[Senate Hearing 117-312]
[From the U.S. Government Publishing Office]


                                                       S. Hrg. 117-312

                          THE DIGNITY OF WORK

=======================================================================

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                                   ON

     EXAMINING HOW TO BETTER HELP THE WORKING PEOPLE OF OUR NATION

                               __________

                             APRIL 29, 2021

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs
                                
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                Available at: https: //www.govinfo.gov /
                
                              __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
48-094 PDF                 WASHINGTON : 2022                     
          
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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                     SHERROD BROWN, Ohio, Chairman

JACK REED, Rhode Island              PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
JON TESTER, Montana                  MIKE CRAPO, Idaho
MARK R. WARNER, Virginia             TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts      MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada       JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota                BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona              CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia                  JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia             KEVIN CRAMER, North Dakota
                                     STEVE DAINES, Montana

                     Laura Swanson, Staff Director

                 Brad Grantz, Republican Staff Director

                       Elisha Tuku, Chief Counsel

                Corey Frayer, Professional Staff Member

                 Dan Sullivan, Republican Chief Counsel

                  Alexander LePore, Republican Detail

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                    Charles J. Moffat, Hearing Clerk

                                  (ii)


                            C O N T E N T S

                              ----------                              

                        THURSDAY, APRIL 29, 2021

                                                                   Page

Opening statement of Chairman Brown..............................     1
        Prepared statement.......................................    30

Opening statements, comments, or prepared statements of:
    Senator Toomey...............................................     4
        Prepared statement.......................................    31

                               WITNESSES

Heather C. McGhee, Author, The Sum of Us: What Racism Costs 
  Everyone and How We Can Prosper Together.......................     6
    Prepared statement...........................................    32
    Responses to written questions of:
        Senator Warnock..........................................    75
Lisa Donner, Executive Director, Americans for Financial Reform..     7
    Prepared statement...........................................    35
    Responses to written questions of:
        Senator Warnock..........................................    77
Trevon D. Logan, Hazel C. Youngberg Trustees Distinguished 
  Professor of Economics, The Ohio State University..............     9
    Prepared statement...........................................    61
    Responses to written questions of:
        Senator Warnock..........................................    80
Andrew F. Puzder, Former Chief Executive Officer, CKE Restaurants    11
    Prepared statement...........................................    66
    Responses to written questions of:
        Senator Warnock..........................................    81
Vivek Ramaswamy, Found and Executive Chairman, Roivant Sciences..    13
    Prepared statement...........................................    70
    Responses to written questions of:
        Senator Warnock..........................................    84

                                 (iii)

 
                          THE DIGNITY OF WORK

                              ----------                              


                        THURSDAY, APRIL 29, 2021

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10 a.m., via Webex, Hon. Sherrod 
Brown, Chairman of the Committee, presiding.

          OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

    Chairman Brown. The Senate Committee on Banking, Housing, 
and Urban Affairs will come to order.
    This hearing is in the virtual format. A few reminders as 
we begin.
    Once you start speaking, there will be a slight delay 
before you are displayed on the screen. To minimize background 
noise, click the mute button until it is your turn to speak.
    You should all have one box on your screen labeled 
``Clock''. For witnesses, you will have 5 minutes for your 
opening statements. For all Senators, the clock applies also to 
your questions.
    At 30 seconds remaining, you will hear a bell ring to 
remind you your time has almost expired. It will ring again 
when your time has expired.
    If there is a tech issue, we will move to the next witness 
or Senator until it is resolved.
    To simplify the speaking order process, Senator Toomey and 
I have agreed to go by seniority for this hearing.
    Yesterday in this country we marked the annual Workers' 
Memorial Day. We honor those Americans who have lost their 
lives on the job. This year, because of this virus, that number 
is staggering.
    Far too many of these workers died because they did not 
have basic protections. They did not have a Government that was 
on their side.
    On my lapel, I wear this pin depicting a canary in a bird 
cage, given to me two decades ago by a steelworker in the Lake 
Erie city of Lorain at a Workers' Memorial Day rally.
    You know the story. Coal miners took a canary down into the 
mines with them to warn them of toxic gases. Those workers did 
not have a union strong enough in those days or a Government 
that cared enough to protect them.
    Today many workers still feel a lot like those miners. They 
feel like they are out there on their own.
    They have watched Wall Street, they have watched big 
corporations reward themselves--not just instead of workers, 
but at the expense of workers. They have watched their 
Government--the people who are supposed to be on their side--
let it happen.
    We have created an economy that runs by Wall Street's 
rules. And we see the results.
    The wealth on Wall Street has exploded. Corporate profits 
have soared. CEO compensation has doubled, tripled, but 
workers' wages have remained flat. CEOs' salaries now are 320 
times greater than workers' pay.
    Wall Street may seem disconnected from most people's lives. 
But behind the scenes, for so many Americans, it is the 
financial system that keeps their wages low, laying them off, 
closing their local businesses, drying up their communities.
    When companies lay off workers or cut their pay, their 
stock prices often go up. When they raise wages or invest in 
worker training, their stock prices often go down.
    And every time CEOs cut a job or deny a raise, they line 
their own pockets because they are evaluated based on quarterly 
stock performance and are compensated in large part with 
company shares.
    Wall Street's and Main Street's interests no longer match 
up.
    Yet when the financial industry cost millions of Americans 
their homes and their jobs, gutting communities of color, and 
preying on towns and neighborhoods around the country, they get 
a bailout. Everyone else paid the bill.
    On Tuesday this week, we heard directly from workers about 
how Wall Street's rules affect them on the job.
    We heard from Melody Crawford, whose company was bought out 
by a private equity firm that dumped her and 3,000 of her 
fellow Michigan employees into the pandemic with no job and no 
benefits.
    We heard from Pamela Garrison, who has seen Wall Street 
rules ship jobs out of her community and fight against raising 
the minimum wage. She has worked her whole life. She has never 
seen that hard work pay off. She told us she has never had a 
vacation. And then she said something that we should all 
remember: `` `Working poor' should not be two words that go 
together.''
    ``Working'' and ``poor'' should not be words in the same 
sentence.
    We heard from Chase Copridge, a gig worker for several 
Silicon Valley tech companies that Wall Street loves to pour 
cash into, but who treat their employees as expendable. He 
works full-time. He has zero job benefits. The companies claim 
he is an ``independent contractor.'' He said companies brag 
about flexibility, but that is a lie. ``The truth is,'' he 
said, ``I have almost no flexibility. I am either working, or I 
am looking for my next gig.''
    We heard from Desiree Jackson, a former Wells Fargo call 
center worker, who talked about how the bank misclassified her 
to avoid paying her overtime. She was a relatively moderately 
low-income salaried worker, and the company made her work 50, 
55 hours a week and never paid her a dime of overtime.
    We heard from Shawn Williams, in my home State of Ohio, 
from Ashtabula County, who does backbreaking work for an 
employer who is using every trick in the book to fight against 
a union that has already won its vote--actually not one pro-
union vote but two votes--to organize.
    He told us, ``We rarely go a few weeks without an injury, 
largely because of the insane pace we work at. We have 
suggested that slowing the pace even a little bit would improve 
safety and could save money, to which we were told, quote, 
`Injuries do not cost this company much money.' ''
    In addition to these five workers, there were others who 
could not join us because they were at work, trying to make a 
living.
    They provided us written accounts of their struggles. 
Unlike, I guess, most of us, they had to be at work. They could 
not just take time off. Courtenay Brown, a Navy Veteran and 
Amazon worker, deals with a grueling schedule and invasive 
tracking of every minute on the job.
    Carlos Aramayo who represents workers for Wall Street 
hotels, that hotel group got a financial bailout during the 
pandemic but laid off its workers anyway.
    We can do better than this.
    Hard work should pay off for everyone, no matter who you 
are, where you live, or what kind of work you do.
    For too long, we have allowed phony populists to stoke fear 
and place blame and divide us by race, religion, and region. We 
know why they do it: to distract from how they have been 
setting up the system and writing up all the rules to benefit 
the financial industry.
    True populists are not racist. They do not lie. True 
populists do not appeal to some by pushing others down. 
Populism never divides. Populism unites. Populism is the common 
struggle of the laid-off and the low-paid; of the worker 
derided by her boss as expendable; of everyone out there trying 
just to get by.
    Part of our job on this Committee--Banking, Housing, and 
Urban Affairs--is to make sure that Wall Street serves the real 
economy, not the other way around. The President said last 
night, ``Wall Street did not build this country. The middle 
class built the country. Unions built the middle class.''
    Wall Street has tried to convince us that when the stock 
market does well, the economy does well.
    But look around. Visit almost any town in--three people in 
this panel, two grew up in Ohio, one lives in Ohio right now. 
Look around my State. Listen to the workers we heard from on 
Tuesday. To them--to most Americans--the idea that a stock 
market rally means more money in their pockets is laughable.
    I think about the words of my fellow Ohioan Mr. Williams 
from Jefferson, Ohio, on Tuesday morning. He quoted Frederick 
Douglass: ``Power concedes nothing without a demand. It never 
did and it never will.''
    Of course, powerful special interests--CEOs, corporate 
elites, their allies that have set up a system where they get 
paid at others' expense--of course, they want to hang onto that 
power. It is time for us to stop letting them.
    I look forward to hearing our witnesses talk about what 
that system costs all of us and what we can do to create an 
economy where companies value the workers that make their 
businesses successful.
    Senator Toomey, welcome. Thank you.

         OPENING STATEMENT OF SENATOR PATRICK J. TOOMEY

    Senator Toomey. Thank you, Mr. Chairman.
    One of the largest contributors to our Nation's success has 
been our free enterprise system, which certainly elevates the 
dignity of work. At its core, free enterprise recognizes that 
the essence of human happiness is not just making money, but 
creating value--value in one's own life, value in the lives of 
others.
    The path to true happiness, according to economist Arthur 
Brooks, is ``earned success,'' and it speaks to the moment when 
your effort, your sacrifices, your investment in yourself in 
whatever endeavor pays off. But one to illustrate this idea, 
Brooks asks a question: When you get your first raise at work, 
will you celebrate the day you get the news or a few weeks 
later when you get the new paycheck?
    Most people celebrate when they get the news because the 
reason you are celebrating is not just the material byproducts 
of your success, but the satisfaction of knowing that your 
efforts succeeded and they were recognized.
    In a free enterprise system, success can be earned by 
anyone. Markets do not ask the color of your skin or who your 
parents were. There is no greater system than free enterprise 
for tearing down the barriers of class and status.
    So how can we support such a system? The answer is simple: 
Mostly, get out of the way.
    The most recent experiment in free enterprise occurred in 
the last few years when Republicans unmoored the economy from 
overtaxation and excessive regulation. What were the results? 
Well, before COVID hit, it was just the best economy of my 
lifetime. We had more job openings in America than people 
looking for jobs; we had a record-low poverty rate. Black and 
Hispanic unemployment rates hit all-time lows. And across the 
board, wages were growing, but they were growing fastest for 
the lowest-income Americans. So we were narrowing the income 
gap as well.
    That is how you recognize the dignity of work--with 
accessible jobs for everyone and increasing pay rates. All of 
this was spurred on by the steps Republicans took to enact 
progrowth tax reform and deregulation.
    Unfortunately, rather than trying to return to the best 
economy in 50 years, some folks are proposing policies that 
dramatically diminish our chances of getting back to that 
level. Whether it is championing stakeholder capitalism, which 
calls on corporations to pursue a liberal social agenda rather 
than prioritize its responsibilities to its owners, or paying 
people more not to work than they get paid to work, which, 
although I am sure this is not the intent, certainly seems to 
have the effect of denigrating the value of their work.
    Although the list of ill-conceived policy ideas is long, I 
would like to address two specific proposals that, if passed, 
would certainly prevent our economy from reaching its 
potential. One is a prohibition on share buybacks, and the 
other is an increase in the capital gains tax.
    I would suggest there are at least three major reasons why 
prohibiting stock buybacks is a really bad idea.
    First, it is a direct attack on freedom. Banning share 
buybacks would restrict the ability of shareholders to run 
their own company. The owners of a company have the right to 
decide what to do with profits after all expenses and taxes 
have been paid. And share buybacks are simply a mechanism by 
which shareholders take out some of the money that they own.
    Second, share buybacks serve a really important function in 
the economy. They facilitate long-term investment by 
redirecting funds from lower- to higher-growth firms, and 
banning buybacks would slow economic growth, as this capital 
fuels investment in businesses' futures.
    Third, banning buybacks would hurt the very people that its 
advocates intend to help. In the U.S., about 40 percent of all 
equities are held in pension and retirement accounts, and share 
buybacks are good for their investments because it returns cash 
that can then be redeployed rather than sitting underutilized 
on a company's balance sheet.
    Another terrible idea is the Biden administration's plan 
for a massive increase in the capital gains tax. They want to 
almost double the capital gains rate to a mind-boggling 43.4 
percent to help pay for enormous spending. This would be a 
grave mistake.
    There are good reasons why we tax capital gains, which is 
the realized gain on an appreciated asset, at a lower rate than 
ordinary income. First, part of an asset's appreciation is just 
inflation. It makes no sense to tax that. Second, in most 
cases, like stocks, the asset has already paid tax on its 
income. And, finally, investment leads to economic growth, 
which is something we do not want to inhibit.
    Now, on top of all this, almost doubling the capital gains 
tax would not even increase tax collections.
    According to the nonpartisan Joint Committee on Taxation, a 
43.4 percent capital gains tax would actually reduce Federal 
tax revenue for a variety of reasons. Now, why would we want to 
levy a tax that will decrease investment in the economy and 
result in less tax revenue for the Government? That certainly 
does not make any sense.
    Let me conclude with this: I think we should do everything 
we can to preserve and elevate the dignity of work. The most 
effective way to do that is by allowing the economy and free 
enterprise to flourish, thereby creating employment opportunity 
and increasing wages for everyone.
    Capitalism has proven to be the greatest driver of 
prosperity in history. We should support rather than inhibit 
this engine of growth and opportunity for all Americans. Thank 
you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Toomey, for your 
comments.
    I will introduce the five witnesses, and then they will go 
in the order of introduction, and then the questioning will 
begin.
    Heather McGhee is the author of ``The Sum of Us'' and board 
chair of Color of Change. Heather was also the president of 
Demos, an effective advocate for establishing the CFPB.
    Lisa Donner is the executive director of Americans for 
Financial Reform and also played a huge role fighting for the 
reforms in the Dodd-Frank Act.
    Dr. Trevon Logan is the Hazel C. Youngberg Trustees 
Distinguished Professor of Economics at the Ohio State 
University. He also serves as a research associate for the 
National Bureau of Economic Research and on the editorial 
boards of several economics research publications.
    Andrew Puzder is senior fellow at the Pepperdine School of 
Public Policy, formerly, CEO of CKE Restaurants. Mr. Puzder was 
born in Cleveland and attended my wife's alma mater of Kent 
State and also graduated from Cleveland State University, I 
believe.
    Vivek Ramaswamy is the former CEO of a pharmaceutical 
company, author of ``Woke, Inc.'', and hails from Cincinnati, 
Ohio.
    So we will begin the testimony with Ms. McGhee.

 STATEMENT OF HEATHER C. McGHEE, AUTHOR, ``THE SUM OF US: WHAT 
    RACISM COSTS EVERYONE AND HOW WE CAN PROSPER TOGETHER''

    Ms. McGhee. Thank you so much. Thank you to Chair Brown and 
to Ranking Member Toomey for the opportunity to testify today.
    In my book ``The Sum of Us'', I outline how racism in our 
politics and policymaking--by that I mean stereotyping, 
indifference to claims of discrimination, political 
scapegoating instead of problem solving--leads to bad economic 
policies. It has been making our economy worse in ways that do 
not only disadvantage people of color. It turns out it is not a 
zero sum. Racism has costs for White people, too. And racial 
equity, designing policies in ways that make them truly 
universal and not just one-size-fits-all, will be good for our 
entire economy.
    I find racism creating distortions in a range of policy 
areas. including workers' rights, and I look forward to 
offering policy solutions in the discussion. But in my limited 
time today, I will focus on one of the most devastating recent 
illustrations of racism costing everyone: the financial crisis.
    After decades of Government policy and business practices 
preventing Black communities from accessing the same subsidized 
mortgage market that fostered White wealth, the deregulatory 
zeal of the 1990s and 2000s sent communities of color 
experience a wealth-stripping phenomenon known as ``predatory 
lending'' or ``reverse redlining.'' These neighborhoods became 
the canaries in the coal mine.
    As you know, Mr. Chair, the majority Black Zip code in 
which you live was the community with the highest number of 
foreclosures in 2007. I visited your neighborhood back then and 
met a homeowner named Glenn who was near foreclosure.
    Now, the common misperception then and still today is that 
homeowners like Glenn were risky borrowers buying properties 
they could not afford. Policymakers blinded by this stereotype 
refused advocates' calls to rein in predatory lending before it 
was too late.
    But that is all it was--a stereotype. A Wall Street Journal 
analysis from 2007 showed that the majority of subprime loan 
holders had prime credit and could have qualified for more 
affordable, safer loans. So if it was not bad credit that made 
one ripe for a subprime loan, what was it?
    Households of color were almost two-and-a-half times as 
likely as White households to end up with riskier loans. And 
despite the excuse that subprime loans were necessary to expand 
home ownership, the vast majority of loans went to existing 
homeowners. After the crash, most of the Nation's big lenders 
from Wells Fargo to Countrywide would be fined for racial 
discrimination. But that realization would come too late.
    The crisis that ensued--the crisis that my colleagues and I 
saw coming--would go on to cost us all: $9 trillion in lost 
wealth, 8 million jobs vanished, a home ownership rate that has 
barely recovered.
    The resulting loss of wealth stands as a grave and lasting 
blight on the future of our diverse middle class. The racial 
wealth gap--Black families' having 15 cents on the dollar of 
the average White family--is the result of public policy, past 
and present. And to ward off any further stereotyping about 
Black work ethic, I will add that White high school dropouts 
have higher average household wealth than Black college 
graduates.
    But it also not a zero sum. The racial wealth gap is 
costing our entire economy; closing it would make our economy 
$1.5 trillion larger by 2028, according to McKinsey 
projections. Looking beyond wealth, the racial economic divides 
in wages, education, housing, and investment have cost U.S. GDP 
$16 trillion over the last 20 years. Adding in gender, the 
Federal Reserve Bank of San Francisco calculated that the gap 
between White men and everybody else cost our economy $71 
trillion over the past 30 years.
    We can do better. The new Administration and Congress have 
a historic opportunity to rewrite the rules to restore the 
dignity of work and redress the injustices in our wealth-
building policies now. We cannot afford to wait.
    Chairman Brown. Thank you, Ms. McGhee.
    Ms. Donner, you are recognized for 5 minutes.

  STATEMENT OF LISA DONNER, EXECUTIVE DIRECTOR, AMERICANS FOR 
                        FINANCIAL REFORM

    Ms. Donner. Thank you, Chairman Brown, Ranking Member 
Toomey, and Members of the Committee. Thanks for the 
opportunity to testify. I am the executive director of 
Americans for Financial Reform, which is a coalition of more 
than 200 consumer, community, labor, civil rights, and other 
organizations advocating for financial policies that serve 
workers and communities.
    Over the past several decades, too many of the laws that 
structure finance have allowed Wall Street to profit at the 
expense of almost everyone else. There are a variety of reasons 
for the growing inequality, economic insecurity, and racial 
wealth gap that plague our country, but policies that allow big 
finance to extract increasing amounts of wealth from workers 
and from firms and communities are a significant factor. We 
need to identify and change these rules if we are going to 
build an economy that treats workers with dignity and enables 
security and the opportunity to flourish for everyone.
    Decades of deregulation have led to an increase in the size 
of the financial industry and to the creation of banking 
behemoths that can put financial stability at risk for all of 
us through predatory practices and excessive risk taking. At 
the same time, Wall Street has increased its dominance over 
decisionmaking at firms that we think of as nonfinancial. 
Financial engineering and financial speculation have been 
rewarded and expanded to the detriment of the real economy of 
producing goods, providing nonfinancial services, and inventing 
things. Money has been pushed to shareholders and executives 
rather than workers. People of color have often been targeted 
first and worst, and working people of every kind and their 
families and communities have lost ground. All of these have 
contributed to a significant upwards transfer of wealth. Since 
1989, the share of the Nation's wealth held by the middle class 
shrank from 35 to 28 percent. Families in the whole bottom half 
of the wealth distribution had 4 percent of wealth and only 2 
percent now. The wealth of the top 1 percent, on the other 
hand, grew by more than one-third. The gap between Black and 
White wealth today is huge and essentially the same as it was 
before the civil rights movement.
    Increasingly, wealth is leading to wealth, and wages are 
falling behind. The gap between CEO pay and typical workers' 
earnings has gone up tenfold over the past 50 years.
    What are some of the specific mechanisms of the transfer of 
wealth away from workers? First, the financial sector is a 
greater portion of the overall economy and a larger slice of 
corporate profits than it was 50 years. And evidence suggests 
that you need a sufficiently robust financial sector to have a 
thriving economy. But once finance gets too big, more banking 
and more credit hurt rather than help with more intermediation.
    Second, payments to shareholders, share buybacks, and 
dividends have exploded. This comes at the expense of worker 
pay and benefits and of investment and research and development 
and more capacity that would sustain and create future jobs. In 
1981, before SEC deregulation enabled stock buybacks on a large 
scale, S&P 500 companies spent approximately 2 percent of their 
profits on buybacks. By 2017, it was 59 percent. Share buybacks 
along with debt financing are associated with the decline in 
the number of workers and with wage stagnation.
    Third, abusive practices by private funds have an 
increasing impact as they grow and provide extreme examples of 
finance run amok. Private equities' worker-harming practices 
include debt-funded leveraged buyouts, financial engineering 
that extracts value from target firms through excessive fees, 
dividends, and stripping out real estate and other assets, and 
exploiting legal and regulatory blind spots. Private equity 
takeovers frequently include aggressive cost-cutting through 
layoffs, offshoring, and wage and benefit cuts. Equity 
stripping and debt loads imposed on target firms also put them 
in a precarious position, so PE-owned firms are more likely to 
end up in bankruptcy, pushing workers out of their jobs. A 2019 
study found that 20 percent of the firms taken over by PE went 
into bankruptcy, ten times higher than the rate of non-PE 
acquisitions.
    Fourth, financial stability can sound very abstract, but 
financial crises do the most harm to those who are already more 
economically vulnerable, compounding existing disparities. So 
deregulation plus mega financial institutions plus Government 
support for the biggest banks and the financial sector in times 
of crisis has enabled kind of a heads-they-win, tails-we-lose 
dynamic where they profit from speculation and overleveraging, 
get bailed out when things go wrong, and working people suffer 
the consequences.
    Fifth, instead of consumer- and investor-facing practices 
that fleece people, whether it is those providing investment 
advice who the rules allow to be compensated more for 
investments that pay lower returns or have higher fees, costing 
people saving for retirement tens of billions a year or poverty 
wages and lack of regulation creating an opening for abusive 
credit products, including things like payday loans and 
frequent overdraft fees, which transfer billions of dollars a 
year from those who can least afford it to financial firms and 
their executives.
    None of these dynamics are inevitable. They are a 
consequence of a host of interconnected policy choices that can 
and should be changed to honor the dignity of work and a more 
just economy.
    Thank you.
    Chairman Brown. Thank you, Ms. Donner.
    Professor Logan, you are recognized for 5 minutes.

   STATEMENT OF TREVON D. LOGAN, HAZEL C. YOUNGBERG TRUSTEES 
DISTINGUISHED PROFESSOR OF ECONOMICS, THE OHIO STATE UNIVERSITY

    Mr. Logan. Chair Brown, Ranking Member Toomey, and the 
distinguished Members of the Committee, I thank you for 
inviting me to testify before you today. My name is Trevon 
Logan, and I am a professor of economics at The Ohio State 
University. I am honored to provide an overview of the evidence 
on worker well-being and its relationship to aggregate economic 
conditions, policy, and the role of the financial system in 
this relationship.
    I would like to emphasize three dimensions in which we 
should think about economic performance and material well-
being.
    First, we must provide and invest in accurate measurement 
of the economy about the well-being of workers and families.
    Second, trends in inequality and working conditions today 
bear an uncomfortable similarity to the late 19th and early 
20th centuries, where worker well-being was poor.
    Third, these present issues of inequality are related to 
policy.
    We many times mistake the tenuous relationship between 
aggregate measures of economic performance and well-being for 
being informative, thinking that economic growth, GDP, or well-
controlled inflation are evidence of an economy that is 
operating successfully.
    Aggregate measures tell us less than we would like about 
well-being. We have seen stock market returns increasing over 
the last several months as food pantries witnessed 
unprecedented demand.
    Distribution and short-run changes are particularly 
important. We would not have known that more than a quarter of 
households with children were facing food insecurity without 
information from the Census Pulse survey. We would not have 
known that Black Americans waited an additional week to receive 
unemployment benefits, on average, without detailed data 
collection. The lack of investment in Government statistical 
data collection has hamstrung our ability to understand our 
economy.
    COVID-19 has exposed the growing reconstruction of what has 
been termed ``factory discipline'' by economic historians, a 
world in which the manager is a de facto authoritarian. They 
tell workers when they work and control and monitor their 
conduct on the job intensively. Discipline designed and 
implemented to coerce workers into doing more than they would 
freely choose is not a hallmark of a free market economy. It is 
the opposite.
    When we hear stories of extremely long work days with no 
time for restroom breaks or prohibitions on having a cell phone 
or basic socialization, these are modern forms of the 
discipline in work environments that first appeared in early 
industrialization.
    Economists have now coalesced around the rise of labor 
market monopsony as one reason why we see few protections for 
workers and why wages have stagnated. In layperson's terms, 
monoposony is the exact opposite of monopoly, but it has the 
same effect of distorting the market in uncompetitive ways. We 
have a monopoly when one firm supplies a good, and we have a 
monopsony when one firm demands a good.
    How does monopsony work? In a labor market, monopsony 
decreases wages because there is only one employer. Recent 
research shows that labor markets with few employers per sector 
have lower wages, and that the rise of market concentration is 
a better explanation of the stagnation in wages for the past 40 
years when compared to import competition or automation.
    The following example from the product market will be 
useful. In 2008, the Department of Justice approved the merger 
of Miller and Coors, at the time the second- and third-largest 
brewers in the United States, leaving just one large 
competitor, Anheuser-Busch. While beer prices had been on a 
downward trend before the merger, they increased immediately 
after the merger by more than 5 percent. With less competition, 
the now two dominant firms charge higher prices estimated to be 
roughly 8 percent higher than what would have prevailed absent 
the merger, all at the expense of consumers.
    Outside of mergers, market concentration and monopsony 
itself is the rise of what I term ``21st century factory 
discipline.'' Examples include noncompete agreements and 
nonpoaching agreements among franchisees. Both of these can 
work to depress wages by structurally reducing labor market 
mobility. Recent survey evidence shows that one in five workers 
with a high school education or less is subject to a noncompete 
agreement. Nonpoaching agreements have also proliferated, and 
today more than half of all major franchises forbid their 
franchisees from competing for one another's workers. NCAs 
exacerbate racial wage gaps, accounting for as much as 9 
percent of the wage differentials.
    One way in which the financial sector may play a role here 
is in the rise of common stock investing. Common stock 
ownership can enhance the market coordination of firms by 
diminishing the competitive forces of the market.
    There are solutions to this problem. The first is to 
understand that antitrust law should be applied to the 
potential labor market impacts of monopsony power via market 
concentration. Second, we can discourage the use of NCAs and 
nonpoaching agreements, as both are against the principles of a 
free market competition.
    Another area of focus is to encourage small business 
development and entrepreneurial activity. Our experience from 
the Paycheck Protection Program shows the ways in which the 
largest banks have failed small businesses, especially small 
Black-owned businesses.
    Last, we need to stand firm on the economic principles of 
open, fair, and just market competition, which includes both 
basic protections for workers and protects their ability to 
move freely to better opportunities in the competitive labor 
market.
    Chairman Brown. Thank you, Professor Logan.
    Mr. Puzder is recognized for 5 minutes. Thank you for 
joining us.

STATEMENT OF ANDREW F. PUZDER, FORMER CHIEF EXECUTIVE OFFICER, 
                        CKE RESTAURANTS

    Mr. Puzder. Chairman Brown, Ranking Member Toomey, and 
Members of the Committee, thank you for inviting me to testify 
on the dignity of work, an issue near and dear to me and of 
great importance for American workers and businesses.
    I am Andy Puzder, and while I am an attorney by training, 
for over 16 years I had the privilege to serve as the CEO of 
CKE Restaurants, which owned or franchised over 3,800 Hardee's 
and Carl's Jr. restaurants in 45 States and 40 foreign 
countries employing over 75,000 Americans.
    However, I was not born with a silver spoon in my mouth. 
Far from it. I proudly grew up in a working-class family 
outside of Cleveland, Ohio, although my parents always told me 
I could be anything I wanted to be if I was willing to do the 
work. And thank God I lived in a country where that was true.
    As a teenager, I worked at the local Baskin-Robbins where I 
experienced the dignity of work. I can still recall the 
afternoon when the franchise owner of that Baskin-Robbins 
called me into her office, gave me a 10-cent-an-hour raise, 
handed me a key, and told me I was now the assistant manager. 
That remains the proudest day of my professional career. I 
opened up the place the following day, and I will bet we had 
the cleanest Baskin-Robbins in America that morning.
    That promotion confirmed that what I did had value, that I 
could be more than I was, and that where I came from was less 
important than where I was going. I felt the kind of pride and 
self-confidence that can keep a person working or in school, 
striving for success, and off the streets.
    Over the coming years, I worked my way through college and 
law school while supporting my small family doing just about 
any job I could find, like painting houses, cutting lawns, and 
busting up concrete with a jackhammer in the scorching St. 
Louis summer heat. I worked almost any job I could find because 
I had no Government or family help to get through college or 
law school. And as I said, eventually I became a lawyer and the 
CEO of an international corporation.
    Now, I tell my grandchildren this story because I think it 
is important for them to know that there has never been another 
country in the history of the world where a working-class kid 
like me could have aspired to that level of success with any 
realistic chance of achieving it. That is the American dream. 
It exists because our free enterprise system inspires 
businesses to create jobs such as the ones I was privileged to 
hold.
    I was very encouraged for America's working and minority 
youth when in 2018 and 2019, thanks to economic policies that 
cut taxes, reduced regulation, and focused on domestic energy 
production, we experienced the strongest labor market in my 
lifetime. In fact, we went into the pandemic with 24 straight 
months with more job openings than people unemployed, 20 
straight months of 3-percent-plus wage growth and greater wage 
growth for low-wage workers than high-wage workers.
    As a result, in 2019 family income increased a record high 
6.8 percent to a new record high of $68,700 while the poverty 
rate dropped a 50-year record 1.3 percentage points to a new 
record low of 10.5 percent. And for the second year in a row, 
income inequality decreased.
    I believe that today we need policies that will return us 
to the very encouraging prepandemic levels, but I have two 
primary concerns: first, the impact of what has been called 
``stakeholder capitalism''; and, second, the Government's 
current economic policies.
    By imposing noneconomic obligations on American businesses 
and reducing their focus on profit, stakeholder capitalism 
reduces the incentive to invest and the capital available for 
dynamic growth. What that means for working-class and minority 
youth is fewer jobs and poorer-paying jobs.
    Shareholder capitalism created the greatest period of 
prosperity in human history, bolstering freedom and quality of 
life. When you strike at its ability to encourage investment in 
profit, you strike at the good it has done for all 
stakeholders. As for economic policy, emerging from the 
recession will need America's small business to reignite labor 
market growth.
    So the message the Government is sending to small 
businesses is extremely important. Unfortunately, that message 
currently boils down to we are going to increase your labor 
costs with a job-killing $15 minimum wage and your energy costs 
as we fight the war on carbon fuels. We are going to unionize 
your business whether your employees want it or not with the 
PRO Act and then overregulate and overtax you. We are even 
going to discourage people investing in your business by 
dramatically increasing the capital gains tax.
    That is not a message that will inspire businesses to 
create the millions of jobs we need to return to prepandemic 
levels of full employment. The dignity of work is dependent on 
the availability and quality of the jobs investors, 
entrepreneurs, and business managers create. Without those 
opportunities, the American dream becomes an impossible dream 
for young workers such as I once was and as many working-class 
and minority youths are today.
    Thank you, and I will be happy to take questions.
    Chairman Brown. Thank you, Mr. Puzder.
    Mr. Ramaswamy, you are recognized for 5 minutes.

 STATEMENT OF VIVEK RAMASWAMY, FOUNDER AND EXECUTIVE CHAIRMAN, 
                        ROIVANT SCIENCES

    Mr. Ramaswamy. Thank you, Mr. Chairman and Ranking Member. 
Thank you for the opportunity to share my perspective. I will 
be offering strictly my personal viewpoints and not those of 
any company I am affiliated with.
    I was born and raised in Ohio by immigrants who came to 
America with almost no money. My father spent nearly 40 years 
working at General Electric's Evendale, Ohio, plant where he 
survived broad layoffs under Jack Welch' tenure and went to 
night school to earn a law degree to protect his job security. 
I spent 7 years as a biotech investor, and for 3 of those years 
I also attended law school part-time, just like my dad.
    In 2014, I founded a biotech company that I led as CEO 
until January, and I am now writing a book called ``Woke, 
Inc.'' to be published this summer, about stakeholder 
capitalism, a topic that is going to be central to today's 
discussion.
    Stakeholder capitalism refers to the idea that companies 
should serve not only their shareholders but other societal 
interests. Big tech, big banks, and big business have now 
roundly endorsed this idea, and folks like Milton Friedman do 
not like the idea because it might leave companies to be less 
efficient. And while I personally do share some of this 
concern, there is an even bigger problem that worries me. I 
worry that stakeholder capitalism represents a threat to the 
integrity of American democracy itself, because for companies 
to pursue societal interests in addition to shareholder 
interests, companies and investors have to first define what 
those other societal interests ought to be. That is not a 
business judgment. It is a moral judgment. And speaking as an 
American, I can say that I do not want our capitalist elites to 
play a larger role than they already do in determining our 
society's core values.
    The answers to those questions ought to be determined by 
America's citizens through our democratic process, publicly 
through open debate and privately at the ballot box. And, 
personally, I do not know if that is a Republican idea or a 
Democratic idea. I consider it an American idea.
    It is puzzling to me, though, that progressives seem to 
love stakeholder capitalism today. Many progressives who love 
stakeholder capitalism abhor Citizens United because it permits 
companies to influence our elections and our democracy. In my 
view, stakeholder capitalism is Citizens United on steroids. It 
demands that these CEOs use corporate resources to implement 
the social goals that they want to push.
    In the pharmaceutical industry, does rejecting stakeholder 
capitalism mean putting profits ahead of patients? No, it does 
not. But putting patients first means putting patients first, 
including ahead of other social causes. It means that we do not 
care about the race or gender of a scientist who discovers the 
cure to COVID-19 or whether the manufacturing and distribution 
process that delivers a vaccine most quickly to patients is 
carbon-neutral.
    Conflicts of interest lie at the heart of this debate. In 
the real world, most conflicts are not financial. If I am a 
public company CEO and I decide to use the corporate piggybank 
to make a donation to, say, my high school or my temple, that 
should raise a red flag since my high school and my temple have 
nothing to do with my business. But why is it any different if 
the CEO uses the corporate piggybank to make a donation to a 
climate change organization or to a specific racial advocacy 
movement? Many CEOs did exactly that last year, and they were 
applauded for it. Yet in both cases, the CEO derives a personal 
benefit from using the company's piggybank to make a donation. 
That is a conflict of interest, and personally I find it 
curious that the conflict-of-interest hawks seem blithely 
unconcerned about this one.
    No doubt many CEOs are going to advise you to do things 
like mandate ESG-related disclosures as public companies. My 
humble advice to you is this: Ask yourself what these business 
leaders hope to achieve for themselves. Some of them may hope 
to distract you from other regulatory issues that pose real 
risks to their business. For a soft drink manufacturer, 
advocating for voting rights is very easy. Reckoning with the 
nationwide health impacts of soda consumption? That is hard 
work.
    When choosing between constraints on matters that relate to 
the core of your business versus matters that do not, self-
interested CEOs are generally going to choose the latter.
    I do have other concerns that I would be glad to address in 
the Q&A. Having stakeholder capitalism tends to favor 
incumbents over startups. That is why the Business Roundtable 
and the Davos crowd tends to favor it rather than small 
business owners. I also think that the ESG movement is on its 
way to contributing to an ESG-linked asset bubble, akin to the 
pre-2008 housing bubble. But those are secondary issues.
    The bigger issue is the threat to American democracy 
because when we demand that corporations make moral judgments 
and exercise political power, democracy loses not once, but 
twice. We lose integrity in lawmaking through corporate 
overreach on the one hand, and we lose social solidarity as a 
people when the private sector itself becomes political. 
Stakeholder capitalism poisons democracy. Partisan politics 
poisons capitalism. And in the end, we are left with neither.
    So, in closing, I urge you as Members of the Senate to 
implement your chosen policies through the front door rather 
than sneaking them in through the back door. Do not use 
companies as instruments to accomplish what you cannot get done 
directly as legislators, because unlike you, CEOs are not 
democratically accountable, and that might make for a 
convenient solution in the short run, but corporations make for 
fickle friends, and in the long run you will create a monster 
that you cannot put back in its cage. That is not just bad for 
Republicans or Democrats. It is bad for America. And speaking 
as an American, I can say that I do not want to live in a 
corporatocracy. I do not want to live in a one-dollar/one-vote 
system. I do not want to live in a modern version of Old World 
Europe where a small group of wealthy elites get to decide what 
is good for the rest of society. I want to live in a democracy 
where everyone's vote and everyone's voice is weighted equally.
    Thank you again for the time and the opportunity.
    Chairman Brown. Thank you, Mr. Ramaswamy.
    Let me start with Lisa Donner. Ms. Donner, explain why when 
our economy runs on Wall Street's rules it results in 
transferring our wealth and prosperity away from workers and to 
giant corporations.
    Ms. Donner. Thank you, Senator. Let me start by digging a 
little further to an example that you talked about in your 
opening remarks this morning. Melody Crawford, who spoke at the 
event you had earlier this week, worked at Art Van Furniture in 
Michigan, and she described losing her job because of financial 
engineering. She talked about being tossed out overnight 
without insurance during the pandemic after 13 years with the 
company while the Wall Street executives who bought that 
business and looted it walked away with millions. There were a 
whole slew of rules that made that job loss and the hundreds of 
thousands of jobs like hers lost in PE-owned retail alone, not 
to mention all the other sectors where there have been job 
losses more likely.
    Wall Street-dominated rules enabled the financial firm to 
buy that company with a lot of money, borrowed money, and then 
put the responsibility for paying back the debt on the company 
they bought and not have any liability for themselves, and then 
burden it further and make more money for themselves by selling 
the company's real estate, which it then had to lease back. And 
when that drove the business into the ground, Wall Street 
already had their money, and workers and their families were 
left high and dry. Destroying viable businesses also leaves 
behind fewer companies that are large and more powerful, making 
markets less competitive, and this approach was enabled--in 
fact, incentivized by corporate tax laws as they exist now, by 
liability laws, by bankruptcy laws, by securities laws written 
around the idea that what works best for Wall Street 
automatically will be best for the rest of us. And as you point 
out, Senator, that is an argument that needs to be challenged 
again and again in each of those--making decisions about each 
of those specific laws.
    Chairman Brown. Thank you, Ms. Donner.
    Dr. Logan, you spoke about when markets get concentrated, 
big corporations have more power over their workers. Does that 
disproportionately impact workers of color? And if so, how does 
it do that?
    Mr. Logan. Yes, it does, Chair Brown. There are two 
dimensions in which this occurs. So the first is when I was 
speaking, I was talking about overall and more global measures 
of market concentration, but local measures of market 
concentration, say, in the health care sector, which 
disproportionately employ Black Americans, for example, are 
also highly concentrated markets now given the consolidation in 
the health care sector. So at the very local level, you will 
see that this has a particularly poor outcome for African-
American workers.
    Another outcome of this is that research has shown that in 
rural areas, the rise of monopsony power is quite acute, so 
African-Americans in rural areas, which have seen business 
destruction on top of market consolidation, are even more prone 
to having markets which are monopsonized.
    Chairman Brown. Thank you, Professor.
    Ms. McGhee, first of all, thank you for writing ``The Sum 
of Us'', which I read over the weekend. I put that book 
alongside two other illuminating, I think earth-shaking in many 
ways, books about race and class and housing, next to 
``Evicted'' and to ``The Color of Law''. I think those three 
books together can teach much of America so much about our 
country, our economy, about race, about class, all of that. So 
thank you for that.
    In your testimony you said Congress and regulators failed 
to get ahead of the 2008 financial crisis because subprime 
mortgages were mostly targeted at Black and Brown families; in 
other words, policymakers did not think it was important to 
protect people of color who also--parenthetically, you talked 
about how they were so often refinancing, not buying homes for 
the first time. Put that aside. But, Ms. McGhee, based on what 
you have just heard from Dr. Logan and Ms. Donner, do you think 
there are parallels between what policymakers failed to do 
before the financial crisis and what has been happening in our 
economy over the last decade?
    Ms. McGhee. I do, and thank you for those kind words, 
Chair. I think that we are seeing it in a couple of different 
ways. The central metaphor at the heart of my book is the story 
of what happened not just in the segregated South but across 
the country when public swimming pools were drained rather than 
integrated. I use that as a metaphor to talk about what 
happened to the public social contract that created the 
greatest middle class the world had ever seen in the middle of 
the 20th century, in the New Deal era, and then switched to the 
more neoliberal inequality era. And I think we are seeing that 
across our society in what has happened to the affordability of 
college with the debt-for-diploma system, which 
disproportionately impacts Black borrowers, eight out of ten 
who have to borrow to graduate from college, but also impacts 
the majority of White borrowers.
    I think we are also seeing it in the opposition to 
refilling the pool of public goods for everyone today with the 
opposition to the American Jobs Plan, which would have 
something for nearly every single American, which is really a 
positive sum vision of getting us back on track, building 
things in America, and providing for soft and hard 
infrastructure that our country needs. And a lot of the 
opposition to it has fallen back on dog whistles and racial 
resentment and distracting with a culture war when it is a 
majority popular plan because the country recognizes that we 
need to refill the pool of public goods for everyone, from 
child care to housing to rural broadband.
    Chairman Brown. Thank you, Ms. McGhee.
    Senator Toomey.
    Senator Toomey. Thank you, Mr. Chairman.
    Let me start with Mr. Puzder. You know, I think there has 
been a narrative and there are some people who believe 
apparently that share repurchases are some kind of nefarious 
scheme to artificially inflate the price of a company's stock 
and that they come at the expense of growing the business.
    Now, you were in business for many years. You have been a 
CEO. In your experience do you think CEOs pass up attractive 
investment opportunities to grow their business in order to 
take cash and use it for share buybacks? Why do companies 
engage in share buybacks? Your mic is not on.
    Now we got you.
    Mr. Puzder. I do not know any instance where a CEO did a 
share buyback where they had a materially better investment 
they could have made with the cash that was available. The idea 
with share buybacks is that your company may be a very good 
investment, and if the value of your stock is low, your dollars 
might best be spent investing in your own company, which is 
good for shareholders because it indicates to everybody that 
you believe in the company, you believe in the company's 
future. It is good for people that sell shares when you sell 
your shares because you create a demand for the shares so the 
price will probably go up. And it is good for the people that 
hang onto the shares because their shares will increase in 
value. Their gains on those shares will increase. And, in fact, 
they will get capital gains treatment on those gains if they 
hang onto them for a long enough period of time.
    But if you are not spending your money--if a CEO is not 
spending money, the corporate funds, on things that improve the 
profitability of the company, that create jobs, that generate 
growth, that do the kinds of things that really raise a 
company's value in the markets, then it does not make any 
difference if you do share buybacks or not because your stock 
price is going to go down. So it would really be 
counterproductive just to go out there and take your money to 
do a share buyback to get a temporary boost in your share 
price, unless you are going to sell your shares immediately, 
which CEOs generally cannot do. It is really not going to 
benefit you long term or short term.
    Senator Toomey. Another premise that seems to be implicit 
in some of the discussion we hear sometimes is that a company's 
profit comes at the expense of its workers. Now, if this were 
true, I guess it would follow that more profitable companies 
would have less-well-paid workers and companies that are not 
very profitable would have higher-paid workers. Is that a 
phenomenon that we see in the real world?
    Mr. Puzder. Look, in the real world, if you are running a 
company, the one thing you know is your most valuable asset is 
your workforce. Your workforce needs to be happy. Your 
workforce needs to be productive. If your workforce is not 
happy and productive, you are going to go out of business. You 
are not going to last. And I think with a small business that 
is almost always the case, because you know all your employees, 
you know their families, you know their financial situation. 
With larger employers, you know, I would use the examples of 
Volkswagen in Tennessee, Boeing in South Carolina, Nissan in 
Mississippi, and most recently, Amazon in Alabama, where 
workers have rejected unions because they are very happy with 
their employers. In fact, in this recent Amazon vote, while 85 
percent of the workers were Black workers, only 16 percent of 
workers in the plant, despite President Biden's support and 
despite Senator Bernie Sanders heading down there, only 16 
percent of the employees voted for unionization. You could have 
tripled that, and they still would have lost the union 
election. So----
    Senator Toomey. All right. Let me----
    Mr. Puzder. ----I do not think you are seeing the kind of 
things that people are saying we are seeing.
    Senator Toomey. I appreciate it. Let me move on. I have a 
quick question for Mr. Ramaswamy. I think Mr. Puzder makes a 
good case that it is in the interest of shareholders to treat 
employees well. I think that is true about other stakeholders. 
But if you elevate stakeholders and say a corporation's 
responsibility is to all these stakeholders, how does the 
management resolve competing demands among different 
stakeholders?
    Mr. Ramaswamy. Well, in my opinion, this is actually a gift 
to the management class of a company to escape accountability, 
actually. Underperforming CEOs--here is the secret that they do 
not teach you in business school. I have seen this firsthand. 
The more people you are accountable to, the less accountable 
you are to any of them. In fact, in the venture capital world, 
in my world of biotech, that is actually why many CEOs want to 
take their companies public, is that when you have thousands of 
shareholders, you actually are less accountable many times than 
when you have a small group of shareholders as a private 
company. But then this stakeholder capitalism movement is 
really taking that to the next level by saying literally by 
making you accountable to everyone, you actually become 
accountable to no one.
    So even though I think the goal of being accountable to 
stakeholders is a worthy goal, the best mechanism to accomplish 
that, even if imperfectly, might actually be and in my opinion 
is through being accountable for delivering financial metrics 
and performance that benefit everyone rather than empowering 
these CEOs who ultimately become accountable to no one in the 
end.
    Senator Toomey. Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Toomey.
    Senator Menendez from New Jersey is recognized for 5 
minutes.
    Senator Menendez. Thank you, Mr. Chairman.
    Ms. McGhee, are undocumented immigrants contributing to the 
safety and recovery as essential workers during the COVID-19 
pandemic?
    Ms. McGhee. Thank you, Senator. Disproportionately so, yes. 
In fact, there are probably about 5 million undocumented 
workers who are essential workers, including 1 million 
DREAMers.
    Senator Menendez. About 74 percent of undocumented 
immigrants are essential workers. During the pandemic 
undocumented immigrants harvested and served our food, cared 
for our children and elderly, treated our patients. When we 
were all told to stay home in order to avoid being infected 
with the virus and to spread it, they were on the front lines. 
They were on the front lines.
    So if that is the case, shouldn't Congress include 
undocumented essential workers as part of our effort to end the 
pandemic?
    Ms. McGhee. I think this is essential not only to those 
families, their loved ones, and the communities that they are 
serving, but to our broader economy. You cannot ask the most 
out of people to serve this country and then give them the 
least and, in fact, make them invisible as we talk about who 
the American people are. Those who have sacrificed so much 
during this pandemic, who have died disproportionately, served 
disproportionately, need to be included in pandemic relief. 
This is something that is popular with a majority of the 
American people, that essential workers, regardless of 
immigration status, should be eligible for things like what New 
York has passed, the Excluded Workers Fund, to allow cash 
assistance to people who have been excluded from all of the 
benefits of the past year that have gone to Americans during 
the pandemic.
    Senator Menendez. I appreciate that. You know, it seems to 
me it is not enough to say that essential workers are heroes. 
Congress has to treat essential workers like heroes. And in my 
view, that includes providing a pathway to citizenship for 
undocumented workers so that, in fact, we do not continue to 
have an underclass in this Nation that can be used in such a 
way that ultimately undermines, you know, income, wages, and 
other elements.
    It seems to me, both on the industry side and as the 
American people, we use these people at poultry plants, at 
meatpacking plants. They are the ones who pick the crops in the 
field to put, you know, your breakfast food on the table. They 
are the ones who deliver when everybody else is staying home. 
They are the ones who are taking care of our elderly. I am a 
little tired of hearing about people who are heroes and then we 
treat them far less than a hero. We do not even treat them 
appropriately. I hope we can do something about that.
    Let me ask you, in the coming months, Congress is going to 
be working on an infrastructure package. One problem that I 
think does not get enough attention is how infrastructure 
affects access to good jobs. A study by the National Bureau of 
Economics showed that housing prices in high-income, job-rich 
areas have been increasing, and this has contributed to rising 
income inequality.
    So, Ms. McGhee, does a lack of affordable housing in job-
rich areas limit workers' access to good jobs?
    Ms. McGhee. It absolutely does, and in many ways, this type 
of segregation away from good jobs was done by design, and so I 
want to take a moment to applaud the way that the Biden 
administration is taking responsibility for past decisions to 
segregate and discriminate and, through the guise of urban 
renewal, make it difficult for Black and Brown communities to 
be connected to job-rich area.
    This is a massive problem affecting every part of the 
country in one way or another, and we do need to really invest 
in public transit and in affordable housing and to marry those 
two goals in ways that are going to green our economy and 
provide a lot more economic vitality to strategically 
disinvested neighborhoods across the country.
    Senator Menendez. Well, I appreciate you bringing both the 
transit equation and the housing equation together. I am in 
agreement. That is actually what my legislation on livable 
communities does. It marries transit and housing and looks at 
some of the redevelopment of our urban communities or other 
places that have that infrastructure in place but that can now 
marry the opportunity to create housing, access to good jobs, 
and to be able to move.
    And then the final point I would make, I hope--I have seen 
study after study in which diverse corporate boards' senior 
executive management procurement produces profitable 
corporations. It seems to me that having disclosure, simple 
disclosure, of what corporate boards' senior executive 
management status is, is an important tool for shareholders to 
make decisions on and for consumers to make decisions on.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Menendez.
    Senator Warner from Virginia is recognized for 5 minutes.
    Senator Warner. Well, thank you, Mr. Chairman, and I really 
appreciate you holding this hearing. This is an area, as you 
know, that I have been looking at for the last 5-plus years, 
how we make capitalism actually work for a broader group of 
people.
    I have to tell you I very much disagree with Mr. 
Ramaswamy's notion. I was a venture capitalist for 20 years, 
longer than I have been a Senator, and the idea that the only 
standard you need to hold a CEO accountable toward is short-
term, quarter-by-quarter profitability is frankly not the right 
metric. I can tell you that as a venture capitalist. I can tell 
you that as the funds who have invested in venture capital 
funds have longer-term goals as well. So, again, I just very 
much disagree and frankly think stakeholder capitalism, 
American capitalism post-World War II was not perfect. It was, 
again, not fair to people of color, not fair to a lot of women. 
But for 40-plus years, there was a mantra that you could make 
money for shareholders, but still do well by your workers and 
do well by your communities. I think that was radically 
disrupted in the late 1980s, early 1990s, and we have now 
created a system, unfortunately, where way too many 
particularly young people do not believe that capitalism can 
actually lift people out of poverty. And I think we need to 
address that. I think honestly I have not met a CEO from the 
literally hundreds of firms I invested in as a venture 
capitalist or large firms that do not talk about, well, our 
biggest assets is our people. We have nothing in our tax 
system, accounting system, or reporting system that incents any 
CEO to invest in human capital. I think that is a bad long-term 
business decision.
    If we go back and look at after the Depression, the 
accounting profession came together and said, ``We need some 
common standards.'' They created GAAP so we could measure 
metrics of capital investment and machinery investment. We have 
not really updated that in many ways to meet what, again, every 
CEO and every firm I invested in as a VC said our biggest asset 
was our people, yet there is no place for that kind of people 
investment.
    I want to give credit--there were a lot of differences I 
had with the previous Administration. Jay Clayton at the Trump 
SEC actually moved the SEC down the path toward human capital 
disclosure. So I want to start, Professor Logan, you talked 
about the need to better measure the state of our economy. You 
mentioned that we need to get better information about how 
workers are faring. I very much agree with that. I am 
reintroducing my Workforce Investment Disclosure Act to make 
sure that the SEC works in a coordinated fashion so, again, you 
do not have companies doing one-off braggings about what they 
may be doing for a subset of their workforce, but there is some 
standardization. The same way we needed GAAP back after the 
Depression, we need that same kind of standardized disclosure 
in this 21st century economy.
    So, Professor Logan, can you speak to this? And there are, 
obviously, things--JUST Capital is out doing some efforts on 
this. There are other groups that are trying to measure this. 
But it is pretty hit and miss. Can you talk about how, if we 
are going to really measure what companies are investing in 
their human capital, how we might address this problem a little 
more holistically.
    Mr. Logan. This is a very large problem, and it is an 
information problem in the labor market. If you imagine the 
situation of someone in the labor market looking for 
employment, two firms which might have observationally 
equivalent positions but one that has more strategic and long-
term investment in the human capital of their workers, longer 
tenure, would in expectation be a better employer. And so there 
is this degree to which this information being obscured leads 
to a serious information problem in the labor market, but would 
also drive, to the extent that the labor market is competitive, 
pressure on firms to better invest in the human capital of 
their workers if that information is public and it is actually 
observable by the labor market and potential employees. So it 
has positive externalities of providing that information by 
adding to the competitive pressures in the labor market and 
encouraging firms to invest in their workforce.
    Senator Warner. Professor Logan, I am having a little 
problem hearing all you are saying. I hope other Members are 
able to hear. But I absolutely believe we need some level of 
standardization here. You know, without that standardization, 
we have no ability to judge. And since CEOs and boards 
themselves say this is one of their top three things, 
measurement of human capital, you have got investors who say 
they want that information. I think it is time the SEC catches 
up with the reality of the marketplace today.
    Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Warner.
    I will next call on Senator Hagerty from Tennessee. I need 
to step out for just a short moment to go to the Finance 
Committee in the other room. And so after Senator Hagerty, 
Senator Warren will proceed. So you are recognized for 5 
minutes, Senator Hagerty.
    Senator Hagerty. Thank you, Chairman Brown, and thank you, 
Ranking Member Toomey, for hosting this meeting today. It is a 
great opportunity to remember that America is the greatest 
Nation in the world for opportunity, and as Senator Toomey 
mentioned, that opportunity in the capitalist system is 
colorblind. The last thing we should do is to contort our 
capitalist system in a way that would destroy opportunities in 
the long run. Capitalism requires a strong rule-of-law culture, 
but too much Government involvement, especially Government 
coercion of economic activity, will destroy jobs, it will 
destroy wages, and it will destroy our entrepreneurial spirit.
    Mr. Ramaswamy, I appreciate you mentioning in your 
testimony that many proponents of stakeholder capitalism are 
indeed throwing up a smokescreen that could distract from 
potentially nefarious business practices. On the Government 
side, the last thing we need to do is create another Government 
power grab in the form of contorting our regulatory framework 
for opaque and ill-defined objectives that are really a 
smokescreen, as you say, to allow for a regulatory back door to 
implement social policy that cannot be secured through 
legislation.
    America's unique strength is its clear-eyed capitalism that 
has generated the greatest economic success the world has ever 
seen. This shift in semantics from shareholder to stakeholder 
by Democrats is indeed a thinly veiled power grab by them to 
create yet another end run around our legislative process and 
further empower unelected bureaucrats to impose social policy 
that could not survive congressional debate.
    Today we are fortunate to have one of America's most 
respected and clear-thinking business leaders testify. Mr. 
Puzder, thank you so much for joining us today.
    Mr. Puzder. My pleasure.
    Senator Hagerty. I appreciate that in your testimony you 
have laid out a tremendous framework. You know, we both live in 
a State where the economy is on fire. Wages are growing, 
unemployment is low, and people are moving to our State in 
record numbers. We both know the reason why. Tennessee has 
implemented low taxes and a friendly regulatory environment. We 
have created an environment that allows Tennessee operators and 
entrepreneurs to compete and to win. True entrepreneurs with a 
clear mandate thrive in our State, and more broadly, they do in 
our Nation.
    So, Mr. Puzder, could you discuss how CKE might have 
evolved differently under this less focused sort of stakeholder 
mandate that we are talking about today? Thank you.
    Mr. Puzder. It would have been a big problem for us because 
you cannot--we would have been pressured to spend money that we 
invested in creating jobs, in growing our restaurant brands, in 
producing returns for our investors. We would have been 
pressured to put those monies and those efforts into projects 
that had nothing to do with creating jobs or raising wages or 
producing returns for our shareholders. It would have been a 
very devastating policy. It would have made the company very 
hard to run, like big States, it is--if you are not tethered to 
profit as a motive for your business, you are untethered. If 
your responsibility is not to your shareholders, if it is to 
everybody, then your responsibility is to nobody and you end up 
with CEOs feeling like they can do whatever they want because 
it is going to address some stakeholders' needs somewhere.
    This focus on trying to generate returns for your 
shareholders which results in jobs and growth is the way to go. 
It is what made America the Nation that it is and produced that 
incredible labor market that we had in 2018 and 2019 in 
particular.
    Senator Hagerty. Well, thank you, Mr. Puzder. We both know 
this as well: that certainty begets more capital investment and 
uncertainty puts a real cloud on capital investment. In your 
management of CKE, you had a company that thrived, CKE and its 
franchisees thrived not only in the United States but 
internationally. You spent a lot of time thinking and writing 
and talking about this. Could you share for the rest of the 
Committee what you believe the impact of excessive regulation 
could be on the success of businesses like yours?
    Mr. Puzder. Well, California is a great example of the 
impact of excessive regulation. In fact, we moved to Tennessee 
from California in part because of the incredible regulatory 
burdens in California. We actually, in my experience--when we 
were opening ne restaurants at Carl's, we actually could open 
easier in Shanghai, China, or in Novosibirsk, Russia, which is 
in Siberia, than we could in Los Angeles or San Francisco, and 
that killed jobs growth. That is where you create the jobs. It 
is the restaurant you open; it is the businesses you open; it 
is those small businesses. And when you make it more difficult 
to open, you kill job creation.
    Senator Hagerty. Indeed. Thank you, Mr. Puzder, and I think 
with the Chairman's departure, Senator Warren is next. Thank 
you.
    Senator Warren. Thank you.
    So unions and working people spent decades fighting for a 
fair work week. It was a fight that led to the enactment of the 
Fair Labor Standards Act and to the 40-hour limit on the work 
week.
    The 40-hour work week was intended to ensure that workers, 
no matter their occupation, had time for rest, time for 
families, time for their own lives. But instead of improving on 
the protections in that foundational legislation, we have been 
chipping away at the promise of a fair work week, and I will 
identify three ways.
    First, the gig economy companies like Uber stripped those 
Federal protections away by misclassifying their workers as 
independent contractors.
    Second, Congress has not raised the minimum wage in over a 
decade, so people take on second and third jobs just to be able 
to make ends meet.
    And, third, companies are subjecting workers to unstable, 
unpredictable schedules.
    Ms. McGhee, I want to talk about those unpredictable 
schedules. Does the Fair Labor Standards Act include any 
protections for workers to have stable schedules
    Ms. McGhee. No, it does not.
    Senator Warren. So, in fact, as I understand it, employers 
can change someone's schedule without any prior notice, and 
this type of disruptive scheduling practice hits low-income 
workers the hardest. About half of low-wage workers report that 
they have little or no say over the hours that they work.
    Ms. McGhee, can you say something about how unpredictable 
schedules impact low-wage workers?
    Ms. McGhee. I can. This is an issue that we worked on while 
I was president of Demos. Hourly workers in general are 
struggling, right? They are reporting going hungry, losing 
housing, scrambling to find child care, unable to invest in 
their own higher education. But those with unpredictable 
schedules, those who have such a narrow band of response time 
for bosses that say, ``Please come into work now,'' or, ``Come 
into work tomorrow at a different time than you did 
yesterday,'' are twice as likely to report those kinds of 
indicators of economic stress, even if they have the same wages 
and hours and employers. And there are racial disparities among 
who gets the most unpredictable schedules. And this is one of 
those issues that is wreaking quiet havoc on the upward 
mobility of some of our most essential hourly workers.
    Senator Warren. Well, I appreciate your raising this. You 
know, I have a bill with Representative Rosa DeLauro to take on 
this problem. Our Schedules That Work Act would guarantee that 
workers had the right to rest between shifts. It would ensure 
that workers in certain industries are required to get their 
schedules with advance notice. And it would protect workers who 
ask for schedule changes from being retaliated against just for 
asking.
    So let me ask, Ms. McGhee, do you think that addressing 
unstable, unpredictable, and rigid scheduling practices like 
the kinds of changes that I want to put in my bill, would this 
benefit workers and families?
    Ms. McGhee. It would absolutely benefit workers and 
families, and I want to thank you and Congresswoman DeLauro for 
introducing it time and time again, actually. And it is high 
time, I believe, that the Congress pass this bill. I am 
reminded of a person named Katy Montuse who works at PetSmart, 
who said, ``At PetSmart it seems we are expected to be 
available at all hours, even when we are not given enough hours 
to make ends meet, and must seek out additional work elsewhere 
to pay our bills. It is a vicious cycle, and it is not at all 
fair.''
    That is the kind of sort of quiet rule that needs to be 
rewritten to make sure that workers have a say. I want to also 
add, of course, the PRO Act, which would give workers more of a 
choice on the job, which I know you are supportive of. We have 
simply got to restore the balance and give back the dignity of 
work to workers who are being abused, often in the name of 
efficiency as driven by Wall Street.
    Senator Warren. Yeah, well, I really appreciate your 
testimony here today. Our laws should afford dignity for every 
worker, and when companies try to get around those laws, we 
need to strengthen the laws.
    My Schedules That Work Act with Representative DeLauro 
would take steps toward making sure that workers have time to 
invest in themselves, in their families, in their own well-
being. President Biden has called for Congress to pass 
legislation to give workers more stable and predictable 
schedules, and Congress should pass my Schedules That Work Act 
and get this done. So Congresswoman DeLauro and I are going to 
be fighting for Congress to pass this bill as soon as possible.
    Thank you very much, Mr. Chairman. In the absence of the 
Chairman, I recognize Senator Van Hollen for 5 minutes. Senator 
Van Hollen.
    Senator Van Hollen. Thank you, Senator Warren, and thank 
you to all our witnesses who are here today.
    President Biden was right on target last night when he 
observed that trickle-down economics has been a miserable 
failure in our country. It has been great for those at the very 
high end of the income scale, but very bad for everybody 
struggling to get ahead. We have seen over the decades larger 
and larger gaps between high-flying CEO compensation and the 
amounts that they pay the workers that make those businesses 
successful.
    We also see many occasions when, after corporations lay off 
workers, their stock prices go up. And, of course, last year, 
2020, we saw the S&P 500 rise by 16 percent even as millions of 
Americans lost their jobs.
    So, clearly, there is a disconnect between how the stock 
market and Wall Street are performing versus how everyday 
Americans are doing.
    So I would like to address a couple questions to you, Dr. 
Logan, regarding something I am very worried about as the 
economy begins to pick up. We obviously have seen positive 
signs, including today, as we beat this pandemic. And with the 
passage of the American Rescue Plan, we do expect to see more 
people get back to work.
    At the same time, long-term unemployment remains a real 
threat to workers and our economy. We now have over 4 million 
Americans who have been looking for a job for more than 6 
months but have not been able to find one. That does not even 
include those who have dropped out of the workforce, millions 
of other Americans. And even before the pandemic, we had over a 
million Americans who were long-term unemployed.
    I strongly believe that if you want to work to support 
yourself and your family, you should be able to find a job in 
this economy. And that is why I proposed the Long-Term 
Unemployment Elimination Act along with Senator Wyden and 
others that would provide a job subsidy on a short-term basis 
to private sector employers, nonprofits, and the public sector 
to help support the hiring of the long-term unemployed, provide 
job training so people can get on their feet and then get back 
into the workforce.
    Could you, Dr. Logan, please talk about this issue and 
whether our response to this crisis should include policies to 
ensure that people who are long-term unemployed or dropped out 
of the workforce and want to get back in are able to do so as 
the economy recovers? And what policy ideas would you suggest?
    Mr. Logan. Thank you, Senator Van Hollen, and I appreciate 
this issue because this is something labor economists have 
studied for some time, those who have been chronically 
unemployed, durations lasting more than 6 months, and also 
those who are dropping out of the labor force entirely, and we 
have seen that in our employment population ratios reached 
really disturbing levels in the last several years.
    The pandemic has intensified that, and now you have a 
situation where you have literally millions of workers who have 
been chronically unemployed for a very long period of time due 
to the pandemic or have dropped out of the labor force.
    And so the question is, we know from experimental evidence 
that workers and, in fact, gaps in employment lead to negative 
labor market outcomes when they are subsequently employed, if 
they become subsequently employed. So targeting those workers 
with a program that would subsidize their employment could 
reattach them to the labor force. And what is critically 
important, we know now from social psychology and other areas, 
is that employment itself has significant benefits for the 
employed above and beyond a paycheck. And we have talked about 
that in this meeting. And yet for these workers who have 
skills, who have employment possibilities, but who now are 
workers who have been detached from the labor force are not as 
competitive, and we have to think about strategies that would 
make them more competitive in the market, and part of that 
would be incentivizing hiring those workers to reattach them to 
the labor force.
    Senator Van Hollen. Well, thank you. We are working to try 
to include something along those lines as part of either the 
American Jobs Act or the American Families Act, because as you 
say, the longer you are out of the workforce, the harder it is 
to get back in, and that obviously hurts also your long-term 
retirement prospects and everything else in life. So I 
appreciate that, and we may be working--I look forward to 
working with you as we try and pass this legislation. Thank 
you.
    Now, Chairman Brown is not back yet. I understand that 
Senator Tillis is next, if he is with us.
    Senator Tillis. Thank you, Senator Van Hollen, and thanks 
to all the witnesses and to the Chair for holding this hearing.
    I just want to touch a little bit on stakeholder 
capitalism. The core ideas behind stakeholder capitalism have 
always been odd and really very confusing to me. The concept 
that a business should be responsible to and reflective of the 
customers and communities they serve certainly sounds good. But 
the question then becomes: In a Nation of 330 million people 
where many Americans of good faith disagree on political 
issues, what constituencies do corporations then serve? If a 
solar energy company found itself surrounded by a community of 
oil pipeline workers, should it alter its business to reflect 
that? Should a pharmaceutical company that produces abortion 
pills be required to reflect the beliefs of millions of pro-
life Americans?
    I imagine most of my colleagues would say no. But this is 
the logic of stakeholder capitalism as it is applied. That 
corporations must be accountable to anyone with a stake in it 
is so vague and undefined that it simply subjects companies to 
the whims of the loudest voices in a room, oftentimes a 
minority but with loud voices, regardless of whether or not 
they represent a constructive of profitable business viewpoint.
    When viewed from this angle, I think anyone can see that 
stakeholder capitalism for what it really is, less of a 
productive idea and more of an ideological and political 
cudgel.
    Mr. Ramaswamy, I know that some of my colleagues--or you 
argued, I should say, that stakeholder capitalism leads to 
unaccountable CEOs. I tend to agree. Some of my colleagues 
across the aisle have disagreed with you and perhaps maybe 
mischaracterized your position. Would you like to respond to 
that?
    Mr. Ramaswamy. Yeah, sure.
    Senator Tillis. Or respond to some of the other 
testimonies?
    Mr. Ramaswamy. Thank you, Senator Tillis. I wanted to first 
respond to correct any misunderstanding about what I said 
earlier as reflected by perhaps Senator Warner's comments. 
Classical capitalism does not demand that companies think for 
the short run. Certainly some business leaders do believe that 
thinking for the short run is the right way to run their 
businesses. Others do not. That is a debate within classical 
capitalism. Even Milton Friedman believed the only companies 
that were going to survive over the long run were the ones that 
actually generated profitability over the long run. And to the 
extent that a company actually makes a short-run business 
decisions that is a shortsighted one, that actually creates an 
opportunity for somebody else to take advantage of it. If you 
pursue a short-run opportunity but leave long-run value on the 
table, that is an opportunity for somebody else.
    In fact, businesses like Berkshire Hathaway, investors like 
long-term value investors have benefited from exactly that kind 
of short-termism. But the point is that is internal to 
capitalism.
    So that raises the question of why we need this new name 
for stakeholder capitalism, and the optimistic view is that 
actually there is just a semantic distinction, that we all mean 
the same thing, that when we say shareholder capitalism or 
stakeholder capitalism, by serving stakeholders, if you are 
just doing it for the long run, this is sort of the Business 
Roundtable perspective.
    I think it is more nefarious than that. I think the 
vagueness that you cited about stakeholder capitalism is not a 
bug. It is a feature. It is a feature that allows the people 
who invent these terms to aggregate more power for themselves. 
And the thing that puzzles me is for the set of people who are 
so skeptical about the intentions of these corporate executives 
and these corporate boards, why in the world would we want to 
aggregate even more power in their hands to now not just 
exercise economic power in the marketplace but social and 
political power in the marketplace of ideas? To me that is the 
mystery at the heart of this debate.
    Senator Tillis. Thank you very much. Thank you, Mr. Chair--
actually, I see Mr. Puzder there. It is good to see you.
    Mr. Puzder. Good to see you, Senator.
    Senator Tillis. Maybe to give you an opportunity--I am 
afraid that I was not able to participate in some of the other 
testimony. I was responsible for a markup of two bills in 
Judiciary. But in the same vein as Mr. Ramaswamy, are there any 
things that you have heard here that you would like to opine on 
or take an opposing view?
    Mr. Puzder. Yeah, I would like to talk a little bit about 
bringing people back into the labor force because I think it is 
critically important and it is what happened in 2018 and 2019. 
Look at 2019. Every month we had unemployment that was below 
what the CBO said it would be if we had full employment. Every 
month we had almost a million or a million or more job openings 
than people unemployed. Every month 3-percent-plus wage growth, 
more for low-wage workers than high-wage workers. That pulled 
people back into the labor force. We had 74 percent of the 
people that became employed in the fourth quarter of 2019 came 
from outside the labor force. That was the highest percentage 
since the BLS began reporting the data back in 1990. We need to 
create jobs. That will drive wages, and that will pull those 
people back into the labor force. We do not need Government 
policies that order them to come back in. We need Government 
policies that encourage growth, that encourage businesses to 
grow, that encourage them to create jobs, and that will bring 
people back into the labor force.
    Senator Tillis. Thank you.
    Thank you, Mr. Chair.
    Chairman Brown. Thank you, Senator Tillis.
    Senator Smith from Minnesota is recognized for 5 minutes.
    Senator Smith. Thank you, Chair Brown, and thanks to all of 
you for being here today.
    I would like to start with Dr. Logan, if I could. From the 
end of World War II until about 1980, economic data shows that 
workers' wages rose at about the same rate as worker 
productivity. Yet since then, real wages, real wage growth has 
slowed considerably, even while productivity has continued to 
increase. And over this same period, union membership rates 
have plummeted also, in part because of what had been really 
aggressive anti-union tactics taken by companies that have made 
it harder and harder for workers to come together and organize 
collectively for better wages, better benefits, better working 
conditions, lifting up their families.
    So, Dr. Logan, let me ask you, what do you think is the 
relationship between this decline in union membership on the 
one hand and this kind of decoupling of productivity and worker 
wages on the other hand?
    Mr. Logan. Thank you, Senator Smith, and I should mention I 
am a native Minnesotan, and so it is very--born and raised in 
St. Paul, so very delighted to answer this question. This 
disconnect between productivity and wages is very curious 
because it is not subject to the typical ways that we think 
that there might be a disjoint or wedge between these, say, 
automation or import competition. It has been going on for far 
too long. So we now know that market concentration plays a role 
in this, and some very new research from Suresh Naidu at 
Columbia University and Ilyana Kuziemko of Princeton University 
has shown that declining union membership does play a role in 
the stagnation of wages. In particular, high school and less 
than high school educated workers, to the extent that there was 
a union membership benefit for them, are now increasingly not 
unionized and in unionized occupations, and so it has led to a 
widening of wage inequality, and that is one relationship that 
we now know from the entirety of the 20th century is a 
relationship between wages and the types of workers who are 
unionized. There is still a union premium, but that premium is 
now applying to a much smaller segment of the labor force, and 
increasingly those with less education are increasingly not 
unionized.
    Senator Smith. So you had a situation where increasingly 
low-wage workers, who often are predominantly workers of color, 
are not able to participate in the benefits of the union, and 
lo and behold, the disconnect between productivity and wage 
levels seems to grow greater.
    So let me turn to you, Ms. McGhee. Some would argue--in 
fact, I think some have argued this today--that if you just 
leave businesses alone, they are going to create jobs and 
growth, and all boats are going to be lifted, and they are 
going to keep the best interests of their employees in mind, 
and so we should just let it all be.
    Tell me what you think the evidence shows.
    Ms. McGhee. I think the evidence shows that a business is 
not just the C-suite and the board of trustees; the business is 
also the workers who put in their time and sweat and creativity 
and innovation every single day. So I think, first of all, the 
very narrow view and, frankly, elitist and often racist and 
gendered view, which is often that C-suites are occupied by 
White men when much of the workforce is more diverse, 
particularly in some of our larger, more frontline industries, 
is a totally cramped view of who really are the business. And 
when we have seen economies, including our own in the past, 
where more of the people who contribute to the baking of the 
pie every day are the ones deciding what ingredients go in it 
and making it grow and, in fact, getting a bigger and bigger 
slice of it for themselves, we have seen the entire economy 
prosper.
    This idea that trickle-down economics, that tax cuts are 
responsible for economic growth has been repudiated on a global 
scale by scores of economists, and I do want to take this 
moment to push back on the idea that the job gains that we saw 
in 2018 and 2019 were because of tax cuts, when we also had a 
reversal of the austerity that had set in from 2010 to 2018 
with a very large stimulus 2018 spending package that, in fact, 
a lot of Republicans said was too big and it was a repudiation 
of the austerity, it was the beginning of the most impactful 
way to grow the economy, which was from the bottom up and the 
middle out. And we also had a Federal Reserve that is not 
getting enough credit for what it was beginning to do in 2018 
and 2019 by keeping rates low, so the least efficient part of 
the overall stimulus package that was created in the 2018-2019 
era.
    Senator Smith. So you are really making the case that 
trickle-down economics is not working for working people, and 
especially for lower-wage working people and working people of 
color who are often the low-wage workers. And I would say to 
all of my colleagues on this Committee that this is exactly the 
argument for why we need to move the PRO Act forward so that we 
can expand the benefits of people being able to come together 
collectively to all workers in this country. Thank you, Mr. 
Chair.
    Chairman Brown. Thank you, Senator Smith.
    Thank you to the five witnesses. I will close the hearing. 
I want to make just a couple of comments. Yesterday or last 
evening, President Biden laid out what he called a ``blue-
collar blueprint.'' Today we heard from experts why after years 
of divisiveness and division that plan is the key to bringing 
this country back together to fight for prosperity for 
everyone. The term ``dignity of work'' first came to me--I have 
this statue behind me that you can perhaps see. It is behind me 
every hearing. It is a statue my wife found at a consignment 
store. It is a statue--I am not Roman Catholic, but it is a 
statue of Leo XIII, known as ``the Labor Pope.'' He was the 
first one in my mind that coined the term ``dignity of work.'' 
It was popularized much more by Dr. Martin Luther King. As I 
think most of you know, Dr. King said, ``No job is menial if it 
pays an adequate wage.'' He said, ``All work has dignity, 
whether done by a street sweeper or Michelangelo or 
Beethoven.'' And as we know, Dr. King was killed fighting for 
workers and civil rights, understanding the two go together, in 
Memphis fighting for some of the most exploited workers in the 
country, African-American sanitation workers in the city of 
Memphis. He understood, as I do--and this hearing is about when 
you love this country, you fight for the people who make it 
work. It means building our society from the bottom up, from 
the middle class out. Whether you punch a clock or swipe a 
badge, whether you work for tips or for a salary, whether you 
are caring for aging parents or raising children, all work 
should have dignity.
    We will continue, this Committee will continue working with 
this Administration to make sure hard work pays off for 
everyone.
    Thank you all. The Committee is adjourned.
    [Whereupon, at 11:29 a.m., the hearing was adjourned.]
    [Prepared statements and responses to written questions 
supplied for the record follow:]
              PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
    Yesterday we marked Workers' Memorial Day, when we honor those 
Americans who have lost their lives on the job. This year, because of 
this virus, that number is staggering.
    Far too many of those workers died because they didn't have basic 
protections--they didn't have a Government that was on their side.
    On my lapel, I wear this pin depicting a canary in a birdcage--it 
was given to me two decades ago by a Lorain steelworker at a Workers 
Memorial Day rally.
    We all know the story--coal miners took a canary down into the 
mines with them to warn them of poisonous gases. Those workers didn't 
have a union strong enough, or a Government that cared enough to 
protect them.
    Today, too many workers still feel a lot like those miners--they 
feel like they're on their own.
    They've watched Wall Street and big corporations reward 
themselves--not just instead of workers, but at the expense of workers. 
And they've watched their Government--the people who are supposed to be 
on their side--let it happen.
    We've created an economy that runs by Wall Street's rules. And we 
see the results:
    The wealth on Wall Street has exploded. Corporate profits have 
soared. CEO compensation has doubled and tripled--but workers' wages 
have remained flat. CEOs' salaries are 320 times greater than workers' 
pay.
    Wall Street may seem pretty disconnected from most people's lives. 
But behind the scenes, for so many Americans, it's the financial system 
that's keeping their wages low, laying them off, closing their local 
businesses, and drying up their communities.
    When companies lay off workers or cut their pay, their stock prices 
go up. When they raise wages or invest in worker training, their stock 
prices often go down.
    And every time CEOs cut a job or deny a raise, they're lining their 
own pockets, because they're evaluated based on quarterly stock 
performance and are compensated in large part with company shares.
    Wall Street's and Main Street's interests no longer match up.
    Yet when the financial industry cost millions of Americans their 
homes and their jobs, gutted communities of color, and preyed on towns 
and neighborhoods around the country--they got a bailout. Everyone else 
paid the bill.
    On Tuesday, we heard directly from workers about how Wall Street's 
rules affect them on the job--in their everyday lives.
    We heard from Melody Crawford, whose company was bought out by a 
private equity firm that dumped her and 3,000 of her fellow employees 
into the pandemic with no job and no benefits.
    We heard from Pamela Garrison, who has seen Wall Street rules ship 
jobs out of her community and fight against raising the minimum wage. 
She's worked her whole life, she's never seen that hard work pay off, 
she's never had a vacation. She said: `` `Working poor' should not be 
two words that go together.''
    We heard from Chase Copridge, a gig worker for several Silicon 
Valley tech companies that Wall Street loves to pour cash into, but who 
treat their employees as expendable. He works full-time, but has zero 
job benefits, because the companies claim he's an ``independent 
contractor.'' He said companies brag about flexibility, but that's a 
lie. ``The truth is I have almost no flexibility. I am either working, 
or looking for my next gig.''
    We heard from Desiree Jackson, a former Wells Fargo call center 
worker, who talked about how the bank misclassified her to avoid paying 
her overtime.
    We heard from Shawn Williams, in my own State of Ohio, who does 
backbreaking work for an employer who is using every trick in the book 
to fight against a union that's already won its vote--not just one, but 
two votes--to organize.
    He told us, ``We rarely go a few weeks without an injury, largely 
because of the insane pace we work at. We have suggested that slowing 
the pace even just a little bit would improve safety and could save 
money, to which we were told, quote, `Injuries don't cost the company 
much money.' ''
    In addition to these five workers, there were others who couldn't 
join us because they were at work, trying to make a living.
    But they provided us written accounts of their struggles--Courtenay 
Brown, a Navy Veteran and Amazon worker who deals with a grueling 
schedule and invasive tracking of every minute on the job.
    And Carlos Aramayo who represents workers for Wall Street-owned 
hotels. That hotel group got a financial bailout during the pandemic--
but laid off workers anyway.
    We can do better.
    Hard work should pay off for everyone--no matter who you are, where 
you live, or what kind of work you do.
    For too long, we've allowed phony populists to stoke fear and place 
blame and divide us by race and religion and region. We know why they 
do it--to distract from how they've been setting up the system and 
writing up all the rules to benefit the financial industry.
    True populists aren't racist. They don't lie. True populists don't 
appeal to some by pushing others down. Populism never divides. True 
populism unites. True populism is the common struggle of the laid-off 
and the low-paid; of the workers derided by their bosses as expendable; 
of everyone out there just trying to get by.
    Part of our job on this Committee is to make sure that Wall Street 
is serving the real economy, not the other way around. As the President 
said last night, Wall Street didn't build this country. The middle 
class built the country. And unions built the middle class.
    Wall Street has tried to convince us that when the stock market 
does well, the economy does well.
    But look around--visit almost any town in Ohio. Listen to the 
workers we heard from on Tuesday. To them--to most Americans--the idea 
that a stock market rally means more money in their pockets is 
laughable.
    I think about the words of my fellow Ohioan Mr. Williams on Tuesday 
morning--he quoted Frederick Douglass that ``Power concedes nothing 
without a demand. It never did and it never will.''
    Of course powerful special interests--CEOs and corporate elites and 
their allies that have set up a system where they get paid at everyone 
else's expense--of course they want to hang onto that power. It's time 
for us to stop letting them.
    I look forward to hearing our witnesses talk about what that system 
costs all of us, and what we can do to create an economy where 
companies value the workers that make their businesses successful.
                                 ______
                                 
            PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
    Thank you, Mr. Chairman.
    One of the largest contributors to our Nation's success has been 
our free enterprise system, which elevates the dignity of work. At its 
core, free enterprise recognizes that the essence of human happiness is 
not just getting money, but creating value-in one's own life and in the 
lives of others.
    This path to happiness, which economist Arthur Brooks calls 
``earned success,'' speaks to the moment when your effort, your 
sacrifices, and your investment in yourself, pays off. To explain this 
term, Brooks asks a question: When you get your first raise at work, 
will you celebrate the day you get the news, or a few weeks later when 
you get the new paycheck? Most people celebrate when they get the news 
because the reason you're celebrating isn't simply the material 
byproducts of your success, but the satisfaction of knowing your 
efforts succeeded.
    In a free enterprise system, success can be earned by anyone. 
Markets don't ask the color of your skin or who your parents were. 
There is no greater system than free enterprise for tearing down the 
barriers of class and status.
    So how can we support such a system? The answer is simple: get out 
of the way.
    The most recent experiment in free enterprise occurred during the 
last few years when Republicans unmoored the economy from over taxation 
and statist control. What were the results? Before COVID, we had the 
best economy of my lifetime: more jobs than people looking for work and 
a record low poverty rate.
    This is how you recognize the dignity of work--with jobs accessible 
and paying well. All of this was spurred on by the steps Republicans 
took to enact progrowth tax reform and deregulation.
    Whether it is championing stakeholder capitalism, which calls for 
corporations to pursue a liberal social agenda rather than prioritize 
its responsibilities to its owners, or paying people more not to work, 
which obviously denigrates the value of their work.
    Although the list of ill-conceived policy ideas is long, I'd like 
to address two proposals that--if passed--would prevent our economy 
from reaching its potential: prohibitions on share buybacks, and an 
increased capital gains tax.
    There are three major reasons why prohibiting stock buybacks is a 
terrible idea.
    First, it constitutes a very disturbing attack on freedom. Banning 
share buybacks would restrict the ability of shareholders to run their 
own company. The owners of a company have the right to decide what to 
do with its profits after all expenses and taxes have been paid. Share 
buybacks are simply a mechanism for shareholders to take out some of 
the money that they own.
    Second, share buybacks serve an important function in the economy. 
They facilitate long-term investment by redirecting funds from lower, 
to higher growth firms. Banning buybacks would slow economic growth, as 
this capital fuels investment in businesses' futures.
    And third, banning buybacks would hurt the very people that its 
advocates intend to help. In the U.S., about 40 percent of all equities 
are held in pension and retirement accounts. Share buybacks are good 
for their investments because it returns cash that can then be 
redeployed, rather than sitting unused on a company's balance sheet.
    Another terrible idea is the Biden administration's plan to raise 
capital gains taxes. They want to almost double the capital gains tax 
to a mind-boggling 43.4 percent to help pay for its enormous spending 
plans. This would be a grave mistake.
    There are good reasons why we tax capital gains--the realized gain 
on an appreciated asset--at a lower rate than ordinary income. First, 
part of an asset's appreciation is inflation, which makes no sense to 
tax. Second, in most cases, like stocks, the asset has already paid tax 
on its income. And finally, investment leads to economic growth, which 
is something we don't want to inhibit.
    On top of all of this, almost doubling the capital gains tax 
wouldn't even increase tax collections. According to the nonpartisan 
Joint Committee on Taxation, a 43.4 percent capital gains tax would 
reduce Federal tax revenue for a variety of reasons. Why would we want 
to levy a tax that would decrease investment in the economy and result 
in less tax revenue for the Government? That certainly doesn't make 
sense.
    Let me conclude with this: I think we should do everything we can 
to preserve and elevate the dignity of work. The most effective way to 
do that is by allowing the economy and free enterprise to flourish, 
thereby creating employment opportunity and increasing wages for 
everyone.
    Capitalism has proven to be the greatest driver of prosperity in 
history. We should support rather than inhibit this engine of growth 
and opportunity for all Americans.
                                 ______
                                 
                PREPARED STATEMENT OF HEATHER C. MCGHEE
   Author, The Sum of Us: What Racism Costs Everyone and How We Can 
                            Prosper Together
                             April 29, 2021
    Thank you, Chairman and Ranking Member, for the opportunity to 
testify today.
    What I have learned in nearly two decades of economic policy 
advocacy is that racism in policymaking--stereotyping, indifference to 
claims of discrimination, insufficient commitment to equitable 
policymaking--leads to bad economic decision making. It's been making 
our economy worse, in ways that don't only disadvantage people of 
color. It turns out it's not a zero sum. Racism has costs for White 
people, too. And racial equity, designing policies in ways that make 
them truly universal and not just one-size-fits-all, will be good for 
our entire economy.
    In ``The Sum of Us'', I find racism creating distortions in a range 
of policy areas including public investment and workers' rights. In my 
limited time today, however, I'll focus on one of the most devastating 
recent illustrations of racism costing everyone: the financial crisis.
    After decades of Government policy and business practices 
preventing Black communities from accessing the same subsidized 
mortgage market that fostered White wealth, the 1990s and 2000s saw 
communities of color experience a wealth-stripping phenomenon known as 
reverse redlining.
    In the wake of Washington's deregulatory zeal, lenders and brokers 
were free to target hard-working families in neighborhoods of color 
with predatory financial products, particularly mortgages with features 
such as exploding adjustable rates, deceptive teaser rates, and balloon 
payments. These neighborhoods became the canary in the coal mine. As 
you know, Mr. Chairman, the majority-Black zip code in which you live 
was the community with the highest number of foreclosures in 2007. I 
visited your neighborhood back then and met a homeowner named Glenn who 
was near foreclosure.
    The common misperception then and still today is that homeowners 
like Glenn were risky borrowers buying properties they couldn't afford. 
Policymakers blinded by this stereotype refused advocates' calls to 
reign in predatory lending before it was too late.
    But that's all it was--a stereotype: a Wall Street Journal analysis 
from 2007 showed that the majority of subprime loan holders had prime 
credit \1\ and could have qualified for more affordable, safer loans. 
If it wasn't bad credit that made one ripe for a subprime loan, what 
was it?
---------------------------------------------------------------------------
     \1\ Rick Brooks and Ruth Simon, ``Subprime Debacle Traps Even Very 
Credit-Worthy; As Housing Boomed, Industry Pushed Loans to a Broader 
Market'', Wall Street Journal, December 3, 2007, https://www.wsj.com/
articles/SB119662974358911035.
---------------------------------------------------------------------------
    Households of color were almost two-and-a-half times as likely as 
White households to end up with riskier loans. \2\ And despite the 
excuse that subprime loans were necessary to expand home ownership, the 
vast majority of loans went to existing homeowners. \3\
---------------------------------------------------------------------------
     \2\ Jacob W. Faber, ``Racial Dynamics of Subprime Mortgage Lending 
at the Peak'', Housing Policy Debate, 23:2, 328-349; and Badger, Emily, 
``The Dramatic Racial Bias of Subprime Lending During the Housing 
Boom'', Bloomberg CityLab, August 16, 2013. https://www.bloomberg.com/
news/articles/2013-08-16/the-dramatic-racial-bias-of-subprime-lending-
during-the-housing-boom (``In 2006, at the height of the boom, Black 
and Hispanic families making more than $200,000 a year were more likely 
on average to be given a subprime loan than a White family making less 
than $30,000 a year.'')
     \3\ Justin P. Steil, Len Albright, Jacob S. Rugh, and Douglas S. 
Massey, ``The Social Structure of Mortgage Discrimination''. Housing 
Studies 33, no. 5 (2018): 759-76, https://doi.org/10.1080/
02673037.2017.1390076.
---------------------------------------------------------------------------
    After the crash, most of the Nation's big lenders from Wells Fargo 
to Countrywide would be fined for racial discrimination. But that 
realization would come too late. These loans spread out past the 
confines of Black and Brown neighborhoods like Glenn's and into the 
wider, Whiter mortgage market.
    The crisis that ensued--the crisis that my colleagues and I saw 
coming--would go on to cost us all: $9 trillion in wealth lost, \4\ 8 
million jobs vanished, \5\ a home ownership rate that still hasn't 
recovered.
---------------------------------------------------------------------------
     \4\ William R. Emmons, Bryan J. Noeth, ``Household Financial 
Stability: Who Suffered the Most from the Crisis?'' Federal Reserve 
Bank of St. Louis, July 2012, https://www.stlouisfed.org/publications/
regional-economist/july-2012/household-financial-stability-who-
suffered-the-most-from-the-crisis.
     \5\ Christopher J. Goodman and Steven M. Mance, ``Employment Loss 
and the 2007-09 Recession: An Overview'', Monthly Labor Review, Bureau 
of Labor Statistics, April 2011, https://www.bls.gov/opub/mlr/2011/04/
art1full.pdf.
---------------------------------------------------------------------------
    The resulting loss of wealth stands as a grave and lasting blight 
on the future of our diverse middle class. \6\ The racial wealth gap--
Black families' having 15 cents on the dollar of the average White 
family \7\--is the result of public policy, past and present. And to 
ward off any further stereotyping about Black work ethic, I'll add that 
White high school dropouts have higher household wealth than Black 
college graduates. \8\ It's about history showing up in your wallet.
---------------------------------------------------------------------------
     \6\ Sarah Burd-Sharps and Rebecca Rasch, ``Impact of the U.S. 
Housing Crisis on the Racial Wealth Gap Across Generations'', Social 
Science Research Council, June 2015, https://www.aclu.org/sites/
default/files/field-document/discrimlend-final.pdf.
     \7\ Neil Bhutta, Andrew C. Chang, Lisa J. Dettling, and Joanne W. 
Hsu, ``Disparities in Wealth by Race and Ethnicity in the 2019 Survey 
of Consumer Finances'', FEDS Notes, Board of Governors of the Federal 
Reserve System, September 2020, https://www.federalreserve.gov/econres/
notes/feds-notes/disparities-in-wealth-by-race-and-ethnicity-in-the-
2019-survey-of-consumer-finances-20200928.htm.
     \8\ Darrick Hamilton, William Darity, Jr., Anne E. Price, Vishnu 
Sridharan, Rebecca Tippett, ``Umbrellas Don't Make It Rain: Why 
Studying and Working Hard Isn't Enough for Black Americans'', Insight 
Center for Community Economic Development, 2015, http://
www.insightcced.org/wp-content/uploads/2015/08/Umbrellas-Dont-Make-It-
Rain--Final.pdf.
---------------------------------------------------------------------------
    But it's also not a zero sum. The racial wealth gap is costing our 
entire economy; closing it would make our economy $1.5 trillion larger 
in 2028, according to McKinsey & Company projections. \9\ Looking 
beyond wealth, the racial economic divides in wages, education, 
housing, and investment have cost U.S. GDP $16 trillion over the last 
20 years. \10\ Adding in gender, the Federal Reserve Bank of San 
Francisco calculated that the gap between White men and everybody else 
cost our economy $71 trillion over the past 30 years. \11\
---------------------------------------------------------------------------
     \9\ Nick Noel, Jason Wright, Duwain Pinder, Shelley Stewart III, 
``The Economic Impact of Closing the Racial Wealth Gap'', McKinsey and 
Company, August 13, 2019, https://www.mckinsey.com/industries/public-
and-social-sector/our-insights/the-economic-impact-of-closing-the-
racial-wealth-gap#.
     \10\ Dana M. Peterson and Catherine L. Mann, ``Closing the Racial 
Inequality Gaps: The Economic Cost of Black Inequality in the U.S.'', 
Citi GPS: Global Perspectives & Solutions, September 2020, https://
www.citivelocity.com/citigps/closing-the-racial-inequality-gaps/.
     \11\ Shelby R. Buckman, Laura Y. Choi, Mary C. Daly, Lily M. 
Seitelman, ``The Economic Gains From Equity'', Federal Reserve Bank of 
San Francisco, January 19, 2021, https://www.frbsf.org/our-district/
about/sf-fed-blog/economic-gains-from-equity/.
---------------------------------------------------------------------------
    We can do better. The new Administration and Congress have an 
historic opportunity to rewrite the rules to restore the dignity of 
work and redress the injustices in our wealth-building policies now. We 
can't afford to wait.
                                 ______
                                 
                   PREPARED STATEMENT OF LISA DONNER
           Executive Director, Americans for Financial Reform
                             April 29, 2021
                             
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 ______
                                 
                 PREPARED STATEMENT OF TREVON D. LOGAN
 Hazel C. Youngberg Trustees Distinguished Professor of Economics, The 
                         Ohio State University
                             April 29, 2021
    Chair Brown, Ranking Member Toomey, and the distinguished Members 
of the Committee, I thank you for inviting me to testify before you 
today. My name is Trevon Logan and I am a professor of economics at The 
Ohio State University, where I teach courses in economic history and 
population economics. As an economic historian whose scholarship is 
focused on understanding the historical roots of contemporary 
disparities and inequality, I am honored to provide an overview of the 
evidence on worker well-being and its relationship to aggregate 
economic conditions, policy, and the role of the financial system in 
this relationship.
    The COVID-19 pandemic presents us with stark and uncompromising 
evidence that economic inequality in our country has material 
consequences for worker well-being and, indeed, the overall functioning 
of our economy. We must recognize the role that Government has to play 
in both setting a floor for working conditions, including a minimum 
wage that tracks the cost of living, ensuring our labor and product 
markets are competitive, as well as investing in public goods, such as 
physical and social infrastructure, that boost productivity and produce 
high-quality jobs. \1\
---------------------------------------------------------------------------
     \1\ Washington Center for Equitable Growth, ``More Than 200 
Economists to Congress: Seize `Historic Opportunity To Make Long-
Overdue Public Investments' To Boost Economic Growth'', Press Release, 
April 6, 2021, available at https://equitablegrowth.org/press/more-
than-200-economists-to-congress-seize-historic-opportunity-to-make-
long-overdue-public-investments-to-boost-economic-growth/.
---------------------------------------------------------------------------
    I would like to emphasize three dimensions in which we should think 
about economic performance and material well-being. First, we must 
improve and invest in accurate measurement of the economy and 
disaggregated, granular information about the well-being of workers and 
families. Second, trends in inequality and working conditions today 
bear an uncomfortable similarity to the late 19th and early 20th 
centuries, where we know worker well-being was poor despite significant 
economic growth. Third, these present issues of inequality are related 
to policy, sometimes in unanticipated ways.
Measuring the Economy and Well-Being
    Many times we mistake the tenuous relationship between aggregate 
measures of economic performance and well-being for being more 
informative than it is--for example, thinking that economic growth, 
GDP, or well-controlled inflation are evidence of an economy that is 
operating appropriately and successfully. While such measures are 
useful in thinking about trends and long-run changes, it is important 
to stress several fundamental aspects that should give us pause.
    First, aggregate measures tell us less than we would like about 
well-being, even in a general sense. Average income, for example, may 
be relatively uninformative about measures of well-being such as 
health, security, and quality of life. We have seen periods of average 
income and wages increasing while at the same time household well-being 
in other dimensions declined. This has happened in the U.S. history and 
is also one of the hallmarks of the early years of the Industrial 
Revolution more generally. \2\ A period of increasing wages but 
declining health is not unprecedented, and assuming a direct linear 
relationship between averages in one measure and well-being more 
generally is often incorrect.
---------------------------------------------------------------------------
     \2\ See, for example, Stephen Nicholas and Richard Steckel, 
``Heights and Living Standards of English Workers During the Early 
Years of Industrialization, 1770-1815'', Journal of Economic History 51 
(4) (1991): 937-957. Sara Horrell and Jane Humphries, ``Old Questions, 
New Data, and Alternative Perspectives: Families' Living Standards in 
the Industrial Revolution'', Journal of Economic History 52 (4) (1992): 
849-880. Timothy Cuff, ``The Hidden Cost of Economic Development: The 
Biological Standard of Living in Antebellum Pennsylvania'' (2005). 
Roderick Floud Burlington, Robert W. Fogel, Bernard Harris, and Sok 
Chul Hong, ``The Changing Body: Health, Nutrition, and Human 
Development in the Western World Since 1700'', Cambridge: Cambridge 
University Press (2011).
---------------------------------------------------------------------------
    We also have seen stock market returns increasing over the past 
several months despite increasing precarity in the labor market and as 
food pantries witnessed unprecedented demand. By one measure our large 
corporate sector is optimistic and has fully recovered, but by another 
hunger and starvation are at unprecedented levels. And both can be true 
simultaneously. An additional example can be seen in something as 
presumably straightforward as inflation. Economists know well the 
problems of bias in the CPI, and their impact on Federal expenditures 
and private expenditures tied to it. \3\ What is less appreciated is 
that households of different types are more exposed to some types of 
price changes than others. \4\ A household in a food insecure 
environment, with limited transportation options, faces much more 
exposure to increases in food prices than a household who can more 
easily shift to bulk buying and substituting to cheaper food options. 
An average change in prices for all households does not reflect the 
changes for particular groups.
---------------------------------------------------------------------------
     \3\ See Dora Costa, ``Estimating Real Income in the U.S. From 1888 
to 1994: Correcting CPI Bias Using Engel Curves'', Journal of Political 
Economy 109 (6) (2001): 1288-1310. Trevon D. Logan, ``Are Engel Curve 
Estimates of CPI Bias Biased?'' Historical Methods, 42 (3) (2009): 97-
110. Thomas Stapleton, ``The Cost of Living in America: A Political 
History of Economic Statistics'', 1880-2000, Cambridge: Cambridge 
University Press (2009) for historical CPI bias estimates and 
corrections.
     \4\ Xavier Jaravel, ``The Unequal Gains From Product Innovations: 
Evidence From the U.S. Retail Sector'', Quarterly Journal of Economics 
134 (2) (2019): 715-783.
---------------------------------------------------------------------------
    Second, distribution and short-run changes are particularly 
important. We saw during this pandemic the need to accurately measure 
such impacts. We would not know that real personal income grew twice as 
fast for the top 10 percent of income earners following the Great 
Recession as for the bottom 50 percent without the Bureau of Economic 
Analysis' new distributed personal income prototype. \5\ We would not 
have known that more than a quarter of households with children were 
facing food insecurity this summer without granular information from 
the Census Pulse survey. \6\ We would not have known that Black 
Americans waited an additional week to receive unemployment benefits, 
on average, without detailed data collection. \7\ And we would not have 
known that more than a decade of gains made in closing the racial 
disparities in life expectancy between Black and White Americans was 
erased in one year of a devastating pandemic. \8\ It is critical that 
we redouble our efforts to collect data that will allow us to 
understand the ways in which our economy is functioning at a 
microeconomic way. We have seen a tremendous outpouring of data in 
light of the COVID-19 pandemic, but at the same time the lack of 
investment in Government statistical data collection hamstrings our 
ability to understand all features of our economy. \9\
---------------------------------------------------------------------------
     \5\ Austin Clemens, ``New Great Recession Data Suggest Congress 
Should Go Big To Spur a Broad-Based, Sustained U.S. Economic 
Recovery'', Washington Center for Equitable Growth, March 4, 2021, 
available at https://equitablegrowth.org/new-great-recession-data-
suggest-congress-should-go-big-to-spur-a-broad-based-sustained-u-s-
economic-recovery.
     \6\ Diane Whitmore Schanzenbach and Abigail Pitts, ``Estimates of 
Food Insecurity During the COVID-19 Crisis: Results From the COVID 
Impact Survey, Week 1, April 20-26, 2020'', Institute for Policy 
Research Rapid Research Report, available at https://
www.ipr.northwestern.edu/news/2020/food-insecurity-triples-for-
families-during-covid.html.
     \7\ Jevay Grooms, Alberto Ortega, and Joaquin Alfredo-Angel 
Rubalcaba, ``The COVID-19 Public Health and Economic Crises Leave 
Vulnerable Populations Exposed'', The Brookings Institution (2020), 
available at https://www.brookings.edu/blog/up-front/2020/08/13/the-
COVID-19-public-health-and-economic-crises-leave-vulnerable-
populations-exposed/.
     \8\ Theresa Andrasfay and Noreen Goldman, ``Reductions in 2020 
U.S. Life Expectancy Due to COVID-19 and the Disproportionate Impact on 
the Black and Latino Populations'', Proceedings of the National Academy 
of Sciences 118 (5) (2021).
     \9\ See Austin Clemens and Michael Garvey, ``Structural Racism and 
the Coronavirus Recession Highlight Why More and Better U.S. Data Need 
To Be Widely Disaggregated by Race and Ethnicity'', Washington Center 
for Equitable Growth (2020), available at https://equitablegrowth.org/
structural-racism-and-the-coronavirus-recession-highlight-why-more-and-
better-u-s-data-need-to-be-widely-disaggregated-by-race-and-ethnicity/.
---------------------------------------------------------------------------
    Third, economists have long understood that quality of work is an 
important dimension to measure the economy. COVID-19 has exposed the 
growing reconstruction of what has been termed ``factory discipline'' 
by economic historians. \10\ Factory discipline is a world in which the 
manager is a de facto authoritarian. They tell workers when they work, 
control their conduct on the job, and make sure that they stayed on 
task. A major distinction in this factory discipline system is that 
workers were rewarded not just for the output that they produce but 
also for their conduct on the job. There are large and frequent 
punishments for even minor infractions, and this does not matter if 
they are related to output. Some economists view this type of 
discipline as a failure of the free market system. Discipline designed 
and implemented to coerce workers into doing more than they would have 
freely chose, in controlling their conduct in a manner approaching 
abuse, is not a hallmark of a free market economy, in fact, it is the 
opposite.
---------------------------------------------------------------------------
     \10\ See Gregory Clark, ``Factory Discipline'', Journal of 
Economic History 54 (1) (1994): 128-163.
---------------------------------------------------------------------------
    In a coercive framework discipline is profitable because you can 
force workers to exert more effort than they would otherwise choose. 
Theoretically, in a competitive market employers must pay a ``disgust 
premium'' in order to get workers to subject themselves to the 
conditions of factory discipline. A ``disgust premium'' is like hazard 
pay, but instead of being for hazards inherent to the occupation itself 
(say, a firefighter's risk of harm in preventing the spread of a fire), 
the premium has to do with the working conditions being relatively 
intolerable. Now, it has to be true that the disgust premium must be 
less than the gains that you realize from the increased output. Firms 
will pay this disgust premium when the amount of fixed capital per 
worker is high--so it is opportune to industries with extensive capital 
investment, including automation that must be regularly monitored by 
workers.
    It is important to stress that high levels of fixed capital per 
worker are consistent with essential worker positions in manufacturing 
and other industries that could not transition substantially to remote 
work. We know that essential workers were more likely to be Black 
Americans, who make up nearly 20 percent of this sector. \11\ When we 
hear stories of extremely long work days with no time for restroom 
breaks, prohibitions on having a cell phone present on the factory 
floor, limitations on social interactions with coworkers, and other 
working conditions that these are modern parts of the discipline in 
work environments that first appeared with early industrialization. 
\12\ This type of discipline can also manifest itself in the way labor 
is organized in contemporary settings. The use of part-time work, the 
increasing number of workers who are part time, and the volatility of 
shift assignments can lead to significant income volatility and poor 
working conditions. \13\
---------------------------------------------------------------------------
     \11\ Molly Kinder and Tiffany N. Ford, ``Black Essential Workers' 
Lives Matter. They Deserve Real Change, Not Just Lip Service'', The 
Brookings Institution (2020), available at https://www.brookings.edu/
research/black-essential-workers-lives-matter-they-deserve-real-change-
not-just-lip-service/.
     \12\ Michael Sainato, ``14-Hour Days and No Bathroom Breaks: 
Amazon's Overworked Delivery Drivers'', The Guardian, March 11, 2021, 
available at https://www.theguardian.com/technology/2021/mar/11/amazon-
delivery-drivers-bathroom-breaks-unions.
     \13\ James P. Ziliak, Bradley Hardy, and Christopher Bollinger, 
``Earnings Volatility in America: Evidence From Matched CPS'', Labour 
Economics 18 (6) (2011): 742-754. Bradley L. Hardy, ``Black Female 
Earnings and Income Volatility'', The Review of Black Political Economy 
39 (4) (2012): 465-75.
---------------------------------------------------------------------------
    What I just said should seem to be inconsistent with other facts 
about the economy that we generally accept. We know that wages of 
workers have stagnated, and I just noted that there should be a disgust 
premium for this type of work settings. Over time, either this premium 
should increase--leading to higher wages, or the working conditions 
would significantly improve in these industries. Our evidence points to 
little improvement in working conditions and little movement in real 
wages. This implies something else is happening to our labor market. 
Economists have now coalesced around the rise of labor market monopsony 
as one reason why wages have stagnated and why we can see both high 
levels of factory discipline, few protections for workers, and flat 
real wages. \14\
---------------------------------------------------------------------------
     \14\ Given the problems with appropriately measuring CPI, real 
wages for low-wage workers could not only have stagnated, but they 
could have declined in the last several decades.
---------------------------------------------------------------------------
Labor Market Monopsony
    Monopsony is a topic rarely taught in a standard introduction to 
economics course, but it is playing a large role in the way in which we 
understand the labor market today. In layperson's terms, monopsony is 
the exact opposite of monopoly, but it has the same effect of 
distorting the market in uncompetitive ways. We have a monopoly when 
one firm supplies a good, and we have a monopsony when one firm demands 
a good. In both cases, the market is inefficient. \15\ How does 
monopsony work? In a labor market, monopsony decreases wages--there is 
only one employer--and it can increase inequality and can lower 
productivity. Moreover, the existing scholarship on monopsony shows it 
to be particularly powerful in low-wage labor markets, where workers 
have fewer employment substitutes and where other market frictions 
could strengthen the effects of market concentration on wages, where 
both the frictions and market concentration have a disproportionate 
impact on Black workers. \16\
---------------------------------------------------------------------------
     \15\ Orley C. Ashenfelter, Henry Farber, and Michael R. Ransom, 
``Labor Market Monopsony'' Journal of Labor Economics 28 (2) (2010): 
203-10. Sydnee Caldwell and Suresh Naidu, ``Wage and Employment 
Implications of U.S. Labor Market Monopsony and Possible Policy 
Solutions'', Washington Center for Equitable Growth (2020), available 
at https://equitablegrowth.org/wage-and-employment-implications-of-us-
labor-market-monopsony-and-possible-policy-solutions/.
     \16\ Alan B. Krueger and Eric A. Posner, ``A Proposal for 
Protecting Low-Income Workers From Monopsony and Collusion'', Policy 
Proposal 2018-05, The Hamilton Project (2018), available at https://
www.hamiltonproject.org/papers/a-proposal-for-protecting-low-income-
workers-from-monopsony-and-collusion.
---------------------------------------------------------------------------
    Recent research shows that labor markets with high degrees of 
market concentration and few employers per sector have lower wages, and 
that the rise of market concentration is a better explanation of the 
stagnation in wages for the past 40 years when compared to import 
competition or automation, which are more recent phenomena. \17\ There 
are also studies which look at particular labor markets, such as those 
for nurses and in the retail sector, which show that wages do not 
respond in markets with high levels of market concentration, a sign 
that competition is stymied. \18\
---------------------------------------------------------------------------
     \17\ Efraim Benmelech, Nittai Bergman, and Hyunseob Kim, ``Strong 
Employers and Weak Employees: How Does Employer Concentration Affect 
Wages?'' NBER Working Paper 24307 (2018), available at https://
www.nber.org/papers/w24307.
     \18\ Jordan D. Matsudaira, ``Monopsony in the Low-Wage Labor 
Market? Evidence From Minimum Nurse Staffing Regulations'', Review of 
Economics & Statistics 96 (1) (2014): 92-102. Arindrajit Dube, Laura 
Giuliano, and Jonathan Leonard, ``Fairness and Frictions: The Impact of 
Unequal Raises on Quit Behavior'', American Economic Review, 109 (2) 
(2019): 620-63. Naomi Hausman and Kurt Lavetti, ``Physician Practice 
Organization and Negotiated Prices: Evidence From State Law Changes'', 
American Economic Journal: Applied Economics 13 (2) (2021): 258-296.
---------------------------------------------------------------------------
    On the other side of the labor market, recent research analyzing 
millions of job ads finds that many Americans are located in local 
labor markets where only a few employers posted the majority of job 
ads. \19\ Even more important, as concentration increases, wages 
decline dramatically, and this effect is more pronounced in rural 
areas, which are more likely to be dominated by a small number of 
employers.
---------------------------------------------------------------------------
     \19\ Jose Azar, Ioana Marinescu, and Marshall I. Steinbaum, 
``Labor Market Concentration'', NBER Working Paper 24147 (2019), 
available at https://www.nber.org/papers/w24147.
---------------------------------------------------------------------------
    How far could this market concentration reach? The following 
example from the product market would be useful. In 2008, the U.S. 
Department of Justice approved the merger of Miller and Coors, at the 
time the second- and third-largest brewers in the United States, and 
leaving the market with just one large competitor, Anheuser Bush. When 
the merger was approved, the Department of Justice reasoned that the 
decreased cost of beer production would outweigh any anticompetitive 
forces given the increase in market concentration. While beer prices 
had been on a downward trend before the merger, they increased 
immediately after the merger by more than 5 percent in the market. 
Changes in consumer demand for beer or cost increases do not account 
for this. Rather, with less competition, the two dominant firms can 
charge higher prices estimated to be roughly 8 percent higher than what 
would have prevailed absent the merger, all at the expense of 
consumers. \20\
---------------------------------------------------------------------------
     \20\ Nathan H. Miller and Matthew Weinberg, ``Understanding the 
Price Effects of the Miller/Coors Joint Venture'', Econometrica, 85 (6) 
(2017): 1763-1791.
---------------------------------------------------------------------------
    The analysis of the market effects of mergers after they are 
approved is still a relatively new area of research in industrial 
organization, and the analysis that we have is somewhat limited about 
the impact of mergers on labor demand and the scope for monopsony. \21\ 
At the same time, some basic facts about the role of market 
concentration and wages are becoming clear. While productivity has 
continued to increase, the median pay for American workers has 
stagnated. \22\ There is an abundance of research showing that, 
overall, labor's share of income has declined over time. This is 
inconsistent with the gains in productivity and a well-functioning 
labor market, and the wedge between worker productivity and wages is 
widening.
---------------------------------------------------------------------------
     \21\ See Nancy Rose, ``Thinking Through Anticompetitive Effects of 
Mergers on Workers'', MIT Working Paper (2019).
     \22\ Marshall Steinbaum, ``Antitrust, the Gig Economy, and Labor 
Market Power'', 82 Law and Contemporary Problems, (2019): 45-64.
---------------------------------------------------------------------------
    Workers certainly face a smaller number of employers than before. 
In the last 30 years small employers have vanished while large 
companies have become more dominant. Firms with fewer than twenty 
employees have declined 15 percent as a share of total employment, 
while firms that have 10,000 or more employees have grown 16 percent in 
the same timespan. More than a quarter of employment in the United 
States today is in the largest firms. \23\ In the last 15 years market 
concentration has accelerated. For example, the two largest firms in 
hardware stores, shipbuilding, tobacco, pharmacies, car rentals, 
amusement parks, and mattress manufacturing control over 50 percent of 
their markets. In some high tech sectors the concentration is even more 
pronounced: the two largest firms in smartphones and social networking 
control more than 80 percent of the total market. When one factors in 
local market concentration, which we typically do not estimate, the 
situation is even more extreme. \24\
---------------------------------------------------------------------------
     \23\ David Leonhardt (2018). ``Big Business, Squashing Small'', 
New York Times, June 18, Section A, p. 23 New York Edition.
     \24\ David Leonhardt (2018). ``The Monopolization of America'', 
New York Times, Nov. 26 Section A, p. 23 New York Edition.
---------------------------------------------------------------------------
    Outside of mergers, market concentration, and monopsony itself is 
the rise of what I term 21st century factory discipline. This new form 
of discipline is related to what you can do during and even after your 
employment ends. Employers now are not only attempting to control the 
work environment of today, they are also holding workers to agreements 
that extend beyond their employment. Examples include noncompete 
agreements and nonpoaching agreements among franchisees. Both of these 
can work to depress wages by structurally reducing labor market 
mobility, where firms compete for workers who have a choice of whom 
they will provide their labor to. Recent survey evidence shows that one 
in five workers with a high school education or less are subject to a 
noncompete agreement. Nonpoaching agreements have also proliferated, 
and today more than half of all major franchises forbid their 
franchisees from competing for one another's workers. \25\
---------------------------------------------------------------------------
     \25\ Alan B. Krueger and Eric A. Posner, ``A Proposal for 
Protecting Low-Income Workers From Monopsony and Collusion'', (2018).
---------------------------------------------------------------------------
    New survey evidence shows that noncompete agreements lower workers' 
earnings and reduce job mobility. Even more alarming is that more 
granular work shows that if one works in a State with strict NCA laws 
but lives in a neighboring State without strict NCA laws, the negative 
effects of the NCAs still hold. Moreover, workers without NCAs can be 
negatively impacted by workers with NCAs as they have large negative 
spillovers in the labor market. We now know that NCAs also exacerbate 
racial wage gaps, accounting for as much as 9 percent of the wage 
differentials. \26\ Workers are not free to search freely for better 
opportunities to the degree that they were in the past. Discipline 
within firms still exist, but now the discipline of postemployment 
options is more prominent than ever, and is related to lower wages.
---------------------------------------------------------------------------
     \26\ Mathew Johnson, Kurt Lavetti, and Michael Lipsitz, ``The 
Labor Market Effects of Legal Restrictions on Worker Mobility'', 
Working Paper, The Ohio State University (2020), available at http://
dx.doi.org/10.2139/ssrn.3455381.
---------------------------------------------------------------------------
    One particular way in which the financial sector may play a role 
here is in the rise of passive investing and market segment (common 
stock) investing in particular. Under the principles of 
diversification, investors have sought to invest in markets, not 
companies. Holding shares in a sector fund, for example, make investors 
relatively agnostic about which particular firm is doing best. With 
more investors following this line of thought and remaining relatively 
silent shareholders, the rise of monopsony power drives anticompetitive 
forces in markets as investors are concerned with the sector as opposed 
to specific firms. Common stock ownership can enhance the market 
concentration of firms by diminishing the competitive forces of the 
market--they can unintendedly lead to more apparently collusive 
behavior that can lead to both monopsony and duopoly style pricing for 
consumers. \27\
---------------------------------------------------------------------------
     \27\ Jose Azar, Martin C. Schmalz, and Isabel Tecu, 
``Anticompetitive Effects of Common Ownership'', Journal of Finance, 
73(4) (2018): 1513-1565. Lysle Boller and Fiona Scott Morton, ``Testing 
the Theory of Common Stock Ownership'', Working Paper, Yale University 
(2019).
---------------------------------------------------------------------------
From Discipline to Worker Freedom
    There are solutions to this problem. The first is to understand 
that antitrust law can and should be applied to the potential labor 
market impacts of monopsony power via market concentration. \28\ 
Second, we discourage the use of NCAs and nonpoaching agreements, as 
both of these harm workers and are against the principles of a free 
market competition. Indeed, recent research has shown that bans on NCAs 
increase wages overall by more than 2 percent, and for the workers 
where the NCAs are more common by even more, as high as 15 percent. 
\29\ Despite the coalescence of research on negative effects of NCAs, 
nearly 80 percent of States have failed to comprehensively study their 
NCA statutes, leading to a national patchwork of legal environments.
---------------------------------------------------------------------------
     \28\ Suresh Naidu, Eric Posner, and E. Glen Weyl, ``Antitrust 
Remedies for Labor Market Power'', 132 Harvard Law Review 537 (2018).
     \29\ Lipsitz, Michael, and Evan Starr, ``Low-Wage Workers and the 
Enforceability of Noncompete Agreements'', Forthcoming, Management 
Science (2021).
---------------------------------------------------------------------------
    Both Federal antitrust and State NCA law can move us in positive 
directions, but both of these require investments in items I mentioned 
at the outset. First, better, broader and more frequent information 
about workers, wages, and market concentration are needed. We also need 
to carefully consider the labor market implications of mergers (large 
and small), and specifically model the potential for market collusion 
to harm consumers and workers simultaneously. Third, we must begin to 
think about how the rise of passive investing influences firm 
competitive decisions, which can give rise to de facto collusion 
leading to higher prices and lower wages.
    A fourth area of focus is to encourage small business development 
and entrepreneurial activity, the benchmark of market competition and 
innovation. Our experience from the Paycheck Protection Program shows 
the ways in which the largest banks have failed small businesses, 
especially small Black-owned businesses. Black-owned firms faced major 
delays in securing much-needed PPP funds, and a higher share of Black 
businesses closed. Part of this is due to many small Black businesses' 
lack relationships with the largest banks, who dominated the PPP 
market. We now know that that only a third of healthy or stable Black 
employers had received bank funding in the past 5 years, while more 
than half of White owned businesses have. \30\
---------------------------------------------------------------------------
     \30\ This is despite Black-owned firms being significantly more 
likely to be located in COVID-19 hotspots. See Claire Kramer Mills and 
Jessica Battisto, ``Double Jeopardy: COVID-19's Concentrated Health and 
Wealth Effects in Black Communities'', Federal Reserve Bank of New York 
(2020), available at https://www.newyorkfed.org/medialibrary/media/
smallbusiness/DoubleJeopardy--COVID19andBlackOwnedBusinesses. Rob 
Fairlie, ``The Impact of COVID-19 on Small Business Owners: Evidence of 
Early Stage Losses From the April 2020 Current Population Survey'', 
NBER Working Paper No. 27309 (2020), available at https://www.nber.org/
papers/w27309.
---------------------------------------------------------------------------
    Lastly, we need to stand firm on economic principles of open, fair, 
and just market competition, which includes both basic protections for 
workers and protects their ability to freely move to better 
opportunities in the workplace.
                                 ______
                                 
                 PREPARED STATEMENT OF ANDREW F. PUZDER
            Former Chief Executive Officer, CKE Restaurants
                             April 29, 2021
    I want to thank Chairman Brown, Ranking Member Toomey, and the 
Members of the Senate Banking, Housing, and Urban Affairs Committee for 
giving me the opportunity discuss the ``Dignity of Work'' an issue near 
and dear to me and of great importance for American workers and 
businesses alike.
    My name is Andrew F. Puzder. For over 16 years it was my privilege 
to serve as the CEO of CKE Restaurants, which, during my tenure, owned 
or franchised over 3,800 restaurants in 45 States and 40 foreign 
countries employing over 100,000 people internationally, about 80 
percent of whom worked in the United States.
    The story of how I became CEO is a distinctively American story, 
and it says a lot about the importance and value of work in our 
national character.
The Dignity of Work
    My father's parents came to our shores from Eastern Europe in the 
early 1900s in search of a better life--as immigrants have done 
throughout our history as a Nation. My grandfather was a construction 
worker until he died during the Great Depression. My grandmother got a 
job in the janitorial department at Thompson Products to support my dad 
and his sister after my grandfather's death.
    My dad was a WWII combat vet; after the war, he and mom set up 
their home in a working class neighborhood outside of Cleveland. Dad 
was a Ford car salesman. Neither he nor Mom had what today we would 
call an advanced education--I'm not even certain they graduated from 
high school. But, as a kid, I was always told I could be anything I 
wanted to be--if I was willing to do the work.
    And thank God, I lived in a country where that was true. There was 
a path to success. For me, it wasn't an easy path. In fact it was an 
arduous path, but there was a path. In my grandparents' native country, 
there was not.
    As a teenager, I worked at the local Baskin-Robbins scooping ice 
cream. It's a job where I learned about being part of a team, the 
importance of showing up on time, being polite and courteous to 
customers, dealing with things like inventory and product quality and, 
perhaps most importantly, the personal satisfaction that comes with 
taking pride in your work.
    I can still recall when the franchise owner of that Baskin-Robbins 
called me into her office, gave me a 10 cent an hour raise (to $1.10), 
handed me a key, and told me I was now the Assistant Manager. It 
remains the proudest day of my career. I opened up the place the 
following day and I'll bet we had the cleanest Baskin-Robbins in 
America that morning.
    That 10 cent raise meant little in real dollars but it was a 
confirmation that what I did had value, that I could be more than I 
was, and that where I came from was less important than where I was 
going. I felt the kind of pride and self-confidence that can keep a 
person working or in school, striving for success, and off the streets.
    Would I have been as inspired to work as hard if I knew I would 
keep that job regardless of how well I performed? Would I have felt as 
proud or as self-confident if I got that promotion because of who I was 
rather than what I did? For those who have never shared the work 
experience, or any experience where success is not assured and failure 
is always a possibility, the answer is--unequivocally--No! There is no 
substitute for earned success.
    That was my first experience with the dignity of work.
    Over the coming years, I worked my way through college and law 
school while supporting my small family (a wife and two children) doing 
just about any job I could find like painting houses, cutting lawns, 
and busting up concrete with a jackhammer in the scorching St. Louis 
summer heat. I worked every job I could find as I had no Government or 
family help to get through college or law school.
    And, as I noted, I eventually became a successful lawyer and CEO.
    Today, I tell this story to my grandchildren. They seem surprised 
that their grandpa once worked as a laborer, and that our family once 
had a different standard of living than the one we enjoy today.
    I tell them there's never been another country in the history of 
the world where a working-class kid like me could have aspired to that 
level of success with any realistic chance of achieving it. They should 
understand that, had our family lived in almost any other country, my 
story--and theirs--would have been very different. Had I been born in a 
socialist country--the Soviet Union of old, or Cuba and Venezuela of 
today--the notion of lifting myself up from the working class--more 
likely the working poor--would either never have occurred to me or, if 
it had, would have seemed an unachievable dream.
    The most gratifying part of my being a CEO was seeing this process 
repeat itself over and over in our restaurants. Young people, often 
immigrants or the children of immigrants, would start off working in 
our restaurants at an entry level position, then eventually become 
shift leaders or managers, some became franchisees who owned their own 
restaurants while others used the job to help get them through college 
or to get the experience required for a different job. Many with dreams 
of a better life similar to mine.
    That's the American Dream. It exists because our free enterprise 
system inspires a thriving private sector--businesses small and large 
that create jobs and job opportunities such as the ones I was 
privileged to hold. When we encourage that private sector, it thrives 
and creates the kind of opportunities that were open to me. This is why 
I have always fought for policies that encourage job creation and 
opposed those that kill the entry-level jobs that America's youth, 
particularly underprivileged youth, need to get on the ladder of 
success.
    We should never ignore the needs of those living in poverty. I hope 
that, as a Nation, we never will. But it is also a mistake to ignore 
the reality that most Americans want to earn their success. For that, 
we need the jobs private sector businesses create and policies that 
encourage them to do so.
    When we encourage the private sector, entrepreneurs thrive and 
create the kind of opportunities that were open to me. But we don't 
have to look back to the 1960s and 70s to see how the economy and 
public policy impact workers lives.
The Impact of Public Policy
    In 2019, for example, the Tax Cuts and Jobs Act, broad-based 
deregulation and a focus on domestic energy production, inspired 
American businesses to focus on making a profit and growing. As a 
result, America experienced the strongest labor market in my lifetime 
and perhaps ever. The job opportunities, particularly for low-wage and 
minority workers, were nothing short of historic.
    For every month in 2019, the unemployment rate was at or near a 50-
year low and lower than the CBO forecast it would be with full 
employment. In every month there were more job openings than people 
unemployed and for most months there were over 1 million more job 
openings than people unemployed.
    With employers competing for workers, year-over-year wages rose 3 
percent or more every month and rose more for low wage workers than 
high wage workers. For the first time in decades, it was harder to find 
blue collar workers than it was to find White collar workers.
    As a result, people who had given up and dropped out began flocking 
back into the labor force. In the fourth quarter of 2019, 74.2 percent 
of workers entering employment came from out of the labor force rather 
than from the ranks of the unemployed--the highest share since 1990, 
when the Government began reporting the data.
    With wages rising and good quality jobs abundant, median family 
income grew to a record high $68,703, an impressive 6.8 percent 
increase over 2018. It was the largest 1-year increase in median income 
on record going back to 1967. Household income grew by an even greater 
7.9 percent for Black Americans, 7.1 percent for Hispanic Americans, 
and 10.6 percent for Asian Americans. All record highs as were the new 
income levels for each of these groups.
    As household income grew, the poverty rate plummeted 1.3 percentage 
points to a 60-year low of 10.5 percent. This was the largest reduction 
in poverty in over 50 years. The decline in poverty for minorities was 
even greater. Black poverty fell by 2.0 percentage points, Hispanic 
poverty fell by 1.8, and Asian poverty fell by 2.8.
    With more jobs, higher wages, and declining poverty, income 
inequality also declined in 2019--and for the second year in a row.
    I've discussed these statistics but I can't emphasize enough that 
there are real people behind the figures--people who felt like their 
efforts were paying off for themselves and their families, because they 
were--just as I had felt 50 years before.
    This broad based labor market strength was the result of business 
friendly Government policies and the desire every entrepreneur has to 
make a profit. It's good to keep in mind that, in free market 
economies, businesses profit only by meeting the needs of others. 
Capitalism encourages people to improve their own lives by providing 
the products or services that other people want at a price they can 
afford.
    Grocery stores are a good example of this dynamic in action. Their 
shelves are lined with literally thousands of products, each one 
representing a business or an entrepreneur trying to get your attention 
and convince you that they have what you want at a price you can 
afford. It's no surprise that visitors from socialist Nations are 
astonished by the abundance in our grocery stores.
    So, far from encouraging a self-centered outlook, Capitalism is 
actually a constraint on that evil. Businesspeople cannot succeed 
unless they look outward and try to understand the needs, desires, and 
perspectives of their customers. When they do that well and they make a 
profit, they better their own lives, with the enormous added benefits 
of creating prosperity and abundance, jobs and incomes, tax revenue and 
communal goods for society in general.
    The reality is that businesses striving for profit benefit society 
as a whole--and create the jobs that make the dignity of work a 
reality.
    Going forward, I have two primary concerns when it comes to 
Government policies, job creation and the potential loss of 
opportunities for working and middle class Americans. First, the impact 
of what has been called stakeholder capitalism and, second, the Biden 
administration's current economic policies.
The Impact of Stakeholder Capitalism on Job Opportunities
    Today, a major threat to the kind of opportunities that were 
available to me in my youth comes from what is called ``stakeholder 
capitalism.'' It is an effort to expand a business' primary 
responsibility from maximizing returns for its shareholders to 
addressing the needs of various other so called ``stakeholders,'' such 
as employees, customers, suppliers, and the community in general.
    No discussion of this topic would be complete without at least a 
reference to Milton Friedman's belief that a business' only social 
responsibility is to ``use its resources and engage in activities 
designed to improve its profits'' consistent with law and ``ethical 
custom.''
    In other words, businesses must and do attend to the needs of their 
customers and employees; they can't survive, much less prosper, without 
doing that. In addition, businesses must and should comply with laws, 
like environmental regulations, that address and account for social 
goals that are externalities in the profit/loss equation. The 
importance of ``ethical custom'' comes into view especially when 
businesses operate internationally; American businesses should stay 
within the limits of American ethics when considering, for example, 
selling surveillance technology to Chinese companies engaged in 
oppressing the Uighurs in Xinjiang province.
    But Friedman's point was that within those relatively broad limits 
it is not only permissible for businesses to pursue profit as the 
primary goal; it is the only way they can fulfill their broader social 
purpose: creating and broadly distributing wealth and opportunity to 
our people--the wealth and opportunity that cannot be created other 
than through profit-driven capitalism, and without which the social 
goals of the stakeholder capitalists are unachievable.
    It's important to examine why the law recognizes the corporate form 
in the first place--why we have a business structure that exists apart 
from its owners and how society benefits from that structure.
    Corporate ownership exists primarily to facilitate investment. It 
permits people to start a business, invest in it by purchasing stock 
and limit their personal liability to the loss of that investment. 
Assuming shareholders and management abide by the law and respect the 
corporate formalities, the corporate entity shields investors from 
personal liability for the broader obligations of the business--such as 
debts or lawsuits. If the business goes under, they'll lose their 
investment, but only their investment.
    This structure provides tremendous societal and economic benefit by 
encouraging people to start, invest in, and grow businesses. Faced with 
high levels of risk, people tend to put their money under the mattress 
so to speak. If we limit investor exposure to the known risks of 
business success or failure, they are more likely to invest. In this 
respect, corporations are the primary risk limiting vehicle for 
business formation and growth. As businesses grow so do opportunities, 
jobs, wages, and wealth.
    This corporate structure has been overwhelmingly successful in 
generating investment, broad based economic growth, and prosperity. 
There is a reason virtually every country, and certainly every 
prosperous country, allows and encourages the corporate structure.
    Because capital investment is a critical component of economic 
prosperity, the next question is why do people invest in a business?
    The answer is profit. The greater the potential for profit--or a 
return on their investment--the greater the attraction of investment 
and the greater the associated economic growth.
    My biggest concern with stakeholder capitalism is the opportunity 
costs of trying to turn businesses into engines of social rather than 
economic progress. When corporations assume or are forced to assume 
noneconomic obligations and thereby reduce their focus on profit, it 
reduces the incentive to invest and the capital available for dynamic 
growth. What that means for the broader community is fewer jobs, poorer 
paying jobs, reduced innovation, fewer products for consumers, and 
reduced prosperity in general. In short, lost opportunity.
    To be sure, corporations, like all businesses, are engines of 
economic production, and people need more than just wealth. That is why 
healthy societies have healthy families, strong religious 
organizations, flourishing arts, and other social institutions through 
which people find love, moral clarity, inspiration, and emotional 
stability. Businesses are not and cannot be the primary agents for 
meeting those needs. But what they can and will do is provide the 
wealth which supports the rest of society--if the Government allows the 
profit motive to do its work.
    In reality, corporate focus on private sector profit has played a 
major role in lifting not only the United States, but humankind itself 
from centuries of privation and misery to an era of unparalleled 
prosperity. Over the past 25 years, living standards have improved as 
annual global output has grown from around $39 trillion to $80 trillion 
because of ``economic freedom underpinned by free-market capitalism,'' 
according to the Heritage Foundation's Index of Economic Freedom for 
2020. In economically free societies people live longer, are healthier, 
take better care of the environment, and push scientific innovation 
further.
    If we are to continue to prosper, thrive and create opportunities 
for people to experience the dignity of work and the benefits of earned 
success, it is extremely important that businesses retain their focus 
on business success rather than solving problems better addressed by 
other social and governmental institutions.
Concerns With Respect to the Biden Administration's Economic Policy
    As we emerge from the recession, we will need America's small 
businesses to reignite labor market growth. Coming out of the last 
recession, small businesses created nearly two-thirds of all new 
private-sector jobs. But these are the businesses that were hit hardest 
by the pandemic's economic lockdowns and they will need to hire (or 
rehire) enthusiastically to reach the Biden administration's goal of 
returning the labor market to prepandemic levels of full employment.
    So the message the Biden administration is sending to small 
businesses is extremely important.
    This is Job Creation Rule number one: businesses invest in growth 
and hiring when they can forecast a profit. Unfortunately, the Biden 
administration's message to American businesses boils down to: ``We're 
going to increase your labor and energy costs, unionize your business 
whether your employees want it or not, and then over-regulate and over-
tax you.'' That message will not inspire businesses to create millions 
of jobs.
    Let's take a look at that message from the perspective of small 
businesses.
    The Biden administration is clearly committed to increasing labor 
costs. Take the proposal for a $15 minimum wage. Business owners around 
the country are considering right now whether to reopen and try to grow 
their companies--whether to invest more of their money or try to raise 
money from others--knowing that a very large increase in the price of 
entry level labor may be coming, making it more difficult if not 
impossible for them to be profitable. Will that increase make it more 
or less likely that they will invest?
    Small businesses also see energy costs increasing as the Biden 
administration ramps up its efforts to limit carbon emissions, 
including the cancelation of the Keystone XL oil pipeline and 
suspending the issuance of oil and gas permits on Federal lands. This 
will mean increased transportation, heating and cooling costs, not to 
mention increased prices at the pump reducing consumers' spendable 
cash.
    Then there are proposals to change the nature of the employer/
employee relationship which could overturn whole models of doing 
business. The House has already passed the Protecting the Right to 
Organize Act, which, among other things, would expand the ``joint 
employer'' doctrine making it easier to unionize hundreds of thousands 
of small, franchised, and gig economy businesses by deeming franchisors 
``joint employers'' of their franchisees' employees and converting 
independent contractors into employees. The Department of Labor has 
already moved to expand the ``joint employer'' definition.
    The restaurant chain I ran consisted mostly of franchised stores. I 
don't believe our model could survive if the corporate entity were made 
jointly responsible for the franchisees employees. Why would we, or our 
franchisees, have invested in business and job growth if it seemed 
likely that the Government was going to outlaw our business model?
    Small businesses are also factoring in a deluge of unfriendly 
business regulations when contemplating growth. To implement Green New 
Deal--even Green New Deal Lite--policies alone, small businesses are 
anticipating a regulatory onslaught.
    Finally, there are tax increases. Treasury Secretary Janet Yellen 
recently acknowledged that tax rates could increase on corporations, 
individuals, capital gains, and dividends. The tax hikes are coming and 
small business owners know their customers will have less to spend and 
that a good chunk of any profits they manage to earn will go to the 
taxman.
    So what are many small businesses and entrepreneurs thinking right 
now? The economy is likely to see a surge based on pent up consumer 
demand and Government spending. There will be an opportunity for profit 
in the short term, but higher costs, more regulations, and tremendous 
uncertainty are just over the horizon. If I were still in business, I 
would be concentrating on making money while the Government spending 
lasts, and save it rather than invest in expansion under conditions 
where it's likely the return on investment will not be there.
    Business owners know that eventually they are going to have to 
operate in a normalized environment without massive government 
spending.
    In fact, given the tremendous uncertainty the government is 
creating with all these proposals that are so costly for business, I'm 
not even sure how a small business owner or investor could calculate 
the likely return on investment. What will labor and energy costs be 2 
years from now? How much money will consumers have to spend? What is 
going to happen with inflation? With all those unanswered and 
unanswerable questions, it's better to invest passively rather than in 
business growth.
Conclusion
    The dignity of work is dependent on the availability and quality of 
the private sector jobs investors, entrepreneurs, and business managers 
create. Without those opportunities, the American Dream becomes an 
impossible dream for young workers such as I once was and as many 
working class and minority youths are today.
    Due to the pandemic, they have just experienced a lost year, one 
they will never get back. We need policies that work and help recreate 
the historic prepandemic labor market conditions that so successfully 
and broadly expanded opportunities. It is our responsibility to pursue 
policies that encourage job growth and empower these young Americans to 
realize their potential and earn their success.
    We know what works.
    Thank you.
                                 ______
                                 
                 PREPARED STATEMENT OF VIVEK RAMASWAMY
            Founder and Executive Chairman, Roivant Sciences
                             April 29, 2021
Personal Background
    My name is Vivek Ramaswamy, and I would like to thank you for 
inviting me to share my perspectives on this important set of issues. 
By way of personal background, I am from southwest Ohio. I studied 
biology in college and spent nearly 7 years as a biotech investor at an 
institutional investment firm. For three of those years, from 2010 to 
2013, I attended law school while continuing to work as an investor. In 
2014, I left my role as an investor to found a biopharmaceutical 
company which I led as CEO from May 2014 through January 2021. I have 
also cofounded two technology startup companies.
    I serve on the board of directors of two nonprofit organizations--
the Philanthropy Roundtable and the Foundation for Research on Equal 
Opportunity. Starting one year ago, I began publishing op-eds and 
speaking publicly about issues relating to capitalism, democracy, and 
American identity. I have been a public critic of stakeholder 
capitalism, a topic that is relevant to today's hearing. I am writing a 
book about some of these topics, which will be published this summer.
    Last month, I stepped down as CEO of the company I founded, in part 
to separate my voice as a citizen from the voice of the company. In 
today's written and oral commentary, I offer strictly my personal 
viewpoints as a citizen, not those of any company or organization that 
I am affiliated with. Thank you in advance for understanding that.
My Perspectives on Corporate Purpose
    I will start by sharing my perspective on stakeholder capitalism.
    Stakeholder capitalism refers to the idea that companies should 
serve not only their shareholders, but also other societal interests. 
Companies across Wall Street, Silicon Valley, and everywhere in between 
have endorsed stakeholder capitalism. In 2019, the Business Roundtable, 
which represents many of America's largest corporations, overturned a 
22-year-old policy statement that previously said a corporation's 
paramount purpose is to serve its shareholders. In its place, its 181 
members signed and issued a commitment to lead their companies for the 
benefit of all stakeholders--not only shareholders, but customers, 
suppliers, employees, and communities. The multistakeholder model is no 
longer merely on the rise in corporate America. Today it is the 
arguably the dominant perspective.
    On its face, stakeholder capitalism is in tension with the demands 
of corporate law in many States, which holds that directors and 
executives of a company have a duty to one master: shareholders. In his 
famous 1970 essay published by The New York Times, Milton Friedman 
expressed concern that a shift away from shareholder primacy would 
cause companies to operate less efficiently and to be less profitable, 
leaving not only investors but also other stakeholders--including 
workers and consumers--worse off in the end.
    I share Mr. Friedman's concerns, but my main problem with 
stakeholder capitalism is different. My problem is that it strengthens 
the link between democracy and capitalism at a time when we should 
instead disentangle one from the other. Stakeholder capitalism, 
including its allies in the ESG movement, demands that companies and 
their leaders play a fundamental role in determining and implementing 
society's core values. But for companies to pursue social causes in 
addition to shareholder interests, companies and investors must first 
define what those other societal interests should be. That is not a 
business judgment. It is a moral judgment.
    Speaking as a former investor, a former CEO, and now as a private 
citizen, I do not want American capitalists to play a larger role than 
they already do in defining and implementing our country's political 
and social values. The answers to these questions should, in my 
opinion, be determined by our citizenry--publicly through debate and 
privately at the ballot box.
    Democratically elected officeholders like yourselves, not CEOs and 
portfolio managers, should lead the debate about what social values we 
ought to prioritize over others. Managers of corporations should 
rightly decide whether to build a manufacturing plant or a research 
lab; whether to invest in one piece of software or another; whether to 
promote one aspiring executive or a competitor.
    But a democracy should not want or pressure its business leaders to 
make the moral judgment about whether a minimum wage for American 
workers is more important than full employment, or whether minimizing 
society's carbon footprint is more important than raising prices on 
consumer goods. Investors and CEOs are no better suited to make these 
decisions than, with all due respect, any Member of this Committee is 
to make the day-to-day operating decisions of a biotechnology company.
    I was a biotech investor for nearly 7 years, and I was a biotech 
CEO for nearly 7 years after that. I have many personal beliefs on 
matters that went beyond biotechnology. For example, I'm vegetarian 
because I believe it is wrong to kill sentient animals for culinary 
pleasure. But I never banned my employees from eating meat. I had no 
special standing to legislate my morals as an investor or a CEO, even 
though I did make corporate decisions about drug development.
    Proponents of this new model of capitalism argue that companies 
will be more successful over the long run in serving shareholders if 
they also serve societal interests along the way. But if that's true, 
then classical capitalism should do the job just fine, since only 
companies that serve society will ultimately thrive, and ``stakeholder 
capitalism'' would be superfluous. In my opinion, social activism by 
companies is often business interest masquerading as moral judgment.
    It is puzzling that stakeholder capitalism is now viewed as a 
liberal idea. Many liberals who love stakeholder capitalism abhor the 
Supreme Court's 2010 ruling in Citizens United v. Federal Election 
Commission because it permits corporate money to influence elections 
and thereby implement corporations' values. In my opinion, stakeholder 
capitalism is Citizens United on steroids: it demands that powerful 
companies implement the social goals that their CEOs want to push. 
Companies should focus on providing goods and services that consumers 
want, not pushing social values that only a subset of people agree 
with.
    My colleagues in the pharma industry have often asked: does 
rejecting stakeholder capitalism mean putting profits ahead of 
patients? My answer to this question is emphatically no--because over 
the long run, the only way for a pharmaceutical company to be 
successful is by serving patients first.
    But putting patients first also means putting patients ahead of 
fashionable social causes. It means that we don't care about the race 
or gender of a scientist who discovers the cure to an important 
disease, or if the manufacturing and distribution process that delivers 
a COVID-19 vaccine most quickly to patients is carbon-neutral or not.
    Historically, stakeholder capitalism reflects conservative European 
social thought, which was skeptical of democracy and convinced that 
well-meaning elites should work together for the common good--as 
defined by them. In the Old World, that often meant some combination of 
political leaders, business and labor elites and the church working 
together to define and implement social goals. But America was supposed 
to offer a different vision: Citizens--not the church, not corporate 
leaders, not large asset managers--define the common good through the 
democratic process, without elite intervention.
Conflicts of Interest
    Conflicts of interest lie at the heart of the stakeholder 
capitalism debate. There are two kinds of conflicts of interest that I 
will discuss. The first relates to conflicts of interests of corporate 
executives. The second relates to the conflicts of interest of 
companies who advocate for the kind of legislation that you may 
contemplate--for example, legislation to compel more ESG-related 
corporate disclosures.
    Today, corporate law generally defines conflicts of interest in 
financial terms. Proving that an executive or director of a company has 
a conflict of interest means proving that the director has a financial 
interest that runs contrary to the interests of the corporation on 
whose board he or she serves. For example, if you serve on the board of 
a company, but that company is also a major customer of another firm 
that you own, then that's a financial conflict of interest that may 
disqualify you from making an impartial business judgment.
    But suppose you're an ex-politician--one who might want to get 
appointed to the Cabinet of a Presidential administration or want to 
run for office again--and you're on the board of a large manufacturer. 
Now suppose it comes to a decision about whether to shut down U.S. 
manufacturing plants here in the U.S. and to relocate them to a less 
expensive country like Mexico. You'll be less popular politically if 
you support moving the plant to Mexico. That means you have a conflict 
of interest, even though it's not a strictly financial conflict of 
interest.
    If Board Member A makes a decision to shortchange the company's 
shareholders by a little bit because of a personal financial conflict, 
and Board Member B makes the same decision because of a personal 
reputational benefit, why should the law treat them any differently? In 
my opinion, it should not.
    Maintaining your personal brand or reputation is not the only form 
of nonfinancial conflicts of interest. Personal social commitments can 
be a source of conflict too. Suppose a public company's CEO uses the 
corporate piggy bank to make a donation to his own high school, or his 
church. Most people would view this as an improper act, since his high 
school and his church have little to do with his business.
    But what if he uses the corporate piggy bank instead to make a 
large donation to a climate change organization? Or a specific racial 
advocacy movement? These causes also have little to do with his 
business. Yet over the last year, countless executives at companies 
both large and small have used the corporate piggy bank to donate to 
precisely these kinds of causes. And they are often lauded as heroes 
for doing so. They are using corporate resources to derive personal 
reputational benefit and personal moral satisfaction. That's often as 
serious of a conflict of interest as many financial ones.
    Finally, I would like to point out one other conflict of interest 
borne by many practitioners and proponents of ``stakeholder 
capitalism.'' Their visible ``do-good'' behavior creates a smokescreen 
that distract investors, employees, and--with all due respect--
lawmakers and regulators from more nefarious business practices. 
Whenever the leaders in a regulated industry ask for greater 
regulation, the real question is what they hope to achieve for 
themselves in the process. These are, in my opinion, relevant questions 
for policymakers to ask. For banks, committing to board diversity is 
easy; improving evaluation practices for new mortgages is hard. For 
soda companies, advocating for voting rights is easy; reckoning with 
the nationwide health impacts of soda consumption is hard. For Silicon 
Valley titans, disclosing climate-related risks is easy; building a 
sound business model that ensures privacy and doesn't harvest sensitive 
user data is hard. For an online retail monopoly, issuing a declaration 
about racial injustice is easy; treating workers respectfully while 
maximizing your operating margin is hard. When choosing between 
accepting constraints on matters that relate to the core of your 
business versus constraints on matters that are ancillary to your 
business, self-interested business leaders will generally choose the 
latter.
ESG Asset Bubble
    I worry about the possibility of an ESG-linked asset bubble. In 
order to understand why, certain factors leading to the 2008 financial 
crisis are instructive.
    The standard explanation for the pre-2008 subprime mortgage bubble 
was that predatory lenders were greedy sharks who took advantage of the 
opportunity to make home loans to individual borrowers who weren't very 
creditworthy. That's why they were called ``subprime'' mortgages. Prime 
mortgages were home loans made to people with reasonable 
creditworthiness. Subprime referred to everything else. Wall Street 
banks bundled up these different mortgages to reduce risk, then sold 
them to speculative investors. That bundle is what we call mortgage-
backed securities.
    But the unsatisfying thing about just blaming greed for the 2008 
financial crisis is that it fails to account for the fact that the 
greediest thing that someone could have done in 2006 and 2007 was also 
the smartest thing: bet against those mortgages. In retrospect it 
should have been obvious that many of these subprime borrowers would 
default on their home loans, and that's exactly what happened. If Wall 
Street bankers were so greedy, then why did they fail to capitalize on 
the opportunity? As it turns out, some did.
    But an important culprit was upstream of that greed: bad Government 
policy. Starting in the late 20th century, the U.S. Government embarked 
on an ambitious policy to drive home ownership in America. The idea of 
owning a home--as opposed to, say, renting one--was seen as the 
pinnacle of the American dream. The Government decided to help make 
that dream come true by creating special categories of loans to spur 
more home ownership, including among people whose incomes didn't 
support the value of the homes they went on to buy. In part, that's how 
quasigovernment, quasiprivate institutions like Fannie Mae and Freddie 
Mac came into being. The real question isn't why predatory lenders lent 
money to people who had poor credit scores; it's why bad predatory 
lenders had all that money to give out in the first place. One answer 
to that question is Government policy itself.
    In my opinion, that ought to be one of our key lessons from the 
2008 financial crisis: socially driven economic policy risks creating 
asset bubbles. And when those bubbles burst, they often end up hurting 
the very causes whom the original policy was intended to help. That's 
exactly what happened when the mortgage bubble burst in 2007, 
especially when that subsequently led to the failure of large 
investment banks in 2008.
    I am not a world expert on these matters. Others are. My reason for 
bringing it up isn't to offer a history lesson. Rather it's to offer an 
early warning: if hindsight is 20/20, it's particularly true for asset 
bubbles.
    Morningstar estimates about $50 billion of capital flows into U.S. 
sustainable open-end and exchange-traded funds in 2020--approximately 
10 times more than in 2018 and 2.5 times more than in 2019. According 
to the United States Forum for Sustainable and Responsible Investment's 
2020 report, total U.S.-domiciled assets under management employing ESG 
(environmental, social, and corporate governance) investing strategies 
increased 42 percent between 2018 and 2020, up to $17 trillion. This 
means that ESG-mandated assets now represent 33 percent of the $51.4 
trillion U.S. assets under professional management. This composition is 
only expected to rise, with ESG-mandated assets representing 50 percent 
of all managed assets in the U.S. by 2025. This is a staggering rise in 
assets invested behind a socially driven investment strategy. More 
money going into the same asset class only helps push prices higher. 
Higher prices mean higher returns for investors in the short run, but 
it is also a formula for creating asset class bubbles.
    Do ESG funds outperform the market? Based upon my review of 
empirical data while conducting research for my forthcoming book, the 
answer to this question is unclear at best. Some datasets support ESG 
investment outperformance; other datasets support the opposite 
conclusion. The existence of dueling datasets shouldn't surprise 
anyone. I believe that these so-called ``empirical'' exercises are 
often agenda-driven, with preordained conclusions. Fudge factors 
include which companies to include versus exclude, the relevant time 
horizon to examine, what benchmark indices to use, and so on. Those are 
fundamentally subjective decisions, ones often made by people who know 
what conclusion they wish to reach.
    I do not know whether we are in the early stages of an ESG asset 
bubble. But if we are, then public policies that fuel this bubble could 
add kerosene to an early fire. I believe we learned as much from the 
American experience of economic policies to expand home ownership in 
the 1990s and early 2000s. By using disclosure requirements and other 
statutory or regulatory mechanisms to favor ESG investments today, we 
risk creating overinvestment in companies that advance a narrow set of 
noneconomic agendas. These policies may favor the industry leaders who 
advocate for them, but that does not necessarily make them good 
economic policies for America at large. It is worth noting that the 
fund managers who market these products often earn a hefty fee for 
doing so--just as subprime mortgage brokers did in the period leading 
up to 2008.
    Furthermore, the average U.S. investor is nearing retirement age or 
is already in retirement. According to the U.S. Federal Reserve Board's 
Survey of Consumer Finances, individuals over the age of 45 owned over 
67 percent of all U.S. equities over the past 30 years. Most of their 
stock is held in retirement accounts such as 401ks and IRAs, to which 
they've spent decades contributing their hard-earned income. Older 
people don't necessarily want to use their retirement savings to 
subsidize social causes. Most need the money to live out their golden 
years and want to have some left over to pass on to their children and 
grandchildren.
    That's not to say that older Americans are greedy. Many tend to be 
extremely generous. They care about supporting charitable causes, but 
they prefer to choose them for themselves, rather than leaving it to 
their mutual fund managers or CEOs of companies that they invest in. 
According to The Philanthropy Roundtable (whose board I joined last 
year), older people are more philanthropic because they tend to have 
more savings, time, and motivation to help others. Charitable giving 
peaks between ages 61 and 75, when up to 77 percent of households 
donate. If older people want to support specific social causes, their 
dollar may go further via a direct contribution to the specific 
charities and nonprofits that they care about, rather than companies 
that an expensive fee-charging investment manager happens to like.
Unforeseen Negative Externalities
    Stakeholder capitalism creates a negative externality for American 
democracy. There is a social cost to America's democratic fabric when 
business elites tell ordinary Americans what causes they are supposed 
to prioritize and what causes they needn't heed as much. I believe that 
much of current populist backlash and mistrust in our institutions 
originates not from the idea that companies pursue the interests of 
their shareholders, but rather from the idea that companies wield too 
much social power on normative questions that go beyond the 
marketplace. Continuing to demand that companies make moral judgements 
and exercise their social power is likely to fuel greater resentment 
from America's citizenry towards business and political elites who 
sidestep open public debate in our democracy to enforce a monolithic 
social agenda using their market power.
       RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                     FROM HEATHER C. MCGHEE

Q.1. Essential Workers Unionization/PRO Act--Thank you Mr. 
Chairman. Last month, this Committee held a briefing where we 
had a chance to hear directly from various workers, employed in 
different sectors of our economy, about reforms needed to 
better protect and strengthen our country's workforce. This 
hearing continues that discussion. The COVID-19 pandemic has 
underscored both the importance of unions in giving workers a 
collective voice in the workplace, as well as the urgent need 
to reform U.S. labor laws to stop the erosion of union rights. 
During the crisis, unionized workers have been able to secure 
enhanced safety measures, additional premium pay, paid sick 
time, and a direct say, in terms of furloughs and other forms 
of alternative work-share arrangements to help save jobs. These 
pandemic-specific benefits build on the many ways unions help 
workers. Unfortunately, however, while providing ``essential'' 
services we rely on daily, many nonunion workers have not been 
able to secure those same type of benefits. Workers have been 
forced to work without adequate personal protective equipment; 
many have no access to paid sick and family leave; and when 
workers have spoken up about health and safety concerns, some 
have even been fired.
    Can you talk about how unionization would better protect 
and strengthen our essential worker labor force, and how it 
would impact our economy?

A.1. The pandemic laid bare the problems with our labor system 
and how it continues to exploit workers. Unionization would 
better protect and strengthen our essential worker labor force 
by giving them the collective bargaining power to make 
permanent improvements to their lives and livelihoods. Despite 
facing a pandemic, an economic depression and the ongoing 
racism and violence against Black communities, tens of millions 
of workers that we deemed ``essential'' have been forced to 
risk their lives for less than $15 an hour, without protective 
gear or paid sick leave. These workers are mostly low-wage 
earners and disproportionately women, workers of color, and/or 
immigrants. We have witnessed firsthand the need for change--
more than just expressing gratitude, we need to respect, 
protect and properly compensate essential workers during covid 
and beyond.
    Improving the wages and protections our essential labor 
workforce is crucial to this country's economic recovery post-
covid. The creation of good-paying union jobs is key to 
rebuilding our fallen economy. Just 1 in 10 essential workers 
are represented by a union; percentages are especially low for 
food, agriculture and health care workers. Passing the PRO Act 
is just one of the many ways Congress can support working 
families as they try to dig themselves out of the economic hole 
that the pandemic created.
    Sources: https://www.epi.org/publication/why-unions-are-
good-for-workers-especially-in-a-crisis-like-covid-19-12-
policies-that-would-boost-worker-rights-safety-and-wages/; 
https://www.epi.org/blog/who-are-essential-workers-a-
comprehensive-look-at-their-wages-demographics-and-
unionization-rates/; https://www.vox.com/2021/6/16/22535274/
poll-pro-act-unionization-majority-bipartisan; https://
www.americanprogress.org/issues/economy/reports/2021/02/03/
495406/covid-19-economic-recovery-investments-must-benefit-
american-workers/; https://www.brookings.edu/blog/up-front/
2020/09/03/essential-workers-during-covid-19-at-risk-and-
lacking-union-representation/.

Q.2. Racial Wage Gap/PRO Act--Thank you Mr. Chairman for 
holding this important hearing. Last month, this Committee held 
a briefing where we had a chance to hear directly from various 
workers, employed in different sectors of our economy, about 
reforms needed to better protect and strengthen our country's 
workforce. This hearing continues that discussion. The right to 
organize and collectively bargain is tied directly to the 
urgent national conversation around the persistent economic 
disparities, particularly within our rural and low-income 
communities of color. Reports have shown that unionized labor 
and collective bargaining help shrink the racial wage gap, 
largely because compared to their White brothers and sisters, 
Black and Brown workers are more likely to have jobs 
represented by an organized union. And as we know, union 
workers overall get a larger boost to wages from being in a 
union than nonunion workers. \1\ In fact, an Economic Policy 
Institute study found that Black workers represented by a union 
are paid 14 percent more than their nonunionized peers, and 
Hispanic workers represented by unions are paid 20 percent more 
than their nonunionized peers. This means that the decline of 
unionization across this country has played a significant role 
in widening the racial wage gap over the last four decades, and 
that more unionized labor could help reverse this trend.
---------------------------------------------------------------------------
     \1\  https://www.epi.org/press/union-workers-are-paid-11-2-more-
and-have-greater-access-to-health-insurance-and-paid-sick-days-than-
their-nonunion-counterparts-policymakers-must-strengthen-workers-
ability-to-form-unions/
---------------------------------------------------------------------------
    Can you talk about how increasing the unionization of 
workers can help address the racial wage gap in our country?

A.2. Increasing the unionization of workers can definitely help 
address the racial wage gap in our country. As far back as 
reconstruction, there's proof that unions can provide a 
multiracial coalition of workers with good paying jobs, leaving 
both White workers and Black workers with working conditions 
that allowed for class mobility and the foundation of the 
middle class. The 40-hour workweek, overtime, health insurance, 
retirement benefits, and increased wages are all benefits that 
stem from union collective bargaining. Originally, Black 
workers were left behind, paid lower wages to create a 
hierarchy that White workers supported because they were 
treated better. With the formation of multiracial unions, both 
Black and White workers could reap the benefits of collective 
bargaining. With racial solidarity, White workers could not be 
threatened with replacement by lower wage Black workers, and 
Black workers were no longer second tier as compared to their 
White counterparts.
    However, there's still more work to be done. To this day, 
workers of color continue to be left behind, by misclassifying 
employees as independent contractors and through other means. 
Whole swaths of workers of color are unable to unionize because 
aggressively anti-union employers currently have the power to 
interfere. And according to researchers, while the share of 
workers in a union has directly tracked the share of the 
country's income that goes to the middle class, as union 
density is declining, the portion going to the richest 
Americans has increased.
    That is why we need the PRO Act. The PRO Act restricts 
anti-union activity coming from employers and attaches civil 
penalties for employers that break the rules. It also stops 
employers from misclassifying employees as independent 
contractors or freelancers, something they often do to prevent 
those workers from joining unions. Union jobs are a crucial 
step towards closing the racial gap because union jobs mean 
consistent work, a livable wage, worker protections, and 
benefits, all things that workers of color need to build 
generational wealth. Simply having unionized workers in an 
industry and/or region raises the standard for nonunion 
employers operating in the same industry and/or region.
    Sources: https://www.epi.org/blog/three-reasons-why-the-
pro-act-wont-destroy-freelancing-or-the-gig-economy/; https://
www.epi.org/publication/why-workers-need-the-pro-act-fact-
sheet/; https://www.nber.org/papers/w24587.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                        FROM LISA DONNER

Q.1. Essential Workers Unionization/PRO Act--Thank you Mr. 
Chairman. Last month, this Committee held a briefing where we 
had a chance to hear directly from various workers, employed in 
different sectors of our economy, about reforms needed to 
better protect and strengthen our country's workforce. This 
hearing continues that discussion. The COVID-19 pandemic has 
underscored both the importance of unions in giving workers a 
collective voice in the workplace, as well as the urgent need 
to reform U.S. labor laws to stop the erosion of union rights. 
During the crisis, unionized workers have been able to secure 
enhanced safety measures, additional premium pay, paid sick 
time, and a direct say, in terms of furloughs and other forms 
of alternative work-share arrangements to help save jobs. These 
pandemic-specific benefits build on the many ways unions help 
workers. Unfortunately, however, while providing ``essential'' 
services we rely on daily, many nonunion workers have not been 
able to secure those same type of benefits. Workers have been 
forced to work without adequate personal protective equipment; 
many have no access to paid sick and family leave; and when 
workers have spoken up about health and safety concerns, some 
have even been fired.
    Can you talk about how unionization would better protect 
and strengthen our essential worker labor force, and how it 
would impact our economy?

A.1. The labor movement and unionization has been a critical 
bulwark in delivering an economy that more broadly shares 
economic prosperity for everyone. People join unions to improve 
their working conditions, wages, and benefits such as paid sick 
days and health coverage that have been essential during the 
pandemic. As the share of workers in unions has declined, the 
share of the U.S. national income going to the top 10 percent 
of earners has increased substantially, according to the 
Economic Policy Institute. Over the past four decades, the 
unionized share of the workers has fallen from 27 percent in 
1979 to under 12 percent in 2018, while the share of income 
going to the top tenth of the earnings doubled to over half of 
all U.S. income in 2018. \1\ Research has shown that higher 
union density not only raises unionized worker wages but it 
also buoys the wages of nonunion workers, especially for those 
without college degrees. \2\
---------------------------------------------------------------------------
     \1\ Shierholz, Heidi. Economic Policy Institute. ``Labor Day 2019: 
Working People Have Been Thwarted in the Efforts To Bargain for Better 
Wages by Attacks on Unions''. August 27, 2019 at 2 to 3.
     \2\ EPI. ``Unions Help Reduce Disparities and Strengthen Our 
Democracy''. April 23, 2021, at 4.
---------------------------------------------------------------------------
    The decline in unionization was driven in part by the 
increased power and financialization of corporations that 
prioritized short-term stock performance, as discussed in my 
testimony. These strategies harmed workers through severe cost-
cutting that led to layoffs, offshoring, and wage and benefit 
cuts. \3\ These trends greatly exacerbated economic inequality 
and racial economic inequality and harms those working families 
but also the broader economy. As real median household earnings 
have largely plateaued, families have less disposable earnings 
to spend in a consumption-driven economy. Many families have 
resorted to high-cost debt to cover expenses and purchases as 
an increasing share of the national earnings have been diverted 
to the richest households. The economic inequality harms the 
economy by stifling overall consumption and demand, encouraging 
companies to pursue rent-seeking and monopolistic strategies 
that raise prices and reduce economic efficiency, and allowing 
wealthy families to hoard educational and economic 
opportunities that hinders talent and innovation. \4\ As Nobel 
Laureate Joseph Stiglitz has noted that ``greater equality and 
improved [overall] economic performance are complements.'' \5\
---------------------------------------------------------------------------
     \3\ Epstein, Gerald. University of Massachusetts. Political 
Economy Research Institute. ``Financialization: There's Something 
Happening Here''. Working Paper No. 394. August 2015 at 8.
     \4\ See Boushey, Heather. ``Unbound: How Inequality Constricts Our 
Economy and What We Can Do About It''. Harvard University Press: 
Boston. 2019.
     \5\ Stiglitz, Joseph. ``Inequality and Economic Growth''. 2016 at 
149.

Q.2. Racial Wage Gap/PRO Act--Thank you Mr. Chairman for 
holding this important hearing. Last month, this Committee held 
a briefing where we had a chance to hear directly from various 
workers, employed in different sectors of our economy, about 
reforms needed to better protect and strengthen our country's 
workforce. This hearing continues that discussion. The right to 
organize and collectively bargain is tied directly to the 
urgent national conversation around the persistent economic 
disparities, particularly within our rural and low-income 
communities of color. Reports have shown that unionized labor 
and collective bargaining help shrink the racial wage gap, 
largely because compared to their White brothers and sisters, 
Black and Brown workers are more likely to have jobs 
represented by an organized union. And as we know, union 
workers overall get a larger boost to wages from being in a 
union than nonunion workers. \6\ In fact, an Economic Policy 
Institute study found that Black workers represented by a union 
are paid 14 percent more than their nonunionized peers, and 
Hispanic workers represented by unions are paid 20 percent more 
than their nonunionized peers. This means that the decline of 
unionization across this country has played a significant role 
in widening the racial wage gap over the last four decades, and 
that more unionized labor could help reverse this trend.
---------------------------------------------------------------------------
     \6\  https://www.epi.org/press/union-workers-are-paid-11-2-more-
and-have-greater-access-to-health-insurance-and-paid-sick-days-than-
their-nonunion-counterparts-policymakers-must-strengthen-workers-
ability-to-form-unions/
---------------------------------------------------------------------------
    Can you talk about how increasing the unionization of 
workers can help address the racial wage gap in our country?

A.2. Growing unions are an essential component of redressing 
America's shameful legacy of racism and racial economic 
inequality by raising wages and the ability to save and amass 
household wealth. U.S. labor law has built-in racial bias by 
exempting domestic and agricultural workers from many important 
worker protections, disproportionately harming Black and Latinx 
workers, and some unions have had a problematic history of 
discriminatory exclusion, but unions today are among the most 
racially inclusive institutions in the country and union 
membership significantly reduces (but does not eliminate) both 
racial income and racial wealth inequality.
    Union membership boosts wages for Black and Latinx workers. 
The Economic Policy Institute found that the racial wage gaps 
between unionized Black and Latinx workers and White workers 
are far smaller than for nonunion workers, and that the union 
wage premium for Black and Latinx workers was bigger than for 
White workers (with unionized Black workers receiving 15 
percent more, unionized Latinx workers receiving 22 percent 
more, and unionized White workers earning 10 percent more than 
their nonunion counterparts). \7\ A 2016 Center for Economic 
and Policy Research study found that Black unionized workers 
had 16 percent higher wages than nonunionized Black workers and 
far more likely to have employer-sponsored health care coverage 
and retirement plans (17 percent and 18 percent, respectively). 
\8\
---------------------------------------------------------------------------
     \7\ Bivens, Josh, et al. Economic Policy Institute. ``How Today's 
Unions Help Working People''. August 24, 2017.
     \8\ Bucknor, Cherrie. Center for Economic and Policy Research. 
``Black Workers, Unions, and Inequality''. August 2016.
---------------------------------------------------------------------------
    The White-Black and White-Latinx wealth gap for workers in 
unions is substantially lower than for nonunionized workers, 
according to a Center for American Progress study. \9\ White 
workers in unions have five times the household wealth as Black 
union workers, an unacceptably giant gap but far lower than the 
37-fold difference for nonunion workers. \10\ White unionized 
workers have four times the household wealth of unionized 
Latinx workers but White nonunionized workers have 28-times 
more wealth than nonunionized Latinx workers.
---------------------------------------------------------------------------
     \9\ Weller, Christian E., and David Madland. Center for American 
Progress. ``Union Membership Narrows the Racial Wealth Gap for Families 
of Color''. September 4, 2018, at 2.
     \10\ Weller, Christian E., and David Madland. Center for American 
Progress. ``Union Membership Narrows the Racial Wealth Gap for Families 
of Color''. September 4, 2018, at 2.
---------------------------------------------------------------------------
    The big business backed erosion of U.S. labor law has made 
it easier for corporations to fight unionization efforts, 
retaliate against workers seeking to form unions, and refuse to 
bargain in good faith with newly formed unions. Legislation 
like the PRO Act would begin to restore the balance between 
workers and employers and make it easier for workers to form 
unions, which would substantially benefit Black and Latinx 
workers through higher wages, better benefits, and an improved 
ability to build household savings and wealth that would begin 
to redress America's stubborn and immoral racial economic 
inequalities.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                      FROM TREVON D. LOGAN

Q.1. Essential Workers Unionization/PRO Act--Thank you Mr. 
Chairman. Last month, this Committee held a briefing where we 
had a chance to hear directly from various workers, employed in 
different sectors of our economy, about reforms needed to 
better protect and strengthen our country's workforce. This 
hearing continues that discussion. The COVID-19 pandemic has 
underscored both the importance of unions in giving workers a 
collective voice in the workplace, as well as the urgent need 
to reform U.S. labor laws to stop the erosion of union rights. 
During the crisis, unionized workers have been able to secure 
enhanced safety measures, additional premium pay, paid sick 
time, and a direct say, in terms of furloughs and other forms 
of alternative work-share arrangements to help save jobs. These 
pandemic-specific benefits build on the many ways unions help 
workers. Unfortunately, however, while providing ``essential'' 
services we rely on daily, many nonunion workers have not been 
able to secure those same type of benefits. Workers have been 
forced to work without adequate personal protective equipment; 
many have no access to paid sick and family leave; and when 
workers have spoken up about health and safety concerns, some 
have even been fired.
    Can you talk about how unionization would better protect 
and strengthen our essential worker labor force, and how it 
would impact our economy?

A.1. The evidence we now have is that unions provide a great 
deal of worker protection and improved working conditions. The 
positive impact of unions still exist, but what has happened in 
recent decades is the erosion of organized labor in the low-
wage labor market. According to the estimates from Henry S. 
Farber, Daniel Herbst, Ilyana Kuziemko, Suresh Naidu (``Unions 
and Inequality over the Twentieth Century: New Evidence from 
Survey Data'' forthcoming in Quarterly Journal of Economics), 
the union wage premium has remained remarkably constant from 
the middle of the 20th century until today. However, those with 
a high school education or less are now less likely to be union 
members. The decline in unionization is also related to the 
increase in income inequality.

Q.2. Racial Wage Gap/PRO Act--Thank you Mr. Chairman for 
holding this important hearing. Last month, this Committee held 
a briefing where we had a chance to hear directly from various 
workers, employed in different sectors of our economy, about 
reforms needed to better protect and strengthen our country's 
workforce. This hearing continues that discussion. The right to 
organize and collectively bargain is tied directly to the 
urgent national conversation around the persistent economic 
disparities, particularly within our rural and low-income 
communities of color. Reports have shown that unionized labor 
and collective bargaining help shrink the racial wage gap, 
largely because compared to their White brothers and sisters, 
Black and Brown workers are more likely to have jobs 
represented by an organized union. And as we know, union 
workers overall get a larger boost to wages from being in a 
union than nonunion workers. \1\ In fact, an Economic Policy 
Institute study found that Black workers represented by a union 
are paid 14 percent more than their nonunionized peers, and 
Hispanic workers represented by unions are paid 20 percent more 
than their nonunionized peers. This means that the decline of 
unionization across this country has played a significant role 
in widening the racial wage gap over the last four decades, and 
that more unionized labor could help reverse this trend.
---------------------------------------------------------------------------
     \1\  https://www.epi.org/press/union-workers-are-paid-11-2-more-
and-have-greater-access-to-health-insurance-and-paid-sick-days-than-
their-nonunion-counterparts-policymakers-must-strengthen-workers-
ability-to-form-unions/
---------------------------------------------------------------------------
    Can you talk about how increasing the unionization of 
workers can help address the racial wage gap in our country?

A.2. Unionization in the past, as of, say, the middle of the 
20th century, was more concentrated among the less educated and 
the non-White than today. The precipitous decline of union 
membership in the private sector has left less educated Black 
and Hispanic workers less likely to be covered by unions than 
in the past, and this is directly related to increasing racial/
ethnic income inequality. The unionization premium is 
significant, so coverage among these populations would, by 
definition, help to close the racial/ethnic wage gap in the 
United States.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                     FROM ANDREW F. PUZDER

Q.1. Essential Workers Unionization/PRO Act--Thank you Mr. 
Chairman. Last month, this Committee held a briefing where we 
had a chance to hear directly from various workers, employed in 
different sectors of our economy, about reforms needed to 
better protect and strengthen our country's workforce. This 
hearing continues that discussion. The COVID-19 pandemic has 
underscored both the importance of unions in giving workers a 
collective voice in the workplace, as well as the urgent need 
to reform U.S. labor laws to stop the erosion of union rights. 
During the crisis, unionized workers have been able to secure 
enhanced safety measures, additional premium pay, paid sick 
time, and a direct say, in terms of furloughs and other forms 
of alternative work-share arrangements to help save jobs. These 
pandemic-specific benefits build on the many ways unions help 
workers. Unfortunately, however, while providing ``essential'' 
services we rely on daily, many nonunion workers have not been 
able to secure those same type of benefits. Workers have been 
forced to work without adequate personal protective equipment; 
many have no access to paid sick and family leave; and when 
workers have spoken up about health and safety concerns, some 
have even been fired.
    Can you talk about how unionization would better protect 
and strengthen our essential worker labor force, and how it 
would impact our economy?

A.1. First, I'd like to note that I am a big believer in the 
right of employees to join or not join a labor union. However, 
I am not a fan of compelling workers either to unionize or to 
join a union. As such, I am not a fan of the so-called PRO Act.
    Senator Warnock's question seems to assume that 
``unionization would better protect and strengthen our 
essential worker labor force . . . .'' But many workers simply 
don't see it that way.
    In reality, unions have been having a difficult time 
convincing workers of their value in recent years. The result 
has been a significant decline in union membership with 
private-sector union membership down from 24.2 percent in 1973 
to 6.3 percent today. Unions have also suffered a number of 
high profile losses in union election.
    For example, in 2014 the United Auto Workers attempted to 
unionize workers in Volkswagen's Chattanooga, Tennessee, 
manufacturing plant. Volkswagen's management did not oppose the 
attempt. ``This vote was essentially gift-wrapped for the union 
by Volkswagen,'' a Detroit-area labor lawyer told the Wall 
Street Journal.
    Nonetheless, the workers voted it down. The Volkswagen 
workers rejected the union again in 2019.
    Workers also rejected unionization in 2017 at Nissan's 
plant in Canton, Mississippi, and at Boeing's plant in North 
Charleston, South Carolina.
    There are even union issues in far-left California, where 
in 2018 farm workers rejected a unionization bid by a 5-1 
margin. In 2019, hospital workers in Los Angeles voted to 
decertify their union.
    Most recently, the union movement suffered a significant 
loss in its attempt to unionize employees at Amazon's warehouse 
facility in Bessemer, Alabama. Of the workers eligible to vote, 
an embarrassingly small 16 percent voted to join the Retail, 
Wholesale, and Department Store Union.
    Unionization remains an important option for employees and 
provides an incentive for management not to undervalue the 
importance of robust compensation for current employees. 
Nonetheless, it appears that many of today's workers prefer 
having a good-paying job with a healthy employer over having a 
union.
    As a practical matter unions need to prove their worth to 
workers if they are to increase membership. They need to 
demonstrate that unionization can actually ``better protect and 
strengthen our essential worker labor force.'' So the question 
is what can unions do to help workers? After all, there is a 
cost to joining a union--the dues for one thing--and there is a 
risk that the union will threaten their livelihoods by creating 
unreasonable and unsupportable demands that disrupt their 
workplaces.
    Private sector unions were strong throughout the 60s and 
declined quickly thereafter. Why did that happen? I think one 
reason is that on workplace issues everyone, including the 
unions, began focusing on governmental policies and laws as the 
relevant thing for employees. It used to be if you were an 
employee and wanted protection at the workplace you organized, 
got a union, and negotiated those protections in a contract 
that your union participated in administering. Now you hire 
your own lawyer and go to one of a myriad of Government 
agencies that protect workers rights or you sue.
    At the same time unions began being more and more overtly 
political, and their politics diverged in important ways from 
many of the workers they were seeking to represent. They still 
do.
    As reported on the pro-union website Strikewave last 
October, polling data commissioned by the progressive think 
tank Data for Progress found that active union members were 
more strongly Republican (31 percent) than strongly Democrat 
(29 percent), though a slight majority lean Democrat. Yet, 
according to OpenSecrets.org, labor organizations contributed a 
whopping $27.5 million to President Biden's campaign and groups 
that supported him, while President Trump took in a mere 
$360,000.
    That kind of political bias might be helpful if the unions 
were trying to organize Harvard professors or the top-level 
executives in multinational corporations. But it wasn't a plus 
in Alabama, where Trump got 62 percent of the vote--much of 
which came from precisely the kind of employees who work in the 
Amazon warehouse.
    Really if unions would focus on demonstrating that 
``unionization would better protect and strengthen our 
essential worker labor force'' and deliver to employees 
benefits that are relevant to them in their workplaces they 
could well begin winning representation elections without 
further help from the Government--and they would also be of 
greater help to their people when they did win.

Q.2. Racial Wage Gap/PRO Act--Thank you Mr. Chairman for 
holding this important hearing. Last month, this Committee held 
a briefing where we had a chance to hear directly from various 
workers, employed in different sectors of our economy, about 
reforms needed to better protect and strengthen our country's 
workforce. This hearing continues that discussion. The right to 
organize and collectively bargain is tied directly to the 
urgent national conversation around the persistent economic 
disparities, particularly within our rural and low-income 
communities of color. Reports have shown that unionized labor 
and collective bargaining help shrink the racial wage gap, 
largely because compared to their White brothers and sisters, 
Black and Brown workers are more likely to have jobs 
represented by an organized union. And as we know, union 
workers overall get a larger boost to wages from being in a 
union than nonunion workers. \1\ In fact, an Economic Policy 
Institute study found that Black workers represented by a union 
are paid 14 percent more than their nonunionized peers, and 
Hispanic workers represented by unions are paid 20 percent more 
than their nonunionized peers. This means that the decline of 
unionization across this country has played a significant role 
in widening the racial wage gap over the last four decades, and 
that more unionized labor could help reverse this trend.
---------------------------------------------------------------------------
     \1\  https://www.epi.org/press/union-workers-are-paid-11-2-more-
and-have-greater-access-to-health-insurance-and-paid-sick-days-than-
their-nonunion-counterparts-policymakers-must-strengthen-workers-
ability-to-form-unions/
---------------------------------------------------------------------------
    Can you talk about how increasing the unionization of 
workers can help address the racial wage gap in our country?

A.2. As for racial income disparities, Senator Warnock's 
question assumes that ``increasing the unionization of workers 
can help address the racial wage gap in our country.'' I don't 
believe it can. It certainly did not in prior years when the 
percentage of unionized workers was much higher. However, free 
market economic policies--such as reduced taxes, reduced 
regulation and a focus on domestic energy production--can 
reduce such disparities as they did in 2019 during the Trump 
administration.
    For example, the Census Bureau reported that real median 
household income grew to $68,703 in 2019, an impressive 6.8 
percent increase over 2018. It was the largest 1-year increase 
in median income on record going back to 1967. It was also 45 
percent more growth in a single year ($4,379) than Obama/Biden 
produced in their entire 8 years in office ($3,021).
    The economic benefits were widespread. While the overall 
growth rate was 6.8 percent, real median income grew by an even 
greater 7.9 percent for Black Americans, 7.1 percent for 
Hispanic Americans, and 10.6 percent for Asian Americans. All 
record highs as were the new income levels for each of these 
groups thus reducing the income disparity to which Senator 
Warnock refers.
    The poverty rate also plummeted 1.3 percentage points to a 
60 year low of 10.5 percent. This was the largest reduction in 
poverty in over 50 years. It lifted over 4.1 million people out 
of poverty, the largest yearly decrease since 1966. Just for 
comparison purposes, over the Obama/Biden era, the number of 
people living in poverty increased by 787,000.
    Minority groups again experienced the largest improvements. 
While the overall poverty rate declined 1.3 percentage points, 
Black poverty fell by 2.0 percentage points, Hispanic poverty 
fell by 1.8, and Asian poverty fell by 2.8. The poverty rate 
for Blacks fell below 20 percent for the first time (including 
years in which much higher percentages of workers were 
unionized). In fact, according to the White House Council of 
Economic Advisers ``the poverty rate fell to an all-time record 
low for every race and ethnic group in 2019.''
    With incomes growing and poverty declining, income 
inequality also declined for the second consecutive year as the 
share of income held by the bottom 20 percent of earners 
increased by 2.4 percent.
    Private sector union membership declined from 2016 to 2019 
from 6.4 percent to 6.2 percent while union membership for 
blacks declined from 13 percent to 11.2 percent Nonetheless, 
the wage/income gap also meaningfully declined.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                      FROM VIVEK RAMASWAMY

Q.1. Essential Workers Unionization/PRO Act--Thank you Mr. 
Chairman. Last month, this Committee held a briefing where we 
had a chance to hear directly from various workers, employed in 
different sectors of our economy, about reforms needed to 
better protect and strengthen our country's workforce. This 
hearing continues that discussion. The COVID-19 pandemic has 
underscored both the importance of unions in giving workers a 
collective voice in the workplace, as well as the urgent need 
to reform U.S. labor laws to stop the erosion of union rights. 
During the crisis, unionized workers have been able to secure 
enhanced safety measures, additional premium pay, paid sick 
time, and a direct say, in terms of furloughs and other forms 
of alternative work-share arrangements to help save jobs. These 
pandemic-specific benefits build on the many ways unions help 
workers. Unfortunately, however, while providing ``essential'' 
services we rely on daily, many nonunion workers have not been 
able to secure those same type of benefits. Workers have been 
forced to work without adequate personal protective equipment; 
many have no access to paid sick and family leave; and when 
workers have spoken up about health and safety concerns, some 
have even been fired.
    Can you talk about how unionization would better protect 
and strengthen our essential worker labor force, and how it 
would impact our economy?

A.1. This was outside the scope of my oral testimony. That 
being said, I have some concerns that unionization may have 
unintended consequences for businesses, workers, and customers.

Q.2. Racial Wage Gap/PRO Act--Thank you Mr. Chairman for 
holding this important hearing. Last month, this Committee held 
a briefing where we had a chance to hear directly from various 
workers, employed in different sectors of our economy, about 
reforms needed to better protect and strengthen our country's 
workforce. This hearing continues that discussion. The right to 
organize and collectively bargain is tied directly to the 
urgent national conversation around the persistent economic 
disparities, particularly within our rural and low-income 
communities of color. Reports have shown that unionized labor 
and collective bargaining help shrink the racial wage gap, 
largely because compared to their White brothers and sisters, 
Black and Brown workers are more likely to have jobs 
represented by an organized union. And as we know, union 
workers overall get a larger boost to wages from being in a 
union than nonunion workers. \1\ In fact, an Economic Policy 
Institute study found that Black workers represented by a union 
are paid 14 percent more than their nonunionized peers, and 
Hispanic workers represented by unions are paid 20 percent more 
than their nonunionized peers. This means that the decline of 
unionization across this country has played a significant role 
in widening the racial wage gap over the last four decades, and 
that more unionized labor could help reverse this trend.
---------------------------------------------------------------------------
     \1\  https://www.epi.org/press/union-workers-are-paid-11-2-more-
and-have-greater-access-to-health-insurance-and-paid-sick-days-than-
their-nonunion-counterparts-policymakers-must-strengthen-workers-
ability-to-form-unions/
---------------------------------------------------------------------------
    Can you talk about how increasing the unionization of 
workers can help address the racial wage gap in our country?

A.2. I do not have a perspective on this.

                             [all]