October 25, 2008

Financial Crisis Socks California

From November, 2008 Labor Notes

Governor Arnold Schwarzenegger approved $7 billion in cuts in October to help fill a $15.2 billion crater in California’s budget, leveling a broad attack on unions and working people as the world’s tenth-largest economy teeters.

Unemployment in California rose to 7.7 percent in August, its highest in a decade. Many of the new jobless are temporary state workers, 10,000 of whom were laid off this summer. “Working in the public sector is increasingly an emotionally difficult place to work,” said Dave Hart, president of the California State Employees Association, representing over 140,000 state workers. “You’re now at the whim of politics.”

Service Employees Local 1000 has won contract language protecting some temporary workers who work full-time hours. Those without permanent status, including retirees doing part-time work, were laid off. “A lot of these retirees had dwindling pensions, and were coming back to work to make ends meet,” said Cathy Hackett, an SEIU bargaining representative.

The deep cuts have put at least one state agency in a good position to bargain for exemptions. “The people in the unemployment insurance office are putting in overtime,” Hackett said. “They cannot keep up with the claims.”


Public sector unions defeated the governor’s attempt to lower state workers’ pay to the federal minimum wage pending a budget agreement over the summer. Now they’re challenging the state’s threat to do the same in January, when California will face another budget gap.

Tax revenues plummeted as consumers have cut back spending. Just weeks after signing a budget full of stop-gap borrowing schemes, the governor called an October emergency meeting to address a newly developing $1 billion deficit in expected tax revenue for the year.

The California Federation of Teachers says much of the budget hole could be fixed by reinstating vehicle registration fees and raising income tax rates 2 percent for just the top earners—those making over $300,000 a year.

California’s constitution makes it one of three states where a two-thirds majority is required in the legislature to raise taxes, but only a simple majority to cut them.

“The wealthy have been huge beneficiaries of regressive tax policies, while we have gone from No. 1 to No. 48 in funding public education,” said Kent Wong at UCLA’s Center for Labor Research and Education. The University of California’s labor program, with a $6 million budget, was the only research program cut from the budget.

At the University of California, service workers in AFSCME Local 3299, who held a five-day strike this summer, continue their bargaining struggle after the school refused demands to boost poverty wages. Nearly all the custodians, groundskeepers, and bus drivers that work for UC are eligible for some form of public assistance.

Bargaining just got harder, as the new budget slashes higher education funding. “The school blames budget cuts whether or not it’s the case,” said President Lakesha Harrison. “We know they spend frivolously, and our demands stay the same.”

Still, hospital workers represented by Local 3299 won increases to $14.50 an hour in a five-year contract announced October 20.

The governor terminated a proposal—pushed by Local 3299 in the legislature—to divert $15 million from administrators’ salaries to fund pay increases for low-wage workers.

Base funding for K-12 schools and community colleges fell by $3.3 billion. In Los Angeles, the budget crisis is one more hurdle for teachers at impasse in contract negotiations with the school district. The teachers union, threatened with a 3.5 percent pay cut, is planning larger job actions than the one-hour walkout it held in July.

Thin state budgets make local governments—and contract mediators—even less receptive to worker demands.

In response, eight unions of L.A. workers, including the teachers, are presenting a unified front, despite some historical rifts, to bargain health benefits with the school district.


California state college employees are feeling the squeeze. The system received $215 million less than expected right when student enrollment is spiking.

“We have health centers with a line outside each morning, there are new buildings without maintenance staff, and things are deteriorating,” said Pat Gantt, president of the California State University Employees Union.

County health care programs for low-wage workers lost $42 million. Cuts to the state-mandated ombudsman program mean crippling layoffs for those who oversee state-funded but privately owned nursing homes. “These are people who find the neglect and abuse in long-term care facilities,” said Michael Connors of California Advocates for Nursing Home Reform. “They are eyes and ears for the community.”

California has taken short-term loans to cover costs during periods of weak tax revenue in the past. The global credit crisis makes this a less feasible way out. Union leaders say anger is growing among members who see that financial institutions will survive the crisis while public services take major hits.

“The opposition to the $700 billion bailout was a good indication that people smelled the rat,” said AFT Vice President Joshua Pechthalt. “We are moving into a period when they are going to be open to new ways of solving this.”

October 06, 2008

Sharpest Job Loss Since March 2003

by Dean Baker
The economy lost jobs for the ninth consecutive month in September, with the pace accelerating to 159,000 jobs. This was the largest one-month fall since March of 2003 when the economy lost 212,000 jobs. The unemployment rate held steady at 6.1 percent, even though the employment population ratio (EPOP) inched down to 62.0 percent. These data, together with other recent reports, leave little doubt that the economy is in a recession.

Virtually all the news in the household survey was negative. The EPOP fell to 62.0 percent which is equal to the low point from the last downturn reached in September of 2003. Unemployment for men rose by 0.5 percentage points to 6.1 percent. The unemployment rate for black men jumped 1.6 percentage points to 11.9 percent, the highest rate since February of 1994.

By education level, the least educated workers are feeling the worst effects of the recession. Unemployment among workers without high school degrees is at 9.6 percent, more than 2.5 percentage points above the lows hit in 2007. Unemployment for high school graduates is 6.3 percent, more than 2.0 percentage points above the lows hit last year.

The number of workers involuntarily working part-time jumped by another 300,000 in September and now stands more than 2 million above its low point in 2006. The U-6 index, which is a broad measure of labor market slack including underemployed and discouraged workers, hit 11.0 percent, the highest level since April of 1994.

One noteworthy item in this report is that the EPOP for white women exceeded the EPOP for black women for the first time ever, 57.8 percent compared to 57.7 percent. Historically black women have always had considerably higher labor force participation rates, since fewer could afford not to work. While the participation rates of black women are still higher than for white women (63.6 percent compared to 60.3 percent), because the unemployment rate for black women is much higher (9.3 percent versus 4.2 percent), white women now enjoy a slightly higher EPOP.

The establishment survey shows an equally bleak picture. The private sector lost 168,000 jobs in September. The Bureau of Labor Statistics also released preliminary benchmark revisions to the survey, which show that between March of 2007 and March 2008, there were 81,000 fewer private sector jobs than originally reported. Including this revision, the economy has created just 3,061,000 private sector jobs since President Bush took office. By comparison, it created 2,600,000 jobs annually during the Clinton administration.

Job loss was sharpest in manufacturing, where employment fell by 51,000 in September, and is now down by 442,000 from its year ago level. Since its peak in March of 1998, manufacturing has shed 4,257,000 jobs, losing 24.1 percent of employment in the sector. The auto sector has been especially hard hit. It has lost 140,000 jobs over the last year and 441,000 jobs since peaking in February of 2000. This drop is equal to 36.2 percent of employment in the industry.

Construction lost 35,000 jobs in September, while retail trade lost 40,100. Car dealers accounted for 8,600 of these jobs. Trucking shed 12,300 jobs, pushing employment down by 4.6 percent from year ago levels. Financial services lost 17,000 jobs and employment services shed 28,900. Employment growth in health care and state and local government, the two main sources of strength in recent months, has also faded. These sectors added 16,600 and 2,900 jobs, respectively.

The report also shows hours dropping, consistent with the growth in part-time employment reported in the household survey. The index of aggregate weekly hours fell by 0.5 percent last month and is now down by 1.3 percent from its year ago level. Wages grew at a 3.3 percent annual rate over the last quarter, almost the same as the 3.4 percent rate over the last year.

This report should remove any lingering doubts that the economy is in a recession. The rate of job loss is accelerating and the unemployment rate is virtually certain to cross 7.0 percent early in 2009.