Economic Policy Institute

  • November 2, 2015
    Guest Post

    by Ross Eisenbrey, Vice President, Economic Policy Institute

    *This piece originally appeared on EPI’s “Working Economics Blog.”

    The New York Times has published two parts of a three-part series about the epidemic of arbitration clauses that have cropped up in millions of transactions between corporations and their customers and employees. The clauses are routinely included in employment contracts, cell-phone contracts, consumer product purchase agreements, cable subscriptions, rental agreements, and a multitude of financial transactions, as a way to prevent injured parties from having their day in court. Giving up the constitutionally protected right to sue in state or federal court is a big deal and is often the result of ignorance and deceit: millions of people have no idea the clauses are there in the fine print of contract provisions written in legalese that few individuals ever read or comprehend. They don’t find out they’ve lost their rights until they need them.

    Individuals give up not just their right to go to court but all protections regarding the venue of any hearing their claim will receive (for example, the agreement might require arbitration in a city a thousand miles away). They might give up certain remedies and the right to appeal even if the arbitrator gets the law completely wrong, and give up the essential right to join with other victims to file a class action, especially important when each claim is small and no single individual could rationally pay to hire a lawyer and bring a lawsuit for such a small sum.

    The myth is that arbitration is preferable because it allows individuals to resolve their grievances easily, quickly, and cheaply. In fact, arbitration can be more expensive for a plaintiff than a civil suit because instead of a small filing fee in court, the plaintiff will have to pay half of the arbitrator’s fee, or sometimes all of it if the arbitration clause includes a “loser pays” provision. Legal fees can be ruinous, and the Times story relates the case of a woman who owes $200,000 in attorney fees after losing a case in which her former employer allegedly destroyed evidence.

    Perhaps the worst aspect of the forced arbitration epidemic is the loss of a neutral trier of fact. Unlike judges who have lifetime appointments to the bench and are protected from financial pressure, arbitrators rely on the companies to use them again and again, creating a financial pressure to please the corporation that will have many arbitration cases in the future rather than the individual plaintiff, who will probably never use an arbitrator again.

  • December 14, 2012

    by E. Sebastian Arduengo

    Michigan Governor Rick Snyder (R) despite a massive outcry of protestors at the state capitol in Lansing signed a so-called “right-to-work” bill into law. And just like in neighboring Indiana, right to work passed despite a massive outcry, and Michigan joined 23 other states that have passed such legislation in a seeming race to the bottom for the benefit of corporations that have made massive political donations to the Republican proponents of these bills.

    So what is “right to work,” and why are so many Republican officials making it a legislative priority? Put simply, right-to-work legislation prohibits agreements that require employees of a firm to maintain union membership as a condition of employment, allowing workers who choose to do so the right to “work through a strike.” The problem with this is that federal law requires unions to bargain for a contract that benefits all workers, regardless of whether they become members of the union. And, unions are founded on the premise of collective action, when individuals can take advantage of the benefits that unions win in contracts without having to pay their fair share in dues; it creates a massive free-rider problem that undermines the purposes, and ultimately the benefits that a union provides. For that reason, the AFL-CIO calls this kind of legislation a “right to work for less [pay/benefits]” law.

  • May 2, 2012

    by Jeremy Leaming

    If one really needs another example of how out of touch or clueless some of the nation’s super wealthy are, Adam Davidson’s piece on a retired multimillionaire for The New York Times Magazine provides it.

    As Davidson notes the retired former partner of Bain Capital, the outfit that excelled in tearing down other businesses for a profit, is plumping a forthcoming book that extols alleged virtues of the filthy rich. Davidson writes that the “spectacularly wealthy guy” believes the “wealth concentrated at the top should be twice as large,” to spur slackers or “art-history majors” into pursuing outlandish wealth.

    Economist Paul Krugman, in his Times’ blog, says the former Bain Capital partner’s argument “might have some plausibility if the era when America didn’t have such overweening plutocracy – the 50s and 60s, when the top 0.01% received only about a fifth the share of income that it commands today – were a time of economic stagnation and low innovation. In fact, the postwar generation experienced the best economic growth – and the fastest productivity growth – of any era in the past century.”  

    Since discussion of the nation’s growing economic inequality, right-wing pundits have attacked or belittled studies showing that the middle class is dwindling, while a tiny few continue to become wealthier. In a widely cited article for Vanity Fair, Columbia University Business School Professor Joseph E. Stiglitz noted that the “upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent.”

    While the former Bain Capital multimillionaire, Edward Conard, is no innovator, he’s not invented anything that has enriched the lives of Americans; he has invested in a company that uses less aluminum for soda cans. “It saves a fraction of a penny on every can,” he told The Times. “There are a lot of soda cans in the world. That means the economy can produce more cans with the same amount of resources. It makes every American who buys a soda can a little richer because their paycheck buys more.”

    This is the gibberish that passes for an argument that investors should be celebrated and indeed helped by economic policies?

    Dean Baker, of the Center for Economic and Policy Research, is unlikely to be persuaded. Last fall Baker scored economic policies that have catered to the super wealthy for far too long, and noted that those policies do redistribute the wealth – to the super wealthy.

  • October 25, 2011

    by Jeremy Leaming

    Forget the fact that the nation’s middle class is shrinking and more and more people are being shoved into poverty every year. Texas Gov. Rick Perry, who is seeking his party’s presidential nomination, has an answer – give more tax breaks to the nation’s wealthiest.

    This morning Perry announced tax policy in South Carolina, which “would dramatically reduce taxes, particularly on wealthy Americans and corporations,” The Washington Post reports.

    The newspaper says Perry’s plan would “reduce the corporate tax rate from 35 to 20 percent, eliminate taxes on dividends and many capital gains and essentially cap individual tax rates at 20 percent.”

    Perry, who not long after entering the presidential race railed against “the injustice that nearly half of all Americans don’t even pay any income tax,” is pushing a flat tax rate that would not only provide the nation’s wealthiest with even more tax breaks, but continue to sap the middle class. (As Post columnist Ruth Marcus noted in August, the nonpartisan Tax Policy Center reported that about 46 percent of Americans would not pay an income tax in 2011 because they are not earning enough “to owe income taxes, based on the progressive structure of the tax code and provisions designed to help the working poor and lower-income seniors.”)  

    In a column for Politico, Robert L. Borosage says “every major candidate” seeking the Republican presidential nomination has “suggested that too many working poor aren’t paying income taxes, a position The Wall Street Journal describes as ‘GOP doctrine.’”

    Borosage says the Republican candidates’ mantra that too many Americans aren’t paying taxes is “disingenuous.” He continues, “Working poor people do pay taxes. They pay a larger portion of their income in payroll taxes and sales taxes than the wealthy. And they pay property taxes indirectly in their rental costs. Poor workers pay about one-eighth of their incomes in taxes on average.”