Category: Financial Security

It’s Time to End Forced Arbitration

What is Forced Arbitration?

Many Americans are unfamiliar with binding arbitration clauses, also referred to as forced arbitration clauses or forced arbitration, which force agreeing parties to cede their right to settle potential disputes within the court system. Corporations and businesses often use these clauses in contracts and terms of service agreements with consumers and employers in order to circumvent the court system, usually to their own benefit and often to the detriment of consumers and employees. By accepting or agreeing to a forced arbitration clause, a person essentially gives up the right to settle any related dispute with the other party before a judge (and possibly a jury). These clauses exclude the right to form a class action lawsuit as well. Instead, disputes are brought before private arbitrators who are often biased against individuals. This is a disturbing notion, given that individuals’ must give up their constitutionally guaranteed day in court.

The Problem with Arbitration

Though many Americans are not familiar with forced arbitration, it is ubiquitous. According to Pew Charitable Trusts, nearly 9 out of the 10 largest banks include these clauses in their contracts for basic accounts. Similar clauses can be found in contracts for financial services, cable TV and Internet, cell phones and even Omaha Steaks. Many of these products and services are arguably essential to function in modern American society (though perhaps not freeze-dried meat). So simply refusing to do business with companies that use forced arbitration is not an option for most Americans who need cell phones or access to banking services to function in a modern society. Arbitration clauses are also often found in employment contracts, which can affect an employee’s ability to seek legal redress for issues such as workplace sexual harassment or discrimination. Simply finding another job is not always an option, giving employees no choice in the matter.

Additional problems arise when parties actually engage in arbitration. For example, arbitration relies on private arbitrators to resolve conflicts between parties who are often retained from the American Arbitration Association or other similar groups. Arbitrators often have a vested interest of ruling in favor of the companies that retain their services, despite their insistence that they maintain strict standards and rules to ensure neutrality.

Arbitration issues are not limited to conflicts of interest with the arbitrators. According to the New York Times, there are no rules or regulations that cover the handling of evidence or the summoning of witnesses, as there would be in the judicial court system. Rulings can limit awards and vary by individual. This means two people with the same dispute could receive different results from the same process. Finally, arbitration outcomes are usually kept secret and cannot be appealed.

On the other hand, proponents of forced arbitration, such as the U.S. Chamber of Commerce (which is a lobbying group, not a government agency) and the Heritage Foundation (a conservative think tank), argue that arbitration favors trial lawyers and benefits consumers. Though this is a somewhat valid claim, it misses the point entirely. The purpose of taking a company to court or joining a class action lawsuit is not for personal enrichment, but to hold businesses accountable when they act unethically or defraud consumers. Since many regulatory agencies are underfunded and/or understaffed, the court system is one of the few remaining options for those seeking redress.

In Recent Events

Recently, forced arbitration has led to scandals in for-profit schools and banking. For-profit schools, such as DeVry almost universally utilize forced arbitration clauses in their enrollment contracts, while very few private non-profit universities and no public or state schools employ them. Given the spate of unethical behavior from for-profit schools, that ranges from fraudulent acts to deceptive recruiting, it should come as to no surprise that these institutions would try to keep consumers from holding them accountable and taking them to court.

Further, it recently came to light that Wells Fargo Bank had opened unauthorized accounts in customers’ names in order to meet sales goals. Wells Fargo, like many other large banks, utilizes binding arbitration clauses in its contracts with customers, preventing customers from bringing litigation against Wells Fargo. Recently, the bank has tried to enforce these clauses with the very same customers it defrauded after those customers sued. In effect, Wells Fargo is attempting to utilize forced arbitration to escape the consequences of its unethical behavior.

The Solution

There have been attempts to address the problems with the unfair system of forced arbitration. Under the Dodd-Frank Act, the Consumer Financial Protection Bureau has been attempting to craft new regulations limiting arbitration in the financial sector. The Department of Education has made similar efforts with for-profit schools. Sen. Al Franken of Minnesota and Rep. Hank Johnson of Georgia introduced the Arbitration Fairness Act of 2015, which eliminates the use of forced arbitration clauses in consumer and employment contracts (the full text of which can be found here). Unfortunately, with Congress and the White House under Republican control, any reform in arbitration seems very unlikely.

There is no problem with arbitration, provided all parties involved have knowingly and willingly agreed to it, and were not coerced or given no other option. Ultimately, the proliferation of forced arbitration clauses following several Supreme Court rulings has led to more and more businesses effectively opting out of accountability in regards to their employers and customers.

While the U.S. legal system is imperfect, forcing consumers and employees into a private, justice system only benefits those with large legal and financial resources: large corporations and businesses. Corporations may now be entitled to legal protections as persons, but their rights should not come at the cost of the 7th Amendment, which enshrines rights of real human beings to their day in court. Why should one class of “person” be entitled to justice, while another class is effectively excluded?

Image Source: Google Images; Lieff Cabraser Civil Justice Blog

G-7 Cybersecurity Accord Aims to Protect Financial Institutions

The Group of Seven (G-7) leaders recently agreed on a set of guidelines to better protect global financial institutions from cyberattacks.  This non-binding accord recognizes the recent pervasive cyberattacks that have hit accounts of major institutions, including the U.S. Federal Reserve.  While the accord signals attention to this international problem, does it really have the ability to better secure the financial integrity of institutions?  Will a new administration seek to pursue cybersecurity through a multinational lens, or will it seek a unilateral approach?

Cyber Policy So Far

Congress passed the Cybersecurity Information Sharing Act of 2015 to make it easier for private companies to share cyber threat information with each other and also with government entities.  The Obama Administration built on the legislation by setting forth a Cybersecurity National Action Plan (CNAP), calling for more funding to modernize government IT systems and place Federal Chief Information Security Officers to implement these changes in agencies across government.  CNAP also partnered with large private companies, like Google, Microsoft, and MasterCard to make it easier for their customers to have more secure accounts and data security.

Cybersecurity is a crucial concern not only for public and private entities, but also for consumers.  Executive Order 13681, ‘to improve the security of consumer financial transactions’ is a 2014 example of an effort to secure government payments, federal transactions online, and better find the perpetrators of theft from financial cybercrimes.  In both its 2015 and 2016 annual reports, the U.S. Financial Stability Oversight Council (FSOC) highlighted cybersecurity as a top priority for agencies to better protect consumer information and the entire financial system.

This past summer, the Administration released a Presidential Policy Directive (PPD) on U.S. Cyber Incident Coordination, to better differentiate significant cyber incidents, categorize government efforts, designate lead agencies to specific categories, and ensure a consistent response with national preparedness.

An Integrated Problem

Attention toward cybersecurity has spiked in the previous weeks with malicious attacks on the internet infrastructure.  On Friday, October 21, a massive internet outage was brought on by requests from millions of IP addresses that disrupted the internet directory services at least three times throughout the day.  The same problem of permeability is an issue for the international financial system.  Prior to the announcement of the G-7 Accord, hackers used the closed communication system that central banks use to send false money transfer requests to the Federal Reserve Bank of New York.  The requests were to move money out of the Bangladesh Bank’s accounts and into ones set up by the hackers, which lead to an estimated $81 million in stolen assets.

What does a G-7 Accord do?

The G-7 nations are a group of industrialized democracies that meet to discuss global economic governance, energy, and international security.  Formerly the G-8, the nations include the U.S., Japan, Canada, France, Germany, Italy and the U.K., with Russia removed from the group after its annexation of Crimea.  An accord from the group spells out a common doctrine that all member states will adopt as a baseline for their own national policies or legislation to work off of.

The G-7 Fundamental Elements of Cybersecurity for the Financial Sector breaks down the high-level fundamental pieces of cybersecurity into eight elements:

  • a cybersecurity strategy and framework informed by national, international and financial industry standards that would respond to specific attacks;
  • governance structures for clear reporting lines, as well as cyber risk tolerance policies for regulatory or oversight bodies;
  • identify activities and services that have cyber risk, identify controls to protect and manage the risks;
  • establish effective monitoring processes, whether on-site, supervisory, or even through joint public-private exercises;
  • establish timely containment, notification, and coordination of cyber incidents and response activities;
  • ensure quick and recovery of operations once stability is regained;
  • allow safe information sharing among entities to share insights; and
  • allow for continuous review and learning.

While broad, the Accord does already match current U.S. efforts in cybersecurity especially with the recent Presidential Policy Directive and the 2015 Cybersecurity Act.  Bringing all member nations under a similar rules regime could make it easier for non-affiliated and even state-sponsored hackers to be tracked and thwarted when engaging in major cyber incidents.  As the Accord reads,

“Public authorities within and across jurisdictions can use the elements as well to guide their public policy, regulatory, and supervisory efforts. Working together, informed by these elements, private and public entities and public authorities can help bolster the overall cybersecurity and resiliency of the international financial system.”

As a non-binding accord, the guidelines have little authority to completely guide the national priorities of the G-7 nations.  While representatives from the nations have agreed to these broad strokes in policy, the entire web of international cybersecurity can succumb to the adage that “a chain is only as strong as its’ weakest link.”  When major financial institutions and central banks interact with entities in each of these nations there are plenty of opportunities for hackers to take advantage of less strenuous cyber policy.  With no concrete mandate for each member to fully comply, there can be little guarantee that a G-7 Accord can protect international financial systems from a cyberattack.

What happens under the next Administration?

Trump’s proposal calls for an immediate review of all cyber defenses and develop protocols and cyber awareness for government employees.  Like the Obama Administration’s protocols, Trump calls for joint task forces throughout the U.S. to coordinate cyber threats and make recommendations to U.S. Cyber Command for offensive and defensive cyber tasks.  He also calls for the development of offensive cyber capabilities to respond to independent and state actors.

While executive actions can guide how agencies implement policy, only Congress can appropriate funding toward cyber initiatives to address the G-7 elements.  International coordination in this arena can help guide the administration, but in no way does this dictate national policy or direct legislative or executive action.  Instead the G-7 Accord can only guide the Administration in its’ quest for effective cyber policy to protect financial institutions, meaning it packs less of a punch that it would appear.

From their proposals, it seems that cybersecurity will continue to be a top priority across the federal government under a Trump administration.  Since both proposals fall within the eight elements set forth in the G-7 Accord, Trump would be poised to continue and even exceed the guidance set forth by the industrial powers.  Despite these ongoing efforts, the cyber infrastructure linking the global financial system remains at risk to the independent actions of highly skilled hackers.

Image source: The Hill

Sinking into Debt: Can Congress move quickly enough to save Puerto Rico?

Facing over $72 billion in debt, Puerto Rico is in the midst of a battle within the US legal system and Congress to help bring relief to its 3 million US citizens. As a territory, existing law does not allow P.R. the types of bankruptcy options that are afforded to US cities or states. With a large portion of its payments due in May, time is of the essence to provide relief for Puerto Rico. Rare bipartisan support in the House leadership and the Executive branch have created a unique policy opportunity that could be a light at the end of the tunnel for the struggling Commonwealth.

On Tuesday, March 22, Speaker Ryan announced that the House Committee on Natural Resources will take up a relief bill on April 13 to assist the territory, with a discussion draft of the legislation likely ready by the end of March [1]. Once Congress returns from its recess on April 12, it will have to act quickly to meet the May payment deadline when $400 million in debt payments are due [2]. If all goes according to plan, what provisions would a meaningful relief bill include? Would Congress even consider such a piece of legislation in a contentious election cycle?

What’s Happening with Puerto Rico?

Puerto Rico’s financial troubles have been ongoing for nearly a decade, when the island territory lost a special tax-exempt status from Congress as it battled the 2007 economic recession. As economic conditions worsened and the government raised taxes to pay off its growing debt, many citizens left and headed for the mainland while still maintaining their U.S. citizenship. As their debts became due, the territory had to continue raising taxes or deferring payments to bondholders, ultimately digging themselves into a $72 billion hole [3].

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(Washington Post, 2015)

During oral arguments before the Supreme Court on March 22, bondholders and the Commonwealth disputed Puerto Rico’s bankruptcy status. Federal bankruptcy law prevents territories and other non-states (that includes Washington, D.C.) from using Chapter 9 bankruptcy or from creating their own bankruptcy legislation. Puerto Rico took such action in 2015 when it passed legislation to restructure its debt, and bondholders have argued that this clearly violates federal statute. While it appears that Justice Sotomayor may have supported Puerto Rico, Justices Breyer and Kagan both seemed to agree that the Court could not justify the Commonwealth’s actions within the language of the current US bankruptcy code.

What Would a Relief Bill Look Like?

In October of 2015, the White House issued a series of legislative proposals to help bring Puerto Rico off its debt-cliff. President Obama called on Congress to:

  • Give Chapter 9 bankruptcy protection to municipalities and the Commonwealth
  • Provide independent fiscal oversight and assistance with proper accounting and disclosure procedures
  • Give Puerto Rico access to the Earned-Income Tax Credit (EITC) to support growth
  • Help expand access and quality of Medicaid coverage to the Commonwealth’s population.

Providing Puerto Rico with the proper tools to restructure its debt is also at the center of a November 2015 proposal from the Treasury Department, which said the Commonwealth should receive a federal bankruptcy regime specifically tailored to its large debt (debt service alone takes 1/3 of governmental revenue of the Commonwealth) and status as a territory. The Treasury Department notes that Puerto Rico would gain restructuring authority for its debts only if it accepts an independent fiscal oversight board to help streamline spending.

Some measures have already been introduced by Congress on both sides of the aisle, including separate legislation authored by Senator Menendez (D-NJ), Senator Orrin Hatch (R-UT), and Representative Sean Duffy (R-SC). While each of these bills offer creation of an independent fiscal oversight board of some sort, only Sen. Hatch’s legislation does not call for placing Puerto Rico under the Chapter 9 bankruptcy provisions. According to GovTrack, Senator Menendez’s legislation currently has a 22% chance of making it past committee, and a 10% chance of being enacted, which means the language within Menendez’s bill is more likely to exist in a comprehensive relief bill.

While it is unclear what the final text of the relief bill will include, it is likely to consist of an oversight mechanism to monitor fiscal spending and a payment plan or restructuring plan to help pay-off at least some of the Commonwealth’s $72 billion debt. An early outline of the GOP draft bill that has been leaked to the press confirms these two points, as well as a stay on any lawsuits regarding debt payments. Any final legislative package would also need to consider the bondholders that are awaiting fulfillment of their payment obligations.

What Happens Next?

The House Natural Resources Committee is set to hold a hearing on the relief bill on April 13, when the bill can be passed from Committee to the full House for a vote. If Speaker Ryan is adamant about passing this relief package, a floor vote should quickly follow. The Senate, which has offered several versions of relief packages as well from both sides of the aisle, would have to follow suit quickly before the May deadline to help Puerto Rico meet its payments. If the Supreme Court delivers a decision on the Commonwealth’s status before the legislation is completed, this could further complicate Puerto Rico’s pathway to recovery.

Image source: Matt McClain, Washington Post
[1] Speaker Ryan had previously committed lawmakers to have a plan for relief completed by this date.
[2] It is interesting to note that, upon their return on April 12, the House of Representatives will only have 62 days left in session before the end of term.
[3] For a great, easy-to-read summary on the background of Puerto Rico’s debt situation, I recommend Vox’s piece from August 2015, http://www.vox.com/2015/7/1/8872553/puerto-rico-crisis.

Universal Pre-K: A Parent’s Perspective

Becoming a parent changes an individual fundamentally. I was interested in childcare policy before becoming a parent, but now when I think about childcare policy, I think about what is going to be best for my smiling one year-old twin girls. One of the major issues in childcare policy is the cost of childcare and an often-proposed remedy is government-provided Universal Pre-K. Under a Universal Pre-K program, all children can attend preschool and eliminate a year or two of childcare costs that parents are currently paying. Yet, political and financial constraints of states make taking on the cost burden largely unrealistic.

The cost of childcare is a major concern for all but the wealthiest of parents. In 2006, the National Association of Child Care Resource and Referral Agencies (NACCRRA) indicated an average cost between $3,000 and $13,000 per year for childcare (Palley and Shdaimah, 2011). Personal experience over the last year (along with market evidence) suggests that the price has risen. American University’s Child Development Center costs $1,365 a month for their services, which is a discount compared to what other community members pay. This amounts to over $16,000 a year per child. Sending two children to the Child Development Center would cost roughly $32,000 a year. If an individual’s net pay is about two thirds of their gross pay, then they would need a job paying more than $53,000 in order to afford childcare. This does not include rent or mortgage, car payments, or medical expenses.

A common objection to any sort of state-sponsored childcare, including Universal Pre-K, is that keeping the children at home with the family is better. The expectation is that a mother or father has a network of people within their family or friends that can assist with raising and caring for their child. The truth is many parents don’t have that kind of support. Having family or friends watch a child for little or no cost is a wonderful thing, but plenty still need more extensive childcare and must pay for it.

Universal Pre-K, providing high-quality preschool to every child, is one of the policy solutions floating around to help solve some of these problems for parents while helping students prepare for elementary schools. As the race to the White House in 2016 ramps up, the Democratic contenders are likely to bring up this issue. Both Bernie Sanders and Hillary Clinton support Universal Pre-K. Clinton has supported this issue previously in Arkansas, as First Lady, and as a Senator in New York. In June 2015, while campaigning in New Hampshire, Clinton introduced her plan for Universal Pre-K, ambitiously planning to make preschool available to all four year olds over a 10 year period. She plans to build on President Obama’s Preschool for All proposal for full day preschool that was introduced in 2013 but didn’t advance through Congress. She particularly pointed to a lack of funds in Early Head Start and Early Head Start Child Care Partnership grant program, and indicated that she would double the investment. These proposals seem geared to relieve the burden of paying for childcare for low-income families. Clinton also said she would offer parents a tax cut for the middle class to help pay for quality childcare.

Senator Sanders also supports this issue; interestingly, he has it listed at least twice on his website, both as a women’s rights issue and as an income inequality issue. Since Sanders frames the issue as an income inequality issue and Clinton’s initial proposals are geared towards low-income children, it seems likely that the Democratic candidates will focus on low-income students through programs like Early Head Start and will consider Universal Pre-K a secondary policy goal.

Relieving parents of the burden of paying for child care while increasing educational opportunities for kids is hard to oppose. The key question given how tight budgets are and how impossible it is to raise taxes is how would these programs and policies be funded? A 2014 piece in The Atlantic poses this very question, and suggests rather than trying to fund preschool for all children, the focus should be on low-income students who are likely to benefit the most from preschool. The article points out that while the long-term benefits are unclear, there are short-term benefits that suggest that it helps to close the achievement gap.

As a parent, I truly believe every child, no matter a parent’s income, should have access to high quality pre-school and/or other child care options that are convenient for parents. With that, other issues that arise in childcare that restrict access such as waiting lists, expensive application fees or expensive monthly fees also need be addressed especially in the policy decision-making process. As a policy analyst, I understand that there are limited funds. Thus, it is logical to focus on children who may benefit the most from preschool such as low-income children.

Many families across the U.S. cannot afford to spend $32,000 a year on day care. Parents who may have incomes that Sanders and Clinton would consider higher than middle class are probably stretching every dollar or going into debt to make sure their children have the best childcare services they can find. For some, that means working two jobs and spending less time with their kids. For others, it means choosing not to work and losing ground in one’s career, as well as adding financial pressure on the working parent. It also means compromising on the quality of care for your child and leaving them in a place or with individuals that compromise their chance to succeed academically, or generally in life. This is the most painful truth for any parent.

If policymakers pursue options such as ratings for childcare centers and providing incentives for additional childcare workers, which will lower costs and increase access, a broader spectrum of parents and families will benefit.

Image source: Jahi Chikwendiu/The Washington Post

CBO’s Daunting Budget and Economic Outlook: 2016 to 2026

This month, the Congressional Budget Office (CBO) released their budget and economic projections for the next decade. After six years of budget deficit decline, the deficit will grow this year to $544 billion, an increase of $130 billion more than what CBO had projected in August, resulting in a $1.55 trillion higher deficit through 2025. The deficit will hit the trillion dollar mark in 2022. The national debt is projected to rise from $13.1 trillion (73.6 percent of GDP) to $23.8 trillion (86.1 percent of GDP), an increase of $10.7 trillion between 2015 and 2026.

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About half of the dismal fiscal outlook can be attributed to legislative changes, mostly December’s unpaid tax extenders and omnibus legislation. The outlook could worsen if lawmakers continue to pass legislation without serious consideration of funding, such as repealing sequester cuts without offsetting their costs, continuing temporary tax breaks, and repealing the Affordable Care Act taxes which were delayed last December. These actions would increase the debt from $23.8 trillion (86 percent of GDP) by 2026, to $25.5 trillion (92 percent of GDP) in that year.

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Outlays Overview

In 2016, spending will continue to outpace revenues. According to CBO’s projections, 83 percent of the $2.7 trillion rise in spending between 2015 and 2026 will be from Social Security, health care and interest on the debt.

Expenditures will rise by 6 percent or $3.9 trillion (21.2 percent of GDP), due to a 7 percent increase in mandatory spending (Social Security and healthcare), a 3 percent rise in discretionary spending (allocated through annual appropriations), and a 14 percent rise in net interest spending.

Mandatory spending is expected to rise by $168 billion with a 3 percent jump for Social Security and a whopping 60 percent jump for healthcare as a result of outlays for Medicare (net of premiums and other offsetting receipts), Medicaid, and the Children’s Health Insurance Program, plus subsidies for health insurance purchased through exchanges and related spending. Combined, the expected costs are $104 billion, 11 percent higher this year than they were in 2015. 

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Discretionary and net interest spending will each increase by $32 billion. The rise in discretionary spending can be attributed to the Bipartisan Budget Act of 2015 (Public Law 114-74), which increased discretionary funding levels along with 2016 appropriations. Net interest spending will continue to rise as interest rates go up and the federal debt grows.

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Revenue Shifts

Although revenues are not keeping pace with spending, CBO still projects solid economic growth over the next few years. In 2016, revenues are expected to rise by 4 percent or $3.4 trillion (18.3 percent of GDP). Revenue growth will come from a 5 percent increase in individual income taxes (due to bracket creep) as nominal income continues to rise more than individual tax brackets, which usually happens when the economy expands. Other sources of revenue, an estimated 9 percent, will come mostly from recent legislation (the Fixing America’s Surface Transportation Act, also called the FAST Act, P.L. 114-94) that increases remittances to the Treasury from the Federal Reserve. Under the recent legislation, the Federal Reserve is required to pay most of its surplus account to the Treasury and to reduce dividends paid to large banks on their capital stock in the Federal Reserve. CBO has estimated that these remittances will increase by $16 billion in 2016, from 0.5 percent to 0.6 percent of GDP.

A source of declining revenue is corporate income taxes down 5 percent, cut due to recent legislation (the Consolidated Appropriations Act, 2016, P.L. 114-113) that extended various unpaid-for, expired tax provisions retroactively to the beginning of calendar year 2015.

Unsustainable Spending: Something’s Got to Give 

As spending continues to surpass revenues, our nation’s deficit grows, driving up our national debt. CBO’s projected deficits would drive debt held by the public to 86 percent of GDP by 2026. The deficit will grow slightly at around 2.9 percent of GDP through 2018, and then much faster to reach 4.9 percent of GDP by 2026, for a total deficit of $9.4 trillion between 2017 and 2026. In three decades, debt held by the public is projected to reach a historic peak of 155 percent of GDP. This overwhelming growth in our debt and deficit is unsustainable, not only does it increase the chances of another fiscal crisis, but it also limits our policy options if it were to happen again.

Sources:

Congressional Budget Office (CBO), The Budget and Economic Outlook: 2016 to 2026 (January 2016), available at https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/51129-2016Outlook_OneCol-2.pdf
Image source: Washington Post 

The Far Reaching Effects of LGBT Workplace Discrimination

The Supreme Court’s decision in Obergefell vs. Hodges in June 2015 legalized gay marriage in the United States, marking a historical and pivotal point in the gay rights movement. Marriage equality has dominated political discourse regarding gay rights, but many pressing issues that affect the nearly 9 million LGBTQ Americans still remain. LGBT Americans residing in 28 states face the threat of losing their jobs due to their sexual orientation. Workplace discrimination against LGBT individuals remains rampant and produces a variety of social, health and economic ramifications including wage disparities, economic losses, decreased worker productivity, and increased risks of mental illness.

The Williams Institute at the University of California, Los Angeles compiled a report in 2011 discussing LGBT workplace discrimination in America. The study yielded some sobering results including the following: 42% of LGBT respondents experienced at least one instance of employment discrimination, 35% reported workplace harassment, and 16% said their sexual orientation caused a job loss. Additional research found that 78% of transgender and gender-non-conforming workers faced discrimination at work and 26% reported losing a job due to their gender identity. In response to these reprehensible findings, the Senate passed the Employment Non-Discrimination Act (ENDA) in 2013 with bipartisan support. However, House Republicans prevented ENDA from reaching the floor for a vote.

The discrimination inflicted on LGBT workers causes an array of social consequences. Studies show that a wage gap exists between homosexuals and heterosexuals. Men in heterosexual marriages have an average income of $50,000 while men in homosexual relationships earned an average of $47,000. Polls also show that LGBT individuals more frequently report incomes of less than $24,000 and are less likely to earn more than $90,000. Many transgender individuals experience economic hardship at higher rates than others in the LGBT community. According to a report penned by the Center for American Progress, the Human Rights Campaign, the Movement Advancement Project, and Freedom to Work,15% of transgender people reported incomes of under $10,000 compared to 4% of the population at large. The authors also note that LGBT individuals were more likely to fall into poverty than heterosexuals.

In addition to the wage disparities that are attributed to workplace discrimination, research suggests that discrimination based on sexual orientation can contribute to some forms of mental illness due to increased stress exposure. LGBT individuals are 3 times more likely to experience a mental health condition than heterosexuals and LGBT youth are 4 times more likely to attempt suicide than heterosexual youth. The Williams Institute found that LGBT workers often face cognitive impairment due to their preoccupation of hiding their sexual orientation and reported feeling depressed, distracted, and exhausted more often than their peers.

LGBT employment discrimination causes a variety of negative economic ramifications. Reports show that two million people leave their jobs annually due to workplace prejudice. Workplace hostility costs companies $1.4 billion in output each year due to decreased productivity from LGBT workers. Evidence also shows that productivity decreases when ambiguity regarding a co-worker’s sexual orientation exists. Additionally, 1 in 4 individuals who experienced unfairness at their job said they would not recommend their employer to jobseekers, hampering recruitment efforts. Employment discrimination against LGBT workers hurts not only individual employees, but also the American business community as a whole.

The issue of LGBT workplace discrimination has gradually emerged into the national conversation. With the passage of gay marriage in June, LGBT advocates are now focusing efforts on obtaining the legal protections in the workplace that LGBT individuals sorely need. Polls show that 90% of Democratic voters and two-thirds of Republicans support workplace protections for LGBT individuals. Multiple presidential candidates from both sides of the aisle also agree that LGBT employees should not have to face the choice of concealing their sexual orientation or keeping a job. Republican presidential hopefuls Jeb Bush and Donald Trump support such legal protections, sharing sentiments with Democratic frontrunners Hillary Clinton and Bernie Sanders. A coalition of Senators and Representatives recently introduced the Equality Act, which seeks to protect LGBT individuals from discrimination in matters of employment, housing, and other realms. Reluctant politicians must stand up for their LGBT constituents and pass the Equality Act. LGBT workers should never have to hide their authentic selves in order to advance their careers. This nation has come so far in the fight for gay rights. Providing LGBT citizens with the legal protections they deserve is the next step in ensuring all Americans can thrive both inside and outside the workplace.

Image Credit: Reuters/Molly Riley

Guest Worker Programs and the 2016 Election

Immigration has emerged as a major issue on both sides of the 2016 Presidential campaign. While Democrats’ sanctuary cities and Trump’s proposed wall along the border have dominated the immigration debate thus far, guest worker programs have also proven to be a key component of candidates’ immigration proposals on both sides of the aisle. Marco Rubio cosponsored recent legislation that increased the number of guest workers allowed in the country. Hillary Clinton has also supported this position, reflected by her voting record as a former Senator from New York. Bipartisan efforts in Congress have failed to pass in both houses, but leadership from the White House after the 2016 cycle could change this. Any effort to reform the program should include individual worker protections and a pathway to legal protection to incentivize labor participation and a more robust workforce within the U.S.

The Current Model

The largest temporary guest worker programs fall under the H-visa category, which includes specialty workers with at least a bachelor’s degree (H-1B visa), seasonal agricultural workers (H-2A), and seasonal non-agricultural workers (H-2B). For the H-2 visa programs, workers are only admitted from a list of 59 eligible countries, set by the State and Homeland Security departments. Admitted workers are able to stay in the country for up to one year with opportunities to renew their stay for up to three years. In 2012, over 350,000 of the 611,000 temporary workers in the U.S. were admitted under the H-visa program.

The admission process for bringing temporary workers into the country is lengthy. Businesses are required to go through different workforce agencies at the state level and the Department of Labor (DOL) to receive certification, then through U.S. Citizenship and Immigration Services (USCIS) to file a visa petition for a particular number of guest workers. Employers are responsible for keeping the workers employed full time, with a guarantee of work for at least 75 percent of their stay. The employers must reimburse some visa-related and travel expenses, and must promise to keep the workers employed within their intended employment occupation. Before hiring guest workers, employers must also make a strong effort to hire local citizens and are encouraged to look into visa petitions only when these efforts yield no qualified employees.

Guest Worker Protections

During the first Democratic presidential debate, Senator Bernie Sanders said that he supports guest workers to help grow the economy, but raised serious concerns about their harsh treatment at the hand of U.S. employers and the lack of protection workers were given for their visa duration. Sanders said that many workers who stand up for their rights are thrown out of the country, while those who remain in their jobs often work under horrible conditions.

Senator Sanders did not highlight the fact that some temporary workers overstay their visas and fail to leave the country, but he did touch on a vital critique with the current guest worker program: The current system grants a large amount of power to employers, who are able to set job descriptions and apply to the DOL for certification. Once workers arrive, employers have the ability to alter the work requirements or treat workers poorly with little concern that they will be held accountable for their actions. Workers are restricted to only working with one employer, and are not legally able to change jobs once within the country. Prior reform efforts have failed to address this lopsided approach. For example, the Southern Poverty Law Center (SPLC) described the guest worker provisions proposed in 2007 as ‘semi-slavery’ because they continued the practice of an employer-centered model.

The treatment of workers raises concerns about efforts to combat human rights abuses that could be committed against foreign workers on U.S. soil. In 2013, the SPLC reported that recruiters in other countries who link workers to jobs in the U.S. often charge the workers outrageous sums of money, and U.S. employers reimburse only some of these expenses. SPLC also reported that some employers do not distribute visa extensions or social security cards for workers that have been approved to receive the documents from the U.S. government. SPLC emphasizes that the power of the employer is a major concern that must be addressed for guest worker reform.

What Could Reform Look Like?

 The 2013 comprehensive and bipartisan Senate Immigration reform package (S.744) included a new category, the ‘W’ visa, to fill jobs requiring less than a bachelor’s degree. The package included new wage requirements for workers and allowed movement between different employers and job occupations for those within the ‘W’ category.  Under S.744, the issuance of visas would be adjusted annually to ensure that any labor shortages or surpluses are accounted for and reflective of the current job market.  Despite its failure to pass in Congress, S.744 provides a glimpse of what a successful start to temporary worker protection could resemble.

Guest worker protections can also be initiated by the coordination between governments. In Canada, government officials partner with Mexican authorities to recruit workers, expedite visas, and guarantee health and safety standards. Workers are afforded protections guaranteed by the Canadian government in this model, which encourage guest workers to seek legal routes to employment. Improved dialogue between the DOL, USCIS, and other nations’ labor departments could improve these protections as well, preventing domestic recruiters in home countries from charging steep fees to connect workers with jobs and even ensuring a safe and affordable system of transportation to and from the U.S.

Another potential reform would be providing guest workers a pathway to some form of legal protection, allowing them access to the court system or an appeals process. Guest workers who have been abused, had documents withheld, or were not paid by their employers should have some recourse to take action against their employer, perhaps by contacting DOL to assist in moving the workers to another occupation or potentially removing the employer’s labor certification and future visa petitions. Such an approach in providing a legal pathway could help level the playing field between employers and guest workers.

Guaranteeing fair treatment and legal protections will attract more foreign workers to fill jobs that American workers are not taking in the agricultural, seasonal, and even STEM fields. The support from the pool of presidential candidates for changes to the guest worker program remains a positive sign, but such efforts are meaningless if reform fails to address worker protections.

Photo source: http://www.guestworkeralliance.org/about-nga/