American workers got a very big break when Andrew Puzder withdrew his nomination for labor secretary.
What may be less obvious is how the Labor Department pursues its mission, and why the agency and its secretary increasingly matter. So let me try to at least scratch the surface.
Naive economic models of the labor market assume that workers are automatically paid their “marginal product,” meaning that their paychecks reflect the value of their contributions to their firms’ output. But even most economists no longer buy that explanation of how things work in the real world. Other determinants of pay and working conditions include racial discrimination, immigration status, how tight the job market is, whether a union is in play, automation, pressure from international trade, and the extent of an implicit social contract between workers and management (a sort of norm that says, “You do your best and we’ll make sure you’ve got a good, secure job”).
Especially with unionization down to 11 percent of employment (6 percent in the private sector; 34 percent in the public sector), the breakdown in the normative contract (as compellingly described in this forthcoming book by Rick Wartzman), and the attack on immigrants by the new administration, all amid ongoing pressure from trade, technology, the rise of the “gig” economy and persistent slack in the labor market, the bargaining clout of the average working person is too low for them to consistently receive their fair share of the output growth they’re helping to produce.
Given these developments, the Fair Labor Standards Act, although it was passed almost 80 years ago, is as relevant as ever. The FLSA established the minimum wage, overtime (time-and-a-half pay for covered workers after 40 hours of weekly work) and child labor laws. It is administered by the Labor Department’s Wage and Hour division (WHD), which has more than 200 field offices nationwide.
Let’s pause for moment on the WHD, for reasons you’ll appreciate. With the rise of franchises, subcontractors (often regular workers who’ve been misclassified), and outsourced tasks that used to done in-house, the distance between worker and employer is ever more arms-length. David Weil, who ran the WHD under Secretary Tom Perez, labels this evolving model the “fissured workplace,” and research shows that as it spreads, violation of wage and hour laws, if not downright wage theft (the division now has a Workers Owed Wages database of employers with such violations), become more common.
In response, WHD shifted more of its resources from passive (wait to hear about violations) toward proactive investigations focused on industries such as hotels, fast food, janitors, truckers and home health care. Weil told me that in the Obama years, the WHD “secured nearly $1.8 billion in back wages for more than 2.0 million workers in over 240,000 investigations.” That’s about three weeks of earnings for a low-wage worker. One study found that in 2008, one-quarter of their sample of low-wage workers in three large cities were paid less than the legally required minimum wage.
This same fissuring of the workplace raises the importance of another venerable office in the department: the Occupational Safety and Health Administration (OSHA). Weil explains how the sharp rise in demand for cellular networks collided with arms-length hiring, leading to layers of subcontracting of workers building and servicing cell towers. Because no company had direct responsibility for health and safety of these workers, “the fatalities of cell tower workers were at ten times the fatalities of construction, and three times the fatality rate of underground coal mining … the highest occupational fatality rate in the country, save probably taxicab drivers.”
These are but a few examples of how important a highly functional, amply staffed and well-run the Labor Department is in our current economy. The department has many more critical responsibilities, including running the Bureau of Labor Statistics, overseeing the security of employee benefits (which is why the Labor Department wrote the much-needed fiduciary rule now under conservative attack), the WARN Act (which ensures that companies give workers ample notice when they’re closing plants), worker training and apprenticeship services and more.
The question is: Does the Trump administration care about any of these roles? The answer is surely not, or they would never have considered Puzder in the first place. All that help-the-left-behind-worker stuff was of course for the campaign. Trump’s ability to fake left and go right on that issue should have gotten him a point guard slot in Sunday’s NBA All-Star matchup.
Trump’s new nominee for labor secretary, Alexander Acosta, sounds better, but who wouldn’t? And, the fact is that running the Labor Department in such a business-oriented administration was always going to be tricky. Regardless of Acosta’s sentiments, it’s very unlikely that he’ll be able to protect a major accomplishment of the Perez Labor Department: updating the outdated overtime salary threshold. Same with a minimum-wage increase for federal contractors and the fiduciary rule (although to their credit, some banks and brokerages are adopting it anyway).
But we still must insist that the agency do its job in the areas noted above, functions that might appeal to Acosta, given his background as a prosecutor. More than ever, changes in our economy and labor market, and the effect of those changes on workers, elevate the need for an activist Labor Department.