding and how we’re

going to try to deal with this situation.

Another issue is the level of wage growth. Looking at the numbers, it seems that we’re experiencing a period of time when wages

are actually pretty flat in the context of the increased cost of living.

Here we go, the annual change in real earnings, OK, thank you.

So one of the major issues that we’re interested in is the whole

question about Gross Domestic Product and how significant Gross

Domestic Product is for the economy and how median income

spending makes up a little more than two-thirds of the Gross Domestic Product.

So if you have median income that is not increasing and you

have the cost of living that is going up substantially, then you’re

likely to see a continuing downturn in the Gross Domestic Product

and a genuine downturn in the economy.

So again, there is more of a likelihood of a recession and, frankly,

if this set of circumstances continues, the likelihood of a deeper recession. This is one of the things that troubles me.

So, the way in which wages have been affected over the course

of the last year and over the course of the last several months is

13

that wages are not going up, that wages are pretty flat, and in

some cases, they’re actually going down.

Commissioner Rones. In the calculation that you have up here,

there are really two things going on: One is the issue of wages and

the other is prices.

Just to clarify, wage growth has continued on a fairly steady

path. We’re getting, let’s say 3.5 percent wage growth a year which

is very similar to what we’ve had in recent years.

There have been little ups and downs, but wage growth has been

fairly steady. The thing that has increased has been the CPI, and

as you know, that’s largely the result of very large increases in energy and large increases in food costs, as well.

Representative Hinchey. Yeah. So when you’re looking at the

rate of inflation, you see one level of increase. When you look at

something that we might call the increased cost of living, you see

something else, something that is very substantially higher.

When you look at the rate of inflation, that rate of inflation

doesn’t include the cost of energy or the cost of food.

Commissioner Rones. I see that a lot in press analyses. Our

price index information includes all of the goods and services that

people spend on, so our core CPI, if we say that the CPI is up 5

percent over the year—I’m just throwing out a hypothetical number—that is going to include energy; it will include food; it will include all the other commodities or goods that people purchase, all

the services they purchase.

There is a thing called—a calculation call the Core Rate, and

that’s just something that our data users have asked us to produce,

and that is, what would the rate of inflation be if you stripped out

the more volatile series, which tend to be food and energy?

But our CPI, and, I would assume the CPI that you’ve used to

do these calculations of real earnings, that includes food and energy.

Representative Hinchey. OK, so what’s the rate of increase

then, including food and energy?

Commissioner Rones. I’m going to let Mr. Layng, who runs our

CPI, I’m going to let him answer that.

Representative Hinchey. Thank you.

Mr. Layng. It was 4.2 percent in April.

Representative Hinchey. Gone up 4.2 percent in April, increased by 4.2 percent?

Mr. Layng. Correct. The issue of the Core versus the All Items

is the CPI press release every month; the lead number is always

everything, and then we break that down into food and energy and

all items, less food and energy, and we don’t use the term, ‘‘core.’’

Some people pick that number up and use it as the number and

gives a misperception to the public as to what’s really going on to

everything.

Representative Hinchey. OK, well, isn’t that the right way to

do it?

Mr. Layng. The right way to do it is to report everything, but

when the reporters—sometimes they’ll focus on what the reporters

call ‘‘core,’’ because people like the Federal Reserve tend to focus

on that, when they’re analyzing monetary policy.

But in terms of the numbers that BLS produces, it is everything.

14

Representative Hinchey. OK. So, with regard to wages, wages

have not fallen over the course of the past year?

Commissioner Rones. Nominal wages certainly have not, but

as the chart shows, real wages have, because——

[The chart, ‘‘Annual Change in Real Earnings: May 2007 - May

2008,’’ appears in the Submissions for the record on page 89.]

Representative Hinchey. Real wages have?

Commissioner Rones. Right, because the CPI has been growing at a faster rate than wages.

Representative Hinchey. Well, the information that we have,

shows that incomes for people in the top level of incomes, those incomes have gone up very significantly.

But if you’re looking at people in the middle income, their incomes have not gone up.

If you look at people in the lower income level, their incomes

have gone down.

Commissioner Rones. We have seen for quite some time,

issues with the dispersion of income. I think it’s largely been the

case that the income growth has been highest among those people

who are most educated, who have the highest earnings, and that’s

been the case, not just in the past 5 months or year, but for really

a couple of decades.

I mean, people—career counselors use that as an argument to get

people to focus on their education and to go to college, obviously.

But yes, I mean, it is the case that wage growth, generally

speaking, has been higher at the top end.

Representative Hinchey. At the top end? And in the middleincome range?

Commissioner Rones. Well, I don’t have the whole time series

here, so I don’t want to speculate on that. I can certainly provide

that for the record.

Representative Hinchey. OK.

Commissioner Rones. I know we have those data.

The information referred to appears in the Submissions for the

Record on page 87.]

Commissioner Rones. One thing I just want to point out, is,

when you talk about incomes going down, incomes are affected by

a couple of things: One is the wage rates, as we’ve talked about,

but the other is just whether you’re employed or not.

And so incomes could go down, not only because there’s an issue

with wage rates, but as we’ve seen in the last 5 months, there’s an

issue with declining employment, as well, and nothing affects family income as much as unemployment does.

Representative Hinchey [presiding]. Right. Well, I know, but

these are the things that we’re trying to understand, comprehensively trying to put it altogether and understand it. I know that

what you’re saying is exactly true.

But what we’re trying to understand, is what is the impact here

on the economic circumstances that most people are confronting.

What are we seeing?

We’re seeing the cost of living going up very, very substantially,

but we’re not seeing incomes going up proportionately to deal with

the rising cost of living.

15

So the effect of that, if that continues, and every indication is

that it will continue, then the likelihood is that blue- and whitecollar working people are going to find themselves increasingly in

a more difficult set of economic circumstances as time goes on.

And that’s one of the reasons why we’re seeing significant increases in debt, for example. There’s been a dramatic increase in

debt for working people, and a lot of that debt is credit card debt.

So, you know, all of that indicates clearly that the economic situation we’re facing is getting darker and darker, more and more difficult for more and more people, for the vast majority of people.

And so this is something that we’re going to have to deal with

here, because, if we don’t, then we’re going to face a bigger and bigger problem. I think that the first element of dealing with it is recognizing what we have to deal with.

And there are people who are arguing that, no, no, everything is

fine; the economy is good; there’s no recession and nothing is receding; everything is fine; don’t worry about it.

But it seems to me, when you look at all the numbers here, it’s

quite the opposite. There’s a growing negativity in the economic circumstances of the vast majority of people, particularly, you know,

blue- and white-collar working people, across the board. They’re

getting hit harder and harder.

So I’m wondering if that seems to be accurate to you.

Commissioner Rones. I think the description that you’ve made,

describes what’s happened up till now, that is, you have some reduction in income for many families because of the job loss we’ve

seen over the last few months, and of course, while we hadn’t been

in negative numbers before that, the pace of job growth had really

slowed down in 2007, as well.

And as you point out, there is an issue with the buying power

of the income, of the earnings that are out there, because inflation

has been heading upwards somewhat recently.

Representative Hinchey [presiding]. Well, let me ask you one

more question, and you may not want to comment on this, but one

of the issues that we’re facing here is what we’ve just been talking

about. Back in the 1970s, when we had a somewhat similar set of

circumstances, a lot of people experienced declining economic circumstances and increases in the cost of living because of driving

up costs of energy, et cetera.

There was at that time, a major push to increase wages, benefits,

things of that nature to try to keep pace with the growing cost of

living. But there are some who are making arguments now that

that was a mistake back then, and we don’t want to set up that

kind of situation here today.

Now, if we adopt that argument that it was a mistake back then

and we don’t want to set up that situation here today, then I’m

wondering, what do we do? What else do we do? How do we help

people deal with the rising cost of living? How do we help people

deal with their rising debt?

How do we help them deal with the need to purchase essential

elements of their set of circumstances so that they can continue to

function with regard to the economy and providing benefits for

their families? I mean, that’s not ultra benefits, but just basic benefits like food and fiber, for example; getting back and forth to work;

16

getting back and forth to school, you know, doing those kinds of

things.

So I’m wondering if you have any particular insight on that experience back in the 1970s, how we may be confronting another set

of ‘‘stagflation’’ circumstances here today, a downward economy,

and upward cost of living. And if we’re not going to deal with it

in the way that we dealt with it back in the 1970s, what do you

think we ought to be doing to confront this situation so that people

do not continue to suffer?

The vast majority of Americans are suffering under this present

set of economic circumstances.

Commissioner Rones. I’ll bargain with you for half an answer,

if I may.

Representative Hinchey. OK.

Commissioner Rones. The half that I’ll give you—and I think

you knew this coming in—the half I’ll give you is looking back at

the economy in the 1980s. We had a peak of unemployment of

about 10 percent; we had inflation that was considerably higher;

we had very high interest rates over a period of time.

Many of the issues that go along with a troubled economy also

exist now—trouble in the construction sector, rising unemployment,

job loss.

The magnitude of all of those things is much less now than it

was in the 1970 recession, so that’s the comparison I’d make.

What would we do about it? I’m going to invoke the kind of separation of powers for a statistical agency. We can’t take a position

on policy issues.

Once we do, then we’re seen as being political, and once we’re

seen as being political, people will dismiss our data as being political, and I think none of us wants that.

Representative Hinchey. OK, well I accept the half answer

and I appreciate the set of circumstances that you’re dealing with.

I would also observe though, that at a certain point back in the

1970s, the unemployment rate was 5.5 percent; the cost of energy

was going up at roughly about the same rate that it’s going up

now, and the other set of circumstances that we’re dealing with,

are similar to that which we’re dealing with now.

The likelihood is that the set of circumstances we’re dealing with

are going to continue to worsen as they did back during that period

of time. So it just seems to me that we ought to be trying to do

something now to head off the danger, rather than waiting till it

gets so bad that we have to do the kinds of things that were done

back in the 1970s, which became so controversial.

Anyway, that probably doesn’t provide the opportunity for half

an answer.

Commissioner Rones. That’s all on the policy side, but I appreciate the sentiment.

Representative Hinchey. OK, well, I appreciate you and your

two colleagues, and I very much appreciate—Vice Chair Maloney is

going to submit a statement for the record here for this hearing.

She’s going to submit a statement for the record, based upon the

fact, at least in part, that she initiated this hearing, so I can fully

understand, her involvement in this and her interest in this issue.

17

[The prepared statement of Representative Maloney appears in

the Submissions for the Record on page 42.]

Representative Hinchey. So we thank you very much for providing all the information that you have. We’re going to look at this

information very, very closely, and see if there’s some ideas that we

might be able to use to try to head off a more difficult set of issues

that we might have to deal with in the future.

Commissioner Rones. Thank you very much.

Representative Hinchey. Thank you very much, gentlemen.

Mr. Rones, thank you very much.

A new set of witnesses is coming in. Let me just introduce them

and describe what they are about.

Heidi Hartmann is the president and founder of the Institute for

Women’s Policy Research. Dr. Hartmann focus on economic issues

affecting women, including poverty, employment discrimination,

caregiving, and retirement.

Dr. Hartmann is co-author of ‘‘Still a Man’s Labor Market: A

Long-Term Earnings Gap.’’ She has published numerous articles in

journals and books, and she lectures widely on women, economics,

and public policy.

Eileen Appelbaum joined Rutgers University in March of 2002,

as a professor in the School of Management and Labor Relations

and director of the Center for Women and Work. She holds a concurrent appointment as professor in the Business School of the

University of Manchester in the United Kingdom. Formerly, she

was research director at the Economic Policy Institute in Washington, DC, and professor of economics at Temple University, and

held a visiting position at the University of Auckland, in New Zealand.

And Diane—how do you pronounce it?

Ms. Furchgott-Roth. ‘‘Firch-got’’ (ph.) Roth.

Representative Hinchey. OK, thank you very much. Diane

Furchgott-Roth is a senior fellow at Hudson Institute and directs

the Center for Employment Policy.

From February 2003 to April 2005, Ms. Furchtgott-Roth was

Chief Economist of the U.S. Department of Labor.

Previously, she served as Chief of Staff of the President’s Council

of Economic Advisors. Ms. Furchgott-Roth was also a resident fellow at the American Enterprise Institute, and prior to that, she

served as Deputy Executive Director of the Domestic Policy Council

and Associate Director of the Office of Policy Planning in the White

House under George H. W. Bush.

Well, thank you all very much. We very much appreciate your

being here. So, if you don’t mind, we’ll start in that way, and ask

Dr. Heidi Hartmann if she would please begin.

STATEMENT OF DR. HEIDI HARTMANN, PRESIDENT, INSTITUTE FOR WOMEN’S POLICY RESEARCH, WASHINGTON, DC

Dr. Hartmann. Thank you. Good morning, Mr. Chairman. I

thank you for the opportunity to testify today and alert you and

your colleagues in the Congress to some of the emerging issues for

women, as the current period of slow or possibly negative economic

growth proceeds.

18

1See ‘‘Figure 1. Employment to Population Ratios Have Not Yet Recovered from the 2001 Recession,’’ in the Submissions for the Record, page 50.

First, I want to stress that the context of women’s employment

has changed over time. If women ever worked for ‘‘pin money,’’ they

certainly don’t anymore. Women’s earnings are a large and critical

share of the economic support of families, and we have estimated

that women’s earnings constitute 45 percent of all earnings that

support families.

Women’s earnings are especially important to the children who

live in families that do not have fathers living with them. Even

though the typical woman who works full-time, year’round, earns

only about three-quarters of what a typical man earns; more than

7 million families with children relied solely or mainly on the

mother’s earnings in 2006.

Second, it’s important to understand that men’s employment has

generally been more sensitive to both the ups and the downs of the

business cycle than has women’s.

If we look at employment-to-population ratios for the last 10

years—do we have a chart of that? 1 We can see that employmentto-population ratios typically rise in good times, as more people

work, and they fall as the economy weakens and workers both lose

jobs and stop looking for work.

For men—I guess we don’t have that chart1 right now—the ratio

was highest in 2000 and 2001, and then it fell more in the downswing and rose more in the upswing than did the ratio for women.

And this greater responsiveness of men than women over the

business cycle really has to do with where men are located in the

economy. They tend to work in the more cyclical sectors like manufacturing and construction, and women tend to work in the more

stable sectors like education and healthcare.

One thing I want to point out though, is that even though women’s employment tends to be less cyclical than men’s, the 2001 recession really marked a watershed for women. For the first time

in 40 years, after decades of continuous employment growth,

women experienced a sustained period of job loss.

And I believe you can see that in this chart, that after the 2001

recession, you see the lowest line there shows that women’s employment growth was negative after that recession, and that’s the

only time that has happened in post-World War II American history.

And, in fact, women’s total employment didn’t recover from its

pre-recession peak until August of 2004. If we have another recession like that, with a slow recovery of employment after a recession, after the downturn, then it will be very difficult for women

to further catch up with men. They will suffer in both their employment growth and in their earnings, so recession is particularly difficult for women, because they still need to catch up to men.

And another thing I’d like to point out, is that really, we haven’t

recovered from that 2001 recession at all. The employment-to-population ratio is still below where it was before the last recession.

Wage growth has been very weak, so whereas sometimes when

you enter a recession, you enter it after a strong boom; families

19

2See ‘‘Figure 3. Women’s Employment Has Suffered More Than Men’s in the Real Estate Crisis’’ in the Submissions for the Record on page 53.

have a little surplus built up; they’ve had strong earnings growth;

they’ve had strong employment; that’s not happening this time.

If we enter a recession now and it becomes deep, it will be very,

very bad for families because they have no backlog that they’ve

built up through a boom. That boom was 10 years ago, so that is

a big problem for families today.

The financial anxiety that appears to affect women more strongly

than men right now—we looked recently at a survey from February

2007, and women were 50 percent more likely than men to worry

about their economic security, and they are more likely than men

to have to put off getting health care, to wait to buy things their

children need, and they are also more likely than men to go hungry.

With these general trends as background, I want to take a look

at a couple of vulnerable areas before I close.

One especially vulnerable group is single mothers. Single mothers have a higher unemployment rate, either than all men or all

women. They may face more constraints when they look for jobs.

They may also face more employment discrimination.

The unemployment rate for female heads of household was 6.8

percent in April of 2008, and that was 10 percent higher than in

the previous April. Rates were also very high for adult African

American women, as well as for African American men, and all of

those groups have higher rates than either white men or white

women.

And in May, the data just released this morning show a very

high rate of increase for African American women, in particular.

I also want to point out that the employment rates overall for

mothers in the last 5 years have been very troubling. We have lost

302,000 jobs for mothers, and 302,000 fewer mothers are working

today than were working in 2001.

There are a lot of different theories for why this might be. It

might be preference; it might be job loss in the industries where

women work; it might be the lack of family friendly policy, but in

any case, a recession or weak job growth will only exacerbate the

problems that mothers face.

One other area of weakness I’d like to look at is the real estate

rental and leasing services industry. We do have a chart2 for that,

as well, and it shows very high volatility in employment in the past

couple of years, for both men and women. You can see that the blue

line—men—is more cyclical, went up more in the 2006–2007 period

or early 2007, but more recently women’s employment has fallen

much more rapidly.

Women have lost almost 100,000 jobs in that industry, and men

about 40,000. Now, in the real estate crisis, as a whole, men have

lost more jobs, because of the construction industry, but just looking at the real estate services, women have lost more jobs than

men, so that’s an industry in which women appear to be more vulnerable than men.

I do want to comment on pay equity, something that Representative Carolyn Maloney asked me to comment on. Pay equity is someVerDate 11-MAY-2000 11:07 Feb 04, 2009 Jkt 044703 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 C:\DOCS\44703.TXT DianeA PsN: DianeA
20

3 ‘‘Figure 6. African American Women Who Likely Qualify for Better Credit Terms Suffer

Disportionately from Subprime Rates’’ in the Submissions for the Record on page 56.

thing that typically improves in a recession: Women do better than

men in recession, because their wages don’t fall as fast, because

women’s employment is a little bit better and more stable. But

women’s earnings also don’t grow as much in the boom, so men

gain on women in a boom, and, in a relative sense, women gain on

men in the recession.

But the overall fact is that since the 1980s, we’ve made very little progress in narrowing the wage gap, and that is something that

I think that Congress should really turn its attention to.

So, in looking at the types of policies that Congress might want

to consider, I would say expanded educational opportunities for

women, especially in non-traditional jobs where the wages are

higher. I think that would be an excellent national investment.

One of the things we’ve noticed is that women in the United

States, especially those with college degrees, do not work as much

as women in the European countries, so we’re losing out competitively. We’re not making the most intensive use of our women as

we could.

We notice that mothers’ ability to compete in the labor force is

limited, and we feel that there’s a great need for more family

friendly policies. Many of those are being considered by Congress

right now.

We would urge stronger enforcement of Equal Employment Opportunity laws in order to combat discrimination against women,

especially women of color and especially mothers. We also urge

greater regulation of the credit industry, because we do have a

chart3 on the fact that women, especially women of color, are much

more likely to hold subprime mortgages than white men or white

women.

You can see that it’s nearly triple for African American women,

the rate of subprime mortgageholding, compared to white women.

This was already so in 2006, so this group is especially vulnerable

in this real estate crisis, and I think credit regulations are very

necessary.

Finally, I think you yourself remarked about the need for economic stimulus, and Mr. Hinchey, you’re particularly concerned

about the long-term unemployed. I would suggest then, that building public infrastructure would be a very good investment for Congress in areas like transportation, communications, healthcare, and

education.

And while some would argue that a recession is not a good time

to take on ambitious new projects, of course, countercyclical spending is a function of national Government. It’s been recognized by

the Employment Act of 1946 which established the Joint Economic

Committee. Not only does the macroeconomy benefit, but so will individuals and families.

So these are some of the policies that I would urge the Congress

to consider and to exercise more oversight over.

In addition, I would like to mention the importance of the American Time Use Survey and other data. We presented data today

that come from the Women Workers Series. This is a series that

21

the BLS proposed to eliminate several years ago, and did eliminate

for 1 year, but because of the actions of Congress, we were able to

get that dataset back. BLS restored the missing year of data and

we were able to present that data to you today.

So we urge the Congress to make information a top priority.

Thank you very much for this opportunity, and I would like to request that my written testimony be submitted for the record.

Thank you.

[The prepared statement of Dr. Heidi Hartmann appears in the

Submissions for the Record on page 48.]

Representative Hinchey. Indeed, it will be and we very much

appreciate that testimony and the way in which you summarized

it just now. Thank you very much.

Dr. Appelbaum.

STATEMENT OF DR. EILEEN APPELBAUM; DIRECTOR, CENTER

FOR WOMEN AND WORK, RUTGERS UNIVERSITY; NEW

BRUNSWICK, NEW JERSEY

Dr. Appelbaum. Good morning, Mr. Hinchey, and thank you

very much for this opportunity to talk to you about how the economic downturn is affecting women workers.

And as you pointed out yourself, we have a lot of business people,

commentators and Government officials who are dithering over

whether or not we’re actually in a recession. But America’s working

women know that the economy is in big trouble as they face those

record high oil prices, food prices, energy prices, as you pointed out.

Income growth has been constrained now by 6 months of privatesector job loss, and housing prices are still falling. We know that

we have millions of families that face the prospect of losing their

homes, their jobs, their retirement savings, their health benefits,

and their middle class way of life.

My remarks will focus on the effects of the economic slowdown

on state budgets, how that affects cuts in spending, and how those

affect women, both in terms of the services they rely on and the

jobs that they hold.

I want to begin by pointing out that Congress can really help.

The economic stimulus package that was passed—those checks are

going out right now, and they are what stands between us and an

official recession at this very moment. In the absence of those

checks going out, personal income and consumption would already

be declining.

In the aggregate, wages are going down, and so what’s holding

up the economy are those checks that, thanks to Congresswoman

Pelosi and thanks to the actions of the Congress, have kept us in

positive territory.

The headline in today’s New York Times, on the Business page,

was that economists were surprised to see that retail sales had not

only not declined, but had increased. And, of course, this was driven by sales growth at Wal-Mart and at Costco. And of course, that

is people who are having a really hard time making ends meet running right out and spending those checks.

So Congress can help, and I will give you other ideas for how you

can continue to help, as I go on. But first let me make the case for

further action.

22

The States are facing substantial difficulties in terms of balancing their budgets. Property tax receipts are down, other tax receipts are down. The decline in property taxes is what’s different

from the 1970s, by the way. You heard about other ways in which

things are better now than they were in the 1970s. But one way

in which they are worse, is that we did not have a housing crisis

in the 1970s and people were not losing their houses.

In any case, tax receipts are down, expenditures are rising, and

we have already 25 States, plus the District of Columbia that have

announced that they face shortfalls. And we have several other

States that have not yet measured the extent of the gap for them

but are anticipating budget gaps. At the moment the aggregate projected shortfall is $40 billion,

and that is a very large number. It is about 8 to 10 percent of what

their budgets are in the aggregate.

We have 8 States that are facing more than a billion dollars in gap. New York’s budget gap is about $5 billion. New Jersey’s is $3

billion. California is $16 billion. So these are big numbers.

States are required, as I think everyone here knows, to follow

balanced-budget rules. And this of course often leads to broadbased spending cuts as the solution.

In the 2001 recession many States cut spending on health care,

child care and education, and these are cutbacks in essential services that women rely on for themselves and their children, and

these are also jobs that women hold.

I want to emphasize one point. We are not necessarily talking

about Government jobs. If you think about it, a lot of the spending

is subsidies for private sector jobs. State spending subsidizes hospitals, health care, nursing homes, child care. These are all jobs

that are either in the private sector or they’re provided by community organizations, or they’re provided by faith-based organizations.

When those cuts in State spending come down, those are services

and jobs that are going to be lost. And these are jobs overwhelmingly held by women.

One thing we know is that the current State budgets were adopted a year ago. There was no downturn a year ago, and so we are

still seeing the kinds of employment and employment growth that

reflects that. But the new State budgets go into effect in July of

this year, in a couple of weeks, and I am predicting that by the end

of the year you will begin to see declines in employment for women

in health, human services, child care, and so on. So these are jobs

that are going to affect women.

I won’t repeat what we’ve already heard. So many of the jobs so

far have been lost in the more cyclical industries that employ men,

especially construction where so many of the job losses have occurred.

The only thing that is keeping employment from falling even

more dramatically, the offsets, are the fact that health and education have continued to grow. Those are the only bright spots. And

these are under real threat from the cuts in spending at the State

level.

So the question is: What can be done?

I just want to emphasize that Congressional action is important.

I won’t repeat what Heidi has already said about the American

23

Time Use Survey. But if we are going to understand what is happening and how people are coping, we have to have that survey.

I think it is also important that Congress pursue policies that

will reduce the likelihood that women are going to be fired and lose

their jobs because of sickness or care responsibilities.

If they lose a job in this environment, it will be very difficult to

get a new job. As we know, the biggest increase in unemployment

this month is in re-entrants and new entrants into the work force.

So if you lose a job, if you drop out to take care of a sick child,

when you come back it is going to be really hard to get another job.

You also asked the last panel about the 1970s. You talked about

the rising wages. That was not driven by Government policy. That

was driven by the fact that we still had strong unions. That is

gone. You are not going to see that kind of wage growth this time.

And so you ask what it is that Congress can do. And of course

what Congress can do is lessen both the blow of unemployment and

also the blow of rising prices. As we get our exchange rate back

where it needs to be so that our manufacturing sector can grow—

is there anybody who really wants to see that stop happening—we

want to see manufacturing improve again. But that fall in the exchange rate leads to rising prices. And the question is: In what way

can Congress buffer this?

Some steps seem pretty obvious. If people knew that they had access to quality health care regardless of whether they had a job,

if they knew that they had access to quality child care regardless

of whether they could afford to pay for it, if they knew that they

could have partial wage replacement if they had to take off time

to take care of a sick child or to recover from an illness of their

own, all of these things which Congress has been considering in

other contexts would really make a huge difference in the current

economic environment.

But there is one more thing that Congress can do: It can target

fiscal relief to the States.

In the last recession, Congress waited a little too long, perhaps

because the relief didn’t come until 2003 and the recession of

course was in 2001. But there was some fiscal help to the States,

and it made a real difference.

The last time the fiscal relief was on the order of $20 billion. A

package like this makes a huge difference. As States exhaust their

rainy day funds, the question is: Will they have to make cuts in

services and jobs?

And if there is some help from Congress in the form of a fiscal

relief package for the States, I think that that can make a huge

difference, as it did the last time.

State budgets do not recover until well after the recession is

over, so those job cuts that affect women continue long after the

official recession is done. I think this would be very important. My

time is up, so I will stop there. Thank you.

[The prepared statement of Dr. Appelbaum appears in the Submissions for the Record on page 62.]

Representative Hinchey. Well thank you very, very much. I

appreciate it.

Ms. Furchtgott-Roth, thank you for being with us, as well.

24

STATEMENT OF DIANA FURCHTGOTT-ROTH, DIRECTOR, CENTER FOR EMPLOYMENT POLICY, HUDSON INSTITUTE, WASHINGTON, DC HEADQUARTERS

Ms. Furchtgott-Roth. Well thank you very much for giving me

the opportunity to testify before you today. I would like to submit

my written testimony for the record, because when I wrote my

written testimony I didn’t know that this morning’s numbers would

be what they are, and even though—because they only came out

at 8:30 this morning.

These numbers are very troubling. Even though unemployment

by historical standards—men 20 and over, 4.9 percent; women 20

and over, 4.8 percent—they are low by historical standards, but

they are still higher than they were last month, and this is very

troubling, and this is something that we need to turn our attention

to.

What is also troubling is that the growth industries where we

saw growth in payroll jobs were the Government-dominated sectors. So there was an increase in 17,000 jobs in the Government

sector, 54,000 in education and health. These are areas that are

traditionally dominated by the Government.

Professional and business services, which has generally shown

increases month after month, declined by 39,000.

So there is a great need for women and for men to keep this private-sector growth growing, and this is something that Congress

really needs to turn its attention to.

First of all, women pay taxes many times at higher rates than

men do because they are the secondary earners. So they pay tax

at the top rate of their families.

Congress needs to pass legislation to keep the current levels of

tax rates low. Taxes are scheduled to go up on the first of January

2011, and there are many businesses that are not making investments because they think the top rates are going to jump.

My recent book, ‘‘Overcoming Barriers to Entrepreneurship in

the United States,’’ talked about the importance of taxes. Small

businesses file under the Individual Tax Rate. The top rate is now

35 percent. It is scheduled to go up to almost 40 percent in 2011,

and that discourages investment.

The Estate Tax goes to zero 2010. Two thousand and ten is a

great year to die. And then it jumps up in 2011, and that just does

not make any sense.

Oil prices and gas prices. Women drive. They do a large share

of their driving. And these high gasoline prices and high oil prices

are very harmful to all Americans, and particularly women.

This is something we need to be doing something about. We talk

about being energy independent. We could be drilling millions of

barrels of oil a day. We do not have to be going to the Saudis asking them to increase production. We could be increasing production.

We could be tapping ANWR. We could be doing off-shore drilling.

We could be drilling in the Gulf of Mexico for oil and natural gas.

You know, Cuba and China have a joint project. They are drilling

60 miles off the Coast of Florida, but we are not. So they are getting the oil, and we are not getting the oil, and that should not be

allowed to happen.

25

We should be building new refineries so that when there is a

hurricane the gasoline prices do not spike. We need to allow waste

storage in Yuka Mountain because no nuclear power plans are

being built because there is nowhere to put the nuclear waste.

We also need to be avoiding new costs and new programs that

are currently being discussed. The Warner-Lieberman-Boxer bill,

this cap-and-trade bill, would be one of the highest energy tax increases in history, and women drive; they pay taxes; they don’t

want this.

The housing bailout, the Frank-Dodd bill, what it would do is it

would raise costs, raise rates—borrowing rates on future borrowers, many of which are women, to pay for a few imprudent borrowers right now.

The Ethanol Bill. We had the ethanol mandate in the Energy bill

in December. This is driving up prices of food. Congress could stall,

or repeal these energy mandates. Where 8 billion gallons of ethanol

were used last year, it is up to 9 billion this year. It is going to

go up to 36 billion in 2022. And all that is raising food prices, raising prices in grocery stores as corn drives out other kinds of food:

eggs, butter.

You know, women are especially conscious of this.

Now some see the solution to higher prices as more mandates of

higher unemployment conditions for women. Some see the solution

as having more mandates on employers. So some people suggest

mandated sick leave. Mandated paid family leave. Equal pay not

for equal work as the law is, but for work of equal worth.

So someone has to figure out what ‘‘equal worth’’ is. That is in

the Paycheck Fairness Act and the Fair Pay Act. This not only puts

more mandates on employers, discouraging them from hiring

women, but it also moves us more toward the European system

where women have higher unemployment rates, longer periods of

unemployment, lower rates of working outside the home, fewer of

them work outside the home than in America, and lower incomes.

And, Mr. Chairman, I would like to argue that this is not where

we want to go. And I have the details in my written testimony

which, as I mentioned, I would very much like to submit for the

record.

Thank you very much for allowing me to testify today.

Representative Hinchey. Well thank you very much. If there

is anything else that you want to say, there is more time.

Ms. Furchtgott-Roth. Oh, no, no. I was told to speak for 5 minutes.

[The prepared statement of Ms. Furchtgott-Roth appears in the

Submissions for the Record on page 69.]

Representative Hinchey. OK, But we have been much more

flexible about it today than the Committee normally is because,

after all, I am the only one up here.

[Laughter.]

Dr. Hartmann. We appreciate that very much, thank you.

Representative Hinchey. Well I appreciate all of you. I appreciate the things that you have said. I think that you all make very

good points about the issues that we have to deal with.

One of the questions that comes to mind immediately, based

upon some of the things that were said is about health care, health

26

insurance. That would have a major impact, I would think, on the

economy. I would just wonder if you would like to make any comments about that.

If we were to be able to set up a system of national health insurance so that everybody had health insurance and could get decent

health care?

Dr. Appelbaum. It would be huge. It would be a tremendous

benefit to our employers. Most of our manufacturing employers do

in fact still provide health care, health insurance for their employees, which adds to the cost of every automobile, every ton of steel,

and our ability to export.

I mean, you have a car made in Canada and it doesn’t include

the health cost. You have a car made right across the border in

Michigan and it does include health care costs. And for families I

think one of the largest sources of insecurity, one of the main

things that makes losing your jobs so traumatic is that when you

lose your job you also lose your access to the health insurance system. You lose the health insurance that you’ve had. You lose access

to your doctors. If you have children, you can imagine how traumatic that is.

I think in terms of economic security, economic fairness, and

competitiveness—on all those grounds—we have got to reform the

health care system.

Dr. Hartmann. I would say right now some employers are basically subsidizing other employers. Government is providing health

insurance to all of its workers. So is a lot of manufacturing. So are

a lot of other businesses. But there are many businesses that are

not. And all of us are picking up the costs for that in tax dollars

that pay for emergency medicine, and that kind of medicine is more

expensive.

I think if we had national health insurance we would have a

more rational health care system, potentially lower costs because

people would be able to get preventive care and not be forced to

wait until they are very ill and go to emergency rooms which is

very expensive.

I think it would also probably improve employment prospects in

the health care industry, which of course is dominated by women

in most of the jobs. And I think since the American people want

good health care, that is fairly obvious that we would like to have

excellent health care, that is an expenditure I think that the American people want to make. And we can make that expenditure a lot

more rational if we have a national health care system rather than

the hodgepodge that we have today.

Ms. Furchtgott-Roth. Right. It is an extremely important problem. In my book, ‘‘Overcoming Barriers to Entrepreneurship in The

United States,’’ I talk about how health care really is a problem for

entrepreneurs and we really need to do something about it.

Now we do not say, ‘‘I am losing my job,’’ or ‘‘I am changing my

job, I am going to lose my home insurance, I am going to lose my

auto insurance,’’ no, it is the health insurance. And that is because

we do not have a vibrant private sector market.

What we need to do is allow insurance companies to offer plans

across State lines so we can offer national plans, so we do not have

people in one state just being limited to small risk pools.

27

That way we need to increase competition. It works in other

areas of insurance, and there is no reason it should not work in

this.

Now if it would work better for the Government to take over and

have universal health insurance and just provide it, why wouldn’t

it work to have universal home insurance, or universal car insurance? Why wouldn’t the Government take over all of that, it would

really be superior?

So I would say that we need to basically expand and allow individuals, as the President proposed, $7000 of just credits to buy

whatever health insurance program they have, at the same time as

liberalizing all the rules that prevent health insurance companies

from offering it.

And then people would be able to purchase plans for themselves,

rather than having the Government set a particular plan. And the

President did propose that last year, and it wasn’t met with a lot

of enthusiasm, but I think the people should take another close

look at it.

Dr. Appelbaum. Can I just add that health expenditure in this

country is now about 15 percent of GDP, and this is about double

what it is in other industrialized countries. And yet we don’t have

anything like that in terms of life expectancy or child mortality to

show that we are getting something for all of this extra money that

we’re spending. And a big chunk of it, I think, is because of the

inefficiency that is provided by the private insurance system that

we have in this country.

So much of our health dollars goes for all those gatekeepers who

keep you from seeing the doctor that you need to see. You know,

I think no fault is really the way we want to go with respect to

health insurance.

We would not have to worry about doctors’ liability insurance if

a person who was injured in any way, whether it is an auto accident, or through some mishap in a hospital, had access to whatever

health care they needed, this whole question of liability insurance

for doctors would disappear.

We have health care costs that other countries simply do not

have that reduce our ability to provide insurance. We have a huge

number of people, including children, who do not have access to

health insurance and do not have regular health care despite the

fact that we spend such a large proportion of our GDP on health.

Dr. Hartmann. Another area where we might want to introduce

some competition is the drug companies. They are allowed to have

very long, lengthy years of patents, and they spend a lot of money

marketing a slightly different drug here, and a slightly different

drug there. A lot of money is wasted on that kind of competitive

marketing, and also lobbying, and advertising of all kinds. One

economist has estimated that about half of that 15 percent—I believe Huey Rhinehart from Princeton. So I don’t really believe that

Ms. Furchtgott-Roth’s recommendation of greater competition is

going to work in the health care market overall.

It does require some Government action. Government action does

affect things like the patent laws and definitely can affect people’s

purchasing power. The $7000 tax credit that the President proVerDate 11-MAY-2000 11:07 Feb 04, 2009 Jkt 044703 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 C:\DOCS\44703.TXT DianeA PsN: DianeA
28

poses is not going to help an awful lot of people buy health insurance.

Ms. Furchtgott-Roth. Well I think a $7,000-policy is a lot—

there are a lot of people, 47 million people without health insurance right now, many of them would welcome $7000 to be able to

purchase health insurance.

A couple more cost-cutting ideas. One of the main ones, and

there’s been a lot of work on this, is electronic record keeping. We

waste a lot of time with paper prescriptions, paper records. You go

into a doctor’s office and you see files of paper. You change doctors,

you have to fill out a new folder of paper. And if we were to go electronic, that could save billions of dollars a year. And also a lot of

unnecessary deaths caused by medical error.

I would also like to say as an emigrant coming from England,

which has a pretty good reputation for its national health service,

how much superior medical care one can get here in the United

States.

We do pay more for it, but we get a lot more for that also. I took

my grandmother when she had a stroke to a hospital and it was

a Friday afternoon. I took her on a Friday afternoon. She had a

stroke. I took her to the hospital and I said: When is the doctor—

she was checked in. I said, When is the doctor going to come?

They said, Oh, the doctor comes on Monday.

I said, Isn’t it possible to get a doctor over the weekend?

Oh, no, the doctors don’t come over the weekend.

I said, well, you know, coming from the United States, could I

pay a doctor to see her?

They said, Well, you wouldn’t want to trust anyone who you

would pay.

So, no, that wasn’t an option. And they said, Besides, someone’s

had a stroke, seeing a doctor right away doesn’t matter very much.

So there is a kind of rationing that goes on. And that is why a

lot of people come to the United States for our level of medical care.

We have a lot more innovation in terms of pharmaceuticals, waiting times are shorter, and there’s a lot of advantages to just keeping the kind of system that we have now.

Representative Hinchey. Well it is an interesting debate here,

but it is a very important subject. I think that one of things you

were saying about the complexity of the paperwork, part of that at

least, or maybe most of it comes about as a result of insurance

companies that are making it much more complex and difficult for

people to actually get the health care they need and get the payments for the health care.

So I know that that’s the kind of experience that a lot of people

have had. But this is an interesting discussion. As you were pointing out, I mean we spend more for health care in the United States

than any other country, but nevertheless we do not have the best

health care.

We have a number of examples of how our health care is of lower

quality for a lot of people than it is for many other people in other

countries. You know, we have more deaths of infants, and a lot of

other issues that really make it more difficult for us, in spite of the

fact that we spend more than any other country does for health

care.

29

4See ‘‘Table 3. U.S. Women’s labor Force Participation Rate Lags Many Other OCEO Countries: Prime-Age Women (25 to 54)’’ in the Submissions for the Record on page 57.

But it is also interesting how this situation is evolving. I can remember back several decades ago when the American Medical Association was adamantly opposed to national health insurance.

Now they are firmly in support of it.

And as I think all three of you were observing, many industries

and employers who had been opposed to it are now for it because

they see how much it is costing them and how much better it would

be for them and for our economy if we did have a system of national health insurance.

Dr. Appelbaum. I would just add, a system of national health

insurance is not the same thing as the kind of national health system that they have in the United Kingdom.

The German Model, for example, is very similar to the United

States. If you were in Germany you really would not be able to see

the difference. You would have an insurance company. You would

have hospitals to go to. There would be doctors and hospitals that

were in your insurance plan, and so on, but Germany nevertheless

has universal coverage.

So we would need to explore the many ways of doing it. And I

just can’t help, since we’ve just had one example of an N of 1, and

as an economist I hate N of 1 examples, but I personally have had

two horrible experiences in the past year myself.

I developed a terrible headache. My doctor said, get yourself immediately to a hospital. You may be having a sentinel bleed, which

is like a warning that you’re going to have a stroke, and I got to

one of the very best hospitals in Philadelphia. I was visiting in

Philadelphia at the time. And it was in the evening and they could

not get a neurologist—they wanted to do a spinal tap, but I’ve had

back surgery and so they couldn’t do the spinal tap that they needed to do. They needed, I’m sorry, an X-ray type person, a radiologist, to come in so that they could look with a fluoroscope and see

exactly where to put the needle, and they could not get a radiologist to come in.

I didn’t see a neurologist until the next morning. If I had had a

stroke that night, right, where would we be today? So we could

have N of 1 examples all over the place. I have other stories, but

I’ll save them.

Only people who have health insurance and have not had to use

it think we have great health insurance in this country.

Representative Hinchey. Those are very good points, and I am

awfully glad that you are here.

Dr. Appelbaum. Me, too.

[Laughter.]

Representative Hinchey. Earlier, you were talking about the

difference between women in the European Union and working circumstances and women in the United States. Could you touch on

that a little bit more?

Dr. Hartmann. Yes. I have a table4 in the written testimony

that looks at women between the ages of 25 to 54, and one of the

things this shows is that between 1994 and 2006 the United States

was one of only two countries that had an actual decline in womVerDate 11-MAY-2000 11:07 Feb 04, 2009 Jkt 044703 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 C:\DOCS\44703.TXT DianeA PsN: DianeA
30

en’s labor force participation. And the United States is the sixth

lowest.

In other words, of all these 25 countries, other advanced countries like us—you know, England, Germany, et cetera—the United

States is sixth from the bottom in the labor force participation rate

of women, and we had a decline in the last 12 years, whereas every

other country had an increase.

Diana’s data is different. I am not exactly sure why, but this is

from the OECD. Then there is another set of data from the OECD

that looks at women with a college education. And here the United

States is at the very bottom compared to the other countries.

The top rate is 90 percent or more in Sweden. Also high in Denmark and the United Kingdom. The United States is at the bottom

at just under 80 percent.

Now 80 percent labor force participation is good, but for college

educated you would like it to be higher. I would love to see it be

90 percent, as in some of these other countries.

Why? Because we are not using educated women as well as we

could. We want to be a productive country. We want to be competitive, and we are leaving some of our talent out of the labor market.

And these other countries such as Sweden have excellent systems

of subsidized child care, paid family leave. These are things we are

moving toward in this country, but we are not there yet.

I think if we want to make the best use of all of our talent, you

know I always say the next Einstein could be a Latina girl from

a barrio. You know, we need to have equal opportunity, and we

need to have things that enable women to do this work.

I am sure Diana will argue that we don’t need any Government

involvement; that it’s just women deciding to stay home. Well you

know, women respond to market incentives like everyone else. And

if I am a young woman and I am looking at my salary and I am

seeing that my husband’s salary is more than mine, and we want

to have children, and someone maybe is going to work part-time,

or stay home a little while with the kids, that is more likely to be

the lower earner.

So the market is not rewarding women as well as it does men,

and I think women do react to those signals sometimes in making

decisions about family care. So that would be one of the reasons to

try to equalize the family care burden between men and women,

and to equalize pay rates in the labor market, so to really kind of

get us on the road toward providing more of the social supports

that we see in Europe.

Ms. Furchtgott-Roth. Well the data I got—and there is no

point in arguing about data—was from the Bureau of Labor Statistics. Our Labor Force participation rates overall, not looking at a

particular segment of our college-educated women, are higher than

Australia, Japan, France, Germany, Italy, the Netherlands, so

those are countries that have these mandated Government-subsidized child-care policies. They also have mandated family leave.

But I think that Dr. Hartmann’s expression, ‘‘we don’t use our

women as well as we could,’’ which she also said in her testimony,

it’s not a question of ‘‘using’’ our women; it is a question of choices.

What do women want?

31

The data show that labor force participation rates for women

about 25 to 45 of child-bearing age peaked in 1999 when economic

growth was very strong. So it is not as though they dropped out

because of a recession. It is not like it was 2002 and they couldn’t

find jobs and so they dropped out.

They are making a choice because of higher incomes because

they want to spend more time with their children and less time

making money.

On the other hand, women 55 and over, their labor force participation has continued to increase. So they are at an all-time high.

I would just argue that there is a lot, in the 1970s, the 1980s, it

was fashionable to say, well, you can just leave your kids at home,

they’ll be fine in daycare, they’ll be fine in after-school care, but I

think a lot of mothers just want to look after their kids themselves.

They think they give them better care.

And so a smaller percentage, a small percentage, decided that

they wanted to stay home maybe for a small period of time, take

time out of the work force, and that’s why we have the decline in

labor force participation rates of women.

And I would not say it is a problem. I do not say we have to use

them better. They need to make their own choices.

Dr. Appelbaum. However, their choices are very much constrained by their opportunities. One of the things that we know is

that what women would really like to do, or at least many women

would like to do when their children are young, is to combine care

of their child with a job that is less than full-time hours. But the

jobs in this country that are less than full-time hours are not jobs

for professionals. They’re not jobs for managers. They are largely

low-wage jobs.

So this is a choice that many women find impossible to make.

Dr. Hartmann. I would also add that it is a problem for the Nation if well-educated people, or any people with talent and skill, are

not using it in a competitive economy, an international global economy. It is very important.

We subsidize higher education. We subsidize public education at

the K through 12 levels, and we want our investment to pay off.

If we had a bunch of men with Ph.D.s sitting around doing nothing, or driving taxicabs, we would think that was a bad investment.

I personally think that we should be encouraging women to move

into the labor market in greater numbers, and to advance there.

The way we can encourage that is to remove barriers. We do not

have a good example of what women’s free choice would be if the

current barriers didn’t exist. At the point in time when there are

no barriers, I might agree with Diana that we could look and see

what parents do, what fathers do and what moms do, when there

are no barriers for anyone, but we are really not there yet.

And we pretty much know, all the social science research evidence points to the fact that there are substantial barriers remaining for women in the labor market that are artificial barriers and

that do need to be removed.

Representative Hinchey. Well I think you’re right.

Ms. Furchtgott-Roth. Well France——

Representative Hinchey. I think one of the ways in which we

can advance our economy and really advance the benefits of our

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country would be to involve women more in the job market and in

the general economic circumstances of the country. That would be

beneficial to them, obviously, but it would beneficial I everybody

across the board in the country.

But excuse me.

Ms. Furchtgott-Roth. Well women get about 60 percent of BAs

and MA degrees in the United States, so women are heavily into

the educational system. They are profiting from it. But it would be

a little bit difficult to say, OK, we are only going to take you at

university if you say you’re going to work full-time afterwards. It

wouldn’t really be a choice.

And also saying it’s a bad investment, people are not just in the

work force or out permanently. They go in and out depending.

About 25 percent of women historically have always worked parttime, and there are jobs in many kinds of different sectors of the

economy.

You can see doctors, for example, female doctors working 2 or 3

days a week in a group practice. This is also possible for lawyers.

So these jobs are available if people want them.

Representative Hinchey. There was some discussion about the

decline in employment by the end of the year. Do you want to say

a little bit more about that?

Dr. Appelbaum. Well I mean as you know employment has

been declining. The only points of strength are in education, health

care, social services, child care, and that’s all—those are overwhelmingly jobs that are either publicly provided or publicly—a big

part of them publicly subsidized even if they are in the private sector.

And these budget gaps that the States are facing are going to

lead, in my view, to cutbacks in those services and to declines in

employment. I would just close this up, but I have some numbers,

just to give you an idea.

New Jersey has proposed $1.67 billion in spending cuts, and the

major cuts are in hospitals—some of which are going to close—

health care, local Government, community services, and afterschool programs.

Well when those programs are cut, we know whose jobs they are.

Those are women’s jobs that we are talking about.

New York faces $2.25 billion in spending cuts with large reductions planned in spending on hospitals and health care. In addition

to that, we are going to reduce nursing home reimbursements, cuts

for economic development, cuts for neighborhood and rural programs. They are zeroing out training programs for displaced homemakers, and the State is going to cut back its share of spending

on things like public assistance benefits and youth detention centers.

California proposes cuts in school aid. Twenty thousand teachers

in California have already received pink slips. Don’t bother to come

back in September.

Arizona is going to eliminate child care subsidies.

Florida is freezing reimbursements to nursing homes and eliminating hospice care for thousands of terminally ill Medicaid patients.

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So the service cuts are going to really impact families, but the

job cuts are going to impact women. And this is all going to begin

this July, and you are just going to see it accelerating.

Some of the States have rainy day funds, so they are not going

to have such deep cuts. So if you take a look at a State like New

York, you are facing a $5 billion deficit, but you are cutting only

$2.25 billion of spending because you have a rainy day fund.

But what is going to happen next year when that rainy day fund

is exhausted? So what we saw in 2001 in that recession, and what

I think we are going to see again, is that unless the Congress acts

and provides some fiscal relief to the States, we are going to see

these kinds of cutbacks in this year, from 2008 to 2009, and again

2009 to 2010.

By that time I am hoping that the other part, the private sector

jobs, will be recovering so you may not see it as a recession any

longer, but nevertheless women’s jobs are going to be negatively affected.

My biggest concern for the economy comes from the housing sector. I personally do not believe that the economy will get back on

its feet until we hit bottom in terms of the fall in home prices and

the backlog of sales and so on, and I don’t see that happening any

time soon.

I don’t think we are in a situation like we were in the 1970s. I

am not predicting depression-level unemployment rates, but we

have a very long period of very slow growth, or negative growth

until the economy picks up again. We need to be thinking about

that.

Dr. Hartmann. You know, I’d like to——

Representative Hinchey. Well I think what you’re saying is

absolutely right. I am deeply worried about it, too. I think that we

are likely to be involved in a long period here of a very staggering

economy.

Dr. Appelbaum. That’s my view.

Representative Hinchey. Whether or not, how deep it’s going

to go——

Dr. Appelbaum. That’s right.

Mr.

Representative Hinchey [continuing]. Is still a big question.

Dr. Appelbaum. Yes.

Representative Hinchey. But it looks like we are going to have

a lot of difficult experiences over an extended period of time.

Dr. Appelbaum. That’s my view.

Representative Hinchey. It is something, I would agree, that

we are going to have to try to deal with.

Dr. Hartmann. I think that is right. And I think the housing

crisis is complicated, but I do want to take issue with one thing Ms.

Furchtgott-Roth said, which was that it is just a bunch, a few individuals who made very poor decisions.

It is a little bit like—you know, I can’t remember the name of

the car where the gas tank blew up when it was in a rear-end accident—it was not a good product that was on the market, an unsafe

product.

We have had a lot of unsafe products on the market in the financial services industry. The industry as a whole did not look at the

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unscrupulous products that members of their industry were dishing

out. They did not look at the fact that the people who were getting

commissions for selling higher rates to people were falsifying people’s records, and they securitized it anyway and said, oh, look,

great, big new securities, buy them everybody, buy them everybody.

No risk because all the different mortgages are all pooled together

in these big new securities.

So it is very hard for regulators to keep up with the innovations

in the financial services market. They are very clever people out

there, and they dream up these things, and then they turn out to

increase—you know, increase the rate at which these poor products

were sold because they gave sales people incentives to sell these inferior products.

So in one of the charts I have it shows that even African American women, for example, with above-average income still had a

disproportionate amount of subprime loans that they were holding.

They qualified for better credit, but sales people were getting commissions to sell them a poor loan vehicle.

Yes, quite possibly if they had read the 60 pages they were presented with at the closing, maybe they would have noticed it, but

I know that I have signed closing papers and I haven’t read every

page, because if I had I would have been there 5 hours. And you

got only a few minutes, and you sign the thing and you walk out

and you assume that the people that are professionals are treating

you well and not doing you dirt.

And I think these people unscrupulously targeted these communities, targeted disadvantaged people that had good credit and sold

them very poor products. And I think that simply requires more

regulation.

Ms. Furchtgott-Roth. Right. I mean, it is a great problem that

all these mortgage-backed securities rated AAA with very high ratings turned out to have far lower values. I mean, it is a big problem.

Going back to your question about employment and declines in

employment, actually men are being harder hit by the current

downturns. They are heavily represented in manufacturing and

construction. Those are the two sectors that have been hurting

month after month.

Services almost up to now have been keeping its head above

water, and it is still in positive territory, and the service jobs are

dominated by women. Until now. This month was an exception.

But you find that women have—the unemployment rates don’t go

so low when there is a downturn, so right now the unemployment

rate for women 20 and over is 4.8, and it is higher for men, 4.9.

Last month it was 4.3 for women. It was higher for men, 4.6. And

it is the same with men and women 16 and over: 5.6 for men, and

5.3 for women.

You also find that women do not gain as many jobs when it is

an upturn. So there is less variation in women’s employment. But

it still means that we need to do something about the fundamental

factors in the U.S. economy that go to job creation and private-sector job creation.

35

I would say fixing the specter of tax rates that are going to rise

by 5 percentage points on small businesses in 2011 I think should

be a very high priority.

Representative Hinchey. Well we are just about out of time.

I just wanted to raise one last question with regard to the debt that

people are experiencing.

There is a dramatic increase in debt above and beyond, mortgage

debt. A lot of that has to do with credit card debt.

One of the things that we are beginning to consider here is the

idea that there should be a cap on interest rates for credit card

debt. I would be interested to hear what you might think about

that.

Dr. Hartmann. Well I would be very much in favor of that. I

actually remember when we had Usury laws. That’s how old I am.

I grew up in New Jersey and I believe we had a cap of something

like 8 or 9 percent in New Jersey at the time.

Now it did mean that, you know, what is true is that some people who are high risk will perhaps not be able to borrow if the cap

is set very low, but I think the kinds of caps that we have been

enacting lately are honestly still way too high. I believe the Congress recently enacted something like a 26 percent rate for servicemen at PayDay Lending firms.

I mean, let’s get real. How about something like 12 percent, or

15 percent? This is pretty absurd. You know, it is unclear why it

has been allowed to fester. I guess again Ms. Furchtgott-Roth

would prefer the free market, blah, blah, blah. I would prefer us

to encourage things like credit unions which do try to take care of

the people with lower incomes and educate them and serve them

well.

I think we do need a lot of financial education in the country, but

the capitalist economic system is great. It is very dynamic. It has

created a fabulous standard of living overall. But I feel it works

better when we kind of regulate that torrent of growth and we kind

of moderate it and channel it and really help it serve the people

well.

Representative Hinchey. Thank you.

Dr. Appelbaum. I would just agree with Heidi.

Representative Hinchey. OK. Well thank you very much——

Ms. Furchtgott-Roth. Oh——

Representative Hinchey. Yes, please.

Ms. Furchtgott-Roth. Well I would say that caps on interest

rates, I think that you all in Congress just have so much to do in

terms of what we are going to do about the energy situation, the

tax situation, different kinds of things like that, that worrying

about what is the correct interest rate at what point in time I think

is a lot to figure out.

You have to keep thinking about adjusting it if there is inflation,

or lowering it. And then as Heidi mentioned, some people would

not be able to borrow. So you have to figure out how many people,

and what kinds of credit you don’t want to have borrow money.

And that would stop them from progressing.

In other words, progressing in the labor force, perhaps borrowing

money to start a small business. So I would say that this is something that Congress should not be addressing at the current time.

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Representative Hinchey. Well thank you very much.

Dr. Hartmann. Thank you.

Representative Hinchey. Ladies, I very much appreciate your

being here, and all of the things you have had to say. It was very,

very interesting and very informative.

Dr. Appelbaum. Thank you very much.

Dr. Hartmann. Thank you.

Ms. Furchtgott-Roth. Thank you very much for inviting me to

testify.

Representative Hinchey. Thank you. The hearing is now adjourned.

[Whereupon, at 11:23 a.m., Friday, June 6, 2008, the hearing

was adjourned.]

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