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U.S. Labor Secretary Tom Perez: How to Fix Inequality in America

U.S. Labor Secretary Tom Perez talked to In Plain Sight about poverty, low-wage work, and the thorny problem of inequality in America.
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U.S. Labor Secretary Tom Perez often talks about helping low-wage workers “punch their ticket to the middle class.” One of the Obama administration’s staunchest progressives, he was appointed to this post last year after serving for four years as head of the Justice Department’s Civil Rights Division. Perez recently sat down with NBC News to discuss poverty, low-wage work, and the thorny problem of inequality.

NBC: The Obama administration trumpets that the economy has seen private sector job growth for five years. Yet wages have not grown for most and growth is concentrated in low-wage sectors like retail and service. Is there a danger in talking triumphantly about a recovery when the economy looks weaker for workers than before the recession?

Perez: It’s undeniable that in the three months before the president took office, we lost 3 million jobs, and in the last 56 months we’ve seen 10.6 million jobs gained, which is the longest streak of private sector growth on record. (We’ve been keeping records since 1940.) We’re at a pace to see job growth this year at a rate we have not seen since the late 90s.

But the difference between the situation now and in the late 90s is twofold. First, we’re digging out from a much deeper hole as a result of the Great Recession. Second, the rising tide of the late 90s lifted more boats. Today we’ve had productivity growth of over 90 percent, but wage growth that has been at 2 to 3 percent. So American workers are helping to bake the cake of this recovery, but they are not sharing in the fruits of their labor. Their sweat equity is not translating into financial equity. And at the same time, they are looking at all too many CEOs and executives who are reaping enormous salary hikes. So it’s understandable that there continues to be angst. There’s angst because there’s unfinished business. I think the principal piece about today is to make sure that the increasing prosperity is shared prosperity.

NBC: You speak often about the middle class, but frankly, it’s not all that clear what the middle class means now. At one time, we were talking about access to education, a stable job that made it possible to buy a home. Things like the GI bill, union salaries, and pensions secured the middle class, but increasingly, these things are relics. When you talk about the middle class, what are you talking about?

Perez: The middle class is a timeless concept that is as much a values set as it is a number that denotes median family income. The values part is about people who have the capacity to have a home, retirement, healthcare and employment security. It’s the ability for people to help their children do a little better than they did. That’s the moral contract, and that’s what makes us the greatest country on earth.

The challenge out of the Great Recession is to ensure that we continue to maintain this social compact with America. And we must continue to strive to ensure that we have shared prosperity. We see encouraging job growth, and we’re on pace to have more; the challenge is to make sure that the rising tide lifts all boats and not simply the yachts. There is an argument that low wages are a product of globalization. But low wages are a choice, not a necessity. In every business model across America I can give you examples of employers that reject the false choice between the shareholder, worker, and customer.

NBC: Yet because the minimum wage remains at an historic low in terms of buying power, many employers are making the opposite choice: to cut worker pay and impose difficult scheduling policies to grow profits. Among the workers at the bottom of the scale are tipped workers who are entitled to just $2.13 per hour under federal minimum wages law. So, what percent do you tip? And how much are we supposed to tip, say, at a coffee shop when you buy a $1.85 cup of coffee. What does the Secretary of Labor put in the tip jar for the barista?

Perez: Well, I am the wrong guy to ask. I save a lot of money because I don’t drink coffee, because I don’t go to Starbucks. I don’t drink tea either. It’s healthier. Look at me I’m drinking water.

It’s interesting: I’ve traveled internationally a fair amount recently, and I always ask what the custom is around tipping. In Spain I was instructed not to tip at all. I bring this up because restaurateurs there say it is their responsibility to pay their workers fairly. That’s not how it works here, and as a result while everyone has monthly overhead—rent utilities and the like—when you’re a tipped worker, you have no guarantee of how much money will come in. That’s colossally unfair. When the government shut down, I’d go into restaurants that were ordinarily packed at lunchtime and they were ghost towns, and those workers relied on tips, but they were not going to get that money back.

"It’s understandable that there continues to be angst."

All too frequently, while an employer is supposed to compensate them for the difference between $2.13 and the full minimum wage, that does not always happen. That’s why my office has a pretty aggressive enforcement operation going after back wages and penalties for employers who don’t pay. The federal minimum wage is too low to begin with and the tipped wage results in tipped workers, disproportionately women, really taking it on the chin.

NBC: Speaking of disproportionality, racial inequality is a persistent feature of the economy—unemployment and underemployment rates are higher in communities of color. How is your department addressing persistent racial inequality in work?

Perez: There is not one magic bullet. If there was one magic bullet to increase wages and to ensure shared prosperity that bullet would have been shot. There are many things that we need to do. For one, 70 percent of GDP growth is from consumption, and we need to take actions to stimulate consumption, including but not limited to raising the minimum wage.

More broadly, we are dramatically reforming how we upscale America. I was at Lorraine County Community College this morning talking to people who were out of work, surviving on public benefits and have now punched their ticket to the middle class because they got onto the skills super highway that we are constructing. It’s allowed them to get the skills that match them with in demand jobs.

When you look at unemployment rates, they’re coming down for all demographics. But at the same time, the African American and Latino unemployment rates were higher, so even though they’re coming down, but they are still unconscionably high. If you look at where it was a year ago, and where it is now, it’s moving in the right direction, but it’s all too slow.

For black workers, if you look at incarceration rates of young black men compared to the rest of the population, they are very high. We have done a number of investments, often in partnership with the Department of Justice, to help people coming out of prison, including but not limited to young black men, to have access to the skills they need, and the support systems they need to get access to a job and not recidivate.

"If there was one magic bullet to increase wages ... that bullet would have been shot."

At the same the [Equal Employment Opportunity Commission] has been looking into the use of criminal histories as a filter in the hiring process and whether that implicates Title VII [anti-discrimination laws]. And that’s something that they continue to look at on a case by case basis.

The largest private employer in the state of Maryland is [Johns] Hopkins [University]. It is also one of the most prolific employers of former offenders. They are not doing it as an act of charity. They are doing it because they find a great, loyal and productive workforce.

NBC: Young workers are also having a tough time in this recovery. Many internships in the U.S. are unpaid, so college and post-college aged people work for free because it’s “good experience.” The Labor Department has issued guidelines saying an intern can be unpaid if they’re doing work that furthers their education and that a paid employee wouldn’t do otherwise. Yet recent reporting has shown that the DOL has not prioritized enforcement of internship laws.

Perez: We do have an active [enforcement] focus on the individual cases of folks who should be classified as employees but are treated as interns and we’ll continue to do that, but at the same time if your focus is entirely on strategies to use enforcement to make sure that you get people into the workforce to make money, I think at best we’ll see fleeting progress.

So we’re looking to alternatives. I was in the U.K. and Germany and went to Volkswagen and learned about their apprenticeship model—young people become paid apprentices in trades. It’s not a coincidence that youth unemployment is far lower in Germany than the United States because there are paid opportunities for young people to get experience. So, yes we need to and do investigate [internship violations], but I think the broader solution will help more people faster to transform the culture of America around this earn-while-you-learn idea.

"It’s not a coincidence that youth unemployment is far lower in Germany."

We’re going to do a $100 million competitive grant to help develop apprenticeship models in the U.S. I expect that a typical recipient will be a partnership that will include business, non-profits and educators that will not be focused only on skilled trades, but also in emerging areas like healthcare, cyber security, IT. I expect that these grants will help get minorities and women into apprenticeships.

NBC: I wrote a story about workers in a foam plant in Selma, Alabama, that that sells cushions to Hyundai. Workers say that chemicals in the plant are making them sick, and they want to hold their employer accountable, but they say it’s not entirely clear if they should complain to Hyundai or the contractor that employs them directly. Subcontracting like this has reshaped the American labor market, and for workers, that can be a tremendous challenge.

Perez: You’re talking about the fissured workplace. When we talk about the challenges of shared prosperity, the fissured workplace poses a challenge to shared prosperity. The fissured workplace has different forms—there are workers that act like and quack like employees but are called contract workers. There are business models that contract out essential services, like in your story.

In your story, you wrote about Denise Barnett [a worker at the Alabama plant]. What she’s dealing with, I see that all the time: accountability becomes and feels unclear.

If we are going to build shared prosperity in society and address wage challenges that you and I have discussed, we need to make sure we treat people as employees. We need to make sure that workers have voice. When you don’t have voice, [employees] feel much more vulnerable.