Congressional Republicans have proposed to tax contributions to 401k retirement plans in a move that amounts to a stealth tax hike on the middle class. The proposed tax on 401ks is also part of the trend of business attempting to shed benefits offered to their workers.
Employees are not taxed on money they contribute to 401k plans, but those contributions are taxed upon withdrawal from the account during retirement. The tax benefits to tax deferral are two. One taxes paid during retirement are generally paid at a lower marginal rate because income is lower during retirement. Secondly, because of the time value of money a dollar in taxes paid today is worth more than a dollar of taxes in the future. Descriptions of the proposed change in 401k taxation as a mere accounting gimmick are misleading and inexcusable from a publication like the New York Times.
The other benefit to a 401k plan to employees is that employers can match employee contributions and employers can get a tax deduction for that contribution. The proposed changes in 401k taxation are expected to lead to an increase in popularity of Roth IRAs. Roth IRAs tax contributions but do not tax withdrawal. Employers can offer and contribute to Roth IRAs, but employer contributions in Roth IRA are taxable for the employer as well, so few employers match Roth IRA contributions like they do with 401ks.
401k or defined contribution plans largely replaced defined benefit or pension plans. The shift from pensions to 401ks has reduced income for many current retirees and will continue to do so for future retirees. The effective end of the pension in the private sector, which coincides with decline in union membership, coupled with reductions in the purchasing power of Social Security retirement benefits resulted in a substantial increase in senior citizens who are forced to work in retirement. This increase in senior citizen employment driven by reduced retirement income forced some senior citizens, who are deemed “work campers,” to become migrant laborers who travel the country in recreational vehicles from temporary job to temporary job.
Curtailing 401k accounts would continue and worsen these trends as the 401k account has essentially replaced traditional pensions. The prospective end of 401ks may be the first tangible result of more draconian employee benefit reforms in the 2010s and 2020s. The emergence of the gig economy will probably be the catalyst for any new round of anti-worker reforms.
The emergence of the gig economy has led to an increase in fights over employee classification. Gig economy workers, like Uber and Lyft drivers, tend to be classified as independent contractors who aren’t eligible for even rudimentary employment benefits like unemployment and workers compensation insurance.
Courts and legislators have yet to conclusively answer whether gig economy workers are employees or independent contractors. No less a luminary than former Treasury Secretary Robert Rubin lead a panel of prominent Democratic economists and elected officials in a forum about modernizing labor laws to promote the gig economy. Anyone who remembers the results of the financial reforms promoted by Rubin in the 1990, should shudder when Rubin discusses reforming laws governing the employer-employer relationship.
The rise of the gig economy is leading to calls for portable benefits not tied to the employee-employer relationship as a way to address concerns about how to classify gig economy workers. Portable benefits are an old idea in the political arena. The Affordable Care Act increased portability of health insurance through health care exchanges. Even business groups critical of the ACA praised how the ACA increased portability of health care benefits. Many employers like the idea of “portable benefits” as it reduces employee costs.
But it would be unfair to dismiss the potential good from portable benefits. Proponents of portable benefits argue that portable benefits help low wage employees who do not but do not have employee benefits like retirement and health insurance even if they are classified as employees. If portable benefit schemes gain traction, they should be implemented in a way that helps workers rather than as a way to reduce income and benefits going to workers.
There are valid criticisms of 401k accounts. Matt Bruenig of People’s Policy Project states that tax deferral benefits of 401k accounts accrue to wealthier Americans. Progressive lawmakers like former Iowa Senator Tom Harkin have proposed Universal Savings Accounts (USAs) that would give employees a low-cost way to save for retirement independent of an employer-provided retirement account like a 401k. USA accounts could be a good replacement for 401k accounts if there was a realistic chance they could be implemented. As it stands now it is likely 401k accounts will be curtailed without the prospect for the adaptation of USA accounts in the near future.
While Congressional Republicans are working to curtail the 401k plan as an employee benefit, some Democrats are also anxious to help employers shed benefits traditionally offered to employees. These benefits can be voluntary benefits like health insurance or mandatory benefits like workers compensation and unemployment insurance. Either way workers need to filter out the noise of politics as entertainment and support political candidates who unambiguously put workers ahead of political donors from big business.
The Washington Post ran a feature story about “Work Campers” – senior citizens who live in campers and travel around for temporary jobs. The story noted that many, if not most, work campers were forced into the lifestyle by inadequate retirement savings and Social Security retirement benefits that have lost 30 percent of their purchasing power since 2000. The story also noted that the number of senior citizens working has increased from 4 million to 9 million during that same time period.
The idea of a growing number of senior citizens essentially acting as migrant laborers strikes many as odd and even dystopian. But work campers will present interesting challenges to the workers compensation system. Though some studies show that older workers are less likely to get hurt on the job, this finding is attributed to older workers having more experience on the job. Since work campers tend to hop from temporary job to temporary job, their chances of injury could increase as temporary workers are more likely to get hurt.
This growing development in the workforce raises many issues for work campers who are hurt on the job because workers compensation laws are state specific so benefits and eligibility for benefits vary from state to state.
Here are some questions that will face work campers when they are injured on the job.
Which states and jurisdictions can you collect benefits?
Employees may be eligible to claim benefits in the state where they are injured, their state of permanent residence, the state their employer is based or the state they were hired. Employees may also be able to claim benefits in multiple states. Employees may also be able to bring claims under the Jones Act or Longshore Act if they were hurt on a ship or a navigable body of water. It helps to get advice from a qualified workers’ compensation lawyer as the decision as to where an employee should claim benefits should be driven by where they have the best chances of recovery.
Which states limit permanent benefits for older workers?
Iowa recently limited workers over the age of 67 from receiving permanent disability benefits for more than 150 weeks. A work camper who was covered under Iowa law and seriously injured could only receive 2 ½ years of benefits.
What is the law on pre-existing conditions?
Many elderly workers have preexisting conditions. In some states those preexisting conditions may impair the ability of an injured work camper to collect benefits. In Missouri employees need to show an injury is a “prevailing factor” in the disability whereas in Nebraska employees merely show the work injury was a “contributing factor” to the disability. In other words, it would be more difficult for a work camper to collect benefits in Missouri for the aggravation of an old injury than it would be in Nebraska.
How do you determine earnings?
Disability benefits are based on earnings or what is called average weekly wage. The work campers profiled in the Washington Post were fairly low wage employees. However some work camping contracts include provisions for benefits like lodging that have a real monetary value. In some states, like Nebraska, those non-cash benefits can be included in the average weekly wage. Short term work assignments also present difficulties in determining average weekly wage because they might not accurately reflect an employee’s actual earning capacity. There could also be questions as to whether employment is seasonal or weather dependent which could also alter the average weekly wage.
Again, calculations of earnings can vary state by state, so work campers injured on the job should contact a member of WILG who specialize in workers compensation and regularly communicate with workers compensation specialists in other states.
The Lincoln City Council is scheduled to vote on an ordinance on October 16th that would formally eliminate a requirement that Uber and Lyft drivers pass a physical, background check and test about Lincoln that taxi cab drivers currently have to pass in order to drive a taxi in Lincoln.
According to city officials, this requirement is not currently being enforced. The ordinance has the public support of Mayor Chris Beutler and at-large City Councilwoman Leiron Gaylor-Baird. Supporters of the ordinance cite a decrease in drunken driving from ride hailing as well as a decrease in traffic and increase in downtown parking.
Taxi cab companies state the ordinance lets unqualified drivers on the street and presents unfair competition to traditional taxi cab companies. What hasn’t been eluded to in the debate over ride hailing litigation in Lincoln, but has played more prominently in the London debate, is the fact that ride-hailing companies treat their drivers as contractors which excuses them from paying basic employee benefits like unemployment and workers compensation insurance. This allows services like Uber to undercut traditional taxis on price.
The City of Lincoln doesn’t have a workers’ compensation ordinance. But allowing Uber competitive advantages over taxi cab companies indirectly impacts workers compensation because if Uber takes market share away from traditional taxi cabs fewer drivers will be covered under workers compensation.
Lincoln does a have a human rights ordinance that covers more employees than either state or federal anti-discrimination laws. By allowing Uber a competitive advantage over traditional taxi cab companies, Lincoln is potentially excluding workers from coverage of that ordinance since Uber denies it is an employer. Traditional taxi cab companies are subject to Lincoln’s human rights ordinance.
Many business observers have argued that Uber’s biggest innovation is “regulatory arbitrage.” Regulatory arbitrage is a fancy word for lobbying. Uber hired former Obama advisor David Plouffe. In the United Kingdom, Uber’s chief lobbyist is the godfather to one of the children for former Prime Minister David Cameron. It’s safe to state that a lot of Uber’s supposed innovation stems from old-fashioned lobbying.
Other cities, most prominently Austin, Texas, have attempted to regulate Uber by imposing the same requirements on ride hailing drivers that they do on taxi drivers. Uber was able to successfully lobby the Texas Legislature to pass a state law that preempted municipal regulation of ride-hailing services.
Though the tech sector is regarded by some as an advocate for LGBT rights, Uber was willing to accept an amendment to the Texas preemption legislation that promoted discrimination against transgender individuals.
Most Nebraskans and Iowans can probably sing a jingle from a regional grocery chain that promises “a helpful smile in every aisle.” But helpful smiles may have a hidden cost for employees.
A summary of 95 medical studies showed that forced cheerfulness by employees lead to psychosomatic issues like trouble sleeping, headaches and chest pain as well as decreased job satisfaction. This so-called emotional labor has also been linked to aggression in the workplace.
Retail and service industry employees are usually required to be cheerful to encourage customers to return. These pressures are likely becoming more acute as certain sectors of retail employment have declined and online giant – and burgeoning monopoly – Amazon has barged into the grocery business with their acquisition of Whole Foods.
Unfortunately, U.S. employment laws are not equipped to deal with the day-to-day mental strains placed on retail workers. Workers compensation laws generally do not compensate purely mental injuries. Workplace bullying or harassment is only legally actionable if the harassment is severe or pervasive and motivated by an unlawful factor like race, religion, nationality, sex, disability, etc.
But employees have the power to work together, even if they aren’t in a union, to address these conditions through protected concerted activity under the National Labor Relations Act. Recently a group of employees at a Target in rural Virginia banded together to help fire a manager who had been sexually harassing employees. Granted sexual harassment may be different than forcing an employee to be cheerful when dealing with the public, but by working together employees can address unreasonable rules and requirements by an employer.
Why were workplace injury statistics left out of Lincoln Vital Signs report?
The 2017 Lincoln Vital Signs report produced by Prosper Lincoln was an interesting and wide- ranging report about demographics and the economy in Lincoln. (Anyone who is interested can read the entire report by clicking here.) But the exclusion of information about workplace safety in Lincoln was puzzling and possibly telling.
In a report chock full of statistics about safety and the workforce in Lincoln, there was no mention about the number of workplace injuries and/or deaths in Lincoln. The Nebraska Workers Compensation Court tracks workplace injuries and deaths statewide. In Fiscal Year 2016, the last year statistics were available, there were nearly 40,000 reported workplace injuries in Nebraska and 40 reported workplace deaths. By a rough estimate, nearly 6000 of those workplace injuries would have taken place in Lincoln and roughly six of those workplace deaths would have taken place in Lincoln.
By way of comparison, from 2006-2016 Lincoln averaged roughly six homicides per year. In short being killed on the job and being killed in a murder are as about as common in Lincoln. In fact, last year a convenience store clerk was murdered on the job in northwest Lincoln.
There is an old adage that goes “Measure what counts and what counts is measured.” If workforce deaths and injuries aren’t measured in Propser Lincoln’s “Vital Signs” does that mean that workplace safety doesn’t count in Lincoln, Nebraska because it wasn’t measured?
It might be harsh to conclude that workplace safety doesn’t matter to groups like Prosper Lincoln, but if you look at who is behind Prosper Lincoln you can see why concerns about workplace safety may have been excluded. Propser Lincoln is heavy on voices from the business community, government, academia and the non-profit sector. There aren’t a lot of voices for employees who are part of Propser Lincoln. I believe that many of these people, some of who I am friends with, are for the most part well-meaning but live in such a white-collar world that the idea of getting hurt at work is almost far-fetched. Maybe this cloistered mindset explains why a supposedly comprehensive report about Lincoln’s economy excludes information about workplace safety. Maybe the same mindset explains ignoring fairly well-publicized links between work injuries and poverty.
City and local governments can take actions to promote workplace safety. Many cities have taken actions to protect convenience store clerks and and other retail workers who work overnight shifts. Sometimes occupational safety and public safety are thought of as separate topics, but protecting retail workers is something that comprises both public and occupational safety. Protecting retail workers from violence in Lincoln would be a good first step, counting workplace fatalities and injuries within the City of Lincoln would be another.
The total solar eclipse skirted just south of our Lincoln office on Monday. The once or twice in a lifetime event was a tourist draw for Nebraska and all around eastern Nebraska today there was a semi-festive atmosphere surrounding the eclipse. (When the eclipse passed over Lincoln around 1 p.m., the cloud cover combined with the eclipse created the temporary appearance of a severe storm coming in at dusk)
In and of itself the eclipse is interesting and even awe-inspiring, but I am not sure it completely explains why people are so fascinated by the event. I believe that part of the attraction of the eclipse is that it gives people an excuse to get away from work on a Monday – especially a Monday in summer.
I don’t mean that in a judgmental way. Americans work hard.
Among citizens of the so-called G-7 nations (U.S., U.K., Canada, Japan, France, Germany and Italy), Americans put in the most hours at work among the citizens of these wealthy nations. The average American put in 1783 hours on the job in 2016 in comparison to just 1363 for the average German worker.
The average American worker logged roughly two more weeks on the job than their counterpart in Canada. The average American worker also logged 70 more hours than their notoriously hard-working Japanese counterpart.
Earlier this year, the Heinz Corporation announced it was giving its employees a vacation day on Super Bowl Monday. Corporate America realizes that American workers work hard and some companies realize that giving people a little extra time off isn’t going to hurt the bottom line. And whether it’s a solar eclipse, the Monday after the Super Bowl or “Black Friday” hard working Americans are going to take some deserved time off from work if they are able.