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Did Cutting the Duration of Unemployment Benefits Lead to Faster Job Growth in 2014? Print
Written by Dean Baker   
Monday, 26 January 2015 15:36

A new NBER working paper by Marcus Hagedorn, Iourii Manovskii, and Kurt Mitman (HMM) argues that end of extended unemployment benefits at the start of 2014 explains much of the pick up in employment growth in 2014 compared with 2013. The story would be that the end of benefits gave people an incentive to find work. Their method is to compare the change in employment in states that previously had lengthy periods of benefit duration with states where benefit duration was already short prior to January of 2014.

The argument is that in the states that previously had long benefit duration we should expect the cut in duration to have a large effect. By contrast, in the states where benefit duration was relatively short, we would expect to see little effect. This means that we should see a bigger uptick in job growth in 2014 relative to 2013 in the states that previously had long periods of benefit duration than in states that had short periods.

They test this claim by first looking at state level data. They find that states with long benefit duration in fact had a bigger gain in the rate of job growth in 2014. They then look at adjacent counties in the states with long benefit duration and states with short benefit duration. They find that the counties in states that had previously had long benefit duration saw a larger uptick in job growth.

This is an interesting result which contradicts much prior research indicating that shortening benefit duration had little impact on employment growth (e.g. here, here, and here). It is worth testing this result with an alternative data series. HMM use the Current Population Survey for the state level data and the Local Area Unemployment Statistics (LAUS) for the county level data. These series are both problematic for this sort of analysis.

First, state level data for the current population survey is extremely noisy. Results can easily be driven by errors in the data.

The second issue is that these are in principle household based surveys that report employment based on where someone lives. This is problematic because unemployment insurance will depend on the state in which a person works. If a person lives in New Jersey but works in New York, then they will get benefits according to New York law, not New Jersey law. If New Jersey increases or reduces the duration of benefits, it will not have a direct effect on this person's work behavior.

The third problem is that the LAUS data are largely model driven. There is little direct data for many counties. The Bureau of Labor Statistics (BLS) generates employment estimates for these counties from a variety of variables, including unemployment insurance claims. This makes them of questionable value in this sort of exercise.

The BLS Current Employment Statistics (CES) survey provides a useful alternative measure. The same sort of test can readily be constructed at the state level using the CES data. The CES has the advantage of both being a much larger survey (it surveys 144,000 establishments every month) and it is a survey of employers. The larger size means that there is considerably less noise in the monthly data. The fact that it is an employer survey means that we are measuring the number of jobs in the same states as we are measuring changes in benefit duration.

Following HMM, I divided the states into a long duration group, that previously had a benefit duration period of greater than 54 weeks, and short duration group for states that duration periods of 54 weeks or less. While HMM found the long duration group had a sharper uptick in job growth, the CES data show the opposite.


                  Source: Bureau of Labor Statistics and author's calculations.

An unweighted average of the long duration states showed their rate of job growth increasing from 1.31 percent in 2013 to 1.41 percent in 2014. By comparison, job growth in the short duration states increased from 1.43 percent in 2013 to 1.82 percent in 2014. (The calculations run from November to November in both cases, since data are not yet available for December.)

This runs completely counter to the claim that shortening benefit duration provided a boost to employment growth. The states in which HMM expected the cuts in duration to have the greatest effect on growth actually saw less of an uptick than the states where they expected a small effect. This is consistent with prior research showing that the main impact of cuts in benefit duration is that more people leave the workforce, not that more people get jobs.



Who’s Competing for Whom? Print
Written by Nicholas Buffie   
Monday, 26 January 2015 10:48

CEPR’s Dean Baker recently took Neil Irwin to task for claiming that wages are going to rise soon. Irwin argued that the growing number of job openings is a significant plus for American workers. According to Irwin, if firms are looking to hire, they may begin raising wages in order to fill current vacancies. Matthew Yglesias of Vox made the same point here.

There is some logic to this point. A greater number of job openings means that more employers are looking to hire. And if employers are competing to hire workers, they will have to bid up wages to attract workers to their firms. So other things equal, a higher number of vacancies should benefit workers by pushing up wages.

But the problem is that “other things” are not equal in today’s economy. In particular, we have a large number of unemployed Americans competing for those vacancies.



Labor Market Policy Research Reports, January 5 – January 22 Print
Written by Nicholas Buffie   
Friday, 23 January 2015 10:20

The following reports on labor market policy were recently released:

Center for American Progress

Valuing All Our Families: Progressive Policies that Strengthen Families Commitments and Reduce Family Disparities
Shawn Fremstad and Melissa Boteach

Report of the Commission on Inclusive Prosperity
Lawrence H. Summers and Ed Balls

Economic Policy Institute

Wage Stagnation in Nine Charts
Lawrence Mishel, Elise Gould, and Josh Bivens

The Erosion of Collective Bargaining Has Widened the Gap Between Productivity and Pay
David Cooper and Lawrence Mishel

Causes of Wage Stagnation
Lawrence Mishel

The Manufacturing Footprint and the Importance of U.S. Manufacturing Jobs
Robert E. Scott

Political Economy Research Institute

 A $15 U.S. Minimum Wage: How the Fast-Food Industry Could Adjust Without Shedding Jobs
Robert Pollin and Jeannette Wicks-Lim

Center on Budget and Policy Priorities

Geographic Pattern of Disability Receipt Largely Reflects Economic and Demographic Factors
Kathy A. Ruffing

Health Reform Not Causing Significant Shift to Part-Time Work: But Raising Threshold to 40 Hours a Week Would Make Sizeable Shift Likely
Paul N. Van de Water

Center for Law and Social Policy

Strengthening the “Work” in Federal Work-Study: Improving Access to Financial Aid and Career-Related Work Experience for Low-Income and Post-Traditional Students
Elizabeth Kenefick

Urban Institute

The Labor Force in an Aging and Growing America
Austin Nichols, Steven Martin, Nan Marie Astone, H. Elizabeth Peters, Rolf Pendall, Kaitlin

Franks Hildner, and Allison Stolte

Local Taxes Are Naturally Regressive Print
Written by Nicholas Buffie   
Tuesday, 20 January 2015 16:53

E.J. Dionne had a very nice piece in the Washington Post last Thursday on how the U.S. tax code is less progressive than most reporting indicates. Dionne’s main point is that by focusing on federal taxes, many journalists miss out on state and local taxes, which tend to tax the poor at higher rates than the rich:

“It is thus a public service that the Institute on Taxation and Economic Policy (ITEP) has issued a report showing that, at the state and local level, government is indeed engaged in redistribution — but it’s redistribution from the poor and the middle class to the wealthy.

“The institute found that in 2015 the poorest fifth of Americans will pay, on average, 10.9 percent of their incomes in state and local taxes and the middle fifth will pay 9.4 percent. But the top 1 percent will pay states and localities only 5.4 percent of their incomes in taxes.”

Dionne attributes the regressive nature of state and local taxes to the types of taxes that these areas tend to impose. As he notes, states and localities often rely heavily on sales and excise taxes; according to the ITEP report, both taxes are quite regressive. Property taxes are also regressive, though state-level income taxes tend to be progressive.

But there’s another way in which state and local taxes tend to be regressive: they contribute to inequality between states.



December Was a Good Month, but We’re Far From Fully Recovered Print
Written by Nicholas Buffie   
Thursday, 15 January 2015 12:26

Last Friday, the Bureau of Labor Statistics released its December 2014 jobs report. Most media outlets have focused their reporting on the U-3 unemployment rate, which fell to 5.6 percent last month.

However, the U-3 unemployment rate is an imperfect measure of joblessness. In order to be counted as unemployed, a prospective worker must “have actively looked for work in the prior 4 weeks.” This means that if someone has been searching for work for a long period of time, but has become dissatisfied with their job prospects and hasn’t applied for any jobs over the previous month, he or she is no longer counted as “unemployed.”

Some have tried to correct for this bias by looking at labor force participation rates (LFPR); this is also misleading, mostly because labor force participation doesn’t distinguish between employment and unemployment. (A prospective worker is counted as being part of the labor force if he or she is either employed or unemployed and searching for work. This means that if 50 percent of a country’s citizens were employed and 30 percent were unemployed, its LFPR would be 80 percent; however, the LFPR would also be 80 percent if 75percent were employed and only 5 percent were unemployed. Obviously it’s important to distinguish between these two scenarios.)



No, the ACA Isn’t Forcing Firms to Cut Workers’ Hours Print
Written by Nicholas Buffie   
Friday, 09 January 2015 15:12

Earlier this morning, CEPR’s Dean Baker reported on the good news about the Affordable Care Act (ACA) in today’s jobs report:

“Most of the other news in the household survey was positive. The number of people involuntarily working part-time fell by 60,000 and is now almost 1 million below its year-ago level. The number of people who chose to work part-time also fell from the November level, but it is still 1.1 million higher than its year-ago level. This is likely due to the ACA, which has allowed workers to get health care insurance outside of employment.”

This directly contradicts critics’ claims that the ACA would force firms to cut their workers’ hours. As can be seen from the graph below, the number of workers involuntarily working part-time has come down drastically since last April, while the number of workers choosing to work part-time has increased. (I use April as my start date because many of the ACA’s 2014 enrollees only purchased insurancein March, even though the exchanges had been open since October 2013.)



JOBS FLASH: Unemployment Edges Down to 5.6 Percent as Workers Leave Labor Force Print
Written by Dean Baker   
Friday, 09 January 2015 08:37

The unemployment rate edged down from 5.7 percent in November (revised from an earlier reported 5.8 percent) to 5.6 percent in December. However, the main reason was that 273,000 workers reportedly left the labor force. The employment-to-population ratio was unchanged at 59.2 percent, roughly 4.0 percentage points below the pre-recession level.

Most of the other news in the household survey was positive. The number of people involuntarily working part-time fell by 60,000 and is now almost 1 million below its year ago level. The number of people who chose to work part-time also fell from the November level, but it is still 1.1 million higher than its year-ago level. This is likely due to the ACA, which has allowed workers to get health care insurance outside of employment.



The Keystone Job Mirage Print
Written by Dean Baker   
Monday, 05 January 2015 15:01

The Keystone pipeline could have a serious impact on our children’s future, since it will facilitate the removal of high carbon oil from western Canada. This comment must be qualified, since if oil prices stay near $50 a barrel, then it is likely that most of this Canadian oil will stay in the ground whether or not the pipeline is built. However, the environmental issues should be front and center in the decision as to whether or not to build the pipeline.



Trends in the Labor Force 1999-2014: Seniors Increase Participation, Younger Workers Withdraw Print
Written by David Rosnick   
Monday, 22 December 2014 14:52

In early 2000, the civilian labor force participation rate peaked at a post-war high of 67.3 percent of the population aged 16 and over. Despite flattening out in the latter part of the decade at about 66 percent, participation rates never recovered and have steadily fallen since the onset of the Great Recession. At 62.8 percent as of November 2014, labor force participation is now at its lowest level since 1978.



Last Chance to Promote Everything That's Good and True in 2014 Print
Written by Dawn Lobell   
Monday, 22 December 2014 11:27

Dear Friend,

As you may know, we here at CEPR like to think of ourselves as the Underdog of the Washington think tank world, fighting the economic and policy powers that be on behalf of the 99%.  We even convinced one of Dean’s dogs to pose as our mascot. Like Biscuit, we’re used to fighting above our weight (which is why we consistently rank number one in media hits and web traffic per budget dollar).

But as we celebrate our 15th anniversary, we’re re-thinking our image. A new congress means even more challenges ahead for progressives. We’re going to have to work even harder and stand tougher. And we’re going to need more support to ensure that all of the gains we’ve made - from exposing the myth that private equity expands the economic pie to ensuring that aid to Haiti is going where it’s supposed to go– are not reversed.  We’re asking you to stand with us, to contribute what you can, to help us put up the strongest fight possible.

So while we’ll always love Biscuit, we think it may be time to recruit one of Dean’s other dogs to the CEPR cause.


Don’t let the calm, peaceful pose fool you.  She’s ready to stand tough. And with your help, so are we.

Thanks, and happy holidays,
Mark, Dean and CEPR staff, including dogs.

PS Donate $75 or more and receive a CEPR 15th Anniversary tote bag, featuring Biscuit, as our gift.

Are We Doing Better Than We Thought? Median Family Income 1979-2010 Print
Written by Dean Baker   
Sunday, 21 December 2014 21:15

The Congressional Budget Office (CBO) recently updated its analysis of changes in before-tax and after-tax family income. In some ways the new analysis showed a brighter picture for middle income families than other work highlighting stagnation. Focusing on the middle quintile of households with children, the new CBO analysis showed a gain in before-tax income of 25.2 percent from 1979. The gain in after-tax, after-transfer income was 46.7 percent. This may not amount to huge gains over a 31-year period, but it is not zero. It is worth looking at these numbers more closely.

Focusing on the before-tax side, the CBO numbers show income for the middle quintile rising from $61,200 in 1979 to $76,600 in 2010 (in 2010 dollars). By far the biggest single chunk of this increase is wages. According to CBO, wage income for this group rose by 14.3 percent over this period, a 0.4 percent annual rate. This is bit better than what we would see looking at the standard wage data. For example, the Economic Policy Institute (EPI) shows the median hourly wage rising by just 5.6 percent over this period.

It turns out that the difference can be explained entirely by differences in price indices used to deflate earnings. (There are also issues about hours worked, the average work year increased somewhat over this period as more women worked full-time jobs, but it would take a more careful analysis to see how hours changed for families in the middle quintile.) CBO used the PCE deflator, the index used to deflate consumption expenditures by households and spending by non-profit organizations. This shows a rate of inflation that averages 0.24 percentage points less than the CPI-URS used by EPI.

There are differences in the expenditures covered by the two indices, and also some minor methodological differences, but the main reason for the gap is that the PCE deflator allows for substitution. If people change their consumption patterns in response to price changes (for example, buying more cell phones and fewer land lines due to a drop in cell phone prices), the PCE deflator will increase its weight on the item people are buying more frequently (cell phones) and reduce the weight on the item people are buying less frequently (land lines). By contrast, the CPI-URS, ignore the change in purchasing patterns over the course of a year and assumes that peoples' purchases of cell phones and land lines is unchanged.



Labor Market Policy Research Reports, December 12 – December 18 Print
Friday, 19 December 2014 10:52

The following reports on labor market policy were recently released:


Stacked Deck: How the Racial Bias in Our Big Money Political System Undermines Our Democracy and Our Economy
Adam Lioz

Rulemaking as a Tool of Democracy: Reclaiming the Debate on Regulation
Michael Lipsky

National Employment Law Project

The Case for Reforming Federal Overtime Rules: Stories from America’s Middle Class
Judy Conti

Urban Institute

A Work Tax Credit That Supports Puerto Rico’s Working Families
María E. Enchautegui

CEPR's Greatest Hits, Volume Two Print
Wednesday, 17 December 2014 15:27

CEPR turned 15 this year! Fifteen years of speaking the economic truth to power. To celebrate, we’ve compiled a list of some of our top accomplishments over the past 15 years - accomplishments that we couldn’t have achieved without your help. Here are just a few: 



The Fed, Interest Rates, and High School Fashion Print
Written by Dean Baker   
Monday, 15 December 2014 20:49

There is growing pressure on the Fed to abandon its zero interest rate policy. The big question is why?

Just to remind people, the reason the Fed typically raises interest rates is to slow the economy to prevent problems with inflation. Higher interest rates will discourage people from buying cars and houses. Higher interest rates will discourage businesses from investing and state and local governments from borrowing for infrastructure and other needs. Through these and other channels, higher interest rates will reduce demand and slow growth. This will mean fewer jobs. That is turn means less upward pressure on wages, which will reduce inflationary pressures in the economy.



CEPR's Greatest Hits, Volume One Print
Friday, 12 December 2014 14:46

In 1999, two economists with a big vision and “a total budget smaller than some other thinktanks' entertainment funds” founded the Center for Economic and Policy Research. And for the past 15 years, CEPR has continued to serve as “a professional thorn in the side of orthodoxy”. That’s according to a 2008 editorial in the Guardiannewspaper titled “In praise of... the Center for Economic and Policy Research”, which also noted that “In a world of Goliaths, CEPR makes a rather effective David” (or Underdog, if you prefer).



Labor Market Policy Research Reports, December 5 – December 11 Print
Thursday, 11 December 2014 16:54

The following reports on labor market policy were recently released:

Center for American Progress

We the People: Why Congress and U.S. States Must Pass Comprehensive LGBT Nondiscrimination Protections
Sarah McBride, Laura E. Durso, Hannah Hussey, Sharita Gruberg, and Bishop Gene Robinson

For Women to Lead, They Have to Stay in the Game: Why We Need Public Policy to Level the Playing Field
Judith Warner

Can Public Policy Break the Glass Ceiling? Lessons from Abroad
Dalia Ben-Galim and Amna Silim



Hobson’s Choice Print
Monday, 08 December 2014 14:20

Last week, the Aspen Institute hosted a discussion on “the future of work in the sharing economy,” which focused on company platforms that facilitate the exchange of property, space, or labor. I consider myself fairly well acquainted with all three sides of this economy, especially when it comes to labor, so I wanted to weigh in here.

Over the years, I have worked a variety of odd jobs to help pay for school and living expenses, such as giving swimming lessons, babysitting, tutoring, and working as a family assistant, where my responsibilities have covered everything from dogwalking, buying groceries, paying bills, to researching preschool admissions processes. Most of these jobs were on-demand, made to accommodate both my schedule and those of my customers/clients. This does not even include my “regular” employment history of working as a university resident assistant, research fellow, lifeguard, security guard, and in various internships. I still laugh when I remember bonding with one of my roommates over always being “on the hustle” (the legal variety, of course). In the months since my graduation, I have also been an avid adopter of Craigslist, having found my apartment, bike, most of my furniture, and even kitchen supplies on the platform.



Labor Market Policy Research Reports through December 5, 2014 Print
Written by Janine Duffy   
Friday, 05 December 2014 15:11

The following reports on labor market policy were recently released:

Center for American Progress

Economic Snapshot: November 2014
Christian E. Weller and Jackie Odum

One Strike and You’re Out: How We Can Eliminate Barriers to Economic Security and Mobility for People with Criminal Records
Rebecca Vallas and Sharon Dietrich

State Disinvestment in Higher Education Has Led to an Explosion of Student-Loan Debt
Elizabeth Baylor

Center on Budget and Policy Priorities

Boosting Disability Insurance Share of Social Security Tax Would Not Harm Retirees
Kathy A. Ruffing and Paul N. Van de Water



Jobs Flash: November Shows Strongest Job Gains in Almost Three Years Print
Written by Dean Baker   
Friday, 05 December 2014 08:38

The economy added 321,000 jobs in November, the strongest gain since it added 360,000 in January of 2012. With upward revisions to the prior two months data, the average job gain over the last three months has been 275,000.



Right to Rent Helping Families Move Back into Homeownership Print
Written by Nicole Woo   
Wednesday, 26 November 2014 10:41

The LA Times ran a nice story on Friday about the Coronel family of Azusa, California, and how they were able to buy back their foreclosed home "for $280,000, far less than the $400,000-plus debt that had gone into default." They had been able to stay in their home after their foreclosure because "Fannie Mae gave permission in 2010 for the Coronels to stay on in the Azusa house as renters."

The article asked if Fannie Mae's allowing this "indirect" principal reduction reflects a change in policy.  That's because before the Coronel's case, Fannie Mae and Freddie Mac required foreclosed homeowners to pay their entire outstanding mortgage balance before being able to repurchase their homes.  That's while other buyers were able to pay the lower market price for the same property.



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