For the last few weeks, I’ve been detailing the ongoing developments in the Supreme Court’s qualified immunity docket. About three weeks ago, I described how the Court had scheduled thirteen different qualified immunity petitions for its May 15th conference, including several petitions calling for qualified immunity to be reconsidered entirely. But then last week, I noted that the Court had unexpectedly “rescheduled” ten out of those thirteen cases, leaving only three for consideration on May 15th. Well, today the Court issued orders from last week’s conference, and there are two major developments.

First, the bad news: The Court denied cert in the three cases that it considered last week — Kelsay v. Ernst, Jessop v. City of Fresno, and Clarkston v. White — without comment from any of the Justices. This is disappointing, because the Kelsay and Jessop cases in particular involved especially egregious applications of qualified immunity that were crying out for correction, if not summary reversal. In Kelsay, the Eighth Circuit, in an 8–4 en banc decision, granted immunity to a police officer who grabbed a small woman in a bear hug and slammed her to ground, breaking her collarbone and knocking her unconscious, all because she walked away from him after he told her to “get back here.” And in Jessop, the Ninth Circuit granted immunity to police officers who were alleged to have stolen $225,000 in cash and rare coins while executing a search warrant, just for their personal enrichment. By denying cert in these cases, the Supreme Court ensured that these victims would be left without redress for their injuries, and that the police who committed such flagrant misconduct will avoid any liability for their misdeeds. 

Second, the good news: The Court also rescheduled the remaining ten qualified immunity petitions for consideration at its conference this Thursday, May 21st. This means that, barring additional rescheduling, we should get orders on these petitions on Tuesday, May 26th (the day after Memorial Day). Most notably, the cases set for consideration this week include Baxter v. Bracey, Zadeh v. Robinson, and Corbitt v. Vickers, which are the three petitions explicitly calling for qualified immunity to be reconsidered entirely. Thus, the fact that the Justices denied the three petitions today doesn’t necessarily mean they aren’t still interested in revisiting qualified immunity. If anything, the fact that the Court rescheduled the biggest three cases may indicate that the Justices are more interested in addressing this larger question, rather than taking a narrower approach.

Ultimately, it’s hard to say with confidence exactly why the Court decided to approach all of these petitions in the way that it did. I still don’t have a great explanation for why the Court chose to carve out Kelsay, Jessop, and Clarkston for earlier resolution than the other cases. And given the number of unexpected reschedulings we’ve already seen, it’s entirely possible the Court decides to push back some or all of these cases yet again. But for now, it looks like this Thursday is the day the Justices will finally confront the question of whether qualified immunity itself should be reconsidered — and next Tuesday is the day we’ll learn what they decided.

Last week’s Private School COVID-19 Permanent Closure Tracker prompted several people to send reports of closing schools that we had not previously captured, and one additional closure was announced after we published. We have also added enrollment numbers to our list so that we can track the number of students who are being displaced. Given the influx of schools and new enrollment column, we are publishing a special Monday update.

The list now has 26 schools with a total enrollment of 5,217. Were all of these students to go to public schools, and had none been part of publicly connected school choice such as voucher programs or scholarship tax‐​credits, the new cost to the public purse would be approximately $80,000,000 ($15,424 per student multiplied by 5,217). This is a rough estimate – some of these students may have attended their current school using a choice program such as a voucher; different kids have different needs and hence require different levels of resources; etc.

Enrollment data come from Niche​.com and may be revised as better data come available. As always, the list is expected to grow as schools learn more about the impact of the economic downturn on enrollment and income for the coming school year. We will ordinarily post an update on Cato’s blog every Friday, but if the list reaches 100 schools we may transition to an online, searchable format. You can contact CEF director Neal McCluskey if you need more current numbers, if you know of permanent closures not on the list, or if you believe schools have been listed by mistake. We also welcome suggestions for improving the list.

As Congress negotiates an additional coronavirus stimulus bill, a new working paper from University of Chicago economists examines one element of the initial stimulus package – the extra $600 weekly benefit for unemployed workers through unemployment insurance (UI). The authors find that:

“The median replacement rate [of unemployment insurance under the provision of the CARES Act] is 134%. Two‐​thirds of UI eligible workers can receive benefits which exceed lost earnings and one‐​fifth can receive benefits at least double lost earnings. There is sizable variation in the effects of the CARES Act across occupations and states, with important distributional consequences.”

Additionally:

“…replacement rates over 100% create distributional issues and may hamper efficient labor reallocation both now, and especially during an eventual recovery. That is, expanded UI induces trade‐​offs between consumption smoothing and moral hazard.”

Under the CARES Act, the weekly $600 Federal Pandemic Unemployment Compensation benefit would expire at the end of June. The HEROES Act, however, which the House passed last week, would extend the $600 weekly benefit until January 2021. (The Senate is unlikely to adopt HEROES without substantial modifications.)

The main problem identified by the authors is the overall design of the UI policy – $600 per week, regardless of previous benefit level. This raises the replacement rate – the ratio of UI benefits to a worker’s average earnings – to over 100 percent for 68 percent of unemployed workers, meaning that nearly seven out of ten workers receive more in unemployment benefits than they did while employed.

In addition to high replacement rates, the policy has strong distributional effects. Unsurprisingly, lower income workers see the largest boost to their replacement rates, which is shown in Figure 3 from the working paper.

There are also differences across employment sectors, seen in Figure 4. The implications are sobering. For example:

“unemployed janitors who worked at businesses which are closed can get UI benefits equal to 158% of their prior earnings, while janitors who continue to work at increased health risk in businesses deemed “essential” have no guarantees of any hazard pay or increased earning.”

Frustratingly, the major problems caused by the current UI expansion could have been easily avoided if policymakers had made simple, common‐​sense decisions from the outset. The authors of the working paper illustrate that if, instead of a fixed weekly supplement, UI benefits had been boosted by adding a fixed percentage to replacement rates, only 7 percent of people receiving UI benefits would have seen a replacement rate of more than 100 percent while all UI recipients would have seen significant temporary boosts to their weekly benefit.

The UI policy in the CARES Act, and especially any extension until January 2021, is an excessive response to the pandemic. In addition to the distributional inequalities it creates, it reduces incentives to re‐​enter the labor market, negatively affecting an eventual economic recovery. Especially as businesses re‐​open, the economy will need a ready supply of workers, perhaps in industries different from where the unemployed originally worked.

Thus even if the CARES UI benefit made sense out of compassion for the unemployed, and even if it made sense to slow the economy as a means of limiting virus transmission, further extension will likely impede the economic recovery, which matters for a huge range of the population, unemployed or otherwise.

The Economic Policy Institute (EPI) released a report last week that purports to show that “H-1B employers undercut local wages.” Employers use the H-1B program to hire temporary foreign workers in specialty occupations. EPI writes, “By setting two of the four wage levels below the median—and thereby not requiring that firms pay market wages to H-1B workers—the DOL [Department of Labor] has in effect made wage arbitrage a feature of the H-1B program.” This post explains why this is mistaken.

The median wage for an entire occupation is not the “market” wage for a specific worker. EPI confuses the median wage—the statistical midpoint in the entire range of market wages—for the singular “market wage.” A market wage is just whatever an employer would pay a worker in an open market—which depends entirely on the characteristics of the job and the productivity of the worker. Some employees receive offers above the median because they have more skills, more experience, or more significant job duties and so are more productive and valuable to the company than most other workers, while others receive wage offers below the median for the opposite reason.

As the Bureau of Labor Statistics (BLS) has detailed, wages in skilled occupations can vary dramatically within an occupational category—a fact that EPI acknowledges but fails to explain. BLS explains that these pay differences are a result of differing credentials, experiences and skills, industries or employers, job tasks, and performance.

By EPI’s definition of the market wage, half of American workers also receive “below market” wages since half are by definition paid below the median wage, yet it states—correctly—that “conceptually, the market wage is the wage a U.S. worker would command for a position in a specific occupation and region.” Since U.S. workers command wages both above and below the median, that means all those wages are market wages, not just the median. Yet EPI wants to stop H-1B employers from paying foreign workers in accordance with their skills (strangely, it doesn’t object to skill‐​based pay for U.S. workers).

Nearly all H-1B employers offer above the median wage for H-1B workers of a specific skill level. The DOL estimates the market wage for H-1B jobs by taking the average wage for workers in the same geographic area and same occupation who have similar levels of experience and skills, using wage surveys from the Bureau of Labor Statistics. DOL calls this average market rate the “prevailing wage” and provides for four levels based on skills, experience, and responsibilities (1. Entry; 2. Qualified; 3. Experienced; 4. Fully competent or supervisory).

Because the prevailing wage is the average wage at a given skill level, and averages were above the medians for 97 percent of occupations in 2019, nearly all H-1B employers were already offering for a specific skill level wages above the median, which EPI insists is the best statistical proxy for the market wage. EPI wants to mandate the median wage, just not the median most relevant to the worker being hired. If DOL did use the median wage rather than the average at a given skill level, it would reduce the required wage for nearly all occupations. For computer and math occupations—the largest H-1B occupation—for example, the national average was $5,190 more than the national median.

100 percent of H-1B employers offer H‐​1Bs at least the average prevailing market wage for similar U.S. workers. By law, H-1B employers must offer their foreign workers the average prevailing wage in the occupation for the relevant skill level. DOL provides the prevailing wage rate through BLS prior to approving the hire. This means that no H-1B employer can offer below the market wage for the occupation, and the DOL data bear this out (see Table 1 below).

Some H-1B employers might sometimes fail to pay out what they offer, which is why DOL audits employers to verify that they meet their obligations. Some H-1B workers would also make more money if they had a status that allows them to easily change occupations or positions to ones where they would be most productive and so earn higher wages. Allowing H-1B workers to change jobs as easily as legal permanent residents would fix this problem. But these issues are very different from claiming, as EPI does, that H-1B employers are offering below‐​market wages for the actual job being performed. They are not.

78 percent of H-1B employers offer wages, on average, above average market wages—20 percent above. Each year, DOL publishes the prevailing wage determination for each H-1B job offer and the actual wage offer for each employee in those jobs. The average offered wage for all 61,420 H-1B requesting employers in FY 2019 was $100,461, while the average prevailing wage determination was $83,619, meaning H-1B employers were offering an average of $16,842 more than the average market wage that the law requires—20 percent above. In fact, 78 percent of H-1B employers had average wage offers above their average prevailing wage determination. The vast majority of H-1B employers pay at least some employees more than they are required to pay.

Table 1 shows the average offered wages and average prevailing wage determinations for the top 500 H-1B requesting employers. The takeaway from the data is that H-1B employers are, on average, offering a premium for many of their foreign workers. The average wage was higher than the average prevailing wage determination for every company in the top 45 H-1B requesting companies. For major companies like those EPI calls out in its report—such as Microsoft, Amazon, and Google—the average increases over the prevailing wage were substantial: 17 percent for Microsoft, 19 percent for Ama​zon​.Com Services, and 64 percent for Google.

71 percent of H-1B employers have average wage offers above average market wages at every skill level. EPI repeatedly emphasizes that employers are underpaying H-1B workers who receive prevailing wage determinations at Level 1 entry or Level 2 qualified wage levels. Yet DOL data show that in fact, not only were 100 percent of Level 1 and Level 2 H-1B employers offering the prevailing market wage for U.S. workers at the workers’ skill levels in 2019, 71 percent of Level 1 and 76 percent of Level 2 H-1B employers were offering wages that were an average of 19 percent and 18 percent higher, respectively, than the prevailing wage for U.S. workers at their skill level.

Level 1 or level 2 wage offers may be below the median for their entire occupation, but they are higher than those for similarly skilled Americans. At the major companies that EPI calls out specifically, this is also true. The average H-1B offers at Microsoft, Amazon, and Google for Level 1 or Level 2 jobs were as much as 96 percent higher than the average prevailing wage determinations for those companies. Overall, 71 percent of H-1B employers had average wage offers above their average prevailing wage determination at every skill level at which they request H-1B workers.

The lowest skilled H‐​1Bs were the most likely to receive above market wage offers. Looking at the share of jobs rather than the share of employers shows that 100 percent of all certified job offers were at least at the prevailing wage in FY 2019 and about half (47 percent) were above it. In other words, the actual market wage was actually above the estimated average market wage for nearly half of H-1B hires. This includes 52 percent of Level I jobs, 46 percent of Level II, 50 percent of Level III, and 44 percent of Level IV. Just because a worker had a lower wage offer did not mean that they were more likely to be underpaid relative to U.S. workers. In fact, the opposite was true (Table 3). Microsoft, Ama​zon​.Com Services, and Google exceeded the prevailing wage for U.S. workers on 57 percent, 67 percent, and 98 percent of their job offers, respectively. Yet EPI states that these companies are “are exploiting a flawed H-1B prevailing wage rule to underpay their H-1B workers relative to market wage standards.” This is incorrect.

H-1B employer requests at higher wage levels have doubled since 2010. EPI might assert that H-1B employers can write whatever they want on the H-1B application, so these numbers are meaningless. Of course, they are the same numbers on which EPI bases its report that concludes H‐​1Bs are underpaid, but more importantly, this theory would fail to explain why employers are increasingly requesting employees at higher wage levels. From 2010 to the second quarter of 2020, the share of H-1B jobs requested at Level I entry level wages fell from 54 to 13 percent, while wages for Level 2 workers almost doubled 29 to 48 percent. Level 3 grew from 11 to 25 percent, and Level 4 from 6 to 15 percent (Figure 1). EPI reports similar numbers, but fails to explain why employers would choose to do this, if it were not reflective of the market.

H-1B workers’ median wage was double the U.S. median wage and growing twice as fast as all U.S. wages. While the data unequivocally show that H-1B workers are not being underpaid relative to similar U.S. workers, it also shows that H-1B workers do not receive “low wages”—as EPI alleges—in an absolute sense either. The median H-1B worker received a salary of about $98,000 in FY 2019. The median for all workers was just short of $40,000. It is absurd to describe workers in the top 10 percent of wage earners as “low” paid. Figure 2 is also inconsistent with the idea that H-1B employers can pay whatever they want, regardless of the market. H-1B wages grew twice as fast as wages in the labor market overall from 2004 to 2019 (88 percent v. 38 percent).

H-1B law requires the government to allow wages based on skills and job duties. EPI’s entire report is based on the idea that employers shouldn’t offer wages based on a workers’ actual job responsibilities and skills and that the government should stop allowing this practice. Instead, they state that the Trump administration should bar wages below the 75th percentile for the entire occupation. That would effectively bar all current job offers at Level I-III wages and even most Level IV offers as well. It would shrink the program by about 95 percent. The law mandates that the government provide “at least 4 levels of wages commensurate with experience, education, and the level of supervision.” EPI asserts—without actually quoting the law—that the government can interpret this requirement as requiring all wage levels be far above the median wage for the entire occupation.

EPI claims that “DOL has yet to explain its reasoning and justification for setting the two lowest levels below the local median wage.” Yet this is false. DOL has explained how it arrives at the four levels in its Prevailing Wage Determination Policy Guidance. Level 1 “entry” wages are for those who have a basic understanding of the job and who perform only routine duties. Level 2 “qualified” wages are for those who have a good understanding of the job and perform moderately complex tasks. Level 3 experienced wages are for experienced workers who have a sound understanding of the job and have special skills or knowledge. Level 4 “fully competent,” supervisory wages are for those workers who solve “complex problems” that require “judgment and independent evaluation” with minimal supervision.

These wage classifications are entirely legitimate categories for evaluating pay and correspond to real observed differences in the wages of U.S. workers, as U.S. Citizenship and Immigration Services’ Administrative Appeals Office has recognized. Private businesses use similar classifications for determining what wage to offer when seeking new hires anyway. EPI fails to explain how DOL could base wages on “experience, education, and level of supervision” as the law requires without permitting wages across the entire wage distribution. Instead, it simply asserts that the median wage for the entire occupation is the “market” wage and that H-1B workers should always receive wages far higher than the median occupational wage, regardless of their experience, responsibilities, or skills.

If employers carried out EPI’s recommendation, it would result in H‐​1Bs being paid far more than comparably skilled U.S. workers in the same occupation. Obviously, this is an untenable result, and instead, the policy would effectively ban hiring nearly all H-1B workers. The H-1B program is the main on‐​ramp that recent foreign college graduates have to the U.S. labor market. Excluding these new skilled foreign workers, the entire immigration system for skilled foreign labor would shrink by more than 50 percent, and America would lose talented workers that are essential to the post‐​COVID‐​19 recovery.

Congress is considering passing additional financial aid for state and local governments. I argued against further aid in this Fox News op‐​ed. One reason is that many states have built substantial rainy day funds, which will help them balance their budgets even as tax revenues decline. Federal bailouts would undermine incentives to build such useful funds going forward.

California has built a substantial rainy day or reserve fund over the past five years, as shown in the chart below from this state report. State residents passed a referendum in 2014 to create the fund structure, and so kudos to Californians for approving Proposition 2 by 69–31. The state is in a better place today both because the reserve fund can be tapped during the crisis and because contributions to the fund during the boom helped to reduce program growth.

California political leaders who supported Proposition 2 should also be commended, including former Governor Jerry Brown. Brown scored poorly on Cato’s Report Cards, but I did note his support of expanding the rainy day fund.

California needs a larger rainy day fund than most states because its revenue system is so volatile. The system is heavily dependent on highly “progressive” income and capital gains taxes, which are tied to growth in Silicon Valley. The top 1 percent of earners pay almost half of California’s income and capital gains taxes, which is remarkably lopsided.

The California Legislative Analyst’s Office (LAO) includes this graphic in its CalFacts publication:

To better handle downturns and promote economic growth going forward, California should restructure its tax system to rely more on sales taxes and less on income and capital gains taxes.

California also needs budget reform because spending rises too quickly during booms. General fund spending rose 6.2 percent in 2018 and 12.1 percent in 2019. The governor has just released projections showing slower 3.3 percent spending growth in 2020 and spending cuts in 2021. The rainy day fund helps, but California government will need to downsize in coming months as revenues fall. Hopefully, the sobering new projections will encourage policymakers to reopen the state economy as quickly as possible.

Over the longer term, California should shrink overall taxing and spending. But its experience shows that even states on the political left can build substantial reserve funds. I argue here and here that when the current crisis passes and the economy starts growing, states should begin building reserves for the next rainy day.

By the way, California’s LAO produces excellent data and studies, perhaps superior to that produced by federal agencies. The CalFacts booklet, for example, has many interesting charts on taxes, budgets, education, and other topics.

The Intelligence Community’s annual Statistical Transparency Report was released earlier this month, and there’s a significant piece of news buried in a footnote: On at least six occasions in 2018 and once in 2019, the government unlawfully reviewed wiretapped communications from a foreign intelligence database while pursuing ordinary criminal investigations unrelated to national security—something the previous year’s report claimed had never happened. The disclosure validates civil libertarian concerns about so‐​called “backdoor searches”: The use of broad foreign intelligence authorities nominally aimed at non‐​Americans outside the country to monitor Americans’ communications, circumventing the normal constitutional warrant process.

First, some context. Section 702 of the Foreign Intelligence Surveillance Act, which Congress created in 2008, permits the National Security Agency to obtain sweeping general warrants from the secretive FISA Court, under which they may intercept the communications of non-U.S. persons who are outside the country without individualized authorization. This effectively codified an extralegal wiretapping program secretly approved by President George W. Bush shortly after the 9/11 terror attacks in 2001. Traditionally, when intelligence agencies conducted wiretaps inside the United States, they needed a particularized warrant naming a specific target as long as one end of the communication was American. But §702 loosened the rules: Now instead of individualized warrants, the government asks the FISA Court to sign off on general “targeting procedures” used to select foreign targets located abroad. The communications of those targets can then be intercepted as they pass through American networks, including their communications with American citizens protected by the Fourth Amendment.

From the outset, civil libertarians have been worried that such an authority would inevitably vacuum up enormous quantities of Americans’ communications, even if wiretap “targets” were foreign. The incredible scale of collection virtually guarantees that’s the case: Last year the number of foreign §702 targets rose to an astonishing 204,968 (up from 164,770 in 2018). This massive cache of intercepts creates a tempting means of bypassing the ordinary warrant process for criminal investigations: Simply search for a U.S. person’s e‐​mail address, phone number, or other identifier in the §702 database.

Backdoor searches are quite common. We know that agencies other than FBI (which in effect means NSA and CIA) searched the database for U.S. person identifiers and reviewed intercepted contents as a result 9,126 times last year. FBI doesn’t count how frequently they query the database, but they’re now required to obtain a court order before actually reviewing U.S. person communications for criminal investigative purposes unrelated to national security. Until this most recent report, the government claimed that this had never happened. But the 2020 report discloses a number of recently discovered instances in which they did just that: One in 2016 (before the warrant requirement was added), six in 2018, and one in 2019—that we know of, at least. 

While it’s good these instances were belatedly detected, this disclosure underscores the problem of giving FBI, which has dual law enforcement and intelligence responsibilities, such poorly monitored access to the fruits of §702’s general warrants. Unlike other agencies, FBI is not required to report how often they query the §702 database for U.S. person identifiers—though by their own admission, they do so far more often than their peers. 

Congress should conduct vigorous oversight over how these unlawful searches occurred—and remove the exemption that spares FBI from having to tally their searches for Americans in this enormous database. The loophole exists because FBI says their systems aren’t designed to track the necessary information… a design choice that makes compliance problems like the ones newly disclosed more likely, and harder to catch when they occur. 

Cato just released a large white paper chock full of new and innovative ways to reform the legal U.S. immigration system for the 21^st century. All of the essays are worth reading and they all shifted my opinion on the relative merits and demerits of certain proposals. But I especially want to highlight a point made by Michelangelo Landgrave in his chapter on a bilateral labor agreement with Canada.

Landgrave, my frequent coauthor, proposes a bilateral agreement between Canada and the United States where citizens of both countries can work in either country with minimal rules. He analyzes other such arrangements between developed countries offers some suggestions for how to adapt their rules to North America, but his most striking finding is how popular such an agreement would be among Americans – if it’s reciprocal. If Americans and Canadians can both work in each other’s countries, as long as there are certain rules, then it would be very popular with Americans.

Landgrave analyzed survey data on this point and found broad agreement along three principles of a bilateral agreement: work authorization, restricted welfare access, and reciprocity. He wrote:

Of the respondents, 66 percent favored a BLA if it were to allow immigrants to live and work, approximately 5 percentage points more than if immigrants faced work restrictions. Seventy percent favored the agreement if immigrants were to be explicitly denied access to welfare, a 13 percentage point difference compared with if welfare access were allowed. An explicit reciprocal agreement garnered the support of 70 percent of respondents. All three differences are statistically significant using conventional measures.

Landgrave discovers that there is a partisan gap in support for a bilateral worker agreement with Canada. While 76 percent of all Democrats favor such an agreement with Canada, 44 percent of all Republicans do. Landgrave is quick to point out that this gap is somewhat misleading. When all three principles of work authorization, restricted welfare access, and reciprocity are included in a proposed bilateral labor agreement, “a sizeable majority of Democrats (87 percent) and Republicans (64 percent) favored a BLA with Canada.”

Reciprocity in immigration reforms elicits a “this is fair” response among Americans. Anecdotally, one criticism I frequently hear against liberalizing U.S. immigration is that Americans can’t work in other countries and, if they tried to do so illegally, they would be treated much more harshly than the U.S. government treats illegal immigrants. Thus, Americans are treated worse than immigrants in their minds. I never thought this was a big criticism of liberalized immigration, but the results from Landgrave’s analysis of the survey data convinced me otherwise.

Reciprocity is an underused way to create a sense of fairness among Americans skeptical of liberalizing the immigration system. Essentially, it will probably convince Canadians to support such a system. I must confess, that I didn’t place much emphasis on the principle of reciprocity before. Immigration is a huge net benefit to the United States regardless of what other countries do. But reciprocity not only garners more support, it liberalizes immigration rules for other countries as well. Mutually beneficial policy changes like these should be seriously considered by policy makers who want to liberalize immigration.

Imagine the selling points for such a plan: “This will allow Americans the freedom to work in other countries. Yes, this will allow Canadians to work here and will allow you to work in Canada.” It also removes the (false) stigma that migrants from one country are exploiting another by making the movement two‐​way.

Of course, this can work with countries other than Canada. The biggest gains are with poorer nations like Mexico, but we should try this policy first with Canada to work out all of the problems. Then we can extend it to other developed nations and, eventually, to countries like Mexico, Haiti, and Guatemala. We can’t just steam roll our political opposition to immigration. Although I disagree with them and think their policy positions are bad for America, we need to address their concerns in thoughtful ways. A bilateral labor agreement that allows Canadians to work in the United States, under certain rules that restrict welfare access, and allows Americans to work in Canada under the same set of rules would do much to alleviate a visceral negative reaction to liberalized immigration.