International Policy Center Home Page

Thomas Perez: Creating shared prosperity through conscious capitalism

February 8, 2016 1:02:00
Kaltura Video

U.S. Labor Secretary Tom Perez discusses the principles of conscience capitalism and encourages companies to value employees. February, 2016.


>> Good afternoon everybody and welcome. I'm Susan Collins, the Joan and Sanford Weill Dean here at the Gerald R. Ford School of Public Policy. And I couldn't be more delighted to see all of you here with us for a very special policy talks. We're very pleased, before I began, we're very pleased that University of Michigan Regents, Shauna Ryder Diggs is here with us. And also that University Vice President for Government Relations Cynthia Wilbanks will be joining us. Thank you both. Great to have you here with us. I'd also like to thank the Ross School of Business and Dean Alison Davis-Blake for co-sponsoring this event. Alison, we're delighted that you're here with us this afternoon as well. And a very special welcome to all of the members of the business world community, in particular a number of business school students who are here with us too. Thanks for joining us. Well, the Ford School is very fortunate this week to be hosting two distinguished members of the Obama administration. Later this week, we will send a delegation of our students to New York for a meeting and lecture with U.S. Secretary of Commerce Penny Pritzker. And if you'd like to tune in on Thursday, please see for information about how to live stream that event. Well, today it is truly my great honor to welcome all of you here for one of the nation's most distinguished public servants, the United States Secretary of Labor, the Honorable Thomas E. Perez. Secretary Perez has been a lawyer and civil rights advocate for his entire career. He has been committed to making good on the promise of opportunity for all. He served as U.S. Assistant Attorney General for civil rights at the Department of Justice from 2009 to 2013. There Secretary Perez actively addressed a wide range of civil rights issues, notably police discrimination, voting rights, and LGBT discrimination in the workplace. In fact, he was the lead official investigating the Trayvon Martin shooting. In 2013, he was sworn in by President Obama as Secretary of Labor. Equal opportunity employment has been a cornerstone for his tenure at the Department of Labor where he continues to work through programs such as registered apprenticeship. His remarks today will focus on a very important aspect of the department's work, its approach to building conscious capitalism and inclusive economic growth in the United States. As it's come to be described, the Obama administration, through this initiative, wants to encourage and make it easier for corporations to do well by doing good. Following Secretary Perez's remarks, we'll take questions from the audience. And so in about ten minutes, they'll be staff circulating the aisles to collect questions cards. Professor of Public Policy and Business Administration, Marina von Neumann Whitman, together with two Ford School students, Emily Rusca and Max Lerner will facilitate the question and answer session. And for those watching online, we encourage you to send your questions into us via twitter. Please use the hashtag policy talks. And now please join me in welcoming Secretary Perez to the University of Michigan and to the Ford School.

[ Applause ]

>> Good afternoon. Hey, it's great to be back here. When I was in the civil rights division, I remember the opportunity and privilege I had to go and speak to folks at the law school. And I'm honored to be here as well. Dean Collins, thank you for your wonderful introduction. Professor Whitman, thank you for your hospitality before and to the students, I had a chance to spend better part of an hour with. You asked great questions and the best of luck to all of you. I have had the privilege in this job of making a lot of house calls. And there's no city where I've actually been to or no state I've been to more than Michigan. And in particular, I've spent a lot of time in Detroit. And I'm proud to say that. I grew up in Buffalo, New York. So I like the Great Lakes. And I got married in Milwaukee, so I really like the Great Lakes. Okay. And I had the opportunity, when I was in Detroit for many visits, to meet with remarkable leaders whether it's Mayor Bing, Mayor Duggan. I met with the governor. I met with incredible business leaders who are part of the Renaissance of Detroit. Bless you. Bless all of you. Let's just start out with that. Okay. So the benediction is over and we'll move right on. You know, I met with the fight for 15 movement. I met with workers. I met with faith leaders. And as I said, as a guy who grew up in Buffalo, what I love about Michigan is it's a state of folks who understand the importance of resilience. Because you know what? Every time you get knocked down, you get up. You get up even stronger. Every challenge here is met with a remarkable determination and resolve and that's because of the remarkable character of people here, the grit and determination of businesses, of workers, of people in this state. And let me just give you one example of someone, and I still keep in contact with her, I met a woman named Andra Rush when I was in Detroit. And she actually came to the state of the union one year at the invitation of the first lady. Andra started a business called Detroit Manufacturing Systems. Andra went from zero employees to over 1000 employees with the help of the Department of Labor and the Department of Labor's workforce investments. Our workforce investments are a joint partnership of the state, the federal government, and local government. And working together, we helped Andra grow her business. And now she is one of the principal suppliers of the console for the Ford F150 pickup truck. And as you know, the Ford F150 is the best-selling truck in America. That's not meant to be an advertisement for Ford. There's just a statement of fact. And it was remarkable because she hired people who were from the community. She hired people who are veterans. She hired people, in some cases, who had a criminal history. And in all cases she hired people with tremendous talent and determination who wanted to be part of the Renaissance of Detroit. People like Andra Rush inspire me. People like Tom Kartsotis who was in my office about a week ago, the founder of Shinola, they believe in Detroit. And as a result of what they're doing, they are just going gangbusters. And so, you know, one of the remarkable privileges of this job is getting to meet people who are indeed doing extraordinary things. And they do indeed, as I've learned from this job and from my prior job, they come from all walks of life. And they share really a vision for America that the rising tide should indeed lift all boats and not just the yachts. That everyone who works hard in America ought to get a chance to get ahead. And in this most prosperous nation on the planet, zip code should never ever determine destiny. And what I really want to talk to you about today is where we've come as a nation. Where we were, where we've come, and where we need to go. And I want to share some of these experiences I've had. Not simply in Michigan but across the country meeting remarkable people. Because the reality is that back in 2009, when the president took office, we were in the worst ditch of our lives. The three months before President Obama took office over 2 million jobs were lost. There was a conversation, as you well know, about whether the auto industry should be allowed to die. And there was all sorts of challenge around our country. Now you fast-forward, just last Friday was our most recent numbers day. The unemployment rate, which was going toward 10% in 2009 is now 4.9%. That's the lowest rate in eight years. We've now had 71 consecutive months of private-sector job growth, over 14 million jobs. In the depths of the recession, there were roughly seven jobs seekers for every job opening. Now there's about 1.5 job seekers for every job opening. I went to law school in the Kennedy School because I was very good at math. But you don't need to be a math whiz to figure out you'd rather compete against one person for a job then against the six people for a job. You look at the auto industry. Last year was its best year ever. Completing a six-year stretch, it's the best six-year stretch since the end of World War II and so we're making real progress. And the challenge is that we've got a lot of unfinished business because there is no one spiking the football in Washington. And there is no one spiking the football. Because you know what? A rising tide, as I said before, needs to lift all the boats and not simply the yachts. And what I have seen in my work is that we can do that but it's about choices. All too frequently I hear conversation that talks about technology and globalization and other forces as if the unfinished business of America is beyond our capacity to accomplish. We can't do it. It's inevitable. It's the invisible hand at work. I categorically rejected those claims because I have seen business leaders like Andra Rush and others. I have seen government leaders who have come together. I've seen faith leaders and other leaders who have come together around a vision of shared prosperity. People who understand what my parents taught me that if you blow out your neighbor's candle, it does not make your candle shine any brighter. That for America to be at its best, we all succeed only when we all succeed. These are choices that we make. When we choose to slash budgets, when we choose to under-invest in infrastructure, those aren't inevitable things that we had no choice in making. Those are explicit choices. And we have a choice between racing to the bottom or racing to the top. We have a choice between building higher walls or building a bigger table. And these are choices that I want to talk about today because I have met with so many leaders across this country who have responded to these choices by embracing a movement that they call conscious capitalism. This coming Friday, we'll be hosting a meeting in Washington with a good friend of mine Kip Tindell, who is the CEO of the container store, one of the best places to work in America, a publicly traded company. And Kip understands the stakeholder model of governance which says that shareholders are best served when all stakeholders are well served, when we reject false choices. I either take care of my worker or I take care of my shareholder or I take care of my customer but I can't do all three. They categorically reject that. The conscious capitalism movement is about creating value for all of our stakeholders, customers, employees, communities, natural ecosystems, supply chains. This is what the president said in the most recent state of the union. "This year I plan to lift up the many businesses who figured out that doing right by their workers or their customers or their community's ends up being good for their shareholders. And I want to spread those best practices across America." That's part of a brighter future. And so that's what we have to talk about. And we see it in the context of the growth that we've had. You see it in the context of where we were, where we are, and where we need to go. And so that is why I am so excited. Because you know what? We have come a long way. But in the house calls that I make, I am reminded day in and day out of the unfinished business. I remember, like yesterday, a visit I took to Detroit with Mayor Duggan in which we set down with fast food workers. I met a woman who was a mother of three. She's trying to make ends meet on a minimum wage that can't feed the family. She's working a full-time job and living in poverty. And the night before I saw her, she actually had slept in her car because she had been evicted from her home because her home was no longer habitable. We can do much better as a nation. And I meet so many people like that. I met a woman in Connecticut. She had just given birth to her second child. Her husband is disabled. She drives a school bus. And because we don't have paid leave, we're the only industrialized nation who doesn't have paid leave. The only choice she had was to take her infant with her on the school bus a couple weeks after her infant's birth. And so all these sick kids getting put on the school bus, in no small measure because their mothers and fathers had to put them on the school bus because they couldn't afford to take a day off from work. And she's on the school bus with her newborn infant, not fully concentrating on the task at hand because she has her infant right behind her. This is the United State in 2016. We can do much better. The fact of the matter is we've made a lot of progress, but our economy is out of balance with the fruits of the recovery being enjoyed by folks who are already living quite comfortably. And here's one data point. In 2014, the combined bonuses of Wall Street executives, the Wall Street bonus pool, this is just their bonuses, was more than double the total earnings of all full-time minimum wage workers in the United States. It does not have to be this way. You'll hear some people, as I said, say that this is structural, you know, globalization, technology, you know, this is the cost of being able to buy a TV for $200 instead of $400. And, again, I don't buy that because I have seen in my short tenure of 30 plus month at DOL, that there are no shortages of smart forward-looking people in our country who make bold decisions and move us forward. There is this movement that I mentioned of those who believe that investing in their workers is one of the best ways to grow the bottom line. And I see it in all the places I travel. I remember the bookstore that I met owner in Fairbanks, Alaska. They paid above the minimum wage. They were able to retain their workers. The Ace Hardware store in my neighborhood, she owns seven stores, and she has been able to be profitable because she pays above the minimum wage. I've met so many CEOs who reject the tired argument that higher wages kill jobs or stifle business growth. Instead, they're embracing what Henry Ford embraced quite a while ago, when he double the wages of people on the assembly line, understanding that better paid workers are more productive workers who provide top-notch superior customer service and that leads to higher retention rates, lower training and turnover rates. That's good for business. I visited, last spring, I was in Seattle. I visited a great ice cream shop. Anyone from Seattle? Molly Moons. Molly was already paying her employees a living wage and paying 100% of their health premiums. Now she made a decision to offer them 12 weeks of paid leave. And she didn't do it simply because she's a nice person. She did it because it meant a loyal workforce and the ability to recruit top talent and she continues to do that. I don't know if you have Shake Shack. Do you have Shake Shack in Ann Arbor yet? Not yet. Too bad. Go to one. Anyone been to a Shake shack? Oh, okay. So you know Shake Shack. One of the most successful IPOs last year was Shake Shack when they went public. Danny Meyer, the original founder of Shake Shack and Randy Garutti, the current president, that is a great example of the business model. And we hear that you can't do burger flipping unless you pay your workers low wages and no benefits. They have categorically rejected that notion, one of the most successful IPOs. And they're going gangbusters. And I recently had lunch with Danny Meyer in Washington. And he told me he had just met with all his senior leadership at their DC Shake Shacks. And he asked them, why are you doing so well? I was told the DC market wasn't going to be able to compete. And they said the most important key to our success was when we paid above the minimum wage when we opened up. They started out at $12 an hour, and they've been able to retain employees. And they're continuing to do that. Costco was a high road employer before. High road employers were cool. I still have my Costco card. It's so old that I had hair in it. And, you know, I wish -- I'm Tom, buy high, sell low Perez. And, you know, they've demonstrated that retail big-box doesn't have to be a race to the bottom. If you had invested $1000 and purchased Costco stock in the mid-80s, you'd be sitting on about $16,000 today. That's more than double the return on investment of the S&P 500 over that same period. I can go on and on with other examples of businesses who understand that when workers have a voice, everyone succeeds. Next time you go get a beer that's from the new Belgium Brewery Company, a great example of how they understand that you do well by doing good. Kim Jordan, a real leader, who was just at the White House for another conference we had. And, you know, they all are taking a page, as I said before, from the playbook of Henry Ford who understand, as he said, that if we can distribute high wages then that money is going to be spent. And it will serve to make storekeepers and distributors and manufacturers and workers and other lines more prosperous. Countrywide high wages spell countrywide prosperity. That is what we're talking about. And these aren't isolated examples. Everywhere I go, I see business leaders combining idealism and pragmatism in new and creative ways. And I'm looking forward, this Friday, with Kip to meeting with other leaders who've understood this. And Kip recommended to me, a while back, a book I encourage you all to read. It's called "Firms of Endearment. How World-class Companies Profit from Passion and Purpose." And there you can read case study after case study about companies that understand that the right thing to do is the smart thing to do who are acting responsibly, not out of charity, this is not corporate social responsibility. This is enlightened self-interest. In one of the stories from that book that I like the most was a story about Jeffrey Immelt of GE, a pretty large company. And he was talking with company executives about a decade ago. And he laid out the four values that the company needed to embrace in order to enjoy continued leadership and success. And the first three were kind of things you'd understand and expect, execution, growth, hiring the right people. But the fourth was interesting to me. And the fourth value was the value of virtue. Virtue, he said. To be a great company, he told them, you have to be a good company. And he went on to say the reason people come to work at GE is that they want to be about something bigger than themselves. The era we live in belongs to people who believe in themselves that are focused on the needs of others. It's up to us to use our platform to be a good citizen because not only is it a nice thing to do, it's a business imperative. That's not Tom Perez talking. That's the CEO of one of the world's most powerful companies. And there is a growing body of research indicating that when you engage your employees, when you give your workers a voice, there are many ways to give your workers skin in the game whether it's a labor union, whether it's a works council, whether it's what Proctor and Gamble did decades ago, profit sharing. So many different ways to give your workers skin in the game. It is tied to business competitiveness. A growing number of corporate leaders believe that you don't have to check your values at the door or kick people to the curb in order to succeed. And they're not just putting these principles into practice. They're making it their brand. They believe that profit and purpose are not mutually exclusive. In fact, they complement and reinforce one another. They believe private enterprise can be both transactional and indeed transformational. And so, you know, again let me make it clear because I'm not talking about simple corporate responsibility. I'm talking about an ethos that you weave into your company DNA. And these companies are shattering all those false choices that we've been indoctrinated with for so many years. They're challenging all the truisms. They're paying higher wages. And they're challenging the truisms that, that undermines competitiveness. They're challenging as you know, so many companies are doing, the big three to name three. You know unionization will stunt their ability to grow and prosper. The vigilance about worker safety will be bad for business. And you know what? They are understanding that there is indeed something to be gained from what my mother taught me which is it's nice to be important, but it's important to be nice. And so we're seeing this in action. And by the way, you know, for those of you who are in the public policy school, you know, advancing this ethos and culture is not simply something to be considered and implemented in the private sector. You know, as someone who had the privilege of going to the Kennedy School, I understand. And as someone who has spent virtually my entire career in public service, I understand that government at all levels can and must play a critical role as a catalytic force investing in people, leveling the playing field, facilitating progress, and protecting us from neglect and forces that are often beyond our control. I am proud of the work that we did to help Andra Rush builder her business. I'm proud of the work. I often refer to the Department of Labor as We help businesses who want to grow their business get matched up with workers who want to punch their ticket to the middle class. And we use the secret sauce of training through a variety of folks. And so I am someone who is very proud of the fact that I've spent the vast majority of my career public service. Because you know what? I believe that government can be a catalytic force. And make no mistake about it folks. There are cynics who believe that government is not the solution. It's the problem. There are cynics who believe that we need to starve the beast. They believe that government can't do anything. And I'll tell you, that's not been my experience. I've seen so many examples of how we have been able to use our investments, use our partnerships, and do so many things to help folks. And the cynics who want to starve the beast, I think we're seeing firsthand that the costs of that attitude can be costly in both human terms and indeed in economic terms. It's impossible for me to land in Detroit today without reflecting on the circumstances in Flint. And the federal government's going to be all in, in Flint. We already are and we will be there as long as necessary. But the Flint crisis is a totally preventable crisis. And I worked at Maryland Law School. When I was clinic director there, we did a lot of work in lead paint. And I understand the short and long-term health consequences of exposure to lead paint. This isn't simply a public health crisis. This is a crisis of neglect. And everybody in this room, whether you're at a business table, whether you're at the public policy school, whether you're an undergrad, whether you're at another school here, we all got skin in the game. Because when we all succeed, we all succeed. And zip code should never determine destiny, as I said earlier. And communities of color, I have seen in my work, regrettably, are all too frequently victims of neglect. And I've seen it in my work in education. I've seen it in my work in housing. I've seen it in my work in policing. I see it in all too many contexts. And so we have a real opportunity here. And I am an internal optimist. I think we can move forward, but I'm not naive about some of the forces that make life challenging. I've talked to a lot of CEOs who talk to me about the pressures of short termism, as they call it. One CEO who said to me in response to a renegade shareholder who was angry at the fact that she was paying people more as a retention strategy, said to that person, you know what? This is how we make our company profitable in the long term. This is how we make it sustainable in the long term. I think I am right. And that person responded, I'd rather be rich than right. That was the pressure that they're confronting and so many other folks are confronting. But the reason I love coming to schools like these schools here, business schools, public policy schools, and I'm doing this across the country is because, you know what? I'm getting old. And you guys are the leaders. I'm a big believer in the irrelevance theory of leadership. I want to become as irrelevant as possible as soon as possible. And all of you in this room have opportunities moving forward. And I hope that as you move forward into positions of leadership whether it's in government, whether it's in business, whether it's in state and local government, and I've loved every job I've ever had in state and local government. I've loved my jobs in the federal government. I hope that you will indeed reject these false choices. I hope you will indeed understand that you have the ability to be part of a joint venture. A joint venture that understands that nobody who works a full-time job should have to live in poverty. An understanding that you know what? Before you we can move forward, wherever I'm working, we need to articulate a set of principles that we can put in place. And by way of example, I recall that Professor Whitman worked at GM. And there was a guy in the 70s, a remarkable man named Reverend Leon Sullivan who was a Baptist minister. And he was, I believe, the first African-American to serve on the board of a Fortune 100 company. And he used his platform as the first African-American to really leverage change. And at the time it was anti-apartheid activism, but he developed what are called the Sullivan principles, a simple code of conduct for companies and the nations where they do business. And it included equal pay, non-segregation, training opportunities, quality of life and housing, education and health. And these principles were a catalyst for divestment later adopted by the U.N. And so as we move forward and as I've thought about how we build shared prosperity across America, I've been thinking that we need Sullivan principles for shared prosperity in America. And these are not principles of corporate charity. These are not principles that are simply applicable to you if you're in the private sector. I think these are principles of proven effective long-term governance. And they happen to be, I think, part of the values of who we are as a nation. And so I've thought about a few of these principles. And I'm confident and hopeful that you agree with some. And I'm equally confident that you may take issue with others. And I'm equally confident that I may have left some out. And I hope that you'll give me your feedback. Principle number one. We need to reject false choices and instead think long-term. Reject that false choice, as I said earlier, that you either take care of your shareholder or your customer or your worker. Effective companies do all three and then some. They know it's not a zero-sum game. They know you can't get sucked into what one Fortune 500 executives called the quarter by quarter earnings vortex. They know that, as I said earlier, shareholders are best served when all stakeholders are well served. Principle number two. Very simple. If you work a full-time job in America, you shouldn't have to live in poverty. And you shouldn't have to rely on food stamps to feed your family. We can do far better. I keep reflecting on that woman who slept in her car in Detroit the night before our event. We can do far better. Principle number three. Worker voice is essential to business competitiveness. And all of your employees deserve a meaningful say. I happen to believe that when we have strong labor movements, we have a strong middle class. That's not the only way to ensure worker voice but that is one way. And we saw last week in our data, if you're a union member, your median income per week is $200 more than a non-union member. Workers have got so much game and they ought to have skin in the game. There are many different ways to provide that voice, and give them a chance to contribute to those great ideas. Principle number four. If you really believe that family comes first, don't pay lip service to it. Put it in practice. One of the questions I got in our session just before we got here was, you know, what can we do to give more opportunity to women so that maybe the Silicon Valley and Wall Street will look more like America? Well, you know what? We're the only advanced economy in the world that doesn't have some form of federal paid leave. We've got this modern family universe, but we've got these "Leave it to Beaver" public policies. You know, I said recently it's the United States and Papa New Guinea are the only industrialized nations in the world and somebody flagged me down afterward and said Papa New Guinea just passed a new law. So stop disparaging Papa New Guinea. So I'm not going to use Papa New Guinea anymore but the point is well taken. I meet so many people around the world. People who are progressive. People who are conservative in Australia, Germany, Canada, U.K. And they all say to me I had don't understand why you don't have federal paid leave in the United States. It's part of our global edge. It's part of our social fabric. Principle number five. Innovation is America's middle name. And innovation will always drive success in business, in government, everywhere. At the same time, the key to long-term success is inclusive innovation that benefits everyone. This principle is so important as we address the challenges and opportunities of the future of work including but not limited to the on-demand economy, the future of work in an area where we continue to see automation and technological advance. That does not have to mean the end of workers as we know them. When we are inclusive, we can do so well. We applaud innovation, but it can never be an excuse to compromise such core labor standards or to leave people behind. Principle number six. Successful businesses believe in diversity. But as one executive said to me, you know what? They do it because it's smart not because it's PC. One of my favorite people in this country is your former president Lee Bollinger because he believed in diversity. And he did a remarkable service by doing that. And I teach my kids, you know, we tolerate Brussels sprouts. We embrace diversity. That's what we do. And I'll tell you why. Because it's key to our global competitiveness. The reason why so many Fortune 500 companies filed amicus briefs in the Grutter and Gratz cases is because they understood if we're going to compete in a global economy, we need to have a diverse workforce that can compete with us. Plain and simple. We celebrate and promote diversity in all of its forms seeking the understanding and perspective that distinct life experiences bring. That's not an educational institution. That's actually the mission statement of a business that I met recently. And that leads me to my final principle. And it's a principle for me that's born out of my work as the labor secretary and the work I do in the civil rights community. And the principle is this. We all succeed only when we all succeed. I had a privilege of going with President Obama last year down to Selma to mark the 50th anniversary to bloody Sunday. Bloody Sunday and the events that followed, which led to the passage of the Voting Rights Act, was about ordinary people who did extraordinary things. And what the president said in those remarkable words was that the most important word in a democracy is the word we. It's a simple two letter word, we. It's incredible what we can do when we come together. The most important dependent clause in America is we the people in order to form a more perfect union. And I believe that speech is really about what this conversation is. When we come together and understand that we only succeed when we all succeed. When we understand that we need to allow people the opportunity that comes with that truism, that's how we build an America that works for everyone. And I think this applies in every line of work because we can't succeed in Flint if people can't drink the water. We can't succeed in America if people are working 50 hours a week and getting their food at the food pantry. We can't succeed if we're not all succeeding. So those are my Sullivan principles. I'm confident or hopeful that you agree with some of them. And I'm equally confident that you may disagree with others. And I'm certain that I've left some out. And I hope that in our conversation that ensues, that you'll give me some feedback on it. Because you know what? Our success has been the result of choices that have been made not just during the Obama administration but throughout our history. I do not believe that the gilded age was a golden age. I want to make sure that we have an age of shared prosperity. And the challenges that exist today and tomorrow are challenges that will be resolved by choices. You all, in this room, are going to be in those rooms whether it's the rooms of local, state government or federal government or the board rooms of companies. You're going to be in that room. And I hope you'll recognize these principles. And I hope you'll have that North Star somewhere in your office so that we can indeed build a society of shared prosperity. Thanks so much. And I look forward to your questions.

[ Applause ]

>> Okay.

>> Okay. I'm going to get closer to you because I've got one that works so that when you talk, everyone else will hear you. So pardon the space interruption here.

>> Well, thank you so much for coming. It's really been an honor to hear from you. I'm Max Lerner. I am a senior studying public policy. My focus area and specialty is labor policy here. And I'm the lead of the college Democrats chapter. It's really great to hear from you. Our first question is what advice do you give to young entrepreneurs who want to do the right thing with their workers but feel like they have limited capital to do so.

>> We just had a meeting with Venture Capitals actually in the Silicon Valley a week before last in that area. And it was really interesting because what we learned from that meeting was that, you know, the question presented was is Venture Capital raising perverse incentives to think short term? And it was really heartening to see that they understood. You know, for instance, there is a startup called It's a home health agency. And if you want to build a home health agency that's built to last, it's all about relationships. You know, I remember when my mother was, you know, advancing in her Alzheimer's. If she, you know, if we had seven different people coming in each week, that would have been -- that's not workable. It's about relationships. And so they're actually paying their workers, bless you again, you know, they call them employees and their paying the benefits. And it's all designed to make sure that they can keep them long enough. And so the advice I would give is that, you know, I think, you know, when you -- I've been heartened at the appreciation for the efforts to think long-term. And I recognize -- and the reason I went out there to talk to folks in Silicon Valley is because I had gotten this question from a lot of folks. You know, and we were wondering how do we help continue to catalyze innovation and entrepreneurship while at the same time, you know, making sure we're built for the long haul. And I think it can be done. And I'm heartened by the conversations that we had with Venture Capital.

>> Thank you Secretary Perez for your thoughtful response. My name is Emily Rusca. I'm a second year MPP here at the Ford School. I have a large interest in education and workforce development. This next question from the audience has to do with one of the economies that you mentioned, the on-demand the economy. This question is what is your analysis of the sharing or on-demand economy of companies such as Uber as it relates to employment and labor policy?

>> We just had a -- did everyone hear the question? Okay. Good. So this must be working now. We just had a conference in DC called the future of work at the Department of Labor. I think it's three days long. And then I've been doing a little bit of a road show with people like Senator Mark Warner and others because this is a very important question. And what I said at the conference was in order to understand the future of work, you need to appreciate the past of work. This is not the first time we've had, you know, transformation. In the end of the 19th century, we had the industrial revolution. And we had people who grew up on a farm who were now working at bakeries or at other facilities. And we had a conversation in this country for literally decades about what does the social compact look like in the industrial age? We had a Supreme Court case in the early 1900s, Lochner, for those of you who may be law students or aspiring law students that said, you know if you try to regulate hours in a bakery or other similar industrial contexts, that's illegal. It interferes with freedom of contract. And over -- it took literally another three decades or so before we had the Social Security Act, the Fair Labor Standards Act, the National Labor Relations Act. And in the on-demand economy, we're having similar conversations today. And so one thing that's important to understand is it constitutes, according to most studies, roughly 1 to 2% of the economy. And what I've learned in talking to Uber and lift drivers and other folks who are working at Task Rabbit or elsewhere is they value they are flexibility. Millennial's value flexibility. I'm learning as a parent of millennials. And at the same time, they appreciate the fact that you know what? You know, I can't have these -- when I have these ups and downs in my income, you know, is there a safety net? Or if I get into an accident is there a safety net? And so the challenge presented from really both questions is how do we build an economy that continues to reward innovation and encourage entrepreneurship and at the same time, you know, have that safety net? What does a social compact 2.0 look like? I meet people whose childcare bills exceed their monthly mortgage payment or their monthly rent because we haven't figured out that aspect of the social compact. I mentioned paid leave. The same thing. You know maybe we should be talking about portable benefits many people say. And we've been -- there is a proposal in the president's budget to study that. The Affordable Care Act is all about enabling people to go from job to job without having job lock. And the irony of people who oppose the Affordable Care Act is that they ignore that reality. I'm not going to say what's in my head because I don't want to get snarky. I'm trying to keep snark out of this. And so, you know, we're going to continue to have this conversation in the context of the on-demand economies. It's a fascinating, important conversation. It is about, you know, 1 to 2%. I'll be it a very important inconspicuous 1 to 2% of the economy. And I think we're good to see answers emerge. And that's why we've been very much an active part of the conversation.

>> Thank you Secretary. This question is about TPP. There's a lot of concern about it in Michigan. Given the effects of other trade deals, what impact do you think that'll have on the future of wages and equality in America?

>> The question -- everyone hear the question again? Okay. The question was about the Transpacific Partnership. And as a guy who grew up in Buffalo, New York, I certainly have an appreciation for prior trade agreements because sometimes there are a lot of lofty promises that were made and the promises weren't necessarily kept. And so the question presented is, you know, is it impossible to build a trade agreement that can help grow businesses and protect workers? Do we simply throw up our hands or can we learn from some of the lessons of history? And one of the things that has been really interesting for me in looking at TPP and trade agreements more generally is studying and understanding the most trade dependent state in the country which is Washington State. Washington State has the highest minimum wage in the country, state minimum wage. Washington State is the most trade dependent state. And they have had some of the, you know, when you look at indicia of prosperity, they've been at or near the top of the list. And so for me I think it's important to understand because, again, I grew up in Buffalo. And I saw, you know, a lot of -- I saw the middle-class hollow out. And so it gives me great concern and a lot of members of Congress from Michigan have asked a lot of important questions about labor protections. And that's why when you look at TPP, for instance, in Vietnam, the status quo in Vietnam is that if you try to organize a labor union, you can be put in jail under these laws that are just absolutely ridiculous. And the question presented is can we meaningfully improve the status quo? And there are number of provisions in the current Transpacific Partnership that are designed to do just that so a minimum wage, for the first time, workplace, occupational safety and health, building an infrastructure so that there is a legitimate and credible enforcement mechanism. These things don't happen overnight. Vietnam isn't going to become Massachusetts you know, overnight in that. But I think the conundrum is that if we do nothing, I don't think the status quo is particularly good either. And so that's really why, you know, President Obama and a lot of other progressives are trying to go to school on the past mistakes of trade issues and trade agreements, understanding that, again, places like Buffalo and places like Detroit and places like Illinois have seen ill effects. But I, you know, the president believes and, again, the future of population growth is in the Asian Pacific quarter. And so we want to have markets to sell our products. And I think it's important for us to take a look at states like Washington who are very trade dependent and have seen a lot of growth in a lot of important indicia of prosperity. And that's the question. You know, what can we learn from that? Because I think there's a lot we can learn from that.

>> Thank you Mr. Secretary. You mentioned Henry Ford as an example of enlightened self-interest but he was also vehemently anti-union so --

>> And an anti-semite.

>> Even better, right?

>> Yeah.

>> So how do you reconcile this sort of contradiction, and what do you see as the role of unions in this conscious capitalism that you're talking about?

>> Well, we had a summit on worker voice back in October. The president spoke. It was at the White House. And our first panel, one of the panelists was a senior executive from Kaiser Permanente, which is, you know, one of the largest healthcare entities and providers and insurers in the country. And it was remarkable. And a unionized workforce. It was remarkable to hear them articulate not only the cost savings that have resulted from this labor-management partnership but also the improvements in health status. Because you know what? I haven't had an original idea in years. And when you listen to folks in the front line and you give them a meaningful seat at the table, you build a better company. So I have always felt that when unions succeed, the middle-class succeeds. And when you look at the data on inequality, you know, for decades after World War II, productivity and real wage growth went hand-in-hand. And then that started to decouple at roughly mid-late 70s. And I may be off by a couple of years. And at the same time, we started to see decreases in union density. And researchers have estimated that anywhere from 20 to 33% of the inequality that we're seeing is a product of the decline in labor union density. And, you know, I look at the auto industry. I own two Ford products. And one of which was made in Louisville, Kentucky and one of which was made here. It's the C-Max made here. And, you know, the plant in Louisville, you know they were down to 700 people back in the depths of the recession. And they came together around a plan of the shared sacrifice that would lead to shared prosperity. Now they're at 4400 employees because they work together in the down times. They shared the pain. And now they're sharing the prosperity. And we saw that in the three most recent labor agreements. So I think that, you know when unions succeed, America succeeds. And I think there is a remarkable opportunity. And I also understand that, you know, unions are facing headwinds. And I've had this conversation. You know, the brand has suffered in the eyes of many. And make no mistake about it, I mean, the Supreme Court case for public sector trade unions is a frontal assault on collective bargaining. And I think that when we have effective collective bargaining, a lot more people do better.

>> What's your position on restaurant workers who are paid below the minimum wage and rely on tips? And there's been a lot of concern about scheduling for service workers, and they're not given their schedule far enough in advance. What can be done about that issue?

>> There is an iconic American labor hero. His name is Bill Murray. Did you ever see the movie "Groundhog Day"? If you were to look on our website on February 2 of this year, you would have seen a tweet with a photo of Bill Murray from "Groundhog Day". And the basic caption was, you know, for tipped workers still making 2.13 an hour, today is Groundhog Day once again. I think it's ridiculous. And by the Way, Washington State, don't mean to get back to Washington State, is one of seven or eight states that do not have a tip credit. So if the opponents of this were correct then every time you travel to Seattle, you better bring a bag lunch because the restaurants are all going to go out of business if they have to pay, you know, the minimum wage. And by the way, I was out there April 1st of last year when the first increment of the $15 an hour wage went into effect in Seattle. And what was remarkable was the head of the Restaurant Association was there. And she said I support this. And smart businesses will adjust. And you know what? It levels the playing field. And by the way, we had a storm in DC. And everything was closed for a week. What if your -- and then, you know, the government got shut down. And all that was basically shut down a couple years ago. If you're a tipped worker, you're screwed. That's a term of art. I mean, you are just screwed in that context. And why you should rely or have to rely for your livelihood on whether someone's a cheapskate or someone's generous or if someone in the kitchen screwed up and, you know, cooked your burger medium well instead of medium rare and you're the server. That's not right. And that's why people like Danny Meyer, by the way, are trying to do away with tip wages. And every time you try to take -- go at the tip credit, you know, then all the calamity hollers come out and say, you know, oh, God. It'll be the end of the world as we know it. And it's just not the case.

>> As someone who's worked as a tipped worker a lot throughout my schooling, I appreciate those comments. What challenges and opportunities do you see for the American economy giving increasing automation and the results and effects on employment?

>> Well, it's undeniable that if you go into an advanced manufacturing facility, there are less workers there. And you see people walking around with an iPad. At the same time, if you look at a number of studies, you know, this issue -- this question, if we had come here in our Model A, you know, 100 years ago and I'm confident the same question would have been asked perhaps slightly differently, but the Industrial Revolution, the question was asked, what's going to happen? Will work become extinct? And historically those predictions have been, I think, a bit overstated. But at the same time we have to understand that, you know, the Bethlehem Steel of my youth in Buffalo which had 20,000 employees has been replaced. It's going to be replaced by Solar City. They're making solar panels. And they're going to need less employees to do it. There's no doubt about it. And what I think we need to make sure we do is as we have these conversations, you've got to make sure that everybody who's impacted is at the table. I told this story to the students I was with earlier today. I was in Hamburg, Germany recently looking at their port system because a year ago I was out in the West Coast helping to mediate a dispute that had basically shut down the West Coast ports. And the issue of automation is front and center in conversations between longshoremen and, you know, the port operators. And what we see in Hamburg is one of the most automated and advanced ports in the world. And I sat there and I met with workers. I met with the management. I met with the head of the labor union in Germany that represents longshoremen. And here's what I learned in a nutshell. They have dramatically reduced accidents in the workplace as a result of automation. And everybody likes that. You know the most important rights you have when you go to work in the morning is to come home safe and sound at night. They have worked together to deal with the consequences of automation. So I watched these containers being loaded into driverless vehicles. And you know what? Somebody needs to repair those driverless vehicles and service them. So they've created new opportunities for employment. And the efficiencies that they're gaining, they're getting more volume which works for everyone. So they were able to negotiate how they're going to transition this automation and it created win-win opportunities. And that model is so important because we need to move away from this adversarial posture toward a partnership model. And when we do that, I think we can really manage this transition in a way that will meet principle number one that I just talked about, rejecting false choices.

>> This has to be our last question, unfortunately, but thank you so much for being here. It's been great. As our nations become more polarized, that's been reflected in our institutions, and that's including the National Labor Relations Board, there's been a lot of controversy in that in Congress.

>> I've heard about the polarization.

>> What do you view is the future of the National Relations Labor Board?

>> Well, they play an indispensable role in making sure that there is a level playing field. And I've talked to employers and workers alike who believe that. You know, we do a lot of work in a lot of different areas like worker misclassification. This is where a worker is called an independent contractor. And when you call someone an independent contractor you don't have to pay them minimum wage. Don't pay them overtime. You don't have to pay Workers Comp. You can really cut your costs. And there's a totally legitimate role for independent contractors. And there is a remarkable body of abuse of this. And I bring this up because a substantial percentage of complaints we get about misclassification are from employers. Employers are playing by the rules who saying to me, you know what? I'm trying to compete on this contract but my competition is paying folks under the table. And so, you know, we now have memorandum of understanding with 28 states including Utah, Arizona, Texas because this isn't a red/blue issue. You know, the issue of workplace fairness, I meet folks in this job. You know, I don't ask them whether they're Republican or Democrat. That's irrelevant. That's offensive. I meet folks, you know, across a geographic spectrum, across so many spectrums who understand that, you know, fairness is fairness and when you have a level playing field that works for everyone. And so in the misclassification context, when you cheat, it hurts the worker. It hurts employers who play by the rules. And by the way, it hurts the tax collector because we don't get those taxes whether it's Workers Comp, UI tax, etcetera. And so, you know, I think, you know, we need an effectively functioning NLRB. We need effective enforcement of wage and hour laws, of civil rights laws because, you know what? We're not only helping workers. We're helping businesses who play by the rules. The race to the bottom is a very, very dangerous race. And it's a very, very unhealthy race for our country. And that's why I have loved being in public service because we help level the playing field. We help expand opportunity not only for workers but for businesses who have those values of respect. And I see it day in and day out. And that's why I'm bullish about the future because we've got to help more employers and we've got to help more workers. And it's not either/or. We can do both and then some. Okay. Thank you.

[ Applause ]

>> So first a big thank you to Secretary Perez for joining us. I'd also like to thank all of you for being here. I hope you'll help continue the conversation by joining me and the Secretary for a reception out in the Great Hall just beyond those double doors. Thank you again for being here.

>> Thank you.

>> Secretary, thank you so much.