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Labor Market Policy Research Reports, Aug. 29 – Sept. 2, 2011 Print
Written by Matthew Sedlar   
Friday, 02 September 2011 15:30

A roundup of the labor market research reports released this week.

Center for Economic and Policy Research

Improving Job Quality: Direct Care Workers in the U.S.
Eileen Appelbaum and Carrie Leana


The Fraying of Oregon’s Middle Class

Economic Policy Institute

Putting America Back to Work: Policies for Job Creation and Strong Economic Growth
Ross Eisenbrey, Lawrence Mishel, Josh Bivens, Andrew Fieldhouse

Sustained, High Joblessness Causes Lasting Damages to Wages, Benefits, Income and Wealth
Lawrence Mishel and Heidi Shierholz

Institute for Women’s Policy Research

Recommendations for Improving Women’s Employment in the Recovery

San Francisco Employment Growth Remains Stronger with Paid Sick Days Law Than Surrounding Counties
Kevin Miller and Sarah Towne

What Does Cynicism Have to Do With It? Print
Written by John Schmitt   
Friday, 02 September 2011 13:30

Matt Yglesias offers some “Cynical Thoughts on The Minimum Wage.” Cynical is fine, but informed would be better.

Most of the post focuses on what Yglesias believes are enforcement problems with the minimum wage. He recites an anecdote about a magazine that reclassified workers as interns rather than pay them the minimum wage; links to a series of exemptions to the federal minimum wage; and offers some hypothetical scenarios that might allow employers to sidestep the law.

But, we actually have good empirical evidence on what happens after the minimum wage goes up. The series of three graphs below, taken from David Card and Alan Krueger’s landmark 1995 book on the minimum wage, are just one example.



Bleak BLS Report Shows No Job Growth in August Print
Written by Dean Baker   
Friday, 02 September 2011 11:00

There was no job growth in August and the job growth numbers for the last two months were revised downwards by 58,000, according to the latest Bureau of Labor Statistics' employment report. Job growth over the last three months has now averaged 35,000, well below the 90,000 needed to keep pace with the growth of the labor force. Peculiarities like the recent Verizon strike may have reduced the number of jobs in August, but adjusting for that particular factor, job growth would have averaged 50,000 over the last three months. The unemployment rate remained unchanged at 9.1 percent.

The employment-to-population ratio (EPOP) did edge up from its recession low to 58.2 percent. The number of people involuntarily working part-time jumped up by 430,000, to 8.8 million. A disproportionate share of the increase in employment in the household survey was among blacks, who saw a rise of 155,000 in employment. However, this went along with a jump in the African American unemployment rate of 0.8 percentage points to 16.7 percent. The unemployment rate for black men rose by 1.0 percentage point to 18.0 percent and for black teens by 7.3 percentage points to 46.5 percent. The EPOP for black teens was just 13.0 percent, a new low for the downturn.

The BLS report shows an economy that is growing, but at such a slow pace that it is not even creating sufficient jobs to keep pace with the growth of the labor force. It is difficult to see how this will change absent a boost from the government.

For more, read the latest Jobs Byte.

The Disposable Worker Hypothesis Print
Written by John Schmitt   
Friday, 02 September 2011 08:30


Source: Robert Gordon

The eminently mainstream economist Robert Gordon has posted a surprisingly hard-hitting paper at the voxeu site. The brief paper estimates that the U.S. economy is currently short about 10 million jobs (14 million using a less conservative estimate –see graph above).

What makes the paper hard-hitting is that Gordon argues a major cause of this enormous employment gap is the increase since the 1980s in “managerial power.” In Gordon’s view, the problem is that “workers are weak and management is strong.”

The weakened bargaining position of workers is explained by the same set of four factors that underlie higher inequality among the bottom 90% of the American income distribution since the 1970s – weaker unions, a lower real minimum wage, competition from imports, and competition from low-skilled immigrants.

Meanwhile, the rise in the importance of stock options as a share of total executive compensation has encouraged managers to come out “with all guns blazing to [cut] every type of costs, laying off employees in unprecedented numbers.”

His econometric analysis suggests that this combination of weaker worker bargaining power and changes in corporate governance have led to a 50 percent higher level of layoffs today for any given decline in aggregate demand. “For every worker tossed overboard in a sinking economy prior to 1986, about 1.5 are now tossed overboard.”

This post originally appeared on John Schmitt's blog, No Apparent Motive.

CEPR News August 2011 Print
Written by Dawn Lobell   
Thursday, 01 September 2011 14:05

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

CEPR on Haiti
CEPR’s recent paper argues that cholera treatment and prevention efforts in Haiti have fallen woefully behind, leading to thousands of preventable deaths, even though the dramatic rise in new cases this spring and summer was entirely predictable. CEPR’s paper was mentioned in this release from Partners In Health and this report by Free Speech Radio News. Mark recently accompanied CEPR Board Director Danny Glover on a trip to Haiti, where they observed firsthand the attempted eviction of people made homeless by the earthquake from their camp (see a photo here).  Mark questions where the billions of dollars in disaster aid have gone in this op-ed in The Guardian, and he argues for the withdrawal of MINUSTAH troops from Haiti in this piece in Folha de São Paulo (Brazil),  Mark also discussed these issues on WBAI 99.5FM’s “Talk Back ”. You can read more about Haiti in CEPR’s Haiti: Relief and Reconstruction Watch blog.

The End of Loser Liberalism is Here!
Dean Baker’s new book, that is. In The End of Loser Liberalism: Making Markets Progressive, Dean argues that progressives hurt their cause whenever they accept conventional wisdom that conservatives are for the "free" market while progressives are for government intervention in the market economy. Dean says that this is bad policy and bad politics. He then explains how markets can be restructured to lead to greater equality rather than redistributing income to a small group of elites.

Dean published the book under a Creative Commons license and as a free electronic download.  As he argues in the book, Dean sees copyrights as a form of government intervention in markets that leads to enormous inefficiency, in addition to redistributing income upward. Distributing the book for free not only enables it to reach a wider audience, but Dean hopes to drive home one of the book's main points via his own example. (Hard copies will be available for purchase - at CEPR’s cost - in the near future.)

Instead, CEPR is asking that readers consider making a donation to CEPR help cover our expenses, if possible. All donations will be used to help CEPR fight for the progressive economic policies described in the book. So please download your free copy today, and share freely with your friends!

(Note from Dean: “In response to many readers’ questions, the Bichon on the cover is Biscuit, one of my three dogs. The others are an adorable doberman and a lab shepherd mix. All three are shelter dogs.”)



Singing Together, But All Off Key Print
Written by John Schmitt   
Wednesday, 31 August 2011 09:15

According to several conservative bloggers and columnists, back in the 1990s economist Alan Krueger (with his colleague David Card) wrote a "fatally flawed,"  "faulty," "tortured," and subsequently "disputed," "debunked,"  and "demolished" study on the employment impact of the 1992 increase in the New Jersey State minimum wage.

This 15-year-old research is in the news now because Krueger has just been nominated by the White House to the head of the Council of Economic Advisors. I wrote a long post yesterday responding to the wildly off-base criticisms of Krueger’s work made in a specific post at the National Review Online’s "The Corner," but I want to take up the issue again today because I am struck by a feature common to all of yesterday’s conservative outpouring on the Card and Krueger research.

Every one of these pieces mentions implicitly or explicitly (1) Card and Krueger’s 1994 study (pdf) based on a telephone survey of 410 fast-food restaurants, only to go on to claim that this work was later refuted by (2) Neumark and Wascher’s 1995 NBER working paper (which analyzed payroll data from a non-random sample of 235 fast-food payroll records). But, every one of these attacks on Card and Krueger is completely silent about, and in fact, appears to be completely ignorant of (3) Card and Krueger’s 2000 follow-up paper (pdf) published in the American Economic Review.



How Conservatives Screwed Up Welfare Reform Print
Written by Shawn Fremstad   
Tuesday, 30 August 2011 19:00

Last week was the 15th anniversary of federal legislation that replaced the Social Security Act's Aid to Families with Dependent Children (AFDC) program with a block grant called Temporary Assistance for Needy Families (TANF). Conservatives and even some liberals referred to this as the 15th anniversary of "welfare reform." But conflating "welfare reform" with the 1996 law is misleading, and not particularly helpful for progressive reformers who want to improve the TANF program, which has turned out to be a largely failed conservative experiment.

Rather than a singular event that took place in 1996 there are really two distinct categories of welfare reform that unfolded in the late 1980s and the 1990s. First, a moderately progressive welfare reform that was mostly put in place in the late 1980s and early 1990s, and, second, a "truly conservative" one, the 1996 legislation that established the TANF block grant.

Key elements of progressive welfare reform during this period included: 1) the large-scale expansion of the Earned Income Tax Credit (EITC) in 1993—in 1994, federal expenditures on the EITC exceeded expenditures on AFDC/TANF for the first time; 2) increases in the federal minimum wage in the first half of the 1990s; 3) the development of several progressive welfare reform demonstration projects, particularly the Minnesota Family Investment Program (MFIP) and the New Hope Project, in the early 1990s; and 4) the expansion of Medicaid eligibility to all very low-income children in the late 1980s and early 1990s. The basic idea guiding progressive reform during this period was to "make work pay."



Krueger and the Minimum Wage: National Review Blog Way Off Print
Written by John Schmitt   
Tuesday, 30 August 2011 15:15

In response to the nomination of Alan Krueger to head the Council of Economic Advisors, National Review Online's "The Corner" blog has published an embarrassingly ignorant attack on minimum-wage research that Krueger did with David Card back in the 1990s. The post reheats the very stale talking points pushed by fast-food lobbyist Richard Berman circa 1995 and leaves NRO readers with the completely false impression that the story ended in 1995 and did so badly for Krueger. NRO readers deserve to know the full story, if for no other reason that they can therefore avoid embarrassing themselves by repeating NRO's astonishingly incomplete account of events.

In case you weren't paying careful attention to all this back in the 1990s: In 1992, New Jersey implemented a state-level minimum wage that raised the state rate above the federal minimum and, importantly, above the minimum wage then in effect just across the state line in Pennsylvania.

Card and Krueger (C&K), who were both teaching at Princeton at the time, got the idea to compare fast-food employment in restaurants on either side of the New Jersey-Pennsylvania border, before and after the increase. If the minimum-wage increase was a job-killer, employment should have suffered in New Jersey relative to Pennsylvania, they reasoned.



Unions and Inequality Print
Written by John Schmitt   
Tuesday, 30 August 2011 12:30

Sociologists Bruce Western and Jake Rosenfeld have a great paper in the current issue of the American Sociological Review on the effect of unions on wage inequality in the United States.

Researchers including David Card (pdf), Richard FreemanJohn DiNardo (pdf) and others long ago established that unions reduce wage inequality, primarily by compressing wage differences within unionized firms. Western and Rosenfeld’s paper extends this research by demonstrating that unions also reduce inequality through a second channel: by lowering wage inequality among non-union workers that work in more heavily unionized industries and areas.

The specifics are somewhat technical, but the graphs below illustrate the main findings. The two researchers divided the economy into a large number of industry-and-region groups and then measured the unionization rate and the wage inequality (the variance of the log of wages) in each group in each year from 1973 to 2007. Overall, and especially for men, the higher the unionization rate in the industry-and-region group, the lower the overall level of wage inequality. Statistical techniques allowed Western and Rosenfeld to separate the part of the lower inequality that was due to lower inequality within the unionized workforce and the part that was related to lower inequality among non-unionized workers in each industry-region grouping.



Housing Prices Rose in June, With Largest Gains in Midwest Print
Written by Dean Baker   
Tuesday, 30 August 2011 10:30

The Case-Shiller 20-City index rose for the third consecutive month, with all 20 cities showing price increases in June. Overall the index rose 1.1 percent. The biggest gains were seen in badly hit markets in the Midwest, with 3.2 percent month-to-month increases reported for both Chicago and Minneapolis and Detroit and Cleveland reporting 2.2 percent and 1.5 percent gains, respectively. These sharp increases appear to have been driven primarily by price jumps in the bottom third of the market. While Detroit and Cleveland don't have tier indexes, prices for bottom-tier homes rose in Chicago by 6.5 percent and in Minneapolis by 6.1 percent.

It is unlikely, however, that this recent data could indicate the beginning of a turnaround for prices. Last month, the Census Bureau released data on vacancy rates for the second quarter. While they have edged down slightly from their peak, rates on both ownership and rental units remain at near-record-high levels. This enormous excess supply of housing will exert downward pressure on prices at least through 2012. The tightening of credit by lowering limits on conformable mortgages will also put downward pressure on prices. In short, it is likely that this upturn in prices will not persist.

For more, check out the latest Housing Market Monitor.

A Spanish Balanced Budget Amendment Print
Written by John Schmitt   
Monday, 29 August 2011 10:45

The socialist prime minister of Spain, Jose Luis Rodriquez Zapatero — apparently at the suggestion of German Chancellor Angela Merkel — has proposed amending the Spanish constitution to ensure that the government never runs a deficit larger than 0.4 percent of GDP. The proposal, which the Spanish right-wing opposition Popular Party has embraced, would be an unambiguous economic disaster for Spain.

If enacted, the measure would take away Spain’s only remaining macroeconomic policy lever, leaving the country’s economic future entirely in the hands of the European Central Bank and the continent’s financial sector, both of which have already shown incredible indifference to the country’s 20-plus percent unemployment rate.

When Spain entered the euro, the country signed away the ability to manage macroeconomic fluctuations through the exchange rate (a devaluation would be one typical way out of the current crisis) or monetary policy (by lowering interest rates or engaging in some U.S.-style quantitative easing). The Zapatero proposal would go one step farther, leaving Spain completely at the mercy of the ECB and "the markets."



Labor Market Policy Research Reports, Aug. 22-26, 2011 Print
Written by Matthew Sedlar   
Friday, 26 August 2011 15:15

A roundup of the labor market research reports released this week.

Center for Law and Social Policy

Farther, Faster: Six Promising Programs Show How Career Pathway Bridges Help Basic Skills Students Earn Credentials That Matter
Julie Strawn

Economic Policy Institute

Why the Amendments to the NLRB’s Proposed Election Regulations Should Be Approved
Ellen Dannin

National Employment Law Project

Advancing Enforcement of the NLRA - Recent NLRB and ICE Guidance

Rights and Remedies for Undocumented Workers in Organizing

Can’t Get There From Here: Facing Reality in Financing Michigan’s Unemployment Insurance Program
Mike Evangelist and Rick McHugh

Unlike with 2002 Venezuelan Coup Regime, IMF Not in a Rush to Recognize a New Libyan Government Print
Written by Dan Beeton   
Friday, 26 August 2011 14:30

The International Monetary Fund (IMF) announced yesterday that it would take approval by its 187 country members for the Fund to officially recognize a new government in Libya. "When there is a clear, broad-based, international recognition of a new government in Libya, it is at that point the fund could or would move towards recognition," Reuters reported IMF spokesman David Hawley as saying.

This should be a welcome change from the IMF’s reaction to the 2002 coup d’etat in Venezuela, when the Fund quickly announced that it was "ready to assist the new administration in whatever manner they find suitable" after the overthrow of the democratically elected government.

To summarize what happened, President Hugo Chávez, who had been elected in a 1998 election observed and certified by international observers from the EU, Organization of American States and others, was ousted in the early hours of April 12, 2002, in a coup and later flown to the island of Orchila. The coup regime, headed by businessman Pedro Carmona, and backed by much of the Venezuelan elite, would soon dissolve the constitution, the congress and the Supreme Court.



Heritage Slips Up in Criticism of CBO Print
Wednesday, 24 August 2011 15:57

Now, I know I am often critical of the Heritage Foundation and I have heard suggestions that maybe I ought stop paying them any mind. But when I came across this review of the Congressional Budget Office's update to the Budget and Economic Outlook, I found I could not possibly let them slide.

Complaining about the "remarkably positive economic forecast," J.D. Foster wrote:

"CBO also has another very curious forecast, this for inflation as measured by the Consumer Price Index. The CBO is projecting a very modest 1.3 percent inflation for 2011. Yet on an annualized basis, inflation has run at an average of 4.3 percent over the last eight months. Except for an easing in May and June, on an annualized basis, inflation has exceeded 4.9 percent every month since December 2010.

"Again, the CBO forecast is also substantially out of line with the Blue Chip consensus forecast, which at 3.2 percent is about two-and-a-half times higher. Inflation may taper off, but for the CBO forecast to hold, prices would have to decline through the balance at an annualized rate of almost 2 percent. This would be a stunning—indeed, frightening—prospect in light of current economic weakness."

I had not yet read the CBO report, so I found this charge quite stunning. Fortunately for CBO, and most unfortunately for Foster, the charge is unfounded. The Congressional Budget Office had in January projected 1.3 percent growth in the CPI. At the time, the Blue Chip Consensus (p.51) was only 1.8 percent, so CBO was optimistic at the time, but not grossly so. Then energy prices rebounded and the Blue Chip Consensus revised its inflation forecast upward by 1.4 percentage points to 3.2 percent. Of course, CBO also revised its forecast (p.58) from 1.3 percent to 2.8 percent—a 1.5 percentage point hike.

Thus, only 0.4 percentage points separate CBO from the Blue Chip Consensus. In erring, Foster grossly exaggerated the difference.

Pew Survey on College Print
Written by John Schmitt   
Wednesday, 24 August 2011 10:04

Over half of male college graduates (59 percent) and almost half of female college graduates (47 percent) believe that “the higher education system” is “only fair” or “poor” in “providing value for the money spent by students and their families,” according to a new poll (pdf) released by the Pew Research Center last week.

Pew survey of college grads

Source: Pew Research Center.

Given how adamant economists are that college is an overwhelmingly good investment, it is surprising to see so many college graduates, especially men, who believe college was not good value for money, even after they have successfully completed the degree.

This post originally appeared on John Schmitt's blog, No Apparent Motive.

History, Class and the European Debt Crisis Print
Written by John Schmitt   
Monday, 22 August 2011 12:25

Unless European officials can find a viable solution soon, the continent's sovereign debt crisis threatens to derail the increasingly fragile world economic recovery. The conventional wisdom blames Greece, Portugal, Spain and Ireland — the poorer “peripheral" countries at the center of the crisis — for “living beyond their means.” In an important new paper, however, Vicente Navarro, professor of public policy at Johns Hopkins University, offers a compelling alternative explanation for the mess.

Navarro observes that for much of the postwar period all four of these countries were largely ruled by right-wing regimes, including military dictatorships in the case of Greece, Portugal and Spain. In Navarro’s view, today’s sovereign debt crisis has its roots in this authoritarian history, which produced weak welfare states relative to the rest of Europe, and, even more importantly, left all four countries with woefully underdeveloped tax systems that are the real source of the squeeze on sovereign debt.



Labor Market Policy Research Reports, Aug. 13-19, 2011 Print
Written by Jane Farrell   
Friday, 19 August 2011 12:15

Several new labor market research reports were released this week:

Center on Budget and Policy Priorities

Policy Basics: How Many Weeks of Unemployment Compensation Are Available?


The Cost of Regulatory Delay
Ben Peck

Economic Policy Institute

Deconstructing Crain and Crain: Estimated cost of OSHA regulations is way off base
Ross Eisenbrey, Isaac Shapiro



Energy Prices Bounce, Leading to 0.5 Percent Rise in CPI Print
Written by David Rosnick   
Thursday, 18 August 2011 13:00

After falling 0.2 percent in June, the Consumer Price Index rose 0.5 percent in July, according to the latest Bureau of Labor Statistics reports on the consumer price, US import/export price and producer price indexes. Over the last three months, headline inflation has run at a 1.8 percent annualized rate, compared with 6.2 percent from January to April. Leaving out food and energy, consumer prices rose 0.2 percent last month and have grown at a 3.1 percent annualized rate since April.

Energy prices rebounded again, driving up the overall rate of inflation. However, there is not much to be made of this volatility.  Energy prices rose 2.8 percent in July, but have fallen at a 10.4 percent annualized rate over the last three months.

For more, check out our latest Prices Byte.

CEO: We Offer Either a Very Skimpy Health Benefit, or Possibly None at All Print
Thursday, 18 August 2011 11:10

According to a video posted over at the Heritage Foundation, CEO Andy Puzder of CKE Restaurants testified, "with franchisees in the United States we employ about 70,000 people." [13:50] What's truly fascinating about this is that "the ACA [Affordable Care Act] will increase our health care costs approximately $18 million per year ... That's a 150 percent increase from the $12 million we spent on health care last year." [17:06]

Apparently, CKE spent on health care less than $15 per employee per month last year. Either the health care benefit was amazingly skimpy, or very few CKE employees received it. Regardless, if everyone at CKE were part-time minimum-wage workers, that would imply total wages of more than half a billion dollars annually. Including health care costs, an extra $18 million would imply a raise of less than 3.5 percent. The minimum wage, by contrast, has fallen in real terms by 5.5 percent since it was last raised in July 2009.

The Devastating Interest Burden of the Debt Print
Written by Dean Baker   
Wednesday, 17 August 2011 11:04

It is important to remember that most of the people in Washington debates on economic policy do not know much economics. They tend not to be very good at arithmetic either. That is why they were blindsided by the collapse of the $8 trillion housing bubble that wrecked the economy.

As we get endless pontification about the crushing debt burden it is worth touching base with reality on occasion. In that spirit, CEPR brings you the latest data and projections on the ratio of the federal government's interest payments to GDP, courtesy of the Congressional Budget Office (CBO).

Click for Larger Image


Source: Congressional Budget Office.

As the chart shows the interest to GDP ratio is currently at a crushing 1.3 percent, near the post World War II low. However this figure overstates the burden somewhat. Last year the Federal Reserve Board refunded almost $80 billion to the Treasury. This was interest earned on government bonds and other assets it now holds. That leaves a net interest burden of 0.8 percent of GDP, by far the lowest of the post World War II era.

Of course the burden is projected to rise in future years. The baseline projections shows the burden rising to 3.3 percent of GDP by 2021, the end of the forecast period. This baseline is probably overly optimistic in some respects, since it assumes that the Bush tax cuts are allowed to expire and some other items in current law that will probably not happen.

If we adjust the the baseline for these factors, the debt to GDP ratio is projected to be just over 90 percent by 2021, approximately 20 percent higher than in the baseline. If we raise the interest payments by the same percent, then we get a ratio of interest to GDP of 4.0 percent, still not exactly crushing.

It is also worth noting that if the Fed continued to hold $3 trillion or so in assets, and rebated the interest earned on this money to the Treasury, then it would reduce the net burden of the debt by close to 1.0 percent of GDP. This would mean that even in 2021, if we just left everything to run its course, we would still not face as large an interest burden from the debt as the early 90s.

Okay, this arithmetic interlude is over. You can rejoin the Washington elite and start panicking over the debt again.

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