Universal childcare’s benefits might cover much of its costs

Posted on by Emilie Openchowski
New research on the universal childcare program in Norway shows that the benefits of universal childcare can cover much of the associated costs.

Several decades of research in economics and psychology show that childcare boasts substantial positive effects on human capital development and labor market outcomes—for both parents and kids. A critical question for policymakers, then, is how these benefits affect the net fiscal impact of a publicly financed, comprehensive childcare system that ensures access for all families in the United States.

A new study on Norway’s universal childcare program sheds light on at least one way in which such a program’s benefits might cover part of its costs. With the goal of making quality, affordable childcare available to all children, a bipartisan reform enacted by the Norwegian Parliament in 2002 dramatically increased state subsidies for childcare enrollment, lowered parental fees, and upped public investment in the construction of new childcare facilities. Exploiting differences between municipalities in the rate of childcare expansion in the aftermath of this reform, authors Martin Eckhoff Andresen, research economist at Statistics Norway, and Tarjei Havnes, associate professor of economics at the University of Oslo, estimate the effects of childcare use on labor supply, earnings, and tax payments for parents of 2-year-old children.

Disaggregating the effects of the expansion in childcare availability on mothers by relationship status, Andresen and Havnes find large and statistically significant labor-supply responses for all mothers. Specifically, three co-habiting or married mothers entered the labor force—largely into full-time employment—for every 10 2-year-old kids enrolled in childcare. The results for single mothers were somewhat weaker: One single mother entered part-time employment for every five toddlers enrolled in childcare.

These effects translated into higher annual earnings for mothers. On average, co-habiting and married mothers saw their wages increase by $6,000, and single mothers saw their wages increase by $2,400. In contrast to the strong impact on maternal labor supply and earnings, the expansion of childcare had little empirical effect on fathers. This nonresult probably reflects persistent social norms that assign mothers a disproportionate responsibility for child rearing, particularly when children are toddlers.

Andresen and Havnes use their labor supply and earnings estimates to calculate the fiscal impact of Norway’s universal childcare program. Specifically, the authors find that at least 13 percent of the cost of expanding childcare for co-habiting mothers is offset by increased tax revenue generated through the additional employment of mothers in the 2 years following the program’s expansion. Additionally, the authors argue that the actual responses and budgetary savings may in fact be larger than their estimates, as initial take-up of public formal childcare may be incomplete.

In conjunction with other recent empirical studies, Andresen and Havnes’s findings provide suggestive evidence that the fiscal impact of universal childcare may grow stronger over time. Their data show that the increase in mothers’ attachment to the labor market persists and remains significant for at least 4 years following the parliamentary expansion. According to contemporary research into the gender wage gap, this increase in long-run labor force participation should allow mothers’ wages to avoid the wage penalties associated with prolonged absences from the labor force and instead increase gradually over time. The authors argue that as a result of these labor market changes, expanding access to childcare in Norway produced an enduring increase in the nation’s tax base.

While the social welfare system, childcare infrastructure, and tax system in Norway are different than those in the United States, there is nevertheless strong reason to believe that childcare expansion might have similar (if not larger) impacts in the U.S. context. First, the results of this study are consistent with others conducted in Quebec, Spain, Belgium, and elsewhere, which also found boosts in mother’s labor supply and government tax revenue from universal childcare. Additionally, Andresen and Havnes’s findings are similar to those in several other studies conducted in the United States, which verify positive effects on mothers’ employment from public childcare subsidies. Finally, in the context of the United States, where both childcare access and women’s labor force participation levels are significantly lower than those in Norway, there may even be more room to increase women’s labor force participation and wages, thereby driving up tax revenues over the long-term despite potentially larger short-term costs due to more robust uptake.

In the United States today, the underprovision of childcare services has substantial negative effects, depressing earnings and labor force participation for parents and driving suboptimal social and economic outcomes for children. Andresen and Havnes’s new paper illustrates that expanded childcare may come with substantial positive effects both for parents’ employment and aggregate tax revenues. Beyond these effects on parents, research documents that childcare expansion can also produce dramatic improvements in children’s health, cognitive and social skills, educational outcomes, and labor market opportunities. In light of Andresen and Havnes’s findings, the implications of these improved outcomes for aggregate economic growth and additional tax revenues in the United States could be an exciting topic for future empirical research.

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Weekend reading: “Home is where the wealth is” edition

Posted on by Ed Paisley

This is a weekly post we publish on Fridays 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 the work 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 U.S. Bureau of Labor Statistics earlier this week released the newest data from the Job Openings and Labor Turnover Survey covering the month of June. Kate Bahn and Austin Clemens put together four graphs utilizing JOLTS data.

In a new working paper by Mark Paul, Darrick Hamilton, William Darity, Jr., and Khaing Zaw, the authors find that wage gaps vary across different races and genders, with white men earning the highest average wage while black women earn the lowest. The gender wage gap is heightened when comparing hourly wages to salaried wages. Here is a summary of this working paper.

In a slide presentation at the Office of Management and Budget’s Office of Information and Regulatory Affairs, Greg Leiserson discusses a cost benefit analysis of tax regulations. He argues that current frameworks for creating cost benefit analyses fails to provide beneficial guidelines to assess tax regulations, yet altering the framework risks bringing up political questions. He believes that such analyses should emphasize transparency over formulating absolute conclusions, and that the priority of these analyses should be on revenues, avoidance and evasion behavior, compliance costs, and distributive impacts.

Brad DeLong compiles his most recent worthy reads on equitable growth both from Equitable Growth and outside press and academics.

Links from around the web

In a series of charts and infographics, The Wall Street Journal indicates that healthcare costs in the United States are relatively high not because Americans buy more health care but rather due to healthcare growing more expensive annually. Merger and acquisitions among healthcare companies and increasing costs of middlemen contribute to rising healthcare costs, which have no impact on the quality of care, as the United States ranks lower among other member nations of the OECD on most indicators of health quality. [wsj]

Today’s top 10 percent of wealthholders in the United States hold three times the amount of wealth compared to the bottom 50 percent of U.S. households. Noah Smith claims that this divergence in the distribution of wealth is because the bottom 90 percent hold most of their wealth in houses, whereas the top 10 percent hold wealth in stocks. After the Great Recession of 2007-2009, stock prices recovered quickly and are now 50 percent higher than pre-crisis levels, while the housing market has yet to return to pre-crisis prices. [bloomberg]

Citing Raj Chetty’s work, Robert Samuelson argues that growing downward mobility in the United States is inevitable because children born into the upper middle class in recent decades are struggling to make more than their parents. He credits income inequality that constrains spending, lack of housing construction, and low-quality schools for declining mobility. [wapo]

Women may have experienced the gender wage gap as early as their teenage years, with one University of Maryland study finding that girls spend more time doing household chores yet receive smaller allowances compared to boys. In addition, boys’ chores tend to include personal hygiene, such a brushing their teeth, whereas girls’ chores are predominantly related to household cleaning. This parallels U.S. households today, as married men spend half the time women spend on housework. [nyt]

Friday figure

Figure is from Equitable Growth’s JOLTS Day Graphs: June 2018 Report Edition

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Brad DeLong: Worthy reads on equitable growth, August 3–9, 2018

Posted on by Emilie Openchowski

Worthy reads from Equitable Growth:

  1. “Economic developments over the past 20 years have taught—or ought to have taught—the U.S. Federal Reserve four lessons,” I write in “The Ahistorical Federal Reserve.” But as I note, “the Fed’s current policy posture raises the question of whether it has internalized any of them. … The proper inflation target … should be 4 percent per year. … The two slope[s of] the Phillips Curve … are smaller. … Yield-curve inversion … monetary policy is too tight. … Principal shocks have not been inflationary.”
  2. “Multiple identities cannot readily be disaggregated in an additive fashion,” write Mark Paul, Khaing Zaw, Darrick Hamilton, and William Darity Jr. in their working paper, “Returns in the labor market: A nuanced view of penalties at the intersection of race and gender.” Instead, the four co-authors note that “the penalties associated with the combination of two or more socially marginalized identities interact in multiplicative or quantitatively nuanced ways.”
  3. Raymond Fisman, Keith Gladstone, Ilyana Kuziemko, and Suresh Naidu write in their 2017 working paper, “Do Americans want to tax capital? Evidence from online surveys,” that “our regression results yield roughly linear desired tax rates on income of about 14 percent … positive desired wealth taxation … 3 percent when the source of wealth is inheritance, far higher than the 0.8 percent rate when wealth is from savings. … These tax rates are consistent with reasonable parameterizations of recent theoretical optimal wealth tax formulae.”
  4. Read Equitable Growth’s latest JOLTS charticle: “The quit rate … historically high level. … The ratio of unemployment-to-job openings trended upward slightly in June to just under 1.0. … The Beveridge Curve continues to be at levels similar to those in the expansion of the early 2000s.”

Worthy reads not from Equitable Growth:

  1. I am confident that there will be jobs. I am much less confident that there will be enough middle-class jobs after reading Adam Ozimek’s “Robots and Jobs: A Check on Fear,” in which he writes: “When it comes to discussing the effects of automation on labor markets, I see far too much partial equilibrium thinking.”
  2. If you take the appropriate measure of labor market tightness to be the prime-age employment rate, there is no wage growth puzzle. So, why does the Federal Reserve take the unemployment rate as the relevant labor market tightness variable and wring its hands about the wage-growth puzzle, rather than taking the prime-age employment rate as its relevant labor market tightness variable? It is a mystery, says Adam Ozimek in his tweet “Wage growth is right on target folks!”
  3. The rise of the factory—the shift from home production to production under the eye of a boss, at a workplace—was underway long before mechanization in numeric calculation, as well as in craft piecework, writes Lorraine Daston in his 2017 paper, “Calculation and the Division Of Labor, 1750-1950.”
  4. Successful place-based policies require what we used to call “local boosters.” One problem with so much of the so-called red states is that the local rich are no longer boosters for their communities—indeed, no longer feel a part of the community in any meaningful way, writes Noah Smith in “How to Save the Troubled American Heartland” after reading the new book by James Fallows and Deborah Fallows, who he says “notice a number of common approaches among towns that are on the mend. Two of these … universities and immigration.”
  5. I find myself wishing that Ricardo Hausmann had given us some numbers here: How much in the way of resources has the government raised from society via its inflation? And how have those resource flows declined since the 2015 decision to monetize the fiscal deficit? Read his “The Venality of Evil,” in which he writes that “inflation in Venezuela … [at] 1,000,000 percent by year’s end … GDP … 45 percent below its 2013 level by the same time.”
  6. Noah Smith wonders if he can make a supply-and-demand argument to people who are allergic to “supply and demand” with a spoonful of sugar. He has three types of housing: newly built yuppie fish tanks, old housing that can switch between working class and yuppie, and newly built “affordable housing,” unattractive to yuppies. Read his “YIMBYism explained without ‘supply and demand’,” in which he writes: “YIMBYism is the idea that cities need to build more housing in order to relieve upward pressure on rents.”
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Slide presentation: Cost benefit analysis of tax regulations

Posted on by Emilie Openchowski

Equitable Growth’s Director of Tax Policy and Senior Economist Greg Leiserson on August 6 gave a presentation to the Office of Management and Budget’s Office of Information and Regulatory Affairs on the cost benefit analysis of tax regulations. In the presentation, Leiserson argues that the traditional “A-4 framework” for conducting cost benefit analyses does not provide useful guidance in the evaluation of tax regulations, yet a new framework for tax regulations would unavoidably implicate deeply political questions. As a result, Leiserson proposes that the analysis should emphasize transparency rather than a definitive conclusion. The focus of the quantitative analysis should be revenues, avoidance and evasion behavior, compliance costs, and distributive impacts.

Download the presentation as a pdf.

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JOLTS Day Graphs: June 2018 Report Edition

Posted on by Austin Clemens

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. Today, the BLS released the latest data for June 2018. This report doesn’t get as much attention as the monthly Employment Situation Report, but it contains useful information about the state of the U.S. labor market. Below are a few key graphs using data from the report.

1.

The quit rate held steady for June, maintaining it’s historically high level.

2.

The vacancy yield continued it’s longterm downward trend, declining slightly further from May to June.

3.

The ratio of unemployment-to-job openings trended upward slightly in June to just under 1.0, indicating that the number of open jobs is about equal to the number of unemployed workers actively looking for work.

4.

The Beveridge Curve continues to be at levels similar to those in the expansion of the early 2000s.

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Discriminatory penalties at the intersection of race and gender in the United States

Posted on by Emilie Openchowski
New research finds that wage gaps differ significantly across genders and races, and that there is no single gender or race penalty.

Race and gender disparities in wages are a relentless and troubling feature of U.S. labor markets. Economists have investigated the gender wage gap and racial wage gap for more than half a century, yet most empirical research still considers these two types of wage gaps in relative isolation, treating race and gender wage gaps separately. Examining these two wage gaps through the lens of intersectional theory, however, enables researchers to understand how workers with multiple socially salient identities such as race and gender are affected in ways that are qualitatively different from the mere sum of the effects of each identity taken separately on outcomes in U.S. labor markets.1

Intriguingly, the intersectionality of race and gender and the comparative advantage or disadvantage for individuals holding multiple identities are topics that are increasingly more common in the press.2 A recent article in the Washington Post on the gender pay gap observed that “women of color get hit twice: they suffer the effects of the gender wage gap plus those of the racial wage gap.” Others emphasize how focusing on one socially salient identity such as gender alone overlooks the importance of holding multiple identities. In The Atlantic, for example, Adia Harvey Wingfield challenges the “now famous” statistic that women make 79 cents on the dollar vis-á-vis men, arguing that “it obscures even wider gaps faced by women of color.” And a recent op-ed in the New York Times acknowledges that penalties or privileges associated with certain identities depend on the bundle of identities that the individual holds, noting that “the racial pay gap is narrower among women” in comparison to men.

A new working paper made possible with the generous support of the Nathan Cummings Foundation, “Returns in the Labor Market: A Nuanced View of Penalties at the Intersection of Race and Gender,” seeks to quantify some of the insights from intersectional theory and critical race theory in order to more thoroughly examine what many in the press already understand intuitively. Specifically, we investigate whether the magnitude of the gender and racial wage gaps varies across group identity. Do blacks and whites face different gender wage gaps? Do men and women face different racial wage gaps? We then present evidence that holding multiple identities cannot readily be disaggregated in an additive fashion, but rather the penalties associated with holding a combination of two or more socially marginalized identities interact in more quantitatively nuanced ways.

Our work provides a robust illustration of why economists should take intersectionality theory seriously in their analyses of labor market discrimination moving forward. We seek to deepen the understanding of how the possession of one socially salient identity such as being a woman or being black may oversimplify the effects of the complex of social identities that interact in ways which researchers still need to identify.

Our first finding: Wage gaps vary significantly across groups

There are substantial hourly wages and annual salary gaps (henceforth wages) across race and gender.3 As expected, our research finds that white men attain the highest average wages. We then observe that white women receive the highest wages after white men, with hourly wages that are 78 percent of those received by white men. This gender wage gap is exacerbated when we analyze annual wages as opposed to hourly wages, with white women receiving only 69 percent of the annual wages received by white men. Our results are confined to workers that are employed for pay, and thus the more pronounced differences in annual wages may reflect greater hours worked and fewer bouts of unemployment for white men.

The wage gap between black and white men is similar in magnitude to the gap between white women and white men. Black men receive just 76 cents on the dollar in hourly wages compared to white men. Annual wage gaps are even larger. This may be due to a number of factors, including the fact that black men are more likely to experience incarceration and unemployment and are more likely to be working part-time during a given year.

Black women endure the largest wage gap observed, as they receive wages that are just 61 percent, on average, of those received by white men. In terms of the mean annual wage gap, black women receive just 56 percent of what white men receive. (See Table 1 for the summary statistics for mean wages in 2016 for our sample, which consists of black and white workers.4)

Table 1

Our second finding: There is no single “gender” or “race” penalty

Individuals who hold multiple socially salient identities face different race or gender penalties once we control for productivity-linked traits, as well as other variables that may contribute to differences in wages.5 By analyzing how gender or race relate to wages across different groups, we are able to identify, for instance, that black women relative to black men and white women relative to white men face substantially different wage disparities associated with their gender.

Our findings show that black men earn 26.9 percent lower wages than comparable white men. The use of controls in our model provides us with the statistical basis for estimating the adjusted wage gap that isolates differences in wages due to labor market characteristics from differences in which labor market characteristics translate into wages due to an individual’s race. The controls (labor market characteristics) reduce this pay gap, explaining 15.6 percent—more than half of the gap—yet 11.3 percent of the gap remains unexplained. This unexplained portion is typically interpreted as statistical evidence for race (or gender) discrimination. As we can see, black men face a larger race pay gap than black women, largely because the results compare black women to white women, whose wages are at least somewhat suppressed, vis-à-vis white men, as a result of their gender.

Second, we see that gender pay differences also differ by race, with white women facing a larger gender pay gap than black women, in this case, because black women are compared to black men, whose wages are suppressed, vis-à-vis white men. In sum, particularly for black women, the magnitude of the penalty for any particular identity is conditional on the combination of other identities the individual possesses—there is no single “gender” or “race” penalty. (Our findings are highlighted in Table 2, where we display differences associated with the race penalty for men and women.)

Table 2

Finally, we quantify and frame some aspects of intersectionality. While critical race theory and the national media often have discussed a presumed “double burden” faced by individuals holding two socially salient disadvantaged identities, this study provides important analytical and empirical insight about the actual magnitude of the burden economywide for black women.

Using white men as the reference group, we examine the wage penalties of black women, a group that holds two socially marginalized identities, to determine if this disadvantage is above and beyond the penalties associated with simply adding isolated penalties ascribed to black women due to their gender relative to black men and their race relative to white women. The wage gap between these two groups amounts to black women receiving 64 cents on the dollar compared to white men. Further, black women are penalized approximately 20 cents on the dollar due to discrimination in this comparison. We find that the wage gap between black women and white men is larger than the sum of the two individual penalties. This confirms that to truly understand the labor market experience for black women, one cannot simply examine racial and gender discrimination in isolation.

Economists typically fail to fully explore or explain the persistence of discrimination in U.S. labor markets. While standard economic models assume the competition will eliminate discrimination, making it merely a temporary phenomenon, the real world has proven that discrimination is resilient and omnipresent.6 Our paper demonstrates that in addition to discrimination based solely on a singular identity such as race or gender, some groups face compounded discriminatory penalties based on the intersection of their identities. The finding highlights the critical role intersectionality should play in the economic analysis of discrimination.

—Mark Paul is an assistant professor of economics at New College of Florida and a fellow at the Roosevelt Institute. Darrick Hamilton is a professor of economics and urban policy at the Milano School of International Affairs, Management and Urban Policy and Department of Economics at the New School for Social Research, is director of the Doctoral Program in Public and Urban Policy at The New School, and is co-associate director of the Samuel DuBois Cook Center on Social Equity at Duke University. William Darity Jr. is the Samuel DuBois Cook Professor of Public Policy, African and African-American Studies and Economics and the director of the Samuel DuBois Cook Center on Social Equity at Duke University.

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Weekend reading: “all wages all the time” edition

Posted on by Ed Paisley

This is a weekly post we publish on Fridays 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 the work 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

As part of the recent launch of our new website, Michael Kades authored a reintroduction of our work on antitrust. Kades gives an overview of the history of competition policy in the United States and highlights recent research into increasing market concentration and monopsony power.

Women’s ability to access reproductive rights has implications for their ability to engage with the labor market. Kate Bahn previews her forthcoming research with co-authors Adriana Kugler at Georgetown University, Melissa Mahoney at the University of North Caroline, Asheville, and Annie McGrew at the University of Massachusetts Amherst into how differing access to contraception and abortion affects women’s moves from one job to another. The authors find that women’s likelihood of moving from one occupation to another is reduced by 5.8 percent in states with Targeted Restrictions of Abortion Providers laws, while men’s chances are unaffected.  Furthermore, these laws reduce transitions into higher paid occupations by 7.6 percent, with no effect on men.

Brad DeLong rounds up his latest worthy reads on equitable growth from both inside and outside Equitable Growth.

Equitable Growth released its monthly Jobs Day Graphs with data from July. The graphs show that wage growth and the prime-age employment rate continue to grow yet neither of these job indicators have recovered fully from the Great Recession.

Links from around the web

Harvard Kennedy School professor and Equitable Growth Steering Committee member Jason Furman offers an explanation for the “wage puzzle” of low wage growth relative to the last time the United States had sustained low unemployment rates in the late 1990s: “this is simply what a high-pressure economy looks like when productivity growth rates and inflation are both relatively low.” [vox]

In response to Furman’s piece, Josh Bivens of the Economic Policy Institute argues that instead of adjusting our expectations downwards for what wage growth “should” look like in the face of simultaneously low inflation and low productivity, their simultaneity should be taken as evidence of just how slack the labor market remains. [epi]

Jeff Bezos’ $150 billion fortune isn’t just a testament to his business skills, argues Annie Lowrey—it’s also a result of deliberate policy choices that have favored capital and corporations over workers. [the atlantic]

Debate about whether high wages led to people finding ways to automate production—kicking off the Industrial Revolution—isn’t just for economic historians: it also has implications for policymakers trying to understand the recent productivity slowdown. [economist]

In an interview with Henry Farrell in The Washington Post, Columbia University economist and Equitable Growth grantee Suresh Naidu explains how Amazon.com Inc.’s Mechanical Turk platform is an example of monopsony power in action. [wapo]

Friday figure

Figure is from “Equitable Growth’s Jobs Day Graphs: July 2018 Report Edition”

 

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Equitable Growth’s Jobs Day Graphs: July 2018 Report Edition

Posted on by Austin Clemens

Earlier this morning, the U.S. Bureau of Labor Statistics released new data on the U.S. labor market during the month of July. Below are five graphs compiled by Equitable Growth staff highlighting important trends in the data.

1.

While employment rate for all workers was little changed in July, prime age workers saw an increase in their employment rate of 0.2 percentage points. Employment rates for prime-age workers are converging toward their pre-recession peak.

2.

Wages continue to grow, but still at lower levels than expected for a tight labor market

3.

Employment growth remains strong in healthcare and education, and continues upward in construction and manufacturing despite the expectations of tariffs impacting these sectors.

4.

More of the unemployed population had lost their job or left their job in July, rather than re-entering the labor force to look for new opportunities.

5.

Workers are reentering the labor force for new jobs, while the proportion of the unemployed, actively looking for work, who were previously out of the labor force has declined.

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Brad DeLong: Worthy reads on equitable growth, July 26–August 2, 2018

Posted on by Emilie Openchowski

Worthy Reads from Equitable Growth:

  1. Anybody looking back at economic history cannot help but note that female physical autonomy and its absence have played an absolutely huge role. Kate Bahn and company are pulling together the evidence that this is not just history—that it still matters a lot in the United States today. Read Kate’s “Understanding the link between bodily autonomy and economic opportunity across the United States.”
  2. Seattle is pursuing (a version of) social democracy in one metropolitan area. In the 2010s, we learned from some of our laboratories of democracy (cough, Kansas and Wisconsin) what really not to do. Will Seattle provide a model for what we should do? Hilary Wething, a 2018 Equitable Growth grantee, will “utilize administrative data from Washington state to study the impact of Seattle’s paid sick time ordinance on earnings, hours, employment levels, and earnings volatility of workers covered by the new law” in her forthcoming research: “Seattle: Paid Sick Leave And Workers’ Earnings Dynamics.”
  3. In my opinion, Arindrajit Dube is one of the best economists around figuring out what we should control for and why in order to achieve real econometric identification. The contrasting pole is simply to throw in a bunch of controls until you have produced the numbers you want. In my view, we do not teach enough what should be controlled for and how, so people pick it up on the fly. Arindrajit has picked it up and is a master. Read Arindrajit Dube’s “Minimum wages and the distribution of family incomes in the United States,” in which he writes: “I find that a 10 percent increase in the minimum wage reduces poverty among the nonelderly population by 2.1 percent and 5.3 percent across the range of specifications in the long run.”
  4. Lyndon Johnson said: “You do not take a person who, for years, has been hobbled by chains and liberate him, bring him up to the starting line of a race and then say, ‘You are free to compete with all the others,’ and still justly believe that you have been completely fair. Thus it is not enough just to open the gates of opportunity. All our citizens must have the ability to walk through those gates. … Equal opportunity is essential, but not enough.” One of our problems in the United States today, however, is that that does not seem to be working for even those African Americans who can and do walk through all of our society’s formal and status gates to opportunity. Read “A College Degree and Marriage Fail to Yield Significant Wealth Gains for Black Women,” by Khaing Zaw, Jhumpa Bhattacharya, Anne Price, Darrick Hamilton, and William Darity, Jr., in which they write: “[In] the story of the American Dream … a college education is viewed as a key driver of upward mobility and the primary vehicle to eradicate racial differences.”

Worthy reads not from Equitable Growth

  1. Martin Wolf in “What really went wrong in the 2008 financial crisis?” reviews Adam Tooze’s book Crashed: How a Decade of Financial Crises Changed the World, in which Tooze writes: “There is a striking similarity between the questions we ask about 1914 and 2008.”
  2. A plea of despair for our politics and public sphere discourse from Duncan Black in “Nobody Who Works Full Time Should Live In Poverty.”
  3. Vijay Govindarajan, Shivaram Rajgopal, and Anup Srivastava note in “Why We Need to Update Financial Reporting for the Digital Era” that “The market caps of just four companies, Apple, Alphabet, Amazon, and Microsoft, now exceed $3 trillion.”
  4. Duncan Black comments in “Remember When Bill Clinton Ended Welfare As We Know It And Took That Off The Table Forever?” that “There’s barely anything resembling ‘welfare’ (aside from rich people welfare) but that doesn’t stop them: ‘(CNN) Republican Rep. Jason Lewis has repeatedly demeaned recipients of welfare and government assistance, calling them “parasites” and “scoundrels,” and said the black community had “traded one plantation for another.’ Conservative white people believe there’s a secret welfare system for black people. You cannot convince them otherwise, no matter what you do.”
  5. The view that all government should do in the economic realm is establish property rights and enforce contracts was never true. Smart governments always did much, much more. (Dumb governments did much, much more too.) Indeed, it is only with proper regulation that a market can fulfill its appropriate social role as a consumer surplus-generating mechanism. Read Diane Coyle in “Three Cheers for Regulation,” in which she writes: “One of the striking changes any rich-world traveler to low-income countries cannot fail to have missed during the past decade or so is the rapid spread of mobile phone use.”
  6. This is a brilliant 10-minute talk on economics as it really is—or should be—by Trevon Logan: “Ohio State University Masterminds,” in which he suggests, “Think of the first questions you ask someone when you meet them: ‘What do you do?’…”
  7. I badly need to find a usable mental model of how employer-side monopsony in labor markets interacts with downward nominal wage rigidity and search and involuntary unemployment. Analyzing just one of these market failures at a time is just not cutting it for me as I try to understand what is going on. Read Heidi Shierholz and Elise Gould, “Why is real wage growth anemic? It’s not because of a skills shortage,” in which they write: “Despite an unemployment rate at 4.1 percent or less since last October, wage growth has been anemic.”
  8. People should read a very nice article from the very sharp Justin Lenhart on one of the three things the Federal Reserve is missing right now. The first thing the Fed misses is that, at least as long as the current interest rate configuration holds, they need an inflation rate of 4 percent per year, not 2 percent per year, in order to have enough running room to fight the next recession. The second thing the Fed misses is that the slope of the Phillips Curve has changed, and so going for faster growth and higher employment right now is not risky but, rather, harvesting low-hanging fruit. The third thing the Fed misses is that a near-inverted yield curve is a danger sign—and yet the Fed is, as in 2006, finding reasons to pretend that “this time is different.” I confess that Fed thought—the governors, the bank presidents, and the staff—is quite opaque to me right now. I do not understand why they are making the analytical judgments that they are making. Justin Lahart makes the effort in “What the Fed Is Missing, Again,” in which he writes: “The Federal Reserve isn’t worried about the yield curve, and it has reason why. The problem: It is pretty much the same reason it wasn’t worried about the yield curve before the financial crisis.”
  9. I very much want everybody to notice that it has now been two-and-a-half years since Jared Bernstein wrote this, and there is still no sign that the economy has reached “full employment” or that the pace of wage and price growth is even beginning to spiral upwards. Thus the Federal Reserve continues to work with a model of the economy in which we should have very little confidence, if any. Read Jared Bernstein from back in 2016: “Important new findings on inflation and unemployment from the new ERP.”
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Understanding the link between bodily autonomy and economic opportunity across the United States

Posted on by Emilie Openchowski
New research shows that access to reproductive health care and the ability to decide if, when, and how to start a family influence women’s opportunities in the U.S. labor market.

On top of all the many work-life challenges women face in the U.S. labor market, there is one that is uniquely female: the need to be able to count on their ability to control their own decisions about if, when, and how to have a child in order to invest in their careers and take risks in the labor market. Economic, political, and social structures that influence control over a woman’s personal life such as family planning decisions are key determinants of how she engages in the economy via the U.S. labor market.

Access to reproductive rights is part and parcel of other structural factors women encounter with wage discrimination, labor market segregation, and lack of access to policies such as paid leave to help balance family responsibilities with working—all of which limit women’s labor market opportunities. While women’s employment has risen from one-third of the labor force in 1950 to almost half (46.8 percent) in 2018, women still carry out the majority of the responsibilities for raising their families and adjust their careers in order to do this work at home. This is why access to family economic security, including to reproductive rights, is an issue of particular importance to women.

The employment outcomes of every worker in the United States also depend, of course, on a variety of factors beyond the simple Econ 101 trade-off between time spent at work and time spent on life’s other demands. Or, put another way, this so-called labor-leisure trade-off often depends on whether the value of not working is less than the amount one would earn from working. Women and men decide whether to invest their time and effort in developing skills through education or training to increase their productivity—their “human capital” in economic parlance—if they think it will increase future earnings and job satisfaction. But business cycles can also impact outcomes—for example, a downturn increasing levels of unemployment, leading to long-term effects of unemployment on human capital development and lifetime earnings for workers affected. And frictions in how workers transition between jobs can give employers wage-setting power, so that they pay workers less than the value workers contribute to their firms.

All of these connective threads are examined in a forthcoming paper of mine, along with co-authors Adriana Kugler at Georgetown University, Melissa Mahoney at the University of North Caroline, Asheville, and Annie McGrew at the University of Massachusetts Amherst—to be published in 2019, in a special issue of Feminist Economics on reproductive rights. In the paper, we examine the past history of evidence of how bodily autonomy, through the availability of contraception and abortion, contributed to women’s economic advancement and what it means for women’s current labor market opportunities. We examine in particular the patchwork of simultaneous expansions and attacks on reproductive health services in the United States and its impact on women in the U.S. labor market.

Underlying empirical evidence on how access to reproductive health care influences economic factors is the notion that what people are able to do and to be—what Nobel Laureate economist Amartya Sen calls capabilities—are a key determinant of economic well-being. As such, Sen’s capabilities approach takes into account how cultural and social determinants may reinforce economic inequality in one’s ability to access and exercise their capabilities. These fundamental concepts have long been understood in the world of reproductive justice, which is defined by movement co-founder Loretta Ross as “the social reality of inequality, specifically, the inequality of opportunities that we have to control our reproductive destiny.”

Economics research provides evidence on the ways in which variable access to reproductive health care—which ensures one can control one’s reproductive destiny—affects women’s ability to fully engage in the economy with equitable opportunities. In the late 1960s and early 1970s, certain states began to grant unmarried women legal access to the contraceptive pill before it was legalized nationally. Women who lived in these states during their early reproductive years (before age 21), which are prime years for investing in human capital, had better economic outcomes subsequently, evident in increased attendance in law school and medical school, and subsequent higher levels of working as lawyers and doctors. Overall, early legal access to the pill increased women’s labor force participation and contributed to the convergence of the gender wage gap.

Research on the economic impact of access to abortion is more ambiguous, but some evidence suggests that it has had positive impacts on high school completion and employment rates for black women. In addition, the research indicates that being denied an abortion leads to a higher incidence of living in poverty afterward.

After the sweeping changes to access to reproductive health care in the early 1970s that came with broad access to the contraceptive pill and the national legalization of abortion, very little research exists on the economic impact of the current and shifting landscape of access to reproductive health care. In particular, the passage of the Affordable Care Act in 2010 increased women’s access through ensuring no-cost contraception, as well as insurance coverage for family planning services and fertility services in some states. At the same time, restrictions on abortion have been passed by state legislatures since the Roe v. Wade Supreme Court decision in 1973 but have increased in both pace and scope since 2010, after the Affordable Care Act went into effect and when abortion opponents gained greater political power in the 2010 midterm elections.

Our forthcoming paper examines the current variations in occupational mobility between states for women and men, as a comparison group, based on the variety of positive and negative indicators of access to reproductive health care. Occupational mobility measures whether workers are able to take risks in the labor market by changing jobs that can lead to rewards such as higher earnings. It’s a measure of labor market dynamism that tells us how well the labor market is functioning for workers.

Our paper uses the U.S. Census Bureau’s Current Population Survey—specifically its Merged Outgoing Rotation Group for 2015 to 2016—merged with data gathered from the Guttmacher Institute on reproductive health care. Measures of restrictions to reproductive health care include Targeted Restrictions of Abortion Providers, or TRAP, laws and mandatory waiting periods to obtain an abortion procedure. Measures of increased access include state Medicaid funding for abortions and state requirements for insurers to provide a broad range of contraceptives. My co-authors and I employ a linear probability model to examine the impact of access to reproductive health care on year-over-year occupational transitions for reproductive age women compared to men as a control group.

TRAP laws are one of the most extreme measures of limited access to reproductive health care since these laws are designed to foster the closure of health care and family planning clinics that provide abortion services. We find that TRAP laws reduce the likelihood of women moving from one occupation to another by 5.8 percent—a phenomenon known as “job lock” in economics—with no effect on men. The results are robust to the inclusion of regional effects, attitudes toward abortion, Gross State Product, and Medicaid expansion after the Affordable Care Act.

Furthermore, TRAP laws reduce transitions into higher paid occupations by 7.6 percent, with no effect on men. Increased access to abortion had a positive impact on reducing job lock, with state Medicaid funding for abortion increasing the likelihood of changing occupations by 6.5 percent when controlling for region and attitudes toward abortion, but not robust to the inclusion of Gross State Product and Medicaid expansion. Medicaid funding for abortion also had a positive impact on men’s transition from nonemployment to employment, robust across specifications. And while contraception usage is a common and widely accepted form of family planning, broad insurance coverage of contraception had less of a robust impact on job lock, with the exception of increasing women’s transitions from nonemployment to employment by 3.4 percent.

Importantly, we also find empirical evidence that access to reproductive health care affects women differently based on their racial and ethnic identity. Expanded contraceptive access didn’t have an impact on the entire sample of women, but it did have a positive impact on women’s transition from nonemployment to employment for female African Americans and Asian Americans.

This research provides evidence for what many women intuitively understand: that the ability to decide if, when, and how to start a family influences their opportunities in the U.S. labor market. The expansion of Medicaid to include robust reproductive health care services are core to the ability of every working-age female to participate in the economy. In contrast, policies that limit bodily autonomy have negative consequences for how women can invest in their careers. This evidence demonstrates how areas previously considered outside the realm of economics are actually crucial to engagement in the economy. Policies that impact individual lives and families outside of the market must be viewed through an economic lens as well so that women and men can advance broadly shared growth.

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