Parrott Presentation: Confronting New York City’s Retirement Crisis

June 17, 2014. The New York City Central Labor Council and the Schwartz Center for Economic Policy Analysis at The New School sponsored a June 17 conference, Confronting New York City’s Retirement Crisis. FPI’s James Parrott made one of the opening presentations at the conference. Other speakers included State Comptroller Thomas DiNapoli, New York City Comptroller Scott Stringer, and New York City Public Advocate Letitia James, as well as leading labor union officials, union pension experts, and academic and finance sector experts. National retirement security expert Teresa Ghilarducci of the New School co-convened the conference together with Vinny Alvarez, President of the New York City Central Labor Council. Ghilarducci also moderated the two panel discussions. In his remarks, Parrott discussed the economic implications of the aging of New York City’s population and workforce, and he reviewed racial and economic disparities in retirement income sources for New York City’s elderly population.

Over one-third of New York City employees are paid less than $14 an hour; workers of color are twice as likely to be low-wage

June 17, 2014. The Fiscal Policy Institute (FPI) released a new data brief today showing the sector of employment and race/ethnicity for New York City workers paid less than $14 an hour. On an annual basis, $14 an hour would put a family $1,900 below the $31,039 poverty threshold for a New York City family.

Altogether, 1.2 million New York City workers are paid less than $14 an hour, 36 percent of all public and private wage and salary workers. This includes part-time as well as full-time workers.

The FPI analysis showed that the largest employers of low-wage workers are the Leisure & Hospitality and Retail Trade sectors. Sectors with the greatest reliance on low-wage workers relative to their total employment are, in order, Home Health Care, Leisure & Hospitality, Retail Trade, and Social Services.

According to James Parrott, FPI’s Deputy Director and Chief Economist: “Nearly four out of five low-wage New York City workers are persons of color, and workers of color are twice as likely as a white, non-Hispanic worker to be low-wage—48% of black workers and 55% of Latino workers are paid less than $14 an hour, while 23% of white workers are paid less than $14 an hour.”

The report noted the difference that union representation makes to the works employed in otherwise low-wage sectors like Retail Trade and Leisure and Hospitality. Stuart Appelbaum, President of the Retail, Wholesale and Department Store Union stated: “The disturbing numbers in FPI’s report show what happens when workers are not able to act collectively to improve their lives. We need policies in place that increase unionization and give voice to these hardworking people in New York City. When workers have the support of a union they are able to live better lives and survive economically in this city.”

Parrott observed that in addition to unionization, low-wage New Yorkers would benefit if New York City is permitted to establish a minimum wage higher than the statewide minimum. Legislation pending in Albany would grant New York City the authority to set its own minimum wage.

70% of Fortune 500 Companies Use Offshore Tax Havens

June 9, 2014. In 2013, 70% of Fortune 500 companies used tax havens. More of these companies were based in New York than in any other state, depriving New York of considerable tax revenue.

The practice of “booking profits” in foreign countries where there are few or no taxes is examined in a new study released yesterday by U.S. Public Interest Research Group (USPIRG) and Citizens for Tax Justice (CTJ), “Offshore Shell Games 2014: The Use of Offshore Tax Havens by Fortune 500 Companies.” For New York’s Fortune 500 companies, over $375 billion in profits are counted outside of the United States. Of that amount, $228 billion came from just five companies: Pfizer, IBM, Citigroup, PepsiCo and JP Morgan-Chase.

“Much of this profit is made in the United States, and only by accounting gimmicks is it made to look as if it was earned in these tax havens,” said Fred Floss, executive director of the Fiscal Policy Institute. By setting up dummy subsidiaries, New York firms borrow money from themselves, raising domestic interest costs and lowering taxes owed in New York, while increasing profits overseas. These firms also shift ownership of patents and trademarks to these subsidiaries and then have the subsidiary charge the parent company for their use again lowering taxes. “More is at issue than simply losing tax revenue,” Floss continued. “According to study by the Congressional Research Service, New York State and the federal government have invested a large amount in the research and development behind these patents and are not getting a return on their investment. This can lead to cuts in future government research and development as tax revenues dry up. In the end this can slow the economy.”[1]

The report points out a large amount of these profits are actually located in the United States and in United States’ banks. The New York companies are able to get the stability of keeping their profits in New York without having to pay for the government services they use. Instead they shift the burden to individual taxpayers and small businesses. An earlier report by USPIRG shows New York ranks second behind the District of Columbia in lost federal and state tax revenue at $1,919 for the average taxpayer; $434 of that amount represents lost state taxes. (See: “Picking up the TAB 2014: Average citizens and small businesses pay the price of off shore tax havens.”)

“Clearly all New Yorkers lose by allowing the largest corporations in the state not to pay their fair share of taxes,” said Ron Deutsch, executive director of New Yorkers for Fiscal Fairness. “It means there is less money to help those who need it the most and puts pressure on local governments to raise property taxes on those who can least afford it.”

Key findings of the report include:

  • As of 2013, at least 356 Fortune 500 companies operate subsidiaries in tax haven jurisdictions. All told, these companies maintain at least 7,736 tax haven subsidiaries. The 30 companies with the most money booked offshore for tax purposes collectively operate 1,297 tax haven subsidiaries.
  • Approximately 30 percent of the companies with tax haven subsidiaries had subsidiaries in just two offshore locations: Bermuda and/or the Cayman Islands. The profits that American multinationals collectively claim to earn in these island nations totals 1,643 percent and 1,600 percent, respectively, of each country’s entire yearly economic output.
  • The 30 companies with the most money booked offshore for tax purposes collectively hold nearly $1.2 trillion overseas. That is 62 percent of the nearly $2 trillion that Fortune 500 companies together report holding offshore.
  • Only 55 companies disclose the amount they would expect to pay in U.S. taxes if they did not report profits offshore for tax purposes. All told, these 55 companies would collectively owe $147.5 billion in additional federal taxes.

The report concludes that to end tax haven abuse, Congress should end incentives for companies to shift profits offshore, close the most egregious offshore loopholes, strengthen tax enforcement, and increase transparency.

One ill-advised approach to this problem being pushed by these Fortune 500 companies is to allow them to repatriate their foreign profits during a tax holiday. Since many of these profits are already in the United States, the only thing this will achieve is to lower already low corporate tax rates on these large companies at the expense of everyone else and with no positive economic impact.

Report available at http://bit.ly/1pfXDoL.

PDF of Press Release


[1] John F. Sargent Jr., Federal Research and Development Funding: FY 2013.  Congressional Research Service  December 5, 2013

Reform of NY’s TDI Program and Provision of Family Leave Insurance: Estimated Costs

June 5, 2014. In this report, FPI estimates costs for increasing workers’ weekly wages during temporary disability leaves and extending those benefits to family leaves under proposed legislation in the Assembly and Senate.

As an increasing number of women and mothers participate in the workforce, federal and state laws and policies have not met the needs of both male and female workers who must balance taking care of themselves and their families with the responsibilities of work. Under Temporary Disability Insurance (TDI) in New York, the maximum wages replaced, or benefits, during leaves for one’s off-the-job illness or injury, including pregnancy, have not been increased for twenty-five years and have lost 50 percent of their value. Moreover, since New York’s TDI program does not cover family leave needs, such TDI benefits are not now available to care for a new child or seriously ill family member. As a result, workers who do not have access to additional employer-paid benefits must often choose between caring for family and their job.

Bills proposed during the 2014 state legislative session would address these circumstances by increasing the weekly wages replaced during temporary disability leaves and extending those benefits to care for family. Specifically, the rate at which wages are replaced would go up from half to two-thirds of a worker’s weekly wage and the overall cap in such benefits would be increased from the current long-outdated level of $170 per week to 50 percent of New York’s average weekly wage over a four-year phase-in period. The resulting additional TDI costs likely would be shared by employers and employees and new Family Leave Insurance (FLI) costs, estimated to be about one-quarter to one-third of total TDI costs, would be paid entirely by employees.

As a proportion of employers’ labor costs, temporary, or short-term, disability insurance costs are very small. Bureau of Labor Statistics’ data indicate TDI costs are $0.10 per employee hour worked, or 0.3 percent, of employers’ total compensation costs in the Mid-Atlantic region that includes New York. However, current costs through the state-operated New York State Insurance Fund (NYSIF) for the minimally-required level of TDI coverage are substantially lower than this, about $0.01 per employee hour worked. This assumes no employee contribution which employers have the option to require as an offset to their costs.

Under the proposed legislation raising TDI benefit levels, projections detailed in this report suggest that NYSIF premiums would increase by up to $0.02 per employee hour worked in the first year and up to $0.04 per employee hour worked in the fourth year when the increase in the weekly benefit cap is fully phased-in. To fund FLI, employees’ estimated costs through NYSIF are minimal with a potential impact of $0.01 per hour in the first year and $0.02 per hour in the fourth year.

In California, where paid family leave has existed since 2004, businesses have experienced lower employee turnover and higher morale; many companies report this benefit has not resulted in cost increases and has had a positive or no noticeable effect on productivity. The proposed expansion of benefits in New York would not only provide necessary support to individuals and their families at very reasonable, or even modest costs to employers and employees, it would reform and modernize family and medical leave in New York along the lines of neighboring states and other countries.

PDF of Report

PDF of Technical Supplement

PDF of Press Release

Testimony to Raise the Statewide Minimum Wage and Allow Localities to Set a Higher Minimum Wage

June 2, 2014. FPI’s James Parrott submitted testimony for the June 2 New York State Senate Labor Committee hearing on several minimum wage-related bills, including five bills that would authorize local governments to enact minimum wages above the statewide level, and one bill that would establish a statewide “living wage” of $15 an hour, indexed to inflation, for certain large employers and chain stores. The FPI testimony reviewed several reasons why it makes sense for New York State to authorize cities and counties to establish higher minimum wage levels than the statewide minimum.

In support of local minimum wage authority, Parrott’s testimony cited data showing that there are wide disparities across counties within the state in terms of the local cost of living, and that there is a similar wide disparity in median wage levels, particularly between New York City and suburban counties on the one hand, and most upstate counties on the other. His testimony also pointed out the disparate living wage levels currently established by local governments that apply to companies and organizations providing services under local government contract.

Beyond the bills considered at this hearing, there is a compelling need for New York to accelerate increases in the statewide minimum wage, and once it gets to a level close to the purchasing power that the minimum wage had through much of the 1960s and 1970s (between $10.50 and $11.50 in today’s dollars) then it should be indexed so that it rises each year along with inflation to prevent renewed erosion in its purchasing value.

Even when New York State fully phases in its currently legislated minimum wage increase to $9.00 an hour by 2016, the purchasing power of the minimum wage will still be 25 percent lower than achieved in 1968 when the minimum wage was $1.60. Many states and localities are pushing quickly past New York minimum wage level. Vermont acted recently to increase its minimum wage to $10.50 an hour by 2018—this is the highest level authorized for a state minimum wage as of today. Four other states (CA, MD, HI and CT) are on the verge of having a minimum wage of $10 an hour or greater, and as a result of the fact that they index their minimums to inflation, both Washington and Oregon likely will pass $10 an hour within a few years. The District of Columbia recently acted to raise its minimum wage to $11.50 an hour in mid-2016, and two neighboring Maryland counties followed suit.

The Seattle City Council is voting today (June 2) on legislation to require a $15 an hour minimum wage from all employers by 2021, and other major cities including San Francisco, Chicago, San Diego, and Oakland are considering raising their minimums to $12-$15 an hour.

There are currently 3 million low-wage workers in New York State paid less than $15 an hour, including 1.25 million in New York City.