AlterNet.org: Labor

The Death of the 'Good Union Job': Plight and Protest of Thousands of Mine Workers Barely Noticed By Mainstream Media

Laura Flanders, AlterNet — Thu, 23 May 2013 08:08:00 -0700

If companies can break the UMWA, heaven help the fast food workers.

Remember the phrase “good union job”? In contrast to the contingent fragile world of retail, service and fast food, a good union job is the sort union coal miners have. At least that’s what thousands of veteran union miners thought, until suddenly last summer, they discovered that just like some Walmart sub-contractee, a boss they’d never worked for was trying to break their contract.
Contracts are the heart of “good union jobs.” The work may not be glamorous, but the contract gives workers a fair shake. Through collective bargaining, they’re able to cut a deal, and in the case of coal miners, that deal is a matter of life and death. Talk to any miner’s wife and she’ll tell you she worries every minute he’s underground, but once he hits the surface, and if he makes it to retirement, at least he and the family will have “Cadillac” coverage. That's what they've won, in exchange for spending their lives digging rock out of the underside of a mountain in the dark, so the rest of us can run our factories, or turn our lights on.

Living wages, basic safety protections, and guaranteed quality healthcare for life. That’s the deal the union fought for, and after 120 years in existence, complete with coalfield wars from Colorado to Harlan County, that’s the deal the venerable United Mineworkers of America was able to extract from American coal companies.

As union leaders explained in a recent informational video, the UMWA extracted decades of those contracts with Peabody Energy and Arch Coal. The companies signed, the miners worked, and the contracts, and the profits piled up, until we hit era of extreme corporate hubris, which is to say, the turn of this century.

At the same time that companies like Apple and Google were figuring out how to avoid paying tax by moving to tiny exotic islands (or Ireland), and banks and mortgage companies were coming up with derivatives and bundled assets, big coal companies, like Peabody and Arch found that by spinning off smaller companies they could rearrange their responsibilities and their liabilities. One of those smaller companies was Patriot Coal. In 2007 The Patriot Coal Corporation was created by Peabody and acquired all the company's union operations east of the Mississippi. By 2012, Patriot had acquired most of the union mines of Arch Coal too. Their sort of coal mining was in decline, but they sure had a lot of those retired miners’ contracts -- and a lot of liability – for thousands of retirees, who’d never worked a day in their life for Patriot.

To no ones surprise but the miners' and their families, in July 2012, Patriot Coal filed for bankruptcy and announced its intention to modify its collective bargaining agreements. The company said it was responding to market declines and trying to survive. Just like Google and Apple, Peabody and Arch say everything they did was legal. The union accused Peabody and Arch of intentionally setting up a shell to dump their union pensions. Now a federal judge in Patriot's hometown of St Louis has until May 29th to decide if Patriot’s bankruptcy plan is valid.
Jim Hall is a retired union miner. Twenty-four years ago, when the Pittston Coal company tried to stop paying retiree health benefits, he and his wife along with thousands of other UMWA families went on strike on behalf of their fathers and uncles and the generation before them. "I was working then. The struggle was about the retirees," said Hall last month. "Now I'm retired and I know what it means to need good healthcare. I'll do anything the union asks me to." "And so will I" said Shirley. The couple has already traveled out of state from their home in Castlewood VA, to join a Patriot protest.

"What's at stake at Patriot is the union," says Jan Patton, now approaching her 90s, a miner's widow in Clincho VA. "I know what a difference the union makes because I watched what my father and grandfather went through before they had one."
In 1989, thousands of miners, miners wives, church groups and community supporters lay down in the streets at the entrance to Pittston's mines to the block the coal trucks and world media paid attention. Rev Jim Lewis, former rector at St. John's Episcopal Church in Charleston was among those arrested then in a struggle which was ultimately mostly victorious.
This spring, their benefits on the chopping block once more, miners and their supporters have been lying down in the streets again, but this time in front of the federal court house in St. Louis. The protests are barely registering in the media.

Cecil Roberts, the President of the UMWA, who was a leader in the Pittston strike was one of a dozen protestors arrested in St. Louis in the latest peaceful protest Monday. Rev. Lewis was arrested in a protest late last month.

"In comparison to 1989, I looked over the crowd and saw people much older, weaker, in a weaker environment, economically and in terms of movements," said Lewis who was recently part of a fact finding mission by religious leaders which produced a report, "Schemes from the Board Room."

If the plan is approved, the report estimates that more than 23,000 retired miners and their families, will lose their benefits and that lifetime guarantee. The company’s proposing a trust fund instead -- it’ll start at $15 million and go up to a maximum of $300 million. That, says the United Mineworkers of America is miserably inadequate. It also sets a dangerous precedent.

What’s happening in St. Louis doesn’t look like a coal-field war but the same things are at stake: reciprocity, respect, fair play. If the companies can break the UMWA, heaven help the fast food workers.

Why Apple is a Sociopathic Company

Curtis Ellis, Huffington Post — Thu, 23 May 2013 07:33:00 -0700

Just like Enron, Apple is using shell companies to hide profits and rip off the American people.

Apple's latest product isn't disruptive to the music industry, cell phones or television. It's aimed at the United States of America.

Congressional investigators found Apple uses the most innovative accounting gimmicks in the world to stiff the US Treasury of some $64 billion. While Apple claims to be the nation's biggest taxpayer in America, it's also among the nation's biggest tax avoiders.

Apple's tax scheme amounts to a high stakes three-card monte game, as Steve Jobs' corporate heirs manipulate shell companies to hide billions in profits from national authorities.

Shell companies are nothing new and by no means an Apple innovation -- Enron used plenty of them to wreak its special brand of havoc.

Apple's innovation is to create a corporate entity that is stateless -- it resides nowhere at the same time it is everywhere. Thus, Apple Operations International is able to file no tax return anywhere, though it is incorporated in Ireland and holds board meetings in California.

This is not a victimless crime, if you will, the New York Times reports.

Because of these strategies, tax experts say, Washington is forced to rely more and heavily on payroll taxes and individual income taxes to finance the government's operations. For example, in 2011, individual income taxes contributed $1.1 trillion to federal coffers, while corporate taxes added up to $181 billion.

In plain English, working stiffs, folks like Steve Jobs' (adoptive) father, a car mechanic and cabinetmaker, pay more so Apple can sit on a crock of gold.

Of course, this is of a piece with the corporate philosophy famously summed up by an anonymous Apple executive:

"We don't have an obligation to solve America's problems."

The inconvenient truth, forgotten at corporate headquarters, is there would be no Apple if not for the United States and, not to put too fine a point on it, the United States Treasury.

Defense spending created the Silicon Valley where Jobs literally cut his teeth. The Pentagon's buy American requirement (since gutted) bankrolled the American electronics and cybernetics industries where the young Jobs worked, and it stocked the surplus stores Jobs and Woz raided to build their first Apple prototypes. Government R&D funded the invention of microchips, the Internet and other foundation technologies Apple has profited from so lucratively.

And now it says it owes America nothing.

This is sociopathic behavior.

A child that acts this way toward the parents that fed and raised him is called ungrateful -- at best.

Make no mistake: Apple is not alone in its behavior.

Throughout the tech industry, engineers who helped build a company are told to train the lower-paid foreign workers who will replace them.

Banks turn their backs on the taxpayers that bailed them out and refuse loans to their longtime customers in small business.

Across America, workers who dedicate the best years of their lives to build industrial enterprises are thrown to the gutter as their workplaces are shuttered, moved to Vietnam, Bangladesh or some other human hellhole.

While we talk about reforming the tax code and the closing loopholes in this law and that, let's be honest about what's at play:

A corporate psychology that refuses to acknowledge the existence of the society in which it operates.

It is a species of pathological individualism that does not have the words "virtue," "decency" or "community" in its vocabulary.

If you're looking for poisoned fruits of the "Me Generation," don't go to Haight Street -- go to Wall Street and corporate suites.

84 Percent of NYC Fast Food Workers Report Wage Theft

Steven Hsieh, AlterNet — Thu, 16 May 2013 10:21:00 -0700

The report arrives in the midst of a national movement in the industry for better wages and the right to unionize.

An alarming 84 percent of New York City fast food workers say their employers withheld wages the workers were entitled to, according to a report released Wednesday by Fast Food Forward, the group responsible for industry strikes in the city last month.

Researchers surveyed 500 of the New York City’s fast food workers, and discovered that more than four-in-five reported wage theft from their employers in the previous year. The Nation’s Josh Eidelson breaks down what this means:

“Wage theft” is a term popularized by activists and advocates over the past decade to describe a wide range of ways in which companies fail to pay employees the wages they’re legally owed. The Fast Food Forward report identifies several types of violations as prevalent in the city’s fast food industry: employees working, without pay, before or after their shift; employees working overtime without being paid time-and-a-half; employees working during their breaks or not receiving breaks; and delivery employees not being reimbursed for expenses like gasoline or safety equipment.

The report comes in the midst of a national movement among fast food workers calling for better wages and the right to unionize. In recent weeks fast food and retailer workers have staged strikes with those demands in five major cities, including New York, Chicago, St. Louis, Detroit and Milwaukee.

Yesterday, the New York Times reported that New York State attorney general Eric Schneiderman is investigating fast food restaurant owners for allegations of wage theft.

Cambodia Shoe Factory Collapse Kills 2

Tang Chhin Sothy, AFP — Thu, 16 May 2013 08:13:00 -0700

At least 11 are injured, some seriously.

KAMPONG SPEU, Cambodia — A ceiling collapse at a Cambodian shoe factory killed two workers Thursday, spurring a government vow to inspect all garment plants amid heightened safety fears after last month's disaster in Bangladesh.

Local rescue teams, helped by soldiers, scrambled to search through the rubble of the fallen structure early Thursday, which appeared to have been on a mezzanine level laden with crates of trainers and canvas shoes.

Khem Pannara, district police chief for the area in the southern province of Kampong Speu, said two staff members were killed and at least 11 injured, some seriously, adding that the rescue operation had ended.

He said the concrete ceiling had likely collapsed because it could not hold the weight of equipment stored on it due to "poor construction".

The Cambodian government said the owner of the "Wing Star Shoes" factory, which employs more than 7,000 people, would have to take responsibility for the incident.

"We will investigate the incident and take measures against those involved," minister of social affairs Ith Samheng told reporters, adding: "We will examine all factories to prevent this kind of incident from happening again."

Last month a nine-storey factory complex outside Dhaka collapsed, killing 1,127 people in one of the world's worst industrial disasters. The tragedy put pressure on Western retailers that rely on cheap labour in the region, where safety standards are often inadequate.

Say Sokny of Cambodia's Free Trade Union, a national body for garment and other industrial workers, said the factory is Taiwanese-owned and produces shoes for Japanese sports brand Asics.

The owner was questioned Thursday to find out whether there was a permit for the construction and how the factory -- in Angsokun village, 50 kilometres (30 miles) south of Phnom Penh -- was built, according to national police spokesman Kirt Chantharith.

Earlier, one employee said more than 100 people work in that area of the plant each day, although she did not know how many had been there at the time of the collapse.

"I was so shocked. I am crying. I saw blood in the debris," Sokny, 29, told AFP.

Rong Chhun, president of the Cambodian Confederation of Unions, welcomed the government plan to inspect garment plants across the country.

"I applaud any measures to investigate the buildings of all factories to ensure safety for workers, but officials have to do it thoroughly and not accept bribes," he said, warning that corruption could undermine efforts.

"Garment factories in Cambodia do not meet international safety standards because the quality of the buildings are not ensured and people have been working with a high risk of danger," he told AFP earlier.

"It happened in Bangladesh recently and now it has happened in Cambodia. We are very worried about the safety of the workers," he said.

Cambodia earned $4.6 billion from its garment exports last year but a series of strikes has highlighted festering discontent at low wages and tough conditions.

Protests by workers have also turned ugly. Three women, employees of Puma supplier Kaoway Sports, were wounded when a gunman opened fire on protesters demanding better working conditions at factories in February last year.

The shooting prompted Puma, Gap and H&M to express their "deep concern" and urged a thorough investigation.

But discontent lingers on the factory floor where 400,000 people of the 650,000 people employed in the industry work for foreign firms.

The monthly minimum wage for the hundreds of thousands of workers who make clothes for firms such as Levi Strauss of the United States and Sweden's H&M this month rose from $61 to $75, plus $5 for health care, after months of protest.

Milwaukee Makes Five (Cities So Far): Fast Food Workers Strike for Higher Pay and Union Rights

Laura Clawson, Daily Kos — Wed, 15 May 2013 11:52:00 -0700

This wave of strikes hitting multiple fast food restaurants (and, in some cases, retail stores) in a single city for a day, then showing up in another city, is truly unprecedented.

Fast food workers in yet another city have walked out for a one-day strike, seeking better wages and the right to form unions. Milwaukee is the fifth city hit by such a strike in the past six weeks; there as in Chicago, retail workers are also joining the strike. The strategy is the same as in New York, Chicago, St. Louis and Detroit: A one-day strike by as many workers in any given store are ready to walk out, with community support not just at the time of the strike but the next day as workers return to their jobs. The complaints are the same, too:

Milwaukee Burger King employee Tessie Harrell says she earned the state minimum wage of $7.25 an hour from 2008 through 2012, even after she was promoted to shift supervisor in 2011. Last year, she got a raise to $8.25 an hour. But she says that's not enough to pay the $650 monthly rent on her two-bedroom apartment and support her six children.
"I can't afford to buy my kids shoes," says Harrell, 34, who gets food stamps and $150 a month from her mother. "There's no way I should be struggling to make ends meet."

When a worker is on food stamps, that's an employer that is relying on taxpayers to augment wages, to bring workers up to the bare minimum they need to survive. Full-time work at $8.25 an hour—a full dollar above the federal minimum wage—still leaves a family of three below the poverty level.

This wave of strikes hitting multiple fast food restaurants (and, in some cases, retail stores) in a single city for a day, then showing up in another city, is truly unprecedented. Shoot, the first New York City strike back in November was unprecedented. While it remains to be seen whether these actions, or the organizing and actions up and down the Walmart supply chain, will have an effect, the simple fact that low-wage workers are fighting back against the poverty and routine intimidation they face is deeply inspiring. What other workers should be thinking about following their lead?

PERMALINK

College Execs have Private Jets? New Report Finds Public University Presidents Live Large

Alyssa Figueroa, AlterNet — Tue, 14 May 2013 11:16:00 -0700

While college students struggle to afford an education, public university presidents are making big bucks.

A new report released by The Chronicle of Higher Educationon Monday revealed that public university presidents in the U.S. are doing quite well financially.

The report lists public university presidents’ compensation for the 2012 fiscal year. Graham Spanier, former president of Penn State University, who was forced out after his handling of the Jerry Sandusky child abuse tragedy, topped the list by bringing in $2.9 million. This includes a base pay of nearly $351,000, a deferred pay of $1.2 million and a severance package of $1.2 million.

Jack Stripling, the Chroniclereporter who worked on the survey, told The New York Times: “The fact that Graham Spanier turns out to be the highest paid president in the country says something about the nature of compensation packages for people who leave under a cloud. … Severance agreements are often very lucrative.”

Following Spanier, Jay Gogue of Auburn University had a compensation package of $2.5 million, and E. Gordon Gee of Ohio State University $1.9 million. Gee received the highest base pay of all the public university presidents at $830,439. The New York Timesreported that Gee enjoys a “lavish lifestyle,” which includes “a rent-free mansion with an elevator, a pool and a tennis court and flights on private jets.”

Stripling told the Timesthat public university presidents have seen much growth in their compensation packages over the years. The $600,000 to $700,000 compensation package range saw the highest growth, as it included 28 presidents in 2012 — up from 13 in 2011.

An increase in deferred compensation also accounts for some of the compensation package growth, as Gogue’s compensation, for instance, went from $720,000 to $2.5 million in one year after completing a five-year contract.

Overall, the median compensation package in 2012 was $441,392 — up 4.7 percent from 2011’s $421,395. The median base salary in 2012 was $373,800 — up 2 percent from 2011’s $366,519.

Meanwhile, for students, life is quite far from lavish. The median student loan debt in the U.S. is $13,600, with the average being $24,301. In total, the amount of student loan debt owed in the U.S. is $1 trillion. Funding for public universities has been cut by about 28 percent since 2008, while the cost of attending one has more than doubled since 1988. Come July 1, the interest rates on subsidized federal Stafford loans are set to double — from 3.4 to 6.8 percent — if Congress doesn’t take action.

The 182 Percent Loan? How Installment Lenders Trap Borrowers

Paul Kiel, ProPublica — Mon, 13 May 2013 12:09:00 -0700

A racket that has caused low-income borrowers a world of hurt.

This story was co-produced with Marketplace. Listen to their coverage.

One day late last year, Katrina Sutton stood at a gas pump outside Atlanta and swiped her debit card. Insufficient funds. But that couldn't be. She'd been careful to wait until her $270 paycheck from Walmart had hit her account. The money wasn't there? It was all she had. And without gas, she couldn't get to work.

She tried not to panic, but after she called her card company, she couldn't help it. Her funds had been frozen, she was told, by World Finance.

Sutton lives in Georgia, a state that has banned payday loans. But World Finance, a billion-dollar company, peddles installment loans, a product that often drives borrowers into a similar quagmire of debt.

World is one of America's largest providers of installment loans, an industry that thrives in at least 19 states, mostly in the South and Midwest; claims more than 10 million customers; and has survived recent efforts by lawmakers to curtail lending that carries exorbitant interest rates and fees. Installment lenders were not included in a 2006 federal law that banned selling some classes of loans with an annual percentage rate above 36 percent to service members — so the companies often set up shop near the gates of military bases, offering loans with annual rates that can soar into the triple digits.

Installment loans have been around for decades. While payday loans are usually due in a matter of weeks, installment loans get paid back in installments over time — a few months to a few years. Both types of loans are marketed to the same low-income consumers, and both can trap borrowers in a cycle of recurring, expensive loans.

Installment loans can be deceptively expensive. World and its competitors push customers to renew their loans over and over again, transforming what the industry touts as a safe, responsible way to pay down debt into a kind of credit card with sky-high annual rates, sometimes more than 200 percent.

And when state laws force the companies to charge lower rates, they often sell borrowers unnecessary insurance products that rarely provide any benefit to the consumer but can effectively double the loan's annual percentage rate. Former World employees say they were instructed not to tell customers the insurance is voluntary.

When borrowers fall behind on payments, calls to the customer's home and workplace, as well as to friends and relatives, are routine. Next come home visits. And as Sutton and many others have discovered, World's threats to sue its customers are often real.

The Consumer Financial Protection Bureau, the new federal agency charged with overseeing consumer-finance products and services, has the power to sue nonbank lenders for violating federal laws. It could also make larger installment lenders subject to regular examinations, but it hasn't yet done so. Installment companies havesupported Republican efforts to weaken the agency, echoing concerns raised by the lending industry as a whole.

The CFPB declined to comment on any potential rule-making or enforcement action.

Despite a customer base that might best be described as sub-subprime, World comfortably survived the financial crisis. Its stock, which trades on the Nasdaq under the company's corporate name, World Acceptance Corp., has nearly tripled in price in the last three years. The company services more than 800,000 customers at upward of 1,000 offices in 13 states. It also extends into Mexico, where it has about 120,000 customers.

In a written response to questions for this story, World argued that the company provides a valuable service for customers who might not otherwise qualify for credit. The loans are carefully underwritten to be affordable for borrowers, the company said, and since the loans involve set monthly payments, they come with a "built-in financial discipline."

The company denied that it deceives customers, saying that it trains its employees to tell borrowers that insurance products are voluntary and that it also informs customers of this in writing. It said it contacts delinquent borrowers at their workplace only after it has failed to reach them at their homes and that it resorts to lawsuits to recoup delinquent payments in accordance with state laws.

"World values its customers," the company wrote, "and its customers demonstrate by their repeat business that they value the service and products that World offers."

The installment industry promotes its products as a consumer-friendly alternative to payday loans. Installment loans are "the safest form of consumer credit out there," said Bill Himpler, the executive vice president of the American Financial Services Association, of which World and other major installment lenders are members.

About 5 percent of World's customers, approximately 40,000, are service members or their families, the company said. According to the Defense Department, active-duty military personnel and their dependents comprise about 1 percent of the U.S. population.

The Starter Loan

Back in August 2009, Sutton's 1997 Crown Victoria needed fixing, and she was "between paychecks," as she put it. Some months, more than half of her paycheck went to student-loan bills stemming from her pursuit of an associate degree at the University of Phoenix. Living with her mother and grandparents saved on rent, but her part-time job as a Walmart cashier didn't provide much leeway. She was short that month and needed her car to get to work.

She said she happened to pass by a World Finance storefront in a strip mall in McDonough, Ga. A neon sign advertised "LOANS," and mirrored windows assured privacy. She went inside.

A credit check showed "my FICO score was 500-something," Sutton remembered, putting her creditworthiness in the bottom 25 percent of borrowers. "But they didn't have no problem giving me the loan."

She walked out with a check for $207. To pay it back, she agreed to make seven monthly payments of $50 for a total of $350. The loan papers said the annual percentage rate, which includes interest as well as fees, was 90 percent.

Sutton had received what World employees call a "starter loan." That's something Paige Buys learned after she was hired to work at a World Finance branch in Chandler, Okla., at the age of 18. At that point, she only had a dim notion of what World did.

At 19, she was named branch manager (the youngest in company history, she remembered being told), and by then she had learned a lot. And the more she understood, the more conflicted she felt.

"I hated the business," she said. "I hated what we were doing to people. But I couldn't just quit."

The storefront, which lies on the town's main artery, Route 66, is very much like the one where Sutton got her loan. Behind darkened windows sit a couple of desks and a fake tree. The walls are nearly bare. Typical of World storefronts, it resembles an accountant's office more than a payday loan store.

Buys said any prospective borrower was virtually guaranteed to qualify for a loan of at least $200. Low credit scores are common, she and other former employees said, but World teaches its employees to home in on something else: whether at least some small portion of the borrower's monthly income isn't already being consumed by other debts. If, after accounting for bills and some nominal living expenses, a customer still has money left over, World will take them on.

In its written response, World said the purpose of its underwriting procedures was to ensure that the borrower has enough income to make the required payments.

With few exceptions, World requires its customers to pledge personal possessions as collateral that the company can seize if they don't pay. The riskier the client, the more items they were required to list, former employees say.

Sutton offered two of her family's televisions, a DVD player, a PlayStation and a computer. Together, they amounted to $1,600 in value, according to her contract. In addition, World listed her car.

There are limits to what World and other lenders can ask borrowers to pledge. Rules issued in 1984 by the Federal Trade Commission put "household goods" such as appliances, furniture and clothing off limits — no borrower can be asked to literally offer the shirt off his back. One television and one radio are also protected, among other items. But the rules are so old, they make no mention of computers.

Video game systems, jewelry, chainsaws, firearms — these are among the items listed on World's standard collateral form. The contracts warn in several places that World has the right to seize the possessions if the borrower defaults.

"They started threatening me," a World customer from Brunswick, Ga., said. "If I didn't make two payments, they would back a truck up and take my furniture, my lawn mower." (In fact, furniture is among the items protected under the FTC rule.) The woman, who asked to remain anonymous because she feared the company's employees, was most upset by the prospect of the company taking her piano. She filed for bankruptcy protection last year.

In fact, former World employees said, it was exceedingly rare for the company to actually repossess personal items.

"Then you've got a broken-down Xbox, and what are you going to do with it?" asked Kristin, who worked in a World branch in Texas in 2012 and, from fear of retaliation, asked that her last name not be used.

World supervisors "would tell us, 'You know, we are never going to repossess this stuff' — unless it was a car," Buys said.

World acknowledged in its response that such repossessions are rare, but it said the collateral played a valuable role in motivating borrowers. "World believes that an important element of consumer protection is for a borrower to have an investment in the success of the transaction," the company wrote. When "borrowers have little or no investment in the success of the credit transaction they frequently find it easier to abandon the transaction than to fulfill their commitments."

'Real Gibberish'

Sutton's loan contract said her annual percentage rate, or APR, was 90 percent. It wasn't. Her effective rate was more than double that: 182 percent.

World can legally understate the true cost of credit because of loopholes in federal law that allow lenders to package nearly useless insurance products with their loans and omit their cost when calculating the annual rate.

As part of her loan, Sutton purchased credit life insurance, credit disability insurance, automobile insurance and non-recording insurance. She, like other borrowers ProPublica interviewed, cannot tell you what any of them are for: "They talk so fast when you get that loan. They go right through it, real gibberish."

The insurance products protect World, not the borrower. If Sutton were to have died, become disabled, or totaled her car, the insurer would have owed World the unpaid portion of her loan. Together, the premiums for her $200 loan total $76, more than the loan's other finance charges.

The insurance products provide a way for World to get around the rate caps in some states and effectively to charge higher rates. Sutton's stated annual percentage rate of 90 percent, for example, is close to the maximum that can legally be charged in Georgia.

ProPublica examined more than 100 of the company's loans in 10 states, all made within the last several years. A clear pattern developed: In states that allowed high rates, World simply charged high interest and other finance fees but did not bother to include insurance products. For a small loan like Sutton's, for example, World has charged a 204 percent annual rate in Missouri and 140 percent in Alabama, states that allow such high levels.

In states with more stringent caps, World slapped on the insurance products. The stated annual rate was lower, but when the insurance premiums were accounted for, the loans were often even more expensive than those in the high-rate states.

"Every new person who came in, we always hit and maximized with the insurance," said Matthew Thacker, who worked as an assistant manager at a World branch in Tifton, Ga., from 2006 to 2007. "That was money that went back to the company."

World profits from the insurance in two ways: It receives a commission from the insurer, and, since the premium is typically financed as part of the loan, World charges interest on it.

"The consumer is screwed six ways to Sunday," said Birny Birnbaum, the executive director of the nonprofit Center for Economic Justice and a former associate commissioner at the Texas Department of Insurance.

Industry data reveal just how profitable this part of World's business is. World offers the products of an insurer called Life of the South, a subsidiary of the publicly traded Fortegra Financial Corp. In Georgia in 2011, the insurer received $26 million in premiums for the sort of auto insurance Sutton purchased as part of her loan. Eighteen million dollars, or 69 percent, of that sum went right back to lenders like World. In all, remarkably little money went to pay actual insurance claims: about 5 percent.

The data, provided to ProPublica by the National Association of Insurance Commissioners, paint a similar picture when it comes to Life of the South's other products. The company's credit accident and health policies racked up $20 million in premiums in Georgia in 2011. While 56 percent went back to lenders, only 14 percent went to claims. The pattern holds in other states where World offers the products.

Fortegra declined to comment.

Gretchen Simmons, who managed a World branch in Pine Mountain, Ga., praised the company for offering customers loans they might not have been able to get elsewhere. She said she liked selling accidental death and disability insurance with loans, because many of her clients were laborers who were "more prone to getting their finger chopped off."

According to several contracts reviewed by ProPublica, losing one finger isn't enough to make a claim. If the borrower loses a hand, the policy pays a lump sum (for instance, $5,000). But, according to the policy, "loss of a hand means loss from one hand of four entire fingers."

Simmons took out a loan for herself from a World competitor — and made sure to decline the insurance. Why? "Because I knew that that premium of a hundred and blah blah blah dollars that they're charging me for it can go right into my pocket if I just deny it."

In its written response, World alleged that Simmons had been fired from the company because of "dishonesty and alleged misappropriation of funds," but it refused to provide further details. Simmons, who worked for World from 2005 to 2008, denied that she left the company on bad terms.

Federal rules prohibit the financing of credit insurance premiums as part of a mortgage but allow it for installment and other loans. Installment lenders can also legally exclude the premiums when calculating the loan's annual percentage rate, as long as the borrower can select the insurer or the insurance products are voluntary — loopholes in the Truth in Lending Act, the federal law that regulates how consumer-finance products are marketed.

World's contracts make all legally necessary disclosures. For example, while some insurance products are voluntary, World requires other types of insurance to obtain a loan. For mandatory insurance, Sutton's contract states that the borrower "may choose the person or company through which insurance is to be obtained." She, like most customers, wouldn't know where to begin to do that, even if it were possible.

"Nobody is going to sell you insurance that protects your loan, other than the lender," said Birnbaum. "You can't go down the street to your State Farm agent and get credit insurance."

When insurance products are optional — meaning the borrower can deny coverage but still get the loan — borrowers must sign a form saying they understand that. "We were told not to point that out," said Thacker, the former Tifton, Ga., assistant manager.

World, in its response to ProPublica, declined to offer any statistics on what percentage of its loans carry the insurance products, but it said employees are trained to inform borrowers that they are voluntary. As for why the company offers the insurance products in some states and not in others, World said it depends on state law and if "it makes business sense to do so."

Buys, the former Chandler, Okla., branch manager, said she found the inclusion of the insurance products particularly deceitful. In Oklahoma, World can charge high interest rates and fees on loans under $1,000 or so, so it typically doesn't include insurance on those loans. But it often adds the products to larger loans, which has the effect of jacking up the annual rate.

"You were supposed to tell the customer you could not do the loan without them purchasing all of the insurance products, and you never said 'purchase,' " Buys recalled. "You said they are 'included with the loan' and focused on how wonderful they are."

It was not long into her tenure that Buys said she began to question whether the products were really required. She asked a family friend who was an attorney if the law required it, she recalled, and he told her it didn't.

World trained its employees to think of themselves as a "financial adviser" to their clients, Buys said. She decided to take that literally.

When a customer took out a new loan, "I started telling them, 'Hey, you can have this insurance you're never going to use, or you can have the money to spend,'" she recalled. Occasionally, a customer would ask to have the disability insurance included, so she left it in. But mostly, people preferred to take the money.

One day, she remembered, she was sitting across from a couple who had come into the office to renew their loan. They were discussing how to cover the costs of a funeral, and Chandler being a small town, she knew it was their son's. On her screen were the various insurance charges from the original loan. The screen "was blinking like I could edit it," she recalled.

At that moment, she realized that she could advise customers renewing their loans that they could drop the insurance from their previous loans. If they did so, they'd receive several hundred dollars more. The couple excitedly agreed, she recalled, and other customers also thought it was good advice and dropped the products.

Buys' regional supervisor threatened to discipline her, Buys said. But it was hard to punish her for advising customers that the products were voluntary when they were. "All they could do was give me the stink eye," Buys said.

But World soon made it harder to remove the insurance premiums, Buys said. She couldn't remove them herself but instead had to submit a form, along with a letter from the customer, to World's central office. That office, she said, sometimes required borrowers to purchase the insurance in order to get the loans.

World, in its response to ProPublica's questions, said Buys' assertions about how it handled insurance were "false," but it declined to provide further details.

Eventually, Buys said, her relationship with management deteriorated to the point that she felt she had no choice but to quit. By the time she left in 2011, she had worked at World for three years.

World, in the answers provided to ProPublica, said that when Buys quit, she was "subject to being terminated for cause including dishonesty and alleged misappropriation of funds." The company declined to provide any details about the allegations, but after Buys quit, World filed suit in county court, accusing her of stealing money from the company. Buys retained an attorney and responded, maintaining her innocence and demanding proof of any theft. World withdrew the suit.

'It's All About Keeping Them'

Sutton's original loan contract required her to make seven payments of $50, at which point her loan would have been fully paid off.

But if World can persuade a customer to renew early in the loan's lifespan, the company reaps the lion's share of the loan's charges while keeping the borrower on the hook for most of what they owed to begin with. This is what makes renewing loans so profitable for World and other installment lenders.

"That was the goal, every single time they had money available, to get them to renew, because as soon as they do, you've got another month where they're just paying interest," says Kristin, the former World employee from Texas.

Sure enough, less than four months after taking out the initial loan, Sutton agreed to renew.

In a basic renewal (the company calls it either a "new loan" or a "refinance"), the borrower agrees to start the loan all over again. For Sutton, that meant another seven months of $50 payments. In exchange, the borrower receives a payout. The amount is based on how much the borrower's payments to date have reduced the loan's principal.

For Sutton, that didn't amount to much. She appears to have made three payments on her loan, totaling $150. (The company's accounting is opaque, and Sutton does not have a record of her payments.) But when she renewed the loan, she received only $44.

Most of Sutton's payments had gone to cover interest, insurance premiums and other fees, not toward the principal. And when she renewed her loan a second time, it was no different.

The effect is similar to how a mortgage amortizes: The portion of each payment that goes toward interest is at its highest the first month and decreases with each payment. As the principal is reduced, less interest is owed each month. By the end of the loan, the payments go almost entirely toward paying down the principal.

World regularly sends out mailers, and its employees make frequent phone calls, all to make sure borrowers know they have funds available. Every time a borrower makes a payment, according to the company, that customer "receives a receipt reflecting, among other information, the remaining balance on the borrower's loan and, where applicable, the current new credit available for that borrower." And when a borrower visits a branch to make a payment, former employees say, employees are required to make the pitch in person.

"You have to say, 'Let me see what I can do to get you money today,'" Buys recalled. If the borrower had money available on the account, it had to be offered, she and other former employees said.

The typical pitch went like this, Kristin said: "'Oh, by the way, you've got $100 available, would you like to take that now or do you want to wait till next month?'"

Customers would ask, "'Well, what does this mean?'" Buys said. "And you say, 'Oh, you're just starting your loan over, you know, your payments will be the same.'"

The company often encourages customers to renew the loans by saying it will help them repair their credit scores, former employees said, since World reports to the three leading credit bureaus. Successively renewing loans also makes customers eligible for larger loans from World itself. After renewing her loan twice, for instance, Sutton received an extra $40.

"We were taught to make [customers] think it was beneficial to them," Buys said.

"Retail (i.e., consumer) lending is not significantly unlike other retail operations and, like those other forms of retail, World does market its services," the company wrote in its response to questions.

About three-quarters of the company's loans are renewals, according to World's public filings. Customers often renew their loans after only two payments, according to former employees.

The company declined to say how many of its renewals occur after two payments or how many times the average borrower renews a loan. Renewals are only granted to borrowers who can be expected to repay the new loan, it said.

Lawsuits against other major installment lenders suggest these practices are common in the industry. A 2010 lawsuit in Texas claimed that Security Finance, a lender with about 900 locations in the United States, induced a borrower to renew her loan 16 times over a three-year period. The suit was settled. In 2004, an Oklahoma jury awarded a mentally disabled Security Finance borrower $1.8 million; he had renewed two loans a total of 37 times. After the company successfully appealed the amount of damages, the case was settled. Security Finance declined to respond to questions about the suits.

Another 2010 suit against Sun Loan, a lender with more than 270 office locations, claims the company convinced a husband and wife to renew their loans more than two dozen times each over a five-year period. Cary Barton, an attorney representing the company in the suit, said renewals occur at the customer's request, often because he or she doesn't have enough money to make the monthly payment on the previous loan.

The predominance of renewals means that for many of World's customers, the annual percentage rates on the loan contracts don't remotely capture the real costs. If a borrower takes out a 12-month loan for $700 at an 89 percent annual rate, for example, but repeatedly renews the loan after four payments of $90, he would receive a payout of $155 with each renewal. In effect, he is borrowing $155 over and over again. And for each of those loans, the effective annual rate isn't 89 percent. It's 537 percent.

World called this calculation "completely erroneous," largely because it fails to account for the money the customer received from the original transaction. World's calculation of the annual percentage rate if a borrower followed this pattern of renewals for three years: about 110 percent.

A Decade of Debt

In every World office, employees say, there were loan files that had grown inches thick after dozens of renewals.

At not just one but two World branches, Emma Johnson of Kennesaw, Ga., was that customer. Her case demonstrates how immensely profitable borrowers like her are for the company — and how the renewal strategy can transform long-term, lower-rate loans into short-term loans with the triple-digit annual rates of World's payday competitors.

Since being laid off from her janitorial job in 2004, Johnson, 71, has lived primarily on Social Security. Last year, that amounted to $1,139 in income per month, plus a housing voucher and food stamps.

Johnson could not remember when she first obtained a loan from World. Nor could she remember why she needed either of the loans. She can tell you, however, the names of the branch managers (Charles, Brittany, Robin) who've come and gone over the years, her loans still on the books.

Johnson took out her first loan from World in 1993, the company said. Since that time, she has taken out 48 loans, counting both new loans and refinancings, from one branch. In 2001, she took out a loan from the second branch and began a similar string of renewals.

When Johnson finally declared bankruptcy early this year, her two outstanding loans had face values of $3,510 and $2,970. She had renewed each loan at least 20 times, according to her credit reports. Over the last 10 years, she had made at least $21,000 in payments toward those two loans, and likely several thousand dollars more, according to a ProPublica analysis based on her credit reports and loan documents.

Although the stated length of each loan was about two years, Johnson would renew each loan, on average, about every five months. The reasons varied, she said. "Sometimes stuff would just pop out of the blue," she said. This or that needed a repair, one of her children would need money.

Sometimes, it was just too enticing to get that extra few hundred dollars, she acknowledged. "In a sense, I think I was addicted."

It typically took only a few minutes to renew the loan, she said. The contract contained pages of disclosures and fine print, and the World employee would flip through, telling her to sign here, here and here, she recalled.

Her loan contracts from recent years show that the payouts were small, often around $200. That wasn't much more than the $115 to $135 Johnson was paying each month on each loan. The contracts had stated APRs ranging from about 23 percent to 46 percent.

But in reality, because Johnson's payments were largely going to interest and other fees, she was taking out small loans with annual rates typically in the triple digits, ranging to more than 800 percent. World also disputed this calculation.

As she continued to pay, World would sometimes increase her balance, providing her a larger payout, but her monthly payment grew as well. It got harder and harder to make it from one Social Security check to the next. In 2010, she took out another loan, this one from an auto-title lender unconnected to World.

Eventually, she gave up on juggling the three loans. By the end of each month, she was out of money. If she had to decide between basic necessities like gas and food and paying the loans, the choice, she finally realized, was easy.

'Chasing' Customers

At World, a normal month begins with about 30 percent of customers late on their payments, former employees recalled. Some customers were habitually late because they relied on Social Security or pension checks that came later in the month. They might get hit with a late fee of $10 to $20, but they were otherwise reliable. Others required active attention.

Phone calls are the first resort, and they begin immediately — sometimes even before the payment is due for customers who were frequently delinquent. When repeated calls to the home or cell phone, often several times a day, don't produce a payment, World's employees start calling the borrower at work. Next come calls to friends and family, or whomever the borrower put down as the seven "references" required as part of the loan application.

"We called the references on a daily basis to the point where they got sick of us," said Simmons, who managed the Pine Mountain, Ga., store.

If the phone calls don't work, the next step is to visit the customer at home: "chasing," in the company lingo. "If somebody hung up on us, we would go chase their house," said Kristin from Texas.

The experience can be intimidating for customers, especially when coupled with threats to seize their possessions, but the former employees said they dreaded it, too. "That was the scariest part," recalled Thacker, a former Marine, who as part of his job at World often found himself driving, in the evening, deep into the Georgia countryside to knock on a borrower's door. He was threatened a number of times, he said, once with a baseball bat.

Visits to the borrower's workplace are also common. The visits and calls at work often continue even after borrowers ask the company to stop, according to complaints from World customers to the Federal Trade Commission. Some borrowers complained the company's harassment risked getting them fired.

ProPublica obtained the FTC complaints for World and several other installment loan companies through a Freedom of Information Act request. They show consistent tactics across the industry: the repeated phone calls, the personal visits.

After she stopped paying, Johnson remembered, World employees called her two to three times a day. One employee threatened to "get some stuff at your house," she said, but she wasn't cowed. "I said, 'You guys can get this stuff if you want it.'" In addition, a World employee knocked on her door at least three times, she said.

The goal of the calls and visits, former employees said, is only partly to prod the customer to make a payment. Frequently, it's also to persuade them to renew the loan.

"That's [World's] favorite phrase: 'Pay and renew, pay and renew, pay and renew,'" Simmons said. "It was drilled into us."

It's a tempting offer: Instead of just scrambling for the money to make that month's payment, the borrower gets some money back. And the renewal pushes the loan's next due date 30 days into the future, buying time.

But the payouts for these renewals are often small, sometimes minuscule. In two of the contracts ProPublica examined, the customer agreed to start the loan all over again in exchange for no money at all. At other times, payouts were as low as $1, even when, as in one instance, the new loan's balance was more than $3,000.

Garnishing Wages

For Sutton, making her monthly payments was always a struggle. She remembered that when she called World to let them know she was going to be late with a payment, they insisted that she come in and renew the loan instead.

As a result, seven months after getting the original $207 loan from World, Sutton wasn't making her final payment. Instead, she was renewing the loan for the second time. Altogether, she had borrowed $336, made $300 in payments, and now owed another $390. She was going backward.

A summons of garnishment Katrina Sutton received. When World Finance discovered that it could not garnish Sutton’s wages, the company put a hold on her “payroll card,” a kind of debit card provided by her employer. She was left without any money to pay for the gas she needed to get to work. (Erik S. Lesser/EPA for ProPublica)

Not long after that second renewal, Sutton said, Walmart reduced her hours, and there simply wasn't enough money to go around. "I called them at the time to say I didn't have money to pay them," she said. World told her she had to pay.

The phone calls and home visitsfollowed. A World employee visited the Walmart store where she worked three times, she recalled.

World didn't dispute that its employees came to Sutton's workplace, but it said that attempts to contact "any borrower at her place of employment would occur only after attempts to contact the borrower at her residence had failed."

In Georgia, World had another path to force Sutton to pay: suing her.

World files thousands of such suits each year in Georgia and other states, according to a review of court filings, but the company declined to provide precise figures.

Because Sutton had a job, she was a prime target for a suit. Social Security income is off limits, but with a court judgment, a creditor can garnish up to 25 percent of a debtor's wages in Georgia.

"When we got to sue somebody, [World] saw that as the jackpot," Buys said. In her Oklahoma store, collecting the junk people had pledged as collateral was considered useless. Garnishment was a more reliable way for the company to get its money, and any legal fees were the borrower's problem.

World said 11 of the states where it operates permit lenders to "garnish customers' wages for repayment of loans, but the Company does not otherwise generally resort to litigation for collection purposes, and rarely attempts to foreclose on collateral."

The sheriff served Sutton with a summons at Walmart, in front of her co-workers. Sutton responded with a written note to the court, saying she would pay but could only afford $20 per month. A court date was set, and when she appeared, she was greeted by the branch manager who had given her the original loan. The manager demanded Sutton pay $25 every two weeks. She agreed.

For five months, Sutton kept up the payments. Then, because of taxes she had failed to pay years earlier, she said, the IRS seized a portion of her paycheck. Again, she stopped paying World. In response, the company filed to garnish her wages, but World received nothing: Sutton was earning too little for the company to legally get a slice of her pay. After two months, World took another step.

Sutton's wages are paid via a "payroll card," a kind of debit card provided by Walmart. World filed to seize from Sutton's card the $450 it claimed she owed. By that point, she'd made more than $600 in payments to the company.

The immediate result of the action was to freeze Sutton's account, her only source of income. She couldn't gas up her car. As a result, she couldn't drive to work.

Sutton said she called a number for World's corporate office in a panic. "I said, 'You're gonna leave me with no money to live on?'" The World employee said the company had had no choice because Sutton didn't hold up her end of their agreement, Sutton recalled, and then the employee made an offer: If Sutton's available wages in her account hadn't covered her total debt to World after 30 days, the company would unfreeze her account and allow her to start a new payment plan.

Desperate, she gave up trying to deal with the company on her own and went to Georgia Legal Services Program, a nonprofit that represents low-income clients across the state.

"Her case is terribly egregious," said Michael Tafelski, a lawyer with GLSP who specializes in collections cases and represented Sutton. World had overstated the amount Sutton legally owed, he said, and circumvented laws limiting the amount of funds creditors can seize. In effect, the company was garnishing 100 percent of her wages. It's "unlike anything I have ever seen," Tafelski said, "and I have seen a lot of shady collectors."

After Tafelski threatened to sue World, the company beat a quick retreat. It dismissed all open cases against Sutton and declared her obligation satisfied.

In its response to ProPublica, World claimed that Tafelski had bullied the billion-dollar company: "Mr. Tafelski used abusive out of court threats to accomplish an end he knew he could not obtain through legal process."

"It's common practice among lawyers to contact the opposing party to attempt to resolve problems quickly, without filing a lawsuit, especially in emergency cases like this one," Tafelski said.

As for Sutton, she had missed several days of work, but her account was unfrozen, and she was done with World Finance forever.

"If I'd known then what I know now," she said, "I'd never have fooled with them."

Breaking Down This Week's Fast Food Strikes in St. Louis and Detroit

AlterNet — Fri, 10 May 2013 11:06:00 -0700

The new labor movement spreads to two Midwestern cities.

A new movement of fast food workers demanding better wages and the right to unionize spread to two Midwestern cities this week, St. Louis and Detroit, bringing the total number of such actions to four in five weeks. Similar strikes occurred last month in New York and Chicago. As we did during the strike in New York, we’ve put together a breakdown of what’s happening in St. Louis and Detroit:

Who is striking this week?

According to MSNBC, organizers estimate up to 400 fast food workers from at least 60 different restaurants in Detroit walked off the job today, possibly a record-high for this type of action. Josh Eidelson reports for The Nation that at least four restaurants were forced shut down due to strikes, including two McDonald’s, a Long John’s Silver and a Popeye’s. At one McDonald’s location, management reportedly brought in additional workers to replace the striking employees, only to have them join the action.

More than 100 St. Louis fast food workers walked off the job Wednesday and Thursday, reported MSNBC’ Ned Resnikoff, including employees of McDonald’s, Jimmy John’s, Wendy’s and Domino’s.

Both actions were organized by coalitions of local and national labor groups. St. Louis labor groups called the campaign “STL Can’t Survive on $7.35.” Detroit’s strikers went with “D15.”

What are they asking for?

Like strikers in New York and Chicago last month, fast food workers in St. Louis and Detroit are demanding a wage of $15 an hour and the right to form a union without threat of retaliation. "I make $7.40 an hour, the same as when I started working in the fast food industry three years ago,” Detroit Burger King employee Claudette Wilson told The Detroit News. “We're the fastest-growing job market in the country with the lowest pay."

Additionally, strikers spoke to media about various problems with working conditions at their restaurants. “We want respect, and we want fifteen and a union, and that’s not too much to ask for,” St. Louis McDonald’s employee Angela Harrison told The Nation. “We want simple things, like the first-aid kit to be fully stocked all the time.”

What does this all mean?

Several writers and labor advocates have spoken about how recent fast food strikes speak to America’s growing service industry, particularly fast food, and a crossroads in the labor movement.

“These are the fast growing jobs, but they’re also the lowest paying,” Rev. Martin Rafanan, the St. Louis action’s campaign director, told Josh Eidelson, writing for Salon. “So this is where we have to pay attention.”

The strikes, made up of non-union workers, also represent a growing strategy used by labor groups, as Eidelson explains:

Rather than waiting until they’ve built support from a majority of a store’s or company’s workers, they stage actions by a minority of the workforce designed to inspire their co-workers. Rather than publicly identifying the campaign and its organizers with a single international union, these union-funded efforts turn to allied community groups to spearhead organizing. Rather than training all their resources on a single company, they organize against all of the industry’s players at once. And—faced with legal and economic assaults that have weakened the strike weapon—these campaigns mount one-day work stoppages that are carefully tailored to maximize attention and minimize, but not eliminate, the risk that workers will lose their jobs.

Amazon Warehouse Workers Forced to Wait at Security Checkpoints Without Getting Paid

Steven Hsieh, AlterNet — Thu, 09 May 2013 07:51:00 -0700

Attorneys representing the workers estimate that 100,000 warehouse workers are owed more than $100 million in back wages.

After spending 12 hours a day packing boxes, Amazon warehouse workers must wait at security checkpoints for up to 25 minutes without pay before going home, the Huffington Post reports.

Nevada workers Jesse Busk and Laurie Castro are leading a class-action lawsuit against Integrity Staffing Solutions, which finds workers for Amazon, for uncompensated time spent in lines aimed at curtailing employee theft. Amazon was not named in the suit. The suit also claimed wages for time spent walking to and from lunch breaks in facilities described as “the size of seven football fields.” Attorneys representing the workers estimate that 100,000 warehouse workers are owed “more than $100 million in back wages and penalties for time spent on security lines,” the Morning Call reports.

"You're just standing there, and everyone wants to get home," Busk told the Huffington Post. "It was not comfortable. There could be hundreds of people waiting at the end of the shift."

In 2011, a federal court tossed out Busk and Castro’s claim, but last month a federal appeals court partially reversed that decision. In an opinion, a judge states that the “plaintiffs have stated a plausible claim for relief” because the security checkpoints are “necessary to employees’ primary work as warehouse employees and done for Integrity’s benefit.” The opinion does not reverse the decision on claimed wages for lunch trips.

Previous court decisions have stated that employers must compensate workers for time spent on activities integral to an employees’ job, such as putting on or taking off safety equipment. But attorneys representing Busk and Castro say, if successful, they would set a precedent winning claims for unpaid time spent at security checkpoints. They argue that Integrity could reduce waiting time for employees who’re ready to go home.

“There are thousands of employees all going through the gates at the same time,” Mark Thierman, one of the attorneys representing the plaintiffs, told Lawyers.com. “They could relieve it by opening more checkpoints or staggering releases.”

This isn’t the first time Amazon warehouses became the center of a labor controversy. A 2011 investigation by The Morning Callrevealed sweatshop-like conditions in a Pennsylvania warehouse, where temperatures “soared above 100 degrees.” A Financial Times report this year documented poor conditions and draconian measures in Amazon’s UK warehouses, including boots that don’t fit and the use of employee tracking devices.

Austerity and Debt Conspire to Wreck the Lives of Working American Families

Robert Kuttner, Knopf Publishing — Wed, 08 May 2013 14:30:00 -0700

Working families are sandbagged by the mortgage debt and, retirees can’t get decent returns on their investments.

The following is an excerpt from from Debtors' Prisonby Robert Kuttner (Knopf 2013).

In this, the fifth year of a prolonged downturn triggered by a financial crash, the prevailing view is that we all must pay for yesterday’s excess. This case is made in both economic and moral terms. Nations and households ran up unsustainable debts; these obligations must be honored—to satisfy creditors, restore market confidence, deter future recklessness, and compel people and nations to live within their means.

A phrase often heard is “moral hazard,” a concept borrowed by economists from the insurance industry. In its original usage, the term referred to the risk that insuring against an adverse event would invite the event. For example, someone who insured a house for more than its worth would have an incentive to burn it down. Nowadays, economists use the term to mean any unintended reward for bad behavior. Presumably, if we give debt relief to struggling homeowners or beleaguered nations, we invite more profligacy in the future. Hence, belts need to be tightened not just to improve fiscal balance but as punishment for past misdeeds and inducement for better self-discipline in the future.

There are several problems with the application of the moral hazard doctrine to the present crisis. It’s certainly true that under normal circumstances debts need to be honored, with bankruptcy reserved for special cases. Public policy should neither encourage governments, households, enterprises, or banks to borrow beyond prudent limits nor make it too easy for them to walk away from debts. But after a collapse, a debt overhang becomes a macroeconomic problem, not a personal or moral one. In a deflated economy, debt burdens undermine both debtors’ capacity to pay and their ability to pursue productive economic activity. Intensified belt-tightening deepens depression by further undercutting purchasing power generally. Despite facile analogies between governments and households, government is different from other actors. In a depression, even with high levels of public debt, additional government borrowing and spending may be the only way to jump-start the economy’s productive capacity at a time when the private sector is too traumatized to invest and spend.

The idea that anxiety about future deficits harms investor or consumer confidence is contradicted by both economic theory and evidence. At this writing, the U.S. government is able to borrow from private money markets for ten years at interest rates well under 2 percent and for thirty years at less than 3 percent. If markets were concerned that higher deficits five or even twenty-five years from now would cause rising inflation or a weaker dollar, they would not dream of lending the government money for thirty years at 3 percent interest. Consumers are reluctant to spend and businesses hesitant to invest because of reduced purchasing power in a weak economy. Abstract worries about the federal deficit are simply not part of this calculus.

“Living within one’s means” is an appealing but oversimplified metaphor. Before the crisis, some families and nations did borrow to finance consumption—a good definition of living beyond one’s means. But this borrowing was not the prime cause of the crisis. Today, far larger numbers of entirely prudent people find themselves with diminished means as a result of broader circumstances beyond their control, and bad policies compound the problem.

After a general collapse, one’s means are influenced by whether the economy is growing or shrinking. If I am out of work, with depleted income, almost any normal expenditure is beyond my means. If my lack of a job throws you out of work, soon you are living beyond your means, too, and the whole economy cascades downward. In an already depressed economy, demanding that we all live within our (depleted) means can further reduce everyone’s means. If you put an entire nation under a rigid austerity regime, its capacity for economic growth is crippled. Even creditors will eventually suffer from the distress and social chaos that follow.

Take a closer look at moral hazard ex ante from ex post and you will find that blame is widely attributed to the wrong immoralists. Governments and families are being asked to accept austerity for the common good. Yet the prime movers of the crisis were bankers who incurred massive debts in order to pursue speculative activities. The weak reforms to date have not changed the incentives for excessively risky banker behaviors, which persist.

The best cure for moral hazard is the proverbial ounce of prevention. Moral hazard was rampant in the run-up to the crash because the financial industry was allowed to make wildly speculative bets and to pass along risks to the rest of the society. Yet in its aftermath, this financial crisis is being treated more as an object lesson in personal improvidence than as a case for drastic financial reform.

Austerity and Its Alternatives

The last great financial collapse, by contrast, transformed America’s economics. First, however, the Roosevelt administration needed to transform politics. FDR’s reforms during the Great Depression constrained both the financial abuses that caused the crash of 1929 and the political power of Wall Street. Deficit-financed public spending under the New Deal restored growth rates but did not eliminate joblessness. The much larger spending of World War II—with deficits averaging 26 percent of gross domestic product for each of the four war years—finally brought the economy back to full employment, setting the stage for the postwar recovery.

By the war’s end, the U.S. government’s public debt exceeded 120 per- cent of GDP, almost twice today’s ratio. America worked off that debt not by tightening its belt but by liberating the economy’s potential. In 1945, there was no panel like President Obama’s Bowles-Simpson commission targeting the debt ratio a decade into the future and commending ten years of budget cuts. Rather, the greater worry was that absent the stimulus of war and with twelve million newly jobless GIs returning home, the civilian economy would revert to depression. So America doubled down on its public investments with programs like the GI Bill and the Marshall Plan. For three decades, the economy grew faster than the debt, and the debt dwindled to less than 30 percent of GDP. Finance was well regulated so that there was no speculation in the public debt. The Department of the Treasury pegged the rate that the government would pay for its bonds at an affordable 2.5 percent. The Federal Reserve Board provided liquidity as necessary.

The Franklin Roosevelt era ushered in an exceptional period in the dismal history of debt politics. Not only were banks well regulated, but the government used innovative public institutions such as the Reconstruction Finance Corporation to recapitalize banks and industrial enterprises and the Home Owners’ Loan Corporation to refinance home mortgages. Chastened by the catastrophe of the reparations extracted from Germany after World War I, the victorious Allies in 1948 wrote off nearly all of the Nazi debt so that the German economy could recover and then sweetened the pot with Marshall Plan aid. Globally, the Bretton Woods accord created a new international monetary system that limited the power of private financiers, offered new public forms of credit, and biased the financial system toward economic expansion. This story is told in detail in the chapters that follow.

In 1936, John Maynard Keynes provocatively called for “the euthanasia of the rentier.” He meant that once an economy was stabilized into a high-growth regime of managed capitalism, combining low real interest rates with strictures against speculation, and using macroeconomic management of the business cycle to maintain full employment, capital markets would efficiently and even passively channel financial investment into productive enterprise. In such a world, there would still be innovative entrepreneurs, but the parasitic role of a purely financial class reaping immense profits from the manipulation of paper would dwindle to insignificance. Legitimate passive investors—pension funds, life insurance companies, small savers, and the proverbial trust accounts of widows and orphans—would reap decent returns, but there would be neither windfalls for the financial middlemen nor catastrophic risks imposed by them on the rest of the economy. Stripped of the hyperbole, this picture describes the orderly but dynamic economy of the 1940s, 1950s, and 1960s, a time when finance was harnessed to the public interest, true innovators were rewarded, most investors earned merely normal returns, and windfall speculative profits were not available—because the rules of the game gave priority to investment in the real productive economy.

In today’s economy, which is dominated by high finance, small debtors and small creditors are on the same side of a larger class divide. The economic prospects of working families are sandbagged by the mortgage debt overhang. Meanwhile, retirees can’t get decent returns on their investments because central banks have cut interest rates to historic lows to prevent the crisis from deepening. Yet the paydays of hedge fund managers and of executives of large banks that only yesterday were given debt relief by the government are bigger than ever. And corporate executives and their private equity affiliates can shed debts using the bankruptcy code and then sail merrily on.

Exaggerated worries about public debt are a staple of conservative rhetoric in good times and bad. Many misguided critics preached austerity even during the Great Depression. As banks, factories, and farms were failing in a cumulative economic collapse, Andrew Mellon, one of America’s richest men and Treasury secretary from 1921 to 1932, famously advised President Hoover to “liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate . . . it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life.” The sentiments, which today sound ludicrous against the history of the Depression, are not so different from those being solemnly expressed by the U.S. austerity lobby or the German Bundesbank.

The Great Conflation

Austerity economics conflates several kinds of debt, each with its own causes, consequences, and remedies. The reality is that public debt, financial industry debt, consumer debt, and debt owed to foreign creditors are entirely different creatures.

The prime nemesis of the conventional account is government debt. Public borrowing is said to crowd out productive private investment, raise interest rates, and risk inflation. At some point, the nation goes broke paying interest on past debt, the world stops trusting the dollar, and we end up like Greece or Weimar Germany. Deficit hawks further conflate current increases in the deficit caused by the recession itself with projected deficits in Social Security and Medicare. Supposedly, cutting Social Security benefits over the next decade or two will restore financial confidence now. Since businesses don’t base investment decisions on such projections, those claims defy credulity.

Until the collapse of 2008, most government debts were manageable. Spain and Ireland, two of the alleged sinner nations, actually had low ratios of debt to gross domestic product. Ireland ran up its public debt bailing out the reckless bets of private banks. Spain suffered the consequences of a housing bubble, later exacerbated by a run on its government bonds. The United States had a budget surplus and a sharply declining debt-to-GDP ratio as recently as 2001. In that year, thanks to low unemployment and increasing payroll tax revenues, Social Security’s reserves were projected to increase faster than the claims of retirees. (More on Social Security in chapter 3.)

The U.S. debt ratio rose between 2001 and 2008 because of two wars and gratuitous tax cuts for the wealthy, not because of an excess of social generosity. The deficit then spiked mainly because of a dramatic falloff in government revenues as a result of the recession itself. The sharp increase in government debt was the effect of the collapse, not the cause.

The United States and other nations had far higher ratios of public debt to GDP at different points in their histories, and those debts did not prevent prosperity—as long as other sensible policies were followed. Britain’s debt was well over 200 percent of GDP after the Napoleonic Wars, on the eve of the Industrial Revolution. It rose to more than 260 percent at the end of World War II, a period that ushered in the British economy’s best three decades of performance since before World War I.

Along with government borrowing, consumer debt is the other villain of the orthodox account. Supposedly, people went on a borrowing binge to finance purchases they couldn’t afford, and now the piper must be paid. This contention is a half-truth that leaves out two key details.

One is the worsening economic situation of ordinary families. In the first three decades after World War II, wages rose in lockstep with productivity. As the economy, on average, became more prosperous, that prosperity was broadly shared. American consumers took out mortgages to buy homes (with very low default rates) but engaged in little other borrowing. However earnings stagnated in the 1970s, and that trend worsened after 2001. Nearly all the productivity gains of the economy went to the top 1 percent.

Wages began to lag because of changes in America’s social contract. Unions were weakened. Good unemployment insurance and other government support of workers’ bargaining power eroded. High unemployment created pressure to cut wages. Corporations that had once been benignly paternalistic became less loyal to their employees. Deregulation undermined stable work arrangements. Globalization on corporate terms made it easier for employers to look for cheaper labor abroad. (See chapter 2 for more on lagging wages.)

During this same period, housing values began to increase faster than the rate of inflation, as interest rates steadily fell after 1982. Many critics ascribe the housing bubble to the subprime scandal, but in fact subprime loans accounted for just the last few puffs. The rise in prices mostly reflected the fact that standard mortgages kept getting cheaper, thanks to a climate of declining interest rates. Low-interest mortgage loans meant that more people could become homeowners and that existing homeowners could afford more expensive houses. With 30-year mortgages at 8 percent, a $2,000 monthly payment finances about a $275,000 home. Cut mortgage rates to 4 percent and the same payment buys a $550,000 home. Low interest rates bid up housing prices. And the higher the paper value of a home, the more one can borrow against it. (It’s possible to temper asset bubbles with regulatory measures, such as varying down-payments or cracking down on risky mortgage products. But the Fed has resisted using these powers.)

The combination of these two trends—declining real wages and inflated asset prices—led the American middle class to use debt as a substitute for income. People lacked adequate earnings but felt wealthier. A generation of Americans grew accustomed to borrowing against their homes to finance consumption, and banks were more than happy to be their enablers. In my generation, second mortgages were considered highly risky for homeowners. The financial industry rebranded them as home equity loans, and they became ubiquitous. Third mortgages, even riskier, were marketed as “home equity lines of credit.”

State legislatures, meanwhile, paid for tax cuts by reducing funding for public universities. To make up the difference, they raised tuition. Federal policy increasingly substituted loans for grants. In 1980, federal Pell grants covered 77 percent of the cost of attending a public university. By 2012, this was down to 36 percent. Nominally public state universities are now only 20 percent funded by legislatures, and their tuition has trebled since 1989. By the end of 2011, the average student debt was $25,250. In mid-2012, total outstanding student loan debt passed a trillion dollars, leaving recent graduates weighed down with debt before their economic lives even began. This borrowing is anything but frivolous. Students without affluent parents have little alternative to these debts if they want college degrees. But as monthly payments crowd out other consumer spending, the macroeconomic effect is to add one more drag to the recovery

Had Congress faced the consequences head-on, it is hard to imagine a deliberate policy decision to sandbag the life prospects of the next generation. But this is what legislators at both the federal and state levels, in effect, did by stealth. They cut taxes on well-off Americans, and increased student debts of the non-wealthy young to make up the difference. The real debt crisis is precisely the opposite of the one in the dominant narrative: efficient public investments were cut, imposing inefficient private debts on those who could least afford to carry them.

During this same period, beginning with the Reagan presidency, other government social protections were weakened and employer benefits such as retirement and health plans became less reliable. People were thrown back on what my colleague Tamara Draut calls “the plastic safety net” of credit card borrowing. In short, debt became the economic strategy of struggling workaday Americans. For the broad middle class, the ratio of debt to income increased from 67 percent in 1983 to 157 percent in 2007. Mortgage debt on owner-occupied homes increased from 29 percent to 47 percent of the value of the house. When housing values collapsed, debt ratios increased further.

From the 1940s through the 1970s—a period when real wages and homeownership rates steadily rose—the habit of the first postwar generation had been to pay down mortgages until homes were owned free and clear and then to use the savings to help finance retirement. By contrast, the custom of the financially strapped second postwar generation, who came of age in the 1970s, 1980s, and 1990s, was to keep refinancing their mortgages, often taking out cash with a second mortgage as well.

Increasingly, young adults facing income shortfalls turned to credit cards and other forms of short-term borrowing. By 2001, the average household headed by someone between twenty-five and thirty-four carried credit card debt of over $4,000—twice as much as in 1989—and was devoting a quarter of its income to interest payments. As Senator Elizabeth Warren of Massachusetts has documented, most of the debt increase went to life’s basic necessities, not luxuries. As health insurance coverage dwindled, the biggest single category was medical debt.

As a matter of macroeconomics, the practice of borrowing against assets sustained consumption in the face of flat or falling wages—until the music stopped. When housing prices began to tumble, the use of debt to finance consumption did not just halt; the process went into reverse as households had to pay down debt. Rising unemployment compounded the damage. Consumer purchasing power took a huge hit, and the economy has yet to recover from this.

According to the Federal Reserve, household net worth declined by 39 percent from 2007 to 2010. The ratio of debt to household income has declined from a peak of 134 percent in 2007 to about 114 percent in 2012, and it is still falling. Borrowing to sustain consumption is no longer viable.

After the fact, it is too facile to cluck that people who suffered declining earnings should have just consumed less. As a long-term proposition, stagnant wages and rising debts were a dubious way to run an economy, but in a short-run depression, paying down net debt only adds to the deflationary drag. The remedy, however, is not to redouble general austerity but to restore household purchasing power and decent wages with a strong recovery.

The real villain of the story is financial industry debt. During the boom years, investment banks, hedge funds, commercial banks with “off-balance-sheet” liabilities, and lightly regulated hybrids such as the insurance giant American International Group (AIG) were typically operating with leverage ratios of 30 to 1 and in some cases of more than 50 to 1. “Leverage” is a polite word for borrowing. In plain English, they borrowed fifty dollars for every one dollar of their own capital. They incurred immense debts, substantially in very short-term money-market loans that had to be refinanced daily. In the case of AIG, which underwrote credit default swaps (a kind of insurance but with no reserves against loss), the leverage was literally infinite. When panic set in, the access to credit dried up in a matter of days.

With the collusion of credit rating agencies that blessed their opaque and risky securities with triple-A ratings, these financial engineers sold their toxic products to investors around the world. Sometimes the financial engineers even borrowed money to bet against the same securities they created—marketing them as sound investments while they shorted their own creations. When the boom turned out to be a bubble, the highly interconnected financial system crashed, with trillions of dollars in collateral damage to bystanders.

Copyright © 2013 by Robert Kuttner. Excerpted by permission of Knopf, a division of Random House, Inc. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.

Indispensable Guide: Where to Shop to Avoid Buying from Businesses that Endanger Workers

Bryce Covert, Think Progress — Wed, 08 May 2013 11:37:00 -0700

After Bangladesh clothing factory collapse, responsible shoppers want to avoid supporting companies that don't care about their employees. Here's how.

Bangladesh’s $20 billion garment industry makes it the world’s second-largest apparel exporter, and the United States is its second-largest buyer after Europe. With the factory collapse death toll now over 800, American consumers may be looking to buy clothes that weren’t made in such working conditions. It is likely much better for the Bangladeshi economy and its garment workers for companies to invest in upgrades rather than flee the country, and those investments could cost consumers a mere 10 cents per garment. But in the meantime, there are some places for American shoppers to turn.

Finding these retailers can be difficult, given how much American companies rely on Bangladeshi manufacturers, but some have either taken steps to ensure better working conditions or simply manufacture their clothing elsewhere. Below are some of those retailers, although the list is far from comprehensive. Help ThinkProgress build this list: Where do you buy clothing that is sourced from humane working conditions? Leave your suggestions in the comments and we will update the post.

Levi Strauss & Co.
Sells: Full range of men’s and women’s apparel
Levi Strauss & Co. claims to be the first multinational apparel company to establish a code of conduct for its suppliers in 1991. Its Terms of Engagement outlines rules for child and forced labor, working hours and wages, freedom of association, and detailed safety requirements. While it still sources from factories in Bangladesh, it doesn’t use multistory facilities that have factories with different owners, and in the past it has taken action to police the standards in its facilities. When it found that two factories in Bangladesh employed child workers, it decided to keep paying the workers while they attended school and offer them full-time jobs once they were of legal working age rather than fire them.

Patagonia
Sells: Outdoor apparel and gear
While it has factories in Bangladesh, it has eight in the U.S. and a Code of Conduct for its suppliers that expressly prohibits unsafe working conditions, child labor, and excessive hours and encourages higher wages and unionization.

Land’s End
Sells: Jeans, shirts, and sweatpants as well as home and pet items
Land’s End launched a “Made in the U.S.A.” collection in 2012 with its Durable Goods line. The line offers clothing, home, pet, and specialty items.

Brooks Brothers
Sells: Men’s dress clothes
Brooks Brothers has a clothing line of men’s dress shirts, suits, ties, and dress shoes that are made in the United States. The company also has a commitment to philanthropic spending and partners with non-profit organizations related to health issues, education, and the arts.

New Balance
Sells: Sneakers and sportswear
New Balance has a line of sneakers either made in the U.S. or assembled here.

American Giant
Sells: Men’s sweatshirts, T-shirts, and sweatpants
Seeking to address the fact that “most clothes we love…are made in countries that are so far away, the only American job it created was a store clerk,” the company sources its materials and manufacturing in the U.S.

Alta Gracia
Sells: College apparel
Alta Gracia’s products are made in the Dominican Republic, where it says it pays a living wage, sometimes “more than three times the minimum wage,” respects the right to form a union, and ensures a safe workplace. The Worker Rights Consortium ensures that the company is compliant with these standards through on-the-ground monitoring.

Flint and Tinder
Sells: Men’s underwear and accessories
The company manufactures all of its products in the U.S. in its own facilities, which started with a single factory and has expanded to a larger group. It says that for every 1,000 pair of underwear it sells in a month, it adds at least one job in its supply chain.

UPDATE

Here are more retailers thanks to reader comments:

Carhartt
Sells: Work pants and jeans, outerwear, and shirts
The retailer’s production comes mostly from company-owned factories in the U.S. and Mexico. It also has a Workplace Code of Conduct based on the Core Conventions of the International Labor Organization and the UN’s Universal Declaration of Human Rights.

Pact
Sells: Men’s and women’s tops and intimates
The company says it is committed to using sweat shop-free factories that it visits multiple times a year. It also sources its materials from eco-friendly and organic factories.

Everlane
Sells: Men’s and women’s tops and accessories
The company claims to “spend months seeking out the best” factories that specialize in different fabrics and construction methods.

Shockoe Denim
Sells: Jeans
The company is family owned and operated and manufactures its products in the U.S. It also says that “all raw materials used in our jeans can trace their origins to a US factory or workshop.”

AG
Sells: Jeans
Every step of manufacturing the jeans is done under one roof in the U.S., including design, sewing, and finishing. It also uses eco-friendly practices and recycles its scraps.

For more ideas, you can check out the Made in USA Challenge blog, which features items made in the U.S.

Casinos Are Booming Thanks to State Governments' Need to Exploit Gambling Addicts for Revenue

Alyssa Figueroa, AlterNet — Fri, 03 May 2013 16:17:00 -0700

Slot machine losses are taxes on suffering addicts to prevent states from going bust.

Growing up, Arelia Taveras' family often traveled to Atlantic City for a fun time together in the casinos. Gambling was always portrayed as a fine form of entertainment, and so at 21, Taveras didn’t hesitate to make her way down to the Jersey Shore with her family about once a month.

More than a decade later, Taveras was visiting AC alone every weekend. As an escape from the stresses of being a lawyer, she would gamble from Friday night until Sunday, playing blackjack, poker and roulette.

Soon, the casinos brought in the comps. Limos, with her personal pillow in the trunk, took her to and from her home in New York. She was given free trips to partner casinos in the Bahamas and Las Vegas, where her friend had to fly out to bring her back home after she got lost in gambling for 21 days. She was only supposed to stay for three.

Taveras hit rock-bottom when she drained a bank account that consisted of her client’s money. A million dollars in debt, a grand larceny charge, and two and a half years in jail later, Taveras is now left trying to pick up the pieces.

Gambling is no longer an acceptable activity in her eyes. “It’s killing people. I lost my professional career. I lost my reputation. I probably wasn’t even meant to survive this.”

What Are the Odds That Casinos Hurt?

People have been gambling for thousands of years. But in recent decades, casinos in the U.S. have seen enormous growth. Long after Nevada legalized casino gambling in 1931, New Jersey legalized it in 1976. Since then, casinos have rapidly sprung up, and today there are about 900 casinos throughout 38 states nationwide.

Why such a drastic expansion?

Casinos have primarily escalated because state governments are increasingly turning to them for a source of revenue. In the past, federal officials often publicly acknowledged the harms of gambling. For instance, during the Great Depression, New York City Mayor Fiorello La Guardia dumped slot machines into the Long Island Sound and shamed those who attempted to prey on his residents during financial hardship.

Today, however, state governments work with casino managers in the name of revenue, which they justify by allotting the money to projects that are meant to enhance communities. In reality, however, governments’ partnership with casinos ultimately harms communities. Unlike other “sin taxes,” like those on tobacco, alcohol and, in the near future, possibly soda, which act to discourage destructive behavior, casino taxes are collected with the government’s encouragement, through partnership and advertising.

Now, with casinos closer to peoples’ homes, more Americans are able to go to casinos and can go more often. In 2011, the manager at a Pennsylvania casino was quoted saying that his customers visited an average of 4.5 days a week.

And with more gamblers comes more gambling addicts. The National Council on Problem Gambling states that in the U.S., an estimated 2 million adults are pathological gamblers, while about 4-6 million are problem gamblers, who meet certain criteria including chasing losses, irritability when attempting to stop gambling, etc. And problem gamblers don’t just lose all their money — consequences are severe. One out of every five problem gamblers attempts suicide.

Meanwhile, casinos make about 90 percent of their profits from problem gamblers, which make up 10 percent of their customers. Though state governments claim that casino tax is a “voluntary tax,” it’s clear that the majority of the revenue is essentially comes from an addict tax.

As casino owners and state governments create and then exploit addicts, they prey on people’s weaknesses, many of which are constructed by societal and economic structures. For one, they prey on people who are desperate for some extra cash. A survey done by the Consumer Federation of America found that one out of five Americans thinks the best way to achieve long-term financial security is to play the lottery. And while casinos are a different form of gambling, people who gamble may have similar high hopes.

Today, gamblers are losing money more than ever. In 2007, Americans lost more than $92 billion gambling — nine times the amount they lost in 1982. Though the American Gambling Association, a top lobbying casino group, states the median income of a casino gambler is around $50,000, Les Bernal cautions that casinos fund the association, and thus their research. Bernal is the national director of Stop Predatory Gambling, a non-profit that works to get the government out of the gambling business. He said he’s never seen good data on gambler incomes, however, he believes that as most of the casinos nationwide are located in small towns, the majority of casino gamblers are now working-class people, not high rollers who made up the majority in the past.

In California, for example, journalists exposed that welfare recipients used their welfare debit cards to withdraw $1.8 million in the span of eight months. And in Pennsylvania, a survey found that 48 percent of those below the poverty line planned to gamble at a newly built casino.

But perhaps more than preying on people’s hopes of winning, casino gambling also preys on the lonely, the stressed and the bored to make a profit. Research shows that for hardcore addicts, gambling isn’t about winning, but rather the entering of a trancelike state. Taveras said, “I never won enough to excite me or lost enough to depress me.” She said that gambling was a huge escape from both the pressure and repetitiveness of everyday life. “I would probably still be gambling if I could. I loved it. I didn’t have a child. I didn’t have a boyfriend.”

For many, the element of risk associated with gambling is a huge enticement, as some people feel they have to scare themselves into feeling alive. Taking risks also allows people to momentarily feel as if they have some control over their lives.

But whatever it is that drives people to gamble should not be preyed upon in the name of a revenue source, especially when almost all of this revenue is generated from problem gamblers.

So why do state governments turn to taxation by exploitation?

Desperation, Bernal says. “We live in a society where people want quick solutions. We’re in desperate times.”

High Stakes and Desperate Measures

Casino managers take drastic actions to make sure problem gamblers keep coming back and losing money, in order to ensure their profits. From supplying losing gamblers with small cash vouchers as incentives to compensating their rooms, limo rides and casino vacation packages. But the government also employs desperate measures to entice casino customers.

Most commercial casinos are exempted from some of the states’ laws, such as smoking laws and dram shop laws that require bartenders to stop serving patrons if they believe they have had too much alcohol. In addition, the law doesn’t permit just anyone to open up a casino, as casinos are given regional monopolies by the state. Casinos are also allowed to lend money, even to people who are drunk. Gamblers can sign up for loans known as “markers,” which are interest-free and usually presented to players who lost big and want to win it all back.

But besides turning a blind eye to the state laws, the government also turns a blind eye to the harm casinos cause, instead of regulating them to prevent addiction.

For example, casino ATMs across the nation are largely owned by Global Cash Access, which creates sophisticated ATMs that are permitted to bypass people’s takeout limit and gather their information. GCA then sells the users’ names back to the casinos. Because people who use casino ATMs tend to be problem gamblers and have the propensity to chase their losses, Bernal said, “you might as well put a neon bull’s-eye on your back.”

As for the games themselves, Bernal said, “The government openly acknowledges slot machines are going to addict and hurt people.”

In fact, slot machines are created to exploit human psychology, allowing players to enter the trancelike state and therefore play faster and play until they lose any earnings. Natasha Schüll, author of Addiction by Design, wrote in The Washington Post,“Every feature of a slot machine -- its mathematical structure, visual graphics, sound dynamics, seating and screen ergonomics -- is calibrated to increase … playing until all your money is gone.” Even the stools at slot machines have been designed to avoid cutting off leg circulation, and levers have been replaced with buttons for quicker and easier play.

Consequently, slot machines account for about 70 percent of casino revenues. And though government gaming boards do regulate the machines to make sure they are secure and their software is running properly, they do not regulate to protect against player addiction. Players are not informed of their odds of winning, and they are unrestricted to bet as much, as fast and as frequent as they desire.

Hitting the Jackpot is Merely Beginners’ Luck

While state governments actively ignore casinos’ harmful consequences, they work to enthusiastically promote casino gambling through advertising campaigns and various other forms of support. For example, New Jersey has increased support to its Atlantic City casinos while decreasing other social services.Governor Chris Christie promised $260 million in tax breaks on a new AC casino named Revel, which went bankrupt, all while making tax cuts for the wealthy, tax breaks for corporations, cuts to education and cuts to women’s health.

States justify their support for casino gambling in the name of tax revenue, which often goes to funds that attempt to enhance public services. The revenue from taxing casinos in Atlantic City, for instance, gets used on services for the elderly and disabled – including, not so ironically, services that offer them free transportation to and from casinos.

Often, however, this revenue can’t even keep up with the services it’s supposed to fund.

For example, the revenue from AC casinos has not been enough to meet the increasing demands of the disabled and elderly. In the NJ Casino Revenue Fund Advisory Commission report for 2011, the commission stated that they continue to push for adequately funded programs to “correct serious inequities in the allocation of several programs that have not received funding increases nor cost of living increases from the Casino Revenue Funds for over a decade and are not equipped to meet the demand for services resulting from a growing elderly population.”

Lucy Dadayan is senior policy analyst at the Rockefeller Institute of Government, a public policy research center, which conducts research on state and local governments. Throughout her years of studying gambling revenue and its effect on state governments, she said she has found that taxes on casinos don’t make for a dependable revenue source, especially for increasing costs of social programs. After studying a 10-year trend on casino revenue, Dadayan found an overall decline of the year-over-year growth rate.

Dadayan said, “All the research results indicate that the pace of growth of tax revenue generated from gambling does not really keep pace with the growth of the services which are financed by the gambling revenue.”

As casinos continue to pop up across states throughout the nation, it becomes unrealistic for those who want to gamble to go out-of-state and travel further than necessary to get to a casino. As a result, states like New Jersey and Nevada have seen tremendous decline in revenue growth from casinos, as its past customers now live near a closer casino. Pennsylvania, on the other hand, has seen a huge spike in revenue growth as casinos have been newly built around the state.

Yet, Dadayan said the new hike in revenue would likely be temporary as casinos around the country are built.

“The growth rate [for casino revenue] is high in the beginning but such growth is only short-term,” Dadayan said. “In the long run, we see a slow down in the growth.”

Government’s Go All-In For the Rescue, Despite Consequences

As a result, state governments look for new ways to expand gambling and further exploit people to bring in more revenue. Governor Christie just recently passed a law legalizing online casinos, allowing Internet users in the state to make bets with a click of a mouse. Online gambling is, perhaps, the most predatory type of gambling, as users can play any game found in Atlantic City 24 hours a day, seven days a week. And two out of three Americans oppose it. New Jersey is now the third state, after Nevada and Delaware, to legalize online gambling. With a 15 percent tax on online winnings, the state estimates online betting will bring in $436 million next year for their Revenue Fund, up from the $235 it will receive this year.

Thus, it seems as though state governments will continue to pull out all the stops, no matter how egregious, to continue to rake in the millions they receive from casino taxes. And, despite popular belief, increased availability to casino gambling increases gambling addicts. State legislatures often argue the opposite to justify more casinos or additional types of casino gambling in their state. They say people will leave the state to "gamble anyway" and that only “certain people” are addicts. But accessibility to casinos means more people try out gambling, and the more who do, the more addicts will inevitably be created by the casinos’ design. One study in South Dakota found that when the state outlawed video slot machines for 100 days, the number of gambling addicts seeking treatment each month dropped by 93.5 percent.

Not only is the casino tax an unethical source of revenue, but it also helps advance an unhealthy economy. Bernal said that taxing casinos has failed as a revenue source because all it does is milk existing wealth and transfer it to an extremely wealthy group of people.

“You grow your economy by manufacturing new goods and services to export or sell locally … and then your sales tax revenue grows,” Bernal said.

In fact, some research has found that casino revenue comes at the expense of sales tax because money lost gambling could have gone to goods and services. Gambling also generally discourages productivity, which works to spur the economy.

Although some argue that casinos do create jobs, most casino work is low-wage work and sometimes more addicts are created than jobs. In Illinois, for example, in 2012, there were 20 percent more people on the state’s self-exclusion list than there were full and part-time jobs. Problem gamblers can sign these lists to prohibit them from entering casinos — which inevitably only prevents a fraction of addicts from gambling because most addicts can’t exhibit self-control. Thus, the actual amount of gambling addicts in Illinois is most likely way more than those employed from casinos.

In the end, governments end up having to pay the costs of problem gambling. Studies have found that problem gamblers can cost states millions of dollars in social costs, due to increased crime, debt and job loss, as well as a decrease in personal savings. The New Hampshire Gambling Commission, for example, reported a net loss of about $69 million after social costs were factored in. Others estimate the net loss is somewhere in the billions.

***

Despite all the addicts and economic issues it assists in creating, state governments continue their predatory behavior — preying on people’s desperation, fears, stress and boredom. The government’s partnership with casinos glorifies gambling as a way to deal with these emotions while distracting them from what’s really behind these feelings. After all, most of these feelings are brought about by our societal conditions. And the more government distracts people, the less criticism and protest they face concerning these restrictive conditions. And, perhaps most egregiously, the distraction is all created by letting ordinary people play capitalist for a few hours, as they attempt to invest their wealth in hopes of gaining more. Ironically, our capitalist economy is likely a huge reason why many of these emotions are felt in the first place.

Upping the Ante on the Government’s Responsibility

Stop Predatory Gambling is currently working on gaining half a million signatures for its petition urging state governments to stop collaborating with casinos. The organization also hopes to continue sharing stories, like Arelia Taveras', to show problem gamblers that they’re not alone.

“The way real change happens … is by awakening people’s consciousness,” he said. “And when people on the streets hear it and care about it, then you see action in government.”

Bernal said he became interested in this issue when he realized how much harm predatory gambling does to society.

He said, “I think this issue is the antithesis of what the common good is. I think one of the primary purposes of the government — and we put it in the preamble of the Constitution, we thought it was so important — was to promote the general welfare of the public. So our sense of the common good … right now we’ve lost it.”

Arelia Taveras now goes to Gamblers Anonymous meetings, therapy once a week and is part of a lawyers' assistance program, where she is working on getting her license back. She is also working on opening up a treatment facility in New York, based on the one she attended in Minnesota, which is one of the few residential programs for problem gamblers in the nation. She also helps Stop Predatory Gambling by continuing to share her story, because, she said, so many gambling addicts feel like it’s their fault. Instead, she believes this addiction needs to be looked at as a real problem.

After everything she’s been through, Taveras said she will continue to fight the stigma against gambling addicts and push for change.

She said, “All this drama. All this sadness … I cried rivers in jail. I don’t believe that pain was for nothing. … If I don’t do anything about it, what would all this pain have been for?”

Why Clean Air and Worker Justice Are in Peril at America's Ports

Paul Rosenberg, AlterNet — Thu, 02 May 2013 16:26:00 -0700

The air in Los Angeles is the cleanest it's been in decades, but it may be a matter of time before backsliding begins.

Published in partnership with GlobalPossibilities.org.

Los Angeles has long had the worst air quality in the nation, and one major cause of that in recent decades has been the twin ports of Los Angeles and Long Beach. When the latest battle to improve the air at the ports reached the Supreme Court in mid-April, the Obama administration showed up with an amicus brief... on the side of dirty air.

Here's how: The Obama administration backed a strict interpretation of federal law, preventing the Port of Los Angeles from enforcing rules on trucking companies as part of its “Clean Trucks Program.”

It's the very same Clean Trucks Program that candidate Obama praised in a letter to three California mayors of port cities when he was running for president in November 2007.

"I write to express my support for the efforts you are making to ensure that our ports are environmentally sound, secure, and supporting middle-class living standards for those working there," his letter to the mayors of Los Angeles, Long Beach and Oakland began. "In particular, the Clean Trucks Program recognizes trade, labor, and the environment are not separate, but linked issues. The program sets tough standards to clean up truck diesel emissions and provides generous subsidies for vehicle purchase and retrofit. And it also recognizes that responsibility for investing in higher standards is best borne by firms rather than the individual truck drivers fighting to make a living with little leverage to negotiate for better pay."

Running as a candidate, Obama was pitching a strong appeal to labor and environmental activists, whose work had been instrumental in shaping the Clean Trucks Program. But now he's taking a conventional big-business view favoring strictly uniform national laws—even though there's strong precedent for certain kinds of exceptions. The port argues that it's operating as a “market participant,” not a legislative body, and this allows it to act like a private business would, setting rules for people it does business with, which is qualitatively different than passing laws that apply to the general public. Airports routinely regulate taxis and limousines using a similar concession model and their representative organization, Airports Council International North America, has filed an amicus brief in support of the port.

“If our name was Walmart, you wouldn’t even be having this lawsuit. We’re operating like a private company,” said David S. Freeman, former president of the port's governing board.

Administration supporters might argue that the provisions involved would only have a minor impact on air quality. The employee mandate, requiring that trucking companies treat truckers as employees, rather than independent contractors, was already struck down by an appeals court panel. But if Obama really believed what he wrote in that 2007 letter, the earlier setback should have only increased his efforts on other fronts, such as direct labor law enforcement, which has not happened.

The employee mandate was the most prominent concern of Obama's one-page letter. He made the case for it over the course of two full paragraphs, in which he wrote, "Many of these truckers may be legally misclassified. Worker misclassification is an issue I have worked on at the federal level to remedy because it hurts workers and costs the taxpayer billions in uncollected taxes.... According to a recent survey of truckers at the ports, five out of six drivers only work for one trucking company at a time and nearly nine in ten own only one truck. They are dependent on the trucking companies for work."

Over the next three years, the argument Obama made in his letter was strengthened substantially on two fronts: First, within a few months of Obama's letter, two independent economic studies were released, both concluding that the employee mandate had a crucial role to play in ensuring the long-term success of the Clean Trucks Program, just as Obama argued in his letter. Second, in December 2010, a much more comprehensive study of port trucking across the country was released, which conclusively removed any uncertainty over port trucker misclassification.

The report, The Big Rig: Poverty, Pollution, and the Misclassification of Truck Drivers at America’s Ports, was so solid that there was virtually no public push-back against it. Together, these reports made it clear that possible administration action to enforce existing labor laws in the port trucking sector represented a rare, vital opportunity to advance both labor rights and environmental goals, even as the original vehicle for doing so—the Clean Trucks Program—became mired in industry threats and litigation. Unfortunately, instead of stepping in to fill the void, the Obama administration was missing in action, even though it did take some action to combat worker misclassification in general.

To fully appreciate the lost opportunity, we need to understand how the case for action that Obama's letter made had been strengthened by the reports cited above, first on the importance of the employee mandate, then on the pervasiveness of misclassification.

The first study, by lead author Jon Haveman of Beacon Economics, argued that consolidation of capital, rather than labor, was key to understanding why the employee mandate was so important. Addressing the issue of sustainability, it said, “[C]ommon ownership of the capital at use—the clean trucks—is key. These trucks will eventually depreciate and have to be replaced. Equivalently new technology will be found to reduce emissions, or further cuts in emissions will be demanded by the local community. Through consolidation of motor carriers, the CTP helps to establish the capacity of the drayage sector to keep up with increasing emissions standards.”

The report also argued that capital consolidaiton would decrease the costs of the new system by increasing efficiency (which would also produce environmental benefits through reduced congestion, less duplicative truck trips, etc.).

“This consolidation also holds the promise of encouraging a significant increase in the overall efficiency of the system. This includes, for example, less wait time at the ports to pickup and drop off containers, better matching of inbound and outbound loads, and other cost reductions that come from economies of scale.”

The report described port pollution as "a classic externality problem." As Haveman explained to me at the time, "An externality occurs any time there is an economic activity which impacts people who aren't directly involved in that transaction." Area residents dying from diesel pollution were an extreme example, which I had written about repeatedly. But Beacon's report on the CTP added another wrinkle, as I then reported:

The trucking industry has a related problem -- those at the heart of the market, the truckers, are powerless to express their strong preference for increased efficiency.

The truckers' powerlessness "is part and parcel of the pollution problem," Haveman added. "Solving the efficiency problem is one important step for solving the pollution problem. If the pollution problem were internalized, there would be a much stronger movement toward reducing those inefficiencies."

In short, Haveman was arguing that properly pricing pollution and empowering truckers were both key to making the market work as advertized—something the major players had little or no interest in doing.

The second economic report, prepared for the Port of LA by Boston Consulting Group, reached similar conclusions via a different methodology. It compared three different possible models for the Clean Trucks Program, and concluded that option with the employee mandate had the following benefits compared to the other options:

• Creates reciprocal obligations
– Port provides concession and demands performance in return
– Truck companies invest in drayage capacity (trucks and employees) and obtain benefits from income generated through concession
• Creates aligned incentives – e.g. both parties benefit from improvements in operational
efficiency through better utilization of assets/trucks and employees
• Strongest basis for ensuring highest levels of accountability
– Environmental e.g. truck maintenance to keep up green performance
– Safety and security e.g. employer accountable for employee

In the long term—five years and beyond—BCG concluded that employee mandate plan was, “Most likely to guarantee sustainable environmental and operational improvements.”

Remarkably, even as these reports were being prepared, the city of Long Beach entered into secret backroom negotiations with the American Trucking Associations to abandon the concessions model entirely, including, of course, the employee mandate.

The ATA was bitterly opposed to the prospect of unionization, as it had made clear in a series of large public meetings and smaller stakeholder meetings with the staff of both ports. Many of the small firms in the ATA would clearly not survive in a system based owning trucks and employing workers—they simply didn't have the capifal to survive. But the larger firms were equally hostile—after all, they were doing relatively well, so why change anything? In most cases, their very existence was a result of the mass de-unionization of the industry in the 1980s, and the replacement of regular employees with “independent contractors” who are barred from collective bargaining under federal law. ATA's testimony as the Clean Trucks Plan was being developed had repeatedly included the threat of lawsuits to block the plan.

It also had the implicit support of the shipping companies and terminal operators as well, since their demand for cheap trucking services had helped drive that earlier wave of de-unionization and the spread of the “independent contractor” model. Furthermore, a massive organizing effort by port truckers in 1996 had been defeated in part because shipping companies redirected cargo to other ports. But the ATA's hostility wasn't limited to unions. It extended to every aspect of the concession system, as has just been demonstrated by their willingness to go all the way to the Supreme Court, even after an appeals court struck down the employee mandate.

The backroom deal with Long Beach gave the ATA everything they wanted, scrapping the concession model in its entirety. There was not even the appearance of a public process, much less an empirical fact-finding one in reaching this decision. In contrast, the Los Angeles plan openly built on the findings above, along with extensive public comment.

A little over three years after Obama's letter, in December 2010, the Big Rig report was released. It came directly out of organizing efforts in the Seattle area, and combined the data from ten studies (including the one Obama cited) at seven major ports on the East, West and Gulf coasts. Then it added a totally new investigation, based on IRS employment law and extensive two two-hour interviews—plus reviews of employment documents such as paystrubs, time cards and the like. Altogether, it included data based on 2,183 workers. “Our in-depth interviews with drivers at major ports around the country and review of their employment documents reveal that drivers commonly lack the autonomy that is the hallmark of an independent businessperson under federal law,” the study stated, as I reported at the time. I went on to cite three key points in law made by the report:

Port drivers are subject to strict behavioral controls. Trucking companies determine how, when, where and in what sequence drivers work. They impose truck inspections, drug tests and stringent reporting requirements. Drivers’behavior is regularly monitored, evaluated and disciplined.
Port drivers are financially dependent on trucking companies that unilaterally control the rates that drivers are paid. Drivers work for one trucking company at a time, do not offer services to the general public and are entirely dependent on that company for work. Like other low-wage employees, drivers' only means for increasing their earnings is to work longer hours.
Port drivers and their companies are tightly tied to each other. Drivers perform the essential (and most often sole) services of the trucking companies they work for. Drivers work for years for the same company; use company signs and permits; represent themselves to others as being from the company and rarely offer their work independently of the company.

I recently interviewed Paul Marvy, a lawyer and researcher with Change To Win and one of three co-authors of the report, to obtain his perspective on the impact of the report more than three years later. He said that the study was intended to provide an integrated picture of condition nationwide, and to document truckers' employment status conclusively. The study's resulting finding of pervasive misclassification had been genearlly accepted, without any of the expected industry push-back.

“We were very aware of how controversial the industry is and results and the fact that, at a minimum, the American Trucking Associations and likely a number of others, agencies would be hiring people whose job it would be to tear the report apart,” Marvy explained, so they were intent on building the strongest possible case. Surprisingly, “It has never really been publicly attacked,” he said.

But neither has it been pounced on by the Obama administration as an alternative way to achieve the goals Obama cited in his Novemer 2007 letter (a particularly vexing lack of development after an appeals court struck down the employee mandate in the Clean Trucks Plan in 2011). The result, Marvy admitted, had been “less than we had hoped.”

Although the Department of Labor, under Hilda Solis—who formerly represented a congressional district close to the ports—has embarked on a broad initiative to combat misclassification, there doesn't appear to be any specific focus on port truckers. There were no examples Marvy could cite, none were listed on the US Department of Labor website, nor did the department provide any examples when requested for this story. There had been an effort to strengthen the labor law in Congress before the 2010 election, but that effort died with Republican mid-term victories in 2010.

And yet, the report is the basis of port truckers' best hope, since the employee mandate was struck down. Some have criticized the organizing strategy as “too top-down” and lacking a “Plan B” to fall back on, after the mandate was eliminated. An earlier mass-organizing effort that peaked with a strike in May 1996 has been cited by way of contrast. But that effort—begun by unaffiliated truckers, and taken on the Communication Workers of America—did not succeed, and left truckers deeply demoralized, even moreso than after two previous strikes, in 1988 and 1993, which were undertaken without support from a pre-existing union.

A key part of the strategy in 1996 was the creation of a new firm, the Transport Maritime Association (TMA), which would hire the truckers as unionized employees and then lease their services to existing trucking companies, thus evading the labor law ban against organizing independent contractors. Conceptually, it was brilliant, and it built on a far-reaching mass mobilization model, with several shows of strength in the form of mass truck convoys to deliver political demands. But Donald Allen, the entrepreneur behind TMA did not turn out to have deep enough pockets to survive a much fiercer fight than he had originally anticipated.

In contrast with that experience, organizers now are doing a much better job of surviving the loss of the employee mandate as their go-to strategy. The Obama administration may have failed to step up, but things are much more promising at the state level, starting with ongoing legislative efforts. “There has been legislation propsed and advanced in California, Washington, New Jersey, and potentially New York,” Marvy said. Unlike the federal level, the efforts have continued. “Last year in Washington we were two votes short in the senate, in actually getting a bill passed that would have categorically made all of the drivers employees. So, close but no cigar.”

There's also been siginificantly stepped-up enforcement of labor law violations by state labor departments, most notably in California and New Jersey, as well as the beginnings of private lawsuits, which can easily involve multi-million-dollar judgments.

Frederick Potter, a Teamsters Union vice president-at-large, and director of the Teamsters Port Division, provided a more detailed view of developments in New York and New Jersey. “There is legislation pending in New Jersey that would create a presumption of employment status for workers, unless the companies who wanted to use comtract worker could show that the status was legitimate.” he said.

Supporters were hopeful of passage, but would then face the challenge of persuading Governor Chris Christie not to veto it. For this, they intend to rely on a broader economic argument about money for the state and fairness for those who already paying their fair share.

“The current system of misclassification is depriving the state of revenue,” Potter pointed out. “When companies misclassify their workers, they don't pay temporary disability, they don't pay unemployment, the workers are responsible for their own income tax. So New Jersey is losing much needed revenue and companies that properly classify there workers are at a competitive disadvantage.

“It's a huge problem.” Potter said. “We estimate that the state's leaving about $7 million on the table annually in temporary disability and unemployment premiums alone, each year, from only the port trucking industry.”

As an example, just one company, Proud 2 Haul, was assessed back payments of $158,536.53 by New Jersey's Department of Labor. But under existing law, it's a slow, painful process to bring companies into compliance, even though they're violating existing law.

“It's already the practice of the New Jersey Department of Labor that if you want to use independent contractors in your business, you have to be able to prove it,” Potter explained. “You have to be able to pass the IRS ABC test. We believe 85% of these so caled Independent contractors are misclassified by the trucking companies. They're not independent contractors.”

The ABC test means that workers are free from company control, that they don't perform a service that's intrinsic to the company business (like truckers, but not accountants, are for a trucking company) and that the allegedly independent business could survive without the relationship with the employer. As the Big Rig study clearly established, none of this describes port truckers.

“So, we want to see the law protect these workers,” Potter concluded.

Successful enforcement actions, like that against Proud 2 Haul, help to support the argument that new legislation is needed to streamline enforcement and bring the whole industry into compliance. So legislation and enforcement go hand in hand.

It turns out that Proud 2 Haul is an unwilling pathbreaker in more ways than one. In addition to the New Jersey finding, the National Labor Relations Board issued a decision in 2011 asserting its jurisdiction in a labor dispute—the first time it decided that it had jurisdiction over truckers misclassified as independent contractors. hat's more, based on extensive documentation of employment specifics, such as those noted in the Big Rig study, an investigation explicitly determined that "there's an employment relationship between the firm and the truck drivers."

David Tykulsker is the attorney who represented the Teamsters and several Proud 2 Haul truckers before the NLRB. He's now representing six Proud 2 Haul truck drivers in a class action lawsuit to recover money improperly taken from them. "We've had a class certified, and we're in the process of discovery," Tykulsker said, but resolution is still a way off. “By the end of the year, I'll have it done,” he predicted.

“More generally, the points here [in the two cases] are that these drivers are employees, when one actually looks at the facts of their relationship with their employer. that is the reality of what's going on.... Both of these actions are meant to drive that proposition forward.”

Things are moving in California as well. On February 28, the California Labor Commissioner won a trial contesting an earlier administrative ruling against Seacon Logix over the misclassification of four drivers and resulting wage theft. In an administration action on Nov. 16, 2011, Seacon was ordered to pay $105,089.15 for violations including unlawful withholding of wages, interest and waiting time penalties. The superior court trial affirmed that the Labor Commissioner's ruling was justified under law.

“In this case, drivers had signed agreements labeling them independent contractors but the Court saw the truth behind the label,” Labor Commissioner Su stated in a press release. “The Court found that the company exerted sufficient control over the drivers such that the drivers were employees of the company and thus, enjoy all basic labor law protections.”

Meanwhile five more drivers filed similar claims against Seacon last year, with a hearing held in February, while another company, Green Fleet Systems, is appealing a similar ruling against it by the Labor Commissioner.

“The big picture is that over 260 port driver claims are pending just in the Long Beach Office [of the Labor Commissioner], with over 100 others in Southern California,” said Jon Zerolnick, who works for the Los Angeles Alliance for a New Economy (LAANE) as director of its Clean and Safe Ports Project. LAANE is a principle member of the Coalition For Clean & Safe Ports, the driving force behind the original employee mandate proposal.

“Drivers see that they're misclassified,” Zerolnick said. “They understand that the Labor Commissioner is a route to address the misclassification, and to getting back some of the money that has been stolen from them by the companies in recent years as companies have forced the costs onto them of truck leases, insurance payments, registration, taxes, parking fees, truck wash fees, fuel, maintenance and all the other core busienes costs of port trucking operations.”

“This is potentially going to be a long process, but as it is going on, the liability is just racking up,” Zerolnick said. “I did a quick back-of-the-envelope [calculation] myself this morning, and we're talking, the liabilty for the industry, if we're only looking at thse cases that are currently pending, that is in the tens of milions, assuming around $50,000 per driver.”

As in New Jersey, another front is opening up, with private litigation. In this case, a relatively new non-profit, the Wage Justice Center, is taking the lead. Working together with LAANE, in late February, the Wage Justice Center filed a class-action lawsuit on behalf of an estimated 100 port truckers worker for cluster of intertwined companies operating under different names, including: “QTS, Inc.,” “WinWin Logistics Inc.” and “Laca Express Inc.” In addition to wage theft violations, the suit is the first to allege violation of a new California law prohibiting the willful misclassification of employees as independent contractors.

Plaintiff Cuahutemoc Cabuto explained, “I filed this lawsuit because I wanted to fight back against the injustices at this company. I work all the time, day and night, and have no money left to take home after all the deductions the company takes out of my paycheck.”

His plight was typical, according to attorney Matthew Sirolly, director of the Wage Justice Center. “After all the deductions from their checks, the take-home salary for the workers probably averages around $5 per hour. $4-5 an hour, so well below minimum wage,” Sirolly said. “Basically that happens because they pay them by the load, an amount that doesn't seem unreasonably low, it's like $200 per load, or somewhere around there, depending on where they're going.” But then, “The company deducts back out of their checks all the expenses, so including the rental expense for the truck, gas, insurance, mantenance costs, and all this kind of stuff.” The named defendants routinely work double shifts four or five days a week, but still can't make ends meet.

Sirolly is reluctant to criticize the Department of Labor. They're “vastly under-resourced” he says. And he's right. But given Obama's focus in that 2007 letter, and given that the Clean Trucks Program has been legally undercut in doing what it set out to do, it's difficult to see how the federal government has seemingly done nothing at all, while hundreds of cases are already in the pipeline of the state government counterpart.

For now, the air in Los Angeles is probably the cleanest it's been in decades. But if the studies done are correct, it's only a matter of time before backsliding begins, unless something is done about the fate of the lowest-paid workers at the ports.

Why the Person Building Your Next House Might Just Be a Woman

Brigid O'Farrell, AlterNet — Thu, 02 May 2013 08:38:00 -0700

Despite harassment and bias, women are fighting for jobs in skilled trade.

The world of work for women is changing. A popular new Barbie construction set -- yes, building pink mansions! -- may help girls expand their view of what occupations are open to them, and that's welcome. But tradeswomen are taking action today: President Obama will soon be hearing from women electricians, plumbers, ironworkers, and carpenters about what it takes to succeed in the world of skilled trades work.

In April over 650 tradeswomen gathered in Sacramento, California, for the “Annual Women Build California and the Nation Conference.” Iron workers and plumbers met with carpenters, electricians, and laborers. They cheered women leaders like Liz Shuler, Secretary Treasurer of the AFL-CIO; the first woman and the youngest person ever elected to that position. The women listened to Ed Hill, president of the International Brotherhood of Electrical Workers, who called for equal treatment on the job site and in the union hall. Cement mason Alise Martiny, business manager of the Greater Kansas City Building Trades Council, offered her story of women’s leadership. These women are “leaning in" in ways Facebook COO Sheryl Sandberg might not imagine. For one weekend tradeswomen from all over the country shared their stories and learned from each other. Most return to worksites where they are the only woman. The isolation of their day-to-day work lives is in stark contrast to the gathering.

Some of these women are brand new apprentices, others are seasoned journey-level workers, the most skilled in their trade. Some have become apprenticeship directors and union officers. These are women who work alongside men to build our houses and hospitals, our bridges and roads, to connect our power lines and solar panels. They work with their hands and their heads. The jobs are demanding, rewarding, and often dangerous.

But why are there still so few tradeswomen? What can be done to make these highly skilled, good paying jobs available to more women?

Thirty-five years ago, President Jimmy Carter expanded Executive Order 11246 to prohibit sex discrimination in employment by government contractors. He established goals and timetables and outlined ways to reach out to recruit and train women for all jobs. An early goal was for women to be 6.9 percent of the workforce on federally funded construction projects.

The Office of Federal Contract Compliance Programs was established to oversee the enforcement process within the Department of Labor. There was active outreach, training, and oversight. Women began to enter apprenticeship programs. When Ronald Reagan was elected president in 1980 the enforcement effort slowed to a crawlfrom which it has never recovered. The OFCCP has half the staff today that it had in 1978.

Women have shown that they are interested in this work and fully capable of performing the most difficult and dangerous tasks. Many have overcome hostile supervisors and co-workers, sexual harassment, and isolation. There have been grievances, complaints, law suits, and consent decrees. Many have also found male mentors, good job training programs, and support. Their stories have been documented most recently in books like Jane LaTour’s Sisters in the Brotherhoods.

According to author and tradeswoman Susan Eisenberg, however, for the few women who get into the trades it is still not uncommon to hear stories of inadequate training, biased evaluations, unsafe assignments, and sexual assaults. Thirty-five years after the Executive Order demanded affirmative action and almost 50 years after Title VII of the 1964 Civil Rights Act prohibited discrimination in employment based on sex, women remain pioneers on construction sites.

Today only 2.5 percent of trades jobs are held by women. According to the latest reports of the U.S. Department of Labor, while women are almost one-third of doctors and lawyers and over 14 percent of our armed forces, they remain barely 1.6 percent of carpenters, 1.8 percent of electricians, and 1.3 percent of operating engineers. The numbers are worse for women of color.

The problems are complex, and cultural stereotypes persist. The education and job training systems continue to track young women into traditional and low paying jobs. We need to reach young girls at an early age to make them familiar with tools and technology. On that front some hope maybe found in the new Barbie construction set and a Lego line promoting pastel construction toys called Friends. Twenty-nine year old Stanford engineer Debbie Sterling has introduced “Goldie Blox and the Spinning Machine." Designed to interest 5 to 9 year old girls, Goldie takes apart her ballerina music box to figure out how it works and weaves instructions for how to build a belt drive into the story.

But what of those 650 women gathered in Sacramento? While their percentages are small, there are in fact over 175,000 women working in construction related jobs nationwide. In 2005, before the recession decimated the ranks of women and men in construction, there were slightly more women in skilled trades, 274,000, than there were women doctors, 268,000. There are thousands of women who can tell employers, unions, and government agencies what needs to be done; for example, update the regulations and increase the budget for enforcing the laws. Actively recruit women for apprenticeship and train male managers and coworkers in ways to end discrimination and harassment.

In March Pat Shiu, director of the OFCCP, told participants at a New York summit on women in construction that the sector is growing again. 306,000 jobs were added in the last two years; half in the last five months. She has recommitted her agency to ending “systemic, pervasive and persistent discrimination” because “It’s not only the right thing to do, it’s the law.” She has hired more investigators, improved training for the compliance officers, and increased the number of construction reviews per year from 238 to an average of 525. Reviews are focused on “mega projects” worth more than $25 million and first-time contractors. The number of violations tripled for things like not having a strong recruitment program, not ensuring an harassment-free workplace or not validating tests used for hiring.

But, she reports, finding concrete examples of discrimination is more challenging. Initial data is often missing, small construction companies may have moved on by the time the OFCCP review is complete. Workers don’t complain for fear of retaliation and those who do complain often face a daunting process.

Shiu concluded that the “key to getting more women and minorities in the construction trades is strong enforcement. And the key to strong enforcement is sound policy, updated regulations and a collaborative effort by government, industry and advocates to connect workers with available jobs.”

To that end, the Department of Labor is to issue proposed changes to the Registered Apprenticeship Equal Opportunity Regulations in June and to the Construction Contractors Affirmative Action Requirements in October. There will be a time for public comment and tradeswomen’s voices are critical.

Tradeswomen in Sacramento agreed to tell their stories. They are stepping up to email the White House about their trade, their union, and why they love their work, but also talk about the challenges they face, the barriers that continue to keep many women from following in their footsteps, and the solutions they see to these problems. They can take to Twitter and YouTube to let the world know why these new regulations are important and how they can help women and men succeed in securing good jobs, good pay, and satisfying work. And we can “like” and “share” their stories, supporting tradeswomen and the government officials trying to make a difference. It’s time for contractors and unions to step up too and collaborate in the fight to end discrimination and provide equal opportunities for women in the trades. As First Lady Eleanor Roosevelt said, “We can’t just talk. We have got to act.”

Pregnant T-Mobile Employee Forced to Take Vacation Time to Use Bathroom, Fired Over 12 Cent Error

Steven Hsieh, AlterNet — Wed, 01 May 2013 09:24:00 -0700

Don't you dare relieve a basic biological need on company time!

T-Mobile forced a pregnant employee to clock out every time she used the restroom, even after she obtained, by company request, a doctor’s note urging her to drink more water, ABC reports.

Kristi Rifkin worked at company call center in Nashville for four years before she became pregnant with her third child. As she explained in a blog post for MomsRising.org, “it was a very, very rough pregnancy” that required special medication, twice weekly visits to the doctor, and high water intake.

As Rifkin naturally started using the restroom more often, her employers warned her that trips to the toilet were at the expense of company time. In her post, Rifkin describes the pressure she felt to keep her job, even going so far as putting her physical well being at risk by eating and drinking less.

“Essentially the message was, ‘You can go, but understand that if you don’t meet that metric at the end of the day, week and month, we have the opportunity to fill your seat,’” Rifkin writes. “They didn’t tell me that I couldn’t use the toilet. But the reality was that this is a metric on how your job is measured and if you don’t meet it, then you do not have your job.”

As her increased restroom use persisted, Rifkin’s supervisor asked her to get a doctor’s note saying she needed to fulfill a basic biological necessity. “And my doctor thought I was crazy,” Rifkin writes. “She told me, ‘I’m sure one person going to the toilet wouldn’t mean the collapse of an entire T-Mobile customer service center!’” However crazy the idea, Rifkin got the note to satisfy her employer.

But that wasn’t enough for the bosses. Rifkin’s supervisors asked her to clock out everytime she used the restroom, effectively punishing a pregnant employee for being pregnant. Rifkin needed every penny, so she continued eating and drinking less, and even used vacation time to use the restroom. Seven weeks before she gave birth to baby boy on May 14, 2010, Rifkin went on the Family Medical Leave Act, which requires employers to provide up to twelve-weeks of unpaid leave to eligible employees.

A month and a half after she returned to work, Rifkin says she was fired, allegedly due to an uncharacteristic error that cost T-Mobile 12 cents. She received no severance and pays for all her medical expenses on her own.

As ABC reports, Tennessee is one of 42 states that don’t require paid rests periods.

“There is no specific legal requirement that requires employers to let their employees use the restroom,” Paula Brantner, the executive director of Workplace Fairness, told ABC. However, “If a pregnant woman is the only employee being forced to clock out, and they don’t require males or non-pregnant females to do so, it would seem to me that would be pregnancy discrimination.”

UPDATE (05/03/2013 1:00 PM EST): T-Mobile Chief People Officer Larry Myers responded with the following statement in the comments:

Sensational headlines are hard to ignore. Here are some facts you should know:

· Of course we make reasonable accommodations for all of our employees when they need time away from servicing our customers’ needs – and we did that three years ago in 2010 for this employee.
· Our industry-standard policies have been in place since 2008 and are understood by all of our call center employees.
· Beyond the breaks that are built into every shift for all of our call center employees, we have additional flexibility to give employees the time they need – especially when there is a medical need.
· After all reasonable accommodations have been exhausted, employees have a choice – they can take additional, unpaid breaks, or they can choose to apply their paid time off benefit. These decisions do not result in adverse performance evaluations.
· When a medical situation is involved and there is even more need for time away from the job, we work closely with our employees to consider potential Leave of Absence (LOA), then consider Family Medical Leave Act (FMLA) time off.·
· For this particular former employee, all of these things were discussed and utilized.
· T-Mobile is a values-based organization that has 5 times in a row been awarded as one of the “World’s Most Ethical Companies.” And our employees continue to tell us that they enjoy working at T-Mobile. In a recent anonymous third party employee satisfaction survey, 78% of T-Mobile’s employees said they are satisfied with their job and 83% said they are proud to work at the company, placing T-Mobile on par with the top 25% of all companies surveyed in the United States.

Please consider the facts, and judge for yourself.

AlterNet.org: Labor

The Death of the 'Good Union Job': Plight and Protest of Thousands of Mine Workers Barely Noticed By Mainstream Media

Related Stories

Why Apple is a Sociopathic Company

Related Stories

84 Percent of NYC Fast Food Workers Report Wage Theft

Related Stories

Cambodia Shoe Factory Collapse Kills 2

Related Stories

Milwaukee Makes Five (Cities So Far): Fast Food Workers Strike for Higher Pay and Union Rights

Related Stories

College Execs have Private Jets? New Report Finds Public University Presidents Live Large

Related Stories

The 182 Percent Loan? How Installment Lenders Trap Borrowers

The Starter Loan

'Real Gibberish'

'It's All About Keeping Them'

A Decade of Debt

'Chasing' Customers

Garnishing Wages

Related Stories

Breaking Down This Week's Fast Food Strikes in St. Louis and Detroit

Related Stories

Amazon Warehouse Workers Forced to Wait at Security Checkpoints Without Getting Paid

Related Stories

Austerity and Debt Conspire to Wreck the Lives of Working American Families

Related Stories

Indispensable Guide: Where to Shop to Avoid Buying from Businesses that Endanger Workers

Related Stories

Casinos Are Booming Thanks to State Governments' Need to Exploit Gambling Addicts for Revenue

Related Stories

Why Clean Air and Worker Justice Are in Peril at America's Ports

Related Stories

Why the Person Building Your Next House Might Just Be a Woman

Related Stories

Pregnant T-Mobile Employee Forced to Take Vacation Time to Use Bathroom, Fired Over 12 Cent Error

Related Stories