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Part 2: Returns to Whose College Degree? Print
Written by Ben Wolcott   
Wednesday, 27 August 2014 14:05

In a recent post, I argued that Avery and Turner’s research, cited by The New York Times' David Leonhardt, ignores the experiences of students of color. For a variety of reasons, such as labor market discrimination, workers’ outcomes diverge significantly based on race. Research from CEPR, for example, showed that in 2013, recent black college graduates had more than double the unemployment rate (12.4 percent) of recent college graduates in general (5.6 percent), and more than half (55.9 percent) worked in jobs that do not require a college degree. Against this background, simply looking at the average return to college does not cut it; the payoffs are smaller and less certain for some groups of students than the overall average suggests.

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Part 1: Returns to Whose College Degree? Print
Written by Ben Wolcott   
Monday, 25 August 2014 09:49

As college students head back to school and costs rise faster than inflation even using a conservative measure, it’s worth revisiting the dispute about the value of a degree. In May, David Leonhardt declared the debate closed, citing a paper by David Autor and explaining that the total cost of college is about negative $500,000 over the course of someone’s lifetime. (As Leonhardt notes, the original source for this estimate is a 2012 journal article by Avery and Turner.) To calculate the return to college, researchers basically subtract the costs of tuition and forgone wages from the average additional lifetime earnings associated with a college degree.

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Labor Market Policy Research Reports, August 15 - August 21 Print
Written by Ben Wolcott   
Friday, 22 August 2014 13:52

The following reports on labor market policy were recently released:

Institute for Women’s Policy Research

Women in Construction and the Economic Recovery: Results from the 2013 IWPR Tradeswomen Survey
Ariane Hegewisch and Brigid O’Farrell

Economic Policy Institute

Lagging Demand, Not Unemployability, Is Why Long-Term Unemployment Remains So High
Josh Bivens and Heidi Shierholz

Low Wages and Few Benefits Mean Many Restaurant Workers Can’t Make Ends Meet
Heidi Shierholz

 
Farmer’s Folly: The Sequel Print
Written by David Rosnick   
Wednesday, 20 August 2014 14:16

In a new working paper, UCLA’s Roger Farmer responds to last year’s investigation into his claim that declines in the stock market caused the Great Recession. Farmer apparently failed to grasp the nature of the critique.

In his original paper, Farmer claimed to have found a stable relationship between the movements in S&P 500 and unemployment rates, and that the data “leads me to stress asset market intervention as a potential policy resolution to the problem of high and persistent unemployment.”  In other words, the government should deliberately prop up the stock market as a way of boosting the economy. Farmer appealed to the apparent forecasting power of his model to support his policy preference.

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Labor Market Policy Research Reports, August 1 - August 14 Print
Written by Ben Wolcott   
Friday, 15 August 2014 14:45

Labor Market Policy Research Reports, August 1  – August 14

The following reports on labor market policy were recently released:

Economic Policy Institute

Wage Inequality: A Story of Policy Choices
Heidi Shierholz, Lawrence Mishel, and John Schmitt

Facts About immigration and the U.S. Economy: Answers to Frequently Asked Questions
Daniel Costa, David Cooper, and Heidi Shierholz

 
Correction and Update on Bain and Blackstone’s Recent IPO for Michael’s Stores Print
Written by Eileen Appelbaum   
Thursday, 14 August 2014 13:04

Michael’s Stores was taken private in a leveraged buyout on October 31, 2006. At the time of LBO, Highfields Capital Partners, which owned shares in the specialty retailer, was allowed to retain its interest – worth about $200 million. Funds of two private equity firms, Bain and Blackstone, purchased the remaining shares for $5.8 billion (PitchBook Michael’s Stores company profile 7-1-14 behind a paywall). Michael’s Stores had very little long-term debt at the time it was acquired. The specialty retail chain had an enterprise value (EV) of $6.025 billion. Michael’s Stores had 2005 earnings (EBITDA) of about $550 million. The multiple at which it was acquired (EV/EBITDA) was 11.

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How Old Will Social Security Be When the Rich Pay the Same Rate as the Rest of Us? Print
Written by Nicole Woo   
Thursday, 14 August 2014 12:35

Today is Social Security's 79th birthday, a good time to celebrate the nation's most effective anti-poverty program, which, especially after the housing crash and Great Recession, is crucial to the retirement security of middle- and working-class Americans.

But in about 20 years, Social Security will likely be able to pay only about 3/4 of promised benefits to retirees (if nothing's done to change the program). One way to make sure that this drop doesn't happen is to have our nation's wealthiest folks pay the same Social Security payroll tax rate as the rest of us.

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What's 35 Grand to Marco Rubio? Apparently Not Much Print
Written by Alan Barber   
Thursday, 07 August 2014 00:00

Writing in the National Review recently, Sen. Marco Rubio of Florida claims that Social Security will be insolvent by the time he retires. He goes on to make a few suggestions to fix the program. Each of these ‘fixes’ is problematic. The flaws with the Rubio fixes have been and will be repeated many times (for example, raising the retirement age can be problematic for workers in physically demanding jobs). But before getting to the fixes, there should be a full stop after the paragraph:

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Update on the Thirteen States that Raised their Minimum Wage Print
Written by Ben Wolcott   
Wednesday, 06 August 2014 09:55

In a series of recent blogposts, we updated a methodology used by Goldman Sachs to evaluate the impact of minimum-wage increases in 13 states at the beginning of this year. A number of publications, including USA Today and The New York Times, cited these blog posts in pieces on the minimum wage.

As we noted at the time, the Goldman Sachs’ methodology is not ideal for a number of reasons. Now, economists Saul Hoffman and Wai-Kit (Ricky) Shum from the University of Delaware have done a more formal analysis of these 13 states and found qualitatively similar results to the pieces using the Goldman Sachs method. Specifically, all of the analyses have found no evidence of negative employment impacts. If anything, the results have indicated that minimum wage increases are associated with more rapid employment growth, although this relationship is not statistically significant.

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CEPR News July 2014 Print
Written by Dawn Lobell   
Friday, 01 August 2014 14:57

The following newsletter highlights CEPR's latest research, publications, events and much more.

CEPR on the Minimum Wage
To mark the fifth anniversary of the last increase in the minimum wage, CEPR released its Minimum-Wage Pay-Cut Clock that demonstrates how much, down to the second, minimum wage workers continue to lose as long as the wage remains frozen at its current level. CEPR’s Pay Cut Clock was featured in a press conference held by U.S. Senator Tom Harkin (D-IA), U.S. Representative George Miller (D-CA), and U.S. Senator Al Franken (D-MN) commemorating the anniversary.

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Labor Market Policy Research Reports, July 18 – July 31 Print
Written by Ben Wolcott   
Friday, 01 August 2014 13:44

The following reports on labor market policy were recently released:

Economic Policy Institute

What Is Manufacturing and Where Does it happen?  The U.S. Should Reconsider Plans to mask Trade Deficit by Reclassifying Factoryless Production and Contract Manufacturing
Robert E. Scott

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DATA FLASH: Job Growth Slows in July Print
Written by Dean Baker   
Friday, 01 August 2014 07:48

The economy added 209,000 jobs in July, a sharp slowing from its 277,000 average over the prior three months. The slowdown was widely spread across sectors, although temporary help, which added just 8,500 jobs and health care, which added just 7,000 were notable weak. Construction, which added 22,000 jobs and manufacturing, which added 30,000 jobs, were surprisingly strong.

The unemployment rate was essentially unchanged at 6.2 percent, as there was little change in either the size of the labor force or the number of unemployed. Involuntary part-time employment edged down slightly reversing part of a jump in June. It still stands 669,000 below its year-ago level. Voluntary part-time employment decreased modestly but is still 502,000 above its-year ago level. This would be consistent with some workers opting to work part-time now that they no longer need to get health insurance through their job.

This report provides little evidence of any pick-up in wage growth. The average hourly wage rose at a 1.82 percent annual rate over the last three months compared with the prior three months. While a tightening labor market should eventually allow workers to see some gains in real wages, the economy does not appear to be at this point yet. 

 
Economy Rebounds in Second Quarter Based on Inventories and Cars Print
Written by Dean Baker   
Wednesday, 30 July 2014 08:04

GDP grew at a 4.0 percent annual rate in the second quarter after shrinking at a 2.1 percent rate in the first quarter. Much of the shift was due to a considerably more rapid pace of inventory accumulation. Inventory changes which had subtracted 1.16 percentage points from first quarter growth added 1.66 percentage points to growth in the second quarter. New car sales added another 0.42 percentage points to growth, after adding just 0.13 percentage points in the first
quarter. Equipment investment, which grew at a 7.0 percent rate, added another 0.4 percentage points to growth for the quarter.

Another positive item in this report was continued slow growth in health care costs. After a reported drop in the first quarter, health care costs grew at a 2.6 percent annual rate. They stand just 3.0 percent above their year-ago level.

On the negative side, the trade deficit expanded again last quarter rising to an annual rate of $564.0 billion. It subtracted 0.61 percentage points from growth in the quarter.

While the 4.0 percent growth is a sharp turnaround, it was very much in line with expectations. It means that for the first half of the year, the economy the economy grew at less than a 1.0 percent annual rate. The economy will have to sustain a growth rate of more than 3.0 percent over the second half of the year just to reach 2.0 percent growth for the year as a whole. This means 2014 will likely be another disappointing year for growth.

 
Private Equity at Work: Perhaps it’s Not Private Equity’s Image that’s the Problem Print
Written by Eileen Appelbaum   
Monday, 28 July 2014 10:29

The theme of this year’s European Private Equity and Venture Capital Association (EVCA) symposium held in Vienna in June was “Private Equity as a Transformational Force.” Speakers emphasized the industry’s need to develop partnerships with the companies it acquires and deliver value for all stakeholders. EVCA is concerned that the private equity industry has an image problem: it is seen as focusing on investor returns with a callous disregard for the jobs of workers and the interests of the company and its other stakeholders. EVCA wants to tell the public that PE delivers economic growth and jobs. It wants to  “Encourag[e] the private equity industry to look beyond returns and recognize its role as a global influencer and agent for progress …”.

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Private Equity at Work: Private Equity’s Excessive Use of Debt Endangers Main Street Firms and Workers Print
Written by Eileen Appelbaum   
Friday, 25 July 2014 08:35

One of the lessons learned from the financial crisis of 2008 is that the excessive use of debt – referred to as leverage – undermines the stability of the financial system and poses a threat to the sustainability of companies and the jobs of workers. As we discussed in an earlier post banking regulators have taken steps to limit risky bank loans to companies.

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Dodd-Frank and Subprime Auto Loan Market Print
Written by Dean Baker   
Monday, 21 July 2014 13:18

Four years out from the passage of Dodd-Frank it is pretty clear that the bill did not lead to an fundamental restructuring of our financial system, as many had hoped. The too-big-too-fail Wall Street banks are bigger than ever and operating pretty much as they always did. Many of the highest earners in the country are still traders, hedge fund, and private equity types who are quite adept at shuffling paper, even if it provides no service to the productive economy.

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'Are We There Yet?' Moving Beyond the Recovery Question Print
Written by Ben Wolcott   
Monday, 21 July 2014 10:02

Jason Furman, who chairs the Council of Economic Advisers, spoke at Brookings on Thursday about the significant progress of the labor market since the Great Recession and the challenges ahead. While Chairman Furman spoke mostly about aggregate trends, he also highlighted specific groups that are struggling disproportionately in the recovery, such as young black males. In discussing the labor market, particularly unemployment rates, Furman repeatedly used the “Average in the Last Recovery” (which he defines as the average rates from December 2001 to December 2007) as a benchmark to judge the progress of the current recovery.

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Labor Market Policy Research Reports, June 8 – July 17 Print
Written by Ben Wolcott   
Friday, 18 July 2014 09:58

The following reports on labor market policy were recently released:

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Private Equity at Work: CalPERS Private Equity Returns: Good, But Not Good Enough Print
Written by Eileen Appelbaum   
Wednesday, 16 July 2014 13:39

As we noted in a recent post:

Private equity investors are flush with cash distributions. Now that money is finally rolling in, many seem blithely unaware that the typical PE fund launched since 2005 has failed to beat the stock market. Investors would have been better off putting their money in an index fund that tracked the market than in these PE funds – and would have had less risk and more liquidity to boot. Yet PE investors are ploughing cash back into new PE funds. According to private equity data research firm PitchBook, 2013 was the best year for private equity fundraising since the financial crisis struck in 2008, and the pace has continued into 2014.

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Quick Thoughts on the New CBO Projections Print
Written by Dean Baker   
Tuesday, 15 July 2014 20:38

The deficit hawks will undoubtedly find much to hype in the latest long-term projections from the Congressional Budget Office (CBO). After all, they move forward by a year to 2030 the date of the Social Security trust fund's depletion. That should be worth a quick war dance down at the Peter G. Peterson Foundation, but there are a few items worth noting for more serious folks.

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