Category: Equitablog

This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.

Equitable Growth round-up

The economics and economic inequalities of college sports, and college football in particular, have long been ignored, with both the physical and economic well-being of athletes often overlooked by universities and fans alike. But the coronavirus pandemic is raising questions about what the economic effects would be of deferring college sports by a year due to the out-of-control public health crisis. Kate Bahn looks at why two top college sports conferences have decided to suspend all activities until at least January 2021, while the other three top university-level leagues are forging ahead. The lost revenue from cancelling a season or a full year of college football will have a dramatic impact on the economies of college towns and the purses of universities across the United States. But, Bahn asserts, with the coronavirus and its corresponding disease, COVID-19, predominately affecting people of color—including students of color who are now the majority of college football athletes, even as coaches remain mostly White—the existing structural and economic inequalities facing Black and Latinx students and their families are being brought to the foreground, as is the longstanding call for student athletes to be recognized as a labor force, entitled to proper pay and workplace protections.

Every month, the U.S. Bureau of Labor Statistics releases data on hiring, firing, and other labor market flows from the Job Openings and Labor Turnover Survey, better known as JOLTS. The BLS recently released the latest data for July 2020. Raksha Kopparam and Kate Bahn put together four graphics highlighting key data from the release, including that workers are beginning to feel more confident about the labor market (reflected in an increasing rate of those who quit their jobs) and that job openings are continuing to yield fewer hires.

Catch up on Brad DeLong’s latest Worthy Reads, in which he provides his take on content from Equitable Growth and across the internet. This week’s articles include Equitable Growth’s August 2020 Jobs Day coverage, an in-depth look at one of our 2020 grant descriptions, and more.

Links from around the web

In August, a group of U.S. senators announced plans to introduce legislation that outlines a so-called college athletes bill of rights, which would provide NCAA players with proper pay, healthcare, lifetime educational scholarships, and additional benefits. The co-sponsors of the legislation hope this bill of rights will get rolled into existing bills making their way through both chambers of Congress on NCAA policies regarding the use of the name, image, and likeness, or NIL, of college athletes. Sports Illustrated’s Ross Dellenger dives into the proposed bill of rights, which intends to “advance justice and opportunity” for athletes, particularly with regard to monetary compensation and representation in decisions that affect them. It would also enhance transparency regarding school finances, revenues, and expenses, and importantly includes college athletic departments—which are notoriously secretive about their spending—in this requirement.

College sports is not the only industry in which those in leadership positions tend to be White. A New York Times review of the more than 900 most powerful people in the United States—from politics to entertainment to law enforcement—shows that even as the U.S. population becomes more diverse, the vast majority of those in power are White. Denise Lu, Jon Huang, Ashwin Seshagiri, Haeyoun Park, and Troy Griggs look at 922 officials and executives, and find that 20 percent identify as Black, Hispanic, Asian, Native American, multiracial, or otherwise a person of color, even as more than 40 percent of Americans identify with one of these groups. The co-authors then look at each specific field to show the diversity—or lack thereof—in its leadership ranks, noting that “even where there have been signs of progress, greater diversity has not always translated into more equal treatment.”

An in-depth look in The Washington Post at a dilapidated motel in Orlando, Florida, just down the road from Disney World and Universal Studios, reveals a devastating present and foreshadows a bleak future for many communities suffering similar fates. Greg Jaffe writes that the motels along this stretch of highway have long been a barometer for the economy, gathering budget-conscious tourists in good times and, during tougher times such as today, transforming into last-resort shelters for struggling workers and their families. After the Great Recession of 2007–2009 and the housing collapse in 2008, the number of families staying in these increasingly decrepit motels rose, thanks to a lack of both well-paying jobs and low-income housing in the city. Now, Jaffe finds, some motel owners are abandoning their properties for the residents to maintain, often leading to power outages, pest problems, rising addiction and mental health crises, and crumbling infrastructure. A few local charities are working to help these vulnerable and hard-hit families, but more assistance is needed—and doesn’t appear to be imminent. It’s a devastating look at what could only get worse if policymakers at the local, state, and federal level continue to ignore the problems facing many low-income communities amid the continuing coronavirus recession.

Friday figure

Figure is from Equitable Growth’s “College football’s inequality dilemma amid the coronavirus recession” by Kate Bahn.

Worthy reads from Equitable Growth:

1. Remember: prime-age employment was something like 80 percent before the novel coronavirus hit. Fortunately for all of us, so far this shock is still predominantly supply-side and not demand-side. If it turns into a demand shock we will have a whole extra set of problems. Read “Equitable Growth’s Jobs Day Graphs: August 2020 Report Edition.”

2. It is a very good idea to do this. In fact, it is so good that I am astonished it is not yet been done, but it has not. Read Equitable Growth 20202 grantees’ Jose Joaquín Lopez and Jamein Cunningham’s grant description, “The evolution of civil rights enforcement and economic prosperity of minorities,” in which they write: “Despite the existence of a vast literature on U.S. labor market discrimination, there is still a lack of empirical evidence on the degree to which the private enforcement of anti-discrimination legislation through the federal courts has influenced racial divides … The authors will create a set of comprehensive measures of civil rights enforcement at the court level, providing the opportunity to track changes in enforcement across 90 U.S. District Courts between 1970 and 2019. These measures of enforcement will be linked to socioeconomic outcomes using data at the individual and household levels in order to shed light on how enforcement of civil rights legislation via the courts influence labor market outcomes and intergenerational mobility of minority groups. In addition, the authors will create a comprehensive dataset on the political party composition of judges across courts and over time to examine how presidential appointees have influenced the evolution of civil rights enforcement and their implications for racial inequities in U.S. labor market outcomes and intergenerational income mobility.”

3. This is simply an truly excellent two-pager. Read “Reforming Unemployment Insurance across the United States,” which details: “Longstanding problems with the Unemployment Insurance system in the United States are immediately evident amid the coronavirus recession and echo the problems experienced during the Great Recession …Administrative failures at state Unemployment Insurance agencies. Lack of a permanent Unemployment Insurance program that includes the self-employed and others traditionally left out of the program. Low benefit levels that require emergency top-offs. The temporary nature of fixes when recessions hit, which, in turn, requires renegotiations just months after political compromises are reached. The current disarray in the Unemployment Insurance system is neither a surprise nor an accident. It is the result of decades of conscious choices made by policymakers.”

Worthy reads not from Equitable Growth:

1. We are squeezing a generation’s worth of structural change into a year. A small amount of it will be reversed. But probably not much. Read John Quiggin, “The Economic Consequences of the Pandemic,” in which he writes: “The potential benefits of remote work and the likely struggle over who will get those benefits … the end of the goods economy and its replacement by an information and services economy … [means that] Investment demand by private firms is likely to stay low, even as greater public investment is desperately needed … We need to invest in human services like health (mental and physical), education and childcare, and in information platforms that break the monopoly power of the tech giants.”

2. The question of whether and how much harm the end of affirmative action had on California education is a much-disputed one. Here is evidence that the harm was great. Read Zach Bleemer. “Proposition 209 and Affirmative Action at the University of California,” in which he writes: “Affirmative action provided very large admissions advantages to mostly-lower-income Black and Hispanic applicants at every UC campus, especially the more- selective … enabled those URM applicants to enroll at more-selective and higher-quality universities, leading to higher degree attainment and higher California wages over the subsequent 15 years. As a result, Prop 209 caused a substantial decline in the number of high-earning, early-career URM Californians that persists more than 20 years later. Affirmative action policies have ‘winners’ and ‘losers,’ but because white and Asian students had alternative access to high-quality public and private universities, there is little evidence that they benefited by the end of affirmative action at UC. Several previous studies have suggested that Prop 209 caused improvements in overall and STEM degree attainment among URM Californians, potentially as a result of “mismatch” between more-selective universities and the academic preparedness of the URM students who benefited from affirmative action.”

3. And here is evidence on the strong positive effect of the 10 percent opportunity program in Texas. Read Sandra E. Black, Jeffrey T. Denning, and Jesse Rothstein, “Winners and Losers?: The Effect of Gaining and Losing Access to Selective Colleges on Education and Labor Market Outcomes,” in which they write: “College admissions processes are fundamentally a question of tradeoffs: given capacity, admitting one student means rejecting another. Research to date has generally estimated average effects of college selectivity, and has been unable to distinguish between the gains to students gaining access and the losses to students losing access. We use the introduction of the Top Ten Percent Rule and administrative data from the state of Texas to estimate the effect of access to a selective college on student graduation and earnings outcomes. Notably, we separately estimate the effects for students who gain and lose access due to the policy. We find that students who gain access to the University of Texas at Austin see increases in college enrollment and graduation with some evidence of positive earnings gains 7-9 years after college. In contrast, students who lose access do not see declines in overall college enrollment, graduation, or earnings.”

Worthy reads from Equitable Growth:

1. This seems to me to be 100 percent completely right. Read Jason Furman, “Dealing with the U.S. economic & public health effects of the coronavirus recession compassionately & with an eye on a strong recovery,” in which he writes: “In an economy where consumer spending accounts for 70 percent of GDP, steeply declining aggregate demand is a disaster in the making. The best way to support consumer spending is for the government simply to write checks to individuals. The question for policymakers is not whether, but when and how much … We [must] not allow administrative constraints to slow or prevent the distribution of money at a time when speed is of the essence. Many federal and state agencies suffer with antiquated information technology and are not well-suited to making significant changes to programs at a rapid pace. There are very good ideas, for example, for precisely targeting increased Unemployment Insurance benefits based on income and other factors. But for now, I think Congress took the right approach of simply adding $600 to every weekly benefit check for up to four months. Unemployment benefits will need to be extended, and the next legislation can be refined to include greater complexity in how we provide aid … Far and away the most important economic issue at this moment has been whether to expand and extend the shutdowns across the country due to grave public health concerns … The right question to ask is whether, by taking costly measures now—in particular, preserving social distancing by extending the shutdown to every state—and for longer periods of time, we can avert far more costly measures down the road”

2. Let us take a step back and remember just how large a “lost generation” was generated by the failure to prioritize employment recovery after 2009. Read Jesse Rothstein,” Great Recession’s ‘lost generation’ shows importance of policies to ease next downturn,” in which he writes: “he damage suffered by young workers in recessions lasts throughout their careers. Those who enter the labor market during recessions have permanently lower employment and earnings, even after the economy has recovered. This long-term scarring argues not only for quicker and stronger action to counter recessions when they occur but also for putting in place policies that can be automatically triggered at the first signs of a recession to limit its depth and duration. The Great Recession was the worst downturn since the Great Depression … Unemployment rose by 6.5 percentage points and took nearly 10 years to get back to its prerecession level. Job losses amounted to 8.7 million. Perhaps more importantly, the prime-age employment rate, which measures the percentage of people aged 25–54 who are employed, fell by more than 5 percentage points to its lowest level in 25 years and, despite continuing tightening in the labor market, has not quite fully recovered after 10 years. And yet, the long-term damage, while less visible, will cause more financial and career losses to cohorts of workers who entered the labor market during this period.”

Worthy reads not from Equitable Growth:

1. This is the start of what looks to be a very useful ongoing series. I am going to keep track of this as I try to grasp what is going on. Read Michael Ettlinger and Jordan Hensley, “COVID-19 Economic Impact By State,” in which they write: “Even before governments had required widespread business closings, by mid-March almost every state showed at least small job losses. The data on the labor market impact of COVID-19 has been trickling in. Unemployment insurance (UI) claims have been reported on a weekly basis—with over 18 million in the three weeks through April 11. On April 3 we saw the Bureau of Labor Statistics (BLS) national report showing 701,000 jobs lost as of the survey taken the week ending March 14. Individual states have been releasing their state reports, but today marks the first release by BLS for all states. Below are a set of interactive charts and maps that allow for the selection of and comparisons between states using the BLS and latest UI claims data. It is important to note that as of the week for which the BLS data apply no state had implemented full stay-at-home orders and wide-spread business restrictions had yet to take hold. Yet, the impact of COVID-19 was already apparent. Map 1 compares states in the percent change in the number of jobs by state between the February and March surveys.”

Worthy reads from Equitable Growth:

1. Equitable Growth’s Heather Boushey considers the larger challenges of economic recovery from the coronavirus recession that we will soon confront in “Beware of Austerity Demands Once the Immediate Crisis Passes,” in which she writes: The need for substantially increased public spending and investment will not diminish once the public-health crisis fades. What will diminish is the broad political consensus that made possible the recently approved $2.2 trillion burst of federal spending to support families and businesses during this economic shutdown. Indeed, if recent history tells us anything, that consensus will fall apart once the immediate health crisis dissipates and people can gradually return to work. That will be another dangerous moment for the country … The risk of doing too little to support families and businesses will still far outweigh the risk of doing too much. We will need to continue to pump money into the economy if we are going to avoid a coronavirus recession that makes the Great Recession of 2007–2009 a fond memory. Families will continue to need support, as businesses struggle to ramp their operations back up … There was a need for substantially greater public spending before any of us ever heard of the coronavirus: to address pervasive economic inequality, to invest in human, physical, and intellectual capital. That need will be even greater in the virus’s wake. But deficit hawks—particularly the über alles crowd, who believe that budget deficits are acceptable only when caused by tax cuts—will be out in force, demanding austerity. We got a taste of what’s to come when some members of Congress objected to the $600 weekly increase in unemployment-insurance checks contained in the Coronavirus Aid, Relief, and Economic Security Act, because some low-income workers might receive a little bit more now than they do when they’re working. Politicians who fretted about short-term work disincentives in a week when more than 3 million people had just been laid off are not going to give a damn about workers a few months from now.”
2. As incomes fall in savings rates rise in response to expectations that commodities not available now will be available in the near future, extremely delicate macroeconomic management is needed to keep the circular flow of economic activity and income going. The cleanest way would be a universal basic income funded partially by a recapture tax hike plus extremely generous zero interest rate loans to businesses. But we are not going to do the cleanest way, are we? Christina Patterson lays out a path that our current configuration of political power has a chance of adopting, although not a large chance of adopting. Read her “The most exposed workers in the coronavirus recession are also key consumers: Making sure they get help is key to fighting the recession,” in which she writes: “Policymakers should be especially focused on targeting policy responses toward those who lost their labor income if they want to limit the severity of the coronavirus recession … Weekly unemployment benefits and the extension of benefits to part-time and contract workers will help … Moreover, hundreds of billions of dollars targeted for firms that maintain their employee payrolls close to where they stood as of February 2020 could help firms stave off that initial wave of layoffs or encourage them to bring back employees who were either let go or furloughed. There already are reports, however, of Unemployment Insurance systems in the 50 states, the District of Columbia, and U.S. territories being overloaded by recently laid-off workers seeking unemployment benefits. And the financial assistance to firms to keep workers employed is suffering through bottlenecks at their banks and the U.S. Small Business Administration. In order for the smoothing effects of unemployment benefits on workers’ marginal propensities to consume to be successful, we need workers to be able to access those benefits quickly and sustainably now and as the extent of the coronavirus recession becomes more clear.”
3. It’s not one-stop shopping for information, but it’s as close as you are going to get. Go to Equitable Growth’s “Policy Resources for the Coronavirus Recession” page. Here’s the opening text to a wide variety of content: “’The coronavirus is first and foremost a public health crisis. In order to address the health crisis, policymakers have insisted for the well-being of us all that people stay home and shutter businesses, inducing an economic downturn. It has also put the people who can least afford it on the front lines of this crisis: low-wage and hourly workers, families, and small and medium-sized businesses. Historically high economic inequality, which, when combined with a porous social safety net, makes the United States particularly vulnerable to economic shocks. This economic fragility is a direct result of prioritizing markets over people for the last 50 years. Though a dire problem in boom times, high economic inequality is particularly stark in a downturn because it exacerbates the severity of recessions and amplifies the impact on the people and communities who can least afford it. At the same time, because many low-wage and hourly workers are women and people of color, the coronavirus recession will only serve to exacerbate existing economic and racial inequalities if we do not take appropriate action. A growing body of research provides a framework for how the federal government can make choices that fully supports people and families and ensure that we address the health crisis and move swiftly into economic recovery, rather than falling into a deep recession. To effectively respond to the coronavirus recession and build a more resilient economy for the future, we must level the playing field between the rich and the rest of us and implement policy solutions that will protect U.S. families now and in the future. That includes prioritizing the small and medium-sized businesses who need support now while the economy is on ice, rather than shareholders. The Washington Center for Equitable Growth is producing resources to connect existing evidence-backed research with the policymaking community to ensure the best available ideas inform a broad, deep, and long-term response to this growing crisis.”

Worthy reads not from Equitable Growth:

1. When economists write the history of the coronavirus depression and when historians of medicine write the history of the coronavirus plague, everyone involved in the Trump administration, especially its economic policy and epidemiological staff, will be judged extremely harshly for failing to understand how important it was to ramp up testing, failing to take steps to ramp up testing, and failing to properly use the testing resources available. This may be the greatest single policy and governance mistake the United States has made in half a century. Read James Stock, “Data Needs for Shutdown Policy”, in which he writes: “If the virus is still not widespread, then … there is still time to implement measures—more severe than those currently in place in the US—to suppress it until a vaccine or treatment becomes available. If the virus is widespread, then the true death rate is low and cautiously opening up the economy becomes an option. Data from random testing of the population, which are still unavailable, are critical to informing this choice … All available options are bad, but some are worse than others. The problem is, we don’t know which options are the least bad because we don’t know the true mortality rate or how prevalent the virus is in the population … The positive testing rates to date cannot be readily generalized. At the same time, there are some individuals, possibly many, who have or have had the virus but did not meet stringent guidelines for getting tested. Sometimes this is called the asymptomatic rate, although more precisely it is the fraction of infected who do not meet testing guidelines … The asymptomatic rate is critical for projecting the epidemic dynamics and the policy response … If the [fraction of those infected and developing immunity who are not tested or whose test is not positive] rate is low … this ‘protracted status quo’ policy will lead to very many deaths, perhaps in the millions, and it could be preferable to take very strong action now to stamp out the virus, avoid those deaths, and wait until a vaccine is available. In the jargon of the model, doing so requires bringing … [the] rate of new infections … [close] to zero … restrictions … more stringent than currently in place in Italy.”
2. Superbly written and analyzed by Adam Tooze. Read his “Shockwave: The World Goes Bust,” in which he writes: “’By this time last year, a miasma of uncertainty was clouding global markets. Investment was retreating … True conservatives, as distinct from those merely wedded to the religion of the stock market, welcomed the prospect of a shakeout. It was time for a purge, time to slim down the businesses that had gorged on too much cheap funding, time for a return to discipline. This, they believed, was the way out of the weird alternate reality created by monetary stimulus since 2008. Instead, in the summer of 2019 the central banks once again stepped into the ring … As 2020 began, the self-confidence of the technocrats remained intact. The chief preoccupation in Europe wasn’t the immediate economic situation, but the possibility of striking a new Green Deal … Then news of a new threat began to trickle out. On 31 December 2019 China informed the World Health Organization of a novel virus. Its lethality, and the fact that it could be passed from human to human, were quickly confirmed. But Trump and his adherents had no more time for the ‘Wuhan virus’ than they did for climate change. On the stump at Davos on 22 January he scornfully waved away questions about it … On 23 January the Chinese leadership began an unprecedented lockdown: a cordon sanitaire was thrown around Wuhan, a city of 11 million people in Hubei province … How to gauge the threat? The obvious model was SARS in 2003, and it was a reassuring one: China may have botched the first steps of its response to Covid-19, but it had experience with these things and would soon regain its grip … In the course of February, economic forecasters began adjusting their predictions downwards by 0.1 or 0.2 per cent … The weekend of 22 and 23 February… Beijing might be winning its war against Covid-19, but in Italy the containment strategy had failed. As the quarantined area stretched to include Milan, the weakest link in the Eurozone was about to lose half of its national output. Given the impasse over banking risks and a common fiscal policy, how would Europe rise to this public health challenge? … Hard on the heels of the Italian shock came the realization that something was terribly wrong in the United States itself. America has a formidable public health apparatus, and had well-laid plans for dealing with a pandemic. But, as became increasingly clear, the Centers for Disease Control and Prevention and the Food and Drug Administration had disastrously botched the deployment of a test for the virus. Trump remained obstinately unconcerned. As financial markets began to show signs of real nervousness, he advised investors to ‘buy the dip’ and lashed out at China and the Democrats for fearmongering … Meanwhile, people who actually do the sums were arriving at terrifying conclusions … Monday, 8 March it was clear that a massive sell-off was underway. Over the next two weeks markets collapsed. Everything sold. The dollar surged, threatening to crush those who had borrowed dollars. To halt the wave of panic-stricken selling, the Fed has propped up every major domestic credit market … The massive response of the central banks has stopped the panic. But we are only at the start of the shutdown. Every day brings news of corporate downgrades, which will progressively tighten the supply of credit. The recessionary spiral is only just beginning. In the United States the unemployment numbers released on 26 March and 2 April were unlike anything seen before: 3.3 million people registered for benefits in the first week and 6.6 million in the second. Even worse is expected in the days and weeks to come. Forecasting at this point is little more than a guessing game.”
3. The Obama administration had the chance to profoundly overhaul the White House Office of Information and Regulatory Affairs. It did not. I have never gotten a straight story as to why it did not. Read Todd N. Tucker and Rajesh D. Nayak, “OIRA 2.0: How Regulatory Review Can Help Respond to Existential Threats,” in which they write: “The next administration should overhaul the Office of Information and Regulatory Affairs (OIRA). Changing OIRA’s structure and its regulatory review process are an essential step toward long-term, structural change. Proposed changes include: enhancing the office’s capacity, promoting sustainability in cost-benefit analyses, and building equity and inclusion considerations more firmly into formal review.”

Worthy reads from Equitable Growth:

1. The U.S. jobs market is going to get much worse. Read Kate Bahn and Carmen Sanchez-Cuming, “First jobs day report since the onset of the coronavirus recession exposes a U.S. Labor market in crisis,” in which they write: “The first Jobs Day report to capture … the coronavirus recession … after decades of rising economic inequality, the decline in the power of unions, and the erosion of the safety net, [means that] U.S. workers are going to be particularly unprepared for this sharp and sudden economic downturn … Today’s report contains labor market data collected during the week ending March 14, before any city or state had ordered the closure of nonessential businesses to slow the spread of the new coronavirus. Yet, by the second week of March, many restaurants, theaters, stores, and hotels had experienced a drop in demand or closed their doors voluntarily, leading to layoffs and reduced shifts for many service workers.”
2. Lisa Cook says an immediate move to mobile payments for delivering federal emergency relief to as many people as can accept them would save an enormous amount of distress and heartache in the next month. Read here “Getting money urgently to low-wage U.S. workers,” in which she writes: “Too little of this federal emergency relief money may well get into these consumers’ hands too late. Most people and small businesses have bills due at the end of the month. They need cash immediately. Direct payments will eventually reach most small businesses and families, but getting these funds to them could take several weeks or perhaps much longer. The most vulnerable who do not file taxes and do not receive benefits, such as Social Security, will be the hardest to reach. Mobile money could be the answer. The federal government should learn from the decades-long experience with mobile money in developing countries and more recently in the United States. Mobile phone networks sent all Americans with a cell phone an emergency text alert this past October. They could get them money today, especially the most vulnerable … Ninety-six percent of American adults have cell phones, and 81 percent have a smartphone that could receive and make mobile payments. Thirty percent of smartphone users made mobile payments in 2019 … Mobile payments are faster than traditional payments and offer a good way to send money to the 16 percent of Americans who are underbanked. Smartphone penetration is high among workers most likely to be missed by traditional payment mechanisms—people who have changed addresses and low-wage earners. Ninety-eight percent of adults ages 18 to 29 have smartphones, compared to 81 percent of adults overall. Nearly three-quarters of those earning less than $30,000 have smartphones. The share of African Americans (80 percent) and Hispanics (79 percent) who own smartphones is comparable to the total, but there are larger shares of blacks (23 percent) and Hispanics (25 percent) who use smartphones rather than broadband at home compared to whites (12 percent), according to the Pew Research Center.”
3. I believe the consequences for those who would have been getting jobs in the next six months are going to be significantly worse than the consequences for those who try to enter the labor market in 2009. Liz Hipple channels Jesse Rothstein on what those consequences were. Read Liz Hipple, “The long-term consequences of recessions for U.S. workers,” in which she writes: “What does the evidence from the Great Recession of 2007–2009 say about what an extended recession could mean for working people over the long term, especially young workers?… Jesse Rothstein finds that workers who happen to be entering the labor market when there’s a recession have both permanently lower employment rates and lower earnings long after the recession has ended. These effects for recent entrants are even worse than for other members of the U.S. labor force who have been in it longer, as Rothstein explains in a column about the paper: “Workers from these cohorts saw their annual employment rates drop by 2 percentage points to 4 percentage points per year, relative to older workers in the same labor market. Those who were established in the workforce by the beginning of the recession—those who graduated college in 2005 and earlier—essentially returned to prerecession levels of employment by 2014. But those who entered after 2005 have not; their employment rates remain depressed even as the overall market has recovered.” Unfortunately, these effects are not temporary. Rothstein estimates that the permanent effects, or scarring, of the Great Recession on young workers will result in those individuals earning 2 percent less through the early years of their careers and will reduce their employment throughout the course of their career by about one week. While these amounts might sound small for one individual, aggregated across an entire generation, they represent a large loss of earnings and employment.”

Worthy reads not from Equitable Growth:

1. This looks about right to me. But the unemployment rate is going to go significantly higher than 15 percent, I think. Read Justin Wolfers, “The Unemployment Rate Is Probably Around 13 Percent,” in which he writes: “The jobless rate today is almost certainly higher than at any point since the Great Depression. We think it’s around 13 percent and rising at a speed unmatched in American history … The Labor Department reported on Thursday that around nine million people had filed for unemployment insurance over the past two weeks … This suggests there are around 8.5 million more people on unemployment benefits today than there were two weeks ago … In addition, independent contractors, including many gig economy workers, most likely lost their jobs but did not qualify for benefits … raise my estimate of the number of job losers to 10 million from 8.5 million … Some people have tried to claim benefits but are not yet counted officially because of processing delays. This might add a further million to our estimate, bringing it to 11 million … The Bureau of Labor Statistics reports that in a typical month, nearly six million workers are hired, a rate of 1.5 million per week. Again, it’s hard to know how much that has fallen, but if the hiring rate fell by a fifth over the past three weeks, that would mean that roughly one million fewer people found work than might otherwise be expected to. At this point, our calculations show 16 million more people without work, for an unemployment rate of 13 percent … The rise in unemployment over the past few weeks has exceeded the rise during the entire year and a half of the last recession. Looking ahead, if job losses continue at the same rate as in recent weeks, the unemployment rate will rise by nearly half a percentage point per day. To give some context, over our recent decade-long recovery, the unemployment rate has fallen roughly that much per year.”

This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.

Equitable Growth round-up

The importance of paid family, medical, and caregiving leave for all U.S. workers throughout the coronavirus pandemic and looming recession cannot be understated. These policies are not just benefits, but also necessities—and are especially needed during this public health and economic crisis. In an issue brief covering the different types of state-level paid time away from work, Jack Smalligan, Chantel Boyens, and Alix Gould-Werth explain the differences between paid sick days, paid medical leave, and paid caregiving leave and why each is important from both an economic and health perspective at this critical moment. In conjunction with the issue brief, Equitable Growth produced factsheets covering benefits for workers and the economy of paid medical and paid caregiving leave, as well as a factsheet on the research about the policy design of these programs.

In addition to these badly needed worker-protection policies, there are many other ways policymakers can confront the coronavirus recession that is either about to hit or already hitting the U.S. economy. Heather Boushey and Somin Park outline the various ways that lawmakers can keep income flowing and pause the expenses of individuals and businesses in the United States, ensuring that once the health crisis passes, people and companies will be ready to get back to work. Boushey and Park’s proposals include providing paid leave, boosting Unemployment Insurance and the Supplemental Nutrition Assistance Program, helping small businesses pay their bills, ensuring that corporate assistance puts workers first, distributing direct cash payments to Americans, and increasing support to states for Medicaid and the Children’s Health Insurance Program. These and other ideas would protect and support workers and their families in desperate need of assistance.

Another suggestion to prevent a long-term recession as a result of the coronavirus outbreak is to make the U.S. government the payor of last resort. This idea, put forward by Emmanuel Saez and Gabriel Zucman during an online conference this week, would essentially have the government pay wages and essential business maintenance costs in order to prevent locked-down businesses from going bankrupt and to allow idle workers to continue to be paid instead of being laid off. The amounts given to businesses do not need to be exact and would be verified and corrected once the lockdowns have ended, allowing businesses to “hibernate without bleeding cash.” The program would also be limited in duration, likely to three months. While this would obviously not fully offset the economic costs of a coronavirus recession, it would lay the foundation for a quick rebound once the public health threat is contained.

With the likely passage this week of a $2.2 trillion stimulus package, Congress has fought back—and, thus far, fought back hard—against the immediate effects of the coronavirus health and economic crisis, writes Claudia Sahm. One of the most commonly discussed elements of the new stimulus package is the direct cash payments that will go to Americans, called recovery rebates in the legislation. These rebates will cost more than $250 billion, or 2 percent of consumer spending in 2019, and will go to 8 in 10 people in the United States. Sahm XX covers XX what, exactly, we know about the rebates, why they are a sound policy idea—and unfortunately, why they will probably not be enough to truly stave off a deep and severe recession.

The federal government’s slow response at the start of the outbreak was a costly misstep, but President Donald Trump can correct this wrong by appointing so-called COVID-19 czar, argue Susan Helper, David Clingingsmith, and Scott Shane. In light of the fast-paced nature of the coronavirus crisis and its grave threat to both the lives and livelihoods of Americans, the president must appoint a coordinator who can “use federal powers to direct the production of needed medical supplies, including personal protective equipment, ventilators, test kits, hospital beds, and negative-pressure rooms, which help prevent cross-contamination.” Doing so would allow the federal government to execute a coordinated, quick, and apolitical response, and deliver much-needed medical supplies to hospitals and care providers across the United States.

There are a variety of other ideas that can be activated to support hospitals and healthcare workers, Helper, Clingingsmith, and Shane explore in another column. These ideas include converting now-empty hotels in the cities worst hit by the outbreak into temporary hospitals with negative-pressure rooms, and retraining medical personnel from different fields to treat COVID-19 patients. But the proposals must be paired with longer-term restrictions on social activity, which inevitably will have economic ramifications—and action must be taken swiftly in order to prevent the coronavirus recession from becoming the coronavirus economic depression.

Links from around the web

The coronavirus outbreak and resulting economic downturn are making clear the holes in the social safety net for millions of workers, writes Shelly Steward for the Aspen Institute’s blog, particularly those workers with demanding and often unpredictable schedules and few job protections. While many companies have committed to expanding their paid sick leave policies due to the crisis, this is not enough. Many of these policy changes are only in place for the duration of this coronavirus outbreak, and many require an official COVID-19 diagnosis. Steward urges Congress to consider long-term and more universal solutions—and in the meantime, states and cities can act to fill the gaps.

Many gig economy workers are facing an impossible choice: risking COVID-19 or starving, report Veena Dubal and Meredith Whittaker in The Guardian. Because companies such as Uber Technologies Inc. sometimes classify their workers as independent contractors, they don’t have to provide benefits to their drivers, including access to the minimum wage or unemployment insurance. Though this is supposed to be illegal—particularly in the state of California, where a law was recently passed to prevent this misclassification of workers—it still happens, and it is particularly harmful amid the coronavirus outbreak, Dubal and Whittaker write. (As a side note, the $2.2 trillion stimulus package would provide access to Unemployment Insurance to gig economy workers, so they won’t have to keep making this choice.)

Said stimulus package is a good start, but more must be done in the coming weeks and months, argues Dylan Matthews for Vox. While the package is an extraordinary display of bipartisan compromise, and a “shockingly ambitious measure from a Republican legislature,” it is imperative that more continues to be done as the country slips into a recession in order to strengthen the measures included. Matthews looks back at the previous economic crisis—the Great Recession of 2007–2009—and the stimulus package passed by President Barack Obama, as well as the lessons it can provide for the current crisis and package, detailing what is commendable and what needs improvement in the Coronavirus Aid, Relief, and Economic Security Act.

The workers most at-risk of exposure to coronavirus are also those who tend to be paid among the lowest salaries, find Beatrice Jin and Andrew McGill in Politico. In an interactive graphic, the authors show how many of the 24 million workers making less than $35,000 per year—from cashiers and bartenders to nursing assistants and paramedics—are facing the highest risk of injury during the coronavirus pandemic. The majority of this group, making up about 15 percent of the American workforce, is so at-risk because their livelihood typically depends on direct human contact and because workers in their salary tier are less likely to receive benefits such as paid sick leave that would help them weather any disruption in work. They also typically occupy jobs where remote work is not an option.

The ability to work from home also reveals a stark contrast in race and education level throughout the U.S. economy, write Christian Davenport, Aaron Gregg, and Craig Timberg for The Washington Post. A recent survey shows that people of color and the high-school (or less) educated make up the majority of those who have to continue going to their workspaces during the coronavirus outbreak—and those whose health is most at risk and whose incomes are most likely to suffer during the economic downturn. Davenport, Gregg, and Timberg show how the inequalities of the labor market are being thrust into light in new ways: Those who can work remotely won’t face the same threats to their health and livelihood as those who can’t. Poor people of color make up the majority of the latter group, while better-off white and Asian American workers fall largely in the former group.

Friday Figure

Figure is from Equitable Growth’s Twitter thread explaining how the coronavirus outbreak and consequent layoffs have led to a historically high number of Unemployment Insurance claims, with almost 3.3 million workers making UI claims the week of March 15–21. That is approximately 2.6 million more than the previous record of 695,000 claims in one week.

Worthy reads from Equitable Growth:

1. Check out Heather Boushey on Twitter, in which she writes: “In response to the #coronavirus crisis, the nationwide economic shutdown has put the economy “on ice” so that it can be ramped back up after the health crisis is addressed. Concerns about falling into a deep and protracted #coronavirus recession are exacerbated by historically high economic inequality, which makes the United States particularly vulnerable to economic shocks. Policymakers should keep income flowing by helping small businesses pay their bills, ensuring any corporate assistance helps workers, boosting unemployment insurance, and providing #paidleave. The United States is one of only three industrialized countries that does not ensure every worker has access to paid time off when they are sick. We also need additional fiscal stimulus to ensure a recession does not turn into a full-scale economic depression. That means direct payments to families and more support for SNAP, Medicaid, and the Children’s Health Insurance Program. We need to remember that the economy isn’t something that happens to us—it’s the direct result of choices that policymakers make. The only entity with the power to mobilize resources and not further exacerbate rising inequality at such a large scale is the government.”
2. Read my“Cases and Deaths from Coronavirus Doubling Every Three Days Is Very Bad News Indeed,” in which I write: “I confess I am positively unmanned by the every-three-days doubling of reported cases and deaths here in the United States. I had thought that we would see true cases doubling every seven days. And back when reported cases started doubling every three days, I was encouraged, because I thought it meant that we were catching up on testing, and so getting closer to detecting the bulk of the symptomatic cases. But now it looks like that was wrong: reported cases were doubling every three days because true cases were doubling every three days—that is what deaths tell us was happening to true cases up until three weeks ago. The lack of case curve-bending makes me think that testing is not improving. It makes me think that reported cases are doubling every three days because true cases are doubling every three days. That means that the Trump administration has only 40 percent as much time to get its ass in gear as I thought it did. And that means the chances it will are very very low indeed.”
3. Also read my “The Trump Administration’s Epic COVID-19 Failure,” in which I write: “As officials at the U.S. Centers for Disease Control and other public-health bodies surely must have recognized, asymptomatic transmission means that the standard method of quarantining symptomatic travelers when they cross national (or provincial) borders is insufficient. It also means that we have known for almost two months that we were playing a long game against the virus. With its spread more or less inevitable, the primary task was always to reduce the pace of community transmission as much as possible, so that health-care systems would not be overwhelmed before a vaccine could be developed, tested, and deployed. In the long game against a contagious virus, how to mitigate transmission is no secret. In Singapore, which has largely contained the outbreak within its borders, all travelers from abroad have been required to self-quarantine for 14 days, regardless of whether they have symptoms. In Japan, South Korea, and other countries, testing for COVID-19 has been conducted on a massive scale. These are the measures that responsible governments take. You test as many people as you can, and when you locate areas of community transmission, you lock them down. At the same time, you build a database of all those who have already developed immunity and thus may safely resume their normal routine.”

Worthy reads not from Equitable Growth:

1. This is by a substantial margin the best thing I have seen on the coronavirus, and where we are with respect to it. My confidence that the Trump administration and the Republican senatorial majority are up to the task of organizing this is too low to measure. Read Richard Danzig and Marc Lipsitch, “Prepare Now for the Long War Against Coronavirus,” in which they write: “It’s essential to clearly envision the problems we’ll face over the next 12 to 18 months and mobilize to respond right away. Here are five priority problems and the actions we should take now … Minimizing errors and uncertainties about and maximizing confidence in our judgments about cure will soon become as important as present efforts at disease detection. People who recover from Covid-19 probably can work in hospitals, emergency response settings and ordinary jobs without fear of infection … We need to identify these people and assess how soon after their recovery they become unlikely to infect others … Assuring that someone has immunity against this new virus requires tests that are distinct from the PCR tests of nose and throat swabs now being used to identify infections. We need to develop and distribute antibody tests … Problem: If current efforts at social distancing succeed in spacing out infections, we face many months of demand for treatment … It’s essential to reduce demand for hospitalization by establishing methods to support lengthy treatment at home … telemedicine, house calls by nurse practitioners, on-line instruction for home care-givers, and support for safe travel … the production of enormous quantities of ventilators, personal protective equipment for health care workers and other medical supplies, and to ramp up our capacity for viral testing … Pervasive illness affecting most of the U.S. population over the course of a year will threaten not just health care systems but other critical infrastructure as well … People responsible for food production and delivery, power distribution, telecommunication, drinking water, transportation, cyber services and police need to ramp up efforts to protect and maintain these systems, and to detect and report any fragilities and failures. The Defense Department should be engaged to backstop these systems … It is essential to ensure that the United States can hold a national election in November safely, securely and democratically, even if contagion persists and social distancing is still necessary …This problem might be best addressed by enlisting a private, non-partisan entity (for example, a major foundation) to offer expert advice to Congress and to state and federal officials. With a sense of urgency and more than half a year to plan, voting by mail or via the internet—or other alternatives—could be made to work everywhere … A long school shutdown and widespread illness will mean missed education, the loss of school nutrition for needy kids, difficulties for teachers separated from their workplace, and psychological effects … The 50 states can address these issues individually, or they can, more effectively, band together to devise high-quality approaches … We can win … by treating it as both an emergency and a long-term challenge. We are rich, ingenious and resolute enough to prevail. But this virus has already shown we cannot wait until the moment of need to get organized.”
2. Let me endorse this as a thoughtful assessment of how important it is to keep the U.S. economy from sending anybody a “you are bankrupt/shut down” signal in this public health crisis. Instead, every business and every worker should be being sent a “you are, at most, on pause/be ready to resume” signal. How to make sure that signal is sent requires fiscal stimulus an order of magnitude greater than the $2.2 trillion currently in the headlines. For one thing, it requires tolerance of inflation, as prices of medical equipment and necessities rise and as social distancing temporarily reduces productivity elsewhere in the economy. Read Peter R. Orszag, “Social Distancing Makes Sense Only With Huge Fiscal Stimulus,” in which he writes: “Mandating social distancing in response to the Covid-19 crisis requires socializing the economic costs of doing so. We as a society can’t reasonably require social distancing, with the massive economic consequences it entails, and believe that most of those costs should be privately borne. We therefore need to either abandon social distancing (thereby overwhelming health systems and sparking untold deaths) or enact much larger stimulus measures. And by much larger I mean far larger even than the eye-popping figures the Trump administration is now pursuing … The disruption is so vast … that government failure to act will result in an avalanche of bankruptcies and extended unemployment that will, in turn, inflict lasting damage on businesses and families, even after the health crisis passes … not being able to put Humpty Dumpty back together again. It is why government intervention cannot be limited to the sectors most directly affected (airlines and hotels, for example) and must take new forms beyond the conventional tools (such as rebates to individuals). While many existing stimulus measures are necessary and helpful … they are terribly inadequate … The dilemmas we face will continue until an effective anti-viral or therapeutic can be found that allows us to contract the disease without suffering significant harm. In the meantime, even if current efforts are successful at attenuating the spread of the disease over the next several weeks, social distancing will need to be re-imposed in cycles. Given the plausible timetable for developing a vaccine, and unless we get very lucky and the virus itself mutates in a less harmful direction, these cycles could continue for well more than a year … This is a fiscal risk worth taking … [To] those who argue that the cost is too high or that a stunning increase in the deficit is too risky [I say:] If you don’t like the fiscal cost but you favor social distancing, what you’re really saying is that you are willing to accept millions of bankruptcies and the ripping apart of corporate and social fabrics across the world … The economic harm comes mostly from the sudden stop … The demographics of those suffering from coronavirus and those suffering from the economic virus are quite different … Emmanuel Saez and Gabriel Zucman have proposed that governments simply pay companies to cushion the shock: “In the context of this pandemic, we need a new form of social insurance, one that directly targets and works through businesses,” they wrote earlier this month. “The most direct way to provide this insurance is to have the government act as a buyer of last resort. If the government fully replaces the demand that evaporates, each business can keep paying its workers and maintain its capital stock, as if it was operating under business as usual.” And Andrew Ross Sorkin of The New York Times has suggested a universal loan program, with a zero interest rate and extended repayment terms. One thing is clear about stimulus measures in this crisis: Bigger is better.”
3. In a good world, Jim Stock would already be back in the Eisenhower old executive office building chairing the Council of Economic Advisors during this crisis. He is vastly more thoughtful, more confident, and more up to speed on the issues and the trade-offs that we face, economically, during this public health crisis. But we are not in a good world. We are in a very bad one. Already, the United States his response to the coronavirus is the worst in the world. And it only looks as though the gap between us and other countries is going to grow over the next months. Read Jim Stock, “Coronavirus: Data Gaps and the Policy Response,” in which he writes: “Social distancing and business shutdowns … [affect] the case transmission rate β…. [One] policy design question is how to achieve that case transmission rate while minimizing economic cost. A second. .. is the optimal. .. β, trading off … economic cost[s] … against … deaths … [We] lack … data … Tests have been rationed … The fraction of tests that are positive do not estimate the population rate of infection … The COVID-19 asymptomatic rate … estimates in the epidemiological literature range from 0.18 to 0.86. However, the asymptomatic rate could be estimated accurately and quickly by testing a random sample of the overall population. The policy response and its economic consequences hinge critically on the asymptomatic rate. As we illustrate using two policy paths for β, without better knowledge of this knowable parameter, policymakers could make needlessly conservative decisions which would have vast economic costs.”