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Labor Market Policy Research Reports, June 8 – 14, 2013 Print
Written by Sheva Diagne   
Friday, 14 June 2013 15:30

The following new reports were released this week: 

Institute for Research on Labor and Employment UC Berkeley

Credible Research Designs for Minimum Wage Studies
Sylvia Allegretto, Arindrajit Dube, Michael Reich and Ben Zipperer

National Employment Law Project

Soaring Poverty at the Philadelphia International Airport
National Employment Law Project

National Women’s Law Center

50 Years & Counting: the Unfinished Business of Achieving Fair Pay
National Women’s Law Center

Small Businesses May Not Pay Print
Written by Will Kimball   
Wednesday, 12 June 2013 13:24

A lot of academic research supports the finding that, on average, small businesses pay lower wages to their employees than larger businesses. This “size-wage premium” was recognized as early as 1911 by Henry Moore, who focused on the benefits and conditions of Italian working women working in textile mills (as cited by Oi and Idson, 1999, p. 2172). Since then, researchers have expanded the studies to account for employee characteristics and job conditions at a large variety of industries and locations. Every major study has confirmed that, on average, larger employers offer their employees higher wages.

Economists have suggested several explanations for this phenomenon, though many of the hypotheses have been difficult to test empirically. Some assume that larger employers, who are more likely to be more profitable, simply have more of an ability to pay their workers better wages (also known as rent-sharing). Others have proposed that larger firms may offer a "compensating differential" to make up for poorer working conditions at the larger firms, but the evidence suggests that working conditions and benefits are also better at larger establishments. A more promising explanation argues that workers with different productivity levels get “sorted” into establishments of different sizes. 

Evans and Leighton (1989), for example, found that more “stable” workers (married, low frequency of past terminations) were more likely to be in larger businesses, which are typically less likely to fail than smaller ones. Todd Idson (1993) found that this sorting improved the “internal job markets” of larger employers, allowing employees to develop their skills and increase their productivity. Though not conclusive, research performed to date suggests that greater job tenure and wider array of opportunities offered by larger employers are also associated with greater productivity and compensation than smaller counterparts.

Broken Bargain for LGBT Workers Print
Written by Sheva Diagne   
Monday, 10 June 2013 12:15

Earlier this month, the Movement Advancement Project, Human Rights Campaign, and Center for American Progress released “A Broken Bargain: Discrimination, Fewer Benefits and More Taxes for LGBT Workers,” a thorough examination of the unique economic hardships faced by many LGBT workers in the United States. According to the authors, inadequate legal protections and exclusionary family policies weaken job security and lead to lower compensation for LGBT workers, especially transgender workers.

Complete with heartbreaking personal testimonies, the report provides ample statistical evidence to show systemic employment discrimination based on sexual orientation and gender identity. Federal protection against these forms of employment discrimination—stemming from Title VII of the Civil Rights Act—is limited in scope, while state-level nondiscrimination laws vary greatly from state to state. This leaves an estimated 4.3 million LGBT people vulnerable. As the authors report, only 16 states and the District of Columbia prohibit employment discrimination based on gender expression and gender identity, while 21 states and the District of Columbia protect against discrimination based on sexual orientation. Twenty-nine states offer no protections whatsoever. The following map illustrates this inconsistency.

Click for a larger version


An interactive version of the map, available on the Movement Advancement Project website, allows users to view sub-state non-discrimination policies as well.

Other sources of economic hardship for LGBT people and their families include tax policies and employer benefits that favor families headed by married heterosexual couples. Same-sex couples (married or not) cannot benefit from joint tax filing, the child tax deduction or childcare expense tax credit for the non-dependent child of a spouse, or Social Security survivor and spousal benefits. Tenuous legal ties to partners and non-dependent children mean that employer-provided benefits such as retirement plans and health care coverage disparately benefit same-sex-headed families. Employer-provided healthcare plans often deny coverage to transgender workers for routine preventative and transition-related health services. These and other practices amount to higher effective taxation and lower benefits for LGBT workers and their families.

The CRFB's Social Security "Reformer" Print
Written by David Rosnick   
Wednesday, 05 June 2013 16:38

So the Center for a Responsible Federal Budget is pushing “The Reformer”—their latest tool for confusing the daylights out of anyone interested in Social Security.  According to the CRFB, “The Reformer” lets users select among various options for changing Social Security “in order to close the program’s 75-year shortfall and keep it sustainable for future generations.”

To do this, “The Reformer” estimates the path of the Trust Fund (shown relative to each year’s benefits) over the next 75 years.  So long as the Trust Fund remains positive, “The Reformer” will report that the 75-year shortfall is closed.

However, “The Reformer” doesn’t let anyone off the hook that easily.  If, in 2087, revenue exceeds outlays, “The Reformer” warns “the program is not yet sustainable.”  It tells us this even if the Trust Fund is growing faster than spending!  What is going on here?  Let us take a relatively simple example with two quick changes to the program and see what “The Reformer” says.

First, Social Security caps the payroll tax in relation to the average wage.  Unfortunately, wage gains in recent decades have gone overwhelmingly to those at the top.  This means that Social Security contributions have fallen relative to payrolls.  Suppose we raised the payroll tax cap to cover once more 90% of wages.  This would mean higher-wage workers would get larger benefits, but the program would receive more in additional contributions than it would pay in additional benefits.

Second, the prospect of longer retirements requires workers to save more.  Social Security is no different in this regard.  Thus, in the 25 years from 1965-90, the contribution rate for employees rose 13 times.  On average, the rate rose nearly 0.2 percentage points every other year.  Yet there has been no increase in contributions since then.  If we had continued raising rates like that, it would have stood at 8.4 percent in 2012.  Suppose then that we raised the contribution rate to 7.7 percent and likewise for employers and then never raised it again for at least the next 75 years.  (In real life, I would prefer to delay and phase in such a change but “The Reformer” isn’t that flexible.)

What does “The Reformer” tell us about these changes?  By 2087, the Trust Fund would hold bonds valued at 774 percent of that year’s outlays and be growing.  This wildly exceeds “The Reformer” condition for closing the shortfall.  Nevertheless, “The Reformer” declares that we have closed only 77 percent of the projected gap between spending and revenue in 2087.

Strictly speaking, there would still be a gap between spending and, say, contributions.  But contributions are not the only source of income to Social Security.  If we are genuinely interested in the sustainability of the program, we must look at all sources of income.  How much more income do we need to fill the gap in 2087?  According to “The Reformer”, outlays exceed revenues by 1.1 percentage points of payroll.  Likewise, the Trust Fund’s bonds-- at 774 percent of outlays—amount to 142 percent of payroll.  That means if the Trust Fund accrued interest of only 0.8 percent in the year, interest income would more than cover the difference.

Some might grow concerned about the amount of interest the government would be paying for the money it had borrowed previously from workers through Social Security, but the program is entirely sustainable so long as the government continues paying interest on those bonds.  It is unfortunate that CRFB would design “The Reformer” to mislead in this fashion.

Labor Market Policy Research Reports, May 25 – May 31, 2013 Print
Written by Sheva Diagne   
Friday, 31 May 2013 15:10

The following are the most recent labor market policy research reports:


Employment Policy Research Network

The Dismal State of the Nation’s Teen Summer Job Market, 2008-2012, and the Employment Outlook for the Summer of 2013
Andrew Sum, Ishwar Khatiwada, Walter McHugh, Sheila Palma

Just the Facts, Ma’am: Postsecondary Education and Labor Market Outcomes in the U.S.
Harry Holzer and Eric Dunlop


Institute for Women’s Policy Research

Valuing Good Health in Oregon: The Costs and Benefits of Earned Sick Days
by Jasmin Griffin, Jeff Hayes, Ph.D.

Access to Earned Sick Days in Oregon
by Institute for Women's Policy Research

CEPR News May 2013 Print
Written by Dawn Lobell   
Friday, 31 May 2013 15:07

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

CEPR on No-Vacation Nation, Redux…
CEPR’s latest paper, “No-Vacation Nation Revisited” by former CEPR Research Associate Rebecca Ray, Program Assistant Milla Sanes, and Senior Economist John Schmitt, finds that the United States is the only advanced economy that does not guarantee its workers any paid vacation time. As a result, almost 1-in-4 Americans do not receive any paid vacation or paid holidays, trailing far behind most of the rest of the world's rich nations.

The new report revisits an analysis originally performed by CEPR researchers six years ago. Since the 2007 CEPR study, the U.S. has made up none of the gap with the rest of the major economies that are members of the Organization for Economic Cooperation and Development (OECD). “It is striking that six years after we first looked at this topic absolutely nothing has changed. U.S. law and U.S. employer behavior still lags far behind the rest of the rich countries in the world,” said John. He elaborated on these themes in a discussion on HuffPost Live with Joe Robinson, founder of the Work To Live Campaign and Ellen Bravo, Executive Director of Family Values @ Work. John was also interviewed by WWL Radio’s The Tommy Tucker show.

The study received a great deal of attention by the press, beginning with this feature article in USA Today. The paper also cited twice in the Washington Post (in the business section as well as in Ezra Klein’s WonkBlog) and was also featured in CBS News’ MoneyWatch, Today’s Life Inc. (it was also mentioned on the Today Show), UPI and numerous local newspapers across the country. The paper was also cited extensively in the Canadian press (Canada ranked 19th out of the 21 countries in the study), appearing in the Toronto Star, The Globe and Mail, CBC News, and other outlets.

And on Workplace “Flexibility”
CEPR also weighed in on the"Working Families Flexibility Act of 2013." As CEPR Senior Economist Eileein Appelbaum wrote in this April op-ed for The Hill: “Touted by House Republicans as a new comp time initiative that will give hourly-paid workers the flexibility to meet family responsibilities, it is neither new nor about giving these workers much needed time off to care for their families… Its major effect would be to hamstring workers – likely increasing overtime hours for those who don't want them and cutting pay for those who do.”

Eileen reiterated these points in this interview that aired on NPR’s Morning Edition, Eileen was also quoted in this Time magazine article as well as this piece that appeared on NBCNews.com’s First Read. Eileen addressed these and similar issues in several op-eds timed to coincide with Mother’s Day. Here she is in the Huffington Post, and she penned this piece for US News and World Report.



Social Security and Medicare Taxes Won't be Disastrous for the Young Print
Written by Dean Baker   
Thursday, 30 May 2013 16:27

The 2013 Social Security and Medicare Trustees reports will be released tomorrow. There is much discussion in policy circles of how the cost of these programs is projected to rise over the next three decades due to both the retirement of the baby boom cohorts and the increased cost of health care, which is the main factor behind the projected increase in Medicare costs. These projected cost increases have frequently been presented as implying a disastrous scenario for today’s young. In today’s edition, economist Dean Baker of the Center for Economic and Policy Research examines how the cost of these programs is likely to affect the financial well-being of our children and grandchildren:
Disaster stories about rising Social Security and Medicare costs ignore the fact that the tax increases projected over the next three decades are not very different than the tax increases that we have actually seen since 1980. Furthermore, the far more important factor in determining the well-being of our children and grandchildren is the extent to which their before tax wages increase in the decades ahead.
Starting with the issue of tax increases, if we assume that the projected shortfall in Social Security is met entirely by increasing the size of the payroll tax, according to the 2012 Trustees Reports it would be necessary to have an increase in the tax of 3.91 percentage points by 2045.

  • This assumes that there are no cuts in scheduled benefits, no other taxes are used to finance Social Security and the cap on wage income subject to the Social Security tax (currently around $113,000) is not raised.
  • In the 2012 Medicare Trustees report, the projected increase in the tax needed to keep the program fully solvent in 2045 was 1.91 percentage points.
  • It is worth noting that the size of the projected shortfall in Medicare has fallen by more than 60 percent since 2008, from 3.54 percent of payroll to 1.35 percent of payroll in 2012.
  • This is in spite of the fact that the change in the 75-year projection period would have increased the projected shortfall by close to 0.20 percentage points.

The combined tax increase needed to keep both programs fully funded in 2045 under the 2012 projections was 5.81 percentage points.

  • By comparison, since 1980, the Social Security tax rate has increased by 2.24 percentage points.
  • In addition, the self-employed were required to pay for the employer’s side of the payroll tax as well. This was an additional increase of 5 percentage points on the roughly 9 percent of the workforce who is self-employed, which is equivalent to a 0.45 percentage point increase.
  • That makes the total increase in the Social Security tax to 2.69 percentage points over this period.

The Medicare tax rate increased by 1.9 percentage points from 1980 to the present.

  • That brings the total increase in the payroll tax since 1980 to 4.59 percentage points.
  • While this increase is less than the 5.81 percentage point increase that would be implied by the projections in the 2012 reports for 2045, assuming no other changes to the programs, it is not hugely different.

The more important part of the equation for living standards is the wage growth that workers will see over the next three decades.

  • The wage growth assumptions in the 2012 report implied that the average annual wage would be $68,300 in 2045 (in 2012 dollars).
  • This implies an increase of more than 55 percent over the average wage of $43,800 in 2012.
  • Even if we assume that the Social Security and Medicare taxes are together raised by 5.81 percentage points by 2045, the average wage in 2045 after deducting payroll taxes would still be more than 46.0 percent higher than it is for workers today.
  • It is difficult to see this as a story in which our children and grandchildren are being impoverished by these programs.

Most workers have actually seen little real wage growth over the last three decades in spite of a substantial increase in average wages over this period.

  • This is due to the fact that top end earners -- doctors, lawyers, CEOs and those in the financial industry – have captured the bulk of the gains from economic growth over this period.
  • If this pattern continues, then the before tax wages of most workers will not be much higher in 2045 than they are today.
  • However, that would clearly be an issue of the distribution of income within a generation, not a question of distribution across generations.
  • This should illustrate the importance of wage inequality in determining the well-being of our children and grandchildren.

The amount of money at stake in terms of the distribution of future wage gains is an order of magnitude greater than the potential tax increases needed to maintain full funding of Social Security and Medicare. For this reason, it is ironic that discussions of future the well-being of our children and grandchildren tend to focus on these programs and the budget more generally. The distribution of income in three decades will be of far greater importance.

This blog post originally appeared in the Roosevelt Institute's Econobytes.


Reinhart and Rogoff Trip Over Data While Attacking Krugman Print
Written by David Rosnick   
Sunday, 26 May 2013 16:19

Yesterday, Carmen Reinhart—she of the infamous Excel error—wrote an open letter to Paul Krugman taking issue with his “spectacularly uncivil behavior.”  That his “characterization of our work is selective and shallow.”  In particular, Reinhart citesKrugman’s views on Italy.  She writes:

However, [falling interest rates in “high-debt Italy”] is meant to re-enforce your strongly held view that high debt is not a problem (even for Italy) and that causality runs exclusively from slow growth to debt.  You do not mention that in this miracle economy, GDP fell by more than 2 percent in 2012 and is expected to fall by a similar amount this year. Elsewhere you have stated that you are sure that Italy's long-term secular growth/debt problems, which date back to the 1990s, are purely a case of slow growth causing high debt.  This claim is highly debatable.

In fact, Reinhart recently cited Italy as an example of a “more recent public debt overhang episode”.  She cites another paper to back up her claim that the evidence shows the direction of causality runs from high debt to slow growth.  But even a cursory examination of the data undermines that case.

Figure 1 takes data from Reinhart’s paper in the Journal of Economic Perspectives and shows very clearly that Italy built up its debt after growth slowed significantly—not the other way around.  In fact, when growth slowed back in 1974, Italy’s debt-to-GDP was only 41.3 percent.  Italy did not reach 90 percent debt-to-GDP until 1988—some 14 years later.


Figure 1: Real GDP Index (Italy Since 1947) (log)


Source: Reinhart, Reinhart, and Rogoff and author’s calculations.

Note: Specified years indicate first year of high-debt episode (see Reinhart, Reinhart, andRogoff)


Indeed, there is a clear association in Italy’s post-war data between high debt and slow growth, but it clearly tells a story very different than what Reinhart would have us believe.

From 1947-74, real economic growth in Italy averaged 5.8 percent per year.  Over the period 1975-88 (when Italy’s debt grew from 41.3 to 90.9 percent of GDP) economic growth averaged only 2.7 percent per year—a fall of 3.2 percentage points.  It is clear, based on Reinhart’s data, that high debt could not have caused this slowdown in Italy’s economic growth, even if Italy’s period of low debt is associated with much faster growth.

Nor is Italy the sole example.  In all four such recent examples of advanced countries with episodes of high debt, the slowdown precedes the increase in debt.

Figure 2: Real GDP Indices Since 1947 (log)


Source: Reinhart, Reinhart, and Rogoff and author’s calculations.

Note: Specified years indicate first year of high-debt episode (see Reinhart, Reinhart, andRogoff)

Though less obvious for Belgium, most of the jump in debt-to-GDP came in 1980 and was largely the result of a series break in the data.  According to the data on Reinhart andRogoff’s website, Belgium’s gross general government debt-to-GDP was 62.5 percent in 1970 and falling (debt-to-GDP stood at 57.8 percent in 1974—the year real GDP peaked).  Nevertheless, from the peak in real GDP in 1948 to peak in 1974, economic growth in Belgium averaged 4.2 percent per year.  When the economy bottomed out in 1975, debt was only 54.4 percent of GDP, and did not reach 90 percent until 1983.  Yetfrom 1975-83, growth averaged only 2.2 percent per year.

For the other countries, it is even more obvious that the economies slowed well before reaching high levels of debt.  Clearly, Reinhart should look carefully to her own data before lashing out at Krugman.

Labor Market Policy Research Reports, May 18 – 24, 2013 Print
Written by Will Kimball   
Friday, 24 May 2013 14:20

Here are the most recent labor market policy research reports:

Center for American Progress

Just Jobs Index 2013
Tewodros Aragie Kebede, Huafeng Zhang and Jon Pedersen

Center for Economic and Policy Research

No-Vacation Nation Revisited
Rebecca Ray, Milla Sanes and John Schmitt

Institute for Research on Labor and Employment at Berkeley

So Goes the Nation? A Preliminary Report on How Immigration Is Reshaping the Identities of Workers in California
Kim Voss and Fabiana Silva

Institute for Research on Labor and Employment at UCLA

California Crisis: The Ups and Downs of Recovery ‐‐ Where Have the Unemployed Workers Gone?
Lauren D. Appelbaum

Young College Graduates: Economic Implications of Unpaid Internships Print
Written by Will Kimball   
Wednesday, 22 May 2013 15:15

In addition to the legal and ethical concerns with unpaid internships, which I raised in a recent post, unpaid internships also pose a number of economic issues. First and foremost, unpaid internships require a substantial financial commitment from interns. Young adults participating in unpaid internships typically sacrifice time they could spend earning money at paying jobs. Even so, many interns work second jobs at night shifts to make ends meet. As many of the most desirable internships are located in cities, interns often have to endure long, costly commutes or somehow afford housing closer to the city. Some interns even paymore than $12,000 for a semester-long internship placement (includes housing costs) in cities like Washington, D.C.

Some students and recent graduates are fortunate enough to have families that can afford to subsidize these costs. For many students from modest backgrounds, however, their families cannot bankroll their living expenses as they perform unpaid work. It is not possible for these students to work unpaid internships when they need to take paying jobs in order to put themselves through school or cover their living expenses. Without internship experiences, lower-income students will be at a competitive disadvantage when applying for future jobs. In this regard, unpaid internships can reinforce socioeconomic inequalities.

Unpaid internships don't always provide the returns many interns expect. The 2011 National Association of Colleges and Employers (NACE) graduate survey (includes every organization type: for-profit, non-profit, government) found that graduates who had unpaid internships not only performed worse in job offers and starting salaries compared with those with paid internships but they also had worse prospects than those who had no internship experience at all (Eisenbrey, 2012).



New Videos on How Unions Make the Middle Class from @AmerWorker Print
Written by Nicole Woo   
Tuesday, 21 May 2013 13:30

"It probably did save my life."

Jeremy, a member of the Writers Guild, is a cancer survivor, and he gives credit to his union for negotiating his health care plan in a new video by the American Worker Project at the Center for American Progress Action Fund.

His is just one of the moving stories told in three short videos released today. These profiles show how unions have helped workers in very different occupations — child care, freelance writing and taxi driving — gain and maintain wages and benefits that are key to a middle-class standard of living.

On the flip side, La Tonya describes the hardship she's faced since public sector workers lost their right to collectively bargain in Wisconsin.

These videos bring to life a huge body of research that finds that unions provide invaluable benefits for workers. CEPR regularly focuses on this topic and has many reports about how union membership increases workers' chances of having health insurance and a retirement plan. Some reports focus on specific groups of workers — African American, Latino, women, young, low Wage, service sector, and immigrant — and find the same positive effects across the board.

Young College Graduates: Unpaid Internships Print
Written by Will Kimball   
Monday, 20 May 2013 13:30

Internships can be great opportunities for undergraduates or recent college graduates to gain career-related experiences or skills. Additionally, these learning experiences can improve trainees’ chances of future employment as they develop networks and connections. But, the widespread use of unpaid internships also raises legal and ethical questions, especially in the for-profit sector. Unpaid internships at non-profit organizations and government bodies also deserve attention, but these programs are not subject to the same rules as at for-profit, private businesses because interns can be considered “volunteering” their time.

The Obama administration had considered cracking down on illegal unpaid internships, which perhaps prompted the Department of Labor’s Wage and Hour Division (WHD) to release a memo that clarifies what constitutes a legal unpaid internship with a six-part test.

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training, which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Recently, over 3,000 former unpaid interns of the Hearst Corporation filed a class action lawsuit against the magazine business. The former interns argued they had been doing the work of paid employees and the “unpaid” classification was misused and illegal.  The lines between a mutually beneficial learning experience and free labor have thus become increasingly blurred as more businesses have adopted unpaid internships in recent years. It appears likely that many other for-profit organizations either openly ignore the six-part test or bend the rules in order to avoid paying for work or any other benefits.



Labor Market Policy Research Reports, April 27 – May 17, 2013 Print
Written by Will Kimball   
Friday, 17 May 2013 15:30

The following are the most recent labor market policy research reports:

Center for American Progress

No Justice for the Injured
Billy Corriher

The Importance of Preschool and Child Care for Working Mothers
Sarah Jane Glynn and Jane Farrell


Underwriting Bad Jobs: How Our Tax Dollars Are Funding Low-Wage Work and Fueling Inequality
Amy Traub and Robert Hiltonsmith         

Economic Policy Institute

Ongoing Joblessness in Texas: African American and Hispanic Unemployment Rates Far Exceed the White Unemployment Rate in the State
Mary Gable and Douglas Hall

Ongoing Joblessness in Michigan: Unemployment Rate for African Americans Tops in Nation, More Than Double the State’s White Rate
Mary Gable and Douglas Hall

Ongoing Joblessness in Mississippi: Unemployment Rate for African Americans Ninth in Nation, More Than Double the state’s White Rate
Mary Gable

Ongoing Joblessness in New Mexico: Unemployment Rate for Hispanics Far Exceeds the State’s White Rate
Mary Gable

Ongoing Joblessness in North Carolina: Unemployment Rate for African Americans Fourth in Nation, More Than Double the State’s White Rate
Mary Gable and Douglas Hall



McKinsey on Young College Graduates Print
Written by Will Kimball   
Tuesday, 14 May 2013 14:45

McKinsey and Company released a report this week that found 42 percent of recent college graduates are currently in jobs that do not require four-year degrees. This finding was comparable to those estimates of previous studies that I mentioned in this blog post. McKinsey surveyed more than 4,900 recent graduates (2009-2012) using the learning platform, Chegg. Almost 45 percent of graduates of public universities reported that their current job requires less than a four-year degree compared with only 34 percent of those from private universities.


Almost half of recent college graduates did not get jobs in their field of choice. The majority of these underemployed appear to work in the retail or restaurant industries. Among those working in the retail industry, 78 percent had desired to enter a different industry prior to graduating. Similarly, 81 percent of those graduates working in the restaurant industry had wanted to enter a different industry. This study once again showed that many of our recent graduates are currently underutilized.  

Brookings Agrees With CEPR: Sometimes College Doesn't Pay Print
Written by Dean Baker   
Monday, 13 May 2013 13:17

It's always nice when other scholars reach conclusions similar to those in CEPR's work. For this reason it was good to see Brookings publish a paper by Stephanie Owen and Isabelle Sawhill questioning whether everyone benefits from going to college. The paper noted that there was a substantial overlap between the earnings distribution for people with just a high school degree and those with college degrees. Specifically, they pointed out that 14 percent of workers with just a high school degree earned more the median college graduate.

This is similar to the findings in a paper that CEPR published with the Center for American Progress two and a half years ago. That paper, by John Schmitt and Heather Boushey, called attention to the large dispersion in earnings among men at all education levels. As a result of this dispersion, almost 20 percent of male college graduates between the ages of 25-34 earned less that the average male with just a high school degree in 2009.

This could help to explain why there has been little increase in college enrollment rates among men over the last three decades in spite of a sharp increase in the college premium. The marginal college student (a person debating whether or not it makes sense for him to go to college) may think it is likely that he could end up in this 20 percent who earn less than the average high school grad. This means that he will have foregone the opportunity to work full-time for four years, and incurred considerable expenses associated with college, yet have little to show for it in terms of a higher paycheck. Given these facts, it is not surprising that many men who graduate high school opt not to go to college.

It's good to see that Brookings' researchers are finding a similar story. If we want to get more people to attend college it will be necessary to have either a surer payoff for those who complete their degree and/or lower costs for attending college. Given the current situation, for many men it probably does not pay to attend college. 

Union Workers Have More Access to Employee Benefits Print
Written by Milla Sanes   
Monday, 13 May 2013 08:15


New research from the Bureau of Labor Statistics highlights the increased access to employer-sponsored benefits for union workers. Across every type of benefits examined, union workers had more access to those benefits. For example, in 2011, 92 percent of union workers in the private sector received medical benefits compared to just 67 percent of those that were nonunion. The only exception was defined contribution retirement plans, but more union workers had access to retirement plans overall.

The data behind these numbers come from the National Compensation Survey (NCS). For a full discussion of the findings, see: “Differences between union and nonunion compensation, 2001–2011.”

Growth Still Slow Despite Uptick in April Jobs Report Print
Written by Dean Baker   
Thursday, 09 May 2013 12:45

Much analysis of the economy is excessively swayed by one or two economic reports or short-term fluctuations that may be driven by random factors like the weather. This appears to be the case following the Labor Department’s release of the April jobs report last week. In a post for the Roosevelt Institute's Econobytes, economist Dean Baker, co-director of the Center for Economic and Policy Research, on why the April jobs report does not presage an economic boom:

The April jobs report showed somewhat faster than expected job growth for the month, along with upward revisions to the prior two months’ numbers, and a drop in the unemployment rate to 7.5 percent. This led many commentators to speculate that the recovery was accelerating and that perhaps the Federal Reserve Board should be pulling back from its quantitative easing program. A more careful assessment of the data does not support this view.

  • The Commerce Department released a report showing that durable goods orders had declined 4.0 percent in March from their February level.
  • Even pulling out the volatile transportation component, the drop was still 2.0 percent.
  • More narrowly, new orders for non-defense capital goods (excluding aircraft) rose 0.9 percent in March, but were still almost 4.0 percent below their January level. The March number is less than 0.2 percent above the year ago level suggesting that the equipment investment component of GDP is barely growing.

The data that the Commerce Department released on construction last week was not any better.

  • In spite of strong growth in residential construction, total construction spending fell 1.7 percent in March driven by a 4.1 percent falloff in spending by the public sector.
  • This sector will likely continue to show weakness as cutbacks at all levels of government, coupled with weakness in non-residential private construction, offset growth in the residential sector.


Young College Graduates: Overqualified Print
Written by Will Kimball   
Tuesday, 07 May 2013 15:10

For young college graduates, high unemployment is certainly a primary concern, but beneath this is the issue of whether those who are employed are being used to their fullest capabilities. Many young graduates who cannot find suitable college-level jobs may opt to accept jobs that do not require college degrees. Two studies examining recent data found that the incidence of this “over-qualification” has risen for graduates of four-year programs in recent years, particularly since the end of the Great Recession. They find that approximately four-in- ten recent college graduates are working at jobs that don’t require a degree, a number similar to the findings of a recent Accenture survey

Neeta Fogg and Paul Harrington of Drexel University studied the growing disconnect between college graduates and the labor market (2011). Without any standard measurement of defining workers as being “overqualified” for a particular job, Fogg and Harrington utilized the Department of Labor’s O*NET occupational-analysis information system in order to determine which jobs required four-year college degrees (college labor market or CLM)[1]. Concentrating on those between the ages of 20 and 24, Fogg and Harrington defined college graduates (Bachelor’s degree) as being “mal-employed”, or overqualified, if they were not in a CLM occupation. Analyzing cross-sections of three separate years (2000, 2007, 2011) of Current Population Survey data, Fogg and Harrington found that a greater share of young employed graduates turned to jobs for which they were overqualified (see table below for results). Note that these numbers represent the share of those employed, and therefore leave out all of those who are unemployed. As of 2011, over 39 percent of those sampled are employed in jobs that do not use their acquired skills and likely pay less than the average college-level job. We know that long unemployment stints can hurt job prospects and future earnings for workers. It appears that persistent over-qualification can have similar detrimental effects for one’s medium-term earnings (Kahn, 2010; Oreopoulos et al., 2012).

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Similar to Fogg and Harrington, Grusky et al (2013) employed O*NET’s classifications to distinguish those occupations that typically require college degrees. Concentrating on 21-24 year olds, Grusky et al estimated job placements across three two-year periods (before recession, 2005-2007; during recession, 2007-2009; and after recession 2009-2011). Despite these subtle differences in sampling, the report’s numbers were very similar to those of Fogg and Harrington. Grusky et al also estimated the numbers for those with high school degrees and Associate’s degrees. Compared with either of these groups, college graduate lost more college-level jobs but the percentage losses were greater for high school and Associate’s graduates. In light of this comparison, Grusky et al suggested that college education had protected many graduates from the worst of the recession. However, having four-in-ten young college graduates overqualified for their jobs is a substantial waste of skill (not to mention the investments made by individuals and their families to acquiring said education).  

Job prospects have deteriorated for recent college graduates. Besides facing high unemployment rates, young college graduates are now accepting more jobs that do not require college degrees. Not only do these stints of over-qualification affect the future earnings of these college graduates, they also make it more difficult for high school graduates to find employment as they face competition from higher-educated workers. Young workers certainly face an uphill battle as the economy continues to struggle.

[1] It is important to note that this definition overlooks those who are in a CLM occupation, but the position does not relate to their field of study, typically indicating some mismatch of skills.

The Financial Health of Public Pensions Print
Written by Dean Baker   
Friday, 03 May 2013 10:45

In a post for the Roosevelt Institute's Econobytes, Dean Baker, co-director of the Center for Economic and Policy Research, on the state of public pensions:

Last month, Moody’s, one of the big three bond-rating agencies announced that it was changing the way that it will treat public pension liabilities. While there are several notable features to announced changes, two are especially important.

  • First, instead of accepting projections of pension fund returns based on the assets they hold, Moody’s will evaluate their liabilities using a risk-free discount rate.
  • The second major change is that it will evaluate pension assets at their current market value rather than using a formula to smooth volatile asset prices over a period of 3-5 years as is the current practice.
  • Together Moody’s changes in accounting will have the effect of making pension funds seem in considerably worse financial condition.
  • They could also lead pension fund managers to follow investment strategies that will provide far lower rates of return on assets. This would mean higher costs for taxpayers with little obvious benefit in reduced risk. 

 The practice of using a risk-free discount rate to assess liabilities is a departure from the current practice of effectively discounting liabilities using projected rates of returns on assets.

  • Most pension funds project rates of return on assets of between 7.0-8.0 percent. By contrast, the rate that Moody’s would apply at present would be around 4.5 percent.
  • This makes a huge difference in assessing liabilities. If a pension fund was obligated to make $1 billion in payments each year for the next thirty years its liabilities would be calculated at $16.5 billion using a 4.5 percent discount rate.
  • By comparison, they would be just $11.9 billion using a 7.5 percent discount rate. This is a difference of almost 40 percent.
  • Put another way, a pension that is fully funded using the 7.5 percent return assumption would be almost 30 percent underfunded using Moody’s new approach.

While the implication for an assessment of funding levels is clear, there are grounds for debating which method is appropriate.

  • Supporters of the Moody’s approach argue that it is appropriate to discount for the risk associated with pension returns, and especially stock returns.
  • However this argument is problematic since it is not clear that there is much risk for pension funds on projected returns when they are properly calculated.
  • The reason is that a pension fund, unlike individuals, does not need to be concerned about the stock market’s short-term fluctuations.
  • State and local governments do not have retirement dates where they have to start drawing on stock holdings. They need only concern themselves with long period averages, without worrying about short-term fluctuations.


The Politics of Good Jobs Print
Written by Colin Gordon   
Thursday, 02 May 2013 16:00

This post originally appeared in Dissent Magazine. Colin Gordon is a professor and director of Undergraduate Studies, 20th Century U.S. History, at the University of Iowa.

What happened to the good jobs? This is the question posed by the walkouts of fast food workers in New York and Chicago in recent weeks. It is the question posed by activists in those corners of the economy—including restaurants and domestic work and guestwork—where the light of state and federal labor standards barely penetrates. And it is the question posed (albeit from a different set of expectations), by recent college graduates for whom low wages and dim prospects are the dreary norm.

There are no shortage of suspects for this sorry state of affairs. The stark decline of labor, now reaching less than 7 percent of the private sector, has dramatically undermined the bargaining power and real wages of workers. The erosion of the minimum wage, for which meager increases have been overmatched by inflationary losses, has left the labor market without a stable floor. And an increasingly expansive financial sector has displaced real wages and salaries with speculatory rent-seeking.

New work by John Schmitt and Janelle Jones at the Center for Economic and Policy Research recasts this question, posing it not as a causal riddle but as a political challenge: What would it take to get good jobs back?

Schmitt and Jones start with a basic distinction between good jobs (those that pay $19.00/hr or better and offer both job-based health coverage and some retirement coverage) and bad jobs (those that meet none of these criteria). Each of these categories accounts for about a quarter of the workforce (the rest fall somewhere in between), with the share of good jobs slipping since 1979 and the share of bad jobs creeping up. The goal, by simulating the impact of different policy interventions, is to increase the share of good jobs and to eliminate—as much as possible—the bad jobs entirely.



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