Job Growth Claims from Right to Work Not Backed by Evidence

Proponents of Right-to-Work (RTW) argue that Kentucky would attract more jobs if such a law was in place, especially in manufacturing. But the evidence does not show our RTW neighbors have grown jobs more successfully than Kentucky in recent years, and academic research on the subject also doesn’t find a link between RTW and job growth.

Looking at statewide manufacturing job growth in Kentucky and our RTW neighbors, all are still below December 2007 employment levels before the Great Recession hit, but Kentucky is the closest to regaining the jobs that were lost.

rtwSource: Economic Policy Institute Analysis of Current Establishment Survey (CES) data.

At the local level, data from the Quarterly Census of Employment and Wages (QCEW) allows comparisons of the manufacturing sector in counties on either side of the Ohio River in the Louisville Metropolitan Statistical Area (MSA). Since Indiana went RTW in February 2012, manufacturing has fared better on the Kentucky side of the MSA than on the Indiana side.

indiana

Source: Bureau of Labor Statistics, QCEW.

More importantly, when researchers control for other factors they have found no evidence of an impact from RTW on job growth, as in a careful analysis of Oklahoma. A study by the Center for Business and Economic Research at the University of Kentucky also found no discernible positive impact from RTW on states’ economic growth.

While research hasn’t found a link between RTW and job growth, RTW is associated with lower wages. Controlling for other factors, workers in RTW states make 3.1 percent, or about $1,558 less a year (in 2015 dollars). Wage erosion harms workers, their families and our economy negatively, including by reducing demand for the kinds of goods manufacturers produce. Low and stagnant wages are already a central problem facing the economy, and we don’t need to make it worse.

Kentucky is wiser to focus on economic development strategies that improve our workforce skills, infrastructure and quality of life rather than approaches that reduce wages while failing to deliver the jobs that are promised.

Prevailing Wage Repeal Would Worsen Job Quality, Harm Kentucky Economy

Good-paying jobs like those in construction are the foundation of a healthy middle class and growing economy, and a skilled construction workforce builds the high-quality physical infrastructure necessary for  growth. According to a new research report, Kentucky’s prevailing wage law strengthens this important industry, and its repeal would have negative repercussions for job quality, workforce development and local economies in the Commonwealth.

Repeal Would Reduce Job Quality for Construction Workers

Kentucky’s prevailing wage law requires construction workers on state and local public projects costing more than $250,000 to be compensated, in terms of both pay and benefits, according to local industry standards measured by the state Labor Cabinet or the U.S. Department of Labor. The law therefore puts a floor on how low a contractor can bid labor on schools, highways and other public jobs, and also helps maintain wage standards for the entire industry in Kentucky.

A repeal or significant weakening of Kentucky’s prevailing wage law (for instance, exempting schools) would lower wages and benefits for workers and increase poverty and reliance on public assistance. The study’s authors estimate:

  • Construction worker income would drop by 10 percent.
  • 6,100 workers would lose employer-provided health insurance.
  • 10,300 would lose employer-provided pensions.
  • About 5,700 would become newly eligible for food stamps/SNAP and the Earned Income Tax Credit (EITC) for low-income workers.

Because people who have previously served in the military are more likely to work in construction than non-veterans, a repeal would disproportionately impact this group, draining an estimated $80 million in total wages and salaries from veterans in Kentucky.

Work would also become more dangerous for construction workers under a repeal of prevailing wages. That’s because the law creates an incentive for contractors to train workers in formal apprenticeships. More training leads to less accidents, preventing both injuries and fatalities. Research shows states without strong prevailing wage laws have higher injury and fatality rates.

Repeal Would Weaken Workforce, Local Economies

Prevailing wage laws are designed to support a skilled workforce, in part by not encouraging use of the lowest-paid workers. These laws are also designed to improve skills: contractors can pay apprentices less than senior “journeymen” on prevailing wage jobs, which leads to increased use of apprentices – and as a result, significant investment in worker training – in states with strong prevailing wage laws. Research shows a steep decline in training after states repeal prevailing wages (in the range of 38 to 42 percent less apprenticeship training) and a 6 to 8 percent difference in apprenticeship enrollments between states with and without prevailing wages.

Weakening labor standards will also lead to fewer opportunities for local construction workers and job loss. According to the report, Kentucky would lose a total of 1,800 construction jobs under a repeal of prevailing wages to out-of-state competitors. Kentucky still has 10,900 fewer construction jobs than it did before the Great Recession and a repeal of prevailing wages would make matters worse.

pw

Source: Economic Policy Institute analysis of Current Establishment Survey data.

And when construction workers lose employment due to out-of-state competition, local economies suffer too. That’s because workers spend their paychecks patronizing local businesses, buying groceries and improving the value of their homes, for instance, creating an economic multiplier effect. Kentucky would lose an additional 1,100 jobs in other industries due to the loss of construction worker spending, according to the report, and an associated $12.5 million in state and local tax revenue. These figures do not include the additional economic consequences of a repeal caused by erosion in construction wage standards.

Repeal Not Associated with Savings for State and Local Governments

Despite lowering wages for construction workers, a prevailing wage repeal is unlikely to save governments and school boards money. The report notes that 13 out of 17 (76 percent) peer-reviewed studies since 2000 suggest prevailing wages are not associated with higher public construction costs. The research shows increased wages are offset by other factors such as higher productivity due to a more skilled workforce. Because labor is a small and decreasing share of total construction costs (23 percent, nationally), small increases in productivity or decreases in other costs offset higher wages. In states with prevailing wage laws, contractors spend less on materials, fuel, and equipment, take home smaller profits, and find other efficiencies to remain competitive while still paying good wages.

Research that claims savings to the public sector from repealing prevailing wages typically does not take these factors into account. So-called “wage differential” analyses, such as Kentucky’s Legislative Research Commission (LRC) 2016 fiscal note for SB 9, estimate the difference between prevailing wage and non-prevailing wage labor costs and assume the difference, multiplied by labor’s current share of total construction costs, is passed onto government. These analyses do not look at differences between total construction costs on prevailing and non-prevailing wage jobs, meaning they ignore the offsets described above. SB 9 proposed exempting school construction projects from prevailing wages, a significant weakening of the state’s law.

A summary of the report is available here.

How Criminal Justice Reform Would Help Kentucky Kids

Criminal justice reform is important not just for adults but also for children, as highlighted in a new report from the Economic Policy Institute (EPI). This link is especially relevant in Kentucky given the large share of children with a parent who has been incarcerated as well as opportunity to make needed changes given the momentum around criminal justice reform in our state. If fewer parents are incarcerated — particularly to serve very long sentences — their kids could see improvements in education, better health and more economic opportunities, the report suggests.

Improvement in School

Reforming Kentucky’s criminal justice system in ways that reduce incarceration could improve kids’ performance in school. Children of incarcerated parents are more likely to:

  • Have speech or language problems than children whose fathers have not been incarcerated (33 percent more likely).
  • Experience grade point average declines.
  • Drop out of school at a higher rate. This is particularly true for adolescent boys with an incarcerated mother, who are 25 percent more likely to drop out and 55 percent more likely to drop out because they themselves have been incarcerated.
  • Complete fewer years of school if they have an incarcerated father than children of non-incarcerated fathers.
  • Develop a learning disability. Children of incarcerated parents are 48 percent more likely to be diagnosed with ADHD, 23 percent more likely to experience developmental delays and 43 percent more likely to suffer from behavioral problems.

Better Health

Research also shows children of incarcerated fathers have worse physical and mental health. As seen in the chart below from the report, children of incarcerated fathers are more likely to:

  • Suffer from migraines, asthma and high cholesterol.
  • Experience anxiety, depression and post-traumatic stress disorder.

cj-pic

Source: Leila Morsy and Richard Rothstein, “Mass Incarceration and Children’s Outcomes,” Economic Policy Institute, December 15, 2016, http://www.epi.org/files/pdf/118615.pdf.

Children with incarcerated parents are also more likely to:

  • Have a higher body mass index as an adult, if they are female, which is associated with such health problems as heart disease and diabetes.

More Economic Opportunities

In addition, children of incarcerated parents are more likely to experience economic instability and to become poor. Economic problems stem from the loss of a parent’s income — often the primary provider in the family — during incarceration as well as incarcerated parents’ difficulty finding a job after release with a criminal record. According to the report, “Income losses from incarceration and exclusion from post-incarceration employment cause multigenerational harm, because income mobility is rare.”

In addition, children of incarcerated parents are more likely to engage in behavior that exposes them to the criminal justice system, to end up in foster care if they have an incarcerated parent and to become homeless.

Given the fact there are racial and social class differences in children’s experiences with parental incarceration, at the national level African American children are more likely to experience these negative impacts — and also benefit from criminal justice reforms. We have previously described the racial disparities that also exist in Kentucky’s criminal justice system. The new report suggests  criminal justice reforms could be a way to help address achievement gaps like those that exist in Kentucky between African American and white children.

If Kentucky passes criminal justice reforms in 2017 that make a meaningful change in incarceration and recidivism rates — including through the efforts of the state’s Criminal Justice Policy Assessment Council (CJPAC) — it could make a big difference in the lives of Kentucky kids.

Six Protections Kentuckians Will Lose if ACA Is Repealed

The patient protections provided by the Affordable Care Act (ACA) have enabled as many as 1.9 million Kentuckians to receive needed health coverage and care without falling victim to harmful insurance company practices. If these vital protections end through a repeal of the ACA, the effects would be widespread and dangerous, particularly for children, seniors and those with disabilities and chronic diseases.

According to a state-by-state analysis by Families USA, here is what is at stake in Kentucky:

  • 1.9 million Kentuckians with conditions like asthma, diabetes, and cancer could be denied insurance coverage.
  • 1.9 million privately insured Kentuckians (including 397,000 children) as well as 863,000 seniors on Medicare could lose free preventative care like immunizations, blood pressure screenings and cancer screenings.
  • 1.4 million Kentuckians, 362,000 of whom are children, could see caps placed on the amount an insurer would spend over each person’s lifetime — cutting off coverage for the sickest individuals when they most need it.
  • Women could be charged premiums as high as 57 percent more than men.
  • All insured Kentuckians could lose protection from being overcharged by insurance companies. Since the ACA was passed, companies have refunded Kentuckians $33.3 million that wasn’t needed for administration or care.
  • The ACA included a provision that closed the so-called “donut hole” (a glitch in Medicare prescription coverage that led to some prescription drugs being out of reach). But an ACA repeal would mean disabled and older Kentuckians would pay more for prescription drugs. These vulnerable Kentuckians have saved $405 million in prescription drug costs. The average savings for affected Kentuckians was $1,108 in 2015 alone.

It is widely expected that the ACA will be partially repealed through a legislative procedure known as Budget Reconciliation in January. Although it is not clear which protections Congress would roll back specifically, at this point all are at risk, especially since they were designed to be inter-related.

Loss of these important patient protections would contribute to and compound the massive rise in the number of Kentuckians without insurance that would happen with ACA repeal, and otherwise decrease access to needed care. As lawmakers in Washington begin to make decisions about the future of healthcare in America, the protections afforded in the ACA should be built on, not rolled back.

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Those at the Top Would Get More Tax Breaks, Investments Would Suffer from Shift to Consumption Taxes

The details of Governor Bevin’s study on tax reform are unknown, but there are indications the administration intends to begin shifting Kentucky away from income taxes towards sales taxes as suggested by involvement from the out-of-state architect of Kansas’s tax shift, as well as the Governor’s own repeated preference for this approach. Kentuckians should be concerned that such a proposal will cut taxes at the top, require low- and middle-income families to compensate and leave us with less to invest in our schools, infrastructure, services for elderly and vulnerable Kentuckians and other building blocks of thriving communities.

Why Tax Shifts Don’t Work

Sales tax-heavy systems are “upside-down” because they ask more from those who have less. A tax shift from income/production to sales/consumption taxes would therefore mean a big tax cut for those at the top. And for reasons including that income and purchasing power for low and middle-income Kentuckians have been largely stagnant in recent history, sales taxes just don’t grow as well as income taxes. Consequently, income-to-sales tax shifts mean less revenue over time, leading lawmakers to further cut investments in our state and increase sales taxes even more.

Who Pays for Tax Shifts

The table below shows the impact, by income group, of two such hypothetical shifts. Notice that even when the shift is seemingly minor – one penny less on the dollar for the top income tax rate and one penny more on the sales tax rate – the top one percent of households get a $5,396 tax cut on average while the bottom 60 percent of Kentuckians pay more, with the highest percentage increase in taxes going to the poorest 20 percent of Kentuckians. The average tax cut for the top one percent grows to nearly $8,000 if 1/4 of the income tax is replaced with a higher sales tax.

consumption

Source: Institute on Taxation and Economic Policy (ITEP)

These shifts would exacerbate Kentucky’s already upside-down state and local tax system (see graph below). Today, the wealthiest 1 percent of Kentuckians pay 6 percent of their income in state and local taxes, while families in the middle and bottom quintiles pay 10.8 and 9 percent, respectively. Instead of making our system even more regressive by cutting income taxes, we could make it more reliable by cleaning up tax breaks.

tax-shift-graph

Source: ITEP

Tax Shifts Cost Us All

As a result of our currently upside-down tax system and other factors, Kentucky already has trouble generating revenue to invest in shared prosperity. Our core funding for K-12 students has been cut deeper than the vast majority of states and higher education has become much less affordable, for example. A shift from income to sales taxes would lead to more and deeper budget cuts and crises.

The idea  we could cut taxes at the top and increase revenue at the same time is misguided and dangerous. Tax cuts/shifts do not pay for themselves: we all pay for them, now and well into the future.

Number of Uninsured Kentuckians Would Triple Under a Partial Health Reform Repeal

An estimated 486,000 Kentuckians would lose insurance coverage under a partial repeal of the Affordable Care Act (ACA), a tripling of the number of uninsured in the state, according to a new report from the Urban Institute. This decline would come from people losing Medicaid coverage, federal insurance marketplace (formerly Kynect) subsidies, the individual mandate and the individual insurance policy market.

The losses of coverage in Kentucky would be the third highest of any state.

aca-repeal

The congressional plan to repeal the ACA, while delaying full implementation for two years, would have both immediate and long-term effects on both the portion of Kentuckians with insurance coverage and the billions in federal spending in Kentucky. Because the repeal would disproportionately harm states that expanded Medicaid and saw large decreases in their uninsured, Kentucky is among the states with the most to lose.

These same plans to repeal would also result in a huge decline in 2019 federal spending in the Commonwealth on Medicaid expansion and individual insurance policy subsidies. Between 2019 and 2028 that drop in federal spending totals $49.7 billion. This federal spending in the state has resulted in large employment gains in the healthcare sector and steep declines in the amount of money healthcare providers must spend on uninsured patients, called charity or uncompensated care. Nationally, the Urban Institute expects there to be a $1.1 trillion increase in demand for uncompensated care between 2019 and 2028 if repeal moves forward.

Very low-income people whose incomes are below the poverty line and middle-class people with incomes over 4 times the poverty line comprise 48 percent of those who would lose healthcare coverage. Very low-income people will lose coverage as Medicaid expansion is no longer made available and middle income people will lose coverage as the non-subsidized individual insurance policy market succumbs to what is called the “death spiral,” and companies no longer provide such policies. What’s more, the report estimates that individuals in working families will be hardest hit; 66 percent of all people losing coverage will have at least one full-time worker in their family.

The Affordable Care Act has been a lifeline to Kentuckians who either gained healthcare coverage through the Medicaid expansion and insurance subsidies, or have been protected from harmful practices which were banned because of the protections in the law. Even a partial repeal of the ACA would be harmful to Kentucky due to coverage losses and fewer health care dollars in the economy. Before any action is taken to strip the healthcare coverage of millions, the harm it would cause must be fully taken into account.

Many Kentucky Workers Have Gained Insurance through the Medicaid Expansion and Are Now at Risk

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Thousands of Kentuckians who work low wage jobs at restaurants, on construction sites and at retail stores are among those who have gained health insurance because of Kentucky’s decision to expand Medicaid under the Affordable Care Act (ACA), newly-available Census data show. These workers’ access to care is now at risk if the ACA is repealed or Kentucky takes steps backward on the expansion, harming our economy and the health of our state.

Over half of all Medicaid eligible Kentuckians who gained health insurance between 2013 and 2015 held a job, according to American Community Survey data. When you factor in the same low-income Kentuckians who held a job at some point in the past five years that proportion grows to nearly 4 in 5.

The biggest industries where workers have gained coverage are as follows:

  • Restaurant and food services, where there are 15,980 more insured workers. Whereas 58 percent of workers in that sector whose family incomes were below the eligibility level for Medicaid under the expansion were uninsured in 2013, only 23 percent were uninsured in 2015. 1
  • Construction, with 6,190 workers gaining health insurance and an uninsured rate that fell from 63 percent to 20 percent.
  • Department and discount stores, with 6,120 workers gaining health insurance and an uninsured rate that fell from 50 percent to 5 percent.

The next largest groups of workers with coverage gains were those employed in gas stations, auto manufacturing, grocery stores, hospitals, children’s day care, general merchandise stores and landscaping services (see chart on following page).

Kentucky is a national leader in health coverage gains under the Affordable Care Act. 2 While most of those who are gaining insurance are working, they are in jobs that do not offer them coverage. The share of Kentucky workers who had access to health insurance through their employer has gradually fallen from 70 percent in 1980-1982 to only 53.7 percent in 2011-2013. 3 Medicaid, as well as access to private insurance with the help of tax credits, are helping fill the gaps left by an eroding employer-based insurance system.

Kentucky ranks near the bottom on many health measures, making our decision to expand Medicaid that much more important. Recent studies from the Chan School of Public Health at Harvard show progress: Kentuckians are getting more preventative screenings and care, more care for chronic conditions that otherwise worsen more severely over time and even report having better health.4 Their ability to go to the doctor for regular checkups and when sick means the rest of the state can stay healthier.

Those gains are seriously threatened with the newly-elected president and Congress promising to repeal the Affordable Care Act, which provided for Medicaid to be expanded in the first place. Doing so would result in an estimated 29.8 million fewer Americans having health insurance, and millions more being vulnerable to many of the harmful practices insurers are currently barred from using.5 Also, the recent request to make changes to Kentucky’s Medicaid program puts the state’s gains at risk. With barriers to coverage, reduced benefits and administrative complexity that both adds unnecessary cost and confusion for beneficiaries, much of the progress we’ve seen would start to move backward under such a plan. 6

It’s important that federal and state lawmakers protect the advances we are making in health care for the sake of workers and the entire economy.

top-10-industries-with-medicaid-eligible-insurance-gains-2015

 

 

  1.  Report looks at citizens ages 19 through 64 in families with income at or below 138 percent of the federal poverty line who have worked within the past twelve months. Citizens are the focus because the Medicaid expansion is generally unavailable for non-citizens.
  2. US Census Bureau, “Health Insurance Coverage in the United States: 2015,” September 2016, https://www.census.gov/library/publications/2016/demo/p60-257.html.
  3. Economic Policy Institute analysis of Current Population Survey March supplement.
  4. B.D. Sommers, R.J. Blendon, & E.J. Orav, “Both the ‘Private Option’ and Traditional Medicaid Expansions Improved Access to Care for Low-Income Adults,” Health Affairs, January 2016 35(1):96–105, http://content.healthaffairs.org/content/35/1/96.full?keytype=ref&siteid=healthaff&ijkey=A6hBKcGzMrX2A.                   B.D. Sommers, R.J. Blendon, E.J. Orav & A.M. Epstein, “Changes in Utilization and Health among Low-Income Adults After Medicaid Expansion or Expanded Private Insurance,” JAMA Internal Medicine, August 8, 2016, http://archinte.jamanetwork.com/article.aspx?articleid=2542420.
  5. L. Blumberg, M. Buettgens, & J. Holahan, “Implications of Partial Repeal of the ACA through Reconciliation,” Urban Institute, December, 2016, http://www.urban.org/research/publication/implications-partial-repeal-aca-through-reconciliation.
  6.  Dustin Pugel & Jason Bailey, “Proposed Medicaid Waiver Would Reduce Coverage and Move Kentucky Backward on Health Progress,” Kentucky Center for Economic Policy, October 7, 2016, http://kypolicy.org/dash/wp-content/uploads/2016/07/1115-Medicaid-Waiver-Federal-Comments-KCEP.pdf.

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