Economic Policy Institute Annual Report 2003-2005

EPI’s Challenge: Make the Economy Work for Working People

President’s Letter

In April 2003, American troops had just taken control of Baghdad when I gave the keynote address at the annual conference of the Society of American Business Editors and Writers. The journalists, understandably, wanted me to predict whether the Iraq War would strengthen or dampen the economic recovery that had been struggling to gain momentum.

I told them the economic impact of the war would likely be surprisingly small, and urged journalists covering the economy to follow two other issues much more closely. “Watch what’s happening to the wages of the typical worker,” I advised them. “And pay attention to how the various policies emerging from Washington, especially the administration’s tax cuts, will perform in meeting their stated goal of creating jobs.”

These two issues define the core of EPI’s work over these past three years — in fact, they go to the heart of EPI’s unique contribution to the nation’s economic debate. The brokerage house and corporate economists, most economic forecasters, and the dominant Washington policymakers are driven by a desire to predict corporate profits, potential sales, and stock market trends, but EPI is different. EPI focuses instead on what is happening to real people in the real economy — where they look for jobs, earn their livings, and struggle to pay their bills and build better lives for their children. The challenge we urge policy makers to take up is to make the economy work for working people.

EPI works toward this goal through high quality, rigorous research and data analysis to explore current trends and examine and report the facts as they stand today. EPI’s research is highly regarded and widely cited as the preeminent source on our issues. To make sure that our research findings have the broadest possible impact and reach the right audience, we employ three additional tools:

Policy analysis and advocacy: EPI’s policy analysis illuminates the immediate and long-term consequences of government action or inaction, offers better alternatives where needed, and communicates forcefully and regularly with policymakers.
Strategic partnerships: We have built working collaborations — with allies such as member groups of EARN (Economic Analysis and Research Network) — to support and assist their work in building better policy at the state and local level. We also partner with national and state-based research, civic, and advocacy groups, such as the Center on Budget and Policy Priorities, the National Employment Law Project, the Campaign for America’s Future, labor unions, and even international research groups through the Global Policy Network. All of these joint efforts bring EPI’s research into play on nationwide and worldwide stages.
Communication and dissemination: And finally, through its comprehensive communications program, EPI conveys its ideas and findings to thousands of journalists to make sure that working Americans’ stories become part of the news media’s coverage of economic issues. Our traditional and online publications program makes our work broadly available to other key audiences ranging from academics and educators to community-based groups and individual activists who utilize our materials as a regular source of vital information.

EPI looks at the economy through the lens of living standards — the incomes and living conditions, the problems and prospects, of working people. Of course, we consider and comment on growth, productivity, and other economic indicators as well, but primarily as they connect — or fail to connect — to the growth of living standards. At EPI, we believe that, in the final analysis, an economy cannot be counted as successful unless its rewards reach the paychecks and lives of working people.

Recession, Recovery, and the Jobs Deficit

As the nation struggled through a long, slow recovery from recession, EPI had an urgent job to do. Our research established what was happening to real people in the real economy and our policy work outlined to the nation’s policymakers and opinion leaders the steps needed to promote a recovery that would generate jobs and increase incomes.

As usual, the people knew something that the elites did not: The economy most people were experiencing was a world of shrunken paychecks, job loss fears, insecure health coverage and pension plans, and downsized prospects — the details chronicled in our 2004/2005 edition of The State of Working America. Although it was true that production had been growing since late in 2001, the nation, although technically in a period of recovery, continued through 2003 to produce the largest loss of jobs (2.9 million in the private-sector) this far into a business cycle since the Great Depression. As 2003 came to a close, there were nearly three unemployed workers for every vacancy, and nearly half of all Americans said they personally knew someone who had lost his or her job. Most of the new jobs that were being created paid significantly less than the ones that had been lost. Workers’ hourly wages were rising more slowly than prices — a trend that continued through 2004 and 2005.

Something needed to be done fast to get the economy moving. As the administration assembled an economic program based on huge, poorly targeted, and unsustainable tax cuts, EPI prepared a better alternative. EPI’s comprehensive economic stimulus proposal included one-time tax credits for lower and middle-income families; federal aid to hard-pressed state governments; and federal assistance for sorely needed school renovation and construction. This program would have pumped an infusion of money into the economy at the critical moment and created millions of jobs, without generating federal budget deficits for years to come. EPI’s economic roadmap was widely adopted by progressive leaders and groups.

Unfortunately, the Bush administration did the wrong thing: $674 billion in new tax cuts, on top of the $1.6 trillion in cuts enacted two years earlier — all tilted to the wealthiest individuals and the largest corporations. EPI warned in congressional testimony and countless media interviews that these tax cuts, although touted by the administration as its “jobs and growth plan,” were not properly designed or targeted to accomplish either.

Then, on April 24, the White House pronounced that its tax cuts would significantly boost the pace of job creation normally expected in the recovery to add a total of 5.5 million new jobs by the end of 2004 — more than 340,000 per month. Using this measure, EPI created JobWatch — an online resource to let people see for themselves the pace of job growth and hold the administration accountable for the success or failure of its economic plan.

Early each month, JobWatch showed how many new jobs had been created nationwide during the previous month, comparing actual job creation to the administration’s 340,000-plus target and tracking progress toward the promised 5.5 million new jobs. Midmonth, when state-by-state figures were released, EPI collaborated with its partners in the EARN network to bring the analysis closer to home. First appearing around Labor Day 2003, JobWatch kept showing the “Jobs an
d Growth Plan” coming up short on both jobs and growth. Through its dedicated web address, EPI signed up over 3,200 subscribers to its bimonthly emails and hosted as many as 21,000 monthly visitors by October 2004. Data and analysis from the site were widely used and quoted by a variety of allied organizations, policymakers, and the media.

With the rising costs of health insurance putting it beyond the reach of growing numbers of Americans, EPI weighed in with important analysis of current data and trends — Health Insurance Coverage in Retirement in 2004 and Prognosis Worsens for Workers’ Health Care in 2005.

As the controversy over initial passage of the administration’s ill-conceived tax cuts gave way to the debate about making them permanent, EPI continued its hard-hitting analysis of how this policy represents an opportunity squandered by the administration and Congress. In The Boom that Wasn’t, EPI research director Lee Price showed in detail that the tax cuts did not create the thriving economy that was promised, and that working people are footing the bill for that failure. In many reports, testimony, interviews, and op-eds, EPI continues to carry the banner for an economy that benefits all Americans, not just the fortunate few.

Wanted: Government For the People

From 2003 through 2005, EPI had to monitor much more than the super-sized tax cuts for the super-rich. The administration and its Congressional allies mounted a comprehensive program to restrict the role of government in protecting working people against mistreatment and hardship and in providing for the future through investments in education, transportation, technology, job training, and environmental protection.

Researching, analyzing, and advocating for worker-friendly policies and programs, EPI’s core program on government and the economy delved into the facts behind the initiatives and changes that were being pursued by the Bush administration. Our work on issues such as compensatory time, the minimum wage, unemployment insurance, pension protections, the shrinking manufacturing sector, the loss of jobs to offshoring, privatization, mass transit, and the challenges facing state and local governments kept EPI’s public policy staff working overtime — and protecting workers’ rights to overtime pay.

As the administration and its allies in Congress mounted a campaign to privatize Social Security, EPI joined forces with its allies as well. EPI conducted research and analysis that laid out the costs and consequences for millions of seniors and families, especially for African Americans, for whom Social Security is a lifeline, and was instrumental in the successful nationwide effort to block the administration’s plan. Through his expertise in this area, EPI Research Associate William Spriggs made a vital contribution to the debate and the ultimate defeat of the administration’s effort to overhaul and privatize the program.

EARN and Other Strategic Alliances

While many of the highest-visibility pitched battles over policy are waged at the national level, many equally significant struggles occur out of the national spotlight in the states and localities. The need for concerted action in the states, especially when national policymakers are unresponsive or hostile to the needs of working people, inspired EPI to create a network of state policy groups. The Economic Analysis and Research Network — or EARN — currently has 47 groups in 36 states. Aggregated, they have staff of about 300 and budgets totaling $25 million. Eighty-eight percent of the nation’s population lives in states with EARN groups. EARN groups work on a full range of issues — economic development, health care, minimum wage and other worker rights issues, corporate accountability, voters’ rights, and many more.

EPI provides technical support, training, coordination, and research that the EARN groups employ in their own work and which they amplify through their own networks and contacts. Working in concert with EARN and other state-level partners, for example, EPI has produced research that is a cornerstone in the growing nationwide movement to push Congress and state legislatures to raise federal and state minimum wages. In 2005, we provided data and analysis on state minimum wage increases in 26 states. For the most part, the data we provide comprise the backbone of research papers published by state-level organizations, typically EARN members. In addition, EPI often does special analyses during the course of state debates to deal with various issues as they arise. With national allies we made the case for extending jobless benefits, as the ranks of the long-term unemployed continued to grow during the jobless recovery.

The EARN team at EPI provides invaluable assistance in communications, strategy, and networking by composing letters to the editor and op-eds, talking to reporters and frequently referring those who contact us to experts within their state. For example, we organized and moderated two press briefing conference calls where reporters from Florida and Nevada were able to call in and listen to economic experts from EARN groups in Oregon, Washington, California, Illinois, Connecticut, and Massachusetts talk about their states’ experiences with raising the minimum wage. In 2004, we organized and published a letter supporting increases in federal and state minimum wages that was signed by 552 economists, including Nobel Prize winners and past presidents of the American Economic Association.

In 2005 we hosted a national conference focusing on the minimum wage in St. Paul, Minnesota — probably the first of its kind. (Dedicated funding provided by the Northwest Areas Foundation.) The conference brought together leaders from states that have successfully raised minimum wages with advocates, policy experts, organizers, and legislators seeking to learn from these successes. Two on-going tools were developed as a result of the conference: 1) “Raising State Minimum Wages: A tool-kit for minimum wage advocates,” a CD-ROM comprising a range of minimum wage resources; and 2) a listserv connecting attendees.

The Challenges of Globalization

EPI weighed in regularly with key information on the fallout for working people from globalization. Nationally, regular analyses tracked the alarming rise in the trade deficit, the impact of offshoring on high-skill jobs, and the cost, in jobs, of poorly designed trade agreements like NAFTA. EPI released reports making the case that protecting workers’ rights and environmental standards in trade agreements makes economic sense. Senior international economist Robert Scott and economist Josh Bivens offered regular and incisive analysis of the enormous and growing U.S. trade imbalance and its risks and costs to Americans’ living standards.

Education

In the field of education EPI presented perspectives that would otherwise have been missing from public debate and the policymaking process. As the No Child Left Behind law went into effect in school systems throughout the country, an EPI study offered answers to the crucial question of what teacher quality is and how it can be strengthened. In 2004, EPI published a ground-breaking volume by noted education expert Richard Rothstein, Class and Schools. This book offers an original and comprehensive perspective on the underlying causes of the persistent school achievement gap between children from poor families and their better-off classmates. EPI’s 2005 volume The Charter School Dust-up looked beyond the conventional wisdom to examine the impact and effectiveness of charter schools. Another 2005 publication, Losing Ground in Early Childhood Education was produced and released in cooperation with EARN groups in seven states. It showed that, despite a national focus both on raising educational standards and on preparing children for success in school, the qualifications of preschool teachers have actually declined.

In important new research published by EPI in 2004, Research Associate Robert Lynch explored the nexus between early childhood education and economic development. The two volumes, Smart Money: Education and Economic Development and Exceptional Returns: Economic Fiscal and Social Benefits of Investing in Early Childhood Development, show that pre-kindergarten schooling is an investment that pays for itself many times over both by preparing children to become better learners and by offering businesses a better educated, more highly skilled workforce.

EPI’s research is meant not to take up space on a bookshelf, but to change the focus and content of the nation’s policy debates. That means we give a very high priority to communicating our findings and views as broadly as possible, and to building an audience for our issues on the web and through the media. Throughout this period, EPI continued to lead the debate on its issues in the news. Among the progressive think tanks, EPI garnered the largest number of media citations in all three years, with a wide array of major national and regional media and significant regional media turning to EPI, time and again, for its expertise on the economy (FAIR studies). EPI’s impact on the web grew steadily throughout the period as more and more people came to rely on EPI for solid facts and analysis on the economy.

Whether we were addressing gatherings of journalists, testifying before congressional committees, or being interviewed by television or radio networks, EPI economists looked beyond the rhetoric and conventional wisdom to present the facts that shed new light on the real experiences of hardworking Americans as they struggle to keep up in an economy that is leaving too many behind. It is EPI’s ongoing mission to make sure that these Americans’ voices and values are heard in the national economic debate.

Lawrence Mishel
President
June 2006

Core Issue Areas

Living Standards and Labor Markets

Located at the heart of EPI’s mission, our living standards research focuses on the well-being of the vast majority of Americans whose ability to thrive depends not on their stock options or investment portfolios but on their paychecks. Under the broad category of living standards, EPI tracks how the economy and the policies that shape it affect regular Americans. Is the economy producing enough good jobs to enable them to prosper? Are the fruits of economic growth being equitably shared among all the people whose work produces that growth? Is government doing its part to honor the contribution workers have made when they reach retirement? Is enough being done to make health care accessible? Are there policies and programs to make tools available, like education and training, that enable people to help themselves? Are the “safety net” programs strong enough to help people avert disaster when the economy fails them? These are the kinds of questions that EPI’s living standards researchers ask and answer every day.

Every two years, EPI compiles these answers and much more in one unique, authoritative volume. The latest edition, The State of Working America, 2004/2005, by Lawrence Mishel, Jared Bernstein, and Sylvia Allegretto, is sought out and used by thousands of policymakers, journalists, academics, policy experts, and others seeking the definitive word on how America’s working families are faring.

Whenever the government issues new economic indicators on employment, unemployment, income, and other labor market data, EPI experts immediately provides policy makers, the media, and the public with the nuances behind the numbers.

EPI also examines the impact of institutions, such as labor unions and immigrant worker centers, that represent and advocate for workers and their families. EPI’s 2005 publication of Dr. Janice Fine’s groundbreaking study, Immigrant Worker Centers: Organizing Community at the Edge of the Dream, brought new clarity and urgency to the needs and role of newly arrived workers struggling to find their place in the American fabric.

Government and the Economy

With the economy mired in a recovery that failed to generate enough jobs or improve living standards, EPI’s research and analysis made an important contribution to the national debate about how to restore the shared prosperity that had existed during the late 1990s. EPI critiqued the administration’s proposals for new federal tax cuts mostly for the highest income Americans, and offered an alternative economic stimulus plan. EPI convened leading economists, including several Nobel Laureates, to share their criticisms of the tax cuts and the budget havoc they would wreak with more than five dozen journalists on a national conference call, and with the nation in a full-page ad in The New York Times.

In 2003, EPI launched a new Web site, www.jobwatch.org, to monitor the results of the administration’s tax cuts, which it called its “Jobs and Growth Plan.” Visitors to the site received clear, useful information on the state of the labor market during the recession and recovery and a clearer picture of the connection between policy decisions and real-world consequences.

The tax-cut debate occurred within the framework of a larger one about the proper role and responsibilities of government, ranging from such issues as attempts to cut back protections for working Americans that had existed for almost seven decades, to assistance for the unemployed, to maintaining the manufacturing sector. EPI broke the story about the impact of the U.S. Department of Labor’s proposed changes to
ref=”/content.cfm/newsflash_051019_minwage”>federal overtime rulesand weighed in on the debates about comp time, pension policies, the minimum wage, Amtrak, Social Security, and federal aid to state and local governments.

When Hurricane Katrina’s devastation brought sharp focus to the question of government’s responsibility to its people, EPI played an important role is raising issues that were not being addressed elsewhere. To bring to the debate important voices and views that were missing, EPI research associate William Spriggs convened a group of African Americans with expertise in urban planning and other relevant fields to develop a statement of principles and share it with decision makers in the rebuilding effort.

Globalization

EPI continues its unique and essential effort to give voice to the interests, experiences, and viewpoints of working people, environmentalists, and human rights advocates in the debates about trade, international investment, the over-valuation of the dollar, and other issues surrounding globalization of the economy.

It makes economic sense to build national policies and international trade agreements that protect working people’s rights. That is the conclusion of the report, Rights Make Might by economists Josh Bivens and Christian Weller. Adopting core labor standards, including collective bargaining rights, helps countries create a middle class with the purchasing power to boost the economy. Outlawing child labor helps tomorrow’s workers gain an education and learn valuable skills. Abolishing forced labor requires employers to modernize. And ending discrimination by ethnicity, gender, or caste means that jobs will be allocated on the basis of skills.

In The High Price of Free Trade, senior economist Robert Scott discussed the damage to the United States, Mexico, and Canada by the North American Free Trade Agreement (NAFTA).

Scott reports regularly on the massive loss of U.S. jobs, especially in manufacturing, and identifies three NAFTA problem areas that should be corrected: enforceable labor rights and environmental standards; increased economic development assistance to Mexico to raise real wages for working people and help support the growth of the middle class; and a substantial adjustment program — $4 billion per year or more — to help displaced U.S. workers move into better jobs.

The dollar’s over-valuation in recent years has been especially costly to the manufacturing sector, resulting in hundreds of thousands of lost jobs and over $150 billion in reduced profits and decreased investment. EPI researchers have explored the wrong-sized dollar, as well as the U.S. and foreign government policies that keep its value artificially high. Among EPI’s analyses are The Benefits of a Lower Dollar, by research associate Robert A. Blecker and The Benefits of the Dollar’s Decline, by economist Josh Bivens.

Education

With tough accountability standards emerging from the federal No Child Left Behind law and the program cuts resulting from state and local budget crises, EPI brought important insights to major issues in the education debate.

Teacher quality is the single most influential factor in determining student success. But what makes a teacher effective is a lot more complex than the simplistic assumptions behind state and federal policies, including No Child Left Behind. In Teacher Quality: Understanding the Effects of Teacher Attributes, EPI research associate and University of Maryland education professor Jennifer King Rice explores which factors in teacher education and experience raise teacher effectiveness and student achievement.

EPI also addressed key issues in keeping qualified teachers in the classroom. In How Does Teacher Pay Compare? Sylvia Allegretto, Sean Corcoran, and Lawrence Mishel found a growing gap between what teachers are paid and the significantly higher pay for other similarly educated workers. And in Losing Ground in Early Childhood Education, collaborative research by EPI and the Keystone Research Institute found that the qualifications of preschool teachers have eroded, largely because the pay for these jobs is too low to attract more highly educated people to the field.

Supporters of publicly funded private school vouchers have touted them as a strategy for meeting the needs of disadvantaged children. But in June 2003, when EPI hosted a national conference call for journalists on this topic, a panel of leading education experts reported that the research shows the strategy is not working. The panel included Richard Rothstein of Columbia University, Martin Carnoy of Stanford University, Helen Ladd of Duke University, and Alan Krueger and Cecilia Rouse of Princeton University. The panel discussion was covered by The New York Times.

EPI’s expertise in both education and labor markets converged to explode another widely repeated myth: American workers don’t have the training and skills that employers need. In Worker Skills and Job Requirements, research associate Michael Handel showed that this common claim just isn’t supported by the facts.

Building Networks to Change the Debate

“Think globally, act locally” is more than a cliché; it is an increasingly accurate statement of how important issues are raised and resolved in the 21st Century. No longer are all the crucial questions debated and decided in Washington, DC. Instead, many of the decisions that shape Americans’ lives and livelihoods are made in state capitals or, in the case of multinational corporations and international economic policies, around the world. Two unique networks created by EPI help organizations operating either locally or globally to influence economic policy in both of those spheres.

Economic Analysis and Research Network (EARN)
Founded by EPI in 1998, the Economic Analysis and Research Network (EARN) includes forty-seven state and local groups that conduct and disseminate research on a wide range of economic issues, such as jobs, incomes, unemployment, workforce and economic development, minimum and living wages, Social Security, and other issues related to living standards.

Global Policy Network

To encourage, exchange, and coordinate research and analysis about the condition of working people throughout the world, EPI helped to create the Global Policy Network (GPN) in 2000. GPN spans the developing and the developed world, and has grown to inclu
de more than 50 worker-oriented (and often union-affiliated) research and advocacy organizations on every continent. It has become an important bridge between the developed and the developing world and, with its focus on the challenges facing workers in the global economy, an important vehicle for concerted planning and action.

Major Publications

Living Standards

2003

Labor Market Left Behind

Understanding the Severity of the Current Labor Slump, by EPI Research Director Lee Price and research staffer Yulia Fungard

The Broad Reach of Long-term Unemployment, a study released in May, EPI economist Jeffrey Wenger and Andrew Stettner, a policy analyst at the National Employment Law Project

Falling Through the Safety Net, EPI economists Jared Bernstein and Jeff Chapman

The Benefits of Full Employment, EPI senior economist Jared Bernstein and Dean Baker of the Center for Economic and Policy Research

Jobless Recovery Catches Up with Wages, Stifles Growth, EPI senior economist Jared Bernstein and president Lawrence Mishel

How Unions Help All Workers

Welfare Issue Guide

Minimum Wage Issue Guide

Lawrence Mishel’s keynote address to the Society of American Business Editors and Writers