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Labor Market Policy Research Reports, February 2 – 8, 2013 Print
Written by Will Kimball   
Friday, 08 February 2013 16:15

Here are the latest labor market policy research reports from the past week:

Center for American Progress

Inclusive Economic Growth: Increasing Connectivity, Expanding Opportunity, and Reducing Vulnerability
John Podesta

Our Working Nation in 2013
Heather Boushey, Ann O'Leary, and Sarah Jane Glynn

Center for Economic and Policy Research

Reduced Work Hours as a Means of Slowing Climate Change
David Rosnick

Center on Budget and Policy Priorities

Introduction to Unemployment Insurance
Chad Stone and William Chen

Testimony of Jared Bernstein, Senior Fellow, Before the House Education and Workforce Committee
Jared Bernstein



Congressional Budget Office Is Pessimistic About the Economy Print
Written by Dean Baker   
Tuesday, 05 February 2013 20:51

The Congressional Budget Office (CBO) came out with its new projections for the budget today. There are not many surprises. It projects somewhat slower health care cost growth in recognition of the recent trend in the sector. It also projects continued high unemployment, with the unemployment rate not projected to fall below 6.0 percent until late in the year 2016.

One interesting item is the sharp projected increase in interest costs. In the baseline projections, outlays are projected to rise by 0.1 percentage points of GDP from 22.8 percent in 2012 to 22.9 percent in 2023. However interest costs are projected to rise by 1.9 percentage points, meaning that non-interest spending is projected to fall sharply over this period. (The baseline includes several assumptions that are unrealistic, so it is probably not the best set of projections.)

It is also worth noting that CBO has become very pessimistic about the economy's growth potential and the lower limit on the unemployment rate. It puts potential growth over the decade at just 2.2 percent annually. Part of the explanation is that it expects capital deepening (the increase in the ratio of capital to labor) to make less of a contribution to growth than in prior decades. This is a bit hard to understand since CBO projects that the cost of capital will be low compared to the 1980s and 1990s when capital made a considerably larger contribution to GDP growth.



                        Source: CBO, Federal Reserve Board, and Bureau of Economic Analysis.

The graph shows CBO's projection for the contribution of capital to growth. At 1.0 percentage point annually, the projected contribution of capital growth in the next decade is lower than in the 1970s, 1980s, and 1990s.



The Impact of the Upward Redistribution of Wage Income on Social Security Solvency Print
Written by Dean Baker   
Sunday, 03 February 2013 16:08

The impact of the aging of the U.S. population on the finances of Social Security has been widely touted by the media and Washington pundits. While these demographics do raise costs for the program, this is hardly an unbearable burden and it certainly is not a surprise. We have known about the baby boom for more than 50 years.

What is newer and was less widely anticipated is the upward redistribution of income that we have seen over the last three decades.  This affects the program in two ways. First it has a direct effect in that a larger share of wage income has gone over the taxable maximum (currently just over $113,000). In 1983, the Greenspan commission set the cap at a level where 90 percent of wage income would be subject to the tax, meaning that 10 percent would escape taxations.

Since that date, the upward redistribution of wages has increased the portion of wage income over the cap to 16.8 percent, with just 83.2 percent of wage income subject to the cap. The share going over the wage cap is projected to rise further, reaching 17.5 percent of wage income in a decade. In this way, the upward redistribution of income directly worsens the finances of the program.

However there is also an indirect effect. If wages had kept pace with productivity growth over the last three decades, the typical workers would be paid around 25 percent more than they are now getting. In an environment of growing wages the prospect of increased Social Security taxes may not seem as bleak as in the environment of stagnating wages that we now see. While it is difficult to know how the political situation would differ if wages had kept pace with inflation, it is worth noting that even now workers would prefer higher payroll taxes to cuts in benefits according to a recent poll by the National Academy for Social Insurance.



Labor Market Policy Research Reports, January 26 – February 1, 2013 Print
Written by Will Kimball   
Friday, 01 February 2013 16:00

Here is a collection of the latest labor market policy research reports from the past week:

Center for Economic and Policy Research

Macroeconomic Policy Advice and the Article IV Consultations: A European Union Case Study
Mark Weisbrot and Helene Jorgensen

Center on Budget and Policy Priorities

The Relationship Between SNAP and Work Among Low-Income Households
Dottie Rosenbaum

The Fiscal and Economic Risks of Territorial Taxation
Chye-Ching Huang, Chuck Marr, and Joel Friedman

Economic Policy Institute

Vast Majority of Wage Earners Are Working Harder, and For Not Much More
Lawrence Mishel

Global Trade Watch

Prosperity Undermined During Era of Fast Tracked NAFTA and WTO Model Trade Agreements

Institute for Women’s Policy Research

Valuing Good Health in Philadelphia: The Costs and Benefits of Paid Sick Days
Claudia Williams

CEPR News January 2013 Print
Written by Dawn Lobell   
Friday, 01 February 2013 14:15

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

CEPR on Haiti
Haiti Relief and Reconstruction Watch blogger and CEPR International Research Associate Jake Johnston was in Haiti for the month of January, providing first-hand accounts on many of the issues that the blog has covered since the earthquake devastated the country three years ago.

CEPR marked the January 12th anniversary of the earthquake, which killed over 217,000 people and left 1.5 million homeless with a series of blog posts offering a partial round-up of news, analysis and commentary. CEPR Co-director Mark Weisbrot also released a statement, noting that Haiti continues to struggle despite – and partly because of – failures of the international aid and reconstruction effort. Mark was interviewed by the Real News on Canada’s decision to suspend aid to Haiti, and was cited in this Los Angeles Times article and this piece from Mother Jones. Jake was quoted in this article from the Christian Science Monitor.

CEPR on Unions

The Bureau of Labor Statistics released its annual summary of unionization in the U.S., reporting that the union-membership rate of wage and salary workers in 2012 was 11.3 percent. Fifty years ago, the figure was almost 30 percent. CEPR Research Assistant Kris Warner wrote an op-ed for Bloomberg's Echoes blog where he contrasts long-standing declines in the United States with higher and more stable unionization rates in Canada, which has labor law that is much friendlier to unionization. Senior Economist John Schmitt and Research Assistant Janelle Jones wrote this analysis of the overall numbers for the CEPR blog. John also wrote a blog post focusing on the decline of public-sector unions.

In CEPR’s latest issue brief titled State Union Membership, 2012, John, Janelle and CEPR Program Assistant Milla Sanes focus on the union membership numbers by state. In addition to presenting the official BLS estimates for overall union membership in each state, the short report also provide CEPR's own breakdown of state union membership in the private and public sector.

CEPR’s work received attention from the media. Kris’s op-ed was named one of the top op-eds of the day on the Washington Post’s Wonkblog. The Wall Street Journal mentioned CEPR, and the Huffington Post quoted John and ran one of CEPR’s graphs, as did an item on the Los Angeles AFL-CIO's web site. John was interviewed by KPFK radio in Los Angeles. The Associated Press used CEPR’s numbers for this article.



Rising Inequality: Don't Blame the Robots Print
Written by Dean Baker   
Friday, 01 February 2013 12:15

There is little dispute among economists about the sharp rise in inequality over the last three decades. According to the Congressional Budget Office, the top one percent's share of before-tax income roughly doubled between the late 1970s and the present -- from 10 percent to 20 percent. This gain came at the expense of the bottom 80 percent of the income distribution, who have seen little benefit from economic growth over this same period.

Economists generally agree about the facts on rising inequality. There are, however, enormous disagreements on the causes. The prevailing view within the profession attributes the rise in inequality primarily to technological change.

Is Rising Demanding for High-Skilled Workers Creating More Inequality?

The basic story is that computerization and other technological breakthroughs of the last three decades have displaced large numbers of relatively good paying jobs in manufacturing and elsewhere.

This loss of middle class jobs has forced formerly well-paid workers to crowd into occupations further down the wage scale, like retail trade and restaurant work. This has driven down wages for these workers in particular, and the occupations more generally. The result: the middle and bottom of the income distribution have seen relative declines in their wages because the demand for labor has simply not kept pace with the supply.

The most prominent proponent of this view is David Autor, an economics professor at M.I.T. His work purports to show a hollowing out of the middle, with demand increasing for workers in both high paid and low-paid occupations.

But while Autor's work has been widely accepted within the profession and in policy debates, not all of us buy it. In fact, my friends and colleagues Larry Mishel, John Schmitt, and Heidi Shierholz recently wrote a paper that challenges many of Autor's claims. They presented it at the annual economics meetings this month.



Visualizing State Union Numbers Print
Written by Milla Sanes   
Thursday, 31 January 2013 10:45

Last week, the Bureau of Labor statistics released its estimates for union members in the United States in 2012. CEPR published our own analysis of the numbers, including a breakdown of state union membership in the private and public sectors.

Early analysis has emphasized specific measures such as the implementation of so-called “right-to-work” legislation in Indiana or the attacks on public-sector bargaining in Wisconsin. But, a look at changes across the states shows some geographical patterns that cross state lines.

In the three maps below, the states shaded in red hues lost union members between 2011 and 2012; those in hues of blue saw gains. The darker the hue, the greater the gain or loss as measured in percent terms. Louisiana – in dark blue – saw the greatest overall gain with a 39 percent increase in total union members. Arkansas – in bright red – had the greatest decline, losing 21 percent of its union workers.

Click Maps for Larger Version

change-in-all-rate-percent-num-2013-01 change-in-private-sector-percent-num-2013-01 change-in-public-sector-percent-num-2013-01

The first map shows the percent change in all union members (that is, combining the public and private sector). The deepest reds – indicating the biggest losses – were concentrated in the center of the country, in states such as Wisconsin, Ohio, Indiana, Michigan, and Illinois. The biggest concentration of blue shades – where union membership grew most –was in the west (California, Hawaii, and Nevada) and the south (from New Mexico through Texas and Louisiana all the way to Georgia and South Carolina – though the union base in many of these states is, of course, small).



Deficit Delusions: Putting to Rest the Clinton Legacy Print
Written by Dean Baker   
Tuesday, 29 January 2013 16:54

There is widely held view in Washington policy circles that the economy was golden in the Clinton years. We had strong growth, low unemployment, rising real wages, a soaring stock market and huge budget surpluses. According to this myth, George W. Bush ruined this Eden with his tax cuts for the rich and wars that he didn't pay for. While there are plenty of bad things that can be said about George W. Bush, his tax cuts for the rich and his wars (whether paid for or not), this story of paradise lost badly flunks the reality test.

At the most basic level, the chain of causation is fundamentally wrong. The driving force in this story was the soaring stock market, which was in fact a bubble. Stock prices had grown hugely out of line with the fundamentals of the economy. The ratio of stock prices to trend earnings at the market peak in 2000 was over 30 to 1, more than twice the historic average. It was inevitable that this bubble would burst and in fact the unwinding actually begin when Clinton was still in the White House. The overall market was down more than 10 percent from its peak by January of 2001 and the Nasdaq was down close to 30 percent.

This collapse was the basis for 2001 recession which began less than 2 months after President Bush stepped into the White House. This downturn was the main cultprit in eliminating the cherished Clinton budget surplus, not the tax cuts or the recession. This can be shown in an extension of a graph developed by the Center for Budget and Policy Priorities which shows the sources of the deficit in the Obama presidency.

U.S. Budget Deficits, 2001-2011

Note that the budget would have shifted from surpluses to deficits in 2002 even if there had been no tax cuts and no increase in military spending associated with the wars in Afghanistan or Iraq. While neither of these may have been good uses of public money, they did not cause the deficit. The downturn following the collapse of the stock bubble led to the deficits in 2002-2005. 

The additional deficits caused by wars and tax cuts were actually a positive for the economy in these years. From an economic standpoint there would have been much better uses of this money, but this spending did help to boost the economy at a point where it desperately needed a lift. While the Fed was not quite at the zero bound in terms of its monetary policy, it had lowered the federal funds rate to 1.0 percent by the summer of 2002.

Most economists would say that there is not much difference between a federal funds rate of 1.0 percent and a rate of zero like we have now, meaning that the Fed would not have been able to provide much additional lift to the economy in 2002-2004 unless it adopted the sort of extraordinary policies that we are seeing today. In this context, it is hard to see an argument against fiscal stimulus, which means deliberately raising the deficit to boost the economy. The deficit would have been much more effective if it had been spent on areas that would provide a direct boost to the economy such as infrastruture or education, but the economy was almost certainly better off as a result of the Bush deficits than if he had tried to maintain a balanced budget as we went into the downturn.

Ultimately the housing bubble grew large enough that it was able to boost the economy nearly back to full employment. By 2006 and 2007 the budget would have again been surplus had it not been for the wars and tax cuts. Of course the collapse of the bubble elminated the prospect of balanced budgets or anything like them for the foreseeable future.

The moral of the story is that the surpluses/small deficits of the last 15 years were the result of bubbles. It is not a good idea to rely on asset bubbles to fuel economic growth or to provide the basis for fiscal responsibility. The result was disastrous when Bush led us down this path. The picture was not much prettier when Clinton went the same route a decade earlier.  

Seventy-Two New Members Elected to the National Academy of Social Insurance Print
Written by Alan Barber   
Tuesday, 29 January 2013 13:30

The National Academy of Social Insurance (NASI) recently announced the addition of 72 new scholars including CEPR’s Director of Domestic Policy, Nicole Woo.  Members of the Academy are nominated in recognition of their substantial and ongoing contributions to the field of Social insurance. They are recognized as leading experts in the fields of Social Security, Medicare, health coverage, unemployment insurance and related social insurance and assistance programs. Nicole’s work, like that of other members, is noteworthy for improving the quality of research, administration or policy-making in one or more of these fields.

As Larry Atkins, the president of NASI said in a press release, “Members are at the heart of NASI. We expect our new members will be engaged – many of them prominently and from a variety of perspectives – on fundamental issues of the role of social insurance programs and their demographic and financial challenges in the next decade. We look forward to recognizing, using, and sustaining their expertise and enthusiasm.  It is with great pleasure that we welcome them.”

In addition to reports on raising the Social Security payroll tax cap and the effects of changing the way in which the Social Security COLA is calculated, Nicole has educated the public and policy makers on social insurance in a wide range of venues from radio shows to panel discussions and briefings.

Labor Market Policy Research Reports, January 5 – January 25, 2013 Print
Written by Will Kimball   
Friday, 25 January 2013 16:45

Here are the labor market policy research reports released in the past few weeks:

Center for Economic and Policy Research

Raising the Social Security Payroll Tax Cap: How Many Workers Would Pay More?
Nicole Woo, Janelle Jones and John Schmitt

Economic Policy Institute

Assessing the job polarization explanation of growing wage inequality
Lawrence Mishel, John Schmitt, and Heidi Shierholz

Earnings of the top 1.0 percent rebound strongly in the recovery
Lawrence Mishel and Nicholas Finio

Employment Policy Research Network

Wage Policy as an Essential Ingredient in Job Creation
Oren Levin-Waldman

Political Economy Research Institute

Real and Financial Determinants of the Profit Share of Income: The Financial Profit Squeeze
Matthew J. Bezreh and Jonathan P. Goldstein

Schwartz Center for Economic Policy Analysis

Older Workers and Employers' Demands
Anthony Bonen

Debt to China: Budget Deficits and Trade Deficits Print
Written by Dean Baker   
Friday, 25 January 2013 13:00

Much of the concerns about the budget deficit often relates to the fact that we owe a substantial portion of the debt to China. Linking the debt to China with the budget deficit reflects a mistaken understanding of the economy. In a post for the Roosevelt Institute's Econobytes, economist Dean Baker, co-director of the Center for Economic and Policy Research argues there is no direct tie between the size of the budget deficit and our debt to China.
The debt to China is in fact far more dependent on the trade deficit, which should be the main concern for those troubled by this debt.

  • The basic logic is straightforward, the trade deficit with China is the mechanism through which China obtains the dollars it needs to buy U.S. government bonds or any other dollar denominated asset.
  • China is in a position to buy large amounts of U.S. government bonds while most other countries are not, because most other countries are not running large trade surpluses. By definition, the fact that China has a trade surplus means that it is selling more goods and services abroad than it is buying.
  • This means that it is accumulating dollars which can then be used to buy government bonds or other U.S. assets.

 There is no special importance to the fact that China’s government is buying government bonds, as opposed to any other asset.

  • If China holds $2 trillion in U.S. government bonds then the interest on these bonds is paid out to China rather than people in the United States. In that sense it can be seen as a drain on the U.S. economy.
  • However if China were to sell its $2 trillion in bonds,  and instead buy $2 trillion of stock in U.S. companies then the dividends and capital gains from this stock would go to China instead of to people in the United States. This would also be a drain on the U.S. economy.
  • There is no obvious reason that we should be less concerned about China or any nation or foreign individuals owning shares in U.S. corporations than we are about them owning U.S. government bonds. In both cases there will be an outflow of payments in future years as a result of the foreign ownership of U.S. assets.
  • If the concern is that a foreign power could disrupt our financial markets by suddenly dumping government bonds, the same concern would arise with a sudden dumping of large amounts of stock of private companies. Both would have a substantial impact on the affected markets and the value of the dollar.


State Union Membership, 2012 Print
Written by John Schmitt, Janelle Jones, and Milla Sanes   
Friday, 25 January 2013 10:30

On January 23, the Bureau of Labor Statistics (BLS) released its estimates for union membership in the United States in 2012. This post focuses on the union membership numbers by state. In addition to presenting the BLS estimates for overall union membership in each state, we also provide our own breakdown of state union membership in the private and public sector.

Both the BLS and our own estimates are drawn from the Current Population Survey (CPS).* To give a picture of short-term trends, we present union membership data for both 2011 and 2012.

Table 1 shows total union membership in each of the 50 states and the District of Columbia in 2011 and 2012, based on the BLS data. The last row of the table shows the same information for the nation as a whole. The first three columns present data on the total number of union members. The last three columns display the data as a share of wage and salary workers (that is, excluding the self-employed).

In 2012, California (2.5 million union members), New York (1.8 million), and Illinois (0.8 million) had the most union members. New York (23.2 percent of employees), Alaska (22.4 percent), and Hawaii (21.6 percent) had the highest unionization rates. North Carolina (2.9 percent), Arkansas (3.2 percent), and South Carolina (3.3 percent) had the lowest unionization rates. (Tables 2 and 3 in the longer pdf version of this post show the same data separately for the private and public sectors within each state.)



Public-Sector Union Numbers, 2012 Print
Written by John Schmitt   
Wednesday, 23 January 2013 13:15

The Bureau of Labor Statistics unionization estimates for 2012, released this morning, are generally bad news for labor. The overall unionization rate fell 0.5 percentage points. The rate was down 0.3 percentage points in the private sector and 1.1 percentage points in the public sector. (CEPR's advance estimates were very close to the official numbers.)

The big drop in unionization in the public sector is rightly getting a lot of attention. The number of public-sector union members fell by 234,000 last year. This is partly the product of a decline in employment in the sector, which has seen employment fall every year since 2009.

But, the share of public-sector workers in unions also fell, from 37.0 percent in 2011 to 35.9 percent in 2012. This sizeable drop may well reflect the organized attacks against public-sector workers in states such as Wisconsin, where public-sector union membership dropped by about 48,000 workers.

But, it is still too early to tell. As the chart below shows, the unionization rate for public-sector workers has fluctuated in a narrow band since the late 1970s and this year's decline leaves union density in the public sector within that long-term range.


Are the Job Polarization Data Robust? Print
Written by Heidi Shierholz   
Friday, 18 January 2013 15:55

This post is the fourth in a short series that assesses the role of technological change and job polarization in wage inequality trends.

In an earlier post, John Schmitt showed that “job polarization”—the expansion of low- and high-wage occupations at the expense of occupations in the middle—did not occur in the 2000s, (and therefore could not be responsible for rising wage inequality in the 2000s). In this post, I examine how well the key figures at the heart of the “job polarization” analysis really fit the underlying data. I begin with a closer look at the data for the 1990s, the decade that appears to conform most closely to the patterns implied by the job polarization explanation for wage inequality.

In a recent piece critical of research myself, John, and Larry Mishel are doing on technology and wages, Dylan Matthews makes a lot of our interpretation of the following chart for the 1990s. The chart, which we prepared for a paper presented at a conference earlier this month, shows the change between 1989 and 2000 in the share of total employment in 100 different occupation groups arrayed by their average wage level (labeled “skill percentile”):

The two lines are statistically smoothed versions of the individual data points, which appear as blue diamonds. Both lines show a rough U-shape that is consistent with the standard story of job polarization: employment increases were largest at the top and bottom of the skill distribution and smallest in the broad middle. 



Union Membership, 2012 Print
Written by John Schmitt and Janelle Jones   
Thursday, 17 January 2013 13:00

On January 23, the Bureau of Labor Statistics will release its estimates of “Union Membership” for 2012. Using the same data from the Current Population Survey (CPS), we have compiled advance estimates for union membership and coverage for 2012 and find a large drop in unionization last year. Most of the losses occurred in the public sector, where union membership fell 1.0 percentage points or about 231,000 members. But, membership also fell about 0.3 percentage points, or about 175,000 members in the private sector.


By industry, the biggest gainers were: administrative and support services (up 51,000 members); arts, entertainment, and recreation (up 24,000); and machinery manufacturing (up 24,000). 

But, by far, the industries experiencing the largest losses were concentrated in the public sector, with educational services (down 199,000 members) and public administration (down 92,000 members). 



Occupation Employment Trends and Wage Inequality: What the Long View Tells Us Print
Written by Lawrence Mishel   
Tuesday, 15 January 2013 13:05

This post is the third in a short series that assesses the role of technological change and job polarization in wage inequality trends.

The discussion of job polarization—the expansion of high and low-wage occupations while middle-wage occupations decline—and its role in driving wage inequality would benefit from a longer examination of occupational change and technology’s impact.

“Occupational upgrading” has been going on for 60 years or more. By occupational upgrading, we mean the erosion of employment in blue-collar and, more recently, pink-collar (administrative/clerical) occupations and the corresponding employment expansion of high wage, professional and managerial white-collar occupations. The share of employment in low-wage, service occupations (food preparation, janitorial/cleaning services, personal care and services) has actually been relatively stable for many decades and remained a small—roughly 15 percent—share of total employment.

The bottom line for the discussion of the role that technologically-driven occupation trends have played in generating wage inequality is that occupational upgrading has been occurring for decades, through periods of both rising and falling wage inequality and through both rising and falling median real wage growth. In our view, this makes occupational employment shifts a poor candidate for explaining the rise in wage inequality since 1979. 

In our forthcoming paper, John Schmitt, Heidi Shierholz and I document these employment trends using data over the 1959 to 2007 period drawn from a Daron Acemoglu and David Autor (2011) paper and supplemented by our analysis of Current Population Survey data from 1979 onwards. These data are based on occupation shares of total employment but the trends are the same if one examines shares of total hours worked.



Timing Matters: Can Job Polarization Explain Wage Trends Print
Written by Lawrence Mishel   
Monday, 14 January 2013 14:57

The recently posted introduction of Assessing the job polarization explanation of growing wage inequality, a paper I wrote with Heidi Shierholz and John Schmitt, has started to raise some interest in the topic so it’s worth surfacing some of the issues and evidence it contains. John has already written a blog post on the fact that job polarization (the expansion of low and high-wage occupations and the shrinkage of middle-wage occupations) did not occur in the 2000s and that recent occupational employment shifts are clearly not driving recent wage trends. Our paper raises two sets of empirical issues. First, we point out that the evidence that job polarization caused wage polarization (growing inequality in the top half of the wage distribution but stable or shrinking inequality in the bottom half) in the 1990s is entirely circumstantial, relying on the two trends (employment and wage polarization) occurring at the same time without demonstration of any linkage. Second, the paper challenges whether occupational employment trends drive key wage patterns.

This post explores the point that one piece of missing evidence from the “job polarization is causing wage inequality” story is around the timing of employment and wage changes. That is, all of the evidence presented so far on job polarization relates to wage and employment trends over big chunks of time (1979–89 and 1989–99 or even 1974–88 and 1988–2008) and there has not been an examination of year-by-year trends. This is important because



Job Polarization in the 2000s? Print
Written by John Schmitt   
Monday, 14 January 2013 09:56

In a recent post at Wonkblog, Dylan Matthews takes a fairly dim view of a new paper that Larry Mishel, Heidi Shierholz, and I have written on the role of technology in wage inequality. Matthews raises several issues, but I want to focus right now on a key point that he missed: proponents of the "job polarization" view of technological change provide no evidence that the framework actually works in the 2000s. Larry, Heidi, and I will cover other issues in additional blog posts.

In his piece, Matthews focused on our criticisms of the ability of the job polarization approach to explain wage developments in the 1990s. I'll leave the discussion of the 1990s for another day, but the more important issue for contemporary policy discussions is whether the framework is helpful at all for the last decade.

Since the occupation-based "tasks framework" that lies behind the academic research on job polarization is widely considered in the economics profession to be the best available technology-based explanation for wage inequality, Larry, Heidi, and I take the lack of evidence for this framework in the 2000s as support for our view that other policy-related factors are what is really driving inequality. We also think that if this purportedly unified framework doesn't work well for the 2000s, that it is likely not helpful for earlier periods either.

But, even if you still think technology is the main or even an important culprit, we would argue that you need a new theory of technology that actually fits the facts of the 2000s.

This is a fairly long post and starts with some necessary background --necessary because there is a sizeable gap between the way economists talk formally about "job polarization" and the way most of the public talks about the same issue.

Some background

For about ten years, a group of economists (most prominently, MIT's David Autor, who has been gracious and patient in his interaction with us around these issues) has argued that a particular type of technological change has been driving much of rising wage inequality.

In their view, the economy has three broad types of jobs: abstract cognitive jobs (think lawyers, doctors, managers), routine jobs (think manufacturing or many clerical jobs), and non-routine manual jobs (think restaurant workers or office cleaners).



Fiscal Cliff Deal was a Raw Deal for Low-Income, Working-Class People Print
Written by Shawn Fremstad   
Wednesday, 09 January 2013 13:25

In a fascinating recent post The Nation’s Greg Kaufman pulls together a range of responses from economic justice advocates and researchers (including me) on whether the fiscal cliff deal was a good one for low-income people.

Reading it along side what's been written over the past week, I have a very difficult time understanding how the cliff deal can be characterized as anything but a raw deal for low-income people. After all, this is a deal that permanently(!) extends 82 percent of the Bush Tax Cuts without restoring the Making Work Pay tax credit, lifting the debt ceiling or averting across-the-board cuts in many low-income and other programs now scheduled to go into effect on March 1.

Not restoring the Making Work Pay tax credit means that low- and middle-income workers will experience incomes losses in 2013 compared with the last four years (2009-2010 when the Making Work Pay tax credit was in place, and 2010-2011 when the less progressive payroll tax cut was in place). That’s a horrible outcome for poorly compensated workers and for the still weak economy in general.

As I understand it, the case for this being a good deal on balance for low-income people comes down to three points: 1) it doesn’t cut programs that help low-income people; 2) it temporarily(!) extends some targeted expansions of the Child Tax Credit and the Earned Income Tax Credit that were part of the Recovery Act; and 3) it extends the federal Emergency Unemployment Compensation program through 2013.

Since the deal doesn’t include any spending cuts (and just defers decisions about them for a few weeks), there’s no reason to celebrate the mere absence from the deal of specific cuts to low-income benefits. 

The one-year extension of Emergency Unemployment Compensation (which amounts to about $30 billion for the long-term unemployed) is terrific, although hard to celebrate as anything more than minimally decent with nearly five million people currently out of work for more than six months.



Back to Full Employment Print
Written by Colin Gordon   
Wednesday, 09 January 2013 09:00

By the conventional “peak to trough” measure, the recession that began in December 2007 ended 18 months later, in June 2009. But you’d be hard-pressed to find much evidence of “recovery” in the labor market.  Job creation is barely keeping up with population growth.  The marginal decline in the unemployment rate (from about 10 percent at its worst to just under 8 percent at the end of 2012) has been driven mostly by people dropping out of the labor force.  And long-term unemployment remains stubbornly high.

All of this begs a bigger question: What would real recovery look like?

The first and simplest measure (see graphic below) is simply to chart our progress towards regaining the jobs lost during the downturn.  This yields a flat threshold at the December 2007 employment levels, and a jobs deficit that pushed past 8 million in late 2009 and now sits at about 3 million.  

This “struggling back to the surface” measure has some utility, especially in comparing the recovery trajectories of different recessions.  But it becomes less useful the longer the downturn lasts, as population growth creates a new baseline for the labor force.  Getting back to December 2007 employment has little meaning after five years of immigration, retirements, and high school and college graduations.



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