Category: Executive action to spur equitable growth

Executive actions to strengthen unions and increase worker power in the United States

Posted on by Maria Monroe
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Overview

In recent decades, wage stagnation and increasing income inequality have plagued the U.S. labor market. U.S. workers experience persistent racial and gender disparities in economic outcomes. These trends largely continued even during the tight labor market immediately prior to the onset of the COVID-19 pandemic in 2020.

Declining worker power and the diminished capacity of the federal government and its state and local counterparts to enforce existing labor market protections contribute to these long-term trends. Wage theft, or when employers pay their workers less than what’s required by law, is just one phenomenon that feeds into these outcomes. The odds that a low-wage worker will be illegally paid less than the minimum wage ranges from 10 percent to 22 percent, with each violation costing that worker an average of 20 percent of the pay they deserve. Women, people of color, and noncitizens are especially vulnerable to wage theft.

Factsheet: Executive actions to strengthen unions and increase worker power in the United StatesDownload

Research finds that employers have little incentive to comply with the Fair Labor Standards Act, which established the federal minimum wage, and the National Labor Relations Act, which protects the right to unionize, under current enforcement regimes.

Fortunately, U.S. workers are increasingly displaying an increasing interest in unionization, despite rising attempts by employers to bust unions and delegitimize their status. From high-profile organizing efforts at Starbucks Corp. and Amazon.com Inc. to smaller businesses and various professions, union activity is on the rise in the United States. With 71 percent of U.S. public support, unions are at their highest approval rating since 1965.

Unions are essential to boosting U.S. worker power and decreasing wage stagnation and income inequality. Studies show that through collective bargaining, unions provide benefits such as increasing the likelihood of access to employer-sponsored health insurance and paid leave, as well as helping determine how new technologies are implemented in the workplace. Union workers also tend to have higher wages than otherwise-similar nonunion workers, thanks to the “union wage premium.”

Additionally, unions provide spillover benefits to workers, such as better education on rights in the workplace and a decreased risk of employer retaliation for organizing or joining a union. Union members also more successfully apply for Unemployment Insurance after involuntarily losing a job, experience better protection against wage theft and decreased levels of sexual harassment, and report improved health and safety and reduced violations of other U.S. labor regulations. All union members benefit from these gains, but they are especially large for Black and Latino unionized workers. This is, in part, due to a reduction in workplace discrimination that otherwise unfairly maintains wage disparities between Black and Latino workers and their White peers. 

While unions can do a lot to improve U.S. workplaces, the Biden administration can also provide more institutional support to increase U.S. worker power. President Joe Biden has already taken some steps in the right direction—for example, by signing an executive order establishing a taskforce on worker organizing and empowerment and launching a resource center through the U.S. Department of Labor for workers who want to organize. Yet more can still be done. Below are some executive actions the Biden administration can take, all of which stand to boost wages, increase worker power, and help decrease income inequality.  

Improve the strategic enforcement of labor standards at all levels of government and institutionalize enforcement within the U.S. Department of Labor

Instead of relying on complaint-based enforcement of labor standards, agencies such as the U.S. Department of Labor should institute strategic enforcement to increase the real and perceived costs of violations. As outlined by David Weil of Brandeis University, strategic enforcement includes a range of actions: targeting industries high in violations but low in complaints, proactively investigating targeted industries, maximizing penalties for violators, launching information campaigns, and instituting robust compliance agreements. Janice Fine, Jenn Round, and Hana Shepherd, all of Rutgers University, and Northwestern University’s Daniel Galvin also outline how a triage system can supplement strategic enforcement by maximizing statutory tools to disincentivize the obfuscation of noncompliance and by assessing large penalties to deter future violations.  

Strategic enforcement also can be applied at the state and local levels. State and local labor enforcement agencies operate in vastly different political climates than federal enforcement agencies, and each have their own variety of powers and limitations. Prioritizing state and local strategic enforcement would not only give states the opportunity to go above and beyond what the U.S. Department of Labor can do and experiment with different tactics and methods, but also allow for the avoidance of one-size-fits-all solutions. The U.S. Department of Labor can provide guidance to state and local labor departments on how to best use strategic enforcement, allowing for maximum impact despite federal budgetary and bureaucratic limitations.

A key component to this strategy is co-enforcement, or sustained partnerships with worker centers, unions, legal advocacy organizations, and other community-based groups that are embedded in low-wage worker communities and high-violation sectors of the U.S. economy. These organizations provide an important connection to workers for labor law enforcers and often have access to information on compliance with labor standards that would be difficult for state and local or federal officials to gather on their own. They also can continue to monitor employers over time after inspectors have moved on to new cases. State and local labor enforcers are likely to have better connections to these groups than federal enforcers, making them a key facet in ensuring successful strategic enforcement.

Finally, the U.S. Department of Labor should institutionalize its enforcement directives within its Wage and Hour Division to ensure more consistent and even application from one presidential administration to the next. This would prevent large swings in policy every 4 or 8 years, provide more stability to employees and employers, and allow for better and more concrete planning among stakeholders. While this action could also limit positive developments, instituting a more concrete floor of enforcement would provide a demonstrable benefit to U.S. workers.  

Require a labor cost analysis from contractors who submit bids for federal contracts

When it comes to competing for federal contracts, contractors often find themselves in a race to the bottom to provide the least expensive services to the federal government. While this ostensibly saves the government money, those cheap prices come at a cost. The biggest driver of a contractor’s costs is labor. So, when contractors skimp on the price, it’s their workers who often bear the burden.

During the Great Recession of 2007–2009 and the 8 years following it, more than 300,000 workers on federal contracts were victims of wage-related labor violations. Research shows that many contractors who are penalized for wage and/or health and safety violations also have contract performance issues such as cost overruns, falsifying legal compliance, and fraudulent billing practices. Due to occupational segregation and systemic bias, the lowest bids disproportionately harm workers of color and women workers, both of whom are disproportionately employed in low-pay and high-risk industries.

The Biden administration should implement an executive order requiring contractors to include a labor cost analysis when bidding on a federal contract. This would require contractors to submit staffing plans in their solicitations, thereby committing contractors to paying proposed wage rates. Such an executive order also would allow the government to audit and evaluate wage information in proposals for successor contracts.

This would essentially force contractors to either self-report their wage violations or comply with good-faith actors who also are competing for the same contract. As such, a labor cost analysis can serve as a powerful tool to help boost wages among those who are most at risk of having their wages stolen.

Executive action to spur equitable growth

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Factsheet: How strong unions can restore workers’ bargaining power

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Unions in the United States improve worker safety and lower health inequality

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Allow unions better access to worksites

When it comes to helping organize workers, one big issue that unions and their representatives face is reaching workers at their worksites. One part of the broader suite of legal and illegal tactics that U.S. employers use to discourage unionization is preventing unions from accessing their worksite at all, even if union members only talk to employees during nonworking hours and in nonworking areas such as breakrooms and cafeterias.

President Biden should issue a presidential memorandum directing federal agencies to develop plans that would allow representatives of unions and appropriate nonprofit organizations to gain access to nonworking areas of worksites for the purpose of communicating with workers employed by federal contractors during nonworking time. This action would help union representatives counter the systemic advantage that employers have when it comes to implementing union-busting tactics. Something as simple as allowing union access to worksites could help boost union organizing and membership and make workers aware of their rights in the workplace, which would in turn provide other benefits that come from unionization to both unionized and nonunionized employees.

Executive actions to modernize federal data collection and improve measurements of U.S. economic inequality

Posted on by Maria Monroe
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Overview

Timely and accurate data are critical for diagnosing and responding to a wide variety of policy problems facing the United States, as well as improving the efficiency and effectiveness of the U.S. government. National statistics and the agencies that collect and distribute them—most notably, the U.S. Census Bureau, the U.S. Commerce Department’s Bureau of Economic Analysis, and the U.S. Department of Labor’s Bureau of Labor Statistics—are a critical public good because they provide policymakers, media, researchers, and the public with a common understanding of how the U.S. economy is faring.

Factsheet: Executive actions to modernize federal data collection and improve measurements of U.S. economic inequalityDownload

Bolstering U.S. national statistical agencies and ensuring they’re able to do their job is of paramount importance. Cultivating and maintaining a strong federal data infrastructure is necessary to inform economic debates and accurately reflect an increasingly complex and data-driven policymaking world. Yet these agencies must be able to not only perform their core functions but also adapt to fit the current U.S. economy and the needs of policymakers.

A changing economy requires new tools. The Bureau of Economic Analysis, for example, is experimenting with disaggregating economic growth as a response to rising inequality in the U.S. economy. This data disaggregation provides deeper insight into economic disparities, furthering the conversation around how to close these divides and exposing vulnerabilities in the social and economic systems designed around a single-minded focus on growing Gross Domestic Product at all costs.

This is just one example of how more granular economic data can inform public policy. More can be done to update the statistics that federal statistical agencies produce and distribute to better understand structural changes in U.S. society. Below are other actions the Biden administration can take to support these agencies, all of which would help them produce relevant, timely data that informs conversations around the U.S economy and society as a whole.

Invest in improving the timeliness and granularity of data

Improving the level of data disaggregation and the timeliness of data reporting is crucial to the Biden administration’s goal of promoting equity through data. There are myriad ways this could be accomplished, some of which the administration is already pursuing. For example, the president’s proposed fiscal year 2024 budget for the U.S. Department of Labor calls for doubling the sample size of the Job Openings and Labor Turnover survey, which collects data on hiring, firing, and other U.S. labor market flows. This would allow for more finely disaggregated results by geography and other characteristics.

The Biden administration should consider other investments to help federal statistical agencies improve timeliness and disaggregated reporting of their economic statistics. Adding massive private datasets to the federal statistical system requires both time and money, but it could give agencies the ability to supplement official statistics and report results both faster and with more detail.

Further changes to existing survey infrastructure should also be considered. The Census Bureau’s American Community Survey is the largest annual economic survey in the United States and as such is unmatched in its ability to obtain economic data about small populations and geographies. Yet these data are only released in 1-year increments on an annual basis. The Biden administration should investigate whether it is feasible to release these data on a quarterly, rather than annual, basis.

Because the ACS survey is an input to other data products, a more frequent release schedule could have cascading effects on the availability and timeliness of other federal economic statistics. With the largest sample size of any federal economic household survey, the administration also could support the more timely release and analysis of economic statistics disaggregated by race, level of education, age, geographic location, and other demographics.

Increase funding for national statistical agencies  

The U.S. federal statistical system is at a critical inflection point. Agencies need resources to manage the transition from a largely survey-based system to new infrastructure that uses private and government administrative data, new methods for maintaining privacy and linking data, and more. Improvements to this infrastructure also are necessary to give policymakers the tools they need to monitor supply chains, make place-based investments, and implement the kind of industrial policies that are required by the Inflation Reduction Act.

Despite these critical needs, many statistical agencies find themselves strapped for cash. Their budgets are measured in millions of dollars—a drop in the bucket compared to other government programs that account for billions of dollars in annual government spending. Despite these relatively paltry funding levels, national statistical agencies are often one of the first on the chopping block when it comes to budget cuts. Spending allocated to the Bureau of Labor Statistics, for instance, has declined by almost 6 percent since 2016 (adjusted for inflation), while Bureau of Economic Analysis spending is down by 5 percent over the same period.

The budgets of past administrations have often been too timid, requesting increases for these agencies that are often paltry, if they even ask for an increase at all, while the U.S. Congress has been all too eager to cut funding for these agencies. Presidential administrations must recognize the value of these data and instead request ambitious funding levels to support this important work and prevent any further decline in data quality.

Adequately funding national statistical agencies is a relatively low-cost way to ensure we have objective, widely trusted data on the state of the U.S. economy. This will keep more U.S. workers employed, shorten recessions, and support an efficient and equitable economy. The Biden administration should engage with the National Academy of Sciences’ recent report on creating a 21st century national data infrastructure and make appropriate plans to meet the panel’s recommendations.

Advocate for data synchronization

One small change that would have an outsized impact on U.S. economic statistics is adjusting the tax code to allow the Bureau of Labor Statistics and Bureau of Economic Analysis to work with a limited amount of federal tax data from the IRS that they currently are not allowed to access. The agencies’ inability to use tax data has degraded U.S. national economic statistics in a number of ways. Perhaps most critically, it results in the Bureau of Labor Statistics and the U.S. Census Bureau, which does have access to tax data, maintaining two conflicting registers of U.S. businesses. These dueling registers disagree not only about how many business establishments there are in the U.S. economy, but also on trends within those sectors.

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Canada is the first country to release subannual statistics on the distribution of income. Here’s how it was done.

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Take semiconductor manufacturing. The Census Bureau says there are about 3,700 U.S. businesses in “semiconductor and other electronic component manufacturing.” Data from the Bureau of Labor Statistics, however, say there are 6,000 U.S. businesses in that category nationwide. Meanwhile, the Census Bureau finds that there are fewer such businesses now, compared to 2012, while the Bureau of Labor Statistics says there has been about a 5 percent increase over that same time period.

This proposal to facilitate BEA and BLS access to tax data, known as data synchronization, can’t be carried out by the Biden administration—only Congress can fully implement it—but the administration should forcefully advocate for breaking down this data silo within the executive branch of the U.S. government. The U.S. Department of the Treasury, which houses the IRS, has already approved the proposal in the FY2024 edition of its “Green Book” of revenue proposals. The Treasury Department, the Department of Labor, and the Department of Commerce must coordinate to communicate this need to Congress and work with the U.S. House Ways and Means Committee and the U.S. Senate Finance Committee to advance this important data infrastructure fix.

Executive actions to reduce inequality and improve job quality for U.S. workers

Posted on by Maria Monroe
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Overview

Even during periods of sustained economic and employment growth, millions of workers across the United States still face economic uncertainty and precarious working conditions. Working conditions such as low pay, unstable schedules, little access to benefits, workplace surveillance, and discrimination and sexual harassment at work impact a considerable portion of the U.S. labor force and decrease job quality for workers.

There are many ways to tackle these problems. Some examples include raising the federal minimum wage, providing workers’ benefits that employers fail to provide, and instituting robust protections for workers. Addressing these problems would not only improve job quality and individual worker well-being, but it would also benefit the broader workforce, employers, and the U.S. economy as a whole.

Factsheet: Executive actions to reduce inequality and improve job quality for U.S. workersDownload

One municipal-level example is the stable scheduling law passed in Seattle and enacted in 2017, which led to a 10 percentage point decrease in workers’ material hardship. Increasing the minimum wage at the local, state, and federal level increases worker tenure and, in turn, decreases employer costs due to more frequent worker turnover. The flip side of this is also true: Hostile workplaces where sexual harassment and racial discrimination are present increase employee turnover rates.

While topline statistics, such as employment growth and pay rates, are important, federal policymakers must also take steps to enact policies that improve job quality and worker well-being. There is interest in proposals to implement some of these improvements, both in the U.S. Congress, with bills such as the Schedules That Work Act and the Stop Spying Bosses Act, and through efforts from various federal administrative agencies.

Yet administrative agencies have only taken some concrete steps to address these problems, while Congress struggles to pass legislation. Though some progress is being made on these issues, there’s still more the Biden administration can do. This factsheet details several executive actions the administration could enact.

Reinstate the expanded EEO-1 form to include detailed pay information by gender, race, and ethnicity

Data collection is a key function of any administrative agency, especially when it comes to the Equal Employment Opportunity Commission. One of the most important tools the agency uses for data-gathering is the so-called EEO-1 form, which requires all private-sector employers with 100 or more employees, as well as federal contractors with 50 or more employees who meet certain criteria, to submit demographic workforce data along the lines of race and ethnicity, sex, and type of job. Thanks to these data, the EEO-1 form provides an understanding of the mechanisms behind economic inequalities and where those inequalities exist at certain firms.

The Obama administration expanded the EEO-1 form to include more detailed data, but the Trump administration stopped the collection of pay data altogether. Subsequent legal challenges during the Trump administration prevented the EEO-1 form from being properly implemented as initially designed.

Even though the agency is facing internal issues with implementing the EEO-1 form, some data continue to be collected. Collecting additional data, such as pay information broken down by employee demographics, would provide a more detailed picture of where and how economic inequality along demographic lines is perpetuated.

As such, the Equal Employment Opportunity Commission should fully reinstate the EEO-1 form to help provide these important baseline data points. Doing so would not only help stakeholders better understand the inequitable divides in the U.S. labor market, but also help guide federal, state, and local governments to more effectively target programs and policies to meet the needs of historically marginalized workers.  

Require government contractors to provide employees a fair workweek

Despite existing workplace protections, many employers—especially those in the retail and service industry—utilize unstable and unpredictable scheduling practices. Unstable scheduling practices, also known as “just-in-time” scheduling, make it harder for families to find child care, increase the likelihood of workers going hungry, and fail to offer more scheduling flexibility for workers.

Policymakers have experimented at different levels of government with fair workweek laws as a way to address just-in-time scheduling. Some common provisions of these laws include:

  • Ensuring workers have advance notice of their schedules (often 2 weeks’ notice)
  • Providing compensation to workers for last-minute schedule changes
  • Guaranteeing 10 hours of rest between working a closing and opening shift
  • Receiving an offer for additional hours before new employees are hired

Implementing such stable scheduling practices would provide important benefits to both employers and employees. Research by Columbia University’s Elizabeth Ananat, Anna Gassman-Pines at Duke University, Daniel Schneider at Harvard Kennedy School, and the University of California, San Francisco’s Kristen Harknett demonstrates that stable scheduling practices reduce scheduling unpredictability without negatively impacting hours worked, lower turnover rates in low-wage, service-sector industries, and increase workers’ productivity and employer profits in the U.S. retail industry.

The Biden administration should require government contractors to provide their employees with a fair workweek. Such a requirement could be implemented alongside commensurate efforts to ensure that contractors comply with the requirement, meaning that adequate reporting and enforcement measures should be considered. This would improve work quality and worker well-being and provide economic benefits to the employers as well, reducing the high rates of employee turnover that often lead to significant costs for the employer. Furthermore, such a mandate from the Biden administration could serve as a guide for state and local policymakers.

Prevent employers from deploying harmful electronic surveillance on their workers and ensure that monitoring does not result in discrimination

Workers across the country are increasingly vulnerable to invasive monitoring and surveillance practices by their employers. Everything from electronic surveillance tracking workers’ movements and computer use, to facial recognition software, to algorithmic management systems that are used to discipline and/or terminate workers are becoming increasingly prevalent in the United States. Low-wage and hourly workers are especially vulnerable to these practices.

Research by Lisa Kresge at the University of California, Berkeley Labor Center and Aiha Nguyen at Data & Society shows that continuous monitoring—and accompanying punitive actions from employers based on that monitoring—exposes workers to a range of harms, such as increased injuries, reduced wages, and a suppression of the right to organize.

Several federal agencies and regulatory bodies are examining issues related to workplace surveillance, including the Federal Trade Commission. A number of researchers, worker advocates, and civil society groups, as well as Equitable Growth, recently responded to the Federal Trade Commission’s Advanced Notice of Proposing Rulemaking on Commercial Surveillance and Data Security, outlining these harms and priority areas for action.

Other researchers and advocates studying this topic highlight key next steps the agency should take in its rulemaking. These include:

  • Ensuring that whatever monitoring data employers are allowed to collect is minimal and for narrow purposes that don’t harm workers, and with a goal of maximizing workers’ privacy, including by restricting businesses from deploying specific, harmful forms of electronic monitoring and sensitive data collection, such as facial recognition software, algorithmic surveillance, and biometric surveillance.
  • Facilitating researchers’ and regulators’ access to the surveillance data that firms collect to understand firms’ actions and potential harms to workers, for oversight, and for accountability. There also should be full notice and transparency of monitoring practices, coupled with other privacy and labor protections, so that workers and unions know what information is being collected and therefore can potentially bargain over these issues.
  • Making sure that any use of electronic monitoring, surveillance, algorithmic decision-making and/or data-driven worker management software tools are not used to discriminate against historically marginalized groups, including disparate impacts on protected classes.

Going forward, continuing and increased coordination between relevant agencies and regulatory bodies will also be necessary to address the many intertwined issues around workplace surveillance and worker power.

Launch a demonstration project to test the efficacy of paying workers more frequently

Like most workers in the United States, federal employees are paid every 2 weeks. But this practice—an artifact of New Deal era legislation and status quo bias—is not necessarily in workers’ best interest. Despite major advances in financial technology in recent decades, workers are still forced to wait many weeks between completing work and being paid, effectively providing their employer with an interest-free loan in the interim.

There is mixed evidence on the benefits of more frequent pay. Some workers who live paycheck-to-paycheck would surely benefit from having enough cash on hand to meet daily expenses and avoiding the high fees and interest payments associated with short-term loans, credit card debt, and other, sometimes predatory, financial products. Other workers might prefer the forced savings associated with being paid larger amounts less frequently, allowing wage earners to build up large enough sums to purchase durable goods and perhaps helping them combat self-control problems. Indeed, recent research shows that more frequent pay can lead to higher consumption due to the feeling among earners that they are richer than they actually are, while other studies find the opposite.

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How U.S. workers’ just-in-time schedules perpetuate racial and ethnic inequality

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It is also not clear how altering traditional pay periods might affect employers. Running payroll more often will likely increase their administrative costs, but reducing workers’ financial stress could redound to firms in the form of higher employee productivity and reduced turnover. Indeed, one paper from 2022 found that more frequent pay led workers to be more productive while also increasing their homeownership rates. But much of the research touting more frequent pay has been done by private companies with a vested interest in the use of their advance pay products, some of which come with high fees.

Given these promising but inconclusive findings, there is a major opportunity for the federal government to lead the way in experimenting with long-overdue payday innovations. Using its statutory authority to conduct demonstration projects, the Office of Personnel Management could collaborate with federal agencies to test the efficacy of more frequent or varied paydays for a subset of federal workers. The agency could also investigate the option of allowing employees to pick their own payday to better time their incomes to expected monthly expenses.

The Office of Personnel Management is well-positioned to analyze the effects of these changes on both employee well-being and employer performance, using existing tools such as the Federal Employee Viewpoint Survey to gauge worker satisfaction. Findings from the trial could help inform not just federal workforce policies, but also state pay frequency laws, requirements for federal contractors, potential federal legislation, including minimum wage and overtime regulation, wider labor market practices, and even ways to relieve macroeconomic congestion. 

Executive actions to strengthen U.S. income support programs and support research about them

Posted on by Maria Monroe

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Overview

Income support programs transfer cash or other goods, such as food or housing, to workers and families to relieve pressure on household budgets, effectively freeing up income for other needs. These programs are powerful tools to reduce the severity of recessions, help stabilize the broader economy, and ameliorate income volatility by providing income for people with low earnings or replacing income for those who experience a temporary dip in earnings.

The COVID-19 crisis exposed longstanding and deep inequalities in access to U.S. income supports, especially along the lines of race and gender. The executive branch can work to reverse these persistent barriers to access and explore more opportunities to expand the U.S. system of income supports.

Factsheet: Executive actions to strengthen U.S. income support programs and support research about themDownload

The Biden administration and agencies such as the U.S. Department of Labor and U.S. Department of Agriculture can utilize research opportunities to suggest improvements to income support programs and better understand the gaps that remain due to lack of congressional action. Indeed, such action would build on steps that have already been taken, such as implementing and evaluating a navigator program for Unemployment Insurance, studying the implementation of paid leave programs at the state level, and tracking access to the Supplemental Nutrition Assistance Program during the COVID-19 pandemic.

Below, we detail a suite of possible executive actions the administration can take to improve U.S. income support programs and thus better support workers and strengthen the broader U.S. economy. The actions listed here aren’t exhaustive but would go a long way to providing much-needed support to U.S. workers and their families, both in times of economic crises and beyond.

Study the impact of boosting SNAP benefits for children under age 5

Lots of research has already been released on the Supplemental Nutrition Assistance Program and its effects on reducing child hunger, supporting healthy eating, boosting the overall U.S. economy, and lessening the extent and severity of poverty. Research shows that access to SNAP benefits before age 5 leads to large reductions in the incidence of health issues later in life, such as obesity, high blood pressure, heart disease, and diabetes, as well as improving long-term earnings and educational attainment and reducing mortality rates.

Research also suggests that more can be done to amplify the program’s positive impacts by increasing investments in very young children. Hillary Hoynes of the University of California, Berkeley and Diane Schazenbach of Northwestern University propose the creation of a “young child multiplier,” which would increase maximum SNAP benefits by 20 percent for households with children between the ages of 0 and 5. The program has the biggest return on investment for children in this age range because these families tend to need more income support and because investing in children at a pivotal developmental stage can help ensure they are productive, healthy adults.

Because the young child multiplier is a relatively new idea, the Biden administration can introduce a randomized control trial through the U.S. Department of Agriculture, which runs the Supplemental Nutrition Assistance Program, to study its effects on both short- and long-term outcomes with regard to food security, labor force participation, and child and adult health, well-being, and educational attainment.

Conduct an evidence review on the efficacy of different paid leave programs

The United States is the only developed economy without a federal paid family and medical leave social insurance program or guaranteed paid sick days. Yet preliminary research shows that U.S. individuals and employers, as well as the U.S. economy as a whole, can benefit from instituting such a policy. U.S. employees who had access to paid sick leave, for instance, experienced significantly fewer COVID-19 infections and had lower job turnover rates. Research also demonstrates that paid leave programs can increase labor force participation (particularly among women), lead to improvements in child well-being, and increase parents’ time helping children with reading and homework.

The U.S. Department of Labor has tools at its disposal that can help us better understand the main takeaways from research on paid sick days and paid family and medical leave. The department’s Clearinghouse for Labor Evaluation and Research—which assesses the quality of research looking at the effectiveness of policies and programs and makes that research more accessible—can establish paid family and medical leave and paid sick time as topic areas to assess the burgeoning evidence base. This would not only inform the conversation around these policies but would also provide policymakers and stakeholders with important information that could guide further evidence-based improvements.

Create a commission to explore improvements to Unemployment Insurance

Unemployment Insurance acts as an automatic stabilizer when the U.S. economy goes into a recession, reduces poverty rates, stops home mortgage foreclosures, improves health outcomes, and improves job matches between workers and employers. The U.S. Department of Labor has already taken several steps to improve the program, from implementing a new navigator program to establishing equity grants and helping states improve the functionality of Unemployment Insurance applications. Yet more can still be done to improve this vital income support program that helps millions of people every year, despite the many discrepancies in how individual states run this joint federal-state program.

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To get a better sense of which improvements would have the most impact, and which states have been most successful in running the program, the U.S. Department of Labor should form an advisory commission similar to those created by Congress. As Equitable Growth’s Alix Gould-Werth and her co-authors suggest, this commission could look into the effects of increasing UI benefit levels and duration, updating minimum standards for eligibility requirements, and reforming financing mechanisms. Another area the commission could explore is improving the collection and dissemination of data related to Unemployment Insurance. This would help policymakers and other stakeholders get a more nuanced understanding of the program and additional gaps that may exist.

This commission would provide federal and state policymakers and stakeholders with a greater understanding of the program and its impact across demographics, particularly as relates to inequity in access to Unemployment Insurance. It also would ensure Congress has the information it needs to design future substantive, evidence-based improvements. Importantly, the commission should include a diverse range of stakeholders—including directly impacted workers and the groups that represent them to center workers in UI policy evaluation and development.

Executive actions to leverage federal agencies to improve child care in the United States

Posted on by Maria Monroe
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Overview

The decisions families make about child care are hugely consequential for each individual child and family, as well as for the U.S. economy as a whole. Yet despite its importance, the child care system in the United States is failing to meet the needs of working families.

Fewer U.S. children live with a full-time stay-at-home caregiver yet rising demand for child care hasn’t translated into a commensurate increase in the supply of affordable, high-quality care. In many states, child care is more expensive than the cost of public college. Yet despite these high prices, child care workers are some of the lowest-paid workers in the U.S. economy.

Factsheet: Executive actions to leverage federal agencies to improve child care in the United StatesDownload

The COVID-19 pandemic only exacerbated these problems. Emergency pandemic investments helped keep the child care industry afloat, but those investments did not address many of the underlying issues that have plagued the sector for years. As a result, the COVID-19 recession in 2020 led to a decline in child care workers, and the child care industry is still recovering more slowly than the overall U.S. economy.

But the pandemic is only a piece of this story.

Child care has been systematically disinvested in and deprioritized for decades. This remains the case today despite research showing that investing in child care would have positive reverberations throughout our economy. Such investments would allow parents to reenter the workforce, support positive development among children, and improve working conditions and pay for millions of low-income child care workers.

Below, we detail some executive actions the Biden administration can take to help facilitate the process of providing better child care and boosting the overall economy. The actions listed here aren’t exhaustive, but they would make strides toward providing better support for U.S. children, families, and caregivers, in turn boosting broad-based economic growth and well-being.

Convene state policymakers, practitioners, and experts to review outcomes from the American Rescue Plan’s child care provisions

The American Rescue Plan Act marked a historic, albeit temporary, investment in child care following the COVID-19 recession. Billions in supplemental Child Care Development Fund money and stabilization grants allowed states to develop the policies and infrastructure that could support future, more permanent public investments in child care.

Some states are experimenting with navigator pilot programs similar to Unemployment Insurance to help unlicensed child care providers become eligible for relevant government resources. Colorado and Minnesota have launched their own licensing incentives that make use of navigators providing assistance to caregivers to help them meet licensing requirements. These experimentations are a step in the right direction, but they remain an underutilized tool.

Such lessons and experiments could pave the way for federal pilot programs replicating local success on a national scale. The White House should convene state policymakers, scholars, child care providers, and other policy experts to discuss opportunities for further research and evaluation of lessons learned from this unique investment in child care. Holding such a convening would help key stakeholders learn what works, what doesn’t, and what could be replicated on a broader scale in the future.

Indeed, other policies and ideas could emerge to help improve the supply of child care in the United States. Participants could examine state-level experiments that address the nonfinancial costs of expanding supply and tailored incentives that address unique constraints faced by different providers—both of which have been examined by Gina Adams at the Urban Institute. Relevant data catalogued by Alycia Hardy at the Center for Law and Social Policy, Katherine Gallagher Robbins at the National Partnership for Women & Families, and Clare Waterman at Child Care Aware of America could also be used to help inform discussions.

Convene a summit or create a federal commission on child care deserts

The term “child care desert” has been popularized by researchers, such as Rasheed Malik at the Center for American Progress, to describe areas of the United States with so few child care providers or available slots that there isn’t enough capacity to meet demand. More specifically, this term can be defined as an area where there are more than three young children for every one licensed child care slot. Just more than half of families across the country live in child care deserts, pointing to an urgent deficiency in the supply of child care.

How child care deserts develop, and how they can be eliminated, requires further research and a multidisciplinary approach. Yet due to privacy considerations, independent researchers cannot always access accurate geographic data on home-based or unlicensed child care providers. And while high-quality data can help identify where child care deserts exist, the experiences of current providers, former providers, and families themselves can shed light on how they form in the first place.

Federal agency support can bolster research on this important topic. Through the development of a commission on child care deserts, the U.S. Department of Health and Human Services can convene advocates, researchers, child care professionals, and families to share their expertise and experiences on this topic. These key stakeholders can provide insight into how to best support researchers working with states to collect comprehensive data and recommend solutions to expand the supply of care. A commission also would formalize the concept of a child care desert and, in turn, could help policymakers better target federal resources.  

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Factsheet: What the research says about the economics of early care and education

By Equitable Growth,

September 15, 2021

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Factsheet: What the research says about the economics of the 2021 enhanced Child Tax Credit

By Equitable Growth,

November 29, 2022

Expert Focus

Expert Focus: Researchers advancing our understanding of U.S. child care policy and how to improve the early care and education system

By Christian Edlagan, Maria Monroe, Emilie Openchowski,

October 27, 2022

Require the U.S. Census Bureau to provide descriptive child care information and ongoing updates to baseline data on families’ child care arrangements

An accurate understanding of the scope and types of child care arrangements that families use in the United States is crucial, as it allows the government to assess and identify trends among families and across time. Such descriptive data analyses, including updating prior research, can be cost- and time-intensive for independent researchers, but it is invaluable for advocates and policymakers.

The U.S. Census Bureau’s “Who is Minding the Kids?” report, for example, was a great tool for providing information on families’ child care arrangements, but the analysis was most recently conducted in 2013 and used even older data. The Census Bureau should reinvest in this type of research to help provide baseline data on the variety of U.S. child care arrangements. This would not only help stakeholders better understand the lay of the land but also help government agencies cater programs more effectively and better identify needs among families.

Executive actions to improve U.S. economic measurements

Posted on by Maria Monroe
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Overview

The rise of economic inequality over the past four decades has changed the U.S. economy in fundamental ways. Unfortunately, the data that our federal statistical agencies produce to measure the nation’s economic progress has not kept up with these structural changes. At the same time, historical racial economic disparities persist, and federal government data has failed to give policymakers the tools to close these gaps.

Our statistical infrastructure must adapt to fit the present shape of the U.S. economy and the current needs of policymakers.

Factsheet: Executive actions to improve U.S. economic measurementsDownload

Aggregate GDP growth, for example, is increasingly disconnected from the fortunes of lower and middle-class Americans as more and more growth accrues only to those at the top of the income distribution. But the media continues to focus on aggregate growth because that is what government agencies report. Consequently, economic news perversely reflects only the fortunes of the rich and policies are assessed similarly. The resulting press coverage may actually reward politicians for increasing economic inequality.

The answer: Growth should not be reported as a single aggregate number, but rather broken out for Americans in different income brackets. We call this measure GDP 2.0. In 2020, the U.S. Department of Commerce’s Bureau of Economic Analysis, began producing, at Congress’ behest, a prototype of what this would look like. (See Figure 1.)

Figure 1

Measuring U.S. economic growth by income groups

U.S. Gross Domestic Product disaggregated by income levels, 2007­–2018

Disaggregation by income is meant to reflect a changing economy. It is also important to disaggregate by race and ethnicity to reveal more clearly the manifestations of long-standing discrimination. The two issues are not unrelated. Racial discrimination in employment and other areas is both an issue of justice and a drag on the entire economy.

There are two ways the federal statistical agencies can contribute to advancing economic research into racial economic disparities, which ultimately can help ensure more equitable economic treatment.

First, federal surveys often have insufficiently large samples to allow data users to analyze subsections of populations by race. Sample sizes are generally sufficient to look at male Hispanics versus female Hispanics, for example. But if we wanted to look at Hispanic females who have obtained a college degree, the level of precision of the estimate or margins of error, may be inadequate for analyses.

Here’s just one case in point. Analyses frequently discuss issues of the “white working class,” but policymakers are limited in their understanding of working class Hispanics, for instance, because federal statistics do not provide the tools to do so.

Second, there are few data releases that focus the attention of policymakers and the media on racial differences in earnings inequality and subsequent economic outcomes. Consider the annual poverty report, which is published every September by the U.S. Census Bureau. Its release serves as a news hook that engages the national and local press, policymakers and researchers in a dialogue about policies around poverty in the United States. This is a model for how economic data on inequality and racial differences can help drive conversations about addressing these problems

Executive action

The Bureau of Economic Analysis should produce distributional growth statistics concurrently with regular GDP reports. The agency’s prototype is promising, but BEA currently plans to produce statistics just once per year, and on a considerable lag of at least two years, limiting their usefulness to Congress and the Executive Branch.

To produce these statistics more quickly and frequently, the Bureau of Economic Analysis will need the resources to devote more people to this effort. In addition, access to IRS tax return data would help BEA construct higher-quality baseline estimates. This access can only be given by Congress, but agencies should signal their support of this move.

Steps the Biden administration could take to support GDP 2.0 include:

  • Direct the Bureau of Economic Analysis to estimate the cost of producing these statistics on a quarterly basis and include that request in president Biden’s annual budget request for the U.S. Department of Commerce.
  • Formally communicate to Congress through both the Annual Budget request of the Department of Commerce and the U.S. Department of the Treasury’s “Green Book” that U.S. statistical reporting would benefit from additional access to IRS tax return data through Section 5103(j) of the Internal Revenue Code.

In order to better describe the experiences of workers of color and their families in the United States and equip researchers, agencies, and Congress with the data tools necessary to advance racial equity, agencies should take the following steps:

  • First, the Interagency Working Group on Equitable Data, itself created by a Biden executive order on January 20, 2021, should study the feasibility, desirability, and cost of instituting oversamples of Black, Latinx, Native American, Asian, Native Hawaiian, and Pacific Islander populations in surveys conducted by the Census Bureau, the Bureau of Labor Statistics and other federal statistical agencies.
  • Second, this study also should examine the desirability of providing cash incentives to respondents if necessary. The Working Group should also consider recommending a similar expansion for the Federal Reserve’s Survey of Consumer Finances.
  • Third, statistical agencies should focus racial equity issues by issuing an annual report on racial equity across economic outcomes. For instance, an annual report out of the Census Bureau could track the nation’s progress towards racial equity and would play an important role in creating space for a national dialogue about economic outcomes across race.

Executive actions to combat wage theft against U.S. workers

Posted on by Maria Monroe
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Overview

Wage theft against U.S. workers exacerbates the long-run problem of low and stagnant wages. When companies commit wage theft, they impoverish families and deprive workers of the just compensation for their hard work, robbing workers of the value they contribute to economic growth and exacerbating economic inequality.

Factsheet: Executive actions to combat wage theft against U.S. workersDownload

The odds that a low-wage worker will be illegally paid less than the minimum wage ranges from 10 percent to 22 percent, depending on overall economic conditions, and each violation costs that worker an average of 20 percent of the pay they deserve. Women, people of color, and noncitizens are especially vulnerable to wage theft and especially likely to feel they are not in a position to report the crime and get justice.

Cracking down on lawbreaking companies that don’t pay workers what they are owed is a straightforward way for the Biden administration to raise the incomes and living standards of U.S. workers and their families.

Executive action

The Wage and Hour Division of the U.S. Department of Labor is the principal agency tasked with detecting, deterring, and punishing wage theft under the Fair Labor Standards Act. The Biden administration can take several steps to enhance the power and effectiveness of this important agency:

  • Ask for a large increase for the budget of the Wage and Hour Division in the president’s fiscal year 2022 budget request
  • Prioritize strategic enforcement to use resources as effectively as possible
  • Pursue co-enforcement with community-based organizations

We will discuss each in order below.

Increase the budget and institutional capacity of the Wage and Hour Division

One of the central problems facing U.S. workers is that the Wage and Hour Division of the U.S. Department of Labor does not have the resources necessary to fulfill its responsibilities. As of May 1, 2020, the division employed 779 investigators to protect more than 143 million workers, which is fewer than the 1,000 investigators it employed back in 1948 when it was only responsible for safeguarding the rights of 22.6 million workers.

President Joe Biden’s first budget should request that Congress more appropriately fund the Wage and Hour Division. For instance, the International Labor Organization recommends a benchmark of one investigator per 10,000 workers, which would require roughly 13,500 more investigators to be hired. Currently, this may be out of reach. But, at the very least, the Biden administration’s first budget request for the division should, in real terms, exceed the FY2016 request for $332,543,000 to fund 2,044 full-time staff. 

The Wage and Hour Division can also work better with state and local agencies. A grant program should be created to support state and local enforcement agencies to facilitate sharing of innovative strategies and practices. Such a program would promote more effective enforcement at all levels while enhancing the potential for coordinating across agencies. In addition, the division should review and update its Memoranda of Understanding with state enforcement agencies that allow for reciprocal information-sharing and maximize coordinated interagency enforcement efforts.

Prioritize strategic enforcement

No matter what the funding situation is, the Wage and Hour Division can also more effectively use its resources to police illegal conduct by businesses. Strategic enforcement differs from reactive, complaint-based enforcement in that agencies proactively and visibly target high-violation industries and maximize the use of enforcement powers to increase the real and perceived costs of noncompliance with labor laws, without waiting for vulnerable workers to initiate complaints.

The division should reprioritize its personnel and other resources toward pursuing proactive investigations to better reach those industries with high violation rates but in which few complaints are filed. Under the Obama administration, roughly half of all investigations were initiated proactively. This is especially important today, amid the coronavirus recession. Research demonstrates that wage violations increase when the unemployment rate is high. (See Figure 1.)

Figure 1

Probability of minimum wage violations measured against state unemployment rates

Even though U.S. workers are more likely to experience wage violations during moments of economic contraction, that does not mean they are more likely to initiate complaints. The scarcity of jobs means that workers may not be able to find alternatives to their current employment situation, making them more afraid to complain about wage theft, lest they be fired or retaliated against. The power differential between workers and employers in economic downturns simultaneously emboldens employers who treat workers poorly and raises the stakes for workers who complain. This problem is most acute among low-wage workers who face the largest power differential vis-à-vis their employers.

Research on minimum wage enforcement suggests that workers in industries with the worst conditions are much less likely to complain about wage theft. Most wage theft goes unreported, and it is especially present in industries where women and people of color are overrepresented. (See Figure 2.)

Figure 2

San Francisco's industries ranked by the ratio of wage theft violations to wage theft complaints, 2005–2018

The Wage and Hour Division needs to prioritize strategic enforcement, so its limited budget has the maximum impact on the most-vulnerable workers and most wage-theft-prone sectors. It can do this in several ways, according to the authors of the essay “Strategic enforcement and co-enforcement of U.S. labor standards are needed to protect workers through the coronavirus recession” in Equitable Growth’s new book of essays, Boosting Wages for U.S. Workers in the New Economy:

  • “First, the use of proactive investigations in targeted industries means enforcement resources are more likely to identify and reach vulnerable workers who are unlikely to complain.”
  • “Likewise, industry research to identify industry structure, influential employers, and widespread noncompliant industry practices helps agencies target employers that are likely to get the attention of others in the industry.”
  • “Strategic enforcement includes … assessing high damages and penalties in addition to back wages owed.” These measures deter future violations by changing the cost-benefit calculation some employers make when they decide that violating the law is worth the risk of being caught.

By not only increasing the budgets of enforcers, but also by using those limited resources more strategically, the U.S. Department of Labor can ensure that its investments in enforcement have maximum impact.

Pursue co-enforcement with community-based organizations

One of the central problems with complaint-based investigations is that some classes of workers are less likely to report wage theft than others. Power dynamics at workplaces and in the community mean that women, noncitizens, and people of color risk more when they report abuses. Indeed, this is the pattern that the data show. (See Figure 3.)

Figure 3

The demographics of workers and the probabilities of minimum wage violations, all workers, 2008–2010

In a co-enforcement model, labor agencies enter formal partnerships with civil society organizations that have strong relationships with low-wage workers and deep knowledge of high-violation sectors to help uncover violations that would otherwise go unreported and provide support to vulnerable workers so that they face lower levels of risk when they speak up. As explained by the same labor market scholars cited above:

Problems will remain hidden unless workers speak up, yet vulnerable workers will not speak up in isolation …Without a connection to the workforce on which the agency can build an investigation, proactive investigations can be daunting and the agency may be unable to establish violations are occurring. Worker organizations have access to information on labor standards compliance that would be difficult, if not impossible, for state officials to gather on their own.

To that end, the Wage and Hour Division should engage in thoughtful outreach to worker organizations. To do so, the division should hire at least one community outreach and resource planning specialist for each of its 54 district offices. These CORPS workers are full-time Wage and Hour Division staff charged with working with worker centers, unions, and community organizations on campaigns related to the division’s targeted industries before and after investigations. These officers should also, when possible, facilitate partnerships on enforcement actions, which they have not prioritized in the past.

Executive actions to reform the cost-benefit analysis of U.S. tax regulations

Posted on by Emilie Openchowski
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Overview

Beginning in April 2018, the federal government required a cost-benefit analysis for many more tax regulations than it had in the past. More than 2 years later, it is clear this experiment in cost-benefit analysis of tax regulations failed. The cost-benefit analyses released alongside regulations implementing the Tax Cuts and Jobs Act of 2017 provide little information relevant to assessing the merits of those regulations. Moreover, while tax experts criticize many of the TCJA regulations for providing unmerited windfalls to favored groups, the cost-benefit analyses for those regulations often fail to identify these windfalls or provide critical analysis of them.

The weaknesses of these analyses are rooted in the framework that the White House Office of Information and Regulatory Affairs mandates for the cost-benefit analysis of federal regulations by executive branch agencies. This framework is fundamentally ill-suited to the evaluation of tax regulations.

Factsheet: Executive actions to reform the cost-benefit analysis of U.S. tax regulationsDownload

First and foremost, this framework treats revenue increases as neither a cost nor a benefit because a revenue gain for the government is accompanied by higher tax payments for some set of people. Yet because raising revenues is the primary purpose of taxation, this assumption means the resulting analysis cannot provide useful guidance in developing tax regulations. The framework assumes there is no reason for the tax system to exist.

The practical upshot of this approach to cost-benefit analysis is to bias the system in favor of tax cuts. A lax regulation that simply gives up on preventing some form of corporate tax avoidance, for example, could easily generate positive net benefits in this framework. This is because giving up on tax enforcement allows corporations to stop engaging in costly schemes to avoid paying taxes—they get a tax cut directly instead—and that is considered a benefit.

Yet the revenue loss itself would not be treated as a cost. In the same way, a more stringent regulatory interpretation that shuts down corporate tax avoidance could have positive costs—the firms might spend more money on lawyers and accountants to avoid paying tax—and no benefits. The higher revenues themselves would not be counted as a benefit.

In addition, the framework that the Office of Information and Regulatory Affairs mandates agencies use for cost-benefit analysis relegates changes in the distribution of the tax burden to second-tier status. Though it may seem neutral to instruct the U.S. Department of the Treasury and the IRS to ignore changes in the distribution of the tax burden, it is not. High-wealth taxpayers are generally better able to avoid tax than low-wealth taxpayers. This framework thus puts a thumb on the scale for shifting taxes from the wealthy to everybody else.

For example, suppose the Treasury Department and the IRS are considering two regulations. The first would raise $150 from rich taxpayers, who would also spend $20 on accountants and lawyers to work around the regulation. The second would raise $100 from poor taxpayers who would only spend $2 to try and avoid the tax. The cost-benefit framework would tell the Treasury Department and the IRS that the second regulation would be the better approach as it would result in only $2 spent on tax avoidance. The higher revenue and more progressive distribution of the first regulation that would require wealthier taxpayers to pay more tax would receive no weight.

Moreover, if the agencies had previously issued the first, more progressive regulation, this framework would say that withdrawing that regulation and replacing it with the regulation raising less money from poorer people would yield $18 in net benefits and thus be a great project to pursue. (See Table 1.)

The framework for cost-benefit analysis that the Office of Information and Regulatory Affairs instructs agencies to use is often described as disregarding redistributive impacts. But, as the preceding example makes clear, it would be more accurate to say that it adopts a specific and regressive view on how to judge redistributive impacts.

Evaluating the merits of a tax regulation requires assessing the impacts of that regulation on tax revenues and the tax burden. These are the most important considerations in any tax change. Do the revenue losses prevented by a more stringent interpretation of the law justify the burden imposed, taking into account who would bear that burden? Or does the burden reduction resulting from a lax interpretation, taking into account who would benefit, justify the revenue loss? The cost-benefit analysis that the Office of Information and Regulatory Affairs currently instructs agencies to produce cannot answer these questions.

Executive action

The Biden administration should eliminate the requirement for cost-benefit analysis of tax regulations, as well as the authority of the Office of Information and Regulatory Affairs to review that analysis. Instead, the Treasury Department should provide a qualitative and, when feasible, quantitative evaluation of tax regulations. This evaluation should examine the impacts on:

  • Revenues
  • The level and distribution of the tax burden
  • Compliance costs

The traditional types of analysis developed for the legislative context are exactly the types of analysis required to evaluate tax regulations. These analyses are the analog of the cost-benefit framework, taking into account the distinct purpose of tax regulations. Though cost-benefit analysis can be a useful framework for judging the economic impacts of certain regulatory changes, it is inappropriate and unhelpful to try to apply it to tax regulations. 

Finally, the U.S. Department of the Treasury’s analysis of the impacts on revenues, burden, and compliance costs should focus on the decision points where the agencies have discretion to regulate differently, as this is the analysis that can inform regulatory decision-making. In addition, the analysis should be conducted only when different interpretations of the law would have substantially different effects. If the Treasury Department and the IRS lack discretion or all permissible interpretations have essentially the same effects, there is little value in requiring additional analysis.

Executive actions to coordinate antitrust and competition policies across the federal government

Posted on by Maria Monroe
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Overview

The U.S. economy is plagued by a problem of excessive market power, stemming, in part, from years of weakened competition and antitrust enforcement. Growing market power disrupts the operation of free and fair markets, and harms consumers, businesses, and workers. It exacerbates inequality and compounds the harms of structural racism.

But it is not too late to change course. A bold vision—one that relies on Congress reengaging on competition policy, the antitrust enforcement agencies adopting an affirmative agenda to strengthen deterrence, and the federal government prioritizing competition more broadly—can restore competition and benefit the country. 

Executive action

One critical way to promote competition as a federal government priority is to establish a new White House Office of Competition Policy. We often equate competition policy solely with antitrust enforcement. No doubt effective antitrust enforcement is critical to stopping the improper acquisition and abuse of market power. But, at the same time, laws and regulations can directly affect competition.

Just one case in point is the Federal Trade Commission’s Prescription Release rule, which requires eye doctors to provide patients with a copy of their prescription after the completion of an eye examination. The 1977 rule can be credited with the rise of an eyeglass retail industry separate from prescribing doctors. This rule is an important precondition for the business model of firms such as Warby Parker, EyeBuyDirect, and other prescription eyeglasses retailers.

Factsheet: Coordinating antitrust and competition policies across the federal government to combat market powerDownload

The so-called eyeglass rule is but one example of how regulations and rules can affect competition. Too often, however, regulatory agencies miss opportunities to promote competition or, worse, issue rules that inadvertently, unnecessarily, or even intentionally undermine competition. For these reasons, the new administration should establish a White House Office of Competition Policy within the Executive Office of the President that is led by the National Economic Council and includes membership from at least the Council of Economic Advisers, the Office of Information and Regulatory Affairs, the Office of Management and Budget, and the Domestic Policy Council.

The role of the White House Competition Office would be to promote the whole government approach to improving competition in three ways.

  • Promote, throughout the federal government, the promulgation or amendment of rules designed to reduce barriers to entry, open industries to entrants, promote “truth in pricing,” improve the functioning of labor markets, or otherwise improve the functioning and competitiveness of markets. There are many opportunities across the government to repeat the success of the eyeglass rule, but they may be difficult to find or require competition expertise that an agency may lack. The Office of Competition Policy would work with the various agencies to identify opportunities to make markets function more competitively. It would also aid in helping to develop solutions.
  • Coordinate action by the U.S. Department of Justice or the Federal Trade Commission and other executive branch agencies, and independent regulatory commissions to tackle endemic competition problems in specific industries.  Sometimes litigation and antitrust enforcement is the best solution to an anticompetitive problem. Other times, however, a regulatory agency, such as the Food and Drug Administration or the U.S. Department of Agriculture, can solve the problem more quickly and less expensively through regulation. When the FTC or DOJ identify a systemic competition problem, the Office of Competition Policy would coordinate with the relevant regulatory agencies to identify the most effective solution.
  • Monitor the rulemaking process so as to discourage or prevent rules that unnecessarily inhibit U.S. labor market mobility, market entry, or otherwise amount to anticompetitive uses of regulations. As it stands, the Office of Information and Regulatory Affairs, or OIRA, within the Office of Management and Budget reviews draft rules across the executive branch for their compliance with broader policies, including competition policy. A new White House Office of Competition Policy would participate in the OIRA regulatory review process, using its expertise to assist in reviewing draft rules with competitive consequences. This would strengthen a function already performed by the White House Council of Economic Advisers.

In these three ways, this new White House Office of Competition Policy would unify the Biden administration’s approach to competition policy and promote the importance of reinvigorated antitrust enforcement for consumers, workers, and marginalized communities.

Executive actions to coordinate federal countercyclical regulatory policy

Posted on by David Evans

This factsheet has been adapted from Yair Listokin’s Vision 2020 essay and his 2019 book, Law and Macroeconomics: Legal Remedies to Recessions.

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Overview

Traditional macroeconomic tools—fiscal policy from the U.S. Congress and monetary policy from the Federal Reserve—are critical but not sufficient responses to the current coronavirus recession. To round out the federal government’s actions to deal with the ongoing economic downturn, executive agencies should consider how their regulatory power can be aggressively leveraged to provide a much-needed, countercyclical boost to the ailing U.S. economy. Regulatory actions that encourage banks to lend, firms to invest, and consumers to spend can increase demand and reduce unemployment.

Factsheet: Executive actions to coordinate federal countercyclical regulatory policyDownload

One case in point is the current regulation of utilities, implemented jointly by federal and state regulators. These rules tend to affect private-sector spending pro-cyclically by allowing for rate increases to compensate for reduced profits during recessions. As a result, retail prices for electricity, water, and trash collection increased during recent recessions. (See Figure 1.)

Figure 1

Percent change from one year ago in price of electricity and water, sewer, and trash collection, 1999–2018

This pro-cyclical pricing effectively amounts to a tax increase on low- and middle-income families, which have a high propensity to consume, and is the exact opposite of how a smart recession-fighting, countercyclical policy would be designed. A better regulatory framework from a macroeconomic perspective would hold utility prices down during recessions but allow for higher utility prices—and profits—during economic expansions. This kind of regulation could be supported by guidance from the Federal Energy Regulatory Commission or state regulators. The state of Connecticut is pursuing a similar idea.

Other examples of regulatory actions the federal government could take to fight the coronavirus recession and other future economic downturns include:

  • The Federal Housing Administration, Fannie Mae, and Freddie Mac could reduce guarantee fees on government-backed mortgages or increase allowable loan amounts in order to jumpstart mortgage origination during economic downturns. The Biden administration also could reduce interest rates or pause payments for existing homeowners with government-backed mortgages.
  • The U.S. Department of Education could use its authority under the Higher Education Act to take a number of steps to reduce the burden of student loan debt during a recession, boosting the ability of otherwise struggling borrowers to spend. This could take the form of pausing payments or potentially cancelling some amount of outstanding student debt by executive action.

These two debt-focused examples build off arguments made by the authors of House of Debt: How They (And You) Caused the Great Recession, and How We Can Prevent It from Happening Again. Economists Atif Mian at Princeton University and Amir Sufi at the University of Chicago make the case that reducing consumers’ debt obligations can mitigate economic slumps because debtors are more likely to spend as a result of having more flexibility in their personal budget than are creditors.

Executive action

But knowing which of these, or other, countercyclical regulations to pursue, and predicting how the regulations will affect the macroeconomy demands expertise. Every regulator and administrator acting across many different sectors of the U.S. economy cannot be expected to have that needed expertise. As a result, effective countercyclical regulatory policy requires a coordinating office staffed by a mix of experts in macroeconomics and regulation.

President Joe Biden should create such an office, to be housed at the White House National Economic Council, by modifying the executive order that established the NEC. This new countercyclical regulatory policy office within the NEC would, in conjunction with macroeconomic experts throughout government:

  • Evaluate macroeconomic conditions and the ability of discretionary fiscal and monetary policies to respond to the business cycle
  • Instruct regulators to identify and implement countercyclical regulatory programs, including the reform of unintentionally pro-cyclical regulations

Importantly, the office’s purview would be limited to evidence-based, countercyclical regulations so as to not morph into a tool for indiscriminate deregulation.

Conclusion

Every federal regulatory program affects the business cycle. Countercyclical regulatory policy offers an infinite variety of macroeconomic policy options that are not subject to the constraints of monetary and fiscal policy. By paying attention to these effects and managing them through a new office within the National Economic Council, the Biden administration could stimulate the U.S. economy during the current recession and lay the groundwork for future administrations to do so as well.