[Senate Hearing 112-855]
[From the U.S. Government Publishing Office]
S. Hrg. 112-855
BUILDING THE LADDER OF OPPORTUNITY:
WHAT'S WORKING TO MAKE THE AMERICAN
DREAM A REALITY FOR MIDDLE-CLASS FAMILIES
=======================================================================
HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
ON
EXAMINING BUILDING A LADDER OF OPPORTUNITY, FOCUSING ON WHAT'S WORKING
TO MAKE THE AMERICAN DREAM A REALITY FOR MIDDLE-CLASS FAMILIES
__________
JULY 26, 2011
__________
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
TOM HARKIN, Iowa, Chairman
BARBARA A. MIKULSKI, Maryland
JEFF BINGAMAN, New Mexico
PATTY MURRAY, Washington
BERNARD SANDERS (I), Vermont
ROBERT P. CASEY, JR., Pennsylvania
KAY R. HAGAN, North Carolina
JEFF MERKLEY, Oregon
AL FRANKEN, Minnesota
MICHAEL F. BENNET, Colorado
SHELDON WHITEHOUSE, Rhode Island
RICHARD BLUMENTHAL, Connecticut
MICHAEL B. ENZI, Wyoming
LAMAR ALEXANDER, Tennessee
RICHARD BURR, North Carolina
JOHNNY ISAKSON, Georgia
RAND PAUL, Kentucky
ORRIN G. HATCH, Utah
JOHN McCAIN, Arizona
PAT ROBERTS, Kansas
LISA MURKOWSKI, Alaska
MARK KIRK, Illinois
Daniel Smith, Staff Director
Pamela Smith, Deputy Staff Director
Frank Macchiarola, Republican Staff Director and Chief Counsel
(ii)
C O N T E N T S
__________
STATEMENTS
TUESDAY, JULY 26, 2011
Page
Committee Members
Harkin, Hon. Tom, Chairman, Committee on Health, Education,
Labor, and Pensions, opening statement......................... 1
Isakson, Hon. Johnny, a U.S. Senator from the State of Georgia... 3
Blumenthal, Hon. Richard, a U.S. Senator from the State of
Connecticut.................................................... 21
Alexander, Hon. Lamar, a U.S. Senator from the State of Tennessee 23
Murray, Hon. Patty, a U.S. Senator from the State of Washington.. 25
Franken, Hon. Al, a U.S. Senator from the State of Minnesota..... 27
Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode
Island......................................................... 28
Merkley, Hon. Jeff, a U.S. Senator from the State of Oregon...... 30
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming.. 61
Witness--Panel I
Solis, Hon. Hilda L., Secretary, U.S. Department of Labor,
Washington, DC................................................. 5
Prepared statement........................................... 9
Witnesses--Panel II
King, Deborah, Executive Director, 1199 SEIU Training and
Employment Funds, New York, NY................................. 33
Prepared statement........................................... 35
Corey, Sarah, Public Relations Director, IceStone, New York, NY.. 38
Prepared statement........................................... 40
Green, Kenneth P., Resident Scholar, American Enterprise
Institute, Washington, DC...................................... 42
Prepared statement........................................... 44
Prinske, Tom, Owner, T. Castro Produce Company, Chicago, IL...... 55
Prepared statement........................................... 57
ADDITIONAL MATERIAL
Response by Hilda Solis to questions of:
Senator Harkin........................................... 70
Senator Whitehouse....................................... 70
Senator Murray........................................... 71
Senator Casey............................................ 73
Senator Enzi............................................. 75
Senator Isakson.......................................... 110
Senator Hatch............................................ 115
Response to questions of Senator Harkin by:
Deborah King............................................. 117
Sarah Corey.............................................. 118
Response to questions of Senator Enzi by:
Sarah Corey.............................................. 118
Tom Prinske.............................................. 119
(iii)
BUILDING THE LADDER OF OPPORTUNITY: WHAT'S WORKING TO MAKE THE AMERICAN
DREAM A REALITY FOR MIDDLE-CLASS FAMILIES
----------
TUESDAY, JULY 26, 2011
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 10:03 a.m., in
room SD-430, Dirksen Senate Office Building, Hon. Tom Harkin,
chairman of the committee, presiding.
Present: Senators Harkin, Murray, Casey, Hagan, Merkley,
Franken, Bennet, Whitehouse, Blumenthal, Enzi, Alexander, and
Isakson.
Opening Statement of Senator Harkin
The Chairman. The Committee on Health, Education, Labor,
and Pensions will please come to order.
I would like to welcome everyone to the third in a series
of hearings to explore the state of the American middle class.
In our previous hearings, the committee has heard testimony
from a number of noted economists and thinkers, including
former Labor Secretary Reich and Vice President Biden's former
economic policy adviser Jared Bernstein.
In addition, we have heard testimony from everyday
Americans like Amanda Greubel of DeWitt, IA, who have explained
to the committee what it is like to sit around the kitchen
table every night and worry about how to pay off debts, put a
child through college, and have enough money left to not only
put a good meal on the table, but to save for retirement and
maybe even take a vacation once in a while.
These hearings have made one thing very clear. Our once
great middle class has been under siege for decades. In fact,
for the last three decades, American workers have failed to
share in our overall economic growth.
The chart shows the percent of total employer expenses that
they have spent on compensation for their workers, and it has
steadily declined ever since the post-World War II era. At that
time, about 66 percent of employer spending was spent on
compensation, and that includes benefits. And that is now down
to about 58 percent. So it has been declining.
In addition, according to a recent study published by J.P.
Morgan that looked at the time period between the 2001
recession and the current downturn, this decline in wages and
benefits over this period was responsible for about 75 percent
of the increase in major corporations' profit margins. Worker
compensation is at a 50-year low relative to both company sales
and U.S. GDP.
These two facts paint a very troubling picture about what
has happened in our economy in recent decades. Hard-working
families have seen their incomes stagnate, while the gains have
gone to the very wealthy, corporate CEOs, and shareholders. As
middle-class families know all too well, our economy simply
can't function like this much longer.
Our hearing today will help orient us in a different
direction by focusing on programs, companies, and policies that
have taken a different approach and are actually working to
rebuild the middle class. For this reason, I am pleased that we
are joined today by Labor Secretary Hilda Solis. The department
is doing excellent work to help America out-innovate, out-
educate, and out-compete in this global economy, and I am
looking forward to hearing more about the work the department
is doing and your experiences as you have traveled the country
talking with middle-class families and businesses.
As Senator Enzi mentioned at our previous hearing, it is
also important to consider the views of the private sector
actors and business owners. One of these individuals, Tom
Prinske, has joined us from Chicago to talk about a topic close
to my heart. Today marks the 21st anniversary of the enactment
of the Americans with Disabilities Act.
In the 21 years since this landmark act was signed into
law, much progress has been made to make our country more
accessible for people with disabilities. But sadly, too
frequently, people with disabilities have yet to make it into
the middle class.
According to the Bureau of Labor Statistics, less than a
third, less than a third of working-age people with
disabilities are participating in the labor force. Only about 4
million to 5 million out of 15.3 million Americans with
disabilities. Put it another way, two out of every three adult
Americans with a disability is not working.
And in the recent downturn, the people with disabilities
left the labor force at a rate six times greater than those
without disabilities. We need to do better, and I am pleased to
be working with employers to help grow the size of the
disability labor force to six million by 2015.
Mr. Prinske's story is a reminder that we need to do more
to help make the American middle class accessible for all
Americans, no matter their race, gender, ethnicity, sexual
orientation, or disability status. His story gives me hope that
we can meet this challenge head on and help people with
disabilities move into and beyond the middle class.
I am convinced that we can do things the right way going
forward and rebuild our middle class. We are not broke. I keep
hearing people say we are broke, we are poor. Well, America
still remains the richest Nation in the history of the world.
We have the highest per capita income of any major Nation.
If we can build on the lessons that I hope we will learn in
this and other hearings and make better policy choices, we can
continue to lead the world in the 21st century with a strong
middle class and a strong economy.
I know Senator Enzi was tied up and couldn't be here right
away. And so, I would recognize Senator Isakson.
Statement of Senator Isakson
Senator Isakson. Thank you very much, Chairman Harkin.
And welcome, Secretary Solis. We are delighted to have you
today.
This is the third hearing we have had on the middle class
and the struggle they are going through. Unfortunately, since
we have begun, unemployment has gone up almost 1 percentage
point or 0.1 of a percentage point per month in the last 3
months.
Since our first hearing early May, the unemployment rate
has increased again and again. While the Administration may be
downplaying this figure, this is just more bad news for nearly
14 million Americans.
Not only has the unemployment rate increased, but so has
the underemployment rate increased--those working part time who
would like to work full time, those who have left the labor
force entirely because they simply have given up searching. The
extended unemployment benefits that have drained the State
trust funds are beginning to run out, and we must face the
shocking statistic that over 50 percent of those exhausting
their benefits are unemployed.
Over these 3 months, there are 50,000 Americans who used up
all regular unemployment benefits and extended benefits and
still have no job. Clearly, the actions taken by the
Administration and this Congress have not created the jobs
middle-class families desperately need.
Over $1 trillion was added to the deficit for stimulus
spending, but too much of it is gone, poorly directed or
wasted. President Obama has even joked about the stimulus funds
going to projects that really were not shovel ready. Job
creating employers of all sizes have been directly harmed by
the policies of the Administration.
I learned a long time ago from my father that you should be
judged by your actions and not your words. Under this
Administration, employers are being punished for creating new
jobs in the right-to-work States of our country.
One notable incident is what has happened in the Boeing
Aircraft Corporation in South Carolina, where they created
1,000 jobs, but an attorney for the National Labor Relations
Board decided to challenge that and issued a complaint claiming
Boeing should have used unionized workers in Washington State
rather than nonunion workers in South Carolina.
Other actions by the Administration are just as disturbing.
I am very involved with Delta Airlines, which is in my own
State. They are a National Mediation Board regulated
transportation entity. They have had union elections 9, 10, 11,
and 12 times in which the company rejected unionization in
terms of their flight attendants. After the last vote, the
National Mediation Board decided to ask for a judicial review
of Delta's management's involvement in those votes, again
forcing Delta to over and over again call votes that are
unnecessary.
And then there is the new proposal on quickie elections,
which reduces the time in which an election can be posed. And
even worse and most troubling for me, as one who worked in
retail for a while, are micro unions--to approve many unions
within a particular institution.
Take a retailer, for example, that has 12, 15, 20, or even
50 different departments in a huge store. This would allow each
department to form a micro union. So you would have 50
different entities competing for the wage rates under the same
roof. That is just not functional for a company to operate
under, and it certainly is a job killer, not a job creator.
The first witness we called in the first middle-class
hearing was Secretary Robert Reich, who, in the answer to
questions, told us the following. That he favors repealing the
right-to-work option in current law in 22 States in America,
including the State of Georgia and the State of Iowa. That is
just not right.
The irony of this singular focus on increasing unionization
rates is that unions fare pretty well under the current system
of secret ballot elections and free and informed choice.
Certification elections are held at a median of 38 days from
the filing of the petition to unionize. Over 95 percent of
elections are conducted within 56 days. Unions win 64 percent
of those elections.
The assault on employers also includes the tremendous surge
in regulatory burden, including the healthcare law and numerous
EPA regulations. Combining these figures with legitimate
concerns of our national debt and efforts to hike taxes, it is
not surprising that employers are uncertain of their ability to
maintain profitable businesses and wary of making new hires.
Senior officials in the White House have expressed
frustration with the regulatory burden coming out of agencies.
I hope that frustration turns into action before it is too
late.
It is important to have this hearing today because we know
the stimulus that we had before didn't work, or where it did
work, it cost us more than it should have for a job. The
Administration's own report estimates that each job added or
saved cost $185,000 to $275,000 per job. That is entirely too
expensive and inappropriate.
I appreciate, Mr. Chairman, you holding the hearing today.
I am grateful that Secretary Solis has come to be with us. And
I look forward to the question and answer session to follow.
The Chairman. Thank you very much, Senator Isakson.
We have two panels. Our first panel will be our Secretary
of Labor, Secretary Hilda Solis. Prior to her tenure at the
department, Secretary Solis represented the 32d congressional
district in California from 2001 to 2009. She served in the
California State Assembly from 1992 to 1994, and 1994 was the
first Latina elected to this California State Senate. In 2000,
she became the first woman to receive the John F. Kennedy
Profile in Courage Award for her pioneering work on
environmental justice issues.
Secretary Solis, welcome back to the committee again. You
have quite a lengthy statement, which I read last night. It is
very good. It is very interesting.
It will be made a part of the record in its entirety. If
you might just sum up for us in 7, 8 minutes, we would sure
appreciate it, and then we can have a discussion.
Secretary Solis. Great.
The Chairman. Welcome back.
STATEMENT OF THE HON. HILDA L. SOLIS, SECRETARY,
U.S. DEPARTMENT OF LABOR, WASHINGTON, DC
Secretary Solis. Thank you so much, Mr. Chairman, Chairman
Harkin, and also Senator Isakson and all your colleagues that
are here today.
It is a real pleasure to be here with you again before this
committee, and I thank you for inviting me here to testify on
what I think is one of the most important topics for our
discussion.
There is nothing more important that is facing our country
today than shoring up the embattled middle class. And as you
said, Senator Harkin, in the first hearing in your series, you
said we can't have a strong economy without a strong middle
class. And I totally agree with that.
This month's jobs numbers show that we have yet to see the
kind of economic recovery that the middle class really needs.
But the challenges of the middle class did not come just with
the great recession. The precarious situation of the middle
class has been developing for a long time, and I am committed
to using the tools at my disposal at the Department of Labor to
address both the longstanding challenges facing the middle
class and those related to the recent economic downturn.
In looking forward to how we should rebuild the security
and stability of the middle class, we first have to talk about
sustaining the middle class at the most basic level. And what I
mean by that is that in an economic downturn, our unemployment
insurance system becomes even more crucial. And that is a part
of the middle-class safety net.
We know that once workers fall out of the middle class,
there is an enormous barrier to their re-entering into it. And
this is why, at the very least, we need to preserve the middle
class by continuing extended unemployment benefits.
No worker, as you know, prefers to receive UI benefits.
They would rather have a job, quite frankly. And that is what I
hear around the country. That is why my goal, as Secretary of
Labor, is to help foster an economy in which good jobs are
available for everyone, and American workers are prepared with
the necessary skills to be productive in these jobs not only
for the time being, but for a lifetime.
And I would like to share with you some principles that I
see as essential in preserving and expanding the middle class
and what our role is at the Department of Labor. And briefly,
those principles are rebuilding the manufacturing sector;
designing our training programs to make them more available in
lifelong learning that occurs and that skill levels are
enhanced; focusing on training programs with high-growth
industries for the future, ensuring that all workers, including
veterans, disabled workers, have access to training; and using
worker protection agencies to provide stability and security
for middle-class workers.
This is why the committee work that you all have been doing
to help reauthorize the Workforce Investment Act is so
critical. And I appreciate, Mr. Chairman, you and Senator
Isakson and Senator Enzi and all of you, and Senator Murray,
for working so tirelessly on this issue. I hope that we can get
something done in terms of reauthorizing the WIA program.
First, let me address why rebuilding our manufacturing
sector is so critical to rebuilding the middle class. The
manufacturing sector has shown enormous resiliency and strength
in our economic recovery so far. In fact, 250,000 jobs were
added since the beginning of 2010.
I saw an example currently, the rebirth of what is possible
in the manufacturing sector earlier this month when I visited
Flint, MI. There, I toured Diplomat Specialty Pharmacy, which
is manufacturing medicine in the same building that once housed
General Motors auto plants.
For the manufacturing sector and the rest of our economy to
thrive, we have to ensure that workers have access to skills
that will support a lifetime of middle-class jobs. It won't be
enough for a worker to master a particular set of skills at the
outset of his or her career. Instead, workers will have to be
more flexible and adaptable to keep pace with more fluid and
dynamic economic challenges that they will see.
To enable workers to adapt to this shift in the 21st
century, we will have to change how we think about education
and job training overall. No longer will most Americans
participate in the world of education and work to be strictly
sequential, first going to school and then going to work.
Instead, we will have to maintain flexibility, lifelong
learning tools. And moreover, the skills that they acquire will
have to be portable, and they will have to be able to be
adaptable to new and emerging industries.
Let me share another example with you of a worker who is
living this principle right now. A worker from Colorado lost
his job in a traditional construction industry and as a result
of the downsizing in the housing area.
He attended one of our training programs funded by the
Recovery Act. The program trained him in energy efficiency,
weatherization, and energy auditing. Now he has a job as a
program director for a nonprofit organization which provides
weatherization and retrofitting to low-income housing.
The Department of Labor is focusing in our training
programs to help prepare workers in other high-skill and high-
growth industries as well. We are paying particular attention
to the green economy and advanced manufacturing and healthcare
sectors.
And just recently, in my travel last week, I happened to be
in California, and I saw our investment in action when I
visited the Santa Clara Valley Transportation Authority. The
authority has developed a fleet of 90 hybrid buses that were
built in one of the few manufacturing American-only facilities
in Hayward, CA. Quite an amazing sight to see.
The department has partially funded a partnership between
that authority and the Amalgamated Transit Union to train
authority workers. I met there Mr. Peter Reyes, who was laid
off from his job in the banking industry and is now working as
a hybrid bus driver.
``Without a doubt,'' in his statement to me, he said, ``I
would much rather wear a jacket and a shirt instead of having
to wear a tie.'' And he was asked that by one of his fellow
colleagues who used to work with him in the banking industry.
He says, ``Now I have the relief and ability to provide for my
last child, to be able to send that child to college. So I am
happy that I have this job and that I got retooled, and I am in
an industry that is providing services that are much-needed and
also reducing energy consumption.''
I was very moved by that story by Mr. Reyes, and there were
many stories like that that I heard as I was on the ground in
San Jose.
We have another example of the focus here that we are
highlighting. One of them happens to be here in the audience.
She is a recipient of one of our programs from Maryland. Her
name is Telmy Alfaro.
Telmy, can you please stand and be recognized? Thank you
for coming here today.
She is here because she has also gone through experiences
in our program. She has gained the skills and experience she
needed to get a job at Prince George's County Hospital Center.
Telmy got her training start there at the local One-Stop
center, and now she is studying to become a registered nurse.
And many of you here in the room know how invaluable that
is, just to be able to provide that opportunity for someone to
get into that profession, which is so hard to get into.
The department has collaborated with also many community
colleges, which is an important factor in our success for
moving toward the future into better jobs. We have partnered
with the business community and several community colleges.
I happen to know something about that as a former trustee
at Rio Hondo Community College, the importance of making sure
that community colleges are engaging firsthand with industry
and manufacturers in their local areas to see that curriculum
fits, fits the type of employees that are needed by different
industries. And I know that in the past few years, perhaps that
was a focus that wasn't prioritized, but now at the Department
of Labor, we are making a part of our excellence.
I also want to mention another individual who went through
our program. Her name is Elizabeth Strader. She was bussing
tables at a casino in Connecticut, and she wanted a better
future, too.
Through a job training grant that she participated in in a
local workforce investment board, she focused on STEM careers
and a partnership between WIB and the General Dynamics Electric
Boat company. Elizabeth was able to take classes in technical
drafting, math at her local community colleges. And as a
result, she has now been hired by Electric Boat, doing computer
design on naval vessels and continuing to work toward her
associate degree in nuclear technology.
Credentials, as you know, are a very important aspect of
improving the skills and adaptability of all of our workers,
and I can tell you that we are, in fact, focusing in on how we
can better provide for our programs to emphasize credentialing.
And I know that if an individual has a credential, their
placement rate in terms of getting a job is much higher than
those that only have a GED.
So we know these programs do work. And I am extremely proud
of the department in also helping our Nation's veterans gain
and retain their rightful place in the middle class. Our VETS
program is helping to return service members and their families
to take advantage of the best civilian opportunities available.
And having a job is essential to being a part of the middle
class, but for people with disabilities--Senator Harkin, as you
well know, on this date, we celebrate the 21st anniversary of
the Americans with Disabilities Act. DOL's Office of Disability
Employment Policy, known as ODEP, is promoting universal
strategies, good business practices for hiring people with
disabilities. The work will help to bring about access for
these individuals to the middle class.
Senator Harkin, we owe you a debt of gratitude for being a
pioneer on this issue, and I salute you for your work.
Job training also is a big piece of the department's
contribution to supporting the middle class, and that isn't the
whole story. We are also implementing major portions of the
healthcare reform and access to affordable healthcare coverage
so that all individuals will be able to be covered and that no
one will fear that one injury or illness will keep them from
receiving the assistance they need and keeping them out of
financial ruin and poverty.
The department's worker protection programs also play a key
role in providing security and stability to workers who need to
sustain their place in the middle class. Without rigorous
enforcement of our wage and hour laws, occupational safety
protections will run the risk of a race to the bottom in terms
of pay and safety. Jobs at the bottom of that race are not
going to be middle-class jobs, as we well know.
We are also very concerned about middle-class workers who
put their time in and expect to live out their retirement with
dignity and respect. The department's Employee Benefit Security
Administration, known as EBSA, works to protect the security of
retirement and employee benefits for America's workers,
retirees, and their families to support them with the remainder
of their lifetime.
And finally, I think any discussion about finding solutions
to the challenges facing the middle class would be deficient if
we did not include a discussion about the importance of
collective bargaining rights. The health of the labor movement
is central to the health of the middle class in this country,
and I have lived that very close connection personally.
And that is why this Administration feels strongly and
supports the right of workers to collectively bargain when they
choose to. We, at the Department of Labor, come to work every
day to do our best to create economic opportunities for all
American workers.
I look forward to working with all of you to ensure that
good jobs for American workers are assured. And I am happy to
answer any questions.
Thank you, Senator.
[The prepared statement of Secretary Solis follows:]
Prepared Statement of Secretary Hilda L. Solis
Chairman Harkin, Ranking Member Enzi, and members of the committee,
thank you for the invitation to testify today and for holding this
series of hearings on the state of the American worker. There is no
more important issue facing our country today than shoring up the
embattled middle class. Senator Harkin, I absolutely agree with what
you said in the first hearing in this series--we can't have a strong
economy without a strong middle class, and we won't have a sustainable
economic recovery without the recovery of our middle class.
This month's jobs numbers show that we have yet to see the kind of
economic recovery that the middle class needs to get on firm ground.
The payroll employment numbers reported for May and June by the Bureau
of Labor Statistics showed a slowing economic recovery--job growth of
25,000 and 18,000 in each of the 2 months respectively--this growth is
nowhere near enough to keep up with regular population growth in the
labor force, let alone bring our unemployment rate down to pre-
recession levels.
No one can deny that now is a difficult time for the American
worker. We have all been focused on the terrible recession that began
in 2007. This recession, the deepest since the Great Depression,
destroyed almost 9 million jobs. But the precarious situation of the
middle class has been developing for a long time. When the 2001
recession began in March 2001, 64.3 percent of Americans age 16 and
over were working. Millions of Americans lost their jobs and the rate
fell to 62 percent by September 2003. But more disturbingly, it hadn't
recovered very much by the time the current recession started. In
December 2007, only 62.7 percent of the working age population was
employed. That means we were still short nearly 4 million jobs at the
start of the 2007 recession. Throughout the entire Bush administration,
total job growth averaged just 11,000 jobs per month, meaning that we
lost jobs from a per capita perspective for 8 years.
The weak labor market has been particularly tough on young workers.
The 17.3 percent unemployment rate for 16- to 24-year-old workers in
June 2011 is nearly 6 percentage points higher than at the start of the
recession in December 2007. While the unemployment rate has declined by
nearly 1 percent in the last year, the rate is still unacceptably high.
Although young workers with a bachelor's degree have more labor market
opportunities, they too face an extremely difficult job market and now
confront substantial hurdles into the middle class. For example, the
unemployment rate for young college graduates was 12.1 percent in June
2011, far worse than the 4.4 percent unemployment rate of older
college-educated workers.
With jobs disappearing, it's not surprising that we've also seen
household income plummet. Real median household income fell by over 4
percent during the recession to its lowest level in more than a decade.
Looking ahead to how we rebuild the security and stability of the
middle class, we first have to talk about sustaining the middle class
at the most basic level. During this Great Recession, the very survival
of the middle class was at risk. For millions of workers, their grasp
on their position in the middle class for the first time in their lives
became tenuous. As millions of pink slips went out, millions of workers
who had never had to worry before about where the next paycheck was
coming from faced their worst fears.
In an economic downturn, our unemployment insurance (UI) system is
the most crucial part of the middle-class safety net. This kind of
backstop is critical. We know that once workers fall out of the middle
class, there are enormous barriers for them to re-enter it.
The Department of Labor helped 23 million unemployed workers
receive $150 billion in unemployment insurance benefits in 2010. That's
23 million people who had a shot at paying their rent, putting food on
their tables, and providing the necessities of life for their
families--that is, carrying out the basic economic activities of a
middle-class life--while looking for work. That is 23 million consumers
keeping demand up for grocery stores and gas stations; keeping local
small businesses afloat.
In the hearing that this committee held last month, you heard from
Amanda Greubel, a social worker from Iowa. She so eloquently described
the cruelty of this Great Recession for so many middle-class workers.
There are millions of middle-class workers who, like Amanda, have
played by the rules for their entire working lives. They scrimped and
saved to get a good education, got good jobs and saved a little money
when possible for a rainy day. No one can blame them, however, for
failing to anticipate just how hard and long the rain would fall during
this recession.
Through no fault of their own, millions of unemployed workers just
cannot find new jobs. There are still about 14 million unemployed
Americans--6.3 million of whom have been looking for work for over 6
months--and just 3 million job openings nationwide. In other words,
there are almost five job seekers for every open job. Our recovery has
resulted in a net increase of 2.2 million private sector jobs since
February 2010, after a recession that saw us lose 8.8 million paying
positions. Simply put, there are still over 6 million fewer paying
positions open for a population that is larger than in 2007. Not all
workers who held jobs in 2007 could get hired, and not all new workers
who entered the labor force after 2007 can get hired.
That's why if we want at the very least to preserve the existing
middle class, we have to continue to extend unemployment benefits.
According to the Census Bureau, UI benefits kept 3.3 million
Americans--including 1 million children--from falling below the poverty
line in 2009. UI benefits get spent right back into the economy and
help local businesses: Every dollar spent on UI benefits adds $2 to
GDP. As you know, we fought a tough battle at the end of the last
Congress to get unemployment benefits extended. Those extended benefits
will expire again at the end of the year. We must renew those
extensions when the time comes.
As important as providing a safety net for unemployed middle-class
workers is, it is clearly not enough. No middle-class worker wants to
be unemployed--no matter how long we extend the benefits. Senator
Harkin, as you reminded us when you began this series of hearings,
``Americans don't expect to be rich or privileged, but they do expect
to be treated fairly and they deserve to have the opportunity to build
a better life for their children.'' The middle class can build a better
life for their children only on the foundation of good, safe jobs.
My goal as Secretary of Labor has been and will continue to be to
help foster an economy in which good jobs are available for everyone
and American workers are prepared with the skills necessary to be
productive in these jobs throughout their lifetime. This means jobs
that can support a family. Jobs that are sustainable. Jobs that are
safe and secure. In short, my highest priority is to get Americans back
to work as part of a stable, secure middle class. We must make these
investments while also making difficult choices that will put our
Nation on a sustainable fiscal path.
As I described earlier, we are making progress. We have stabilized
the economy, prevented a financial meltdown, started the economy
growing again, and created more than 2.2 million private sector jobs in
the past 16 months. As the President said in his State of the Union
address, however, if we are going to win the future and rebuild the
middle class, we are going to have to out-educate, out-innovate, and
out-build our global competitors. The whole Administration is committed
to this vision and we are all doing our part.
I would like to share with you the principles that I see as
essential to preserving and expanding the middle class in the 21st
century American economy and the role that the Department of Labor can
play in supporting that mission.
First, I agree wholeheartedly with President Obama that rebuilding
our manufacturing sector is critical to rebuilding the middle class.
The manufacturing sector has shown enormous resiliency and strength in
our economic recovery so far, with over 250,000 jobs added since the
beginning of 2010. Manufacturing jobs are the kinds of jobs that pay
well and can serve as an anchor in communities across the country.
After more than a decade of losing manufacturing jobs, it is a thrill
for me to be part of the policies that are helping to rebuild our
manufacturing base.
I saw an example of the rebirth that is possible in the
manufacturing sector earlier this month when I visited Flint, MI.
There, I toured the Diplomat Specialty Pharmacy, which is manufacturing
medicine in the same building that once housed a General Motors auto
plant. I was there with Jay Williams, the Mayor of Youngstown, OH, who
in a few days will be taking over our Office of Recovery for Auto
Communities and Workers. I know that Mayor Williams will effectively
lead the Department's efforts to help transform the manufacturing
sector.
In June, the President announced the Advanced Manufacturing
Partnership, an effort that brings industry, universities, and the
Federal Government together to invest in emerging technologies that
will create high quality manufacturing jobs and enhance our global
competitiveness. This Administration initiative will leverage existing
programs and proposals and invest more than $500 million to build
domestic manufacturing capabilities in critical industries. Supporting
the development of new technologies can be particularly valuable in an
economy that is just beginning to come out of recession and in which
millions of jobs need to be added to return to full employment.
Moreover, by helping to train workers for these positions we can help
speed up a process in which many U.S. workers will need to acquire new
skills before they can succeed in these industries. Just as U.S.
investment in science and new technologies for NASA stimulated economic
growth during the 1960s, I believe that the President's vision of
economic growth due to our investments in technologically advanced,
green industry can stimulate economic growth today.
To take advantage of the jobs created as a result of the Advanced
Manufacturing Partnership and the other promising industries of the
21st century economy, we are going to have to ensure that workers have
access to skills that will support a lifetime career path of productive
middle-class jobs. To maintain a secure spot in the middle class, it
will not be enough for a worker to master a particular set of skills at
the outset of his or her career. Instead, workers will have to be more
flexible and adaptable to keep pace with a more fluid and dynamic
economy than that of the past.
As technology continues to rapidly change and advance, the economy
will continue to shift. Workers will have to have the skills to
accommodate those shifts in technology and changes in the workforce
overall. For example, the President has called for 80 percent of
America's electricity to come from clean sources by 2035, including
wind, solar, nuclear, clean coal, and natural gas. He has also put
forward measures to ensure that the United States is the first country
to put 1 million advanced technology vehicles on our roads. These
commitments, coupled with private sector investments, will expand our
clean energy economy, producing new green jobs in new green industries.
Employers will need skilled workers to fill these jobs. The skills that
workers will need are different than those they needed in the pre-
recession economy and are likely to change again as these new
industries continue to mature and expand.
To enable workers to adapt to these shifts in the skill sets that
employers require, we will have to change how we think about education
and job training. No longer will most Americans' participation in the
world of education and work be strictly sequential--first going to
school and then going to work. Instead, to maintain a good middle-class
job, workers will need life-long learning. Moreover, the skills they
acquire will have to be portable to support moves within and between
emerging industries.
This is why this committee's work to reauthorize the Workforce
Investment Act (WIA) is so important. I appreciate all your hard work,
Mr. Chairman, as well as the work of Senators Enzi, Murray and Isakson
to make WIA reauthorization a priority and to work together on this
bipartisan initiative to modernize our job training system to meet the
needs of employers and workers.
Let me share with you a couple of examples of workers who are
living these principles, adapting and reinventing themselves as the
economy shifts. A worker from Colorado lost his job in the traditional
construction industry as a result of the recession. He attended a
training program funded by the Recovery Act. The program trained him in
energy efficiency, weatherization and energy auditing. Now he has a job
as a program director for a local nonprofit that provides
weatherization and retrofitting of low-income housing. One woman, from
Herrin, IL, was a hard worker at a washing machine assembly plant. She
and a thousand of her colleagues lost their jobs when they were laid
off from the plant. She took advantage of dislocated worker funding and
training assistance available through the Workforce Investment Act and
Trade Adjustment Assistance programs and made a big change in her
career plans. She went back to school to get a degree in applied
sciences and a certificate in nursing. She now works for a doctor and
is realizing her dream of working in the medical profession.
These stories point to another principle of preparing workers for a
place in the middle class in the future. The world is more science and
technology oriented than it has ever been before. Computational
literacy is more important than ever. Workers will need higher skills
training to maintain good-paying middle-class jobs. I do not mean to
say that every worker will need a 4-year college degree for a middle-
class life, but they will need more than a high school degree. The
Bureau of Labor Statistics (BLS) projects that two-thirds of the
occupations that will grow the fastest between 2008 and 2018 will
require postsecondary education.
In my travels throughout the country as Secretary of Labor, I have
met workers of all ages who are accepting the challenge posed by the
new higher skills future. When I was back home in California, I visited
the American River College, where I met Rhonda Gage, a 54-year-old
medical assistant. Although it had been a long time since Rhonda had
been in a classroom, with the help of WIA and Recovery Act funding,
Rhonda went back to school to update her skills. Her enhanced skills
led to a new job with a healthcare firm, making three times what she
previously earned. Rhonda now has a more secure future and place in the
middle class as a result of her enhanced skills.
The Department of Labor has an important role to play in preparing
workers for the middle-class jobs of the 21st century. First, we are
focusing our training programs to prepare workers for the high growth
industries, with particular attention to jobs in the green energy,
advanced manufacturing, and healthcare sectors. As all of you probably
know, I am a big believer in the promise of these sectors. I am proud
of the investment that the Department has made in training workers
across the country to take advantage of current and future
opportunities.
The Department's investments in the clean energy economy have
focused on three goals:
1. Enabling States to develop needed partnerships and plans to
better align their workforce and State energy policies leading to
employment;
2. Building the capacity of established job training providers to
train workers for clean energy jobs; and
3. Directly supporting education and training services for a
diverse community of American workers either seeking entry into or
retraining for new and emerging jobs in the clean energy economy.
To advance these goals, we just announced $38 million in Green Jobs
Innovation Fund grants to serve workers in 19 States and the District
of Columbia. These grants will equip workers with the necessary
knowledge, skills and abilities to succeed in green energy industry
jobs. They are smart investments in the green energy jobs of today and
the green energy economy of the future. The funds will help
organizations with existing career training programs leverage
Registered Apprenticeships, pre-apprenticeship programs and community-
based partnerships to build sustainable green career pathways.
For example, we recently awarded a Green Jobs Innovation Fund grant
to the Finishing Trades Institute of the Mid-Atlantic Region, a non-
profit organization located in Philadelphia, to further Registered
Apprenticeship opportunities. The Institute will use the grant to
create a partnership between employers, organized labor, and the public
and private workforce development sectors to create training
opportunities for incumbent workers, dislocated workers and unemployed
people in the construction and building trades. The almost 2,000
participants in the program will be working towards green-related
associate's degrees and Green Advantage credentials.
We also are working with the Department of Commerce and the Small
Business Administration (SBA) to accept applications for $33 million in
grants available under our Jobs and Innovation Accelerator Challenge.
This program is administered in partnership with Commerce and the SBA,
and focuses on supporting what are called ``industry clusters.'' Many
of these clusters are designed to encourage investment in the high
growth industries of the future, like the technology cluster in the
Silicon Valley or the energy cluster in Houston. I recently traveled to
Silicon Valley in April and met with business leaders to learn more
about what they need to continue growing and innovating and creating
jobs in the United States. We are looking for innovation and
collaboration to infuse these types of communities through our grants
and, as a result, to create and retain higher-wage and sustainable
jobs.
The Administration's Better Building Initiative is another
innovative program working to bring green energy jobs to middle-class
workers. This initiative will lead to more energy efficient buildings
across the Nation, while at the same time boosting manufacturing of
energy-efficient products and putting contractors and construction
workers back to work.
We are having similar success in shifting our focus to training for
the health care industry. As you may know, BLS projects that health
care workers will experience the largest job growth of any industry
over the next decade. Under the Recovery Act, we awarded 55 Health Care
and Other High Growth Emerging Industries grants.
The Recovery Act also provided funding for other health care
training programs, including a program in Maryland that helped Telmy
Alfaro gain the skills and experience she needed to get a job at the
Prince George's County Hospital Center. She participated in a program
called the Knowledge Equals Youth Success at her local One-Stop Career
Center. Telmy is now studying to become a registered nurse--a job that
should provide a good middle-class career for her.
In addition to identifying the industries that will provide the
middle-class jobs of the future, the Department is also identifying the
types of training that workers will need in those industries and across
the economy to succeed. We are focusing on a career pathways approach
to ensuring that workers have the best chance to compete for good jobs.
The term ``career pathways'' refers to a clear sequence of education
and training that is aligned with the skill needs of employers,
utilizes curriculum and instructional strategies, leads to the
attainment of industry-recognized degree or credentials, and includes
supportive services such as childcare and transportation services, and
job placement services.
The Department's collaboration with the Nation's community colleges
is an important part of our efforts to ensure that workers have the
advanced skills they need to obtain middle-class jobs. We're bringing
together the business community and community colleges to help provide
the relevant training that industries are looking for, and will surely
need more of, as we pave the way to recovery. DOL's support of
community colleges is increasingly important during a time when State
and local governments, as well as employers, continue to trim their
budgets and cut spending. As a former trustee on a community college
board, I know first hand the transformative power these institutions
can have in the careers and lives of young and older students.
Many of the Department's largest job training grants, such as
Community-Based Job Training Grants, Recovery Act green jobs training
grants, and Health Care Sector and Other High Growth Emerging
Industries job training grants, have invested hundreds of millions of
dollars in community colleges and related organizations over the past
few years. These grants have provided training to hundreds of thousands
of individuals, many of whom are earning degrees or certificates
through their training.\1\ And it is just as critical that employers
who understand the needs and the skills desired in their specific
industries work directly with community college faculty to develop
relevant curricula and coursework that prepare workers to succeed in
good, safe jobs.
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\1\ Since 2005, the Department has invested over $485 million in
over 250 community colleges and related organizations through the
Community-Based Job Training Grants. By the end of fiscal year 2010,
these grants provided training to over 171,000 individuals, of whom
over 72,000 earned a degree or certificate. The green jobs training
grants and Health Care Sector and Other High Growth Emerging Industries
job training grants are still ongoing. $750 million was invested
through these ARRA grants and final numbers of people who have been
trained through these ARRA grants will be available when the funding
ends in 2013.
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On January 20th, we announced the availability of $500 million for
the Trade Adjustment Assistance (TAA) Community College and Career
Training Grants. These competitive grants will provide community
colleges and other eligible institutions of higher education with funds
to expand and improve education and career training programs suitable
for workers who have lost their jobs or are threatened with job loss
because of trade with other countries. These training programs must be
completed in 2 years or less. The overarching goals of these grants are
to increase attainment of degrees, certificates, and other industry-
recognized credentials and better prepare beneficiaries for high-wage,
high-skill middle-class employment. The program will also encourage
community colleges to develop innovative methods, use data, and
replicate evidence-based practices to improve student outcomes and
efficiency. For example, grants will support the delivery of online
education that can allow students balancing the competing demands of
work and family to acquire new skills at a time, place and pace that
are convenient for them. We are working with our colleagues at the
Department of Education as we prepare to award and administer these
grants.
Last month, the President announced another important initiative to
expand the opportunities for workers to enhance their skills at
community colleges in order to compete for advanced manufacturing jobs.
As part of the Skills for America's Future initiative, the President
launched new commitments from businesses and universities to make it
possible for 500,000 community college students to earn industry-
accepted credentials for manufacturing jobs that companies across the
country are looking to fill. This program will make it easier for
workers to get retrained and move up into better, more secure middle-
class jobs.
I have a great example of how these collaborations between the
Department of Labor, community colleges, and companies can work.
Elizabeth Strader was busing tables at a casino in Connecticut, but she
wanted a better future. Through a job training grant awarded to the
Eastern Connecticut Workforce Investment Board (WIB) that focused on
science, technology, engineering and math (STEM) careers and a
partnership between the WIB and the General Dynamics Electric Boat
company, Elizabeth was able to participate in training that included
technical drafting and math at her local community college. That
investment by the Department, Elizabeth, and Electric Boat paid off.
Elizabeth is now working for Electric Boat doing computer design on
naval vessels and continuing to work towards her Associates degree in
nuclear technology.
In Georgia, a worker was looking to upgrade her skills after she
lost her job as a quality assurance technician at a Georgia bakery. But
she took this challenge as an educational opportunity to re-invent
herself thanks to the Workforce Investment Act Adult Program. With help
from the Atlanta Regional Commission, a DOL funding recipient, she
enrolled in a 2-year technical college to study bioscience. When she
earns her degree, she said her current contract job as a lab technician
with an international food producer will become a full-time employee
position. She admitted she was ``shocked and blindsided'' when she
first lost her job but looked at it as ``an opportunity to go back to
school.''
Credentials are a key component of improving the skills and
adaptability of workers who want to compete for middle-class jobs in
the 21st century. Credentials serve as documentation that workers have
attained the specific skills they need to perform a job. The Department
has an important role to play in encouraging a more focused effort on
credentialing. Ensuring that workers attain the credentials needed for
jobs in the new and growing sectors of the economy will help workers
break into those good-paying fields and move between jobs as necessary.
The value of credentials to employers and workers cannot be
overstated. For employers, credentials provide assurance of a potential
employee's skills, giving them the security they need to take a leap of
faith and hire a new worker. For workers, credentials improve their
likelihood of landing a good middle-class job and represent a portable
manifestation of the skills they have attained. According to one recent
study, workers with an associate's degree earned, on average, 33
percent more than workers with only a high school diploma or General
Education Development credential.
Rubin Castneda from Juneau, AK is a good example of the wage
advantage that credentials can provide. He was a 20-year-old single
parent, who had dropped out of high school to work with his parents,
immigrants from Mexico. His jobs never provided the kind of salary he
needed to take care of his son. With help from the Workforce Investment
Act Youth Program, Rubin got his GED and acquired the credentials he
needed to get a better job, including a Commercial Drivers License and
Basic Welding. He is driving a big rig in Juneau, making a good living
and taking care of his son.
In December 2010, I announced, as part of the Department's 2011
Strategic Plan, a high priority performance goal to increase credential
attainment by 10 percent among customers of the public workforce system
by June 2012. To achieve this goal, we are working to refer more WIA
and TAA participants into programs that result in credentials. We are
also focusing on providing participants with resources to help them
complete training. Finally, we are assisting our workforce agencies to
ensure that the credentials that workers are pursuing are the ones that
will lead to secure middle-class jobs by encouraging them to assess the
needs in their local labor markets and educate employers about the
value and validity of credentials.
I have a great success story from Maryland. Lisa McDowell, a
Baltimore resident, lacked the skills and confidence to get the good-
paying job she desired. According to Lisa, the last time she had worked
in an office, people used switchboards. To get her skills and
confidence upgraded, she sought help from Baltimore Works at her local
One Stop Career Center. There, she earned certifications in several
areas of computer skills, including Computing Core Certification--a
global, validated, standards-based training for basic computer
hardware, software, and networks. Her success at her One Stop training
courses has led to a $45,000 a year job with the Maryland Board of
Public Works. She is thrilled with the doors that have opened to her
and that the computer training she received can take her, in her own
words, ``anywhere and everywhere.''
A very special kind of credential comes with completion of a
Registered Apprenticeship program. Last month, I celebrated 100 years
of Registered Apprenticeships legislation in a great event on the
National Mall. We had labor and industry leaders with us to recognize
the contribution of Registered Apprenticeships to supporting entry into
the middle class. Registered Apprenticeships continue to provide first-
rate training and a path to good jobs with good pay and solid footing
in the middle class. Last year, more than 100,000 workers entered into
a Registered Apprenticeship program, over 400,000 active apprentices
continued to earn and learn in over 20,000 apprenticeship programs
nationwide, and more than 50,000 program participants completed their
apprenticeships and received a nationally recognized, portable
credential. I am especially proud of the fact that the Employment and
Training Administration's Office of Apprenticeship recently recognized
Wind Turbine Technician as the first new green occupation to be added
to the official list of apprenticeship occupations--another example of
how we are working across the Department to prepare workers for the
middle-class jobs of the 21st century.
The training needs of incumbent workers are another important piece
of the skills challenge facing middle-class workers that the Department
is addressing. In times of high unemployment and tight budgets,
however, we struggle to find resources to address this need. If we want
to ensure that workers have a long-term and not just short-term place
in the middle class, it is critical to devote at least some resources
to training incumbent workers. Without this training, workers are at
risk of having their jobs leave them behind. Changing technology does
not only bring out new industries, but it changes the way existing
industries do their work. Without opportunities for life-long learning,
workers have a hard time keeping up with those changes.
For example, a construction worker in Florida, previously at the
top of his profession, found himself unqualified for his job when solar
panel installation and renewable energy skills became a requirement. He
participated in a DOL-funded program and now has an industry recognized
Solar Photovoltaic (PV) degree and a firmer hold on a good-paying job.
DOL also helped fund training for Marat Olfir. He is a residential
building superintendent in New York. He took courses provided by the
32BJ Thomas Shortman Training Fund, a joint labor-management
partnership. He earned the fund's Green Diploma after taking courses in
green building maintenance and management. He feels he is now better
prepared for the future of building maintenance and has advanced his
career.
The role of the Department in supporting incumbent worker training
is critical. Some employers may be disinclined to provide this kind of
portable skills upgrade for fear that their workers will take those
skills to another employer, possibly a competitor. Some workers don't
have the resources they need to invest in their own training. That
leaves a gap that is best filled by publicly supported training and
public-private partnerships.
I am also extremely proud of the work the Department is doing to
help our Nation's veterans gain and retain their rightful place in the
middle class. Our veterans' employment and training programs are part
of a larger effort to provide a smooth transition process for veterans,
transitioning Service Members, and their spouses as they seek to
identify and secure productive middle-class civilian opportunities. By
promoting priority of service for veterans in the One-Stop Career
Center system, we ensure that over 1.8 million veterans a year receive
the training and employment assistance they need to obtain good jobs.
Our work with homeless veterans is especially important. Clearly,
being homeless is a serious obstacle to moving into the middle class.
Our homeless programs help nearly 20,000 veterans a year in their
efforts to reintegrate into the workforce. I am proud to share with
you, Senator Harkin, a success story from Iowa. A Goodwill Industries
of Central Iowa caseworker, Jan Broers, learned of a homeless Army
veteran in her community who was battling substance abuse. With help
from a grant to the program from the Department's Homeless Veterans
Reintegration Program, she was able to get the veteran a place to live,
medical attention and training. Eventually, she was able to find a job
for the veteran at a convenience store. The veteran has since been
promoted to a management position. Ms. Broers has seen more than 100
homeless veterans get help as a result of the Department's $200,000
grant to the program. That's 100 Iowa veterans who have served their
country and deserve our support, who now have a better chance at a
middle-class life.
Having a job is essential to being a part of the middle class, but
many people with disabilities are not a part of the U.S. labor force.
The most recent BLS report issued in June 2011 shows that only 32.8
percent of working age people (16-64) with disabilities are actually in
the American workforce, while the participation rate for people without
disabilities is 77.2 percent. On this date, which happens to be the
21st anniversary of the Americans with Disabilities Act, DOL's Office
of Disability Employment Policy (ODEP) is working hard to reduce this
disparity. We believe that by making the Federal Government a model
employer of persons with disabilities, promoting integrated employment
of people with significant disabilities through customized employment
and Employment First strategies, capitalizing on workforce flexibility
strategies to retain aging workers and assist workers in returning to
work, and ensuring that youth with disabilities have the skills they
need for today's workplace, we can bring the middle class within reach
of many people with disabilities. Because ODEP's policy work focuses
primarily on universal strategies and good business practices, it also
holds great potential to help millions of other workers with complex
needs to find good jobs in the private sector. We owe so much to you
Senator Harkin for your leadership in both shepherding passage of the
ADA and in continuing to be a champion for the employment of people
with disabilities.
Job training is a big piece of the Department's contribution to
supporting the middle class, but it is not the whole story. I believe
that one of the most important contributions that the Administration
and the Department have made to the future security of the middle class
is the implementation of health care reform. The Affordable Care Act
and the implementation of regulations to make it a reality are making a
huge difference in the lives of Americans across the country.
Access to affordable health care coverage means that middle-class
workers are no longer one injury or illness away from financial ruin
and descent into poverty. Without the Affordable Care Act, middle-class
families were facing multiple health-care related challenges, including
an increasing percentage of their income spent on out-of-pocket health
care costs and increasing difficulty in obtaining health care coverage.
With the Affordable Care Act, middle-class families can look forward to
lower costs and better coverage. In fact, a recent report by the
Department of Health and Human Services predicts that middle-class
families purchasing private insurance in the new State-based health
insurance exchanges could save as much as $2,300 per year in 2014. And
independent research on Medicaid released just this month by the
National Bureau of Economic Research showed that those with access to
health insurance through Medicaid reported they were in significantly
better health and were more financially stable as a result of the
insurance coverage.
The Department's worker protection programs also play a key role in
providing the security and stability that workers need to sustain their
place in the middle class. Without rigorous enforcement of our wage and
hour laws and occupational safety protections, we run the risk of a
race to the bottom in terms of pay and safety practices. It is simply
unfair and bad policy to require good employers to compete against
employers who are willing to flout the law, cut corners on safety, and
pay workers less than they are owed.
Over 4,000 workers are killed in workplace accidents on the job in
this country each year, and thousands of others continue to die from
occupational disease. These tragic numbers are well-known. Less well
known is the fact that every year well over 3 million workers are
seriously injured on the job. With so many family budgets already
pushed to the breaking point and so many families with little or no
savings, living paycheck-to-paycheck, a workplace fatality or even a
serious injury may be the blow that keeps a struggling family from
entering the middle class or knocks a family out of the middle class.
We know how to prevent these tragedies and our worker enforcement
agencies are crucial to ensuring that American workplaces are safe
workplaces.
The Department's effort to combat misclassification of employees is
an excellent example of how our worker protection programs are central
to sustaining the middle class. We know that the vast majority of
employers play by the rules. Unfortunately, these high road employers
are forced to compete with employers who misclassify their employees as
something other than employees, such as independent contractors, in
order to avoid minimum wage and overtime obligations, paying workers
compensation premiums and payroll taxes, and investing in required
safety practices. Work as a misclassified independent contractor is
less likely to support a middle-class lifestyle than work as an
employee, which comes with all the protections that Congress intended
employees to have. Enforcing the laws that Congress has passed ensures
that firms can count on a level playing field and don't lose profits
and opportunities to firms that cheat. And workers can focus on doing
their jobs, knowing that they can count on the protections that
Congress intended them to have.
Our concern for the middle class extends not only to those actively
in the workforce, but also to those who have put their time in and
expect to live out their retirement in dignity and security. The
Department's Employee Benefits Security Administration (EBSA) works to
protect the security of retirement and other employee benefits for
America's workers, retirees, and their families and to support the
growth of our private benefits system. In fulfilling that role, EBSA
oversees approximately 718,000 private sector retirement plans,
approximately 2.6 million health plans and similar number of other
welfare benefits plans covering approximately 150 million Americans.
These plans hold over $6 trillion in assets. Most middle-class workers
and retirees cannot afford to lose retirement savings to mismanagement
or theft.
I also believe that the issues facing defined benefit plans are
central to the conversation about the security of middle-class
retirees. I intend to continue to look at proposals to help these plans
keep their commitments to workers and retirees. Defined benefits plans
play a critical role in the retirement security of millions of
Americans. The President's budget proposes to strengthen the defined
benefit system by shoring up the solvency of the Federal agency that
acts as a backstop to protect pension payments for workers whose
companies have failed. Moreover, the trends that I described earlier in
my testimony about the increasing fluidity in workers' careers clearly
have significant implications for planning for a secure retirement. I
commend the committee for holding a recent hearing on these issues and
I look forward to working with you on innovative solutions.
Finally, I think any discussion about finding solutions to the
challenges facing the middle class would be deficient if it did not
include a discussion of the importance of collective bargaining rights.
I know that the recent actions of the National Labor Relations Board
(NLRB) have been discussed in earlier hearings in this series. I do not
mean to take our conversation in that direction. As you know, the NLRB
is an independent agency and I cannot comment on either the Boeing
complaint or the recently proposed union election rules.
I can comment, however, on the centrality of the relationship
between the health of the labor movement and the health of the middle
class in our Nation. I have lived that connection. My father was a
Teamsters shop steward in a battery recycling plant. When I was a
child, I would sit at our kitchen table and help translate the workers'
grievances from Spanish to English. They wanted safer working
conditions and livable wages and benefits. The union helped them get
what they earned and deserved--a shot at a middle-class life for
themselves and their families.
The statistics bear this out. From the 1940s to the 1960s, when
union density was at its height, the middle class in our country
thrived. Wages and productivity rose together during that time and we
experienced robust growth throughout the economy. Union members with
good, secure jobs could afford to buy good American products so
American companies could succeed. That's why this Administration
supports the right of workers to collectively bargain if they so
choose.
We at the Department of Labor come to work every day to do our best
to create economic opportunities for the American people. Last month's
jobs report just underscores that more work needs to be done to
stimulate new employment opportunities in the private sector and to
support workers striving to achieve the skills needed in the new
economy. Again, I appreciate your invitation to be a part of this
incredibly important examination of how we can come up with the best
solutions for the security of the middle class. I look forward to
working with all of you to ensure good jobs for American workers. I am
happy to answer your questions.
The Chairman. Well, Secretary Solis, thank you very much
for a very eloquent statement and a summation of a very nice
statement that you had prepared.
We will begin 5-minute rounds. As I shared with you, before
we came out here, some disturbing news in the paper this
morning. The Pew Foundation study examined the impact of the
recent recession on wealth disparities. They looked at Census
Bureau data.
They found that the median wealth of Hispanic households
fell by 66 percent from 2005 to 2009. African-Americans saw
their wealth drop by 53 percent. Asians also saw a big decline,
with household wealth dropping 54 percent. By contrast, the
median wealth of white Americans fell by just 16 percent.
As a result, a wealth gap between white America and
minorities is now the widest it has been in 25 years since the
census started collecting the data, with white households
having 20 times the net worth of Hispanic and black households.
By way of comparison, in 1995, the wealth ratio was 7-to-1
whites to minority. This is very disturbing.
I saw a recent interview with Bill Moyers, and he was asked
what his biggest concern was. And he said his biggest concern
was that in the future, that we were going to--as Americans, we
were going to accept a wider and wider disparity of income, of
inequality, a wider disparity of inequality as the norm, that
he was afraid that we would accept that as the norm.
Now, Secretary Solis, as you have traveled around the
country--and I congratulate you for doing that. You have really
been out and around listening to people. Do you get a sense
that people are--do you get a feeling--when you are talking to
average Americans out there, working Americans, do they get a
sense that somehow things aren't quite right, that there is
this disparity going on? Do they feel that?
Secretary Solis. Senator, I know this is a hard question
because there are, unfortunately, groups that suffer more
severe impact in terms of poverty when we are going through a
recession. And it is true that Latinos and African-Americans
and others that are low-skilled are the ones that have had to
carry the burden through this recession, and even before then.
I have said that time and time again.
I think the reality is, that we can't forego our commitment
to education. And the statistics still continue to bear out,
those individuals with higher earnings have higher degrees or
credentials.
So my statement to you is that we have to continue
providing job opportunities through these programs that can not
so much, I would say, positively guarantee a job right away,
because people have to go through a transition. We are talking
about a massive number of people who have lost jobs, who have
been out of work for more than 6 months and are somewhat
disillusioned but need to be integrated into our systems, our
One-Stop centers.
And that is an appropriate place for this to be, so that
individuals can get an assessment, know what skill sets they
have, where they can ramp up, and then given options and
opportunities as to where to go.
So education, certificates are important. I hear from
businesses all the time telling me that it isn't so much that
they need the higher end, the bachelor of science or Ph.D.
engineer. What they need is a good technician who has adaptable
skills and is flexible and is ready to take on the
responsibility of adapting to a whole new environment.
I would say there are different factors going on. But, yes,
the disparity amongst these groups is alarming, and that is why
the Department of Labor has emphasized in grant programs known
as Pathways Out of Poverty, $150 million went to communities
across this country with levels of 50 percent or higher
unemployment.
Now, surely, that wasn't enough. But we know that it was a
start in the right direction, and I can tell you that different
collaborative opportunities have made themselves available with
business, community colleges, and even faith-based and other
organizations.
The Chairman. Madam Secretary, I appreciate that. I also
wanted to ask about youth unemployment.
I have seen figures recently also that show that more and
more young people, first of all, aren't even entering the
workforce. And if they are, there are very low-skilled jobs
they are in, and then they fall back out of the workforce.
It seems that we have a real problem with youth
unemployment. What can we do about that?
Secretary Solis. Senator, unfortunately, what is happening
is we have older workers who are staying in longer. We have
older workers who are not retiring, as usually would take
place. But because of this recession, they are staying in
longer because they have to out of necessity.
That isn't opening up more jobs for those at the lower end
and the entry level. Unfortunately, for young people, my
preference is that we give them mentorships, internships, that
we give them at least that work-based experience. It is so
essential for them.
I can recall when I was an intern how important it was,
even if I wasn't paid, but to have that experience and to have
that noted on my resume, how that created an opportunity to
open up another full-time job.
But what is happening here for young people also is that
some of the areas that perhaps they are getting degrees in may
not be the ones that are opening--that are offering jobs right
now. So we are asking students, young people to also take a
look at adapting their skill sets and taking, perhaps, another
credential or maybe another type of degree in another area that
might be of help while this transition occurs, while we begin
to expand.
That is why I think looking at opportunities in the green
industry, renewable energy, and looking at how we can
transition individuals from some of the harder manufacturing
and, say, construction fields is so essential to move people up
so we can open up opportunities for them. For young people, it
is very hard. And for minorities, young people, it is three
times harder.
I think one of the things I would like to make clear is,
though, under the Recovery Act, we did have moneys for summer
youth employment. That money has gone away. I have created my
own initiative and asked corporations around this country if
they would unselfishly open up some slots for summer jobs. Our
goal was to help provide at least 100,000 jobs. We are up to
about 80,000.
Recently, I visited Jamba Juice in San Jose. They committed
2,500 jobs initially. When I went to visit them this last week,
they had 2,700 jobs that they provided. And they are willing
now to work with us even to open up slots, internships for some
of our Job Corps students.
And so, I think, once we begin a discussion with businesses
about what we are faced with, I think people will give it some
thought and open up those opportunities.
The Chairman. Thank you very much, Madam Secretary.
Senator Isakson.
Senator Isakson. Thank you, Mr. Chairman.
Madam Secretary, are you familiar with OSHA's rule known as
RIR, or reportable incident rate rule?
Secretary Solis. Yes.
Senator Isakson. OK, well, I was not familiar with it until
yesterday, when a dear friend of mine, who is an Hispanic
woman--naturalized U.S. citizen, been recognized by the
Department of Labor in past years as one of the leading
minority enterprises in the country--came to my office because
of the difficulties with regulations being applied in a very
difficult economic time.
And it is important for us to understand that because we
are an equal opportunity country, all of our rules and
regulations apply to everybody, regardless of ethnicity or
anything else. The RIR rule is the reportable incident rate
rule that limits a worker, a company from getting involved in a
government contract if they have a reportable incident rate
higher than 3.
Now I don't want to be technical, but this is important for
everybody to understand. The reportable incident rate rule says
the following. A company must take its last 12 months and take
how many reportable incidents to OSHA it had. A reportable
incident is an injury that goes beyond first aid, OK?
They multiply those incidents times 200,000. Two hundred
thousand is the number of hours a company employing 100 people
would consume in a year if each worker worked 40 hours a week
for 50 weeks. And then you divide that by the number of
workable hours your particular company had in the preceding
year to come up with a product.
This is the exact case in terms of this company. They had
three reportable incidents in the last 12 months. If you
multiply that times 200,000 hours, which is 100 people working
full time in a company, that equals 600,000. If you then divide
that by the number of hours your company did--and she had 48
employees, not 100--multiply 48 times 2,000, you get 96,000
hours.
When you divide the smaller denominator of 96,000 into the
larger number accomplished by 100 workers at 200,000, the
reportable incident rate for her company with three incidents
is 6.2. So the rule negatively impacts small business, rewards
the more employees you have in a larger business.
We have Plant Vogtle being built in Georgia right now,
which is a major nuclear plant, a green jobs plant, I might
add. She cannot bid on that contract because the RIR rule
applies a strict across-the-board three factor with no
accommodation for a business employing less than 100. Most
small business employs less than 100.
None of us want people being injured. But my point is, it
is very important that we make sure these rules apply to small
businesses in an equitable fashion so they can get jobs and
employ workers. And I would be happy for your comments.
Secretary Solis. Certainly, Senator Isakson. This is the
first time I am hearing about this particular incident, and I
will take it back to our Assistant Secretary in OSHA.
But I do want to make clear that OSHA does work very
closely with small businesses when there are issues that do
come up. So I would work with you or your office on this
particular case, but would say to you that one of our emphasis
out front is that we have to work with small businesses, and we
know that we have to provide free consultation to them.
In many ways, we can prevent some of these types of
incidents if we are working with people on the ground and
understand that we are making ourselves available. We are
trying to be more transparent and more available than we have
in the past, and I, for one, know how important it is.
In fact, recently, our office actually was working on
another regulation, a noise hazard, an MSD column initiative,
where we had gotten a lot of concerns from businesses. So we
have managed to go back and work with the Small Business
Authority so that we could take into consideration all these
comments where we do find that there are regulations that may
have, say, an overly burdened disposition for some of these
businesses.
I am open to working with you, and we know that the small
business intent is to minimize penalties to small businesses.
So I also am surprised to hear about this case, but we will
guarantee that we will get back to you and work with you on
that.
Senator Isakson. Please understand, I am not begging
attention to an individual case, which is specifically why I
did not mention either the company or the individual. But to
point out, when you take an arbitrary rule and apply it, you
can sometimes have the unintended consequence of costing jobs
and hurting minority employers equally to what any other non-
minority employer might have been hurt.
One other point, and I am going to run out of my time, but
just one other rule and compliance issue that is causing
terrible consternation. And you have gotten a letter from me.
This is the fiduciary rule under ERISA.
And the department, as I understand it, stated it was
unable to estimate the number of service providers affected or
the cost on small business when it wrote the rule. But the
unintended consequence--I hope it is the unintended
consequence--of the fiduciary rule is going to cost small
business a tremendous amount of money and lose a lot of people
in financial advice business and consulting business to small
businesses. It is going to put them out of business.
So that is just two examples of rules that are hurting
small businesses, raising compliance costs, and eliminating
opportunity.
Thank you, ma'am.
Secretary Solis. Well, Senator Isakson, I would just say
that, that current rule that you point out is very important
because it would help to identify who is giving advice. And in
many cases, in the previous rule, many of those decisions have
had adverse effect on small businesses as well as individuals
because they were given erroneous or wrong advice, and we find
that there have been conflicts of interest.
And so, what we are doing with this current rule is trying
to close that loophole so that the burden does lie on the
individual that is giving that advice. If there is a conflict
there, and there shouldn't be, quite frankly, but if there is,
then this rule would apply.
I think that what we are trying to do is not be a burden on
small business at all, but to have transparency where we know
it will make a difference, especially in these hard times,
economic times, when people are making major investments of
their pension plans and given wrong information and end up
losing later on because they were misled, say, half of their
savings. And there are several cases that I could go through
and talk to you about.
But these stories we have read about, we have heard about
them, and all we are trying to do here is trying to level the
playing field so that consumers and individuals that make these
decisions understand that they are getting the best advice and
that there isn't a conflict of interest.
Senator Isakson. My time is up, Mr. Chairman.
The Chairman. Thank you very much, Senator Isakson.
And in order of appearance, we have now Senator Blumenthal,
Senator Alexander, Senator Hagan, Senator Bennet, Senator
Murray, Senator Casey, Senator Franken, Senator Whitehouse.
Senator Blumenthal.
Statement of Senator Blumenthal
Senator Blumenthal. Thank you, Mr. Chairman.
And once again, thank you for holding this hearing on a
vitally and profoundly important topic.
Thank you, Madam Secretary, for the great work that you are
doing on issues like skill training, particularly using
community colleges, where both the Chairman and I have
expressed an interest, and on misclassification of workers,
which degrades the value of jobs. And the Chairman and I, along
with Senator Brown, have introduced legislation, the Payroll
Fraud Prevention Act, that would help address a number of these
concerns.
If I can't get to all of my questions, I will submit some
in writing to you. But I would like to focus just at the
beginning on an issue that has been a concern in my State,
concerning the redefinition of ``fiduciary'' under Federal law.
I know you have been working hard on it, very difficult and
complex set of issues surrounding this task. And there have
been concerns expressed that the new rule might have the
consequence, perhaps unintended consequence, of limiting the
choice of providers or restricting investment, education, and
guidance. And I wonder if you could talk a little bit about
what you are doing to avoid those consequences?
Secretary Solis. Thank you, Senator Blumenthal, and it is
good to see you.
Senator Blumenthal. Thank you.
Secretary Solis. And I do want to say that, one of the
things that we have attempted to do--and Assistant Secretary
Borzi of EBSA will also be happy to meet with you after if
there are further questions.
But in this particular regulation, what we are trying to do
is, as I said earlier, minimize the kind of information that
could be misleading and could lead to a potential loss of
individuals' savings and their retirement. And we have seen
that happen time and time again.
So we are saying here in this regulation that we want to
make clear that the individual that is giving this advice be
held accountable because under the current rules, they are not.
So what we are asking for is that this be an item that we can
move through.
We have worked with all the agencies, including Treasury
and all those other agencies that are involved here, and there
does not seem to be any conflict with respect to how this rule
is being interpreted. The White House has been very much
involved in this. We all have been hearing from many of our
friends, and I think a lot of it has to do with just
misinterpretation of what fiduciary is.
But I think----
Senator Blumenthal. So you will be coordinating as well
with the Securities and Exchange Commission and other agencies
that have that.
Secretary Solis. Absolutely. And we have.
We have had several meetings with them and have purposely
held more hearings so that we could have more comment made
available to us.
Senator Blumenthal. And perhaps also, I know that some
concerns have been raised by folks in the industry about
information that might be made available to them before
finalization of the rule, such as relating to the prohibited
transaction exemptions, and perhaps either now or in a
subsequent discussion, we might have a conversation about how
the Department of Labor will proceed in dealing with those
revisions to the prohibited transaction exemptions?
Secretary Solis. Be happy to do that.
Senator, you also mentioned TAA--well, TAA community
college program funding that is going to actually be issued in
September, $500 million of the first $2 billion that will be
made available for community colleges to help them ramp up so
that we can provide better training. It is not for, how could I
say, access to a community college. It is to expand current
programs that may be impacted.
So one that I know is very dear to many people in the room
happens to deal with nursing. We hear these programs have been
impacted. Places like that in institutions where you can
acquire equipment, bring on staff to change curriculum, and
work very closely with employers. That is the requirement for
that particular grant. We are really excited about that.
And then the last one, misclassification, thank you for
your work on that. What we are trying to get at here is that
those businesses and employers that misuse the system are
actually hurting our economy because they don't pay into the
workers' comp system. They don't pay into disability insurance.
They rob the employee, but they also hurt other legitimate
businesses.
That is why we have decided to work collectively in our
department with different divisions to put more strength and
enforcement in this particular area, to really hold clear what
the intent of that legislation is about.
Senator Blumenthal. Well, I really commend you. I know a
lot of the members of the committee join me in welcoming and
commending that work. And particularly on the community
colleges, I know the Chairman and Senator Hagan, I believe in a
prior hearing, and I have remarked on the enormous potential
for providing skills.
What I hear in Connecticut--and I know you have visited
Connecticut, and thank you for doing so--is that a lot of the
employers have openings, but they can't find the workers for
the skills. And actually, we have community colleges that have
established relationships with those employers to meet those
demands.
And so I would be very, very eager to follow up with you on
that issue.
Secretary Solis. Thank you. Thank you so much.
Senator Blumenthal. Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Blumenthal.
Senator Alexander.
Statement of Senator Alexander
Senator Alexander. Madam Secretary, thank you for coming.
You mentioned Flint, MI, and the example there, and it
reminded me of the auto industry. This is a discussion about
middle-income families, and the auto industry in my State,
Tennessee, has been a story of raising family incomes, of
creating more middle-
income families.
It also reminds me of a book that the late David Halberstam
wrote in the late 1980s, where he described the American
automobile industry centered in the Midwest as noncompetitive,
with high costs, high labor prices, sort of an oligopoly, as he
described it, unable to compete with Japanese and German car
manufacturers.
What happened was that when President Carter said that the
Governors in the 1980s go to Japan and persuade them to make in
the United States what they sold in the United States, they
came for the first time to Tennessee. And one of the reasons
was the central location of the State in the marketplace, but
an equally important reason was the right-to-work law, which
created a different environment for labor relations than was
found in the Midwest.
Do you agree that States should have the right to enact
right-to-work laws?
Secretary Solis. Senator Alexander, I recall the first time
that I came before this committee, you asked me a similar
question. I believe my response was that States ought to be
able to do what they find in their best interests. And given
the situation, there are many States that are right-to-work
States, and there are many that are not.
And as I said earlier, my role is to help people right now
find jobs and good jobs. In fact, I had the pleasure of going
down to Tennessee and visit the Sharp Industries there, where
they were assembling photovoltaic panels, solar panels.
The individual there, I believe, was from Japan, said that
he was ready to ramp up and do more, but wanted to make sure
that there was also support from the local government as well
as the surrounding areas that would help support that build-
out. And I told him I was very encouraged by what he was doing,
and I was very happy to see the diversified staff that he had
on the ground.
Senator Alexander. Yes, Sharp is one of those Japanese
companies that is located in Tennessee because of the right-to-
work law.
Secretary Solis. They also, Senator, had a full force of
African-American workers, male and female, who happened to be
represented by union.
Senator Alexander. But that doesn't have anything to do
with the right-to-work law. I mean--
Secretary Solis. I just want to say that that was my
observation there.
Senator Alexander. Yes, well, that is a good--they also
make solar panels. So my point is that I am deeply concerned by
the Administration's seeming undermining of the right-to-work
law in a number of ways, and I am reassured by your comment
that you think States ought to continue to have, under Section
14(b) of the Taft-Hartley Act, the right to choose to enact a
right-to-work law or not to, as 22 States do.
Do you believe that it is appropriate for a company to
decide to locate in a State based upon the cost of labor and
upon the relative number of strikes in that State? Do believe
that using those as considerations for locating a plant is a
violation of Federal labor laws?
Secretary Solis. Senator, I believe you are referring to
the Boeing issue. And I would just clarify that that current
dispute is being handled by another independent agency, and I
don't have any impact with respect to that particular agency.
But I do, again, want to reiterate that, as I said in my
statement, I am supportive of those individuals that would
choose to be associated with a union, if they choose to. It is
entirely up to----
Senator Alexander. If they choose to. But you are all part
of the same Administration, and the same President that
appointed you appointed members of the National Labor Relations
Board and the acting general counsel who brought a case.
Do think it was a wise idea for counsel to wait until our
largest manufacturer, Boeing, who sells airplanes all around
the world, built--chose to begin the first new large airplane
manufacturing plant in 40 years in South Carolina, wait until
that manufacturer had spent $1 billion, hired 1,000-plus
people, and then say you can't build the plant there or you
can't open the plant there unless you build X number of planes
in Washington State and X number of planes in South Carolina?
Is that the kind of policy that will create an environment
in the United States where we can create the largest number of
good new jobs for middle-income families?
Secretary Solis. Senator, I am very supportive of creating
good jobs, particular middle-class jobs. I think that is what
the thrust of this hearing is about. And as I said earlier, you
are talking about a case that is not under my current
jurisdiction. It is with the NLRB, and I can't comment on
what--their current cases being undertaken at this time.
Senator Alexander. Thank you, Mr. Chairman. My time is
expired.
The Chairman. Thank you.
And now Senator Hagan. OK, Senator Bennet and Senator
Murray.
Statement of Senator Murray
Senator Murray. Well, thank you very much, Mr. Chairman.
And Secretary Solis, thank you so much for testifying today
on this really important topic. You talked about it in your
opening remarks that since the late 1970s, income inequality in
the United States has increased dramatically and, at the same
time, the once-robust middle class has severely deteriorated.
Instead of focusing on the causes today, which certainly
are important, I want to focus on what we can do to help hard-
working families climb back up that ladder. And I am
particularly interested, as you have talked a lot about this
morning, in making sure that low-skilled individuals have
access to education and to training, and that education and
training leads those skills and cre-
dentials that have value in the labor market, that empower them
to manage their own careers and enable them to earn family-
sustaining wages.
You talked about reauthorizing the Workforce Investment
Act, and how critical it is to meeting that goal. And I want to
read to the committee a quote from a group of GAO researchers.
And they said,
``Reauthorizing WIA has never been more urgent than
it is today. Workforce trends in the economic downturn
have placed greater demands on the workforce investment
system than ever before. At present, this system is
stretched thin.
''If we, as a Nation, are to maintain our
competitiveness for the higher skilled jobs, we must
place more emphasis on training workers to keep their
skills current before they are threatened with layoffs.
We must develop better linkages with education and
employment. Increasing labor force participation will
require improving basic skills levels and greater
involvement of employers and unions in designing
education and training opportunities.''
I think it is really clear, as you have stated, that higher
skills are correlated with higher wages and good jobs. So I
want to ask you while you are here today what else the Federal
Government should be doing to support skills development for
our workers and the employers who need those highly skilled
laborers and what new ideas we should be looking at as we look
to reauthorize the WIA bill.
Secretary Solis. Well, Senator, I want to commend you and
the Chairman and also Senator Isakson and Enzi for all of your
work on this issue of WIA reauthorization. It is one that I
continually hear around the country from our workforce
investment boards, but particularly from businesses that have
participated in the past and want to see a change and
encouraging us to move forward with reauthorizing the
legislation to allow for different sectors in the business
community to also be able to draw down and utilize some of the
funds that are made available.
What I want to present to you is that--and this isn't
something new. You are aware of this. The whole issue of
looking at sectors and regionalization of what is happening
around the country, and trying to garnish that and allow for
more flexibility so that the WIA boards and the Workforce Act
can really engage and provide support for these industries that
we know are really going to be the future of a particular area.
We see it in clusters right now. Silicon Valley--I think in
other parts of the country we see pharmaceutical companies that
take hold in a corridor, say, in North Carolina, or what have
you. These are areas where we are hearing people say we want to
see more support for these kinds of efforts.
We have worked with, partnered with the Department of
Commerce to create a program that we are calling Accelerator
Program, to look at how we can give funding up to $240 million
to particular sets of individuals that are looking at sectors
and accelerating the growth in industries, so the 21st century
types of jobs, whether it be IT, broadband, healthcare, and, in
particular, renewable energy. Those are sectors that we are
looking at right now, and these grants are going to be made
available.
And it is something that I believe the WIA reauthorization
should encompass, but also to provide for a variety of other
players or stakeholders to also be a part and represented in
the WIA programs. We are not doing enough to also allow for,
say, community-based organizations and faith-based groups to
also be partnering with us.
In many cases, they provide essential services for the
dislocated workers that haven't been to school in 25 years,
lost their job. There is no return of that job. They need to
have the assistance that is provided, guidance, and the
intensive support case management that is required.
Unfortunately, our programs, as is, don't allow for that,
enough flexibility. So I know those discussions are ongoing
about who can be partners, and I think it is essential to have
businesses. But there are many businesses that just sit on the
board in some cases, but haven't done anything to help provide
assistance to innovate and to look at reforming themselves or
reinventing themselves.
So there also has to be a greater monitoring of what these
boards actually do and more accountability.
Senator Murray. Well, thank you for that comment, and I am
extremely concerned about this. I think we are working very
hard to get a good, solid bill out to address that.
We do have a skills gap. Senator Blumenthal talked about 3
million jobs available today, but we don't have the skilled
workforce. This has to be part of our economic recovery, and
certainly it is important for the middle class. So thank you
for your words on that this morning.
Thank you, Mr. Chairman.
Secretary Solis. Thank you, Senator.
The Chairman. Thank you, Senator Murray.
Senator Franken.
Statement of Senator Franken
Senator Franken. Thank you, Mr. Chairman.
I would like to associate myself with what Senator Murray
just spoke about. And I have recently cosponsored Senator
Sherrod Brown's SECTORS Act.
I visited manufacturing shops and tech colleges all across
Minnesota, and I have heard repeatedly from industry groups
like the Minnesota Precision Manufacturing Association and
companies like the Top Tool Company in Blaine that we have a
skilled worker shortage in advanced manufacturing. And there
are jobs actually going unfilled in a time we have so many
Minnesotans out of work.
And some manufacturers in Minnesota have been collaborating
with community and technical colleges to develop training
programs to prepare people for jobs, and I just want to
reiterate what she said, reemphasize what she said and you said
in response. And I liked what I heard.
Secretary Solis, in the next panel, Dr. Kenneth Green of
the American Enterprise Institute will be testifying. And in
his written comments, he says, ``When it comes to American job
creation, it is unlikely that the Recovery Act has significant
positive impact.''
Yet, I heard from economists, like Blinder and his cohort,
Mark Zandi, who had been McCain's adviser in 2008, that, in
fact, the Recovery Act created or saved anywhere from 2 million
to 4 million jobs at a time when States were disinvesting. And
that these jobs and the stimulus--and I saw it all around my
State--helped create or helped prevent us going into a
depression. What is your response to that?
Secretary Solis. Senator, I was very pleased to visit your
State back in April, and I actually visited Viking Drill and
Tool. I don't know if you are aware of the group, but they were
recipients of one of our grants in a partnership with the
BlueGreen Alliance.
And in part, this particular manufacturer was around for
over 50, 60 years, I believe, creating drill bits and had come
in contact with our partners on the ground and decided that
they wanted to learn how to retool, make themselves more
competitive. Otherwise, they would have to close down.
What they ended up doing was actually bringing in
individuals to help increase the skill level of current
technicians they had on the ground there to be able to make
that, I guess, step up so that they could produce a better
product, using more computerization, what they call CAD/CAM
robotics and things of that nature.
They were able to utilize our assistance to help provide
the skill training, the education that was needed, but they
were also able to help the company save about $100,000 in
energy costs and consumption and using new methods for
conservation.
So our partnership assisted this facility from actually
having to lay off more people. They are now adding more people
there, and they are providing a product that is being
manufactured here in our country that is sent throughout the
world.
I was quite amazed to see the diversity of the workforce
because not everyone was highly skilled, but individuals had an
opportunity then to move up. So that allowed for individuals
that were looking for jobs to also be able to come in and be a
part of this effort.
It was also a partnership, labor-management. So you had
unions, the steelworkers that were represented in that
partnership. And that is probably one of the best examples that
I could give you that we would like to see more of in terms of
looking at legislation like WIA reauthorization that would
allow for these kinds of partnerships to be explicitly
supported in this kind of legislation.
Senator Franken. When the President took office, how many
new jobs were being created each month--in other words, what
was the net, plus or minus, new jobs in the United States per
month?
Secretary Solis. Well, what I would say to you, Senator, is
that, when I took office, we were hemorrhaging about 700,000 or
more jobs for the first part of this Administration. Since the
time that the Recovery Act was instituted, we have seen numbers
changing dramatically.
And I would say in the last 16 months, 2.2 million private
sector jobs, many of which came out of the manufacturing area,
have been created. And I would say to you, one of the sectors
that has been more resilient has been in the healthcare arena.
That has continued to go up.
So I can see where, with the help of the Recovery Act, we
have added jobs. When you look back at the previous
administration, in each month of the previous administration,
they added about 11,000 jobs per month. And this President has
exceeded that.
Senator Franken. Thank you very much, Mr. Chairman.
The Chairman. Senator Whitehouse.
Statement of Senator Whitehouse
Senator Whitehouse. Thank you.
Welcome, Madam Secretary.
Today's Wall Street Journal says that the median net worth
of white households is 20 times greater than that of minority
households, 20 times greater than that of black households and
18 times greater than that of Hispanic households. The
disparity, the Wall Street Journal says, is the greatest since
the Government began tracking such data a quarter century ago.
We just had last week a study correlating the corporate
profits that are being reported across the corporate sector and
buoying the stock market with low wages, that there is a direct
correlation between the profits that the corporations are
declaring and their refusal to raise wages for their workers at
a time when American workers are actually getting more and more
productive.
And third, we see wealth disparity with the wealthiest
Americans with a larger and larger share of the Nation's wealth
really unprecedented since the robber baron era of many, many
years ago. What is your reaction to those sorts of disparities
emerging in our economy?
Setting aside the relative injustice between the winners
and the losers in an economy like that, overall, does an
economy succeed with that kind of disparity in it, or is it a
stronger engine for growth if the wealth is more broadly shared
with the middle class?
Secretary Solis. Well, obviously, I believe with the
latter. If the distribution of wealth is made available to
everyone, obviously, as they say, every boat is lifted. And I
am very concerned because I think it is very unacceptable the
high rates of unemployment among the different ethnic groups,
and in particular, as I said earlier, amongst our youth.
It sends a very negative message in particular to young
people, who are looking, and who will be our future workforce.
And therefore, I believe that we can't afford to continue to
cut back on services for the most vulnerable populations, who
happen to be these particular groups.
It takes longer to get dislocated workers back into the
workforce, but chances are, when they are in our programs, they
have a higher rate of placement in a job if they go through our
workforce training programs. And I am happy to say, with our
workforce investment funds and the Recovery Act in particular,
we were able to expand some of the curriculum so that people,
young people in areas, for example, that are experiencing high
numbers--high levels of unemployment with the African-American
community and Latino community, we concentrated efforts in the
Job Corps program.
We have a couple of students here in the back who are
visiting from the DC Potomac program, and I am sure they will
tell you their individual stories, how these job training
programs made the difference for them. Or perhaps they fell out
of high school. Maybe no one in their household is working.
This is giving them an opportunity to gain a credential, but
also to be placed in a worksite and then eventually hired up
by, say, a local employer.
Those are the kinds of programs that we can't afford to cut
right now, and I think that we also have to move forward on
extending the TAA, the Trade Adjustment Assistance program,
because there are too many people who have lost their jobs and
are in need of this particular assistance.
We know it works. We know that these individuals lost their
jobs, in many cases, through no fault of their own, but
decisions that were made in another place. And yet, they are
suffering. So we need to extend TAA, as well as provide
incentives for middle-class individuals to get some of those
tax breaks, in particular payroll tax.
Those kinds of things are very important, and also
investing in infrastructure, transportation, high-speed rail,
and other systems where we could put people in the construction
industry back to work, where high numbers of African-American
and Latino workers were displaced in this recession.
Senator Whitehouse. Well, let me thank you for your focus
on jobs. A very small group of very hard-core extremists is
holding the debt ceiling hostage to an agenda to attack
Medicare, things that the American people don't want that you
could never get done through a vote, but by taking the economy
hostage, they are trying to do that right now. And it has
fixated the public and the press on this debt ceiling crisis.
It is a manufactured crisis, but it is a real crisis. But
it is really important for families who are out there trying to
find a job and get back into the workplace and try to get this
economy rolling and fairer that the Administration focus on
jobs and not allow itself to be distracted by the real debt
limit problem from the other very real problem for families in
States like mine that have very high unemployment.
So thank you for keeping that focus.
Secretary Solis. Thank you, Senator.
The Chairman. Madam Secretary, thank you very much.
Senator Merkley.
Statement of Senator Merkley
Senator Merkley. Thank you very much, Mr. Chair.
And thank you, Madam Secretary.
When we were immersed in the conversations about the
stimulus 2 years ago, there was a conversation about renewable
energy and whether we could require the wind turbines to be
built in America. And we were told, no, due to trade
agreements, we couldn't.
Meanwhile, it is my understanding that China had insisted
that the turbines that they purchased be made in China, that
they provided enormous subsidies for companies to come there.
And while they were pursuing an industrial policy, which
discriminated in many ways against American companies, we were
giving them free reign to our economy. And in fact, many of the
turbines were made overseas that were purchased during that
effort.
If China is pursuing an industrial policy that protects
their domestic industries and we are not, and we lose jobs and
they gain jobs, why is that a sustainable policy for the United
States?
Secretary Solis. My response would be that I know that
during the Recovery Act, there were many projects that were
funded, and in the course of that, obviously, there were some
beneficiaries of that. And unfortunately, some of those
programs were not funded through the Department of Labor.
My funding goes through to job training, and I am very
proud of what we have been able to do with respect to creating
sustainable green jobs. And I am very excited about the fact
that recently there was a report that came out from Brookings
Institute that actually outlines the creation and number of
jobs that have been made available here in the United States.
In fact, I think 10 days ago they just released a report
that I am sure this committee will have access to. If not, I
would be happy to share the information that we have. But
around the country, you can see where there are jobs. In fact,
the clean economy, according to this study that was put out by
Brookings, says that there are some now--employed 2.7 million
workers in the clean green economy, and much of it has been
happening in big metropolitan areas.
In fact, in States like Toledo, OH; Charlotte, NC;
Cleveland, OH; San Jose, Sunnyvale, Santa Clara; Knoxville, TN;
Albany, NY; and Troy. I am happy that this information is
finally coming about, but I know we need to have policies where
we encourage more investment here, that we support American-
made products.
Senator Merkley. Thank you.
I am a big advocate of green jobs, but I think the heart of
the issue I was raising is not one you address, which is China
has an industrial policy that discriminates. We provide an open
country.
Let me try a different angle on it, which is that China
also pegs its currency, which acts as a de facto tariff, on
imported goods to China. That means it affects the goods that
we manufacture, while making their goods cheaper to us. Ours is
more expensive to them and theirs is cheaper to us.
This sort of de facto tariff is extremely disadvantageous
for creating jobs in America, and isn't this part of the
picture?
Secretary Solis. I don't disagree with you. I think there
are many issues that we have to look at, and many of which are
not under my purview. But I agree with you that we need to have
better trade agreements that are fair, and I look forward to
encouraging the manufacturing base here to grow and be robust.
That has been what my discussion, I think, today has been
about, trying to make sure that we can keep these competitive
jobs and bring some of those back here to pay good wages and to
make that investment and to close those tax loopholes and not
allow for that to continue in the pattern that has actually
driven down our salaries and created the disparities that exist
amongst our different racial and ethnic groups, and
particularly amongst young people.
Senator Merkley. Well, I appreciate that a great deal
because I think it has been very hard for us to hold a national
conversation over how, I think, we all believe that trade is
advantageous in the context of countries being able to
specialize and, thereby, produce things at lower costs. And
trading back and forth on an equal basis enhances jobs and
standard of living in both countries.
But I think we really have to wrestle with this issue of
disparity in trading when there is an industrial policy on one
side and not on the other. There are some very interesting
studies of historical relationships, where one side has had
industrial policy, the other hasn't. And almost always the side
with the industrial policy, as you might expect, comes out
ahead in that relationship.
In our recent bipartisan trip to China, every American
company, every single one we talked to, had stories about their
products being discriminated against, about the form of the
financial agreement under which they could enter the market
being stipulated, about that type of relationship, that
economic structure being used to strip technology, steal
technology, if you will.
These are very serious things for our success as a
manufacturing Nation. And I realize it may not be under your
direct purview, but in this conversation about jobs, I think we
have to wrestle with some things that, as a Nation, we have
found difficult to address.
Secretary Solis. I think, Senator, if I might, one of the
recent activities that has occurred was with respect to tires,
the sale of tires to China, as you know. And had it not been
for some of the folks in the steel industry, our friends, we
probably wouldn't have moved and really seen the imbalance
there.
And as a result, we now brought those jobs, those jobs came
back, so to speak, and we are now having more assembly
production of these tires that we knew were being--we were
being disadvantaged because we were being flooded by exports
from China.
So there are some good rays of hope. And I certainly want
to work to continue with members on this committee to see that
we provide opportunities for goods that are made and can be
produced here and sent abroad. I think that is what many of us
would like to envision.
Senator Merkley. Thank you so much.
Secretary Solis. Thank you. Thank you, Senator.
The Chairman. Thank you, Senator Merkley.
Secretary Solis, thank you very much for the generosity of
your time, for coming up here and responding to our questions.
We may have further questions in written form that we will
submit. But again, I just thank you for your attention to this
plight of the middle class.
We are going to continue to have these hearings. I don't
feel there is any--I really don't believe there is any debate
or discussion about the fact that the middle class has lost
ground in the last 20, 30 years. There may be a debate and
discussion about what has caused it, what may be some of the
answers to it, and what we can do. But that is OK. Healthy
discussion and debate can lead to progress, not necessarily
stalemate.
But I do believe that this is something that all of us are
going to have to pay attention to, and we are going to have to
have this as a major debate and discussion in our country, what
is happening to the middle class and what can we do--if we
believe that a solid middle class is beneficial to our society,
what can we do to regenerate it and to replenish that middle
class?
So I thank you very much for your involvement in this and
for your advice and suggestions today. Thank you, Madam
Secretary.
And we will now go to the next panel.
[Pause.]
Our second panel, we welcome Deborah King, who has served
as the executive director of the 1199 SEIU Training and
Employment Fund since 1995. Also project director of the Health
Careers Advancement Program, a national project to develop
career ladders for healthcare workers. Ms. King has served as
an adjunct professor at Cornell University in labor-management
relations for 10 years. She also serves on the New York City
Workforce Investment Board.
Sarah Corey is the director of public relations for
IceStone, LLC, a small manufacturing company in New York City
that produces durable surfaces made from 100 percent recycled
glass and concrete. Ms. Corey has a degree in sustainable
development, economics, and policy from the University of
Vermont.
Kenneth Green is a resident scholar and the interim
director of the American Enterprise Institute's Center for
Regulatory Studies. He is an environmental scientist by
training and has worked for more than 16 years at public policy
research institutions across America. He has twice served as an
expert reviewer for the United Nation's Intergovernmental Panel
on Climate Change.
Tom Prinske is an owner of T. Castro Produce in Chicago,
IL, a small produce distributor with 15 employees. He has a
progressive facial disability that began when he was a
teenager, also serves as a member of the Illinois Workforce
Investment Board.
We welcome you all here to this hearing. As you may have
heard from our first witness, Secretary Solis, that we have
been having a series of hearings basically on the middle class,
what is happening to the middle class and any suggestions on
how we can stop this erosion of the middle class in our
society.
So we welcome you and your input into this hearing.
We will start with Ms. King then to Ms. Corey to Mr. Green
to Mr. Prinske, Your statements will all be made a part of the
record in their entirety, and I would ask if you could sum up
in 5 minutes or so.
Ms. King, welcome. And please proceed.
STATEMENT OF DEBORAH KING, EXECUTIVE DIRECTOR, 1199 SEIU
TRAINING AND EMPLOYMENT FUNDS, NEW YORK, NY
Ms. King. Thank you. Thank you, Chairman Harkin, Ranking
Member Enzi, and other Senators, for the opportunity to testify
today.
I am Deborah King, executive director of the 1199 SEIU
Training and Employment Fund. We are the largest labor-
management workforce organization in America, covering over
250,000 health-
care workers and 600 hospital, nursing home, and homecare
employers in New York, New Jersey, Massachusetts, Maryland, and
DC.
The oldest part of the organization is the Training and
Upgrading Fund, or TUF. Since 1969, TUF has supported over
100,000 workers to upgrade from service and clerical jobs to
nursing and other technical and professional healthcare
careers. These upgrades have enabled them to move from low-
income jobs to good middle-class jobs, often increasing their
salaries by 50 to 100 percent from before the training.
Additionally, achieving a college degree has brought
workers long-term job security and has increased the chance
that their children will also become college graduates.
TUF is a Taft-Hartley fund, administered by both labor--in
this case, 1199 SEIU United Healthcare Workers East--and
healthcare employers. It is financed through employer
contributions and Federal, State, and private grants. Because
TUF has input from employers about industry needs and SEIU
about worker needs, it has been very successful in increasing
the mobility of healthcare workers, promoting retention, and
addressing industry needs.
TUF programs provide a full range of benefits, including
counseling, preparatory classes, and tutoring, to support
workers, many of whom have been out of school for years or
dropped out of school because of economic or life hardships.
TUF has established innovative worker-friendly programs, such
as partnerships with colleges to create part-time, evening, and
flexible programs.
This allows workers to move up the education and career
ladder and out of entry-level jobs, creating yet another hiring
opportunity. As people move up, it is an opportunity for
unemployed workers to move in.
TUF benefits, provided at no cost to workers, include
English as a second language, GED, and college preparation. TUF
offers up to 24 credits per year in tuition benefits and a
range of technical and professional programs.
Pell grants, which provide most students with additional
support, allow TUF to support many more workers each year.
Without Pell grants and TUF, most of these workers would never
afford to attend college. And I think we know that college is
essential for many jobs that are available today.
In 2010, almost 20,000 workers participated in one of the
fund's programs. Around 5,000 were supported through tuition
vouchers and assistance to study for technical jobs, such as
respiratory therapy, radiology tech, or for social work and
counseling.
In the last 3 years, the fund has produced over 1,500 RN
graduates. The vast majority of these workers were certified
nursing aides, allowing them to nearly double their previous
average salary of $35,000. They went to $65,000 a year to
start. Last year, the fund also graduated over 500 licensed
practical nurses, who went from salaries in the low $30s to
earning in the high $40s.
Another success of our programs is the high levels of
retention and completion rates in college. The Health Care
College Core Curriculum is a college program where participants
attend prerequisite courses as a cohort and are provided
additional tutoring, counseling, and interventions to ensure
success. It has a 90 percent retention rate in college,
compared to national average of 30 to 50 percent for adults
returning to school.
On June 16, we had a graduation ceremony, and when I think
of our successful outcomes, I think of one of the speakers who
spoke there, Christine Porter. Born on a dairy farm in upstate
New York, Christine left home and school at 16 and had her
first child at 18. Several years later, her life was in turmoil
as the result of a terrible divorce that left her and three
young children seeking refuge in a domestic violence shelter.
Moving her family to Queens, NY, Christine worked three
jobs, 7 days a week to keep food on the table. After getting a
job as a medical assistant and becoming an 1199 SEIU member at
Long Island Jewish Medical Center, Christine learned about
training fund benefits.
Christine found the transition to college to be much
smoother, thanks to taking classes in the Healthcare College
Core Curriculum and getting additional supports. While still
working full time, Christine graduated with honors, earning her
nursing degree at Queensborough Community College.
Christine now works for her same employer, but now as a
neonatal intensive care registered nurse. She is currently
pursuing a bachelor of science degree in nursing and will
graduate next year. Her dream of having a decent life for
herself and her children is now a reality.
Because of her perseverance--and I want to say none of this
happens without workers really working hard, but it wouldn't
happen just by that. It happens also with the support from our
program.
TUF's track record of success has encouraged employers
around the country to join the existing fund or create similar
model organizations. In the past 10 years, the fund has grown
by 50,000 workers, while similar funds in California,
Pennsylvania, Connecticut, Washington State, Oregon, and Nevada
cover an additional 100,000 workers. So this is an idea that
works, and it is an idea that is catching on with other
employers around the country.
Today, attaining middle-class status does not necessarily
mean, unfortunately, that you will maintain it. Another project
under the fund's umbrella is the Job Security Fund, started in
1992 and also funded by collective bargaining contributions.
Over 300 employers in the acute care and long-term care
industries currently participate in the Job Security Fund,
which covers over 125,000 employees. Laid-off workers receive
supplemental unemployment benefits, continued health coverage,
and retraining, as well as priority placement rights in
participating institutions.
This safety net is a clear example of a benefit that
prevents people from falling into poverty when faced with job
loss. The Job Security Fund enables workers to get support and
assistance they need to quickly re-enter the workforce.
And I want to say that over 90 percent of the workers that
we have serviced since 1994 have been able to be placed back
into employment, 11,000 out of 12,000 workers we have serviced.
And it also supplies participating employers with well-trained,
experienced staff.
Thank you again for the opportunity to testify. I urge the
committee to look for ways to encourage initiatives like these
through the Department of Health and Human Services, Labor,
Education, and other agencies. We must not give up on the hope
that today's workers and future generations will be able to
live the American dream.
Thank you.
[The prepared statement of Ms. King follows:]
Prepared Statement of Deborah King
Thank you Chairman Harkin, Ranking Member Enzi, and all Senators on
the Health, Education, Labor, and Pensions Committee for the
opportunity to testify today at your hearing on ``Building the Ladder
of Opportunity: What's Working to Make the American Dream a Reality for
the Middle Class.'' I am Deborah King, executive director of the
1199SEIU Training and Employment Funds. 1199SEIU is part of the 2.1
million member Service Employees International Union. 1199SEIU
represents more than 300,000 members and retirees in New York, New
Jersey, Maryland, the District of Columbia, Florida and Massachusetts.
The 1199SEIU Training and Employment Funds is the largest labor-
management workforce organization in the United States, covering over
250,000 healthcare workers and 600 hospital, nursing home and homecare
employers in New York, New Jersey, Massachusetts, Maryland and
Washington, DC.
The oldest part of the organization is the 1199SEIU League Training
& Upgrading Fund (TUF). Since it's founding in 1969, TUF has supported
over 100,000 workers to upgrade from service and clerical jobs to
nursing and other technical and professional healthcare careers. These
upgrades have enabled workers to move from low-income jobs to good
middle-class jobs, frequently increasing their salaries by 50 to 100
percent when they move into their new classification. In addition,
achieving a college degree has brought workers enhanced long-term job
security and has increased the likelihood that their children will also
become college graduates.
TUF is a Taft-Hartley Fund administered by both labor (1199SEIU
United Healthcare Workers East) and management (healthcare employers)
and is financed through employer contributions. In accordance with
collective bargaining agreements, employers contribute a percentage of
gross payroll to TUF. As a 501c (3) non-profit organization, the Fund
is also supported by Federal, State and private grants. Because TUF has
input from employers about industry needs, and SEIU about worker needs,
it has been an extremely successful partnership in increasing mobility
of healthcare workers, promoting retention and addressing industry
shortages.
Although the TUF in New York City started in 1969, its track record
has incented employers in other geographic areas to join the existing
Fund or to create new organizations modeled on TUF. In the last 10
years, the Fund has grown by almost 50,000 workers and similar funds
programs by other locals in California, Pennsylvania, Connecticut,
Washington, Oregon, and Nevada cover an additional 100,000 workers.
This program works and it is growing throughout the country.
TUF programs have been successful because they provide a full range
of benefits including counseling, preparatory classes and tutoring to
support workers, many of whom have been out of school for years or who
dropped out of high school or college because of economic hardships or
other life circumstances, to succeed. Without this encouragement and
support, many would remain in entry level jobs and not fulfill their
human and economic potential.
TUF benefits, provided at no cost to workers, include English as a
Second Language, GED and college preparation. In 2010 in New York City
alone, thousands of workers participated in these programs. Over one-
third of those who attended college preparatory programs moved on to
college.
In addition, TUF offers up to 24 credits per year in tuition
benefits and a range of programs for technical and professional
workers. This includes reimbursement as well as tuition vouchers. TUF
has negotiated these pre-paid agreements with State and city University
colleges, which enable people to attend public colleges with little to
no out-of-pocket cost. Most of the TUF's workers receive additional
support through Federal Pell grants, which make it possible for the TUF
to support so many people each year. Without the support of these Pell
grants and TUF's tuition assistance, most of these workers would not be
able to afford to attend college. I urge you to continue to support
full funding of the Pell program, which is so essential to enable low-
income people to obtain the credentials necessary to secure a decent
job.
In 2010, almost 20,000 workers participated in one of the Fund's
many programs.
Approximately 5,000 workers were supported through tuition vouchers
and tuition assistance to attend college. Many people study for
technical jobs such as Respiratory Tech, Radiology Tech, Pharmacy Tech,
Surgical Tech, for Social Work and counseling and hundreds of our
members upgrade to these positions each year. Over 60 percent of SEIU
members choose nursing as a career. In the last 3 years, the Fund has
produced over 1,500 nursing graduates. The vast majority of these
workers were Certified Nursing Aides (CNAs) prior to graduating from
nursing school. Upon upgrading, these workers almost double their
salaries. For example, the average salary of a CNA in New York City is
$35,000; Registered Nurses typically start at around $65,000. In that
same time period, the Fund proudly graduated over 500 Licensed
Practical Nurses (LPN), who went from earning salaries in the low $30s
to the high $40s.
In addition to the salary increases, these workers secured more
satisfying jobs with more responsibilities and increased recognition
and respect. This is what the American Dream is about and we are making
it happen.
Another success of TUF is the high levels of retention and
completion rates. One specific example is the Health Care Career Core
Curriculum program (HC-4), a supported college entry program. In this
program, Fund participants attend pre-
requisite college courses as a cohort, with additional tutoring,
counseling and interventions to ensure success. HC-4 retention rates
are over 90 percent, as compared with national success rates of 30 to
50 percent for adults returning to school. TUF is now expanding this
model to other geographic regions.
Another positive outcome has been TUF's track record in
establishing innovative worker friendly programs. Through labor and
management working together, TUF has been able to partner with colleges
to create part-time, evening, and flexible programs. These programs
have allowed healthcare workers to move up the education and career
ladder. This is an example of how labor and management speaking with
one voice can make systemic change which benefits everyone.
When I think of our successful outcomes, I cannot help but think
about some of TUF's participants who have shared their stories at our
annual graduate recognition ceremonies.
When Christine Porter spoke at our ceremony just a few weeks ago,
the entire audience was in tears. Born on a dairy farm in Upstate New
York, Christine left home at 16 and had her first child at 18 years
old. Several years later, her life was in turmoil as a result of a
terrible divorce that left her and her three young children seeking
refuge in a domestic violence shelter. Moving her family to Queens, NY,
Christine worked three jobs, 7 days a week, to keep food on the table.
After acquiring a job as a Medical Assistant and becoming an 1199SEIU
member at Long Island Jewish Medical Center, Christine learned about
Training Fund benefits.
Like the thousands of Health Careers Core Curriculum (HC-4)
graduates who came before her, Christine found the transition to
college to be much smoother while taking classes with other 1199
members and having access to additional types of support. While working
full-time, Christine completed the program and moved on to receive
tuition vouchers for her nursing degree at Queensborough Community
College. She graduated this year with honors and served as the
President of the Student Nurses Association. Christine is now working
for her same employer as a Neonatal Intensive Care Registered Nurse.
She is currently pursuing a Bachelor's of Science in Nursing and plans
on graduating in 2012. Her dream of having a decent life for her and
her children, which began in that shelter, is now a reality because of
her perseverance and support from our program.
Another speaker who comes to mind is Dr. Michelle Joyce. Michelle
worked at Jordan Hospital in Plymouth, MA for nearly 10 years after
obtaining her masters in physical therapy. Many healthcare professions
are increasingly requiring higher credentials. The Training Fund was
negotiated into her Union contract for the first time in 2007, and
Michelle saw her door to higher education and increased job security
open.
Michelle pursued her Doctorate in Physical Therapy at Boston
University, something that was too costly to consider before the
Training Fund was established. She continued to work, be a wife and
mother to two small children and obtain her PhD! She credits both the
Union and Jordan Hospital's administrators for their insight and timely
trust to partner together to bring the Fund to Massachusetts.
Some of our graduates had a longer road to travel to reach their
goals. Some did not have a high school diploma or were working in a
very low paid, entry level job. One such graduate, who I now see every
day, is Denise Cherenfant.
Denise began her journey as a home health aide and then became a
Certified Nurse Aide and 1199 member at Daughters of Jacob Nursing Home
in the Bronx, NY. Denise was a single mother at the time and determined
to increase her standard of living so that she could offer her son a
better future. She tried to pass college entrance exams on her own
several times but was unsuccessful. When she learned about the Training
and Upgrading Fund, Denise enrolled in free college preparation courses
which gave her the ability to pass the college entrance exam and
succeed in college level work. Denise received her Associate's degree
as a Physical Therapy Assistant from New York University, a very
demanding program.
A few years later, Denise decided to return to school to become a
Bachelor's-
prepared Registered Nurse. Through support from the Fund, she attended
Lehman College, with no out-of-pocket cost and also received a stipend
so that she could take time off to attend classes and study. Without
this financial support, Denise could not have reached her career goal--
she became the first member of her family to graduate college and
earned her Bachelor's of Science in Nursing in 2009. After working as a
Registered Nurse at her former employer, Denise is now working at the
Training Fund and is planning to pursue a Masters Degree in Nursing
Education.
At the beginning of her journey, Denise earned minimum wage, with
no benefits. She now earns a middle-class salary with excellent health,
pension and other benefits and she is able to pay for her son's college
tuition. He just started this fall.
Unfortunately, in our country today, attaining middle-class status
does not necessarily mean that you will maintain it. A particularly
scary time is when an employer moves out of the area or closes. Another
project under the Training and Employment Funds umbrella is the
1199SEIU League Job Security Fund (JSF), which was established in 1992
and is also funded by collective bargaining contributions. Over 300
employers in the long-term and acute care industry currently
participate in the JSF. Together, labor and management accept joint
responsibility for the employment security of over 125,000 employees.
Since 1993, there have been more than 12,000 lay-offs from 214
institutions in New York. The Fund provides a safety net and re-
employment for laid-off workers within the healthcare industry. Over
11,000 of those laid-off have accessed JSF services, 8,000 of whom have
been re-employed in the industry. Others have chosen to retire,
relocate, change industry, and so on.
Laid off workers receive supplemental unemployment benefits,
continued health coverage and re-training benefits as well as priority
placement rights in other participating institutions. This safety net
is a clear example of a benefit that prevents people from falling into
poverty when faced with job loss. The intervention of the JSF enables
Fund participants to get the support and assistance they need to
quickly re-enter the workforce. It also helps to supply participating
employers with well-trained, experienced workers. It is clearly a
program that can work where there is a network of employers jointly
committed to the workforce in their industry.
One person who benefited from both TUF and JSF is Jorge Negron, a
2008 graduate. Growing up in ``El Barrio'' in East Harlem, NY, Jorge
dropped out of school, became a father at 19 and went to work as a
housekeeper at Mount Sinai Hospital. Years later, after obtaining his
GED, Jorge was promoted to a job in Materials Management in an
operating room. He would spend his lunch hours observing procedures and
talking to nurses about their work.
Jorge learned about the Fund's HC-4 program from one of these
nurses. With Fund counseling and tutoring services, and the support of
his fellow union members in class, Jorge completed the HC-4 program and
continued his pre-requisite classes at New York City College of
Technology. He was able to become an Anesthesia tech and Operating Room
Aide at St. Vincent's Midtown Hospital while still pursuing his RN
degree. Sadly, St. Vincent's closed down and Jorge lost his job while
in his last semester of school.
Being an 1199 member, Jorge was able to access the services of the
Job Security Fund. This allowed him to continue his education, with
full tuition being paid, and preserved his medical benefits. Today,
Jorge works as a Registered Nurse at Mt. Sinai, where he once swept the
floors. He earns nearly double what he was making prior to being laid
off. Jorge still lives in ``El Barrio'' and because of his knowledge of
his community and Spanish fluency, is making a great contribution to
both the quality of care at the hospital and to the health of his
community.
We are encouraged that even in these difficult economic times,
programs like TUF and JSF are continuing to grow and make a
difference--demonstrating the value-added of the labor movement, joint
labor management partnerships, and that it is still possible to
implement initiatives which provide pathways to the middle class.
In addition to the established funds, in States like Minnesota,
Illinois and Michigan, healthcare employers and SEIU are collaborating
on fledgling training initiatives. These projects are giving workers
access to education opportunities they never had. They also are giving
employers the chance to create local career pathways and site-based
projects that engage incumbent workers and improve the quality of care
that is delivered. I predict that these pilot initiatives, in these
States and elsewhere, will result in the creation of new Taft-Hartley
funds in the next several years.
I would like to thank the Health, Education, Labor, and Pensions
Committee for this opportunity to testify and to share our programs
with you. I urge the committee to look for ways to encourage these
initiatives through support from the Departments of Health and Human
Services, Labor, Education and other Federal agencies. We must not give
up the hope that our children will have a secure and fulfilling future.
Thank you.
The Chairman. Ms. King, thank you very much.
And now we will turn to Ms. Corey. Ms. Corey, welcome.
And again, your statement will be made part of the record.
Please proceed.
STATEMENT OF SARAH COREY, PUBLIC RELATIONS DIRECTOR, ICESTONE,
NEW YORK, NY
Ms. Corey. Good morning, and thank you, Mr. Chairman,
Ranking Member Enzi, and members of the committee. It is an
honor to be here today.
My name is Sarah Corey, and I am the director of public
relations for a company called IceStone. I am here to share
with you IceStone's unique story and illustrate how our company
is part of an American manufacturing renaissance, creating
safe, good jobs that pay a living wage.
Eight years ago, Peter Strugatz and Miranda Magagnini co-
founded IceStone in Brooklyn, NY. Both Brooklyn natives, Peter
and Miranda envisioned a company that would invigorate the
local economy and challenge the notion that America's
industrial age had passed. They believed that a manufacturing
renaissance could be possible through the creation of green
collar jobs.
Like so many American entrepreneurs, they embarked on a
journey to create a better future for their children, and they
found their inspiration in America's landfills. Since 2003,
IceStone has diverted 10 million pounds of glass from the waste
stream through the production of its eponymous durable
surfaces.
I brought a sample with me today. IceStone has three core
ingredients--100 percent recycled glass, cement, and pigment.
There are no carcinogenic resins or toxic chemicals in
IceStone. So our products are safe for the employees who make
the material and for the families who prepare their meals on
IceStone countertops.
We procure 100 percent of the cement and 100 percent of our
glass from American suppliers. Every slab is cast in Brooklyn.
Our day-lit 19th century Navy Yard factory is both a reminder
of our industrial heritage and proof that innovation often
requires reflecting on the past. We are proof that America can
regain a competitive advantage in the global economy by
creating green products and paying wages that support families.
Today, IceStone employs 45 full-time men and women, six of
whom were hired in 2011, and we are each dedicated to the same
ethos that inspired our co-founders. A successful business
places equal value on social responsibility, environmental
stewardship, and fiscal profitability. We call this the
``triple bottom line.''
For the purposes of today's hearing, I will focus on
IceStone's social bottom line, which has three key attributes--
job training, a living wage, and employee health and safety.
Job training is an essential component of the IceStone
employee experience, and we heard earlier from Secretary Solis
just how important it is. Each IceStone employee creates a
professional development plan every year. More than any other
tool, the development plan empowers us to take a proactive role
in the direction and evolution of our work. It captures our
goals and details the resources needed to achieve them,
inspires pride in our work, and has served as a roadmap for
entry-level and executive-level employees alike.
In 2010, our lead technician, Jose Gomez, completed a 5-day
workshop in total productive maintenance. By participating in
the workshop, Jose expanded his arsenal of skills required for
his job, which enabled him to identify and prevent potential
equipment issues throughout the factory. This led to increased
efficiency, and in turn, Jose received an increase in wages.
Other employees have used their professional development
plans to explore skills unrelated to their day-to-day work.
This summer, for example, Luke Keller from the operations team
left the factory floor a few hours each week to work with the
marketing team and hone his video production skills.
The capacity building that Jose and Luke have found at
IceStone should be accessible for every working American and is
a critical part of strengthening America's middle class.
The second key attribute of our social bottom line is the
living wage. The minimum wage in the State of New York is
$7.25. And any of you who are familiar with the monthly cost of
riding New York's subway can attest to the inadequacy of this
wage.
At IceStone, we believe that all employees have a right to
a wage that will provide shelter, food, and other basic
necessities for their families. We also believe that a living
wage includes benefits, and currently, all IceStone employees
have access to health and dental care.
Providing such benefits, coupled with a safe work
environment, is the third pillar of IceStone's social bottom
line. Our company has a low employee turnover rate, a high
number of employee referrals, and promotes a culture of
inclusion and service. But it doesn't end there.
IceStone strives to make positive social, environmental,
and economic impacts beyond the gates of the Navy Yard. We are
a founding member of B Corporation, a network of 427 companies
that prove businesses have the power to solve social and
environmental issues. To date, five States have signed
legislation that recognizes B Corporations and holds the
leaders of such companies accountable for the material impact
their businesses have on society, stakeholders, and the
environment.
IceStone has worked to build a network of like-minded
businesses to bolster local economies, and we have partnered
with an elementary school in Brooklyn, where employees
collaborated with fifth grade teachers to create a curriculum
on sustainable careers and recycling. We also partner with
organizations like AHRC, which provides work and services for
individuals with developmental disabilities.
The question posed by the committee today is, ``What is
working to make the American dream a reality for middle-class
families? '' Innovative businesses like IceStone and hundreds
of thousands within the American Sustainable Business Council
are effectively bridging the gap between reality and the dream.
There is still much work to be done, and IceStone's growth
would not be possible without State and Federal capital.
Legislation similar to Senator Gillibrand's Made in America
block grant program and guaranteed loans are needed to support
the new wave of manufacturing in our country.
However, above all else, America's workers need and deserve
triple bottom line careers that improve the quality of life for
their families, their local communities, and the planet.
Thank you.
[The prepared statement of Ms. Corey follows:]
Prepared Statement of Sarah Corey
Good morning, and thank you Mr. Chairman, Ranking Member Enzi, and
members of the committee; it is a privilege to be here today.
My name is Sarah Corey and I am the director of Public Relations
for a company called IceStone. I'm here to share with you IceStone's
unique story, and illustrate how our company is part of an American
manufacturing renaissance, creating safe, good jobs that pay a living
wage.
Eight years ago, Peter Strugatz and Miranda Magagnini co-founded
IceStone, LLC in Brooklyn, NY. Both Brooklyn natives, Peter and Miranda
envisioned a company that would invigorate the local economy and
challenge the notion that America's industrial age had passed. They
believed that a manufacturing renaissance could be possible through the
creation of green collar jobs. Like so many American entrepreneurs,
they embarked on a journey to create a better future for their
children. They found their inspiration in America's landfills.
Since 2003, IceStone has diverted 10 million pounds of glass from
the waste stream through the production of its eponymous durable
surfaces. IceStone durable surfaces contain three core ingredients: 100
percent recycled glass, cement, and pigment. There are no carcinogenic
resins or toxic chemicals in IceStone, so our products are safe, for
the employees who make the material, and for the families who prepare
their meals on IceStone countertops. We procure 100 percent of the
cement of our surfaces and 100 percent of our glass from American
suppliers. Every slab is cast in Brooklyn; our day-lit 19th century
Navy Yard factory is both a reminder of our industrial heritage and
proof that innovation often requires reflecting on the past. We are
proof that America can regain a competitive advantage in the global
economy by creating green products and paying wages that support
families. Today, IceStone employs 45 full-time men and women, each
dedicated to the same ethos that inspired our co-founders; a successful
business places equal value on social responsibility, environmental
stewardship, and fiscal profitability. We call this the ``triple bottom
line.''
(A green collar job is one that pays a living wage, and directly
improves environmental (and therefore societal) quality).
For the purposes of today's hearing, I will focus on IceStone's
social bottom line, which has three key attributes: job training, a
living wage, and employee health and safety.
Job training is an essential component of the IceStone employee
experience. Each employee creates a professional development plan every
year. More than any other tool, the development plan empowers us to
take a proactive role in the direction and evolution of our work. It
captures our goals and details the resources needed to achieve them,
inspires pride in our work, and has served as a road map for entry- and
executive-level employees alike. In 2010, our lead technician, Jose
Gomez, completed a 5-day workshop in Total Productive Maintenance. By
participating in the workshop, Jose expanded his arsenal of skills
required for his job, which enabled him to identify and prevent
potential equipment issues throughout the factory. This led to
increased efficiency and in turn, Jose received an increase in wages.
Other employees have used their professional development plans to
explore skills unrelated to their day-to-day work. This summer, for
example, a member of our Operations Team named Luke Keller left the
factory floor a few hours each week to work with the Marketing team and
hone his video production skills. The capacity building that Jose and
Luke have found at IceStone should be accessible for every working
American, and is a critical part of strengthening America's middle
class.
The second key attribute of our social bottom line is the living
wage. The minimum wage in the State of New York is $7.25. Any of you
who are familiar with the monthly cost of riding New York's subway can
attest to the inadequacy of this wage. At IceStone, we believe that all
employees have a right to a wage that will provide shelter, food, and
other basic necessities for their families. We also believe that a
living wage includes benefits, and currently, all IceStone employees
have access to health and dental care.
(Living wage rates factor the cost of living in a particular area,
and the size of a family.)
Providing such benefits, coupled with a safe work environment is
the third pillar of IceStone's social bottom line. Our company has a
low employee turn over rate, a high number of employee referrals, and
promotes a culture of inclusion and service. It doesn't end there.
IceStone strives to make positive social, environmental, and economic
impacts beyond the gates of the Navy Yard. To that end, we've co-
founded B Corporation, a network of 427 companies that prove businesses
have the power to solve social and environmental issues. To date, five
States have signed legislation that recognizes B Corporations and holds
the leaders of such companies accountable for the material impact their
businesses have on society, stakeholders and the environment. IceStone
is part of the Business Alliance for Local Living Economies, and has
partnered with an elementary school in Brooklyn where employees
collaborated with 5th grade teachers to create a curriculum on
sustainable careers and recycling. We also partner with organizations
like AHRC, which provides work and services for individuals with
developmental disabilities.
The question posed by the committee today is, ``what's working to
make the American dream a reality for middle-class families?'' I
believe that sustainable, innovative businesses like IceStone are
effectively bridging the gap between reality and the Dream. There is
still much work to be done, and IceStone's growth would not be possible
without State and Federal capital. Legislation similar to Senator
Gilibrand's Made in America block grant program is needed to support
the new wave of manufacturing in our country. However, above all else,
America's workers need and deserve triple bottom line careers that
improve the quality of life for their families, their local
communities, and the planet.
(The five States that have passed B Corp legislation are: Hawaii,
Maryland, New Jersey, Vermont, and Virginia. Pending legislation:
California, Colorado, Michigan, New York, North Carolina, Pennsylvania)
The Chairman. Ms. Corey, thank you very, very much.
And now we go to Kenneth Green. Again, your statement will
be made a part of the record. Please proceed.
STATEMENT OF KENNETH P. GREEN, RESIDENT SCHOLAR, AMERICAN
ENTERPRISE INSTITUTE, WASHINGTON, DC
Mr. Green. Thank you, Chairman Harkin, Ranking Member Enzi,
members of the committee, for having me here today.
Along with my remarks, I have submitted a pertinent study I
authored recently, called ``The Myth of Green Energy Jobs: The
European Experience,'' through the American Enterprise
Institute. Much of my testimony today will be excerpted from
that study, and I should observe that my testimony represents
my views only. AEI does not take official positions. The views
of the scholars are their own views.
I have been asked to discuss the question of today's
hearing in the context of green jobs, and I will forego the
green job jokes, although I have many of them, as you will no
doubt imagine. I have been writing about for a few years now.
First, a few words about my background.
As Senator Harkin mentioned, I am a biologist and
environmental policy analyst by training, and I have applied
that training to public policy analysis since 1994, when I
received my doctoral degree from UCLA. While I do not hold a
specific degree in economics--this came up in at another
hearing--economic analysis is a fundamental component of policy
analysis and, of course, is studied formally, both in the
process of learning about policy analysis and applying it.
So, to the question of green jobs. As it turns out, we are
only beginning to get a definition of what a green job is. As
Secretary Solis mentioned, the Brookings Institution recently
took a shot at defining what they are calling ``clean'' jobs.
In fact, we are really not working on defining green jobs. Now
we are looking actually at clean jobs.
They tried to do a good job of it. I give them full credit
for doing their best to really define what they were talking
about and measure it accurately. Very important effort.
But even their analysis raises more questions than answers.
So, for instance, Brookings does not count the people who work
inside companies today on environmental compliance issues or
environmental impact reduction. Those people in the EHS, the
environmental health and safety industry, aren't counted by
Brookings as having a clean job.
And I worked with those people, and I am sure they are
motivated by that desire to improve the environment. And yet,
mass transit workers are virtually all thrown in, as are waste
management workers. And so, there is a conflation of managing
sludge, or are you driving a bus?
Whether or not a job is green or clean depends really on a
number of things. With regard to transit, it is ridership
levels, the power source of the transit, the age of the
vehicles, and so on. It is hard to see how an inefficient 20-
year-old Metro car, for instance, powered by coal and based on
electricity, running half empty, is cleaner than newer, much
cleaner automobiles carrying the same number of people over the
same distance.
With that caveat, I will move into a quick discussion of
the general theory of job creation, then a quick review of some
real-world experience with Government stimulation of green
energy jobs, which are somewhat better defined, green energy
being a subset of the entire green job arena or field.
First, what is the source of jobs? Do jobs emerge from the
interaction of entrepreneurs and consumers, which, to admit my
bias, is where I believe they come from, or do governments
create them? That question has been debated since at least the
1850s, when Frederic Bastiat, a French journalist and
politician, wrote ``What is Seen, and What is Not Seen,'' an
essay that should be mandatory reading for anyone who wants to
study public policy.
Bastiat explained--and I am going to paraphrase this to
break up the usual discussion of broken windows and children
throwing bricks. Bastiat explained that since the Government
doesn't have capital of its own, it can only create a job with
money it takes from someone else who is already using it. So if
Uncle Sam wants Taxpayer Tom to hire someone, they must give
him money they have taken from Taxpayer Paula, who is already
using it to create jobs, either directly or indirectly, even if
it is sitting in a bank or even under her mattress.
But several dynamics make that effort a losing proposition
on net. First, because Government administration costs money,
some of the money taken from Paula doesn't all get to Tom. Some
goes to pay Bureaucrat Bob.
Second, Government planners tend to create jobs that are
less economically efficient than the private sector. After all,
if the wind power job that Uncle Sam wants Tom to produce was
more profitable than the job Paula was already producing, she
would cash out of what she was doing and throw in with Taxpayer
Tom for her own benefit, no Government intervention and no
mandate required.
The same is true when Government tells a manufacturer what
product they can't sell, while telling someone else what
product they are allowed to sell. Just as with jobs, when
Government regulations favor product A over product B, what is
seen are the new jobs making product A. What is not seen are
the killed jobs that were making product B.
So let us look at the application of green jobs as it has
played out in three European countries. There are more examples
in the study I mentioned when I began my testimonies. Let us
start with Spain.
In March 2009, researchers at the Universidad Rey Juan
Carlos studied the economic and employment impacts of Spain's
push into green energy job creation. Their study calculates
that since the year 2000, Spain spent about $815,000 to create
each green energy job. When it was a wind job, it was
particularly expensive, at $1.5 million per job created.
The study calculates that the money used to create those
jobs would have produced 110,500 jobs elsewhere in the economy.
Or in other words, for every green job created, over two jobs
were destroyed or foregone in the general economy.
In Italy, a study performed by the Bruno Leoni Institute
found similar problems, if not worse. In Italy, they found for
every job created, a green job created with government stimulus
funds, five to seven jobs were either destroyed or foregone in
the general economy.
Finally, to the United Kingdom. A recent report by
consultancy Verso Economics found the situation similar there.
For every job created by the government in renewables,
renewable energy, 3.7 jobs were destroyed or foregone in the
general economy.
That report, by the way, is interesting because it uses the
government of Scotland's own accounting mechanisms for
determining job creation based on tax rates. And so, this is
how the government calculates jobs created and destroyed, which
makes it somewhat different than the previous studies I
discussed, and we can go into the detailed methodology, if you
wish, during the question period.
Before I conclude, I was asked to comment about the
stimulus of 2009 and its effectiveness in creating green jobs.
A report in September 2010 pointed out that only $20 billion of
the $92 billion allocated for renewable energy projects had
even been spent. According to the Department of Energy, much of
that was spent abroad, creating green jobs in China, Spain, and
South Korea.
For example, a report by American University found 11 U.S.
wind farms used their stimulus grants to buy wind turbines made
abroad. Seventy percent of those wind turbines purchased with
stimulus grants were made elsewhere. It could have been worse.
The Department of Energy reports that for some green stimulus
projects, 80 percent of the spending was spent abroad.
The EPA recently admitted that it can't say whether or not
stimulus money it used created jobs. They can tell you what
they spent and who they gave it to, but they acknowledge they
can't tell you what effect it had in terms of creating jobs.
So given that most of the green stimulus is unspent, and
much of what has been spent has been spent elsewhere, and I am
referring to the green stimulus, that being money targeted for
green jobs, not all stimulus spending. And some of the projects
funded have either moved to China or gone bankrupt.
When it comes to American job creation, it is unlikely that
the act had a significant positive impact, at least in the
domain of green jobs, green energy jobs.
In conclusion, the idea that Government can create jobs in
the economy is a myth. Painting the myth green doesn't make it
any less of a myth.
The experience of Europe, which has preceded us in the
quest for a new green economy, is both negative and
unsustainable, with subsidies being cut back and feed-in
tariffs being reduced, even as we speak. And what little we
know of our own efforts are similarly proving to be poorly
thought out.
I thank you for the opportunity to testify, and I look
forward to your questions.
[The prepared statement of Mr. Green follows:]
Prepared Statement of Kenneth P. Green
Chairman Harkin, Ranking Member Enzi, members of the committee,
thank you for inviting me to testify today. Along with my remarks, I
have submitted a pertinent study that I authored, titled ``The Myth of
Green Energy Jobs: The European Experience.'' \1\
---------------------------------------------------------------------------
\1\ The study submitted by Kenneth P. Green may be found at
www.aei.org/article/energy-and-the-environment/the-myth-of-green-
energy-jobs-the-european-experience/.
---------------------------------------------------------------------------
Much of my testimony is excerpted from this study. I should observe
that my testimony represents my views only.
I have been asked to discuss the question of today's hearing in the
context of green jobs, which I have been writing about for a few years
now.
But first, a few words about my background.
I am a biologist and environmental policy analyst by training, and
I have applied that training to public policy analysis since 1994.
While I do not hold a specific degree in economics, economic analysis
is a fundamental component of policy analysis, and I have studied it
both academically and professionally since 1990.
So, to the question of green jobs.
As it turns out, we are only beginning to get a definition of what
a green job is.
The Brookings Institution recently took a shot at defining what
they're calling ``clean'' jobs, and they tried to do a good job of it,
but even their analysis raises more questions than answers.
For example, Brookings doesn't count people who work inside
companies in environmental compliance or environmental impact
reduction, but they throw in a very large number of mass transit
workers.
Yet whether or not mass transit is green depends on ridership
levels, the power source, the age of the vehicles, which emissions
you're focused on and so on.
For example, it would be hard to see how an inefficient 20-year-old
metro car powered by coal-generated electricity, running half empty is
``cleaner'' than the newer, much cleaner automobiles carrying people
over the same distance.
With that caveat, I'll move into a quick discussion of the general
theory of job creation, then move to a review of real-world experience
with government stimulation of green-energy jobs, which are somewhat
better defined.
First, what is the source of jobs? Do jobs emerge from the
interaction of entrepreneurs and consumers, or do governments create
them?
That question has been debated since at least the 1850s, when
Frederic Bastiat, a French journalist and politician wrote What is
Seen, and What is Not Seen, an essay that should be mandatory reading
for anyone interested in public policy.
Bastiat explained that since the government doesn't have capital of
its own, it can only ``create'' a job with money it takes from someone
who is already using it.
So, if Uncle Sam wants Taxpayer Tom to hire someone, they must give
him money they've taken from Taxpayer Paula, who was already using it
to create jobs directly or indirectly.
But several dynamics make that effort a losing proposition. First,
because government administration costs money, what they take from
Paula doesn't all get to Tom. Some goes to pay bureaucrat Bob.
Second, government planners tend to create jobs that are less
economically efficient.
After all, if the wind-power job that Uncle Sam wants Tom to
produce was more profitable than the job Paula was already producing,
she would cash out of what she's doing and throw in with Taxpayer Tom
for her own benefit. No mandates required.
The same is true when government tells a manufacturer what product
they can't sell, while telling someone else what product they can sell.
Just as with jobs, when government regulation favors product A over
product B, what is seen is the new sales of product A, and the jobs
associated with such sales. What is not seen is the lost sales of
product B, and the lost jobs that go with it.
Now, let's look at the application of green-energy job stimulation
as it played out in three European countries. There are more examples
in the study I referenced when I began.
I'll start with Spain.
In March 2009, researchers at the Universidad Rey Juan Carlos
released a study examining the economic and employment impacts of
Spain's push into green energy job creation.
The study calculates that since 2000 Spain spent about $815,000
dollars to create each green energy job. Wind industry jobs were
particularly pricy, at $1.5 million per job created.
The study calculates that the money used to create those jobs would
have produced 110,500 jobs elsewhere in the economy. In other words,
for every green job created, 2.2 jobs were destroyed or foregone in the
general economy.
Now to Italy, where a study performed by the Bruno Leoni Institute,
found similar problems.
The Bruno Leoni study found that for every job created in the green
sector, 5 to 7 jobs would likely have been created in the general
economy.
Finally, to the United Kingdom.
A recent report by consultancy Verso Economics found that for every
job created in the UK in renewable energy, 3.7 jobs were foregone in
the general economy.
This report uses the government's own macroeconomic model for
Scotland, and calculates that promoting renewable energy in the UK has
an opportunity cost of 10,000 direct jobs in 2009/10 and 1,200 jobs in
Scotland.
Before I conclude, I was asked to comment about the ``stimulus'' of
2009, and its effectiveness in creating green jobs.
A report September 2010 pointed out that only $20 billion of the
$92 billion allocated for renewable energy projects had been spent.
And, according to the Department of Energy, much of that was spent
abroad, creating green jobs in China, Spain, and South Korea.
For example, a report by American University found that 11 U.S.
wind farms used their stimulus grants to buy wind turbines made abroad:
70 percent of those wind turbines purchased with stimulus grants were
made elsewhere.
It could have been worse: the Department of energy reports that for
some green stimulus projects, 80 percent of the spending was abroad.
The EPA itself recently admitted that it can't say whether or not
stimulus money created jobs: they can tell you what they spent, but not
what effect it had.
So given that most of the green stimulus is unspent, and much of
what has been spent has been spent elsewhere, and some of the projects
that were funded have already gone belly up, when it comes to American
job creation, it's unlikely that the Act had a significant positive
impact.
In conclusion, the idea that government can create jobs in the
economy is a myth, and painting the myth green makes it no less of a
myth.
The experience of Europe, which has preceded us in the quest for a
new green economy, is both negative, and unsustainable, with subsidies
being cut back, and feed-in tariffs reduced.
What little we know of our own efforts are, similarly, proving to
be poorly thought-out.
I thank you again for this opportunity to testify, and look forward
to your questions.
Attachment--Prepared Statement of the American Enterprise Institute
for Public Policy Research (AEI)
the myth of green energy jobs: the european experience
(By Kenneth P. Green)*
With $2.3 billion in Recovery Act tax credits allocated for green
manufacturers, President Barack Obama and other Democratic politicians
have high hopes for green technology. But their expectations clash with
both economic theory and practical experience in Europe. Green programs
in Spain destroyed 2.2 jobs for every green job created, while the
capital needed for one green job in Italy could create almost five jobs
in the general economy. Wind and solar power have raised household
energy prices by 7.5 percent in Germany, and Denmark has the highest
electricity prices in the European Union. Central planners in the
United States trying to promote green industry will fare no better at
creating jobs or stimulating the economy.
---------------------------------------------------------------------------
* Kenneth P. Green ([email protected]) is a resident scholar at AEI.
---------------------------------------------------------------------------
Key points in this Outlook:
The Obama administration, its allies in Congress, and the
environmental community champion the benefits of green technology and
the creation of green jobs to alleviate unemployment.
Green jobs merely replace jobs in other sectors and
actually contribute less to economic growth.
Experiments with renewable energy in Europe have led to
job loss, higher energy prices, and corruption.
Green is the new black, in both the United States and Europe.
Virtually everyone on the left has thrown on the green pants, green
shirts, and green cloak of what we are assured is the future of life on
earth as we know it.
President Obama regularly references the green economy in his
speeches. The Obama/Biden New Energy for America document released in
2008 focuses on green jobs, green technology, green manufacturing,
green buildings, and even green veterans. In a speech to the Democratic
National Committee in September 2010, Obama boasted,
``We'd been falling behind and now we are back at the
forefront of [research and development]. We made the largest
investment in green energy in our history so that we could
start building solar panels and wind turbines all around the
country.'' \1\
In an August 13 speech, Vice President Joe Biden also sang the
praises of greenness:
``It's not enough to just rescue the economy, we have to
rebuild it better--and that work begins with giving American
manufacturers the resources to produce the clean, green energy
technology that will be the foundation of our 21st century
economy. With the launch today of $2.3 billion in Recovery Act
tax credits for green manufacturers, we are going to ramp up
manufacturing of green energy materials in this country, while
creating thousands of new jobs right here in our own backyard.
From wind and solar power to electric vehicle technology, our
recovery is going to be fueled by the Recovery Act incentives
we are offering businesses today that will be the engine of our
economy tomorrow.'' \2\
Former speaker Nancy Pelosi (D--CA) also supports the green cause.
A blurb describing a speech Pelosi gave to the Stanley School in
Waltham, MA, begins,
``For a brighter and more prosperous future, we must invest
in a green infrastructure, a green economy, and green schools
to create a workforce of good-paying green collar American
jobs.'' \3\
Governments do not ``create'' jobs; the willingness of
entrepreneurs to invest their capital, paired with consumer demand for
goods and services, does that.
Of course, Senator Harry Reid (D--NV) was not left out. At a Senate
Democratic Green Jobs Summit in 2009, Reid boasted of his green
accomplishments:
``We have made unprecedented investments in clean, renewable
energy and new, green jobs that can never be outsourced. In
2007 we passed a landmark energy bill that led to the
development of clean, renewable fuels here at home, and the
creation of critical American manufacturing jobs. We raised
fuel-efficiency standards for the first time in a generation,
and set new energy-efficiency standards for lighting,
appliances, and Federal office buildings and vehicles. In the
economic recovery plan we passed this year, we invested $67
billion to develop clean energy, and $500 million more to train
a new `green collar' workforce--Americans who each day will
make our Nation more energy efficient and energy independent.''
So, at least on the left, it is unanimous: the world's future is
green: green energy powering green technologies, creating green houses,
buildings, cars, and jobs, jobs, jobs. But is this thinking based on
realistic economics, realistic understanding about green technology, or
realistic expectations of the growth potential of the green movement?
This Outlook examines whether the Government creates jobs through
subsidies of any sort and then looks at the troubling European
experience with green energy and job creation.
green energy and green jobs
To understand the fallacy of the Government creating green jobs
through subsidies and regulations, we have to refer to the writing of
French economist Frederic Bastiat. Back in 1850, Bastiat explained the
fallacy that underlies such thinking in an essay about the unseen costs
of such efforts. He called it the ``broken window'' fallacy.
The fallacy works as follows: imagine some shop keepers get their
windows broken by a rock-throwing child. At first, people sympathize
with the shopkeepers, until someone claims that the broken windows
really are not that bad. After all, they ``create work'' for the glass
maker, who might then be able to buy more food, benefiting the grocer,
or buy more clothes, benefiting the tailor. If enough windows are
broken, the glass maker might even hire an assistant, creating a job.
Did the child therefore do a public service by breaking the
windows? No. We must also consider what the shopkeepers would have done
with the money they used to fix their windows, had those windows not
been broken. Most likely, the shopkeepers would have plowed that money
back into their store; perhaps they would have bought more stock from
their suppliers or hired new employees.
Were the windows not broken, the town would still have had jobs
created by the shopkeepers' alternate spending, plus the shopkeepers
would have had the value of their original windows. Because the value
of the windows was destroyed, however, they--and the village as a
whole--have been made poorer.
It is well-understood, among economists, that governments do not
``create'' jobs; the willingness of entrepreneurs to invest their
capital, paired with consumer demand for goods and services, does that.
All the Government can do is subsidize some industries while jacking up
costs for others. In the green case, it is destroying jobs in the
conventional energy sector--and most likely in other industrial
sectors--through taxes and subsidies to new green companies that will
use taxpayer dollars to undercut the competition. The subsidized jobs
``created'' are, by definition, less efficient uses of capital than
market-created jobs. That means they are less economically productive
than the jobs they displace and contribute less to economic growth.
Finally, the good produced by government-favored jobs is inherently a
noneconomic good that has to be maintained indefinitely, often without
an economic revenue model, as in the case of roads, rail systems, mass
transit, and probably windmills, solar-power installations, and other
green technologies.
To understand how this works in practice, I now turn to European
countries that went hog wild for renewables, while singing the praises
of green jobs: Spain, Italy, Germany, Denmark, the United Kingdom (UK),
and the Netherlands.
spain
Spain has long been considered a leader in the drive to renewable
power. Indeed, Obama singled out Spain as an example in a 2009 speech.
The president said,
``We have enormous commercial ties between our two countries
and we pledged to work diligently to strengthen them,
particularly around key issues like renewable energy and
transportation, where Spain has been a worldwide leader and the
United States I think has enormous potential to move forward.''
\4\
But the story of Spain's green-job leadership took a series of hits
shortly after the president's speech. In March 2009, researchers
Gabriel Calzada Alvarez and colleagues at the Universidad Rey Juan
Carlos released a study examining the economic and employment effects
of Spain's aggressive push into renewables. What they found confounds
the usual green-job rhetoric:\5\
Since 2000, Spain spent 571,138 euros on each green job,
including subsidies of more than 1 million euros per job in the wind
industry.
The programs creating those jobs destroyed nearly 110,500
jobs elsewhere in the economy (2.2 jobs destroyed for every green job
created).
The high cost of electricity mainly affects production
costs and levels of employment in metallurgy, nonmetallic mining and
food processing, and beverage and tobacco industries.
Each ``green'' megawatt installed destroys 5.28 jobs
elsewhere in the economy on average.
These costs do not reflect Spain's particular approach
but rather the nature of schemes to promote renewable energy sources.
Spain has found its foray into renewable energy to be
unsustainable. Bloomberg reports that Spain slashed subsidies for new
solar power plants.\6\ As analyst Andrew McKillop observes in the
Energy Tribune:
In Spain, where subsidies to the country's massive wind farms
and their dependent industries is estimated to have attained as
much as 12 billion Euros in 2009, either directly or through
``feed-in tariff '' subsidy for power sales, government
proposals target at least a 30 percent cut in subsidies. Major
wind energy producer firms, such as Gamesa, have begun cutting
their workforces, while trying to find sales outside Europe,
helped by a weaker Euro. In addition and due to Spain's highly
exposed deficit finance status, making it a target for market
speculators betting its bond rates must rise, the Spanish
government is also likely to cut financial backing to existing
renewable energy power plants, built with an expectation of
guaranteed prices and government subsidies for 25 years.\7\
And then, there is the matter of corruption. As Bloomberg
Businessweek reports,
``An audit of solar-power generation from November 2009 to
January 2010 found that some panel operators were paid for
doing the `impossible'--producing electricity from sunlight
during the night.'' \8\ Further, it appears that the solar
power producers ``may have run diesel-burning generators and
sold the output as solar power, which earns several times more
than electricity from fossil fuels.'' Nineteen people have been
arrested in Spain's ``clean energy'' sector on charges ranging
from bribery, to unsavory land deals, to issuing licenses to
friends and family, to simple construction fraud.
As the Guardian reports,
``When Spain's National Commission for Energy decided to
inspect 30 solar gardens, it found only 13 of them had been
built properly and were actually dumping electricity into the
network.'' \9\
italy
A similar situation has played out in Italy, also a leader in wind
and solar-power deployment. A study performed by Luciano Lavecchia and
Carlo Stagnaro of Italy's Bruno Leoni Institute found an even worse
situation:
Finally, we have compared the average stock of capital per
worker in the RES [Renewable Energy Systems] with the average
stock of capital per worker in the industry and the entire
economy, finding an average ratio of 6.9 and 4.8, respectively.
To put it otherwise, the same amount of capital that creates
one job in the green sector, would create 6.9 or 4.8 if
invested in the industry or the economy in general,
respectively--although differences exist between RES
themselves, with wind power more likely to create jobs than
[photovoltaic] power. This fact is particularly relevant
because we didn't even consider the non-trivial value of the
renewable energy produced, but we focused on pure subsidies. If
we had considered the energy value, the average stock of
capital per worker would result even higher. Since subsidies
are forcibly taken away from the economic cycle, and allocated
for political purposes, it is especially important to have a
clear vision of what consequences they beg.\10\
The researchers also found that the vast majority of green jobs
created were temporary:
``Using what we see as inflated estimates, from various
sources, of already-existing green jobs, we take between 9,000
and 26,000 jobs in wind power, and between 5,500 and 14,500 in
photovoltaic energy, as our starting point. From there, we have
calculated that thanks to the subsidies Rome has promised, the
number of people working in the green economy will rise to an
aggregate total of between 50,000 to 112,000 by 2020. However,
most of those jobs--at least 60 percent--will be for installers
or other temporary work that will disappear once a photovoltaic
panel, or a wind tower, is operative.'' \11\
And like Spain, Italy has experienced rampant corruption in the
renewable sector. Rather than having numerous individuals defrauding
the government, however, the mafia is involved. As Nick Squires and
Nick Meo report in the Telegraph,
``Attracted by the prospect of generous grants designed to
boost the use of alternative energies, the so-called `eco
Mafia' has begun fraudulently creaming off millions of euros
from both the Italian government and the European Union.'' \12\
They go on to report:
Eight people were arrested in Operation ``Eolo,'' named after
Aeolus, the ancient Greek god of winds, on charges of bribing
officials in the coastal town of Mazara del Vallo with gifts of
luxury cars and individual bribes of 30,000-70,000 euros.
Police wiretaps showed the extent of the mafia's infiltration
of the wind energy sector when they intercepted an alleged
mafioso telling his wife, ``Not one turbine blade will be built
in Mazara unless I agree to it.''
In another operation last November, code-named ``Gone with
the Wind,'' 15 people were arrested on suspicion of trying to
embezzle up to 30 million euros in European Union funds. Among
those arrested on fraud charges was the president of Italy's
National Wind Energy Association, Oreste Vigorito.
Wind and solar power have raised household energy prices by 7.5
percent in Germany, and Denmark has the highest electricity prices in
the European Union.
germany
Germany's foray into renewable energy started in earnest in 1997,
when the European Union adopted a goal of generating 12 percent of its
electricity from renewable sources.\13\ Germany's method for achieving
such targets was the institution of a feed-in law, which required
utilities to purchase different kinds of renewable energy at different
rates. In a study of the effects of Germany's aggressive promotion of
wind and solar power, Manuel Frondel noted that the German feed-in law
required utilities to buy solar power at a rate of 59 cents per
kilowatt-hour, far above the normal cost of conventional electricity,
which was between 3 and 10 cents. Feed-in subsidies for wind power, he
observed, were 300 percent higher than conventional electricity
costs.\14\
Needless to say, this massive subsidizing of wind and solar power
attracted a lot of investors: after all, if the government is going to
guarantee a market for several decades, and set a price high enough for
renewable producers to make a profit from, capital will flow into the
market. Germany became the second-largest producer of wind energy after
the United States, and its investment in solar power was aggressive as
well.
But according to Frondel, things did not work out as Germany's
politicians and environmentalists said they would. Rather than bringing
economic benefits in terms of lower cost energy and a proliferation of
green-energy jobs, the implementation of wind and solar power raised
household energy rates by 7.5 percent. Further, while greenhouse gas
emissions were abated, the cost was astonishingly high: over $1,000 per
ton for solar power, and over $80 per ton for wind power. Given that
the carbon price in the European Trading System was about $19 per ton
at the time, greenhouse gas emissions from wind and solar were not
great investments.
Frondel concludes that,
``German renewable energy policy, and in particular the
adopted feed-in tariff scheme, has failed to harness the market
incentives needed to ensure a viable and cost-effective
introduction of renewable energies into the country's energy
portfolio. To the contrary, the government's support mechanisms
have in many respects subverted these incentives, resulting in
massive expenditures that show little long-term promise for
stimulating the economy, protecting the environment, or
increasing energy security. In the case of photovoltaics,
Germany's subsidization regime has reached a level that by far
exceeds average wages, with per-worker subsidies as high as
175,000 euros (US$240,000).''
He adds:
``In conclusion, government policy has failed to harness the
market incentives needed to ensure a viable and cost-effective
introduction of renewable energies into Germany's energy
portfolio. To the contrary, Germany's principal mechanism of
supporting renewable technologies through feed-in tariffs
imposes high costs without any of the alleged positive impacts
on emissions reductions, employment, energy security, or
technological innovation. Policymakers should thus scrutinize
Germany's experience, including in the United States, where
there are currently nearly 400 Federal and State programs in
place that provide financial incentives for renewable energy.
Although Germany's promotion of renewable energies is commonly
portrayed in the media as setting a ``shining example in
providing a harvest for the world'' (The Guardian 2007), we
would instead regard the country's experience as a cautionary
tale of massively expensive environmental and energy policy
that is devoid of economic and environmental benefits.''
As with Spain and Italy, Germany is finding it hard to continue to
subsidize wind and solar power at existing levels. In May, the German
parliament cut back the subsidy for domestic rooftop solar photovoltaic
systems by 16 percent, with free-standing systems cut by 15
percent.\15\
denmark
Denmark is yet another country that has made wind power a hallmark
of its energy policy. Obama praised it for its aggressive wind-power
program, telling an Earth Day audience in Iowa that,
``America produces less than 3 percent of our electricity
through renewable sources like wind and solar--less than 3
percent. Now, in comparison, Denmark produces almost 20 percent
of their electricity through wind power.'' \16\
The U.S. Energy Information Administration tells America's children
that ``Denmark ranks ninth in the world in wind power capacity, but
generates about 20 percent of its electricity from wind.'' \17\ That
sounds impressive, but is it true?
Green programs in Spain destroyed 2.2 jobs for every green job
created, while the capital needed for one green job in Italy could
create almost five jobs in the general economy.
Not according to CEPOS, a Danish think tank, which issued a 2009
report entitled, Wind Energy, the Case of Denmark.\18\ The CEPOS study
found that rather than generating 20 percent of its energy from wind,
``Denmark generates the equivalent of about 19 percent of its
electricity demand with wind turbines, but wind power
contributes far less than 19 percent of the Nation's
electricity demand. The claim that Denmark derives about 20
percent of its electricity from wind over-states matters. Being
highly intermittent, wind power has recently (2006) met as
little as 5 percent of Denmark's annual electricity consumption
with an average over the last 5 years of 9.7 percent.''
The CEPOS study revealed that Denmark can only produce and consume
as much wind power as it does due to a convenient circumstance:
neighboring countries have a lot of hydro power that can quickly and
effectively balance the flow of electricity on its energy grid,
allowing it to export surplus wind capacity.
``Denmark manages to keep the electricity systems balanced
due to having the benefit of its particular neighbors and their
electricity mix. Norway and Sweden provide Denmark, Germany and
Netherlands access to significant amounts of fast, short-term
balancing reserve, via interconnectors. They effectively act as
Denmark's `electricity storage batteries.' Norwegian and
Swedish hydropower can be rapidly turned up and down, and
Norway's lakes effectively `store' some portion of Danish wind
power. Over the last 8 years West Denmark has exported
(couldn't use), on average, 57 percent of the wind power it
generated and East Denmark an average of 45 percent. The
correlation between high wind output and net outflows makes the
case that there is a large component of wind energy in the
outflow indisputable.''
Finally, the CEPOS study found that Danish consumers are the ones
who take it on the chin. Denmark's electricity prices are the highest
in the entire European Union. And the greenhouse gas reduction
benefits? Slim to none, since the exported wind power replaces hydro
power, which does not produce significant greenhouse gas emissions. The
wind power consumed in Denmark does displace some fossil-fuel
emissions, but at some cost: $124 per ton, nearly six times the price
on the European Trading System.
Regarding green jobs, CEPOS found that,
``The effect of the government subsidy has been to shift
employment from more productive employment in other sectors to
less productive employment in the wind industry. As a
consequence, Danish GDP is approximately 1.8 billion DKK ($270
million) lower than it would have been if the wind sector
workforce was employed elsewhere.''
Not surprisingly, Denmark is also finding renewable power
unsustainable and is backing away from the technology. As Andrew
Gilligan reports in the Telegraph, the Danish state-owned power
industry will no longer build onshore wind turbines, and consumers are
complaining about high energy rates and environmental despoliation.
``Earlier this year, a new national anti-wind body,
Neighbours of Large Wind Turbines, was created. More than 40
civic groups have become members. `People are fed up with
having their property devalued and sleep ruined by noise from
large wind turbines,' says the association's president, Boye
Jensen Odsherred. `We receive constant calls from civic groups
that want to join.' ''\19\
the united kingdom
Our Commonwealth cousins across the pond have also embraced the
``green power means green jobs'' theory. The UK (Scotland particularly)
has pursued an ambitious wind-power agenda.
Former prime minister Gordon Brown told a Labor Party conference,
``I am asking the climate change committee to report by
October on the case for, by 2050 not a 60 percent reduction in
our carbon emissions, but an 80 percent cut and I want British
companies and British workers to seize the opportunity and lead
the world in the transformation to a low carbon economy and I
believe that we can create in modern green manufacturing and
service one million new jobs.'' \20\
Ed Miliband, current leader of the opposition, is also big on wind,
announcing,
``With strong government backing, the UK is consolidating its
lead in offshore wind energy. We already have more offshore
wind energy than any other country, we have the biggest wind
farm in the world about to start construction, and now we'll
see the biggest turbine blades in the world made here in
Britain. . . . Our coastline means the offshore wind industry
has the potential to employ tens of thousands of workers by
2020.'' \21\
Party does not seem to be a factor in green-job boosting. Prime
Minister (and Conservative Party leader) David Cameron, discussing a
deal to work on wind turbines with India, said,
``The innovation and creativity of business won't just help
us save the planet, but is expected to create millions of jobs
and billions of revenue in the green goods and services
market.'' \22\
Referring to offshore wind, Cameron is equally bullish: ``I want us
to be a world leader in offshore wind energy,'' he said, announcing a
national infrastructure plan.
``We are making these investments so that major manufacturers
will decide that this is the place they want to come and build
their offshore wind turbines. This investment is good for jobs
and growth, and good for ensuring we have clean energy.'' \23\
Alas, the UK and Scotland have fared no better than the other
countries discussed above in their pursuit of the new green-energy/
green-jobs economy, as a recent report by consultancy Verso Economics
points out.\24\ The study is particularly interesting because its
methodology is touted as superior to the methodology used in the
Spanish and Italian studies. Verso uses what economists refer to as
``input/output'' tables to estimate the number of jobs that were
foregone in the UK general economy in favor of the green jobs
``created'' through government subsidies.
Verso's conclusion aligns neatly with those of the Spanish and
Italian studies discussed above:
``The report's key finding is that for every job created
in the UK in renewable energy, 3.7 jobs are lost. In Scotland there is
no net benefit from government support for the sector, and probably a
small net loss of jobs.''
``The main policy tool used to promote renewable energy
generation is the Renewables Obligation, which effectively raises the
market price paid for electricity from renewable sources. This scheme
cost electricity consumers 1.1 [billion] British pounds in the UK and
around 100 [million] British pounds in Scotland in 2009-10.''
``This report uses the Scottish Government's own
macroeconomic model for Scotland to assess the impact of identified
costs on jobs. A similar model was used by the Scottish Government to
measure the opportunity cost of the cut in [the value-added tax]
implemented in 2008-9. Based on this, policy to promote renewable
energy in the UK has an opportunity cost of 10,000 direct jobs in 2009-
10 and 1,200 jobs in Scotland.''
``In conclusion, policy to promote the renewable
electricity sector in both Scotland and the UK is economically
damaging. Government should not see this as an economic opportunity,
therefore, but should focus debate instead on whether these costs, and
the damage done to the environment, are worth the candle in terms of
climate change mitigation.'' \25\
While the UK and Scotland may have avoided the problems of
corruption that afflicted Spain and Italy, they learned something that
the warmer countries did not: wind turbines can freeze in winter. Not
only do they cease to put out power in very cold weather, they actually
need to be heated. As reporter Richard Littlejohn points out in the UK
Daily Mail,
``Over the past 3 weeks, with demand for power at record
levels because of the freezing weather, there have been days
when the contribution of our forests of wind turbines has been
precisely nothing. It gets better. As the temperature has
plummeted, the turbines have had to be heated to prevent them
seizing up. Consequently, they have been consuming more
electricity than they generate. Even on a good day they rarely
work above a quarter of their theoretical capacity. And in high
winds they have to be switched off altogether to prevent
damage.'' \26\
The frozen turbine problem has also occurred in Canada. As Greg
Weston of the Telegraph-Journal explained in February 2011,
``A $200-million wind farm in northern New Brunswick is
frozen solid, cutting off a supply of renewable energy for NB
Power. The 25-kilometre stretch of wind turbines, 70 kilometers
northwest of Bathurst, has been shut down for several weeks due
to heavy ice covering the blades. GDF Suez Energy, the company
that owns and operates the site, is working to return the
windmills to working order, a spokeswoman says.'' \27\
the netherlands
The Netherlands is yet another country that went big for wind
power; it is the world's third-largest producer of offshore wind power.
And while no data are available about green jobs in the Netherlands,
there is evidence that it will not be producing many through its green
power plants. The new conservative government has radically reversed
course and is slashing subsidies to wind and solar power.
According to the journal Energy Debate, the Dutch government has
lost its faith in windmills. The new government in the Netherlands has
taken exception to the massive subsidies required to build and operate
wind farms--and, in this case, to the expected export of 4.5 billion
euros in subsidies to a German company (Bard Engineering) that would
have built, owned, and operated those wind farms. The new prime
minister of the Netherlands, Mark Rutte, is reported to have said,
``Windmills turn on subsidies.'' \28\
On November 30, 2010, the government unveiled its new renewables
plan, slashing annual subsidies from 4 billion euros to 1.5 billion
euros. And not only are the subsidies cut back, what remains will be
redirected well away from wind power. As Energy Debate explains:
In the new system (somewhat misleadingly called SDE-plus),
which will take effect halfway through 2011, the government
will allocate subsidies in an entirely different, and rather
complicated way. Subsidies are made available in four
``stages'' (on the basis of first-come, first-served).
1. In the first stage, a government subsidy of 9 eurocents
per kWh (or 79 cents per m\3\ for gas) is offered, but only to
producers of technologies that have ``deficits'' of less than 9
eurocents. Based on the figures from ECN, these are: biogas
(``green gas''), hydropower, power from waste processing
installations, and gas from fermentation processes.
2. If there is still money left after this first stage, the
second stage will be opened up, in which a subsidy of 11
eurocents per kWh (or 97 cents per m\3\) will be offered. This
stage will be open to producers of onshore wind power and
fertiliser-based gas.
3. Again, if there is money left, there will be a third stage
with subsidies of 13 cents per kWh or 114 cents per m\3\. This
will be open to producers of hydropower and small-scale
biomass.
4. The fourth and last stage (15 cents per kWh or 132 cents
per m\3\) will be open to electricity produced from all-purpose
fermentation processes.
Not included in any of the four categories, because they are
too expensive, are solar power, large-scale biomass and,
indeed, offshore wind power.\29\
Another change in the Dutch attitude toward renewables is how to
pay for the subsidies. In the past, subsidies came from the general
budget. Moving forward, consumers will see a surcharge on their energy
bills. The new direct billing could cool the public's ardor for
additional building of ``green energy.''
According to reports, the new government was planning on a nuclear
power renaissance to generate electricity, and one could certainly
argue that such a plan would generate ``green jobs.'' \30\ However, in
the wake of the tragic Japanese earthquake and tsunami in March 2011,
such a plan will also undergo a great deal of scrutiny.
The irony here is rich. The Dutch, who have been enamored of wind
power for hundreds of years,\31\ may have finally had enough tilting at
windmills. If even they cannot make it work, one has to wonder if
anyone can.
conclusion
Both economic theory and the experience of European countries that
have attempted to build a green-energy economy that will create green
jobs reveal that such thinking is deeply fallacious. Spain, Italy,
Germany, Denmark, the UK, and the Netherlands have all tried and failed
to accomplish positive outcomes with renewable energy. Some will
suggest that the United States is different, and that U.S. planners
will have the wisdom to make the green economy work here. But there is
no getting around the fact that you do not improve your economy or
create jobs by breaking windows, and U.S. planners are no more
omniscient than those in Europe.**
---------------------------------------------------------------------------
** I would like to thank AEI research assistant Hiwa Alaghebandian
for her valuable assistance with this Outlook.
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Notes
1. White House, ``Remarks by the President at DNC Event,'' news
release, September 16, 2010, www.whitehousegov/the-press-office/2010/
09/16/remarks-presi
dent-dnc-event (accessed January 27, 2011).
2. White House, ``Statement from Vice President Biden on Launch of
$2.3 Billion Recovery Act Green Manufacturer Credit Program,'' news
release, August 13, 2009, www.whitehouse.gov/the-press-office/
statement-vice-president-biden-launch-23-bill
ion-recovery-act-green-manufacturer-ta (accessed January 27, 2011).
3. Nancy Pelosi, remarks to the Stanley Elementary School, Waltham,
MA, March 10, 2008.
4. White House, ``Remarks by President Obama and President Zapatero
of Spain after Meeting,'' news release, October 13, 2009,
www.whitehouse.gov/the_press
_office/Remarks-by-President-Obama-and-President-Zapatero-of-Spain-
after-meeting (accessed January 27, 2011).
5. Gabriel Calzada Alvarez, Raquel Merino Jara, Juan Ramon Rallo
Julian, and Jose Ignacio Garcia Bielsa, ``Study of the Effects of
Employment of Public Aid to Renewable Energy Sources'' (draft,
Universidad Rey Juan Carlos, March 2009), www.juandemariana.org/pdf/
090327-employment-public-aid-renewable.pdf (access-
ed January 27, 2011).
6. Ben Sills, ``Spain Slashes Prices 45 percent for New Ground-
Based Solar Plants, 5 percent for Homes,'' Bloomberg, November 19,
2010.
7. Andrew McKillop, ``The Bursting of the Green Energy Bubble? ''
Energy Tribune, June 4, 2010, www.energytribune.com/articles.cfm/4264/
The-Bursting-of-the-
Green-Energy-Bubble (accessed February 1, 2011).
8. Todd White, ``Spanish Solar-Panel Trade Group Calls for Fraud
Investigation,'' Bloomberg Businessweek, April 12, 2010.
9. Giles Tremlett, ``Scandal Sullies Spain's Clean Energy,''
Guardian, March 22, 2009.
10. Luciano Lavecchia and Carlo Stagnaro, Are Green Jobs Real Jobs?
The Case of Italy (Milan, Italy: Instituto Bruno Leoni, May 2010),
http://brunoleoni
media.servingfreedom.net/WP/WP-Green_Jobs-May2010.pdf (accessed
January 27, 2011).
11. Carlo Stagnaro and Luciano Lavecchia, ``Clean Jobs, Expensive
Jobs: Why Italy Can't Afford a `Green Economy,' '' Wall Street Journal,
May 11, 2010.
12. Nick Squires and Nick Meo, ``Mafia Cash In on Lucrative EU Wind
Farm Handouts_Especially in Sicily,'' Telegraph, September 5, 2010.
13. Konrad Bauer, ``German Renewable Energy Policy,'' German Energy
Agency, October 24, 2007, www.gaccsanfrancisco.com /fileadmin/
ahk_sanfrancisco/Doku
mente/2007-10_ Solar_Delegation/_1_California_Solar_Business_Delegation
_Vortrag_Konrad_ Bauer_241007.pdf (accessed January 27, 2011).
14. Manuel Frondel, Nolan Ritter, Christoph M. Schmidt, and Colin
Vance, Economic Impacts from the Promotion of Renewable Energies, the
German Experience (Germany: Rheinisch-Westfalisches Institut fur
Wirtschaft Sforschung, 2009).
15. ``German Bundestag Approves Solar Incentive Cuts,'' Reuters,
May 6, 2010.
16. Igor Kossov, ``Transcript: Obama's Earth Day Speech,'' CBS
News, April 22, 2009.
17. U.S. Energy Information Administration, ``Wind,'' http://
tonto.eia.doe.gov/kids/energy.cfm?page=wind_home-basics-k.cfm
(accessed January 28, 2011).
18. Hugh Sharman, Henrik Meyer, and Martin Agerup, Wind Energy: The
Case of Denmark (Copenhagen, Denmark: Center for Politiske Studier,
September 2009), www.cepos.dk/fileadmin/user_upload/Arkiv/PDF/
Wind_energy_-_the_case_
of_Denmark.pdf (accessed January 28, 2011).
19. Andrew Gilligan, ``An Ill Wind Blows for Denmark's Green Energy
Revolution,'' Telegraph, September 12, 2010.
20. Paul Eccleston, ``Labour Conference: Gordon Brown Says CO2
Targets Must Be Raised to 80% by 2050,'' Telegraph, September 23, 2008.
21. Helene Mulholland, ``Ed Miliband Announces Boost for Green
Jobs,'' Guardian, September 17, 2009.
22. Catherine Airlie, ``UK, India to Create Millions of `Green'
Jobs, Cameron Says,'' Bloomberg Businessweek, November 15, 2010.
23. Fiona Harvey, ``Go-Ahead for Wind to Generate 70,000 Jobs,''
Financial Times, October 25, 2010.
24. Richard Marsh and Tom Miers, Worth the Candle? The Economic
Impact of Renewable Energy Policy in Scotland and the UK (Kirkcaldy,
Scotland: Verso Economics, March 2011), www.versoeconomics.com/verso-
0311B.pdf (accessed March 17, 2011).
25. Ibid.
26. Richard Littlejohn, ``You Don't Need a Weatherman to Know Which
Way the Wind Blows,'' Daily Mail, December 27, 2010.
27. Greg Weston, ``Ice Buildup on Wind Turbines Cuts Reusable
Energy,'' Vancouver Sun, February 16, 2011.
28. Jose Mario, ``The Dutch Lose Faith in Windmills,'' Energy
Debate, January 16, 2011.
29. Ibid.
30. Michael Gassmann, ``Holland's Radical U-Turn on climate and
Energy Policy,'' Global Warming Policy Foundation, February 9, 2011.
31. The Netherlands Board of Tourism and Conventions, ``The Land of
the Windmills,'' May 21, 2007, http://us.holland.com/e/7779/
The%20land%20of%20the%20
windmills.php (accessed March 17, 2011).
The Chairman. Thank you very much, Dr. Green.
Now we turn to Mr. Tom Prinske. And again, we welcome you,
and your statement will be made a part of the record.
Please proceed, Mr. Prinske.
STATEMENT OF TOM PRINSKE, OWNER, T. CASTRO PRODUCE COMPANY,
CHICAGO, IL
Mr. Prinske. Thank you very much for the opportunity,
Senator Harkin.
I would like to thank your staff for all the help they have
been getting me here and preparing me for this opportunity.
One of the problems with having a visual disability--I have
lost two-thirds of my vision--is I can't come with a prepared
statement like the others. So while I wouldn't call it shooting
from the hip, I would refer to it as my thoughts and my real-
life experience.
At a young age, at about 14 years old, it was determined
that I was going to lose the majority of my vision, about two-
thirds of my vision by the time I was in my mid-20s. And back
in the 1970s, there wasn't really much of an opportunity to get
the training that was available to completely blind people,
which it is kind of ironic that being completely blind may have
been a better benefit. But nonetheless, I was very, and still
am, grateful for the vision that remains.
As time went on and my vision became worse and worse, I
would like to give the perspective to people. And I think with
all disabilities, what it does to your psyche is something
that, unless you have grown in or have the experience getting a
disability is something that you couldn't understand unless it
were to happen to you. But eventually, it kind of beats you
down to a person that doesn't feel like they are very useful,
frankly.
I was right on the brink there. I was brought to the point
where I am going to go try and get Social Security help here
because I am not going to make it otherwise.
And then one day, as I told in my written story, I woke up
with a dream because one of--the little bit of the research I
did showed that there were programs available for persons with
disabilities--I mean, minorities and female-owned businesses.
But for persons with disabilities, there really weren't any
programs.
The programs I am referring to are ones for businesses
owned by minority and female-owned companies in the State of
Illinois. In particular, the Minority and Female Business
Enterprise Act was in place for those groups who wanted to take
advantage and certify themselves and move toward maybe
obtaining Government or State contracts.
The idea I had with my business, what was left of it,
frankly, was to maybe participate in that program by sending a
letter to my local State representative, Senator Pate Philip,
at the time and informing him of what I thought was something
that could be looked at. Senator Philip decided to try to amend
the Minority and Female Business Enterprise Act to include
businesses owned by persons with disabilities, which is really
what started to change our business lives once the law was
passed.
After becoming a certified disabled-owned business and--I
apologize. After being invited by Senator Pate Philip to
testify at both the House and Senate committee hearings to help
the law get amended, we later found that the vote was totally
for the amended change. And after Governor Edgar signed the law
into effect in 1992, we became one of the State's first
certified disabled-owned businesses.
After I decided to look at how it would help our company,
we thought that our best opportunities would be with the
private sector and their relationships with the Government
contracts, and we can be subcontracted for providing product
and service to those private sector facilities. It really made
a change in our business.
We grew from before the pre-amendment change, from $100,000
a year to in a few years $1 million a year. And then after
that, it just began to continue to progress, mostly because of
the fact that private sector really started viewing this--our
certification as, first, credible because of the State's
certifying policies and then their own in-company social
responsibility efforts at doing business with companies with
our certification.
It was on a fast track, frankly, to us being viewed by
companies that we were able to partner with as a viable
resource for product and service.
If I can now go back to the time where my psyche was at its
worst, and now imagine where it is. I am a business owner that
has grown the company from $100,000 to $1 million, and a few
years after that to $5 million, and a few years after that to
where we currently are at $6.8 million, with 15 employees. And
the feeling, quite frankly, is much different than it was when
things were at their worst.
That is really what I want to get to here at this hearing,
which is that persons with disabilities have this mountain to
climb. And one of the greatest feelings in the world, I am sure
you can imagine, is owning and operating your own business and
then giving something back to people that don't have
disabilities.
There are people without disabilities relying on two
partners in this company that are both legally blind, on the
work they did for their livelihood. There is a lot of pride
there that I don't think--it is one of the gifts that you have
been granted when you have a disability. One of the gifts I
have been granted is giving back and taking a real important
look at making sure my employees are taken care of, and they
are getting a fair and above fair wage and that the company is
thriving and that it is just a sense of responsibility that,
again, I don't think that you can appreciate unless you have
achieved what we have been fortunate to achieve.
There are wonderful opportunities out there now for
business owners with disabilities that weren't there before.
The State of Illinois certification is one. USBLN, U.S.
Business Leadership Network is another who has really done a
wonderful job partnering and certifying companies like ours
nationally and as well as bringing the private sector
companies, corporations together to introduce, if you will,
these two organizations.
It is something that I can see as being the future of
entrepreneurship for persons with disabilities because private
sector has taken the role of this social responsibility like
they have so many times with minority and women-owned
businesses. And I believe that it will be the future for
entrepreneurship for persons with disabilities, as well as
asking if on the Federal side, we could maybe gain some support
that has been lacking in the past.
Thank you very much.
[The prepared statement of Mr. Prinske follows:]
Prepared Statement of Tom Prinske
introduction
My name is Tom Prinske and I am one of two partners of a produce
distribution company in Chicago, IL. I would like to express a very
warm thank you to the committee and all of those responsible for
allowing me this opportunity. I am especially pleased to be here today
as we celebrate the 21st anniversary of the signing of the Americans
with Disabilities Act (ADA). I am aware that this committee has had a
series of bipartisan hearings exploring the issue of how best to
improve employment and economic well-being of people with disabilities,
and I appreciate this opportunity to talk about what has worked for me
as a small business owner with a disability. I am very aware of the
shockingly low employment rates of people with disabilities, and I am
here to make the case that expanding opportunities for disability-owned
businesses is an effective strategy for bringing more people with
disabilities into the labor force. Speaking to the theme of today's
hearing, I also want to make the point that as people with disabilities
continue to fight to make a place for ourselves in the middle class, we
have a special responsibility when we take on the role of an employer
to give back by treating our employees well and creating ladders of
opportunity for others.
my story
When I was in my teens, my parents and I learned that I was going
to lose about two-thirds of my vision by the time I was 25 years old.
At the time, in the 1970s, it was very difficult for partially-sighted
people to obtain much adaptive technology to help with reading or
writing. There was help with braille and talking books for the blind,
but outside of magnification, there wasn't much available for the
partially-sighted. As a result, I barely made it out of high school and
really felt as though college was not a possibility.
After high school I worked at a few labor jobs and did what I could
to get by, while my vision was getting worse each year. I was given a
chance to work with my uncle in his small produce business and I
accepted. The only problem was that he had the same inherited eye
disease as me, except he was further along than I was at the time. In
addition, the business only had annual sales of about $100,000 a year,
and it was barely generating enough for us to get by. After I was
unable to continue to drive for us anymore we had to hire an expensive
driver, and there was a sense that we were definitely going to go out
of business in a short time. In fact, we got to the point where I
looked into applying for Social Security disability benefits as a means
to get by. At 26 years old, that was a tough pill to swallow.
I then began researching how I might be able to generate business
under my circumstances. When I was looking at applying for disability
insurance, I thought to myself, ``I bet the government has some type of
opportunity for businesses owned by persons with disabilities,'' and I
began to research that. I quickly learned that there was really nothing
in place legislatively for disability-owned businesses, but I did find
that there were programs in place for minority- and women-owned
businesses at both the State and local levels.
Just as I was about to throw in the towel, I awoke from a nap with
an idea. I began researching who my local State legislators were and
thought I would write them a letter. The first one I sent was to State
Senator James ``Pate'' Phillip. About 2 weeks after I sent it, Senator
Phillip's staff person contacted me and told me that Senator Phillip
was not aware of any programs regarding businesses owned by persons
with disabilities but that he would like to look into writing a law
that would create such a program. A few weeks later, the staff person
contacted me and told me that Senator Phillip was going to try to amend
the State of Illinois' Minority and Female Business Enterprise Act to
include businesses owned by persons with disabilities, and to ask if I
would like to help. With our efforts being pre-ADA, the toughest part
of the process was writing the definition of a person with a
disability. However, we were able to get it done and we now were ready
to present it to legislators. I was asked to testify at both the
Illinois House and Senate committee hearings and when it was finally
voted on, there was not one vote against the amendment. As a result, on
January 1, 1992 Governor Edgar signed into law the amended version of
the Minority and Female Business Enterprise Act that is now titled The
Minority, Female and Persons with Disabilities Business Enterprise Act.
After becoming the first certified disabled-owned business in the
State of Illinois, I began to research new potential business
opportunities in State facilities. I learned that for my type of
business, most of the opportunities were not directly through State
contracts but as a sub-contractor for food service management companies
that had contracts with the State like Marriott, Sodexo, Aramark, and
several others. With our new certification, I was able to introduce my
company to organizations that never would have considered doing
business with us in the past. We now were able to fit two needs in
these fine organizations. One, as a tool to help them meet potential
contract requirements with State facilities, and two, the company's
social responsibility efforts in the company's diversity programs.
Marriott and Sodexo were the first to accept our company into their
system and we needed to show them that we had the ability to perform.
Over the next few years we were able to grow the company to over $1
million a year in sales, and these companies began viewing us as a real
asset. We knew that our certification gave us a great opportunity to
engage in new business, but there were no guarantees. In my mind, it
was critical to express to these companies that we viewed our business
relationship with them as an opportunity, not an entitlement. We knew
that we had to work at continuing to bring in product and service at
fair market value, despite the fact that operating our disabled-owned
business had added expenses that our competitors did not experience.
This is a real fact for business owners with disabilities. In my
business, we need a driver to drive both my partner and I. We need an
office person dedicated to reading and working directly with us,
adaptive technology for our computers, and several other expenses that
fall under the cost of doing business. No other groups have these types
of added expenses to their companies. At the end of the year, relative
to the disability, these costs can be significant. That is one of the
reasons why giving disability-owned businesses a competitive advantage
in going after contracts and subcontracts is good policy.
Over time, as we built a relationship with these companies, we
earned their trust and saw business expand. We not only were receiving
business from the State of Illinois, but also more opportunities to
compete for other private sector business. By the fifth year of our
certification we had grown our annual sales to more than $2 million
dollars while adding two trucks and five employees.
Around this time I began a dialogue with the city of Chicago in an
effort to include persons with disabilities in the city's minority- and
women-owned business program with the procurement department. I first
approached a relatively new office that Mayor Daley had established
called the Mayor's Office for Persons with Disabilities. The executive
director of MOPD, David Hansen, embraced the idea and we proceeded to
begin the efforts of amending the existing ordinance. This effort was a
much more difficult one, and did not result in the inclusion of
business owners with disabilities into the existing ordinance. We were
able to create a separate ordinance that only certified business owners
with disabilities, but did nothing to create an incentive for the city
to do business with these companies. As a result, it has not been as
productive as the State's law.
Nonetheless, we continued to grow our business each year by
creating more and more opportunities by partnering with other private
sector companies. We began to directly approach larger corporations
through their diversity office. Over the years, these companies have
embraced the concept and have truly gone beyond the call of duty to not
only include business owners with disabilities in their procurement
diversity programs, but also to view the disabled community as a hiring
resource.
The combinations of all these factors over the past 25 years has
brought T. Castro Produce into quite a different look than when I
began, and much further than I have ever imagined. The company had
annual sales in 2010 of $6.8 million. We are based in a 20,000-square
foot warehouse in Chicago, operate six trucks throughout Illinois, and
what I am most proud of, we employ 15 people.
One of the most difficult things to deal with in living with a
disability is having to rely on people for their help during the course
of the day. For instance, I have to get a ride to work each morning and
I need my mail read to me. To think that the same person who needs this
help can also employ 15 people, gives me the sense that I am not a drag
on society, like a lot of persons with disabilities. In fact, the
responsibility I feel toward my employees is a direct result of the
accomplishments we have achieved in bringing the business as far as we
have, despite our disabilities. With our success, we feel strongly that
we need to treat our employees with respect and fairness, which is what
we as disabled business owners have been trying to achieve for
ourselves. I believe it would be quite hypocritical to act otherwise.
As a result, we pay our workers a well-above minimum wage in our
warehouse, above the going rate for drivers and office personnel, and
everyone is offered health care, of which the company pays 70 percent.
We are proud of the fact that we have a very low turnover of employees,
and we believe it makes good business sense when our customer sees the
same drivers over and over, and talks to the same personnel in the
office for years. It gives our customers a certain feeling of comfort
to see the same face over and over again.
Naturally, none of this would have been accomplished if not for our
first certification with the State of Illinois. I am hopeful that more
State and local governments, and the Federal Government, would pass
laws similar to the Illinois law so that there would be more of an
incentive for people with disabilities to start their own businesses.
Although the public sector has been slow to embrace disability-
owned business enterprises in many instances, I have been encouraged by
trends I am seeing in the private sector. More and more I am finding
through large corporation's Web sites that their diversity programs
specifically include persons with disabilities along with minorities
and females. The fact that these companies have made commitments to
disabled-owned businesses is increasingly evident, as can be seen
through the emergence of the United States Business Leadership Network
(USBLN). The United States Business Leadership Network (USBLN) has
brought both business owners with disabilities and large corporations
together. The USBLN Disability Supplier Diversity Program (DSDP)
offers businesses that are owned by individuals with a disability,
including service disabled veterans, an exciting opportunity to
increase their access to potential contracting opportunities with major
corporations, government agencies, and one another. Through the USBLN
DSDP, a disability-owned business can obtain Disability-Owned Business
Enterprise Certification and get connected to a nationwide network of
corporate and government procurement professionals, disability
advocates, and other certified disability-owned businesses. T. Castro
Produce Company is a proud, certified Disability-Owned Business
Enterprise of the USBLN!
The USBLN's certification process is extremely rigorous and
challenging, thus preventing those without disabilities who might try
to ``game'' the system to achieve certification. At the same time, it
does not preclude severely disabled business owners, many of whom rely
on others for assistance, in achieving certification. The USBLN has
certified several businesses owned by persons with intellectual and
other disabilities.
The private sector has moved quickly to join the Disability
Supplier Diversity Program by including disability-owned businesses
among their preferred vendors, which also include businesses owned by
minorities and women. Diversity efforts are intended to include
everyone, and most progressive companies know their employees must look
like their customers and their customers must look like their vendors.
It's time for the Federal Government to step in and step up!
The Federal Government can assist certified disability-owned
business enterprises in several ways:
First, by setting aside Federal procurement opportunities
for certified disability-owned businesses, the Federal Government can
provide disability owned businesses with significant opportunities to
grow and hire more employees, including people with disabilities, by
delivering our goods and services to its many Departments and Agencies.
Second, either through legislation that could begin within
this committee or by the President issuing an Executive order, Federal
contractors could be encouraged to use certified disability-owned
business enterprises in their procurement efforts.
Finally, the Federal Government can use its platform to
recognize leading Federal contractors who embrace disability as an
integral part of their Diversity & Inclusion efforts and who
participate in this certification program, such as IBM, Sodexo, Merck,
Ernst & Young, J.P. Morgan Chase, Marriott International, Freddie Mac,
KPMG, Microsoft, QUALCOMM, Southwest Airlines, Sun Trust, Wal-Mart,
Wells Fargo, WellPoint and Lowes. The list continues to grow each day.
In closing, I want to reiterate my belief that people with
disabilities want to work, make a living, and be part of the middle
class. Business ownership isn't for everyone, but it is one proven
strategy for helping disadvantaged groups take their place in the
middle class and create jobs for other people at the same time. As you
know, small businesses are the primary engine for job growth and
economic development. As we celebrate 21 years of the ADA, let's
recommit ourselves to creating more ladders of opportunity for people
with disabilities, and let's make sure that business ownership is part
of our strategy.
The Chairman. Well, Mr. Prinske, thank you very much for a
very eloquent statement.
We will start a round of 5-minute questions. And since this
is the 21st anniversary of the signing of the Americans with
Disabilities Act, Mr. Prinske, I will start with you.
Quite a story. You know, there are four pillars of the
Americans with Disabilities Act, four pillars. Two of the four
pillars are full participation and economic self-sufficiency.
Mostly we have focused on the issue of providing jobs,
meaningful jobs, to people with disabilities. I mentioned
earlier that right now, we are facing about a two-thirds
unemployment among people with disabilities. But there is a
subset of that that has not been focused on very much, and that
is the equal opportunity portion of the ADA, married up with
economic self-sufficiency, and that is providing the
opportunity for people with disabilities to own their own
business.
Mr. Prinske. That is right.
The Chairman. We had a project in my State of Iowa some
years ago that worked on this, and we found that with just some
training in elementary things like bookkeeping and accounting
and things like that--Mr. Enzi understands--we found that
people with disabilities starting a small business were quite
entrepreneurial and grew those businesses and provided goods or
services to people in different parts of the State. But it did
require some training and did require some input in basic
business principles and things like that.
From your experience, I want you to speak a little bit more
about what owning a business means to you. What you would say
to people with disabilities today who would be thinking about
starting their own business.
You said something about how the Federal Government should
do what the State of Illinois has done. I am going to look into
that. I am not certain that we have that in our Federal laws in
terms of minority and women-owned businesses. You say it
doesn't apply to people with disabilities?
Mr. Prinske. Yes, sir. It does not.
The Chairman. That needs to be changed. That is what you
are saying right?
Mr. Prinske. That is what I am saying. That is what I said
20 years ago in Illinois, and Senator Pate Philip made the
change then.
The Chairman. Tell me just a little bit more about your own
employees. You have employees. You believe in giving them a
shot at the American dream. Tell me more about how you do that,
I mean, what you do with your employees.
Mr. Prinske. OK. I think, when I put my written statement
together, it really, truly would be hypocritical if a person,
or myself and my partner, didn't feel like we needed to give
back. We felt as though we were very, very fortunate to have an
opportunity based on the legislation that came out of Illinois
and feel very, very strongly today, how fortunate we are to
have the opportunity and to have the business that we have.
Giving back to my employees is a huge part of how I am at
work. It is very, very important that we give back. And in
particular, looking at persons with disabilities as a first
hire is something that my partner and I feel is very, very
important.
But I truly feel, Senator, that the Federal Government
needs to show now leadership. If State government, and even in
the city of Chicago, there is an ordinance in place for putting
business owners with disabilities in programs like minority and
female-owned businesses, and now with USBLN certifying in a
national effort, I truly believe that the Federal Government
needs to stand up and say that persons with disabilities are
truly a viable source for entrepreneurship.
One of your first questions, Senator, was, what do I feel
about who should be a--how do I view entrepreneurship for other
people with disabilities? It is probably the same ratio--I was
talking to your staffer, Andy, about that earlier today. It is
probably the same ratio as the nonpersons with disabilities.
Not everybody is cut out to be a business owner or an
entrepreneur. You know, one of my sons will be, and the other
one will definitely not be. But entrepreneurship isn't for
everyone. But to create opportunities like there are in place
for minority and female-owned businesses, what is more worthy a
group, Senator, than persons with disabilities?
The Chairman. Well, thank you very much.
And I am going to take a look at the Federal contracting
dollars. We have been at this before, but we are going to have
to take another look at it, I think.
I have further questions for the rest of the panelists. But
my time is up. So I will yield to Senator Enzi.
Statement of Senator Enzi
Senator Enzi. Thank you, Mr. Chairman.
I want to thank all the people on the panel. Your testimony
has been extremely helpful.
I have more questions than I will be able to ask during the
allotted time as well, and we are coming up against a vote. So
I hope you would be willing to answer some questions submitted
in writing.
I will begin with Dr. Green. From your testimony, I learned
that some of the stimulus projects have gone belly up already.
Can you elaborate a little bit on that?
Mr. Green. Well, these are basically from news reports that
are available to anyone. We suffer from a paucity of data.
The company I am thinking of, most recently, an electric
car company in California declared bankruptcy after receiving
numerous infusions of both State and, I understand, Federal
stimulus moneys to build a new electric car company.
Last year, I believe a solar power company, a solar company
that was built with stimulus funds closed up. It developed a
successful business. Then it closed up and moved it to China.
And so, there are some of the battery manufacturers that are
not proving out in terms of being unable to come forward with
the sort of advanced technologies they promised to produce.
Senator Enzi. You also mentioned that taxpayer dollars are
going to fund foreign jobs, as well as being extremely
expensive per job in the United States. How is that money going
overseas?
Mr. Green. This is an interesting problem, and it is one
that actually new findings have made even more interesting. The
renewable technologies, a lot of the high technologies and
renewable technologies--and if I get too deeply in the weeds,
just sort of wave at me. They depend on a class of elements
some people call them critical energy elements. Other people
call them rare earth elements.
These are certain classes of metals primarily that have
very unique characteristics. So if you want to build a wind
turbine, the generator requires extremely strong magnets. To
make these magnets, you need to add these particular metals to
the magnets.
The problem is, is that the source of these metals
increasingly, in fact, 97 percent of the market is controlled
by China, in the rare earth elements. And these metals are used
in almost every advanced technology you can name that is on
your body now, from your cell phone to your hybrid vehicle, to
your battery-operated car, to your wind turbine, to your solar
panels. They are doped with these minerals--these metals as
well--elements as well.
And so, because they have the metals locally, they are, in
fact, using their trade power, perhaps unfairly, to encourage
companies to come and build the products there with local labor
and local access to the rare earth elements to then ship them
elsewhere, to the United States and to Europe, for example. And
so, in a sense, what is biasing this movement of the renewal of
the funds is the more we look at sort of high-tech outlets, we
limit ourselves to these being built abroad, where they have
lower environmental standards often, sometimes better on paper,
but poorer in practice.
They have access to these rare earth elements, which, by
the way, again, the production of it is extremely
environmentally difficult and dangerous as well. And so, in a
sense, we are losing out on those grounds.
Senator Enzi. Well, I am pleased that a rare earth mine may
be opened in Wyoming. They have discovered some of those
minerals about 60 miles from my home. So that may ease a little
bit of that tension.
I have some other questions, but I will--because I want to
know more about the green jobs funded by stimulus dollars
costing jobs, but I will move on to Ms. Corey.
You mentioned the social bottom line in your capacity
building. Would you support requiring every small business to
provide all of the benefits you provide on day one when it
hires its first employees. Why or why not?
Ms. Corey. I think that, as I said earlier, all employees
should be able to provide for their families and for
themselves. And obviously, a living wage and benefits will
vary, depending on where a business is located. But I do
believe that businesses should be striving to provide those
types of benefits to employees as soon as possible.
Senator Enzi. What is your starting wage?
Ms. Corey. Currently, our starting wage is $10 per hour,
and we work very quickly, through the professional development
plans with our employees, to get that increased as soon as
possible.
Senator Enzi. Thank you.
Ms. King, recently there was an SEIU document titled
``Contract Campaign Manual,'' which was made public as part of
a lawsuit against your employer. The manual contains some
disturbing tactics, including threatening the employer with
costly Government or legal action, telling employees to do no
more than what is required in the union contract, telling
employees to not solve or suggest solutions for workplace
problems, telling employees to refuse to participate in
employer-sponsored social and charity events, and going after
employer's clients, suppliers, etc. That is just a part of it.
This document underscores why so many private sector
workers have lost faith in unions. Do you endorse those
tactics?
Ms. King. First of all, let me say that I work for a joint
labor-management project. My board is half healthcare employers
and half people from SEIU. I am not an officer of SEIU.
But what I can say is that from what I have seen from the
work that we are doing with over 600 employers, it is helping
workers. It is helping patients, and it is helping those
institutions' bottom lines. So I think there are very many
positive things that the labor movement is contributing to.
Senator Enzi. Certainly. My time has expired.
Thank you, Mr. Chairman. I will submit additional questions
in writing.
The Chairman. OK, thank you.
Senator Franken.
Senator Franken. Thank you, Mr. Chairman.
Dr. Green, I was intrigued by your explanation of how
inefficiently the Government creates jobs using Taxpayer Tom
and Bureaucrat Bob. Do you mind terribly if I call you Witness
Ken?
Mr. Green. Not at all, Senator, and I will not call you
anything other than Senator.
Senator Franken. You can call me Senator Al.
[Laughter.]
Now, your conclusion is, ``The idea that Government can
create jobs in the economy is a myth.'' I would like to take
issue with that conclusion. And so, for a while here, I may be
just saying some stuff before I get to any questions.
This hearing will be seen on C-SPAN. C-SPAN stands for
Cable Satellite Public Affairs Network. Our first satellite was
launched by the Army Ballistic Missile Agency, a Government
agency. Of course, our satellite technology was further
developed by the Government. Today, we have industries based on
satellites. I think you know about GPS and smartphones and all
the kinds of jobs that came out of our space program.
This hearing will also be available on the Internet. The
Internet was developed by the Government, too, and has created
a lot of jobs. I don't know if maybe you have looked at the
Internet.
You tell us that your doctorate is from UCLA, a public
university. I wonder if any of your professors thought they had
jobs. I would suspect that they do.
I think about, oh, this has been going on for a while, kind
of here in this country. the Erie Canal. The Erie Canal was
built by the government of the State of New York. We all
remember Dewitt Clinton. It really connected the Midwest to the
Atlantic Ocean and created a lot of jobs. It made it much more
efficient for farmers to ship their goods and lumber to the
east coast and then to Europe, it connected the Great Lakes to
Europe.
The interstate highway system was built by Government. I
wonder how many companies rely on the interstate highway system
to ship their goods? Rural electrification seemed to create a
lot of jobs during the 1970s.
And I will bet you, Witness Ken, that you would be grateful
if you got very sick at some point, and that you are saved by a
cure that came from research from the NIH that not only saved
your life, but then would save your job.
To come to the conclusion that the idea that the Government
can create jobs in the economy is a myth, to me, is just
absurd. And where did you go undergraduate? Did you go to a
public university undergraduate?
Mr. Green. Yes, I am proudly public school all the way.
Other than third grade when we left New Jersey and I was taken
out of Yeshiva, I was a public school student ever--
Senator Franken. So, is the Yeshiva responsible for all of
this, everything?
Mr. Green. No, of course not, Senator.
Senator Franken. Because we are good. I mean----
Mr. Green. I will simply--let me add two words, which I am
sure you understand are already in my testimony. Those two
words are ``on net.'' Of course, it would be absurd to say that
the Government can't create jobs. And it would be absurd to say
that----
Senator Franken. Well, that is what you said.
Dr. Green [continuing]. I am not helped by healthcare. I
have been helped by healthcare. I had a heart attack not that
long ago and was very glad to receive a stent.
But the ``on net'' is the key point, which is, while we
would love to believe that we can suspend rules like gravity
and things like that, the fact of the matter is there are
transferred costs to payments. There are more expensive jobs
than less expensive jobs, and there is no evidence that on net
the Government can create jobs.
I would just like to say, you pointed out some great
examples, and I wish we had an entire hearing for this, because
many of the examples you pointed out created many of the
environmental problems you now decry. The interstate highway
system--a wonderful thing. Many, many benefits. Also led to
huge rural and suburban living that have caused urban sprawl,
greater driving, greater environmental problems, fractionation
of the landscape, ecosystem disruption. The list could go on
for a very long time.
Rural electrification, wonderful thing. Electricity is
vitally important to lift people out of poverty. Side effects,
people living in places--in flood plains, in drought areas, far
away from urban centers, causing many of the problems that are
bemoaned today environmentally, socially, and otherwise.
Senator Franken. OK, sir. I hate to interrupt. But may I
remind you what your actual testimony was, ``In conclusion, the
idea that Government can create jobs in the economy is a
myth.''
Now, either that is your conclusion, or it isn't. And if it
is not your conclusion, you probably should have said so. And
so, when we receive testimony here in the U.S. Senate, we
really like the testimony to say what it means and mean what it
says.
So if you were going to say now we could have an enormous
discussion over net jobs created by the Internet. I think the
Internet, it is hard to--do you believe the Internet did not
create net jobs?
Mr. Green. I actually worked with people who were working
on the Internet at UCLA. The question is, what created the
jobs? Did the Government pave the way for the technology?
Certainly. Was it private businesses who marketized the
technology and created the jobs? Absolutely.
You pointed to satellites. The same thing is true. Did the
military and the space program invent some of these
technologies, basic R&D? And by the way, I have written in
favor of basic R&D as a Government function in the past. Yes,
absolutely.
Senator Franken. Why would you do that if doesn't create
jobs?
Mr. Green. Because it is a genuine market failure. And it
is----
Senator Franken. OK. My time is up.
Mr. Green. So is mine.
Senator Franken. But I will let you finish because you are
Witness Ken.
Mr. Green. Thank you, Senator. Thank you, Senator Franken.
[Laughter.]
The bottom line is, is that, of course, you can create
jobs. And R&D, as I have written before, is a vital function
of--legitimate function of Government because it represents an
actual market.
Senator Franken. Ah, thank you.
Mr. Green. But as somebody recently joked, the only way to
make sense of the manned space program--for example, it is a
sad thing, but true--is that it makes a good story if you run
it backwards, which is, first, we had no spaceflight
capability, then we had low-Earth orbit, then we went to the
Moon. And then we now have no spaceflight capability.
So these things are not always sustainable when the
Government builds them, and that is something to keep in mind.
Senator Franken. Thank you. And I am sorry to go over my
time.
The Chairman. Thanks, Senator.
Ms. Corey, one of the things we often hear is that the way
to increase jobs is to let businesses pay their workers the
lowest amount possible, source their materials from the
cheapest provider anywhere in the world, be free of any
Government regulation or oversight.
IceStone's story is the exact opposite of that. You pay
your workers a living wage. You source your materials from the
United States, and you work with local government to improve
the safety of your factory.
So the question is, how do you stay competitive while
taking all of those steps? And what drives IceStone to expand
and hire new workers?
Ms. Corey. I believe that the way that IceStone is staying
competitive right now rests on the quality of our product, as
well as on the location of its manufacturing. Most of our
competitors are manufactured or quarried overseas. And as
consumers begin to demand more products or services that are
available to them locally, the demand for durable surfaces and
stone that is sourced locally is also increasing. And so,
IceStone, being manufactured in Brooklyn, NY, has definitely
had an appeal and has enabled us to remain competitive.
And the first part of that was the quality. As I displayed
our sample earlier, the look, the composition, and the
aesthetics of IceStone are really what set us apart from our
competitors. And so, architects, designers, and builders are
able to distinguish IceStone from other products. And there are
very few competitors right now in our space that can produce a
similar look that meets the quality standards that IceStone
does.
The Chairman. Tell me about the co-founding of B
Corporations, a network of 427 companies that proved businesses
have the power to solve social and environmental issues. You
say, five States have signed legislation that recognizes B
Corporations.
Again, it seems that this goes counter to everything that
we are hearing now. That, again, the way to beat your
competition is to pay workers less, cut benefits, do everything
you can so that they don't unionize, all those kinds of things.
But you seem to be going in the opposite direction, and so do
the 427 other companies. Again, are they profitable companies?
Ms. Corey. The B Corporations that are part of that
network, as well as the businesses that are within the American
Sustainable Business Council, are profitable businesses and
businesses that are striving toward profitability as well. They
range in size.
I think the trend that these businesses are really
underscoring is that in order to be profitable, social
responsibility and environmental stewardship need to be valued
on par with fiscal profitability. And the five States, which
have passed that legislation of recognizing B Corporations and
holding them to standards, are Hawaii, Maryland, New Jersey,
Vermont, and Virginia. There are seven States that have
legislation pending.
The Chairman. Well, I just find that fascinating. The other
thing I would like to know is what is the divergence? What is
the span, the gap between the income, the payment to the CEO of
your company and the workers on the floor? If you don't know
that right now, I would like to have you submit that.
Ms. Corey. I know that it is less than a 10 spread
between----
The Chairman. It is less than----
Ms. Corey. Less than a 10 spread between the----
The Chairman. Ten times.
Ms. Corey [continuing]. Between our gemba, our operations
team, and our CEO. And I could certainly submit the detailed
answer in writing to you.
The Chairman. Because one of the things we have seen in the
past 30 years has been a tremendous gap opening up between the
pay and remuneration for CEOs and other high-ranking people of
these publicly held corporations--privately held, too--and the
amount of income of the workers in those plants or in those
companies.
I think I am right in saying this, that in the heyday of
the 1950s, 1960s, maybe early 1970s, I think the gap was around
20 times, between the pay at the top and the bottom, or the
workers. I think that has widened. I think the average now in
America is, I think, almost 300 times now.
And I just wonder what effect that has on sort of the
mindset of those who work there and what that says to them
about their worth and their own individual worth, but their
worth to the company when CEOs just keep making more and more
and more money, and they get golden parachutes, and they have
great pension benefits and everything, but the workers don't.
Ms. Corey. Well, IceStone has a very flat structure.
Organizationally, we do not have what is commonly found in a
lot of manufacturing companies or other corporations, where
there is a hierarchy, and there are such gaps in pay, but also
in the impact that workers at various levels can have on the
operations of the business.
And as I mentioned earlier, the professional development
plans that every employee is required to create each year are
really helping to keep our company flat and to also bring
conversation and transparency between our C suite and between
the floor.
Something else that we do is hold a town hall meeting every
month. And that town hall meeting, every single member of our
company--from our CEO, our co-founder, our VP of sales and
marketing, to the employees who are making our product--gather
together, share a meal, but also discuss topics of business. We
go over our yields. We celebrate birthdays. We share important
safety announcements.
Those types of activities at IceStone are really helping--
in addition to the minimal gap in pay--are really helping to
create a culture where all employees feel valued and all
employees feel that they are having an impact on the business.
The Chairman. Thank you, Ms. Corey.
Senator Enzi.
Senator Enzi. Thank you.
Again, I appreciate all the testimony, and I know votes
have started. So we are running out of time here.
But, Ms. Corey, you remind me of a company that I knew
before I ever got to Washington. They put out a little video.
It was called ``The Great Game of Business.'' The tractor
repair company was going broke, and the employees decided to
buy it.
Of course, the employees found out they really didn't have
any assets, but they were still able to buy it. They did many
of these things that you are talking about, where they were
very inclusive of the employees and kept them informed of the
bottom line and encouraged ideas. I think that is a tremendous
way to do business, and I congratulate your company for it.
I didn't get to ask Mr. Prinske a question. Your testimony,
Mr. Prinske, it was very, very inspiring, and your presentation
today was also. For small businessmen and women, that have
disabilities, pursuing the American dream is not an easy road.
And you have done it.
In your testimony, though, you mentioned that one challenge
for your business is keeping the cost of your products and
services competitive when you are faced with higher operational
costs. Would you share with us some of the decisions that you
have to make in order to mitigate those costs?
Mr. Prinske. Well, there really isn't much you can do other
than live with them. It is just a cost that I think is a fact
of life for business owners with disabilities. When adapting
the company to our disability, it is just more of an expense
that is not incurred by our competitors, unless, of course,
they would have a disability.
I think it is an important fact that we need to realize in
the company. But we can't pass it on or complain about it to
our customers. It is a reality. And it is something that should
be considered when looking at trying to level the playing field
for persons with disabilities to compete like minority and
female-owned businesses are.
Those two groups, frankly, don't experience that extra
cost. But you are right. I did point out that--and those are
real expenses. I mean, to get 25 miles from Elmhurst, IL, to
where my warehouse is in Chicago, I have to have a van from
work come and pick me up and bring me back, and the same thing
on the way home. So those expenses are real.
Senator Enzi. Well, I thank you for coping with that and
would appreciate you sharing in some written testimony any
ideas that you have for businesses providing those services
because it is essential. I congratulate you for what you have
done and for what you are doing for the disability community.
We will try and do our part in that, too. I will work with
Senator Harkin to see what the Federal requirements are and
appreciate you bringing that to our attention.
Mr. Prinske. Well, I thank you very much for being--one of
the first steps is being part of this group, this hearing. It
is important that persons with disabilities are in the picture,
and then discussions like this will take place.
I am sure you are aware of that, and that is why you
invited me. And I am very grateful to all of you that did
invite and allow me to represent persons with disabilities. I
appreciate it.
Senator Enzi. Thank you. I will forego the rest of my time.
The Chairman. Thank you, Senator Enzi.
We have 8 minutes left.
Ms. King, I am sorry. I had a whole number of questions for
you. If you don't mind, I will submit them to you in writing.
And again, on the 21st anniversary of the ADA, I couldn't
think of a better witness, Mr. Prinske, than you to give some
hope and encouragement to people with disabilities that they,
too, can become entrepreneurs and own their own business.
Mr. Prinske. You are very kind. You are very, very kind.
Thank you very much.
The Chairman. I thank all of our witnesses. You have all, I
think, contributed a lot to this hearing.
And again, we will continue. As I said earlier, we have to
have more of a national debate on what is happening to the
middle class. There are certain facts that are irrefutable in
terms of income and slice of the national income and things
like that.
What has caused it and what solutions we may have is open
for debate and discussion. And I think it can be a healthy
debate. But I really believe it is the debate that we have to
have.
I know we are all wrapped up now in this other thing that
is going on around here, and that is important. But we have got
to have a national discussion and debate about, is the middle
class worth saving in America? Is it something that makes us a
kind of unique country?
If so, what do we do? What do we do to kind of re-energize
and rebuild that middle class that has been sinking? As I said,
I don't have all the answers, but we need a national discussion
on this.
And yes, we can all have differences on how we get there.
But through that kind of debate and discussion, we make
progress. I don't think debate and discussion necessarily mean
stalemate. It means you get the best ideas out there. You
challenge other people's thinking, and out of that, maybe we
will come up with some ways to solve this problem.
But I believe it is a very big problem, and this committee
is going to continue to have hearings and discussions on this.
And hopefully, we can engender a national discussion on what is
happening to the middle class and what we do to rebuild it.
I guess implicit in what I just said is that I do feel that
it is important for this country to have a solid middle class.
Thank you all very, very much. You see our vote has
started, and I am going to be late if I don't get out of here.
Thank you. The record will stay open for 10 days for other
questions or submissions.
Again, I thank the panelists for being here today, all of
you. Thank you very much.
[Additional material follows.]
ADDITIONAL MATERIAL
Responses by Hilda L. Solis to Questions of Senator Harkin, Senator
Whitehouse, Senator Murray, Senator Casey, Senator Enzi, Senator
Isakson, and Senator Hatch
senator harkin
At the hearing, Senator Isakson asked you about certain data that
is collected under the Occupational Safety and Health Act. To followup
on this discussion, what is an incidence rate? How is it calculated?
Who is required to report this information? For what purpose does the
Department of Labor use this information? Does the Department have any
rules or regulations that prohibit or disqualify employers from being
awarded any contracts based on recordable injury and illness rates?
Question 1. What is an incidence rate? How is it calculated?
Answer 1. In the context of occupational injury and illness
statistics, an incidence rate is an expression of the number of
injuries and/or illnesses in relation to a fixed unit, such as the
number of hours worked, or the number of full-time employees. For
example, BLS publishes an incidence rate for total injuries and
illnesses per 100 full-time workers calculated as follows: (N/EH)
200,000, where: N = number of injuries and/or illnesses, EH = total
hours worked by all employees during the calendar year, and 200,000 =
hours worked by 100 full-time equivalent workers (working 40 hours per
week, 50 weeks per year). Other incidence rates may be expressed per
10,000 or 100,000 full-time workers.
Question 2. Who is required to report this information?
Answer 2. OSHA does not require employers to report incident rates
as such. Employers subject to OSHA's recordkeeping rule must record
work-related injuries and illnesses that meet certain criteria and must
prepare a year-end summary reflecting the total number of cases and
hours worked. OSHA requires employers in some industries to report
information from their injury and illness records to the agency,
including total cases and hours from the summary. BLS separately
collects data from a statistical sample of employers and uses the data
to calculate incidence rates as part of the national injury and illness
statistics.
Question 3. For what purpose does the Department of Labor use this
information?
Answer 3. Incidence rates are used for a variety of purposes,
including identifying industry sectors warranting national and local
emphasis programs, identifying emerging trends, setting regulatory
priorities, and measuring the impact of various OSHA programs on
occupational safety and health.
Incidence rates are also used by employers, researchers, employees
and employee representatives, among other groups, in researching the
causes of occupational injuries and illnesses and in developing
effective abatement measures.
Question 4. Does the Department have any rules or regulations that
prohibit or disqualify employers from being awarded any contracts based
on recordable injury and illness rates?
Answer 4. Neither the Department of Labor nor OSHA has a rule or
regulation that would prohibit or disqualify employers from being
awarded contracts based on injury/illness rates.
senator whitehouse
Question 1. The Department of Labor's ERISA fiduciary proposal
takes appropriate steps to ensure that people who give retirement
advice stand behind it and look out for the customer's best interest by
becoming a fiduciary. I understand the Department is looking at further
changes to ERISA that would allow different business models (e.g.,
commission, managed account, etc.) to give advice as long as they
become a fiduciary. Can you tell me where those efforts stand?
Answer 1. On September 19, the Department announced it will re-
propose the definition of a fiduciary, with the new proposed rule
expected to be issued in early 2012. As we stated in our September 19
news release, we also anticipate issuing exemptions addressing concerns
about the impact of the new regulation on the current fee practices of
brokers and advisers, and clarifying the continued applicability of
exemptions that have long been in existence that allow brokers to
receive commissions in connection with mutual funds, stocks and
insurance products. The agency will carefully craft new or amended
exemptions that can best preserve beneficial fee practices, while at
the same time protecting plan participants and individual retirement
account owners from abusive practices and conflicted advice.
senator murray
Question 1. How can we expand proven approaches, such as on-the-job
training, incumbent worker training, sector strategies and registered
apprenticeships?
Answer 1. The Department of Labor is taking multiple steps to
identify and expand proven workforce approaches by providing the public
workforce system and its partners with increased information on the
services delivered by the workforce system that are most cost-
effective, demand-driven and high-impact and by developing new venues
in which to provide that information.
First, the Fiscal Year 2011 continuing resolution included $125
million for a new Workforce Innovation Fund (WIF) to demonstrate
innovative strategies or to replicate effective evidence-based
strategies that support greater coordination of systems and structures
between workforce development, education, human services and other
programs to improve the workforce investment system, leading to better
employment and related educational outcomes, connecting employers to
the skills they need, and increasing the cost-effectiveness of service
delivery. The Department is pursuing an aggressive timeline for
publication of the WIF solicitation.
The Department intends that the WIF:
Invest in projects that are designed to deliver services
more efficiently and achieve better outcomes, particularly for
vulnerable populations, including individuals with disabilities, and
dislocated workers;
Support both structural reforms and the delivery of
services;
Emphasize building knowledge about effective practices
through rigorous evaluation;
Translate into improved labor market outcomes and
increased cost efficiency and other measures in the regular formula
programs; and
Encourage the use of waivers, consistent with program
requirements, to facilitate integration and coordination across
programs and funding streams.
This investment in innovation and best practices will establish the
infrastructure necessary for the continued integration of innovative,
evidence-based and cost-saving workforce strategies that will lead to
improved service delivery for both job-seekers and employers.
Second, the Department has embarked on an effort to identify and
disseminate information on best practices methodologies to benefit the
public workforce system. This initiative establishes levels of rigor
and uses consistent processes and terms for information on best
practices and enhances quality and presentation of practices
descriptions.
Third, we have built online communities, which provide a medium in
which our grantees can share their experiences with the Department and
other grantees. For example, the 21st Century Apprenticeship online
community provides a useful forum for apprenticeship stakeholders and
the Department to share successful approaches for expanding
apprenticeship.
Finally, the Department conducts pilot projects, demonstrations,
research and evaluation studies that contribute to improving the
understanding of how programs work and the effectiveness of service
approaches. In addition, most of the Department's grant programs are
designed to accommodate independent evaluation of program outcomes and
impacts. For example, the Workforce Investment Act Gold Standard
Evaluation of the Adult and Dislocated Worker Program will help
policymakers and practitioners assess the impact of WIA-sponsored Adult
and Dislocated Worker activities on participants in the programs. The
Green Jobs Innovation Fund grants, awarded in June 2011, will help
expand registered apprenticeship, pre-
apprenticeship, and many other training opportunities in the energy
efficiency and renewable energy fields. The $240 million H-1B Technical
Skills Training grant program is designed to provide education,
training, and job placement assistance in the occupations and
industries for which employers are using H-1B visas to hire skilled
foreign workers, and the related activities necessary to support such
training. The first round of grants, totaling $159 million, were
awarded in September 2011 across a variety of high-growth industries,
such as advanced manufacturing, energy, health care, and information
technology. ETA will award approximately $80 million during the second
round of grants, focusing on on-the-job training (OJT) and other
training strategies, healthcare-focused projects, and those projects
that serve the long-term unemployed. In addition, ETA added additional
funds totaling approximately $100 million for high-quality applications
that are implementing OJT.
Question 2. I'm particularly concerned about reports regarding
skills gaps--that small and mid-sized employers are having a hard time
finding skilled workers to fill some of the 3 million job openings
currently available. What more can we do to work with small and mid-
sized companies--the very companies that tend to be the engine of our
economy--to close that gap?
Answer 2. The Department of Labor's worker training programs and
job search assistance for both workers and firms are a vital part of
helping the economy run smoothly. The Department of Labor provides
crucial training for individuals who have left the formal education
system, eligible youth, and workers who find themselves out of work and
in need of re-tooling in the middle of their careers. Increasing the
skills of U.S. workers is key for long-term growth and for the future
competitiveness of our economy.
In addition, the Department of Labor plays a crucial role in
providing information to both workers and employers. In any economy,
employers will sometimes have a difficult time finding the right worker
for the right position. The intermediary role played by the Department
of Labor helps to grease the wheels of the labor market and helps the
economy function more smoothly.
Problems with intermediation and skills gaps are always present,
though unlikely to be the main reason for today's high unemployment.
The simple fact is that we currently face a labor market that combines
record high numbers of unemployed workers with record low numbers of
job vacancies. Although 3 million job openings may seem substantial,
there are still more than 1 million fewer job openings than on average
in 2007, prior to the recession. With almost 14 million unemployed
workers, there are still more than 4 unemployed workers for every open
job. This pool of individuals looking for work means that businesses
are generally having a much easier time filling their positions than in
a stronger economy. For example, each month, the National Federation of
Independent Businesses surveys small businesses, and asks whether
qualified individuals are applying for their open jobs. In August 2011,
33 percent of employers said they had no qualified applicants. That
number is still down dramatically from 4 years ago, when it was 43
percent.
The Department of Labor's Employment and Training Administration
(ETA) has a dual-mission--increase employment opportunities for workers
and promote economic growth for businesses by supporting skills
development that aligns with business needs. The nationwide network of
2,900 One-Stop Career Centers supports businesses, including the small
business community, by linking employers looking to hire with Americans
looking for work. One-Stop Career Centers work with businesses to post
job openings, screen and refer applicants, and provide other services
to meet their workforce needs.
Employers are not only customers, but critical partners. State and
local workforce investment boards that administer the One-Stop Career
Center system at the State and local levels have a majority of members,
as well as the board chair, from the business community. Participation
on workforce boards is an important way that businesses in key sectors
of the economy can help ensure that job training is meeting the needs
of area employers. In addition, ETA's grant programs that focus on
employment in key industry sectors, such as health care, green jobs,
advanced manufacturing, and information technology, are required to
have employers as partners.
A recent example of employer partnerships is the Trade Adjustment
Assistance Community College and Career Training (TAACCCT) initiative,
for which the Health Care and Education Reconciliation Act included a
total of $2 billion over a 4-year period. In partnership with the
Department of Education, ETA awarded $500 million in TAACCCT grants in
September 2011 to community colleges around the country for targeted
training and workforce development to help dislocated workers who are
changing careers. These grants support partnerships between community
colleges and employers to develop programs that provide pathways to
good jobs, including building instructional programs that meet specific
industry needs.
Another example of strong linkages with employers is the $37
million Jobs and Innovation Accelerator Challenge, a multi-agency grant
competition to support the advancement of 20 high-growth industry
clusters in rural and urban regions spanning 21 States. The winning
projects, announced in September 2011, are driven by local communities
that identified their economic strengths. Investments from ETA, the
Department of Commerce's Economic Development Administration, and the
Small Businesses Administration, as well as technical assistance from
13 additional Federal agencies, will promote economic and workforce
development in industries such as advanced manufacturing, information
technology, aerospace and clean technology.
ETA also supports small- and mid-sized businesses by supporting
entrepreneurs. Many Americans have the motivation and skills to develop
a small business on their own, but may lack business experience or more
importantly the access to financing.
ETA released guidance to the One-Stop Career Center system
in November 2010 encouraging States to establish parameters for funding
entrepreneurial training (http://wdr.doleta.gov/directives/
corr_doc.cfm?DOCN=2957).
To help emerging entrepreneurs, the Project GATE (Growing
America Through Entrepreneurship) demonstration project teamed ETA
training and assistance programs with economic development entities
such as local small business development centers, local chambers of
commerce, small business loan providers, and other such entities.
Current grantees in four States are helping older and dislocated
workers launch and grow successful businesses. A random-assignment
evaluation of Project GATE, completed in December 2009, found that
compared to the control group, participants started their first
business sooner, and their businesses had greater longevity.
ETA is also developing a new Self-Employment Training
Demonstration focused on the role of One-Stop Career Centers in
supporting self-employment in coordination with Small Business
Administration programs.
In collaboration with Small Business Development Centers,
chambers of commerce, economic development leaders, business
incubators, and higher education institutions, ETA developed a
technical assistance tool kit to help local communities build a strong
network for start-up entrepreneurs and small businesses, from their
first hires through their first expansion.
ETA has made a significant investment in on-the-job training (OJT)
through the award of $75 million in Recovery Act funds for OJT National
Emergency Grants to 41 States, the District of Columbia and three
federally recognized Native American tribes. OJT is of particular value
to small businesses because it can offset initial training costs to
fill skilled positions while building organizational productivity as
the participant learns job requirements. This initiative so far has led
to 2,000 placements with several thousand more placements expected over
the course of the next year.
As part of ETA's efforts to improve virtual tools and resources,
the ``Business Center'' site (http://www.careeronestop.org/business/
businesscenterhome.asp) provides a range of resources to help
businesses, including information and tools for financial planning;
human resources; information technology; workforce safety; and
workplace issues among other services. This site also features a ``Job
Description Writer'', a step-by-step guide that incorporates
occupational data to enable employers to write descriptions for job
postings and increase chances of hiring a qualified applicant. These
free, on-line tools are especially helpful for small- and mid-sized
businesses that may not be able to afford to pay for these services.
senator casey
Question 1. I would like to praise your focus on job creation. It
is clear that the lack of enough good paying jobs is the most pressing
issue confronting our economy. As Chair of the Joint Economic Committee
(JEC), I have been examining our Nation's manufacturing policy and its
role in our economy's future strength. In your view, what more do we
need to do to support the manufacturing sector?
Answer 1. The Administration sees a resurging manufacturing sector
as part of the American path to recovery, job creation, and sustained
economic growth. The manufacturing sector has shown enormous resiliency
and strength in our economic recovery so far, with over 300,000 jobs
added since the beginning of 2010. Across the Administration, the
President recently launched the Advanced Manufacturing Partnership, an
effort led by the Commerce Department that brings industry,
universities, and the Federal Government together to invest in emerging
technologies that will create high quality manufacturing jobs and
enhance our global competitiveness.
The Department of Labor has emphasized the importance of the
manufacturing sector and its role in the American economy by playing a
leading role in ensuring our workforce is trained and prepared to
compete for manufacturing jobs across the country, especially in high
growth industries, such as high-tech, health care, and green
industries.
DOL's competitive grant programs have allowed for the opportunity
to support job training for careers in high-growth and emerging
industries, including manufacturing.
The Jobs and Innovation Accelerator Challenge--A joint
funding opportunity for high-growth regional innovation clusters,
including advanced manufacturing, to compete for $37 million ($19.5
million from the Department) in flexible workforce, economic
development and small business development funds to accelerate cluster
growth.
H-1B Technical Skills Training Grants--$240 million in
competitive grants to provide training, job placement, and other
assistance in the occupations and industries for which employers are
using H-1B visas to hire skilled foreign workers. Manufacturing is
among the top 10 industries for which H-1B visas are granted.
Trade Adjustment Assistance Community College Career
Training Grants--$500 million in competitive grants to eligible higher
education institutions for education and career training programs that
can be completed in 2 years or less and prepare TAA-eligible and other
workers for employment in high-wage, high-skill
occupations, including manufacturing.
In the manufacturing industry, employers also have utilized
Registered Apprenticeship for many years to train apprentices in
traditional manufacturing occupations. In the past decade, as the
manufacturing industry has advanced, DOL has worked with industry
partners, particularly the National Institute of Metalworking Skills,
to develop competency-based Registered Apprenticeship training models
that establish unified skill standards throughout the industry. Today,
there are approximately 17,000 active apprentices in Advanced
Manufacturing programs and over 3,000 active apprenticeship programs in
Advanced Manufacturing, of which 112 were registered in the past year.
In spring 2010, DOL released an updated advanced manufacturing
competency model, working in close collaboration with industry
partners, such as the National Association of Manufacturers. This
employer-validated model outlines the skills necessary to pursue a
successful career in the manufacturing industry.
DOL also is promoting the importance of credential attainment with
the adoption of a high priority performance goal to increase credential
attainment by 10 percent among customers of the public workforce system
by June 2012. The Department also issued guidance in December 2010 that
describes the credentialing goal, provides information on defining
credentials and directs the public workforce system to resources and
online tools.
Question 2. I appreciate your continued advocacy on the part of
unemployed Americans, especially your emphasis on continuing
Unemployment Insurance benefits for those looking for work. The
Pennsylvania legislature recently passed work share legislation. How do
you think Federal work share legislation can assist in strengthening
the employment environment?
Answer 2. The Administration supports the work sharing program as a
win-win for both business and workers because it encourages employers
to reduce hours rather than lay off workers, and it mitigates the
effect of reduced wages on workers and their families by providing
workers a partial unemployment benefit. By helping employers keep their
staff on the job, it helps weather uncertain times while protecting
their investment in worker training, improving employee morale, and
staying ready to scale up their production when business returns to
normal. We applaud Pennsylvania for enacting legislation that will help
workers remain on the job rather than becoming unemployed.
The American Jobs Act includes a proposal to encourage States to
implement work sharing programs. The proposal includes a 2-year Federal
work share program for those States without pre-existing work share
programs and up to 3 years of Federal payment of work sharing benefits
for States that either have adopted, or subsequently adopt, a permanent
State-based program. The proposal also would provide financial
incentives to encourage States to adopt and promote permanent work
share programs with employers, and small subsidies to enable an intense
marketing campaign to promote work sharing by the Department of Labor.
This proposal is similar to the legislation recently introduced by
Senator Reed that you have cosponsored.
Question 3. The JEC will soon be releasing a report illuminating
the need for Trade Adjustment Assistance (TAA). Among other findings,
this report highlights that TAA beneficiaries are typically older
workers with no more than a high school education. How do the
Department's TAA initiatives support this demographic? Do we need to
better target resources?
Answer 3. Trade Adjustment Assistance (TAA) participants come from
a variety of backgrounds and industries and therefore, participants
enter the program with a wide array of skills and experiences. However,
the majority of TAA participants who enter the program face similar
challenges in obtaining re-employment, which can include no
postsecondary degree, job skills solely in the manufacturing sector,
and an average age of 46 with over 12 years of experience in a specific
job that may no longer exist.
Under the 2011 Amendments, TAA offers a variety of benefits and
services to support workers in their search for re-employment. This
includes training in new occupational skills, a job search allowance
when suitable employment is not available in the worker's normal
commuting area, a relocation allowance when the worker obtains
permanent employment outside the commuting area, the Health Coverage
Tax Credit (HCTC) covering 72.5 percent of the qualified health
insurance premium paid by an eligible worker, and Trade Readjustment
Allowances (TRA) providing income support while workers are enrolled in
training. Training and income support are available for up to 117
weeks, with an additional 13 weeks available to support workers who
have met established benchmarks while they complete coursework
resulting in an industry recognized credential.
In addition to the benefits available to all trade-affected
workers, Reemployment Trade Adjustment Assistance (RTAA) benefits are
provided to assist certain eligible workers 50 years of age and older.
Participation in RTAA allows older workers, for whom retraining may not
be appropriate, to accept re-employment at a lower wage and receive a
wage subsidy. Eligible workers age 50 or older who obtain new, full-
time employment at wages of less than $50,000 may receive a wage
subsidy of 50 percent of the difference between the old and new wages,
with a maximum of $10,000 paid over a period of up to 2 years.
The 2011 Amendments restore provisions of the Trade and
Globalization Adjustment Assistance Act of 2009 (TGAAA), which improved
the ability of trade-affected older workers to take advantage of the
RTAA program by eliminating the deadline for workers to become re-
employed and by eliminating the wage insurance certification. Taken
together, these changes provided more flexibility and support to allow
trade-affected workers, especially those with no more than a high
school education, the time they in particular may need to transition
into new employment.
The 2011 Amendments are a result of extensive negotiations with the
Administration, Chairman of the Senate Finance Committee, Max Baucus,
and Chairman of the Ways and Means Committee, Dave Camp. In these
negotiations, we reached a bipartisan agreement on the underlying terms
for a meaningful renewal of a strengthened TAA. These Amendments
preserves the key goals of the 2009 program to ensure workers harmed by
trade the best opportunity to acquire skills and credentials to get
good jobs. The recent passage of these critical elements of TAA gives
trade-affected workers a good opportunity to retrain and retool for the
21st century economy to get good jobs that keep them in the middle
class.
Question 4. Natural gas exploration provides a significant economic
opportunity for Pennsylvania. We need to equip local workers for these
jobs that come with tapping these resources. I have introduced
legislation that would provide on-the-job training for Marcellus Shale
workers and I will continue to advocate for resources that prepare our
local workforce for these opportunities. Can you speak about efforts
already underway by the Department to train these workers?
Answer 4. The Department of Labor recognizes the recovery of shale
gas deposits in Pennsylvania, West Virginia and Ohio has been greatly
accelerating. The Department awarded Westmoreland County Community
College a grant of $4,964,534 to create a comprehensive recruitment,
training, placement and retention program for high priority occupations
in the natural gas drilling and production industry. The competitively
awarded Community Based Job Training grant is titled Marcellus ShaleNet
and will serve 4,500 unemployed, dislocated and incumbent workers, low-
income workers, youth and veterans between July 1, 2010 and June 30,
2013.
With Westmoreland County Community College serving as the Western
``hub'' and Pennsylvania College of Technology serving as Eastern
``hub,'' Marcellus ShaleNet brings Workforce Investment Boards, their
One Stop Career Centers, industry, and training providers together to
build a Marcellus-wide, industry--recognized, uniform training and
certification program, aggregating and augmenting existing curricula,
and adopting best practices as identified.
senator enzi
Question 1. The June jobs report from the Bureau of Labor
Statistics showed the economy only gained a net 18,000 new jobs, while
unemployment remained very high at 9.2 percent. The July jobs report is
slightly better, but no matter how you view it, President Obama's claim
that the Stimulus would create or save 3.5 million jobs in 2 years has
not panned out. Now, some are suggesting that a second, larger stimulus
is needed. Why should the American people believe that a second
stimulus would yield any better result?
Answer 1. In all, since employment hit its low point in February
2010, the private sector has added nearly 2.4 million jobs. Those are
just the net new jobs created. The success of the American Recovery and
Reinvestment Act (ARRA) was to prevent the economy from continuing its
dramatic decline, as we saw when over 800,000 jobs were lost in January
2009, the month President Obama took office. Without that critical
investment in the economy, through tax cuts, support for State and
local government and infrastructure improvement projects, we would have
had 3.6 million fewer jobs according to the most recent report by the
Council of Economic Advisors.\1\ The non-partisan Congressional Budget
Office has estimated that ARRA boosted the total number of people
employed by up to 3.3 million.\2\ Mainstream economists, of all
political persuasions, agree that the Recovery Act did what it was
intended to do by preventing our economy from falling into another
depression and boosting employment by several million jobs.
---------------------------------------------------------------------------
\1\ The Economic Impact of the American Recovery and Reinvestment
Act of 2009, Seventh Quarterly Report, Council of Economic Advisors,
July 1, 2011 http://www.whitehouse.gov/sites/default/files/
cea_7th_arra_report.pdf.
\2\ Estimated Impact of the American Recovery and Reinvestment Act
on Employment and Economic Output from January 2011 Through May 2011.
Congressional Budget Office. May 2011. http://www.cbo.gov/ftpdocs/
121xx/doc12185/05-25-ARRA.pdf.
---------------------------------------------------------------------------
We have made important strides to get the economy back on solid
footing, but we still have more work to do. The President's proposed
American Jobs Act includes immediate, common sense and bipartisan steps
we can take to boost economic growth and job creation:
1. Extend tax cuts, including payroll tax cuts, for middle-class
families so people have more money in their paychecks next year. This
will help small- and medium-sized businesses, whose customers will be
more able to pay for goods and services.
2. Extend unemployment insurance to support workers who are looking
for work to pay for basic needs for themselves and their families,
while also providing an added jolt to the economy.
3. Re-build America's infrastructure. There are millions of
unemployed workers in construction and other industries, while at the
same time much of America needs rebuilding. This bill will help private
companies hire these workers to rebuild our roads, bridges and
highways, and lay the groundwork for future economic growth.
4. Pass the patent reform bill to streamline the patent process so
innovative and job-creating ideas can make it to the market faster.
All these ideas have bipartisan support and should be passed
swiftly, providing an immediate boost to job creation.
Question 2. The Administration has included a package of expanded
provisions for the Trade Adjustment Assistance (TAA) Program into the
implementing text of the Korea Free Trade Agreement. These provisions
significantly expand the TAA program beyond its existing authorization
and will cost nearly $1 billion in new spending. Analysis prepared by
both industry and the International Trade Commission indicate that all
three of the pending free trade agreements with South Korea, Colombia
and Panama will create a large number of American jobs--not destroy
them. Do you agree that more American jobs will be created with these
agreements?
Answer 2. While these agreements are expected to improve the
competitiveness of U.S. exports to South Korea, Colombia, and Panama
when their tariffs are removed on a wide range of U.S. products, the
Department of Labor does not expect the agreements to have a
significant effect on aggregate employment in the United States. This
position is supported by the literature of general equilibrium modeling
simulations of these agreements, including those done by the
International Trade Commission. In the case of the U.S.--Korea FTA,
which is by far the most economically significant of the agreements,
the simulations find an overall employment impact ranging from
negligible to an increase of 280,000 jobs. The agreements with Colombia
and Panama are expected to have even less of an impact on aggregate
employment in the United States.
Although the aggregate impact on jobs is expected to be negligible,
there are likely to be adjustments to the U.S. economy as output and
employment adjust to the FTAs, with output and employment losses in
some industries and new opportunities in others. Some workers may be
displaced from their jobs as a result. This is why the President has
signed into law a strong and robust renewal of Trade Adjustment
Assistance (TAA) that supports Americans who need training and other
services when their jobs are affected by trade. TAA is essential to
protect against any displacements U.S. workers will experience as the
result of these agreements.
Question 3. How do you address the concerns about even more
duplication of workforce training services under the expanded
provisions of the Trade Adjustment Assistance program? We know that the
Workforce Investment Act (WIA) and other long standing programs already
work to help displaced workers. Why should we expand TAA when there are
already programs to provide this type of assistance to State
governments and community colleges? Is this an effective way for the
Federal Government to be spending its resources during a time when we
are being asked by the President and constituents to cut spending?
Answer 3. As a part of an ambitious trade agenda, it was very
important that Congress renew a strong and robust TAA program
consistent with reforms enacted in 2009. Renewal of this program is
necessary to support Americans who need training and other services
when their jobs are adversely affected by trade. As we expand access to
other markets abroad, we need to ensure that American workers are
provided the tools needed to take advantage of these opportunities and
are not left behind in the global economy.
Both WIA and TAA are programs that are designed to serve dislocated
workers who are laid off from work in declining industries, and would
therefore benefit from federally funded re-employment services to
retool their skills for new employment. However, in WIA, this
eligibility criterion is applied at the local level and is open to a
certain level of flexibility in interpretation. In many cases, WIA
participants may only require self-access services (such as local labor
market information or computer-based coursework) or shorter training
including skill upgrading in order to become marketable.
In contrast, initial TAA eligibility is more narrowly interpreted
through a highly standardized investigation process at the Department
level, resulting in a written determination as to whether the worker
groups are affected by foreign trade. Many TAA workers are faced with
the prospect of starting from scratch on new career paths as the U.S.
economy and employment adjust to the FTAs, with output and employment
losses in some industries and new opportunities in others. Compounding
this challenge is the fact that TAA workers are older, with an average
age of 46, and that more than two thirds of the program's incoming
participants in 2010 only had a high school education or less. The need
for these individuals to jumpstart into entirely new careers midlife
justifies the specialized range of services and benefits provided to
TAA participants.
Additionally, consistent with the overarching focus of all Federal
programs at this time, the renewed TAA program contains several
provisions designed to see that the program delivers necessary services
in the most cost effective manner possible.
The provision eliminates an additional 26 weeks of income
maintenance (TRA) available for workers enrolled in Remedial or Pre-
requisite training that was available under the 2002 law.
Separate funding sources for Training, Administration, Job
Search and Relocation, and Case Management have been consolidated under
the previous $575 million Training Cap, allowing States to determine
the most efficient and effective mix of benefits and services for their
enrollees.
Underutilized funds in States can be re-allotted to States
in need during the 2d and 3d year after original allocation when
appropriate to maximum available funding for the TAA program.
Benefit levels for Reemployment Trade Adjustment
Assistance have been rolled back to 2002 levels.
Ensures the final 13 weeks of TRA are available only if
trade-affected workers in training are making satisfactory progress
toward gaining a credential and need the additional weeks to complete
their program.
Three of six waiver provisions allowing workers to receive
income maintenance (TRA) for a limited period while not enrolled in
training have been eliminated so that the program focus is firmly fixed
on income maintenance only for those seeking retraining. Waivers for
Marketable Skills during an extended search for work; Retirement Within
the Next Two Years; and Awaiting Recall have been eliminated.
Question 4. A few weeks ago, USA Today published a piece titled,
``How Unions are Stifling American Growth.'' It placed the blame for
the failed economic recovery on waste and mismanagement of public works
projects. The author specifically cites ``organized labor's legacy of
work rules, jurisdictional disputes and unproductive practices that
cause costs to soar through delays and over-staffing.'' The most
outrageous example in the article is a union worker at the new World
Trade Center site in New York City that makes $405,000 per year for
virtually doing nothing. What has the Administration done to crack down
on waste and overspending when it comes to public works projects?
Answer 4. We note that the article you reference is an opinion
piece and does not reflect the typical experience of Federal
contracting. In particular, we also note that the World Trade Center
project that is cited is not a Federal project and not subject to
Federal contracting guidelines in the Federal Acquisition Regulations
(FAR).
Question 5. I have submitted numerous inquiries to the Department
of Labor asking important questions and have not received answers from
several of them or a very delayed response. For example, the Department
never responded to one letter from March 2010; was late in responding
to Questions for the Record from my colleagues and I following a May
2010 OSHA hearing; never followed up on a request for updates on a
hiring at the Mine Safety and Health Administration; and was late in
responding to two other requests and also refused to provide the
requested documents in responding to one of those letters. I would like
your commitment that the Department be more responsive to congressional
inquiries in the future.
Answer 5. The Department takes seriously input and inquiries from
members of Congress. We endeavor to respond as appropriate to all
requests we receive from committees and individual Senators and
Representatives. Due to the nature or complexity of some inquiries,
however, delays are sometimes unavoidable. I assure you that the
Department will continue to be as responsive as possible to
congressional requests.
Question 6. In 2010, the Department failed to get a clean audit for
the first time in over a decade. A makeup audit done earlier this year
still noted a number of ongoing material weaknesses, as well as a
pending possible Anti-Deficiency Act violation. In addition, I am told
that the Department's inability to pay invoices in a timely manner has
resulted in $1.3 million in interest penalties last year and $424,000
in interest penalties through June 2011. That's $1.7 million in
penalties, plus the cost of the makeup audit. What are you doing to
prevent it from continuing?
Answer 6. As noted in the independent auditor's report, the
inability to obtain a clean opinion was related to the transition to a
new financial management system. The ``disclaimer of opinion'' issued
by the auditors was due to the inability of the Department to provide
the financial data to the audit team in time to meet the November 15
deadline for issuing an opinion. Two issues were largely responsible
for that delay. First, the migration of data from a 20+ year-old
financial management system, which no longer met Federal standards to a
robust, modern reporting system, proved very challenging and time
consuming.
Second, the new financial system provides for the first-ever
integration of the financial system with the procurement, grants,
travel and HR systems. Since this integration was new to all these
systems, the Department experienced the challenges inherent in such an
effort. The Department now has its most extensive internal controls and
reporting capabilities ever, but the initial efforts created delays in
supporting the audit function in a timely manner. Recognizing these
issues during fiscal year 2010, the Department focused its efforts on
supporting the mission of the Department's agencies and successfully
completing the 2010 year-end close. As a result, grants to States and
other entities, FECA payments, and procurement activities were all
supported in the same manner as in past years, in spite of the
implementation issues. In addition, there were no funds unintentionally
left unobligated, nor any ADA violations. The ADA violation noted in
the question is from a previous audit which was still under review by
the department at the time of the 2010 audit.
The Department takes very seriously our fiduciary responsibility,
and the need to provide stakeholders the independent verification of
our financial management activities that a financial statement audit
represents. As a result, we resubmitted the financial statements to the
Office of Inspector General, and their independent audit firm, KPMG,
for review in January 2011. That review led to an unqualified, or clean
opinion, which the Department had held for each of the previous 13
years. However, even though KPMG noted in their review of the
Department's resubmission that the conditions which gave rise to the
material weaknesses were addressed in a number of cases, their analysis
of our resubmitted financial statements did not include a formal re-
evaluation of their original findings resulting in the material
weaknesses. Therefore, the original material weaknesses, which had been
reported by the auditors for a number of years as significant
deficiencies, remained to be addressed by the auditors in the 2011
audit. The Department is confident that the number of material
weaknesses will be substantially reduced in the 2011 audit report.
Late payment penalties increased significantly last year due to the
systems implementation issues discussed above. This year, the rate has
dropped consistently. Total late payment interest penalties between
October 2010 and August 2011 were approximately $543,000, almost a 60
percent reduction from fiscal year 2010's total of $1.3 million in
penalties. In addition, the Department is building upon the
capabilities available in the new system to implement an electronic
invoicing process in 2011, which will streamline the invoice payment
process, and should reduce the late payment rate even further.
Question 7. According to the Labor Department's own annual No FEAR
Act report, the number of EEO complaints filed against the Department
increased by 37 percent in just 1 year (2009 vs. 2010). Many of your
enforcement agencies are reporting results that are substantially
inferior to prior years. For example, your wage and hour results in
terms of back wages recovered and workers assisted appear to be lower
than all but 1 year since 2001, despite a significant increase in
personnel. Given these problems, do you believe your management team is
successful? How would you grade them, and can you explain these
problems?
Answer 7. As noted, the Department's No FEAR Act reports
demonstrate an increase in the number of EEO complaints filed from
fiscal year 2009 to fiscal year 2010. However, the number of complaints
filed in 2010 was almost exactly the same as the number filed in 2007
(126) and lower than the number filed in 2008 (133) despite an increase
in the number of DOL employees that began in 2009. The Department will
continue to assess the trends in overall EEO complaints. However, it is
also important to note that, although the overall number of complaints
increased, the number of complaints that ended with findings of
violations was very low; in fiscal year 2009 there was one final action
finding discrimination, while in fiscal year 2010 there were two.
The Department takes very seriously its responsibility to ensure
that the DOL workplace is free from unlawful discrimination and
harassment. At the beginning of her tenure and annually thereafter, the
Secretary of Labor issued robust policy statements on Equal Employment
Opportunity (EEO) and Harassing Conduct, expressing her commitment to
the mandate of equal opportunity for all Department employees and
applicants regardless of their race, color, religion, sex (including
pregnancy and gender identity), national origin, age, disability,
genetic information, parental status, and sexual orientation.
Additionally, the Secretary has made clear that harassing conduct by
managers, supervisors, or employees, including contractors, at any
level, will not be tolerated. In furtherance of the commitment to
prevent and eliminate discrimination, harassment, and retaliation, all
agencies within the Department are required to conduct self-assessments
to identify potential barriers to equal opportunity; enhance
accountability by including an EEO element in the performance standards
of every DOL manager and supervisor; widely publicize the EEO and
Harassing Conduct policies and procedures available for filing
complaints; take swift and appropriate action (including disciplinary
action) to remedy any violations of the Department's EEO policies; and
provide full support to the Department's internal programs related to
nondiscrimination, equal opportunity, and diversity. Additionally, the
Department implemented a vigorous program to train and educate
Department managers and employees on EEO rights and responsibilities.
For fiscal year 2011 (October 2010-September 2011) the Wage and
Hour Division collected $224,844,870 in back wages for 275,472 low-wage
and vulnerable workers, the largest amount collected in a single fiscal
year in the Division's history. Even when the prior administration's
performance criteria are used, these results demonstrate that during
fiscal year 2010 (October 2009-Septemer 2010), the WHD successfully
rebuilt its enforcement capacity. Additional resources for the Wage and
Hour Division to hire 250 new investigators were not appropriated until
March 2009. During the spring and summer of 2009 the Division engaged
in an ambitious recruitment and hiring effort. The first wave of newly
hired investigators was brought on board in the fall of 2009, with a
second significant wave brought on board midway through fiscal year
2010. During fiscal year 2010, it was necessary for the Division to
train these new investigators on how to conduct effective and efficient
investigations and to enforce the more than a dozen laws under the
Division's enforcement authority. This training is intensive and
conducted over a 2-year period. It requires significant investment of
time by not only the trainees but also by the Division's management
team and senior investigators who conduct the training and provide
ongoing coaching and mentoring. This training and commitment of
resources continued during fiscal year 2011 and will be completed in
fiscal year 2012. These results demonstrate the strength and capability
of the DOL's national and regional management team and field employees.
----------------------------------------------------------------------------------------------------------------
Fiscal Year Fiscal Year Fiscal Year
WHD Enforcement Statistics--All Acts 2009 2010 2011
----------------------------------------------------------------------------------------------------------------
Back Wages Collected............................................ $172,615,125 $176,005,043 $224,844,870
Employees Receiving Back Wages.................................. 219,759 209,814 275,472
Complaints Registered........................................... 26,311D 31,824 27,112
Enforcement Hours............................................... 879,626 1,066,188 1,213,182
Average Days to Resolve Complaint............................... 101 142 177
Concluded Cases................................................. 24,922 26,486 33,295
----------------------------------------------------------------------------------------------------------------
Question 8a. The Office of Labor-Management Standards (``OLMS'')
came out with a new initiative earlier this year called the ``Persuader
Reporting Orientation Program'' (``PROP''). Essentially, this program
examines union petitions filed with the National Labor Relations Board
(``NLRB'') and sends notices to employers and their representatives of
their obligation to report ``persuader activity.'' Was there any
coordination or communication between the NLRB and the Department of
Labor on this initiative? If not, why not?
Answer 8a. Periodically, OLMS receives a spreadsheet from the
National Labor Relations Board (``NLRB'') listing all employers and
their legal representatives involved in recently filed NLRB
representation petitions. NLRB also makes the information it provides
to OLMS publicly available upon request. Because the information is
available to the public, there is no written inter-agency agreement or
memorandum of understanding regarding the provision of this
information.
Using this information, OLMS then sends a letter to the employers
and to their representatives in the NLRB proceeding to inform them of
their potential reporting obligations under the LMRDA, and to explain
how to access the reporting forms and instructions in the event that
they are required to file. PROP letters are compliance assistance
letters, not demand letters.
Question 8b. How much of the OLMS staff is tasked to the PROP
initiative?
Answer 8b. The equivalent of one FTE spends an average of
approximately 6 hours per week on PROP.
Question 8c. Do you send similar notices to unions of their duty to
file under the Labor-Management Reporting and Disclosure Act
(``LMRDA'')?
Answer 8c. Yes. PROP is modeled after the existing Labor
Organization Orientation Program (``LOOP''), under which similar
compliance assistance letters are sent to newly-covered unions that
have filed their initial Form LM-1 Labor Organization Information
Report. The LOOP letters inform these unions of their obligations under
the LMRDA or the Civil Service Reform Act (``CSRA'') standards of
conduct provisions for Federal sector unions, including their
continuing obligation to file annual financial disclosure reports.
Question 9. As you know, section 8(c) of the NLRA implements the
First Amendment, and protects an employer's right to free speech. If
Federal administrative roadblocks intentionally or unintentionally
limit an employer's access to effective legal counsel, and thereby keep
an employer in the dark about how he or she can legally communicate
with his or her employees, does this infringe on an employer's free
speech rights? Why or why not?
Answer 9. It would be inappropriate for the Department to offer a
legal opinion on the hypothetical presented, and I am aware of no such
roadblocks. Of course, the Department is committed to protecting
constitutional and other rights.
Question 10a. A union has launched an organizing drive on a small
employer. The employer, who does not have any labor relations
professionals on its payroll, retains outside counsel in order to
understand its rights and obligations under the NLRA. Under the DOL's
``Persuader'' NPRM, can you please give examples of services that
attorney could perform for the employer in relation to the organizing
drive that would NOT trigger the Federal reporting requirements?
Answer 10a. In June, the Department published a Notice of Proposed
Rulemaking. See Labor-Management Reporting and Disclosure Act;
Interpretation of the ``Advice'' Exemption, 76 FR 36178 (June 21,
2011). The NPRM provided examples of services that an attorney could
provide relating to an organizing drive that would not be reportable.
Question 10b. If an attorney reviewed a speech written by the
company president to ensure that the speech did not contain any
unlawful statements, would this trigger the reporting requirements?
Answer 10b. No. As stated in the proposed instructions, this
described activity alone would not trigger reporting because it would
be exclusively the provision of advice. See 76 FR 36192-93.
Question 10c. If an attorney gives a presentation to managers about
what they can and cannot say under the NLRA, would this trigger the
reporting requirements?
Answer 10c. No. Pursuant to the proposed instructions such activity
alone would not trigger reporting, as it constitutes exclusively the
provision of advice. See 76 FR 36192-93.
Question 11. Executive Order 13563 requires all agencies, including
the Department of Labor to improve its regulations and regulatory
review. It states that one way to achieve that improvement is through
public participation, including an ``open exchange of information and
perspectives.'' Do you think the teleconferences DOL organized on the
OSHA proposed rule on adding an MSD column to injuries logs, meets the
spirit of Executive Order 13563?
Answer 11a. OSHA fully met the Executive order's goal of fostering
an open exchange of information and perspectives by providing multiple
opportunities for public participation on the proposed MSD column
requirement. The proposed rule published in the Federal Register in
January of this year provided an explanation and economic analysis of
the proposal, and allowed the public 60 days in which to submit written
comments. This initial comment period was followed by a public meeting
and a second opportunity to submit comments following the meeting. At
the public meeting, any interested party was allowed to give oral
presentations and exchange views with OSHA representatives. After the
record closed, OSHA determined that the comments indicated some
confusion in the small business community on the scope of the proposed
rule, and that further public participation would be beneficial.
Accordingly, OSHA, in cooperation with the Small Business
Administration's Office of Advocacy, scheduled a series of
teleconferences in which small businesses could directly discuss the
rule with OSHA representatives. OSHA and SBA Advocacy held three
teleconferences, which accommodated all small businesses that expressed
an interest in participation. OSHA then published a report on the
teleconferences prepared in cooperation with SBA Advocacy, and
solicited additional comment from the interested public on both the
report and the issues raised in the teleconferences. OSHA allowed 30
days for comment.
In summary, OSHA provided three different opportunities for
participation by the public: an opportunity for written comments, a
meeting during which the public could give oral presentations and
exchange views with OSHA representatives, and three teleconferences
where small businesses could present their views without needing to
come to Washington, DC in person. OSHA thoroughly satisfied both the
letter and the spirit of the Executive order with respect to open
exchange of information and perspectives.
Question 11b. Do you believe that the recently proposed
``persuader'' regulation that will hamper employer efforts to
communicate to their employees during union organizing campaigns is
consistent with Executive Order 13563?
Answer 11b. Yes, the persuader regulation is consistent with
Executive Order 13563.
Question 12. Do you accept that injuries and illnesses are at their
lowest rates? If so, please explain why the National Emphasis Program
(NEP) is trying to establish that employers are underreporting? What
has OSHA found during the more than a year and half of this NEP?
Answer 12. Workplace injuries and illnesses are at their lowest
reported rate, according to the Bureau of Labor Statistics (BLS).
However, although OSHA considers the BLS injury and illness estimates
to be the most accurate and authoritative statistics on the subject,
recent academic research (comparing injuries and illnesses reported to
BLS to those recorded in State Worker's Compensation databases) has
brought into question the accuracy of these data. At the request of
Congress, OSHA has taken positive steps, along with BLS and National
Institute for Occupational Safety and Health, to address this issue.
The Recordkeeping National Emphasis Program (NEP) was implemented to
identify and correct individual cases of under-recording of
occupational injury and illness. At this point, citations for
violations of OSHA's recordkeeping rule have been issued in more than
50 percent of the establishments targeted under this NEP. Although it
is still too early to make a conclusive judgment on the NEP, it is
OSHA's belief that this high profile program not only leads to
correction of the records within the establishments inspected, but will
also have the positive effect of leading to more accurate recordkeeping
throughout the regulated community.
Another Department effort related to the undercounting of injuries
and illnesses is research the BLS is conducting and overseeing to
ascertain factors associated with the completeness of the Survey of
Occupational Injuries and Illnesses. BLS, three State grantees and a
contractor are matching multiple sources of data to find and classify
types of cases that appear not to be captured in the BLS survey.
Employers are being interviewed regarding their OSHA recordkeeping and
workers' compensation claiming practices, to identify circumstances
when workers' compensation cases might not be captured on an OSHA log.
Final results of the research will be available in 2012. These results
and consensus recommendations from the researchers will guide potential
changes to SOII or other possible actions to develop more complete SOII
estimates.
Question 13. Can you give us an update on the ``Bridge to Justice''
program? How many cases have your Wage and Hour investigators referred
to the American Bar Association (``ABA'')? How many of those cases have
led to the filing of private suits against employers? Does the
Department, the ABA or the ABA's local bar association affiliates
receive any monetary benefit through this program, including from
attorneys' fees collected in cases referred by the Department? How will
Wage and Hour determine which cases to take and which cases to refer
through the ABA?
Answer 13. WHD's role in the ABA Referral System is limited to
adding the toll-free number for the Referral System to WHD's standard
notification letter sent to complainants in cases where the Department
will not pursue a claim. In addition, WHD staff provide the number
orally in appropriate circumstances in which WHD does not send a
notification letter, e.g., where the worker decides not to file a
complaint with the WHD.
The Department decides whether to pursue a claim based on its
national and regional priorities and the particular WHD office's
current resources and workload.
Complainants who call the Referral System's toll-free number are
connected to an automated system that asks them to enter the zip code
for their home or place of employment. The system provides the caller
with the telephone number of participating ABA-approved local attorney-
referral service(s) in their area. The complainant may then choose to
contact the local referral service, which would then refer the
complainant to an attorney experienced in FLSA or FMLA matters. If no
such referral service covers the caller's geographic area, the system
informs the caller of that fact.
The ABA reported that, during the period covering the second
quarter of 2011, there were 14 instances in which the complainant
received attorney referral information from a local referral service,
but did not follow up with the attorney; 38 cases were closed after
brief advice or service; 13 cases were found to have insufficient merit
to proceed; 17 cases were pending as of the date of the ABA's report;
and 2 cases were resolved through settlement negotiations without
litigation. Please see the ABA's second quarter report on the Referral
System, which is enclosed with this response.
The Department does not receive any monetary benefit through the
program and the ABA and its participating referral providers do not
receive a monetary benefit from the program. Any fees are used to
recoup the costs of the referral program. For example, the
participating local referral programs pay a nominal annual fee to the
ABA to cover the costs of the toll-free telephone vendor. In addition,
many bar association referral programs have a percentage fee program in
place that requires the attorney who received the referral to return a
percentage of any fees collected as a result of the referral, but under
the ABA's model rules, which these programs abide by, the percentage
fee cannot increase the total cost to the individual client of the
legal services provided. These percentage fees help cover the referral
program's operational costs. Finally, attorneys who wish to participate
and receive referrals pay an annual fee to be on the panel of their
local referral provider as an FLSA or FMLA specialist, but again, it is
our understanding that these fees cover operational costs and do not
provide an overall monetary benefit.
Question 14. Under the ``Bridge to Justice'' program, private
attorneys will be given specific documents to aid them in their
lawsuit. They can obtain these documents through what the Wage and Hour
Division calls a ``special process,'' but in reality the attorney will
simply have to fill out a form provided by the Department. Is the
request process open to employers' representatives or third parties?
Answer 14. If a complainant receives the toll-free number from the
WHD after it has completed a full or partial investigation of the
complaint, WHD will also provide the complainant with a Document
Request form. This form allows the complainant or his or her authorized
attorney to request: the complainant's own statement, the WHD's back
wage computations for the complainant, and copies of any documents the
complainant provided to the WHD Investigator. The form also allows the
worker or authorized attorney representative to request the case
narrative from the file; however, it explains that requesting the
narrative will delay the WHD's response because it must be redacted.
The complainant, his or her attorney, employers and third parties may
continue to request these and other documents in the case investigation
file using the Freedom of Information Act.
Employers may use the form to request the same information from the
WHD, and such a request would be construed as a FOIA request. Whether
requested by a complainant or an employer, information will only be
released in closed cases.
Question 15. In staff interviews, the former nominee to lead the
Wage and Hour Division, Mr. Leon Rodriguez, committed to reconsidering
the elimination of opinion letters in favor of Administrative
Interpretations. Do you support reconsideration of this change?
Answer 15. The WHD has a variety of means for issuing policy,
interpretations, and guidance regarding the laws it is responsible for
administering and enforcing, including regulations, administrator
interpretations, field assistance bulletins, fact sheets, e-laws, and
opinion letters. All of these continue to be available to WHD. However,
the WHD has determined that its limited resources are best spent on
those means that address issues of general application and that are of
interest to broad segments of employers and employees rather than
guidance that has limited application because it is applicable to only
a particular set of facts.
Question 16. Given that the Wage and Hour Division has never had a
political appointee in charge of it during this Administration, who
makes the decisions for that division on behalf of the Administration?
Answer 16. Nancy J. Leppink, who was appointed as Deputy
Administrator by President Obama on September 21, 2009, has headed the
Wage and Hour Division in an acting capacity since that date.
Question 17. One likely consequence of the FLSA Right to Know
regulation being developed by the Wage and Hour Division will be an
exacerbation of the already troubling level of multi-plaintiff lawsuits
based on subjective interpretations of criteria for exemptions under
the FLSA. Is this an outcome the Department supports?
Answer 17. The Right to Know proposed rule is still under
development and no final decisions have been made regarding this
rulemaking. The WHD has consistently pursued policies that inform both
employers and employees about workers' employment status. These
policies' primary objective has been to prevent violations from
occurring by providing guidance that helps employers ``get it right''
from the outset and thereby prevents litigation.
Question 18. The President said that many ``shovel ready'' stimulus
projects were not actually ``shovel ready.'' The President's own Jobs
Council said that many of these so-called ``shovel ready'' projects
were delayed because of government regulations and burdensome
permitting procedures. Do you agree?
Answer 18. At its June 13 meeting in Durham, NC, the President's
Job Council presented the President with 11 different broad ideas for
creating jobs and getting the economy back on track. One of those was
streamlining regulatory and permitting processes. No one--including the
Administration--can deny that there are examples of wasteful,
redundant, burdensome processes and procedures in the government, and
this Administration is dedicated to making government run more
efficiently, effectively, and accountably. However, I also agree that,
as the Jobs Council said in its recommendations, in the course of our
streamlining, we cannot afford to undercut the protections that our
regulatory system affords, to workers, to the environment, and to the
public at-large.
Question 19. In the Department's Spring 2011 Regulatory Agenda,
there are many regulatory proposals that will increase enforcement,
reporting, inspections, penalties, etc. in almost every agency. Many
can question how imposing more regulatory burdens on businesses,
especially small businesses, will encourage job creation. What
regulatory proposals are you advocating that WILL encourage job
creation?
Answer 19. The Department's regulations do not discourage job
creation; they are designed to provide a level playing field for firms
following our Nation's labor laws so that they do not face unfair
competition while playing by the rules, which could cause a loss of
jobs.
The Department's regulations, among other things, make sure that
U.S. jobs are good jobs--a concept that means that jobs should be safe,
secure, and paid in accordance with legal norms. In other words, our
efforts ensure that workers have good jobs.
At the same time, the Department has regulatory projects designed
to result in significant savings in terms of dollars and burden-hours.
For example:
OSHA's Standards Improvement Project III (SIP III)
rulemaking achieved a 1.9 million burden hour reduction, and we
anticipate that OSHA's SIP IV project will similarly yield savings for
employers and
OSHA's Hazard Communication/Globally Harmonized System for
Classification and Labeling of Chemicals proposal has estimated savings
for employers ranging from $585 million to $789.4 million.
Question 20. The Government Accountability Office (``GAO'') found
that the Davis-Bacon Act requirement on the home weatherization program
money in the stimulus resulted in only a fraction of the projected
homes getting upgraded weatherization treatment. Was it a mistake to
expand the application of the Davis-Bacon Act to a construction
activity where the Federal Government has never been involved and thus
there were no previous wage surveys and wage determinations available?
Answer 20. The Department ensured that the prevailing wage
requirements contained in the Recovery Act were properly applied to
covered construction activities, including the weatherization program.
In a report issued earlier this year, the Office of Inspector General,
Office of Audit found that WHD did provide adequate outreach, did
conduct timely DBA Recovery Act complaint and directed investigations,
and did conduct wage determination surveys for Department of Energy's
weatherization program that were timely and reliable.
As the GAO report notes, WHD completed an expedited nationwide
prevailing wage survey of weatherization construction on residential
projects throughout the United States. The survey was initiated after
DOE advised the Department that the classifications and wage rates
listed in existing Davis-Bacon residential construction wage
determinations were not applicable to the specialized nature of the
weatherization work being funded under the Recovery Act. After
examining the classifications and wage rates used on weatherization
projects, the Department agreed with DOE and immediately began work on
the weatherization survey. Wage rates for weatherization projects were
published for each county in the United States in September 2009.
Once DOE and the Department agreed that a survey was appropriate,
the Secretaries of Energy and Labor issued specific guidance to the
weatherization grantees on how to proceed with these projects while new
prevailing wage rates were being established. Grantees were told to
proceed with weatherization projects using existing on-line residential
wage determinations with the caveat that contractors and grantees must
compensate workers for any increase in wage rates that resulted from
the new weatherization prevailing wage survey. This June 2009 guidance
was made available on DOE's Web site.
Question 21. The Davis-Bacon Act has been shown to increase the
cost of construction, reduce access to construction projects for
minority contractors, and reduce the amount of jobs that Federal
construction projects can create. Does the Administration still support
the Davis-Bacon Act and its wide application to projects where the only
nexus with Federal funding may be a loan guarantee?
Answer 21. The principle underlying the Davis-Bacon Act (DBA) is
simple--to provide that the Federal Government's extensive contracting
activity does not have the unintended consequence of depressing
workers' wages. Whether the Federal construction activity results from
a direct Federal contract or is made possible through other forms of
Federal assistance, the protections provided by the Davis-Bacon Act and
over 60 Davis-Bacon related Acts provide a secure floor on wages.
Congress reached that same conclusion when it applied the Davis-Bacon
prevailing wage provisions to the many Federal statutes that provide
assistance through grants, loans, or loan guarantees.
The Federal Government continues to construct buildings, build
dams, and fund housing projects. State highway departments pave roads
with Federal funds from the Federal Highway Administration. Local and
State governments build water treatment plants, modernize schools, and
renovate airports. The DBA therefore is as relevant today as it was
when it was first enacted, and it continues to provide stable wage
rates and benefits that attract higher-skilled labor. And by attracting
higher-skilled workers who are both experienced and productive,
construction projects are more often completed on time and at lower
cost. Additionally, more and more economic studies dispel the notion
that prevailing wage laws drive up the cost of Federal contracting,
such as the University of Utah's ``Losing Ground: Lessons from the
Repeal of Nine ``Little Davis-Bacon'' Acts (Garth Mangum, Peter
Philips, Norm Waitzman, and Anne Yeagle).
Question 22. In this year's Continuing Resolution, the Department
received $21 million for worker misclassification initiatives. In May
you reprogrammed those funds for other uses, including spending for
more enforcement. Can you provide this committee with an accounting on
how that reprogrammed money has been spent thus far?
Answer 22. The Department's fiscal year 2011 budget proposal
included a request for an additional $21 million for misclassification
initiatives; however, the funds for that initiative were not included
in the final continuing resolution. The Wage and Hour Division did
receive an additional $335,790, which was transferred from the fiscal
year 2011 Departmental Management appropriation to prepare for the
fiscal year 2012 regional enforcement initiatives.
Question 23. On May 5, the Department finalized the Fair Labor
Standards Act ``clean-up'' regulation first proposed in July 2008.
Stakeholders have expressed their disappointment in the new rule as it
bears very little resemblance to the proposed rule. Can you explain why
the Department decided not to reopen the comment period or simply
publish a new proposal? Don't you think that either of those solutions
would have been more in line with the President's Executive order on
improving regulations and the regulatory process?
Answer 23. The WHD published a notice of proposed rulemaking,
commonly referred to as the ``FLSA Clean-Up Rule,'' because it updates
the regulations to reflect a number of statutory amendments to the FLSA
dating back to 1974, on July 28, 2008, and the final rule on April 5,
2011. The final rule closely follows the proposed rule. All substantive
issues addressed in the final regulation were included in the notice of
proposed rulemaking and the final rule is the result of careful
consideration of all the comments received during the public comment
period.
Question 24. It has been reported that the Department is
negotiating a settlement of a long-term union grievance for violations
of the Fair Labor Standards Act with regard to hundreds of bargaining
unit employees. What is the status of that grievance? How many
employees have been reclassified and paid back wages? What are the
parties' positions on damages if the matter has not been resolved?
What, if any, changes have been implemented to prevent future
violations and/or will be required by the settlement? Please provide
copies of any directives or changes to policies resulting from the
grievance, including any changes to the availability or use of
Blackberrys or other similar communications devices by nonexempt staff.
Answer 24. The AFGE Local 12 FLSA Group Grievance is currently
before the arbitrator and the parties are in the midst of litigation.
Therefore, the Department cannot opine regarding damages and potential
liability, if any. The parties, however, were able to negotiate a
settlement concerning FLSA designations for positions in the AFGE Local
12 bargaining unit, and in 2009 the Department re-designated 688
positions from FLSA exempt to FLSA non-exempt. The parties have not
negotiated back wages for those positions. On September 25, 2009, the
NCFLL filed an institutional class grievance mirroring the AFGE Local
12 Group Grievance. The Department is reviewing over 30,000 pieces of
personnel data to discern the number of positions that need to be
reviewed for FLSA re-designation and is in the process of producing an
estimated damage calculation based upon the data. In any event, on
January 29, 2010, the Department issued guidance and established
requirements (copy attached) to ensure that the FLSA provisions
established under 5 CFR part 551 are correctly and consistently applied
to all DOL positions and employees and to reduce DOL's vulnerability to
future FLSA grievances.
Question 25. Given the recent problems with the top leadership of
the Veterans' Employment and Training Service as reported by the Office
of Inspector General, how does the Department plan to ensure the agency
continues its important mission to serve veterans?
Answer 25. Our commitment to America's veterans remains unchanged.
The dedicated team at the Veterans' Employment and Training Services
(VETS)--and each and every U.S. Department of Labor employee--will
continue their important efforts on behalf of the men and women who
return from military service and transition to civilian work. Our
Nation's veterans deserve nothing less. VETS' core programs were not
affected by the OIG report findings, nor were the new initiatives VETS
was working on, such as the TAP redesign. The current VETS leadership
will provide the management direction and vision needed to ensure our
work is accomplished successfully and with integrity.
Question 26. The enforcement agencies of the Department of Labor
need to report transparent data to ensure that Congress can grade them
on their performance. For example, I am concerned that the Wage and
Hour Division apparently has not updated its annual fiscal year
enforcement results since 2008. (available at http://www.dol.gov/whd/
statistics/). Please provide the enforcement results for fiscal year
2009 and fiscal year 2010 for Wage and Hour using the same statistics
and tables reported on the 2008 (and earlier) annual enforcement facts
sheets available on the Wage and Hour Web site.
Answer 26. See the chart inserted in the answer 7.
Question 27. I am similarly concerned that the performance of the
Office of Federal Contract Compliance Programs (OFCCP) is difficult to
evaluate. For example, the agency's enforcement results for fiscal year
2009 and fiscal year 2010, presented in the Labor Department's fiscal
2011 and 2012 budget justifications, show OFCCP collected $9.3 million
in fiscal year 2009 for 21,839 workers and $9.75 million in fiscal year
2010 for 12,397 workers. In fiscal year 2008, reportedly using
different methodology but with a much smaller budget and more targeted
enforcement, OFCCP reportedly collected $67,510,982 for 24,508 American
workers who had been subjected to unlawful employment discrimination. I
would like to know the bases for any changes made in the way OFCCP
calculates its enforcement results. Please provide the following
information for each of the past 4 fiscal years (if possible using both
the current and the prior methodology): The amount of back pay
collected; the amount of back pay and annualized salary and benefits
collected; the number of workers on whose behalf OFCCP obtained
financial recompense; the number of compliance evaluations undertaken;
the staffing level of the agency; the average length of time a
compliance evaluation is open; and the number of compensation cases
brought and settled each year.
Answer 27. The reason for the apparent reduction in back pay
recovered was a change in the methodology by which the Office of
Federal Contract Compliance Programs (OFCCP) reported financial
settlements. Prior to fiscal year 2009, the agency used projected
annualized salaries in its financial settlement reports. That meant
that the agency previously estimated the salaries of the employees who
were to be offered jobs under the settlement for a year after they
could return to work, and included those estimates in its reports on
the settlement amounts--even though those monies had not yet been paid
to the employee by the company and indeed, may never be paid by the
company. This methodology artificially inflated the actual back pay
settlement amounts reported. In fiscal year 2009, OFCCP began reporting
its enforcement accomplishments using actual back pay paid to victims
of discrimination and discontinued the practice of using projected
annualized salaries in its financial settlement reports.
For comparative purposes, the table below provides an overview of
the OFCCP's financial settlements with back pay, annualized salary and
other benefits, total financial settlements and total number of
compensated workers. As the table shows, the amount of actual back pay
in fiscal year 2011 was significantly greater than the actual back pay
for any of the prior 3 years, including fiscal year 2008, and has been
on a steady increase since fiscal year 2009.
As to the question about compensation cases, OFCCP settled a total
of 28 compensation cases in fiscal year 2011 as compared to the prior 3
fiscal years combined (2008, 2009 and 2010), in which OFCCP settled a
total of 26 compensation cases. This continues a 4-year upward trend
and is also one indicator that OFCCP's current strategy of ensuring
that its compliance evaluations more fully reflect the broad spectrum
of the Agency's authorities is aggressively implemented.
OFCCP completes compliance evaluations without discrimination
findings on average within 8 months. Reviews with discrimination
findings are completed within a 2-year timeframe. Reviews involving
financial relief for findings of discrimination were completed within 2
years in fiscal year 2008, 2.3 years in fiscal year 2009, and 2.2 years
in fiscal year 2010. We do not yet have this information for fiscal
year 2011.
Fiscal Year 2008-Fiscal Year 2011 Comparative Data
[OFCCP Enforcement Results]
----------------------------------------------------------------------------------------------------------------
Fiscal Fiscal Fiscal Fiscal
year year year year Total
2008 2009 2010 2011
----------------------------------------------------------------------------------------------------------------
Back Pay*.................................................... $10.83M $9.31M $9.75M 12.3M $42.19M
Annualized Salary & Other Benefits*.......................... $56.67M $35.36M $29.82M $39.2M $161.05M
--------------------------------------------------
Total Financial Settlements*............................... $67.50M $44.67M $39.57M $51.5M $203.24M
# Workers.................................................... 24,508 21,839 12,411 16,356 75,114
# Compliance Evaluations..................................... 4,333 3,917 4,960 4,014 17,224
# Compensation Cases Settled................................. 6 7 13 28 54
# OFCCP Staffing Level....................................... 555 581 778 748 N/A
----------------------------------------------------------------------------------------------------------------
* Includes compliance evaluations, complaint investigations, and FAAP enforcement results.
Question 28. I am concerned about the reliability of the
Occupational Safety and Health Administration's Integrated Management
Information System (IMIS). I understand there are plans to upgrade that
system for some time and that much of the software and hardware
infrastructure is getting quite old. I would like to know about the
reliability of the IMIS system in terms of its ability to continue to
serve OSHA and the timeline for any replacement. Please also explain
how much has been spent to replace the IMIS system to date, including
consulting contracts, and provide copies of all annual Exhibit 300s
under Office of Management and Budget Circular A-11 (and any prior
circulars) for this undertaking from 2008 through the present.
Answer 28. OSHA's Integrated Management Information System (IMIS)
is a reliable system that is available 24-7, 365 days per year, updated
nightly with OSHA data, and equipped with an active contingency site in
the event of a disaster. The legacy IMIS system has served the agency
well for the last two decades, but is deteriorating. For example,
replacement parts for the individual machines cannot be readily found,
and maintenance contracts are extremely difficult to establish because
few vendors still exist in this business area. OSHA has stockpiled
replacement parts for the NCRs, but the knowledge and skill set to
actually repair the system is becoming more and more scarce. OSHA had
anticipated these difficulties and has prepared for the implementation
of the new data program.
To date, approximately $60 million has been spent on the new data
program, OSHA Information System (OIS) over a 7-year period, which is
consistent with the amount estimated when the project was being
developed using the Department's System Development Life Cycle
Management (SDLCM) process. Exhibit 300s are attached.
[Editor's Note: Due to the high cost of printing, the Exhibits are
maintained in the committee file.]
On March 11, 2011, OSHA initiated field deployment of its OIS,
designed to house the Nation's occupational safety and health data, to
two Federal field offices located in Boise, ID and Concord, NH. As of
August 2011, the OIS has been further deployed to the Federal regions
in Denver, Chicago, and Seattle. The next Federal region tentatively
scheduled for deployment is the San Francisco region in September 2011.
The OIS has also been deployed to five State On-site Consultation
Projects in the mid-west, including Colorado, Montana, Wyoming, and the
Dakotas. Pending next year's and the following year's agency budgets,
the OIS is scheduled for further Federal, State plan, and consultation
project deployment in fiscal years 2012 and 2013. The OIS is web-based,
and is the next generation replacement for the National Cash Register
(NCR) machines. Once the OIS is fully deployed to the field, OSHA will
initiate a plan to retire its NCRs.
Question 29. My staff have learned that OFCCP may be investigating
individual complaints of discrimination--a responsibility entrusted to
the Equal Employment Opportunity Commission (EEOC) under a longstanding
Memorandum of Understanding--and then launching broader inquiries based
on the investigation of individual claims. Has OFCCP undertaken
individual cases? If so, please provide a list of cases undertaken by
OFCCP involving individual complainants since Jan. 20, 2009 (without
including the complainants name or identifying information) and OFCCP's
reason for not referring the matter to the EEOC.
Answer 29. First, Executive Order 11246 allows for individual
complaints of employment discrimination to be filed with OFCCP. The
procedure under OFCCP's MOU with the EEOC has been that, if the
individual's complaint also states a claim under title VII, OFCCP
refers it to the EEOC. However, this rule has never been absolute, and
the MOU has long preserved OFCCP's ability to coordinate with the EEOC
to retain individual complaints when deemed necessary to avoid
duplication and ensure effective law enforcement. As indicated below,
the very few individual complaints retained by OFCCP have been retained
pursuant to this authority.
This MOU does not cover the processing of individual complaints
that are filed with OFCCP under either Section 503 of the
Rehabilitation Act of 1973 (Section 503) or the Vietnam Era Veterans
Readjustment Assistance Act of 1974 (VEVRAA or Section 4212). EEOC has
no concurrent jurisdiction with VEVRAA. Coordination on disability
issues and complaints under section 503 and title I of the ADA is
separately governed by a joint OFCCP--EEOC regulation at 29 CFR part
1641 (EEOC) and 41 CFR part 60-742 (OFCCP).
In fiscal year 2009 (beginning January 20, 2009), OFCCP
investigated 65 individual complaints, of which only three were
Executive Order 11246 complaints. Meanwhile, 60 complaints (92 percent)
were investigated pursuant to section 503 or VEVRAA. In fiscal year
2010, OFCCP investigated 94 individual complaints of which only 10 were
Executive Order 11246 complaints, while 83 complaints (88 percent) were
investigated pursuant to section 503 or VEVRAA. Through August 15, 2011
of fiscal year 2011, OFCCP has investigated 77 individual complaints,
of which seven were Executive Order 11246 complaints, 66 complaints (86
percent) were investigated pursuant to Section 503 or VEVRAA.
The chart below shows the breakout of individual complaints
investigated by OFCCP from January 20, 2009 to August 15, 2011. Because
the vast majority of individual complaints alleging Executive order
violations are, pursuant to the MOU between OFCCP and the EEOC,
referred directly to the EEOC, they are not captured on this chart. The
few individual complaints alleging Executive order violations that were
investigated by OFCCP were retained, pursuant to the MOU, to avoid
duplication and assure effective law enforcement. For example, if OFCCP
is in the process of conducting a compliance review of a company
against which an Executive Order 11246 complaint is filed, it makes
sense for the complaint to be investigated by OFCCP rather than EEOC,
to conserve law-enforcement resources.
------------------------------------------------------------------------
Types of Complaint
Reason Total Issues
------------------------------------------------------------------------
Executive Order...................... 3 Termination, Wages,
Demotion, Harassment,
Job Benefits, Job
Assignment, Segregated,
Retaliation, Other
Section 503.......................... 34 Hiring, Termination,
Layoff, Recall, Wages,
Promotion, Demotion,
Harassment, Job
Benefits, Job
Assignment, Training,
Retaliation, Disabled,
Other
Section 4212......................... 26 Hiring, Termination,
Layoff, Wages,
Promotion, Demotion,
Seniority, Harassment,
Job Benefits, Job
Assignment, Training,
Retaliation, Disabled,
Sabbath, Other
Other................................ 2 Termination, Other
----------------------------------
Total fiscal year 2009 (from Jan. 65
20, 2009).
Executive Order...................... 10 Hiring, Termination,
Layoff, Promotion,
Demotion, Seniority,
Harassment, Job
Benefits, Job
Assignment, Training,
Retaliation, Other
Section 503.......................... 36 Hiring, Termination,
Layoff, Recall, Wages,
Promotion, Demotion,
Harassment, Job
Benefits, Job
Assignment, Training,
Retaliation, Disabled,
Other
Section 4212......................... 47 Hiring, Termination,
Layoff, Wages,
Promotion, Demotion,
Seniority, Harassment,
Job Benefits, Job
Assignment, Training,
Retaliation, Disabled,
Other
Other................................ 1 Wages, Harassment, Job
Benefits, Job
Assignment, Segregated,
Retaliation, Disabled,
Other
----------------------------------
Total fiscal year 2010............. 94
Executive Order...................... 7 Hiring, Termination,
Wages, Demotion,
Harassment, Job
Assignment, Training,
Segregated,
Retaliation, Disabled,
Sabbath, Other
Section 503.......................... 35 Hiring, Termination,
Layoff, Wages,
Promotion, Demotion,
Seniority, Harassment,
Job Benefits, Job
Assignment, Training,
Segregated,
Retaliation, Disabled,
Other
Section 4212......................... 31 Hiring, Termination,
Layoff, Recall, Wages,
Promotion, Demotion,
Seniority, Harassment,
Job Benefits, Job
Assignment, Training,
Retaliation, Disabled,
Other
Other................................ 4 Hiring, Termination,
Wages, Harassment,
Retaliation, Other
----------------------------------
Total fiscal year 2011 (as of Aug. 77
15).
----------------------------------
Summary Totals: 3-Yr Executive 20 Executive Order ONLY
Order Total.
----------------------------------
Overall Total...................... 236 Executive Order, Section
503, VEVRAA, and Other
------------------------------------------------------------------------
Note: Some complaints alleged more than one basis. In those cases, OFCCP
personnel categorized them as ``Executive Order,'' ``Section 503,''
``Section 4212,'' or ``Other'' (thereby avoiding double-counting). The
``Other'' category is used for complaints that do not allege
violations of one of the laws that OFCCP enforces.
Question 30. It appears OFCCP is altering standards and guidance
for employers without replacing them with an alternative--leaving
Federal contractors to guess at how to comply with the law. Please
explain whether the ``Interpretative Standards for Systemic
Compensation Discrimination'' (71 FR 35124, June 16, 2006) were
followed for investigating cases of systemic compensation
discrimination for the last 2 years, and describe any additional
techniques being used by the agency to investigate compensation
discrimination? What standards will OFCCP use to evaluate compensation
discrimination once the current ones have been withdrawn? Without the
Standards and voluntary guidelines how do employers determine if they
are compliant with the law? If you are planning to issue other
standards, what are you holding employers to in the interim?
Answer 30. There is a pending Notice of Proposed Rescission of the
existing 2006 Interpretive Standards for Systemic Compensation
Discrimination and Voluntary Guidelines for Self-Evaluation of
Compensation Practices (2006 Standards). In the absence of the 2006
Standards, contractors will not have to ``guess'' at their compliance
obligations. OFCCP's longstanding policy is to follow title VII
principles in conducting investigations and analyses of potential
discrimination under Executive Order 11246, including compensation
discrimination. The agency will continue to hold contractors to title
VII principles with respect to equal employment opportunity in their
compensation practices.
During the past 2 years (August 2009 to August 2011), the 2006
Standards have applied to OFCCP reviews. However, it is important to
note that the 2006 Standards, by their terms, only related to the
standards by which a violation will be determined rather than the
methodology of investigations or preliminary assessments. During this
period, OFCCP identified very few Executive Order 11246 violations
involving compensation disparities and they largely involved
individuals or small cohorts where the 2006 Standards would not apply.
If the Standards are rescinded, OFCCP will develop and issue
compensation investigation procedures in the same manner it establishes
procedures for investigating other forms of discrimination--through
instructions for its compliance officers contained in the OFCCP Federal
Contract Compliance Manual (FCCM), directives, and other staff guidance
materials. OFCCP will continually refine those procedures to ensure
that they are as effective and efficient as possible.
OFCCP works hard to respond to the concerns of contractors and
subcontractors. In response to requests from the contractor community,
OFCCP publicly stated that the agency intends to further clarify how it
is investigating compensation discrimination.
Question 31. Given the fact that the construction industry has an
unemployment rate of 20 percent, why is OFCCP seeking to make changes
to the requirements applicable to that industry? In revising the
construction requirements, will OFCCP look into whether apprentice
programs meet affirmative action requirements since contractors often
rely on them for new hiring?
Answer 31. Even in times of high unemployment, it is important that
Federal contractors and subcontractors comply with their contractual
requirements and the law. In order for OFCCP to fully monitor this
compliance, the agency must have the tools it needs to effectively
enforce the law in the current environment. The construction
regulations are over 30 years old. Much has changed in the industry and
the workforce since that time. As a result, the requirements need
updating to reflect those changes. In considering revising the
requirements, OFCCP conducted a series of town hall meetings, webinars
and listening sessions to solicit comments on the construction
industry's compliance with Executive Order 11246 and recommendations
for revising and updating the regulations that apply to Federal and
federally assisted construction contractors and subcontractors.
OFCCP is developing a Notice of Proposed Rulemaking and is
considering the effect of apprenticeship programs on construction
industry employment during the process. Although OFCCP generally does
not have jurisdiction over apprenticeship sponsors because many are not
Federal Government contractors or subcontractors or federally assisted
construction contractors or subcontractors, OFCCP works closely with
the Office of Apprenticeship (OA) within the Department's Employment
and Training Administration (ETA). OA is currently updating its equal
opportunity regulations applicable to registered apprenticeship
programs. OFCCP and OA are coordinating development or their equal
opportunity regulations to ensure that their respective regulations
will be complementary.
Question 32. Please explain whether OFCCP is inquiring into Family
and Medical Leave Act (FMLA) policies and independent contractor
enforcement issues as part of its audits and investigations. How would
OFCCP detect and address a violation of FMLA or employment
misclassification given that it does not have authority under the
relevant statutes? For example, do you anticipate seeking debarment if
OFCCP determines there may be misclassification or FMLA violations?
Will OFCCP make referrals to other Federal agencies in this or other
areas if investigators detect a violation of laws that OFCCP does not
enforce? Please provide any documents, including memoranda of
understanding, regarding such referrals. Please explain what training
OFCCP has provided to it compliance officers about FMLA or independent
contractor status.
Answer 32. FMLA: Under the Executive order and section 503, OFCCP
may review leave and other personnel policies to determine whether they
either treat women, minority groups, and others protected by the laws
OFCCP enforces differently than others, have a discriminatory impact on
these employees or applicants, or both. This review does not constitute
FMLA enforcement. Should OFCCP uncover evidence of possible violations
of the FMLA in the course of its review of such policies, its
Memorandum of Understanding with the Wage and Hour Division (WHD) of
the U.S. Department of Labor, which enforces the FMLA, provides that
OFCCP will refer any apparent violations to WHD. See attached copy of
the Memorandum of Understanding.
Employee misclassification: Pursuant to section 4212 as well as to
the Executive order and section 503, OFCCP has jurisdiction to
determine whether individuals who work for a contractor are properly
classified as employees or independent contractors. That information is
essential to almost every aspect of OFCCP's investigations and
compliance evaluations, including, for example, establishment of
jurisdiction; accuracy of EEO-1 reports; and existence of
discriminatory decisions regarding hiring, promotion, termination, and
compensation.
Training: In the years immediately preceding this Administration,
the National Office of OFCCP did not routinely provide standardized
training to its compliance officers (COs). Training occurred on the
job, or was provided infrequently by regional or district offices. In
August 2010, OFCCP standardized National Office training, with Basic
Training being offered to every newly hired CO, refresher training
opportunities offered for current COs, and specialty training sessions
to be offered on an on-going basis for all COs. FMLA and independent
contractor status are both expected to be topics of future specialty
trainings. During OFCCP's All-Managers Meeting, held in early August
2011, OFCCP piloted training on FMLA issues.
Question 33. Does OFCCP verify that there is a covered contract
before seeking to investigate/audit an entity? What guidance/directives
have been issued since January 20, 2009 on jurisdictional requirements
to OFCCP staff? Please provide a copy of all such guidance. Please
explain whether OFCCP staff believe a jurisdictional objection to an
investigation or audit can be waived if a non-Federal contractor
initially complies with the agency's requests/investigation but then
realizes they are not a covered Federal contractor.
Answer 33. Before scheduling an entity for a compliance evaluation,
OFCCP verifies that there is a covered contract at two distinct stages.
First, pursuant to an agency initiative called ``Contracts First'',
OFCCP's Data Integrity Team evaluates all possible entities for
scheduling by researching the entity's Federal contract activity
through Federal contractor Web sites that summarize a company's Federal
contracting activity with the Federal Government (i.e., FPDS-NG), and
by examining the company's statement on its EEO-1 Report that it is a
Federal contractor (i.e., Question 3 data). The ``Contracts First''
initiative occurs while the annual scheduling list is being developed
by the Data Integrity Team, and before the scheduling notification
letters are issued to companies by OFCCP field offices. If the
underlying Federal contract meets the requisite dollar amount for
coverage under the laws that OFCCP enforces, and the contract's term is
current when the annual scheduling list is developed, then it becomes a
candidate for possible scheduling by OFCCP. Secondly, once an OFCCP
field office selects that entity for a scheduled compliance evaluation,
field staff will generally contact the entity directly by phone to
verify its Federal contractor status, physical location, and number of
employees at the establishment.
OFCCP's National Office, through its Division of Program
Operations, has held many training sessions via webinar presentations
to provide guidance for OFCCP field staff on jurisdictional issues. For
example, on December 3, 2009, OFCCP's National Office held a joint
webinar presentation with attorneys from the Department's Office of the
Solicitor for OFCCP. This webinar was created for field staff to
address jurisdictional issues and to reinforce the elements needed to
establish jurisdiction over scheduled entities (see attached Power
Point presentation). This same presentation was provided later as an
external webinar for our stakeholders and members of the public.
A jurisdictional objection to an investigation cannot be waived at
any time by the scheduled entity during a compliance review or
subsequent litigation, even if it initially complies with the agency's
request for materials or investigation. The contractor can raise a
jurisdictional objection at any time during the review once the
contractor realizes that it is not covered. If OFCCP can verify that it
has no jurisdiction over a company, it cannot proceed with a review,
even if the company has already provided us with documents/materials.
OFCCP does, however, have the authority to investigate whether it has
jurisdiction over a company.
Question 34. Please provide a list of peer reviewed or agency
enforcement data to support the statement in the 2012 OFCCP budget
justification that there is still a 23 percent ``pay gap'' between
women and men.
Answer 34. According to the U.S. Census Bureau,\1\ women still earn
only 77 cents for each dollar earned by a man. This is based on a broad
comparison of workers age 15 and older who work full-time, year-round.
The wage gap is even greater for women of color: non-Hispanic white
women make 75 cents for every dollar earned by a non-Hispanic white
man, while African-American women make 62 cents and Latinas make 53
cents for every dollar earned by a non-Hispanic white man.
---------------------------------------------------------------------------
\1\ Source: Calculations from U.S. Census Bureau, Current
Population Survey, 2010 Annual Social and Economic Supplement, Table
PINC-05: Work Experience in 2009--People 15 Years Old and Over by Total
Money Earnings in 2009, Age, Race, Hispanic Origin, and Sex, available
at http://www.census.gov/hhes/www/cpstables/032010/perinc/toc.htm (last
visited Dec. 7, 2010).
Question 35. OFCCP and EEOC are reportedly both in the process of
requesting information to develop surveys on compensation. Please
explain whether allowing both agencies to seek this information
separately complies with the Equal Pay Task Force's recommendation ``To
avoid duplicative data collection efforts, OFCCP and the EEOC will work
collaboratively when evaluating data collection needs, capabilities,
and tools.'' How does OFCCP plan to develop and implement this survey
and what is the status of the survey development? Will you also commit
to ensuring the survey is validated and goes through the notice and
comment process before being imposed on the private sector?
Answer 35. OFCCP has been in close communication with EEOC
regarding the proposed compensation survey instruments. Neither agency
wants to impose duplicative or conflicting data collection requirements
on Federal contractors. At this time, each agency is pursuing different
but complementary information gathering channels--OFCCP through its
recently issued Advance Notice of Proposed Rulemaking is gathering
public comment from all stakeholders through a traditional public
notice and comment process. EEOC has commissioned an expert panel
through the National Academies of Sciences to provide a report and
recommendation. These approaches are in fact complementary and were set
forth in the Equal Pay Task Force's Pay Equity Report. Indeed, seeking
more and broader input before proceeding is a sound regulatory
practice. OFCCP's plans are set forth in the ANPRM available at http://
www.regulations.gov/#!documentDetail;D=OFCCP-2011-0005-0001, which
calls for advance public comment and also states that there will be an
additional public comment period following the NPRM.
Question 36. As detailed in the 2012 budget justification, OFCCP
reportedly plans to release contractor data to allow the public to
``[c]onduct automated surveys'' regarding OFCCP's enforcement
activities and provide information ``to various ethnically diverse
groups which comprise the general population.'' How does OFCCP plan to
accomplish this and what are the goals of doing so? Please explain how
OFCCP will protect privacy for individuals and businesses.
Answer 36. The language quoted refers to OFCCP's ongoing build-out
of its new IT system, the Federal Contractor Compliance System (FCCS).
By bringing together and integrating several disparate data and
reporting systems, the FCCS will greatly improve OFCCP's enforcement
activities in a variety of ways. For example, it is being designed so
that, among other things, it will:
Provide fundamental information describing OFCCP, its
mission, and the laws it enforces in multiple languages to the public
in general and specifically to stakeholders from the ``various
ethnically diverse groups which comprise the general population;''
Enable OFCCP to conduct more robust analysis and make
better use of statistical workforce data;
Make data submission during compliance evaluations much
more efficient and less time-consuming by providing a secure web portal
through which Federal contractors can submit their data electronically;
Capture and search information about complaints filed with
the agency;
Enhance recordkeeping and records retrieval;
Survey and evaluate OFCCP's own enforcement activities
(these are the ``automated surveys'' quoted in the Question); and .
Report aggregate data about OFCCP's enforcement activities
to Congress, interested stakeholders, and the public at-large.
The FCCS is being developed to be in full compliance with the
Privacy Act as well as the Trade Secrets and Freedom of Information
Acts. It will not post or otherwise release private data of contractors
or individuals except as permitted under law.
Our ability to provide information in multiple languages will also
be greatly enhanced by the FCCS. Fundamental information describing
OFCCP, its mission, and the laws it enforces will be made available to
the broadest possible scope of communities and stakeholders.
Question 37. It is vital that positions in the career senior
executive service be filled based on civil service merit requirements
so that all candidates who are interested--both inside and outside
government--can be considered. Are there any career senior executive
service positions that you have filled using emergency authority
thereby avoiding merit competition? If so, please explain why.
Answer 37. The Department of Labor (DOL) has not utilized emergency
hiring authority to fill any of our current career SES positions.
Question 38. In October 2010, the Employee Benefits Security
Administration (EBSA) published a proposed rule revising the term
``fiduciary'' pursuant to ERISA Section 3(21)(A). The Regulatory
Flexibility Act requires Federal agencies to conduct regulatory
economic analyses if a rule proposal has a significant economic impact
upon a substantial number of small entities. In the preamble to the
fiduciary rule proposal, EBSA states that the proposal will directly
affect plan sponsors. Why did EBSA not conduct a Regulatory Flexibility
Act analysis on small plan sponsors?
Answer 38. In the preamble to the original proposed regulation, the
Department performed an initial regulatory flexibility analysis that
conformed to the requirements of the Regulatory Flexibility Act. The
Department based this analysis on the best information it had available
at that time, and solicited public comment on the impact of the rule on
small entities. The re-proposal of the rule, which is expected to be
issued in early 2012, will ensure that the public receives a full
opportunity to review the agency's updated economic analysis and
revisions of the rule.
Currently, small employers rely on advice from financial
professionals, such as investment advisers, to help them design and
implement their retirement plans. The original proposed regulation
would protect small employers by making it more difficult for
investment advisers to steer these small employers into investment
options that pay higher fees to the advisor. It would also hold
advisers accountable for any imprudent advice that causes harm to plans
and participants.
Question 39. Since the Regulatory Flexibility Act is designed to
give small entities the chance to review and understand the potential
burdens and costs and then a chance to comment on those proposed
burdens and costs, it would be inappropriate for the Department to
conduct a Final Regulatory Flexibility Act analysis on small-plan
sponsors. Will EBSA re-propose the fiduciary rule with the proper
economic analyses?
Answer 39. As stated in the response to Question 38 above, the
Department's original proposed rule complied with the requirements of
the Regulatory Flexibility Act. As we move forward to re-propose the
rule, we will continue to comply with all Regulatory Flexibility Act
requirements and take into account the input on our proposal that we
have received from stakeholders.
Question 40. The fiduciary rule proposal inquires as to whether a
fiduciary duty should attach to disbursements from plans and roll-overs
authorized by participants into individual retirement accounts. If the
final rule does cover both of these events, could small plan sponsors
be held liable for violations of a fiduciary duty related to these
events? In addition, would small plan sponsors be held liable for roll-
overs conducted by third party service providers (that do not have a
contract with the plan) conducted on behalf of former employees?
Answer 40. The Department noted in the preamble to the original
proposed regulation that,
``As a general matter, a recommendation to a plan participant
to take an otherwise permissible plan distribution does not
constitute investment advice within the meaning of the current
regulation, even when that advice is combined with a
recommendation as to how the distribution should be invested.''
The Department requested public comment in the original proposal as
to whether and to what extent the final regulation should encompass
recommendations related to taking a plan distribution. As we move
forward to re-propose the rule, the public will have the opportunity to
provide further input on this issue.
Question 41. Recently, a senior Department official testified
before Congress regarding the fiduciary rule proposal. In a response to
a question regarding appraisers and/or valuation experts for employee
stock option plans (ESOP's), the official responded, ``. . . What
ERISA's fiduciary rules say is that you have a duty to be fair,
objective and meet professional standards of conduct . . .'' Courts
have found that ERISA fiduciaries have duties of prudence and of
loyalty. If the fiduciary proposal is finalized in its current form,
will ESOP appraisers and/or valuation experts be held to both duties of
prudence and of loyalty (i.e., exclusive benefit)? Are there any other
examples under ERISA where a fiduciary would be held only to a standard
of prudence?
Answer 41. The Department's original proposal contemplates that
ESOP appraisers and valuation experts who provide an appraisal or
fairness opinion for a fee would be subject to the fiduciary duties of
prudence and loyalty. The duty of loyalty, however, would generally
require no more than that the appraiser provide an objective and
unbiased valuation. It is not in the best interest of the plan for the
valuation to be incorrect. As stated in the preamble to the proposed
rule,
``The Department would expect a fiduciary appraiser's
determination of value to be unbiased, fair, objective and to
be made in good faith and based on a prudent investigation
under the prevailing circumstances then known to the
appraiser.''
As we move forward to re-propose the rule, we will respond to
concerns about the application of the regulation to routine appraisals.
Question 42. For the past 5 years, please list any regulatory
proposal issued by the Department that required an economic analysis
pursuant to Executive Order 12866.
Answer 42. Between August 2006 and August 2011, the Department
published a total of 82 notices of proposed rulemaking (NPRMs). Of
these proposals, the Department conducted an Executive Order 12866
economic analysis on the following eight economically significant
items.
----------------------------------------------------------------------------------------------------------------
Publication
Agency Title Date FR Cite
----------------------------------------------------------------------------------------------------------------
EBSA..................................... Default Investment 9/27/2006 71 FR 56806
Alternatives under 7/23/2008 73 FR 43014
Participant- Directed 3/2/2010 75 FR 9360
Individual Account Plans. 10/22/2010 75 FR 65263
Fee and Expense Disclosures
to Participants in
Individual Account Plans.
Investment Advice--
Participants and
Beneficiaries.
Definition of the Term
``Fiduciary''.
ETA...................................... Wage Methodology for 10/5/2010 75 FR 61578
Temporary Non-Agricultural
Employment H-2B Program.
MSHA..................................... Refuge Alternatives for 6/16/2008 73 FR 34140
Underground Coal Mines.
OSHA..................................... Hazard Communication....... 9/30/2009 74 FR 50279
Walking and Working 5/24/2010 75 FR 28862
Surfaces.
----------------------------------------------------------------------------------------------------------------
______
Quarterly Case Status Report; Period: April 1, 2011-June 30, 2011;
ABA Approved Attorney Referral System
summary--case status report
Total Programs Reporting: 40 Programs reporting .
Twenty-one programs have not received any contacts during this
quarter.
Nineteen programs have received contact(s) during this quarter, see
below for the details.
case activity
1. Brief counsel/brief services: Case closed as a result of brief
advice or other action taken within a few days or weeks of accepting
the referral.
Number of cases: 38.
2. Insufficient merit to proceed. Case closed.
Number of cases: 13.
3. Case referral made, no followup contact by client. (No contact
made to the attorney after referral from the LRIS program.)
Number of cases: 14.
4. Case open--resolution pending.
Number of cases: 17.
5. Negotiated settlement without litigation: Case closed through
negotiation prior to starting court action, resulting in:
Number of cases in this category: 2.*
* Two different programs reporting amounts recovered: $7,000 and
$17,500.
---------------------------------------------------------------------------
a. FLSA: $24,500 in back wages and $0.00 in liquidated damages
(if applicable) on behalf of 2 * (x number of ) workers.
b. FMLA: ________________________________
(type of relief or remedy obtained, i.e. reinstatement,
back pay, front pay)
6. Negotiated settlement with litigation: Case settled after filing
in court of court action, resulting in:
Number of cases in this category: 0.
a. FLSA: $____ in back wages and $____ in liquidated damages
(if applicable) on behalf of ____ (x number of ) workers.
b. FMLA: ________________________________
(type of relief or remedy obtained, i.e. reinstatement,
back pay, front pay).
7. Case resolved through (check one):
Number of cases in this category: 0.
Jury
Bench Trial
a. FLSA decision in favor of plaintiffs with $____ in back
wages and $____ in liquidated damages (if applicable) on behalf
of $____(x number of ) workers.
b. FLMA decision in favor of plaintiff resulting in:
____________________________________
____________________________________
(type of relief or remedy obtained, i.e. reinstatement, back
pay, front pay).
c. Decision in favor of defendants.
Attachment 1
U.S. Department of Labor,
Office of the Assistant Secretary
for Administration and Management,
Washington, DC 20210,
January 29, 2010.
MEMORANDUM FOR: AGENCY ADMINISTRATIVE OFFICERS,
REGIONAL ADMINISTRATORS, OASAM
FROM: SUZY M. BARKER, Director of Human Resources
SUBJECT: Determination of Fair Labor Standards Act (FLSA) Coverage for
Department of Labor (DOL) Positions
This memorandum establishes new requirements for the designation of
all DOL. positions as exempt or nonexempt from the provisions of the
Fair Labor Standards Act (FLSA), in accordance with provisions of part
551 of title 5, Code of Federal Regulations (5 CFR part 551).
Specifically, all DOL positions at the GS-11 grade level and lower
will be designated as FLSA nonexempt, unless a position has been
previously designated as exempt by a finalized union agreement relating
to the FLSA (including any agreements to which the Department has
agreed in the course of pending grievances or other litigation), or the
position clearly and compellingly meets exemption criteria under 5 CFR
part 551, consistent with the 5 CFR 551.202(a) provision that requires
a position to be designated as nonexempt unless it fully meets
exemption requirements. If reasonable doubt exists as to whether
exemption criteria are met, the position must be designated as FLSA
non-exempt.
The Department of Labor enforces the FLSA provisions as they apply
to the nonFederal sector. Accordingly, it is expected that the
Department will be in full compliance with the Act, and will serve as
an example to other Federal sector agencies. It is critical that we
demonstrate appropriate application of the Federal sector FLSA
provisions to all Department positions and employees. In this regard,
the aforementioned new FLSA designation requirements reflect a
deliberate initiative within the Department to ensure that the FLSA
provisions established under 5 CFR part 551 are correctly and
consistently applied to all DOL, positions and employees, and to reduce
DOL's vulnerability to future FLSA grievances.
The new FLSA designation requirements established by this
memorandum are effective immediately for all new and vacant positions.
Position descriptions and PeoplePower records must reflect the
appropriate FLSA designation by the time such positions are filled.
Additionally, within 30 days of the date of this memorandum, agency and
Regional human Resources Offices are directed to review all encumbered
positions at grades GS-11 and below that are currently designated as
FLSA exempt, determine whether the positions should be re-designated as
non-
exempt in accordance with the provisions of this memorandum, and update
position descriptions and PeoplePower records as appropriate. Human
Resources Offices are requested to provide written confirmation to the
OASAM Office of Human Resources Policy and Accountability (OHRPA) that
these actions are complete. Compliance with these new FLSA designation
requirements will be confirmed during future Human Resources Management
Accountability Program reviews conducted by OHRPA.
I appreciate your support in implementing the provisions of this
memorandum.
Please direct questions about this memorandum to Katherine
Greenlaw, Office of Human Resources Policy and Accountability, HRC,
OASAM, at (202) 693-7737 or [email protected].
Attachment 2
U.S. Department of Labor,
Office of the Assistant Secretary
for Administration and Management,
Washington, DC 20210,
January 29, 2010.
MEMORANDUM FOR: AGENCY ADMINISTRATIVE OFFICERS,
OASAM REGIONAL ADMINISTRATORS
FROM: SUZY M. BARKER, Director of Human Resources
SUBJECT: Fair Labor Standards Act (FLSA)-Position Description
Requirements
This memorandum establishes new requirements for documenting Fair
Labor Standards Act (FLSA) coverage on position descriptions (PDs)
within the Department of Labor.
Effective immediately, all new PDs must reflect the following
requirements:
1. Approximate percentage of time spent on each major duty. An
essential component of the FLSA exemption criteria provided under title
5, Code of Federal Regulations (5 CFR part 551) is the ``Primary Duty
Test,'' which specifies that exempt work must be performed for a
``majority of time.'' Accordingly, for each major duty required by the
position, the PD should indicate the approximate percentage of the
employee's time spent performing such major duty. When identifying the
major duties, include only those duties that are performed 25 percent
or more of the time. Also, since duties can occur on a cyclical basis
within the year, remember that the percentage of time spent should be
based on the full annual cycle of duties performed. The sum of the
percentages listed in the position description should equal 100
percent.
2. The basis for FLSA exemption or coverage. The FLSA determination
must be included on all new PDs by completing and incorporating the
FLSA checklist (Attachment A) within the body of the position
description. This checklist is a summary; however, the complete
rationale for the FLSA determination must be documented by completing
the appropriate worksheet (Attachment B). The worksheet must then be
retained with the official copy of the PD.
Implementation of the new requirements and utilizing the attached
tools will provide a consistent approach in documenting FLSA
determinations for positions departmentwide. Please direct questions
about this memorandum to Katherine Greenlaw, Office of Human Resources
Policy and Accountability, HRC, OASAM, at (202) 693-7737 or by email at
[email protected].
Attachment 3
U.S. Department of Labor,
Office of the Assistant Secretary
for Administration and Management,
Washington, DC 20210,
January 29, 2010.
MEMORANDUM FOR: AGENCY ADMINISTRATIVE OFFICERS,
REGIONAL ADMINISTRATORS, OASAM
FROM: SUZY M. BARKER, Director of Human Resources
SUBJECT: Management of Overtime Pay, Compensatory Time Off, and Credit
Hours for FLSA Exempt and Nonexempt Employees
The following is a brief, general overview of overtime pay,
compensatory time off, and compensatory time off for travel. We would
like agencies to distribute this information to all employees so that
they can be aware of their rights and responsibilities regarding the
approval of overtime work and the Administration of the time and
attendance system.
It is the responsibility of supervisors to properly manage their
employees' work schedules, to authorize overtime work when it is
necessary to accomplish the mission of the organization, and to approve
employees' bi-weekly time and attendance submissions as appropriate.
Knowledge of these rules will enable supervisors to ensure that the
regulations are adhered to, and that employees receive the compensation
to which they are entitled. Servicing human resources offices can
provide valuable guidance and assistance based on their knowledge and
familiarity with the Office of Personnel Management's (OPM)
governmentwide regulations and the Department's implementing policies.
fair labor standards act (flsa)
The Fair Labor Standards Act is a Federal law administered by the
Department of Labor that protects workers by providing minimum
standards for both wages and overtime entitlement and rules governing
overtime pay. Included in the Act are provisions related to child labor
and equal pay. While the Department of Labor has responsibility for
administering and enforcing the FLSA in the private sector, OPM
administers the provisions of the FLSA for Federal employees. These OPM
provisions, which apply to Federal employees and are addressed in this
memorandum, are not identical with the regulations applicable to the
private sector, but are consistent where practicable to maintain
compliance with the FLSA.
flsa nonexempt or exempt
The duties of an employee's position determine whether an employee
is covered (nonexempt) or not covered (exempt) by the FLSA. Each
agency's servicing human resources office determines FLSA coverage, and
this information is contained in Block 7 of each employee's position
description cover sheet (OF-8) or Block 35 of the Standard Form 50
(i.e., ``E'' for exempt, and ``N'' for nonexempt). These documents are
available in each employee's electronic Official Personnel Folder
(eOPF). Nonexempt employees are covered by the FLSA rules while exempt
employees are covered by rules in title 5 of the United States Code
(U.S.C.).
overtime pay rules
Employees not covered by FLSA (i.e., FLSA exempt)
Overtime work must be officially ordered or approved in
writing by an authorized official. Employees shall use DOL Form DL-1-
105, available on LaborNet, to document ordered or approved overtime.
Overtime hours are for work ordered or approved in
advance, performed over 8 hours per work day or 40 hours per work week.
For flexible work schedules, overtime hours are generally for work
ordered or approved in excess of 80 hours per biweekly pay period. (But
see below for guidance on the difference between overtime work and
credit hours.)
For exempt employees whose rate of basic pay does not
exceed the rate of pay for GS-10, step 1, the overtime hourly rate is
1.5 times their hourly rate of basic pay. For exempt employees whose
rate of basic pay exceeds GS-10, step 1 and whose pay is below or equal
to the GS-10 step 10 level, the overtime hourly rate (when overtime
work has been properly approved) is the greater of: (i) 1.5 times the
rate of basic pay for GS-10, step 1, or (ii) 1.0 times the employee's
hourly rate of basic pay. For all other DOL employees (i.e., those
whose rate of basic pay exceeds the GS-10 step 10), DOL generally
provides an equivalent amount of compensatory time off for all
authorized irregular or occasional overtime.
The ``biweekly pay cap'' limits the amount of premium pay
(overtime pay, night pay, Sunday pay, holiday premium pay, compensatory
time off, and some others, such as Law Enforcement Availability Pay,
and Standby Duty Pay) that an exempt employee may receive in any 2-week
period, to the greater of the pay for GS-15, step 10 (including any
applicable locality pay or special rate supplement) or the rate payable
for Executive Schedule level EX-V ($145,700 in 2010). In emergency or
mission-critical situations, an annual premium pay cap may be used
instead of a biweekly pay cap.
When the biweekly pay cap is reached, FLSA exempt
employees may still be ordered to perform overtime work without
receiving further compensation.
Employees covered by FLSA (i.e., FLSA nonexempt)
Overtime hours are for work performed that is over 8 hours
in a day or 40 hours in a workweek. For employees on flexible work
schedules, overtime hours are generally those in excess of 80 hours per
biweekly pay period. (But see below for guidance on the difference
between overtime work and credit hours.) Employees shall use DOL Form
DL-1-105, available on LaborNet, to document ordered or approved
overtime.
Creditable overtime work includes work ordered or approved
by an authorized official. In addition, generally any work that is
``suffered or permitted'' (e.g., overtime work not officially
authorized or approved by an authorized official but of which
management was aware) is also creditable as overtime hours. However,
for employees on a flexible work schedule, overtime hours are defined
to include only hours officially ordered in advance. (See below for
guidance on the difference between overtime work and credit hours.) A
supervisor is responsible for preventing the performance of
unauthorized work.
Nonexempt employees on a flexible work schedule will be
paid overtime compensation for overtime as defined in 5 U.S.C.
Sec. 6121--i.e., ``overtime'' includes all hours in excess of 8 hours
in a day or 40 hours in a week that are officially ordered in advance,
but does not include credit hours voluntarily worked.
The overtime hourly rate (when overtime work for such
employees has been properly approved) is equal to 1.5 times the
employee's ``hourly regular rate,'' which is computed by dividing total
remuneration (not just basic pay) by the total number of hours of work
for the given period (usually 1 week).
No hourly, biweekly, or annual pay caps limit FLSA
overtime pay; overtime work must always be compensated.
compensatory time off
Employees not covered by FLSA (i.e., FLSA exempt)
For employees on flexible work schedules, at the
employee's request, compensatory time off may be approved in lieu of
overtime pay for any overtime work, whether regularly scheduled or
irregular or occasional overtime work,
For employees not on a flexible work schedule, at the
employee's request, compensatory time off may be approved in lieu of
overtime pay only for irregular or occasional overtime work.
The agency can require the payment of compensatory time
off (rather than overtime pay) only for FLSA exempt employees with pay
greater than GS-10, step 10 (including applicable locality pay and
special rate supplements), and only in lieu of overtime pay for
irregular or occasional overtime work.
FLSA exempt employees whose pay exceeds the biweekly pay
cap (as defined above) cannot receive ``premium pay,'' which includes
both overtime pay and crediting of compensatory time.
FLSA exempt employees have 26 pay periods after the pay
period in which compensatory time is earned to use the hours. Any hours
unused after 26 pay periods will be forfeited.
Employees covered by FLSA (i.e., FLSA nonexempt)
For employees on flexible work schedules, at the
employee's request, compensatory time off may be approved in lieu of
overtime pay for any overtime work, whether regularly scheduled, or
irregular or occasional overtime work.
For employees not on a flexible work schedule, at the
employee's request, compensatory time off may be approved in lieu of
overtime pay only for irregular or occasional overtime work.
FLSA nonexempt employees may never be ordered to take
compensatory time off in lieu of overtime pay.
The biweekly pay cap does not apply to FLSA nonexempt
employees.
FLSA nonexempt employees have 26 pay periods after the pay
period in which compensatory time is earned to use the hours. The
nonexempt employee will be paid for any hours unused after 26 pay
periods at the overtime rate in effect when the hours were earned.
overtime vs. credit hours for flsa exempt and nonexempt employees
Under the flexible work schedules, which are in use
throughout DOL, it is important to distinguish overtime hours from
credit hours. In accordance with 5 CFR 610.404, employees on a flexible
work schedule at the Department of Labor need to sign in and out every
day to account for their time worked. Hours that an employee on a
flexible schedule voluntarily works--to accrue hours in excess of the
basic work requirement--are credit hours, not overtime hours.
For example, an employee has an assignment which
requires several days to complete, and chooses to work extra
hours on 2 days to complete the assignment. If the employee
exceeds the 80-hour basic work requirement for the pay period,
the extra hours will count as credit hours.
An employee on a flexible schedule--whether FLSA exempt or
FLSA nonexempt--receives overtime pay or compensatory time if ordered
to work beyond 8 hours on a given day or 40 hours during a given week.
Employees shall use DOL Form DL-1-105, available on LaborNet, to
document ordered or approved overtime.
For example, if an employee informs the supervisor
that he/she cannot complete an assignment by the established
deadline unless he/she works overtime and the supervisor
authorizes the overtime work by signing the DL-1-10, the
employee will receive compensatory time or overtime pay, as
appropriate, for work performed in excess of 8 hours in a day
or 40 in a week to complete the assignment.
An employee may accrue no more than 24 credit hours for
carryover from pay period to pay period.
Credit hours are not included in the premium pay cap.
compensatory time for travel of flsa exempt and nonexempt employees
Compensatory time for travel is earned by an employee,
without regard to whether he or she is FLSA exempt or nonexempt, for
time spent in a travel status away from the employee's official duty
station when such time is not otherwise compensable. See DOL Spotlight
No. 890 for more information.
Compensatory time for travel is not included in the
biweekly pay cap.
``Travel status'' includes only the time actually spent
traveling between the official duty station and a temporary duty
station, or between two temporary duty stations, and the usual waiting
time that precedes or interrupts such travel--typically 1 hour for air
travel within the United States and 2 hours for international travel.
Both FLSA exempt and nonexempt employees have 26 pay
periods after the pay period in which compensatory time for travel is
earned to use the hours. Any hours unused after 26 pay periods are
forfeited, regardless of the employee's FLSA coverage.
The following references are also provided for your convenience:
OPM Regulations
Covered by Title 5 (5 U.S.C.): 5 CFR part 550.
Overtime and Compensatory Time for FLSA Nonexempt Staff: 5 CFR part
551.
Compensatory Time Off for Travel: 5 CFR part 550, subpart N.
DOL Policies
Overtime and Compensatory Time for FLSA Exempt Staff Covered by
Title 5 (5 U.S.C.): DPR 550.
FLSA Nonexempt Staff Covered by the Fair Labor Standards Act: DPR
551.
Compensatory Time Off for Travel: DPR 550; Spotlight 890 at http://
www.labornet.dol.gov/DCS_FileSystem/Spotlights/Spotlight890.doc.
U.S. Department of Labor,
Office of the Assistant Secretary
for Administration and Management,
Washington, DC 20210,
January 29, 2010.
MEMORANDUM FOR AGENCY HEADS
FROM: T. MICHAEL KERR
SUBJECT: Application of the Fair Labor Standards Act (FLSA) in the
Department of Labor (D0L)
This correspondence establishes new requirements for the
application of the Fair Labor Standards Act (FLSA) within DOL, as the
Act is administered by the Office of Personnel Management (OPM) for
Federal sector positions under the provisions of part 551 of title 5
Code of Federal Regulations (5 CFR 551). In addition, this memorandum
transmits guidance to assist DOL, management officials, human resources
representatives, and employees in implementing these Departmental
requirements and in understanding the implications of FLSA coverage for
overtime and compensatory time off.
DOL enforces the FLSA provisions as they apply to the non-Federal
sector. Accordingly, it is expected that the Department will be in full
compliance with the Act and will serve as an example to other Federal
sector agencies. It is critical that we demonstrate appropriate
application of the Federal sector FLSA provisions to all Department
positions and employees. In this regard, the requirements and guidance
provided with this memorandum reflect a deliberate initiative within
the Department to ensure that the FLSA provisions established under 5
CFR part 551 are correctly and consistently applied to all DOL,
positions and employees and to reduce DOL's vulnerability to future
FLSA grievances.
Please find attached the following:
Memorandum for Agency Administrative Officers/Regional
Administrators, OASAM: Determination of Fair Labor Standards Act (FLSA)
Coverage for Department of Labor (DOL) Positions (Attachment 1). This
memorandum requires all DOL positions at the GS-11 grade level and
lower to be designated as FLSA nonexempt, unless a position has been
previously designated as exempt by a finalized union agreement relating
to the FLSA (including any agreements to which the Department has
agreed in the course of pending grievances or other litigation), or the
position clearly and compellingly meets the exemption criteria under 5
CFR part 551. This requirement is consistent with 5 CFR 551.202(a),
which requires that a position must be designated as nonexempt unless
it fully meets the exemption requirements. If reasonable doubt exists
as to whether exemption criteria are met, the position must be
designated as FLSA non-exempt.
Memorandum for Agency Administrative Officers and OASAM
Regional Administrators from the Director of Human Resources: FLSA
Position Description Requirements (Attachment 2). This memorandum
requires all new DOL position descriptions (PDs) to reflect the
approximate percentage of time spent on each major duty, and to reflect
the basis for FLSA exemption from coverage within the body of the PD.
The memorandum additionally requires the complete rationale for the
FLSA determination to be documented and retained with the official copy
of the PD.
Memorandum for Agency Administrative Officers and OASAM
Regional Administrators from the Director of Human Resources:
Management of Overtime Pay, Compensatory Time Off, and Credit Hours for
FLSA Exempt and Nonexempt Employees (Attachment 3). This memorandum,
which is suitable for distribution to all employees, provides a general
overview of overtime pay, compensatory time off, compensatory time off
for travel, and credit hours under flexible work schedules, so that
supervisors and employees can be aware of their rights and
responsibilities regarding the implications of FLSA designation on
eligibility for and approval of overtime work.
Two additional accountability initiatives further emphasize
appropriate application of the FLSA as a priority within this
Department:
The DOL performance management forms for executives and GS
managers and supervisors have been updated for the fiscal year 2010
performance cycle to include the responsibility for complying with the
ELSA requirements. Specifically, the managerial competency for
``Resource Management'' has been modified to require executives,
managers, and supervisors to prevent staff from working unauthorized
overtime hours by consistently applying FLSA and DOL policy regarding
overtime, maintaining an awareness of staff hours worked and
organizational goals accomplished, and ensuring that staff are
knowledgeable of how the FLSA designation impacts overtime eligibility
and authorization. This new requirement was announced in my September
24, 2009, memorandum to Agency Heads: Closing-Out Fiscal Year (FY) 2009
Performance Appraisals and Establishing FY 2010 Performance Plans for
Senior Executive Service, Senior Level, and General Schedule Employees.
The DOL Human Resources Management Accountability Review
Program has been expanded to include review of FLSA exemption
designations. Specifically, human resources accountability reviews led
by the OASAM Human Resources Center's Office of Human Resources Policy
and Accountability now include a review of selected FLSA exemption
designations for purposes of ensuring compliance with governmentwide
and DOL requirements.
Finally, the Department will soon release a comprehensive tutorial
regarding the implications of FLSA designation through the LearningLink
portal. All DOL personnel will be required to complete this course,
which is intended to supplement the guidance addressed in this
memorandum.
I appreciate your support in implementing the provisions of this
memorandum and the attachments.
Please direct questions about this memorandum to Katherine
Greenlaw, Office of Human Resources Policy and Accountability, HRC,
OASAM, at (202) 693-7737 or [email protected].
U.S. Department of Labor, Employment Standards Administration, Wage and Hour Division--All Acts
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
WHD division enforcement Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year
statistics--All acts 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Back Wages Collected............ $131,954,657 $175,640,492 $212,537,554 $196,664,146 $166,005,014 $171,955,533 $220,613,703 $185,287,827 $172,615,125 $176,005,043
Employees Receiving Back Wages.. 216,647 263,593 342,358 288,296 241,379 246,874 341,624 228,645 219,759 209,814
Complaints Registered........... 29,085 31,413 31,123 31,786 30,375 26,256 24,950 23,845 26,311 31,824
Enforcement Hours............... 998,937 1,070,600 1,032,879 1,000,739 969,776 951,971 899,406 882,419 879,626 1,066,188
Average Days to Resolve 139 129 108 92 85 93 97 97 101 142
Complaint......................
Concluded Cases................. 38,051 40,264 39,425 37,842 34,858 31,987 30,467 28,242 24,922 26,486
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fair Labor Standards Act Back Wages
----------------------------------------------------------------------------------------------------------------
Percent of
Percent of Employees employees
Violation Back wages FLSA back receiving receiving
collected wages back wages FLSA back
(duplicated) wages
----------------------------------------------------------------------------------------------------------------
Fiscal Year 2009:
Minimum Wage............................ 9,176 13,918,600 10 40,235 21
Overtime................................ 8,792 119,215,069 90 175,496 92
Fiscal Year 2010:
Minimum Wage............................ 10,529 21,043,700 16 52,530 28
Overtime................................ 8,788 107,545,263 84 166,295 90
----------------------------------------------------------------------------------------------------------------
Back Wages Collected For Workers in Low-Wage Industries
----------------------------------------------------------------------------------------------------------------
Low-wage
industries
Low-wage industries Cases Back wages Employees statistics Cases Back wages Employees
statistics fiscal year 2010 fiscal year
2009
----------------------------------------------------------------------------------------------------------------
Agriculture.................. 1,259 $3,153,957 5,744 Agriculture.... 1,379 $1,404,125 5,523
Day Care..................... 694 $1,018,255 3,028 Day Care....... 714 $1,074,842 3,310
Restaurants.................. 3,759 $16,415,519 23,042 Restaurants.... 3,818 $17,016,109 24,375
Garment Manufacturing........ 374 $2,142,336 2,215 Garment 371 $2,413,839 2,734
Manufacturing.
Guard Services............... 565 $11,751,811 10,631 Guard Services. 563 $7,623,120 10,093
Health Care.................. 1,194 $12,456,283 20,888 Health Care.... 1,046 $12,616,148 18,266
Hotels and Motels............ 724 $1,935,241 4,051 Hotels and 806 $1,762,195 4,256
Motels.
Janitorial Services.......... 507 $2,774,972 2,543 Janitorial 447 $2,170,279 3,261
Services.
Temporary Help............... 237 $1,676,467 2,524 Temporary Help. 216 $5,982,453 8,937
----------------------------------------------------------------------------------------------------------------
Total Low-wage industries.. 9,303 $53,324,841 74,666 Total Low-Wage 9,360 $52,063,110 80,759
Industries.
----------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year
Low-wage industries statistics 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Back Wages Collected................................ $32,470,183 $38,608,612 $39,595,382 $43,141,911 $45,783,743 $50,566,661 $52,722,681 $57,549,45 $52,063,110 $53,324,841
Employees Receiving Back Wages...................... 69,469 86,432 80,772 84,897 96,511 86,780 86,560 76,903 80,759 74,666
Cases in low-Wage Industries........................ 14,267 14,016 12,962 12,625 12,468 11,172 11,382 10,299 9,360 9,303
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
WHD Continues Strong Child Labor Enforcement
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
Child labor statistics year year year year year year year year year year
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
Directed Child Labor Cases.................................... 2,021 2,105 2,031 2,155 1,406 952 1,285 1,269 1,341 591
Cases With Child Labor Violations............................. 2,103 1,936 1,648 1,616 1,129 1,083 1,249 1,129 887 684
Minors Employed in Violation.................................. 9,918 9,690 7,228 5,840 3,793 3,723 4,672 4,734 3,448 3,333
Minors Per Case............................................... 4.7 5 4.4 3.6 3.3 3.4 3.7 4.2 3.9 4.9
Cases With HO Violations...................................... 876 747 654 459 396 361 410 466 394 308
Minors Employed in Violation of HOs........................... 2,060 1,710 1,449 1,087 1,091 994 1,000 1,617 1,183 863
--------------------------------------------------------------------------------------------------------------------------------------------------------
Family And Medical Leave Act Enforcement
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year Fiscal year
FMLA enforcement statistics 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
No. of Complaint Cases.......... 2,700 3,501 3,565 3,350 2,784 2,161 1,983 1,889 1,841 2,094
Percent of No-Violation Cases... 48% 50% 54% 55% 51% 49% 45% 47% 49% 58%
Nature of Complaint:
Refusal to Grant FMLA Leave... 629 741 815 697 647 522 459 416 412 468
Refusal to Restore to 360 400 370 369 328 261 242 220 239 230
Equivalent Position..........
Termination................... 1,123 1,503 1,567 1,473 1,132 870 764 757 763 913
Failure to Maintain Health 62 71 46 48 50 31 29 39 33 36
Benefits.....................
Discrimination................ 616 786 767 763 627 477 489 457 394 447
Status of Compliance Action
No Violation Cases............ 1,323 1,766 1,911 1,848 1,429 1,069 896 894 911 1,207
Employer Not Covered.......... 58 63 68 75 37 39 27 29 30 36
Employee Not Eligible......... 164 224 199 238 176 152 82 105 109 156
Complaint Not Valid........... 953 1,281 1,417 1,301 1,058 765 689 655 660 869
Other......................... 168 198 227 234 158 113 98 105 112 146
Violation Cases............... 1,447 1,735 1,654 1,502 1,355 1,092 1,087 995 930 887
No. of Employees Affected..... 1,627 2,077 1,867 1,742 1,626 1,200 1,675 1,082 2,951 910
Amount of Back Wages.......... $2,983,936 $3,731,929 $2,397,876 $2,311,781 $1,867,807 $1,772,342 $1,573,501 $1,532,505 $1,533,927 $1,630,817
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
senator isakson
Fiduciary Rule
Question 1. Millions of middle-class Americans rely on IRAs to
supplement their retirement savings. A vast majority of those
participants are satisfied with their IRAs and maintain ongoing
relationships with their broker-dealers. Despite this, you have clearly
expressed the view that absence of fiduciary status for those who sell
IRAs is a problem that needs fixing. You have not offered any concrete
study or evidence of any data that suggests a problem exists that needs
fixing--or indeed that can be fixed by a new definition of fiduciary.
You and others at the DOL have offered anecdotal examples of bad
investor experiences over the years--which, frankly, isn't surprising
given the turmoil we've had in the markets. Beyond anecdotes, which do
not count as evidence, what is the evidence of a persistent or
pervasive problem caused by broker-dealer conflicts of interests in the
IRA markets?
Answer 1. There is a great deal of evidence that conflicts of
interest are widespread in the marketplace for investment services and
that these conflicts have resulted in lower returns and higher fees for
retirement investors. This has been demonstrated through the
Department's own investigations and cases, SEC and GAO reports,
published securities cases, academic literature, and other sources.
Some examples of these include: GAO, 401(k) Plans: Improved Regulation
Could Better Protect Participants from Conflicts of Interest, Report to
the Ranking Member, Committee on Education and the Workforce, House of
Representatives, GAO-11-119 (Jan. 2011); Securities and Exchange
Commission, Office of Compliance Inspections and Examinations,
Protecting Senior Investors: Report of Examinations of Securities
Firms Providing ``Free Lunch'' Sales Seminars, Sept. 2007, at http://
www.sec.gov/spotlight/seniors/freelunchreport.pdf, Daniel Bergstresser,
et al., Assessing the Costs and Benefits of Brokers in the Mutual Fund
Industry, The Review of Financial Studies, 22, no. 10, Oct. 2009.
Further, while the impact on an individual person or plan in 1 year
might be small due to these conflicts, even a few basis points per year
of excessive fees compounds over time and can detrimentally impact the
retirement income security of America's workers and their families.
Question 2. Respected economists conclude that the Proposed
Fiduciary Rule would not generate benefits large enough to outweigh its
costs. Is the DOL intending to perform any study to assess these costs,
particularly the cost of the impact of the rule on IRAs?
Answer 2. OMB requires that an agency cannot put forward a final or
proposed rule without an economic analysis complying with Executive
Order 12866, which requires agencies to perform a comprehensive
regulatory impact analysis (RIA) for any economically significant
regulatory action. The Department provided an RIA for the proposed
regulation that assessed the costs and benefits associated with the
proposal. Currently, we are in the process of conducting an expanded
RIA that will take into account comments received from stakeholders on
the initial RIA that was published with the proposed rule. As we move
forward to re-propose, the extended rulemaking process will ensure that
the public receives a full opportunity to review the agency's updated
RIA, which will address the rule's impact on both ERISA plans and IRAs.
Question 3. As unemployment remains stubbornly high and we are
facing significant cuts in government spending, I think you will agree
that we should be doing everything possible to protect private sector
jobs. In April, there were 317,000 brokers in the United States who
would immediately lose their jobs if the proposed rule became
effective. This is the number of brokers who currently are licensed to
sell IRAs, but who are not licensed to provide fiduciary advice.
Hundreds of thousands more broker-dealers' jobs are at risk of being
lost as a result of the industry restructuring that would occur, moving
retail customers into self-directed accounts and away from professional
service relationships. To what extent has the DOL analyzed the impact
of the Rule on jobs? It appears that your continued momentum regarding
the promulgation of this rule is in contradiction to President Obama's
Executive order mandating that Federal agencies review their
regulations to ensure that they are not impeding economic growth and
job creation.
Answer 3. We respectfully disagree that 317,000 brokers will
immediately lose their jobs if the proposed rule becomes effective, or
that hundreds of thousands more jobs will be at risk of being lost.
Your question relates to assertions included in the Oliver Wyman Study
(Wyman Study) on the impact of the original proposed fiduciary
definition on IRA consumers. This study indicates that, by imposing
fiduciary duties on brokers, the proposed regulation would increase
costs for IRA holders in that they will lose access to brokerage and
advisory services, thus diminishing their retirement savings.
We believe the analysis performed in the Wyman Study is open to
challenge in at least two ways. First, the Wyman Study presumes that,
under the proposed regulations, brokers would no longer be paid by
commissions for advising IRA consumers, and that all IRA accounts will
have to be converted to advisory accounts which will increase costs.
The proposed regulation, however, would not prevent brokers from being
paid by commissions for advising IRA consumers. Existing administrative
exemptions granted by the Department currently allow fiduciary broker-
dealers to receive commissions. To the extent that brokers would need
additional relief, the DOL is prepared to consider additional
exemptions for fee arrangements that are beneficial to plan
participants and beneficiaries. Second, the Wyman Study presumes that
there are only two business models available for advising IRAs: a
broker model with conflicted advice and a registered investment adviser
model. The Department believes a rule can be redrafted to leave ample
space for alternative models that are tailored to client needs,
competitively priced, and which mitigate conflicts of interest.
Finally, broker-dealers would also have the option to become registered
investment advisers.
The Department believes that it has complied with the requirement
in Executive Order 13563, ``Improving Regulation and Regulatory
Review'' to examine outdated and outmoded regulations. The Department
retrospectively reviewed its current investment advice fiduciary rule
and determined it was outdated because it had not been updated since it
was issued more than 35 years ago and does not reflect current
practices in the investment advice marketplace. Further, the Executive
order requires Federal agencies to assess all costs and benefits
associated with any rule and available regulatory alternatives. The
Department conducted such an assessment in connection with the original
proposed rule and believes that investment results will be better
without conflicted advice, which will in turn increase retirement
security. Consistent with the President's Executive order, the extended
rulemaking process will ensure that the public receives a full
opportunity to review the agency's updated economic analysis and
revisions of the rule.
Question 4. Can you address the concerns raised in the comments and
studies that the Proposed Rule will have the effect of significantly
reducing IRA retirement savings of millions of middle-class Americans,
perhaps by as much as $240 billion by 2030?
Answer 4. This question relates to data cited by the Wyman Study.
As we explain in our answer to Question 3 above, we believe that the
analysis in the Study is open to challenge. Please see our response
above to Question 3.
Question 5. Nearly 36 percent of client-facing representatives will
not be properly licensed to service investors under the DOL Rule.
Moreover, to adapt, the industry likely will shift accounts to advisors
who earn their living based on the assets under management. These
advisors won't have the bandwidth to service small accounts that don't
add enough to their bottom lines. As a result, the combined job losses
and industry adaptations are likely to result in significantly reduced
access to financial services, particularly for working-class and
middle-income Americans. Since this seems to be the very group that the
DOL is attempting to protect, how do you respond?
Answer 5. We respectfully disagree with the premise that there are
only two business models, for reasons stated in the answer to Question
3. Our original proposed regulation protects small employers by making
it more difficult for investment advisers to steer them into investment
options that pay higher fees and would hold advisers accountable for
any imprudent advice that causes harm to plans and participants.
Question 6. Several respectable economists expect a significant
decrease in IRA savings because of this proposed rule, which seems
contrary to your intended purpose. Rather it seems to be that the
proposed rule is a disguised tax increase on the already struggling
middle class. As fewer IRAs are opened, the growth in retirement asset
values will be taxed as capital gains, instead of protected in a tax-
advantaged vehicle. The impact to the consumer will be diminished
investment returns, but the coffers of the government will grow. It is
becoming increasingly apparent that some in the Administration actually
want fewer IRAs and 401(k)s since these accounts enjoy tax advantages
which diminish governmental tax receipts. Isn't it true that fairly
construed, the rule is a middle-class tax increase disguised as a
consumer protection device?
Answer 6. No, it is not true and we respectfully disagree with the
premise of the question. The Department is seeking to protect the
millions of employers, workers and IRA holders who need and rely on
investment advice for their retirement savings. The original proposed
rule addresses conflicts of interest that are widespread in the
marketplace for retirement advisory services. When an adviser's
compensation is directly tied to specific investment recommendations,
there is a real danger that the recommendations will not be based
solely on the customer's interest in a secure retirement, but instead
will reflect the adviser's own financial self-interest. As stated in
the response to Question 1 above, evidence indicates these conflicts
have resulted in lower returns and higher fees for retirement
investors. While the impact on an individual person or plan in 1 year
might be small due to these conflicts, over time excessive fees can
detrimentally impact the retirement income security of America's
workers and their families.
Question 7. Members from both parties and both chambers of Congress
have expressed concern to the DOL about the Proposed Rule and more are
doing so each week, yet the DOL seems to be increasing its efforts to
finalize the Rule by the end of 2011. In fact, the DOL has not
responded to my letter or the inquiries of many of my colleagues. Why
do you feel it is so necessary to ignore these concerns and push ahead?
Answer 7. We appreciate your letter and the letters from your
colleagues on the proposed regulation. As Assistant Secretary Phyllis
C. Borzi stated in her August 12 response to your letter, the
Department is committed to developing and issuing a clear and effective
final rule that takes proper account of all stakeholder views.
On September 19, the Department announced it will re-propose its
rule on the definition of a fiduciary. The decision to re-propose was
in part a response to requests from the public, including Members of
Congress, that the agency allow an opportunity for more input on the
rule. Consistent with the President's Executive order, the extended
rulemaking process also will ensure that the public receives a full
opportunity to review the agency's updated economic analysis and
revisions of the rule. The new proposed rule is expected to be issued
in early 2012. When finalized, this important consumer protection
initiative will safeguard workers who are saving for retirement as well
as the businesses that provide retirement plans to America's working
men and women.
Injury and Illness Prevention Program (I2P2)
Question 8. The Administration has aggressively touted the
reductions they believe will occur from the regulatory look back
process underway as a result of Executive Order 13563, and in
particular gains that will be made under regulations from OSHA. Leaving
aside the credibility of those claims, won't the burdens of the I2P2
regulation under development at OSHA entirely overwhelm whatever burden
reductions are produced by this look back effort?
Answer 8. Executive Order 13563 states that ``Our regulatory system
must protect public health, welfare, safety, and our environment while
promoting economic growth, innovation, competitiveness, and job
creation.'' It also requires regulatory agencies such as OSHA to
conduct look back reviews of existing regulations to identify those
that are outmoded, ineffective, insufficient, or excessively
burdensome.
OSHA still is in the process of developing the Injury and Illness
Prevention Program rule. OSHA has held five stakeholder meetings across
the country to give all interested parties an opportunity to inform our
development of the rule. OSHA has learned much from the variety of
approaches taken by 15 States that have required such programs of some
or all of their employers. OSHA will base its proposal on the real
world experience of employers and the substantial data on reductions in
injuries and illnesses from employers who have implemented similar
programs--
including the companies in our Voluntary Protection Programs. OSHA will
develop a flexible proposal that is appropriate to large and small
businesses.
Question 9. The Administration's claims of burden reductions from
the look back effort include this from Cass Sunstein's Wall Street
Journal op-ed of May 26:
``The Occupational Safety and Health Administration is
announcing today that it is eliminating over 1.9 million annual
hours of redundant reporting burdens on employers, saving tens
of millions of dollars every year.''
Doing a little math and dividing the 1.9 million burden hours by
the 6.05 million firms with employees in the country, according to the
Census Bureau, yields about 20 minutes (a third of an hour) of reduced
burden. How do you imagine 20 minutes of burden reduction making a
difference? Isn't it true that these redundancies are being eliminated
because nobody is following them anymore?
Answer 9. The burden hour reductions that Administrator Sunstein
referenced in the May 26 Wall Street Journal op-ed resulted from the
Department of Labor's Occupational Safety and Health Administration's
Standards Improvement Project--Phase III (SIP-III) rulemaking. SIP-III
is the third in a series of rulemaking actions to improve and
streamline OSHA standards. The Standards Improvement Project removes or
revises individual requirements within rules that are confusing,
outdated, duplicative, or inconsistent.
The 20-minute burden hour savings per firm that you calculated
assumes that all 6.05 million firms are impacted by the SIP-III final
rule and that each of these firms would have the same burden hour
reduction. This calculation is incorrect. The largest burden hour
reduction in the SIP-III final rule results from OSHA removing the
requirement that firms develop and maintain training records for
employees who must receive training on personal protective equipment
(PPE) ((29 CFR 1910.132(f)(4)). This burden reduction was determined by
the total number of workers who wear PPE and who are required to be
trained. Therefore, the burden hour savings per impacted firm is
determined by the number of worker training records that no longer must
be generated.
Based on the SIP-III rulemaking record, OSHA believes that instead
of requiring employers to develop and maintain PPE training records to
assure OSHA that training had been conducted, the Agency could use
other, less expensive means, such as observation, to determine if
workers have received adequate training on their PPE. Based on this
finding, OSHA removed the burden to maintain these records.
Regardless of the amount of burden hours saved, if OSHA identifies
a paperwork requirement that does not serve to promote the mission of
the Agency to save and protect American workers, the Agency has and
will continue to eliminate such unnecessary requirements.
Question 10. Given that fatality and injury and illness rates are
at their lowest levels since data was first collected, exactly how will
imposing more enforcement and citations from OSHA in the form of the
Injury and Illness Prevention Program (I2P2) regulation improve this
trend? How will this help employers create more jobs?
Answer 10. OSHA's goal in issuing new standards is not to do more
enforcement or issue more citations, but to encourage employers to
comply with the best practices laid out in the standard--in this case
to work cooperatively with their employees to develop a systematic
program to identify and correct health and safety problems in their
workplaces.
The most recent data shows that 4.1 million serious injuries
occurred in 2009 and 4,547 fatalities occurred in 2010 on the job. Far
too many workers are still getting injured, sick and killed at work.
OSHA believes that there is good evidence that the Injury and Illness
Prevention Program rule will help reduce these numbers.
OSHA still is in the process of developing the Injury and Illness
Prevention Program rule. OSHA has held five stakeholder meetings across
the country to give all interested parties an opportunity to inform our
development of the rule. OSHA has learned much from the variety of
approaches taken by 15 Sates that have required such programs of some
or all of their employers. OSHA is basing its proposal on the real
world experience of employers and the substantial data on reductions in
injuries and illnesses from employers who have implemented similar
programs--
including the companies in our Voluntary Protection Programs. OSHA will
develop a flexible proposal that is appropriate to large and small
businesses.
OSHA believes that the resulting reduction in workers' compensation
costs, resultant premium reductions over time, and reductions in
indirect costs will save U.S. employers billions of dollars each year,
make them more competitive on the world market and free up capital for
business expansion and job creation.
Tree Care Industry
Question 11. Earlier this year, Assistant Secretary Michaels
indicated to me that OSHA would consider taking on a new regulatory
initiative to separate arborists and tree care workers from traditional
loggers. As another regulatory agenda was just published without the
inclusion of an ANPRM on tree care operations, when will you initiate
the process to better protect these thousands of middle-class workers
who work to make our communities safer and more livable?
Answer 11. This is one of many areas where OSHA has been asked by
employee and employer associations to issue new standards and
regulations. Unfortunately, the regulatory process is quite lengthy and
resource intensive. Because OSHA's resources do not permit the agency
to engage in rulemaking in all areas where new or revised OSHA
standards are needed, where possible, OSHA looks at non-regulatory
alternatives that can provide effective worker protection.
OSHA currently has standards that protect both traditional loggers
and tree care workers. OSHA's logging standard 29 CFR 1910.266 is a
vertical standard that provides comprehensive coverage for logging
operations. Because the nature of tree care operations involve care and
trimming instead of removal, and the scale of the operations is
generally smaller than logging operations, the logging standard does
not apply to most tree care operations. This does not mean tree care
workers are unprotected; both the OSHA general duty clause and other
general industry standards apply to tree care workers. OSHA has
determined that together they are sufficient to adequately address tree
care worker health and safety protections.
In August 2008, OSHA issued a compliance directive, CPL 02-01-045,
to detail how OSHA's general duty clause and general industry standards
apply to tree care operations. OSHA has determined that this compliance
directive has strengthened our tree care enforcement efforts and
enhanced our ability to protect tree care workers. It outlines the
application of existing OSHA standards such as personal protective
equipment requirements, fall protection requirements, hazard
communication, first aid, and so forth to protect the health and safety
of workers in the tree care industry. The Agency also has in place
extensive compliance assistance efforts to provide information on
health and safety to this industry and is working to enhance those
compliance assistance efforts to specifically target Latino workers.
This decision does not rule out rulemaking on tree care at a future
time. OSHA will continue to consider taking on this new regulatory
initiative when resources and other priorities permit. OSHA has
decided, however, that where resources or other priorities do not allow
us to work actively on a standard, that standard should be removed from
the regulatory agenda until such time as resources permit the agency to
make significant progress on it.
Noise Interpretation
Question 12. At what point did you realize the OSHA noise reduction
proposal to require employers to implement costly engineering or
administrative controls instead of better and less expensive personal
protective equipment was not a proposal worth pursuing? Did you know
about this proposal before OSHA published it? Did it go through OIRA
review?
Answer 12. The proposal would have clarified that the noise
standard's existing requirement for use of ``feasible'' administrative
or engineering controls is to be given its plain, ordinary meaning
consistent with the meaning of the word feasible throughout the OSH Act
and its standards. OSHA issued the proposal because occupational
hearing loss remains a serious problem in workplaces and the agency
believes that the existing interpretation permits overreliance on
personal protective equipment in some situations. Between 2004 and
2009, the Bureau of Labor Statistics has reported that more than
144,000 OSHA recordable hearing loss cases occurred in private
industry. The reported annual number of cases ranged between 19,500 and
28,400 during the 2004 to 2009 period.
OSHA did not withdraw the proposed interpretation because the
agency decided that personal protective equipment was better or less
expensive. Evidence shows that personal protective equipment, such as
ear plugs or ear muffs, while effective under laboratory conditions,
may be far less effective in actual working conditions. For example,
earplugs and earmuffs are only effective if they fit properly, if they
are worn all the time and if workers are trained to use them properly.
Another problem with personal protective equipment is that earplugs and
ear muffs can interfere with hearing all kinds of noises that employees
at work need to hear, such as equipment back-up warnings, people's
shouts, and changes in workplace conditions.
Engineering controls are generally preferable because they
eliminate harmful noise at the source, while allowing employees to hear
audible warnings and communicate with each other. Engineering controls
may also be less expensive than personal protective equipment in some
situations. For example, engineering controls can include such
inexpensive measures as mufflers, sound blankets or curtains,
dampeners, and routine lubrication and maintenance on noisy equipment.
In some instances, the application of a relatively simple engineering
noise control can reduce the noise hazard to the extent that further
costly requirements of the OSHA noise standard (e.g. audiometric
testing, hearing conservation program, provision of hearing protectors,
etc.) are unnecessary.
OSHA withdrew the noise interpretation because it became clear from
the concerns raised by some employers and business associations that
effectively addressing the noise problem requires more public outreach.
OSHA therefore decided to step back and look at the entire problem of
workplace noise and how we can develop a comprehensive approach to the
serious problem of hearing loss.
OSHA has begun the outreach process by developing a new
occupational noise
exposure web page (http://www.osha.gov/SLTC/noisehearingconservation/
index
.html) and is working on scheduling an informal stakeholder meeting
this fall to engage in a dialogue with employers, workers, noise
control experts, manufacturers, and public health professionals on how
to prevent occupational hearing loss. The meeting time will be used to
gather and share information on best practices for noise reduction in
the workplace, including a discussion on personal protective equipment,
hearing conservation programs and engineering controls.
This proposal went through normal Department of Labor review and
clearance. As this initiative was a proposed interpretation of an
existing OSHA standard and not a new standard or regulation, it did not
go through OIRA review.
Persuader Rule
Question 13. Under DOL's proposed persuader rule, employers will
face civil (and possibly criminal) sanctions if they do not properly
disclose certain relationships that they have with attorneys and
clients. Due to the threat of such penalties, some employers will
likely forego receiving professional legal advice about the rights and
responsibilities under the NLRA. How does this help employees?
Answer 13. The employer-consultant reporting proposed rule is
currently in the comment period, and the Department will review and
consider any and all comments submitted on the matter addressed in this
question. The Department is committed to protecting the rights of
employers, employees, unions, and their members as prescribed by the
LMRDA.
The potential sanctions for reporting violations derive from
section 209 of the LMRDA, and they apply equally to unions, union
officials, employers, and consultants. There are no civil sanctions,
monetary or otherwise, for violations of the LMRDA reporting
provisions. The Secretary, however, is authorized to bring a civil
action for such relief (including injunctions) as may be appropriate,
if it appears that any person has violated or is about to violate any
of the reporting provisions. Criminal sanctions apply only to willful
conduct and not merely to a failure to ``properly disclose certain
relationships.'' The Department also intends to continue its efforts to
provide compliance assistance and outreach to employers and
consultants, as it does with unions and their officials.
senator hatch
Question 1a and b. I have serious concerns with the Office of Labor
Management Standards proposed changes to the current LMRDA reporting
requirements under section 203(b). Under current law, organizations
that provide services where the object is to persuade employees in the
midst of a union campaign to disclose their fees and arrangements. But,
for more than half a century, the LMRDA has exempted services that
amount to ``giving or agreeing to give advice,'' which has long been
interpreted to exclude law firms and consultants performing services
like reviewing statements and materials to determine their legality
without having any interaction with employees.
Under the DOL's proposed rule, the advice exemption will be more or
less obliterated, and any counseling that is directly or indirectly
related to persuading employees will be reportable. This would
presumably include reviewing materials drafted by employers to
determine if they will make the employer vulnerable to unfair labor
practice charges.
In your view, won't this proposal discourage employers from seeking
legal assistance before communicating their views on unionization to
employees? Will we not see an increase in unfair labor practices among
un-counseled employers, especially among smaller employers, as a result
of this proposal? How is this desirable national labor policy?
Answer 1a and b. Under the proposed rule, the LMRDA will continue
to exempt reporting for agreements that exclusively consist of services
that constitute the ``giving or agreeing to give advice.'' The proposed
rule would change the way that the reporting trigger, pursuant to the
exemption, is applied.
As stated above, the employer-consultant reporting proposed rule is
currently in the comment period, and the Department will review and
consider any and all comments submitted on the matter addressed in this
statement and question. The Department is committed to protecting the
rights of employers, employees, unions, and their members as prescribed
by the LMRDA.
Question 2. The Department of Labor's controversial changes to the
reporting requirements under the LMRDA were released on the same day
the NLRB announced a change to union election rules, paving the way for
quickie elections and eliminating procedural protections for employers
and employees. So, basically, in a single day, the Labor Department
proposed to limit the amount of information an employee would receive
and the NLRB proposed to limit the time an employee has to consider
this information before having to vote for or against a union.
To what extent were the DOL and NLRB communicating regarding these
two proposals? Was it purely a coincidence that these two highly
controversial proposals were announced on the very same day and with,
at least initially, the very same 60-day comment period? Combined, what
do these two rules say about the Obama administration's respect for a
worker's right to be fully informed when deciding whether to join a
union?
Answer 2. The Department did not engage in communication with the
NLRB about these proposed rules, nor did the Department and the NLRB
coordinate the publication dates of the two proposed rules. Moreover,
as you are aware, the NLRB is an independent Federal agency that does
not report to the White House, OMB, or the Department.
While the Department cannot comment on the NLRB's proposed rule,
the Department, as stated in the NPRM, views reporting of persuader
agreements or arrangements:
``as providing employees with essential information regarding
the underlying source of the views and materials being directed
at them, as aiding them in evaluating their merit and
motivation, and as assisting them in developing independent and
well-informed conclusions regarding union representation and
collective bargaining.'' 76 FR 36182.
Thus, transparency for workers is at the core of this proposed
rule, as the proposed rule helps ensure that workers are fully informed
about the information bearing on the exercise of their protected
rights. Id. 1, see also 76 FR 36187.
Questions 3 and 4. We are currently facing the highest unemployment
levels in recent memory. Job creation continues to be sluggish and more
and more Americans are simply giving up in their efforts to find a job.
Do you agree that reducing unemployment, training workers for new
jobs, and stimulating the economy should be the Department of Labor's
highest priority? If so, what do the proposed changes to the LMRDA
reporting requirements (Section 203(b)) have to do with these goals?
Will any new jobs be created as a result of this proposed rule?
Answer 3 and 4. The Department of Labor is currently working on
multiple fronts to reduce unemployment and create new jobs. Securing a
sustainable economic recovery is critical. The Department will continue
to help foster an economy in which good jobs are available for
everyone. Additionally, the Department has ongoing responsibilities to
administer and enforce numerous statutes that protect workers and
establish workplace standards, including the LMRDA. DOL continues to
perform these functions as well.
Question 5a. I have a number of questions as to how the DOL came up
with the proposed changes to reporting requirements for persuader
activities under the LMRDA.
What empirical evidence do you have to support this rule change
after 50 years of consistent, well-established interpretation of the
advice exemption under Section 203 of LMRDA aside from the few
questionable academic studies cited in the Notice of Proposed
Rulemaking?
Answer 5a. In proposing these changes to section 203 reporting, and
as explained in the NPRM, the Department reviewed the available peer-
reviewed literature on the subject of labor relations consultants. See
76 FR 36185-87. Additionally, we reviewed our own reporting data,
which, in connection with the available literature showing that, on
average, 75 percent of employers hire consultants to orchestrate
counter-campaigns to union organizing efforts, appeared to reveal
potentially significant underreporting. See 76 FR 36186.
Question 5b. Further, the Department's most recent view of the
advice exemption, including the distinction between direct and indirect
contact, dates from 1989, and was not subject to notice-and-comment
rulemaking. See 76 FR 36179-82.
What are the harms this rule is trying to address? Have a large
number of employees complained to the Department of Labor about legal
advice their employers receive from law firms during union organizing
campaigns? If so, why weren't these complaints cited in your proposed
rule?
Answer 5b. The Department does not have a record of complaints from
employees regarding legal advice their employers receive from law
firms. The NPRM does not propose that such activity triggers reporting.
As explained in the NPRM and above, the reporting seeks to provide
workers with information about the underlying source of the views and
materials being directed at them, which the NPRM demonstrates is not
currently available to workers. See 78 FR 36186.
Question 5c. To what extent is this proposed rule the result of
consultation with union leaders and organizers? And, how much input, if
any, did you seek from employers and business owners?
Answer 5c. The Department sought input from the public at a
stakeholder meeting held in May 2010, which was attended by unions and
their officials, as well as employers, consultants, and their
representatives. The Department provided notice of the meeting to the
public through a Federal Register notice. The Department's own
experience in interpreting and administering section 203 of the LMRDA,
along with the input provided at the stakeholder meeting served as the
basis of the Department's proposal.
Response to Questions of Senator Harkin by Deborah King
Question 1. It's great that so many employers have made the choice
to contribute to the funds that you're describing. Can you talk about
the benefits that employers reap from their contributions? What's the
case that you would make to an employer (or group of employers) in
another State or region for why they should set up funds like 1199
runs?
Answer 1. Virtually all healthcare employers have experienced
shortages or skill gaps in their workforce, which have made it
difficult for them to deliver quality, cost-effective health care. For
example, shortages of nurses have resulted in increased recruitment and
wage costs, with employers needing to go abroad to recruit and/or being
forced to increase salaries dramatically because of the shortages.
Other strategies, such as the use of agency nurses or excessive
overtime have jeopardized consistency and quality of care. I would tell
employers that experience with joint labor management training funds
have shown that with assistance, there are many incumbent healthcare
workers in service or clerical jobs who can be supported to become the
pipeline to fill such shortages and/or to enhance their skills to meet
changing demands. The ROI is great, reducing the cost of recruiting and
inflated salaries and providing the skills needed to achieve the
clinical and patient care outcomes, which are increasingly affecting
reimbursement rates.
In addition, training funds have created added value for and
positive engagement and cooperation between unions and employers and
have spurred collaborative relationships that might not otherwise
exist. Training funds are helping both employers and our members change
and adapt to the shifting delivery models in healthcare. Negotiated
education benefits are a draw for workers and an important factor in
retention that helps both employers and workers. Training incumbent
workers and providing them with access to a career ladder increases
retention and employee morale and brings workers with demonstrated
commitment to their employers and to the job into higher skilled
occupations.
Training funds also help create systemic changes in the education
system, making colleges and other educational vendors more responsive
to worker and industry needs.
Question 2. As you know, this committee has jurisdiction over the
Workforce Investment Act and many of us are working hard to get that
reauthorized in the near future. Along with WIA, what do you think the
Federal Government can do to support programs like yours that are
working so well to move people into the middle class? Are there any
Federal policy barriers that impede the job-training system's ability
to scale up best practices?
Answer 2. We totally support the value of WIA and its
reauthorization, however, WIA itself could be strengthened to support
training management initiatives like ours. WIA's value structure does
not reflect many of the positive attributes that labor-management
partnerships bring to the table.
The current WIA system favors short-term training and
immediate placement into entry-level/low-wage positions. In general,
training within the healthcare industry requires a much longer timeline
than training within other industries. The healthcare industry requires
highly skilled workers and often requires participants to obtain
college level courses and credentials. Labor-management partnerships
not only value job placement, but they emphasize career pathways and
lifelong learning.
Secondly, incumbent healthcare workers are an important
source to fill higher level positions and WIA does not currently
include incumbent workers as a significant target of public investment.
In addition, programs that promote incumbents can open entry level
positions for the unemployed.
WIA does not have performance measure metrics that
document industry-recognized certificates, wage gain, entry into
college, nor outcomes for reaching targeted populations with multiple
barriers. WIA is a ``work first'' model that counts job placement, and
not occupational development and employment with responsible employers.
Question 3. In a previous hearing on this topic, one of our
witnesses talked about how they felt that you either needed to be rich
or poor to get benefits from the government and that those in the
middle were being left behind. In that context, can you tell us more
about the idea behind the Job Security Fund? What is working to help
workers who experience periods of unemployment and underemployment stay
in the middle class?
Answer 3. The idea behind the JSF was that employers in one
industry (in this case, healthcare) in a particular region would take
responsibility for the workforce in that region (previous experience
has shown that there was a 3 to 7 percent turnover rate each year
through attrition and retirement). It made sense to create an
employment service and re-training benefits to keep experienced workers
in the industry. Grants to labor management partnership to seed such
projects would be helpful in replicating this model in other parts of
the country. In addition, Department of Labor funding to support short-
term training where there is a demonstrated employer commitment to
employ workers laid off in the same industry could help workers stay in
well paying, high road jobs.
Question 4. When you think about the career pathways in the
healthcare and allied health sectors, what do you (or employers or
Federal, State, or local governments) need to do to make more of the
jobs along those pathways (even entry-level jobs) ``good jobs'' with
family-sustaining wages, health benefits, and retirement plans?
Answer 4. Promote incumbent worker training: Incumbent worker
training and education has proved to be an effective strategy to move
workers into ``good jobs.'' Training can give workers the skills and
credentials to advance along a career ladder into a new position or
occupation, and to move out of jobs that then become new employment
opportunities for others. This training ``escalator'' can have an
especially dramatic impact on entry-level workers who are often stuck
in low-wage jobs because they lack the skills or education to advance
into family-sustaining occupations and careers. In Los Angeles, for
example, the Worker Education & Resource Center has been training
lower-wage workers for high-demand jobs and occupations in healthcare.
Program graduates have advanced to new occupations such as Registered
Nursing, Licensed Vocational Nursing, and Health Information
Technologist, resulting in 359 new vacancies in low-wage healthcare
occupations such as nursing attendants, clerks, and laboratory
assistants. With ARRA funds, WERC's program is now also helping
unemployed individuals gain the skills and education necessary to apply
for these vacancies. Once employed, incumbent worker training can
repeat the job creation cycle.
In addition to training, increasing the minimum wage and fully
implementing healthcare reform will dramatically improve the quality of
these jobs.
Response to Question of Senator Harkin by Sarah Corey
Question 1. Can you please provide the committee with additional
detail comparing executive pay to the pay of the average employee at
IceStone? What is the ratio between the CEO's annual compensation
compared to the annual compensation of the median manufacturing worker?
Answer 1. IceStone's pay ratio between the CEO and an hourly
factory employee is 8:1. The pay ratio between the next level of
leadership (which includes IceStone's VP of Sales & Marketing, senior
director of business development, controller, and managing partner) and
an hourly factory employee is 6:1.
Response to Questions of Senator Enzi by Sarah Corey
Question 1. Thank you very much for your testimony. You mentioned
that IceStone's growth would not be possible without State and Federal
capital. Now that the company has grown to employ 45 full-time men and
women and you have a growing customer base, I have a two-part question.
First, for this fiscal year, what percentage of capital is generated
from State and Federal programs? And second, would IceStone continue to
be a viable company without such support?
Answer 1. This year, IceStone, LLC did not receive any capital from
State or Federal programs. In previous years, IceStone has received a
cumulative 5 percent of its capital from State and Federal programs.
IceStone has benefited from such programs, without which its
products would not be where they are today. In 2007 for example, the
company received support from the New York State Environmental
Investment Program to purchase a new polisher and construct a
foundation for the equipment. This capital investment has resulted in
increased product yield; a greater percentage of the slabs IceStone
produces each month are saleable with this new machine.
Question 2. I read in your testimony about IceStone's ``social
bottom line,'' as well as the ``capacity building'' programs the
company is able to provide its employees. Are IceStone employees
unionized?
Answer 2. No, IceStone employees are not unionized.
Question 3. I understand that IceStone pledges to pay employees a
``living wage'' and your starting wage is $10 an hour. Does the living
wage take into account the size of the employee's family or number of
dependents?
Answer 3. At this time, IceStone pays full-time employees a living
wage, which starts at $10 per hour with benefits that include a dental
and vision plan. As our revenues increase and loans become readily
available to IceStone, we will have the ability to provide living wages
that do factor in the size of the worker's family.
Question 4a and b. It sounds like IceStone does a great deal of job
training for employees ``in house.'' Have you participated or drawn
employees from any Federal- or State-funded job training programs?
If so, do you have suggestions for improving these programs? If
not, are you aware of Federal or State funded job training programs in
your area?
Answer 4a and b. Yes; IceStone has worked with the Brooklyn
Workforce Initiative, a government-funded non-profit, to recruit
skilled workers.
Responses to Questions of Senator Enzi by Tom Prinske
Question 1. Your business experienced a substantial amount of
growth after Illinois State Governor Edgar signed ``The Minority,
Female and Persons with Disabilities Business Enterprise Act'' into
law. From your testimony, you also mentioned that you have worked with
your local municipality--the city of Chicago--to create incentives for
the city to work with businesses owned by persons with disabilities.
How many business owners are benefiting from these two laws?
Answer 1. I have attached the most recent annual report from the
State of Illinois' Business Enterprise Program (BEP) \1\ for you to
reference. The report provides the most recent details for all three
groups in the program, minority (MBE), woman (WBE) and persons with
disabilities (PBE). According to the attached report, there are
disabled-owned businesses participating in the BEP program, and
together they accounted for $48 million in contracts with the State of
Illinois.
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\1\ The material referred to may be found at http://
www2.illinois.gov/cms/business/sell2/bep/Documents/
BEP_Council_Documents/Business_Enterprise_Program_FY2010_Report.pdf.
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In addition to providing the annual report, BEP runs the
certification process which allows entrepreneurs with disabilities to
become certified to participate in the program. This certification has
proven more valuable for my company in our dealings with the private
sector than in our dealings with the State of Illinois or the city of
Chicago, because we are able to use it to position our company as a
disability-owned vendor for purposes of corporate diversity sourcing
and social responsibility programs. Although my company has not been
able to use the certification to obtain subcontracts from companies
doing business with Illinois or Chicago, other disability-owned
companies have been able to use the certification successfully in the
subcontractor arena as well.
Unfortunately, the BEP program did not bear the fruit for business
owners with disabilities as much as I hoped it would. While the 2010
BEP report shows a reasonable participation by PBEs, the fact is the
numbers include both business owners with disabilities and non-profit
businesses that employ high percentages of disabled workers. While the
original amendment did not have non-profits in the language,
unbeknownst to me, a few years later it was amended again to include
non-profits. Also, it must be noted that the BEP annual report does not
distinguish between business owners with disabilities and non-profits
when breaking down the numbers. The only time I am aware of the report
separating the PBE for-profits and the non-profits is in the beginning
of the report where it shows 112 non-profits and 128 total disability-
owned vendors. The original intent of the legislation was to promote
the use of for-profit businesses owned by persons with disabilities as
it promotes the use of minority-owned and women-owned businesses. I
have also attached a copy of the highlights of legislation we are
proposing, to correct this flaw. If passed, it will in part, require
the program to distinguish between business owners with disabilities
and non-profit employment programs like sheltered workshops. This will
then allow the program to be held accountable for the low participation
and or, not achieving the goals of the statute which is 2 percent of
State expenditures. In regard to the city of Chicago, unfortunately,
business owners with disabilities have not fared much better. I believe
that there are about the same number of for-profit businesses certified
in the city of Chicago's program as in the State of Illinois program
(16-18). The problem there seems to be twofold. First, the disability-
owned business initiative for Chicago is totally separate from the
successful MBE and WBE programs in the city, which have explicit goals
and typically exceed those goals. Second, the disability-owned business
program for Chicago is based on a confusing voucher system that has
proven difficult to understand and use and has not been adequately
promoted by the city.
I believe at the time these two pieces of legislation were
introduced, we took the best possible approach to getting something
done. In my opinion, and if I had an opportunity to develop the
legislation now, I would try to include persons with disabilities in
the definition of a minority, as opposed to making an entire separate
group. That way, we could establish goals for disability-owned
businesses that would be similar to the goals that have been
established for minority-owned and women-owned businesses. This would
ensure total inclusion into existing programs that are already
effective.
After having said all that, I guess you would be wondering how I
was able to grow my business the way I have. The answer is through
private sector opportunities. The one extremely beneficial thing both
programs did was certify business owners with disabilities in their
respective programs. I then took my certifications to private sector
companies and their procurement diversity programs and asked if their
programs were inclusive for business owners with disabilities. In
almost every case the answer was yes. In my case, they then would
provide me with little opportunities which grew into bigger ones until
we got where we are today. While I seem to be one of the most
successful stories coming out of either program, the irony is, our
company does not show up in either program's reporting. I have a total
of zero direct contracts or sub-contracts with either the State of
Illinois or the city of Chicago. However, without my certifications,
I'm out of business. That is why what USBLN is doing with their
Disability Supplier Diversity Program (DSDP) is vital to the long-term
growth of promoting businesses owned by persons with disabilities. As
you can imagine, with DSDP certifying disabled-owned companies like
mine, the USBLN has been successful in securing private sector
commitments from large corporations, opening opportunities for the
certified businesses, and linking corporations with credible vendors
that fit into their existing social responsibility programs.
I hope this long answer was helpful to you. In closing, I would
just like to add that the Federal Government's position with how they
view business owners with disabilities is very important to the work we
are all doing here on the local level. We truly need you to step up and
agree that disability-owned businesses can and should benefit from the
same Federal incentives that have long existed for minority-owned and
women-owned businesses.
Attachment.--Highlights of Legislative Changes to the Business
Enterprise for Minorities, Females, and Persons with Disabilities Act
and the Illinois Procurement Code
Distinguishes a business owned by a person with a
disability as a separate business from that of a not-for-profit agency
serving people with severe disabilities.
Provides same opportunities and preferences to obtain
State contracts to persons with disabilities who own businesses as
those afforded to businesses owned by minorities, females, veterans
with disabilities, and not-for-profit agencies serving people with
severe disabilities.
Ensures at least one business owned by a person with a
disability is appointed as a member of the Business Enterprise Council
as indicated in the Business Enterprise Act.
Ensures two representatives from businesses owned by a
person with a disability are appointed to the State Use Committee as
indicated in the Procurement Code.
Includes businesses owned by a person with a disability in
the Procurement Code requirement to develop a 5-year plan for
increasing the number of products and services purchased for females,
minorities, veterans with disabilities, and not-for-profit agencies
serving people with severe disabilities.
Distinguishes businesses owned by a person with a
disability from those of not-for-profit agencies serving people with
severe disabilities in the Business Enterprise Act Annual Report
analysis of goal achievement and summary of the number and dollar
amount of contracts awarded.
[Whereupon, at 12:25 p.m., the hearing was adjourned.]