Decline of Unions Redistributes Income; Corporate Profits Soar

By Jillian Berman

Corporate profit has been soaring for years at workers' expense and a decline in union membership is to blame -- not a rise in technology, a new study found.

The jump in corporate profit over the past few decades can be explained largely by a decline in union membership over the same period, according to a study by Tali Kristal, a sociologist at the University of Haifa in Israel. The boost in companies’ bottom line comes at workers’ expense, Kristal wrote in an email to The Huffington Post.

“It’s a zero sum game: whatever is not going to workers, goes to corporations,” Kristal said. “Union decline not only increased wage gaps among workers, but also enabled capitalists to grab a larger slice of the national income pie at the expense of all workers, including the highly skilled.”

The findings, published Thursday in the American Sociological Review, add a new dimension to the debate over income inequality in the U.S., suggesting that policies aimed at boosting unions may help. Corporate profit soared to a record high share of the economy earlier this year, according to Bloomberg, while workers' wages have remained largely stagnant. The rise in profit comes as union membership has dropped to a record low.

Kristal’s findings contradict claims that increased computerization largely accounts for the boost in corporate profit at the expense of workers. Kristal argued that the rise of machines is only indirectly to blame, because technology has reduced union workers by replacing some union jobs with automation, directly increasing corporate profit.

“If we want all workers to benefit from the economic growth, then policymakers can initiate some steps to strengthen unions, such as pro-union reforms of labor law, and deterioration with employers' illegal anti-union tactics that increasingly spread over the last decades,” Kristal wrote.

Indeed, other analyses, including one from the left-leaning Economic Policy Institute, have found that that the drop in union membership in recent decades correlates with the rise in inequality during the same period.
“The decline in union members is directly related to the stagnation of wages for working people,” Brandon Rees, acting director of the Office of Investment at the AFL-CIO, an umbrella labor organization for many unions, told HuffPost. “Economic growth has been going somewhere and its been going to the top 1 percent.”

That dynamic could be problematic for the U.S. economy as a whole, Rees said, as middle-class Americans burdened by debt and slow wage growth buy less and hold back the recovery.

“One of the reasons why we are suffering from anemic growth today is because consumers have been reducing their debt levels, but wages are not keeping up with productivity growth,” Reese said. “The rights of workers to join a union has helped create the middle class in this country and the middle class has been hammered in the past 20 years as unions have declined.”

This article originally appeared in The Huffington Post on June 9, 2013

For-Profit School to Pay U.S. up to $2.5 Million for Submitting False Federal Student Financial Aid Claims

American Commercial Colleges Inc. (ACC) has agreed to pay the United States up to $2.5 million, plus interest, to resolve allegations that it violated the civil False Claims Act by falsely certifying that it complied with certain eligibility requirements of the federal student aid programs, the Justice Department announced today.

To maintain eligibility to participate in federal student aid programs authorized by Title IV of the Higher Education Act of 1965, for-profit colleges such as ACC must obtain no more than ninety percent of their annual revenues from Title IV student aid programs. At least ten percent of their revenues must come from other sources, such as payments from students using their own funds or private loans independent of Title IV.

Congress enacted this “90/10 Rule” based on the belief that quality schools should be able to attract at least a portion of their funding from private sources, and not rely solely upon the Federal Government.

The civil settlement resolves allegations that ACC violated the law when it orchestrated certain short-term private student loans that ACC repaid with federal Title IV funds to artificially inflate the amount of private funding ACC counted for purposes of the 90/10 Rule. The short-term loans at issue in this case were not sought or obtained by students on their own; rather, ACC orchestrated the loans for the sole purpose of manipulating its 90/10 Rule calculations.

“American taxpayers have a right to expect federal student aid to be used as intended by Congress -- to help students obtain a quality education from an eligible institution,” said Stuart F. Delery, Acting Assistant Attorney General for the Department of Justice’s Civil Division. “The Department of Justice is committed to making sure that for-profit colleges play by the rules and that Title IV funds are used as intended.”

Under the False Claims Act settlement, ACC, a privately-owned college operating several campuses in Texas, will pay the United States $1 million, plus interest, over five years, and could be obligated to pay an additional $1.5 million under the terms of the agreement.

“Misuse of taxpayers’ dollars cannot be tolerated – not only for the sake of taxpayers, but especially in the case of innocent individuals who seek to improve their lives through a quality education,” said U.S. Attorney for the Northern District of Texas Sarah R. Saldaña.

Today’s settlement resolves allegations brought by Shawn Clark and Juan Delgado, former directors of ACC campuses in Odessa and Abilene, respectively, under the whistleblower, provisions of the False Claims Act, which permit private citizens with knowledge of fraud against the government to bring an action on behalf of the United States and to share in any recovery. Messrs. Clark and Delgado will receive $170,000 of the $1 million fixed portion of the government’s recovery, and would receive an additional $255,000 if ACC becomes obligated to pay the maximum $1.5 million contingent portion of the settlement.

This case was handled by the Civil Division of the Department of Justice, the U.S. Attorney’s Office for the Northern District of Texas; and the Department of Education’s Office of Inspector General and Office of General Counsel.

The lawsuit is captioned United States ex rel. Clark, et al., v. American Commercial Colleges, Inc., No. 5:10-cv-00129 (N.D. Tex.). The claims settled by this agreement are allegations only, and there has been no determination of liability.

Fed says Wisconsin's economic performance one of nation's worst!

The Federal Reserve Bank of Philadelphia has released its six-month economic forecast for the nation's 50 states.

Wisconsin is one of only five state's (Alaska, Louisiana, North Dakota, Wisconsin, and Wyoming) whose coincident indexes are projected to decrease. Forty-five states, including Illinois and Minnesota, both of which raised tax rates on high income earners recently, are projected to grow.

Walker's austerity economic policies are not working.

Rosen's U.S Depart. of Ed testimony in support of gainful employment rule

Good Morning.

My name is Michael Rosen and I have been an economics professor at Milwaukee Area Technical College for twenty-six years.  MATC is one of the largest two- year colleges in the nation with 50,000 students, the majority students of color and economically disadvantaged.

I am appearing before you today to urge you to develop a strong gainful employment rule to ensure that students who attend college with noble academic and employment aspirations are not left unemployed or underemployed with huge debts they have no possibility of paying back.

I have become an advocate for a gainful employment regulation based on my own experience and that of literally dozens of former for-profit college students I have met.

Three years ago I read an article in Milwaukee’s local paper about a new technical college that was planning to open a block and half from MATC. That piqued my interest because I wondered why Everest College, which I had never heard of, would want to locate so close to the state’s largest, public technical college.

So I did some research and was shocked to learn that Everest, a subsidiary of Corinthian College Inc., was mired in controversy over poor graduation and job placement rates; that its credits didn’t transfer to most colleges and universities; and that its students had incredibly high student loan default rates. I also learned that Everest was the subject of several lawsuits and investigations and had recently settled with the state of California for almost $7 million.

I contacted the city council person, Milele Coggs, who represented the district Everest wanted to locate in. She was equally concerned and asked me to testify at a Board of Zoning Appeals hearing on Corinthian’s request for a zoning change so they could begin construction.

Upon hearing our concerns about Everest’s record, the Board held their decision over for a full public hearing. Corinthian representatives threatened that if they did not receive immediate approval the redevelopment deal would die. That proved to be an idle threat, but representative of their corporate culture.

A hearing was finally called for February 2010.  Corinthian spared no expense, hiring one of the city’s most expensive public relations firms andpressuring the Chamber of Commerce to hold a public meeting to promote their venture.  Their representative asked me what Corinthian could do for me to get me to stop opposing their project.

Opposition to Everest had grown, including the resident’s council representing the housing project next to Everest’s desired location, the NAACP, seven aldermen, the MATC District Board and a local Latino organization, Voces de la Frontera.

Nonetheless, the Board of Zoning Appeals approved the project, which was subsidized with $11 million in interest free bonds. But a spotlight was now on Everest when it opened in the fall of 2010.

Less than two years after Everest opened it quietly announced it was closing. But because its opening had been so controversial, the decision became big news. Immediately the local media learned that our worst fears had been realized. As it had in other cities, Everest enticed low-income students with the promise they would find gainful employment after they completed their studies, encouraged and sometimes coerced them to take out huge loans to pay tuition for programs that cost four times what they would have paid for the same courses at MATC, and had more students drop out than graduate from their programs. An article in Milwaukee Journal Sentinel lists the damage:

More than half of the 1,585 students who enrolled since October 2010 when the school opened dropped out.

Everest placed only 95 students by the end of July—less than 6 percent of enrollees and 25 percent of its graduates.

By comparison, according to the Wisconsin Technical Colleges’ annual Graduate Follow-up Report, 88 percent of the 2011 graduates were employed within six months of graduation and 71 percent were employed directly in their field of study.

At the time its closing became public, Everest had only 300 studentsenrolled. At the behest of the Education Approval Board, a Wisconsin regulatory body, it agreed to pay the educational loans of the 827 dropouts, assuming they can be located, and those of any of the 300 students who didn’t make it to the end of March. The debt is estimated at $3.7 million.

The mayor sent a letter requesting that Everest pay the loans of those who had graduated. But Everest did not agree. The school is now closed and there are hundreds of former Everest students who are left with broken dreams, no jobs and huge debts.

One of them is Michelle Reise whose full testimony I have supplied to this committee. Her experience is like many others who have been lured into attending for-profit colleges by the promise of an accelerated academic program that will lead to immediate and gainful employment.

As Michelle wrote: “I graduated with a 4.0 GPA and was an Everest  Ambassador. My credentials speak for themselves. I have only had 3 interviews for offices in my field, all of which I found on my own with no help from Everest. They promised me, based on their advertising, a better life and that they would place me in my desired field of study. Everest was not the start of a better life, but more of a beginning of a long still unfinished nightmare, leaving me with a large amount of debt ($10-15,000) and no new start.”

Or Carron Kilpatrick, an Everest grad, wrote: “Everything they promised was a lie. I could talk all day about how my decision to go to this career college ruined my life but unfortunately I don’t have enough time in my day because I am working two jobs as a housekeeper and personal aid and have two children to take care of. My intentions were to give my children a better future by bettering myself through education. Everest ripped that dream away from me and is the reason I am struggling today with a $12,000 debt. “

Or listen to Antonia Fuentes:” I enrolled into the Criminal Justice degree program at Sanford Brown… My recruiter embellished on the career outlook, promising a bright future with a favorable career. From the salary level of $40,000 annually to the success stories plastered all over the walls, it was all an advertisement strategy to recruit vulnerable students to enroll in their bogus programs. The credits I earned were nontransferable to any four year degree program… I found myself stuck with close to $30,000 in loans that I may never be able to pay back… It has been almost four years since I graduated and I am without a job in my field of study.”

Or Kyla Morrison: “I was a good student with good grades. When I finally had an interview with Aurora Health Care the lady confided in me that this school had a bad reputation and no one wanted to hire anyone from this school, from their bad experiences.  I started talking to other graduates and they too were having the same issues. I went back to the school where they had people who helped find you jobs. This again was no help… This school was a total disappointment and I wasted so much money on a school that got me nowhere.”

These are just a sample of the testimonies I have submitted. But all of them indicate that students, many of whom have no experience with higher education, are lured into enrolling in for-profit colleges by aggressive recruiting and marketing techniques, the promise of accelerated classes and effective job placement services, and high paying employment. Yet they wind up with their dreams destroyed, credits that do not transfer, huge debtsthey cannot possible pay back, and no gainful employment.

The reason there are so many dissatisfied students, multiple lawsuits, andthirty-two state Attorney General investigations is that their business model is focused on misleading and aggressive advertising and recruitment, paid for by procuring government loans for students.  It is confirmed by the Department of Education that for-profits enroll only 9.6% of higher education students, but capture almost a quarter of all federal financial aid. Equally alarming, they are responsible for almost half of all student loan defaults.

Because for-profit colleges’ goal is profit not placement, their primary concern is getting students signed up, not educating them, securing internships or clinical experiences, or finding them jobs. They have a sordid history of promising jobs and transferability to students, but not delivering anything but crushing debt.

Several of the students I have spoken with were counseled to forbear their loans, regardless of their individual financial situation and despite the fact that, depending on the loan, interest could continue to accrue and other repayment plans were available. This widespread practice along with  investor reports from for-profits schools like Corinthian suggest a strategy of abusing forbearances to manipulate cohort default rates and thus avoid gainful employment sanctions. I urge the Department of Education to consider this possibility and other evasion tactics documented by groups like The Institute for College Access and Success when writing new gainful employment regulations.   

A gainful employment rule that ensures that former students, both grads and non- completers, obtain a meaningful education to qualify them for jobs that pay enough for them to pay back their loans without significant hardshipwill protect both students and taxpayers. A debt to income metric will measure whether grads have excessive public and private debt. Both the repayment rate and debt to income standard are reasonable and necessary measures of institutional quality and student success. They protect students in their roles as consumers and as taxpayers.

Gainful employment regulations will help ensure that the nation’s Antonias,Carrons, Kylas and Micheles and millions like them who are willing to juggle school, work and family to secure a better life for themselves and their children will not be taken advantage of by unscrupulous career collegesthat provide them no career at all.

For-profit university settles Pell Grant fraud case

The United States University, a California based for-profit college,has agreed to a $686,720 civil settlement over federal financial aid fraud charges.

The school’s former financial aid director pleaded guilty to falsifying student records and could face up to a year of prison time, according to the local U.S. Attorney's office.

Between 2008 and 2011, Christina Miller filed falsified Pell Grant applications for students of United States University, a school with online and in-person programs.

Miller pleaded guilty to filing more than $300,000 worth of fraudulent Pell Grant applications on behalf of the school’s students, said Assistant U.S. Attorney Christopher Tenorio, who handled Miller's prosecution. The case was unusual for resulting in a civil case against the university as well as criminal charges.

“A lot of times if there is a indication that there are false applications for financial aid, it’s usually by an individual," Tenorio said. "And in this case, it was a financial aid director. There were many, many applications under her control and many false applications we suspect she made.”

Joseph Price, the assistant U.S. attorney who handled the civil case against the university, said there has likely been an uptick in these kind of cases of financial aid fraud with the proliferation of for-profit universities that has taken place in recent year.

The cases against the university and Miller were the result of a whistleblower suit filed by Veronica Glaser, a former student and employee of the university. Under the federal False Claims Act, Glaser could receive 15 percent to 25 percent of the university's settlement payment, according to Price.

According to its website, tuition at United States University ranges between $7,800 and $15,600 a year for a full-time student depending on the program. The school offers teacher credential, nursing and other programs. Its enrollment was 326 students during the 2009-10 school year, the most recent year for which enrollment information is available on the school's website.

University representatives have not yet responded to requests for comment.

What CAT's layoffs say about Wisconsin's skilled worker shortage

So much for Bucyrus International’s alleged shortage of skilled welders.

Last Friday the iconic South Milwaukee firm, now owned by Caterpillar, announced that it was laying off 40% of its hourly workforce, including many highly skilled welders.

For the past four years Tim Sullivan, Bucyrus International’s retired CEO, has criticizedthe Milwaukee Area Technical College (MATC) for not producing enough skilled welders to meet his firm’s production needs. Sullivan even claimed that a shortage of welders in the Milwaukee area forced him to build a plant in Kilglore, Texas.

Sullivan’s complaints were echoed by a chorus of others including the Executive Director of the Metropolitan Milwaukee Association of Commerce, Tim Sheehy, who ominously declared: "We shouldn't fool ourselves that if companies cannot find labor in Milwaukee that they won't look elsewhere. The message for Milwaukee is to fix the workforce or die."

The Milwaukee Journal Sentinel (MJS) has dutifully, almost breathlessly, covered speeches lamenting the skilled labor shortage by area CEOs. Most recently it covered one by Briggs and Stratton’s Todd Teske, despite the fact that Briggs’ employment has plummeted from 11,000 to 500 as it outsourced jobs to Alabama, Georgia and China.

It is likely that Caterpillar's announcement, coming just days before the beginning of contract negotiations, is part of a cynical negotiations strategy. But whether the layoff threat is real or simply hardball bargaining, it demonstrates why Wisconsin manufacturing firms are having difficulty attracting skilled workers.

Wisconsin's skilled workers are tired of being treated as disposable liabilities. After decades of outsourcing and job loss, they seek employment with firms that value their work ethic, skills and commitment. To put it bluntly Wisconsin’s manufacturing CEOs won't get loyalty from Wisconsin’s workers unless the loyalty is reciprocated.

More than a year ago I wrote in In a MJS op ed:”The list of companies that have offshored or outsourced production reads like a who's who of Wisconsin's manufacturing: Briggs & Stratton Corp., A.O. Smith , Rockwell, Badger Meter - and many more.

Milwaukee's working families have had their lives turned upside down by plant closings, downsizings, outsourcings and offshoring. Their experience in manufacturing has meant job loss, declining wages and benefits and economic insecurity.

Take my former student, John. He did everything we ask young workers to do, earning two journeyman cards while working and attending Milwaukee Area Technical College full time. John left Briggs when it began moving jobs to low-wage states and Mexico. But his new employer, Rockwell, began outsourcing to nonunion, low-wage plants even before it eliminated all hourly workers last year. So John started over again at Harley-Davidson. But, a year and a half ago, Harley laid John off.

John's experience is unfortunately not unique. Almost everyone with roots in this community has a father or mother, aunt, cousin or uncle who has experienced the instability that characterizes manufacturing employment.

Nationally, manufacturers shed 2 million jobs during the Great Recession. Wisconsin lost 58,300 manufacturing jobs, 11.6% of its total, between December 2007 and June 2009, the official end of the recession. The state continued to lose manufacturing jobs for several months even after the recession ended. By September 2010, Wisconsin had lost 69,800 manufacturing jobs, 14% of its total.

Laid-off manufacturing workers have summed up this experience with their kids, nieces and nephews. As Mario, a nursing student now after being laid off from a foundry after 16 years, told me, "I have a family, and I need a job with security."

His attitude is reinforced by the occupational programs at MATC that are most popular and have waiting lists: culinary arts, automotive, heating and air-conditioning, physical therapy, barber and cosmetology, occupational therapy and nursing.

What do they all have in common? These are jobs that cannot be offshored.

Our working-class students are voting with their feet by choosing careers that provide more secure employment. They'll continue to do so until manufacturers offer the same level of security they find in other occupations or sufficient compensation to justify the insecurity that has characterized manufacturing employment."

New report identifies why Wisconsin's economy is among the nation's worst

Wisconsin’s economy continues to be among the nation’s worst performing.  A new report by the Bureau of Economic Analysis reports that between 2011 and 2012 the state ranked 41st in nation in personal income growth.

The single largest contributor to this dismal performance was the dramatic decline in state and local government income, the direct result of Governor Walker’s austerity economic policies (See table 3).

Wisconsin’s state and local government employees’ incomes shrank by $529 million dollars, a 2.55% decline. Only Louisiana under the leadership of Tea Party favorite, Governor Booby Jindal, experienced as steep a decline according to the analysis.

 

The Milwaukee Journal Sentinel has repeatedly written that the state’s lack of job creation and weak economic and income growth is inexplicable. This report makes it clear that  Wisconsin's weak  economic performance is the direct result of Walker’s austerity economics- massive cuts in state aid to local governments, public schools, tech colleges and the UW system. It will be interesting to see if the Milwaukee Journal Sentinel reports that the economic mystery of Wisconsin’s subpar economic growth has been solved.