U.S. businesses report that tariff policies will likely lead to price increases and labor market impacts in 2026

Posted on by Maria Monroe
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Key takeaways:

  • Across the board, U.S. businesses report concern about the uncertainty created by rapid and substantial fluctuations in tariff policy.
  • Many businesses have already increased prices or have plans to do so, and dwindling inventories will increase pressure on firms to raise prices.
  • Labor market effects of tariffs—both positive and negative—are beginning to show.

Overview

As 2026 begins, U.S. manufacturers are contending with a varied and uncertain economic environment. Many are weighing growth driven by domestic investments in data centers and artificial intelligence against the deleterious effects of a shifting and loophole-ridden global tariff environment. Tariff-impacted manufacturers, particularly in the transportation equipment sector, employ substantial numbers of U.S. workers and are often major economic pillars of the communities where they operate. As such, these firms’ tariff-related decisions on investment and hiring stand to have a major impact in 2026 and beyond.

Predicting the effects of the Trump administration’s new tariff policies on U.S. workers, consumers, and businesses has thus far been difficult. Recent research from economists at Harvard University and the University of Chicago shows that the tariff rates actually paid by U.S. importers is meaningfully lower than nominal tariff rates established by trade policy, reflecting the sheer complexity of the current tariff regime and the possibility of widespread tariff evasion.

Disentangling the effects of tariffs from other major economic drivers—the AI and data center boom, immigration crackdown, rollback of Biden-era industrial policy, and elimination of electric vehicle tax credits and other climate policy—is likewise extremely challenging. Equitable Growth’s own quantitative tariff project has sought to estimate the future costs of tariffs on U.S. industries but is currently limited by the use of nominal policy rates and by the difficulty in capturing the administration’s complex tariff-layering scheme.

Yet a review of recently released qualitative information from tariff-impacted businesses can shed some light on current and future tariff costs, as well as discussions of firm-level responses to tariff pressures. The two primary qualitative sources reviewed in this column are corporate filings through the third quarter of 2025, made public through the U.S. Securities and Exchange Commission’s Electronic Data Gathering, Analysis, and Retrieval portal, and the Federal Reserve’s Beige Book publications throughout 2025.

SEC filings show many U.S. firms revised their tariff cost estimates throughout 2025

How firms report they have responded to the Trump administration tariffs could be economically positive—for example, the policies resulted in some firms boosting investment in U.S. production to mitigate tariff costs and improve supply chain resiliency. Firms alternatively could report negative responses to the tariffs, such as increasing prices or laying off workers to contain costs associated with tariffs.

In October 2025, for example, U.S. automaker Stellantis (which was formed when U.S. auto giant Chrysler merged with European car companies Fiat and PSA Group in 2021) announced a $13 billion planned investment in the United States to create more than 5,000 new jobs and boost its U.S. output by 50 percent. While the company did not explicitly mention trade policy in its press release announcing the plan, its CEO said in a late October earnings call that its strategy of expanding its U.S. footprint has “a positive side effect to reduce exposure against tariffs.” Investors and the United Auto Workers union more directly attributed the decision to tariff pressures.

Stellantis’ projection of tariff costs changed over the course of 2025 as it contended with rapid swings in U.S. trade policy. In a July 2025 report, Stellantis estimated its tariff bill in the first half of the year at roughly 300 million euros (about $354 million at the contemporaneous exchange rate), projecting annual costs of up to 1.5 billion euros—a meaningful hit, compared to the company’s reported FY2024 net profit of about 5.5 billion euros. In third quarter documents, however, Stellantis downwardly revised its projected annual tariff cost from 1.5 billion euros to 1 billion euros and said the firm is prepared to “manage this new variable of our business equation.”

Other major transportation manufacturers similarly adjusted their tariff cost projections throughout the year. In an early May 2025 filing to the U.S. Securities and Exchange Commission, U.S. automaker Ford said it incurred about $200 million in tariff costs in the first quarter of 2025 and projected annual net costs of $1.5 billion. In a filing covering the second quarter of the year—the first filing period after the White House’s Liberation Day announcement of 10 percent across-the-board tariffs—Ford reported $800 million in quarterly tariff costs and increased its annual net cost projection to $2 billion. In its third quarter SEC filing, Ford reported $700 million in tariff costs and cut its annual projection to $1 billion, citing expected refunds under an import adjustment offset program created by the White House. That projection is meaningful in comparison to Ford’s FY2024 reported net income of about $5.9 billion.

U.S. automaker GM’s estimates of annual tariff costs likewise fluctuated throughout 2025. In a first quarter SEC filing, GM projected an annual tariff impact of up to $5 billion; a third quarter filing revised that projection down to $4.5 billion, citing the same import adjustment offset program that Ford also cited. Caterpillar, which produces heavy transport equipment for construction and manufacturing firms, initially projected annual tariff costs of up to $1.5 billion before upwardly revising that estimate to $1.75 billion in the third quarter. Other transportation equipment firms, including Lockheed Martin and John Deere, provided regular updates on tariff costs as they were incurred during the year, citing impacts of $350 million and $600 million, respectively.

All these firms, and many others, discussed tariff costs in qualitative terms in their SEC filings, describing the trade policy environment as “highly dynamic,” “fluid,” and “difficult to predict.” Several filings mentioned plans to mitigate tariff costs, including this instructive paragraph from Lockheed Martin’s 2025 Q3 filing detailing the limitations of mitigation efforts:

We are pursuing available options to fully or substantially mitigate the impact of the increased tariffs or any future tariffs, including seeking exclusions, through drawbacks, refunds, recovering the costs in the pricing of our products, securing alternative sources of materials or products, or, in certain cases, qualifying for duty-free treatment. However, these actions may not be successful in fully or substantially mitigating the impact of tariffs, and, even if successful, there could continue to be a near-term volatility in cash flows due to the timing of when tariffs are paid compared to when such costs may be refunded or recovered.

The Fed’s Beige Book reveals how tariff uncertainty affects U.S. firms’ planning for the future

The second valuable source of qualitative discussion of tariff costs comes from the Federal Reserve’s Beige Book, published eight times annually in advance of Federal Open Market Committee meetings. The Beige Book contains anecdotal references to economic conditions across the Fed’s 12 districts, collected through interviews with business leaders and market experts.

In the late April Beige Book, as White House tariff policy was beginning to come into focus, firms expressed pessimism about the future, with some producers planning to pass through tariff costs to consumers and shortening pricing windows for other business clients in response to both existing and anticipated tariffs. Manufacturers in particular complained that tariffs were not only hurting consumer demand and pushing up prices but also complicating future business planning. Some firm planning moved away from efficiency-improving capital investments toward a focus on mitigating tariff costs.

Most Beige Book discussion of business responses to tariffs focused on price increases and supply chain adjustments, but some labor market impacts began to show as the year progressed. The August Beige Book, for example, mentioned firm behavior in the Philadelphia region to “adjust both workforces and prices in response to tariffs.” The October publication mentioned one manufacturer based in the Boston region laying off workers “to offset tariff-related cost increases.”

The August publication also mentioned dwindling inventories among some tariff-impacted businesses, meaning input costs could rise and soon force price pass-throughs to customers—which thus far have been relatively modest.

All of the Fed’s Beige Book publications this year mentioned uncertainty as a core feature of U.S. tariff policy. This uncertainty broadly complicates the ability of firms to follow through on investment strategies—despite some headline-drawing positive decisions such as the aforementioned $13 billion Stellantis U.S. expansion plan.

Conclusion

Rapid fluctuations in trade policy over the course of 2025 brought a high degree of uncertainty to U.S. businesses, particularly for tariff-impacted manufacturers and their downstream business clients. SEC filings covering the full breadth of 2025 are due to be submitted by major manufacturers—including the big employers in transportation equipment and automakers—in the coming months, providing a more complete look at tariff costs throughout the year and the strategies firms actually used to mitigate them, as well as projections for the trade policy environment in 2026.

If the discussions in SEC filings and other qualitative sources are any guide—and evidence suggests quantitative and qualitative information in corporate filings are predictive of firm outcomes—substantial prices increases and even labor market impacts are more likely in 2026 if White House trade policy continues along its “highly dynamic” path.

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ASSA 2026 Round-up: Day 3

Posted on by Emilie Openchowski
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Yesterday was the third and final day of the 2026 annual meeting of the Allied Social Science Associations, which is organized by the American Economic Association. The 3-day conference, held in Philadelphia this year, features hundreds of sessions covering a wide variety of economics and other social science research. This year, Equitable Growth’s grantee network, Steering Committee, and Research Advisory Board and their research are well-represented throughout the program, featured in many different sessions of the conference.

Below are lightly edited abstracts from some of the papers and presentations that caught the attention of Equitable Growth staff during the second day of this year’s conference, with links to the sessions in which the papers were presented. Equitable Growth also organized two different paper sessions on the third day of the event, one on participation and trends in U.S. social insurance programs and the other on the economics of the clean energy transition.

Want more? Check out our highlights from the first and second days of this year’s conference.

The Macroeconomics of Net Zero

Neil R. Mehrotra, Federal Reserve Bank of Minneapolis

Abstract: This paper examines the macroeconomic cost and implications of transitioning to net-zero emissions. The macroeconomic cost of achieving zero emissions is a combination of lower output due to higher energy prices and higher investment due to more costly technology. Along the transition path, a net-zero target operates as both an anticipated negative productivity shock and a negative capital shock. Thus, for monetary policy, net zero is a negative aggregate demand shock that lowers the natural rate of interest. Using projected technology costs and net-zero modeling scenarios, decarbonization of U.S. electric power generation is estimated to cost less than 0.2 percent of steady state consumption.

Liquid Wealth and Consumption Smoothing of Typical Labor Income Shocks

Peter Ganong, University of Chicago; Damon Jones, University of Chicago; Pascal Noel, University of Chicago

Abstract: We develop a methodology to identify exogenous, transitory, and unpredictable shocks to labor income by combining elements from both the quasi-experimental and more structural approaches in the consumption smoothing literature. We find that household consumption is highly sensitive to monthly labor income shocks. This suggests that temporary income volatility has a large welfare cost. Furthermore, consumption is most sensitive for households with low liquidity and almost unchanged for households with high liquidity. Our findings that consumption is sensitive in a welfare-relevant setting and that there is a steep, precisely estimated liquidity gradient help to distinguish between competing classes of consumption models.

This research was funded in part by Equitable Growth.

Unemployment Insurance Generosity and the Wages of New Hires

Kevin Rinz, Federal Reserve Bank of Cleveland; David N. Wasser, U.S. Census Bureau

Abstract: The federal government made Unemployment Insurance benefits substantially more generous in response to the COVID-19 pandemic, leading some observers to worry that emergency UI programs were reducing labor supply and forcing firms to bid up wages excessively, especially for low-wage jobs. Were they, and did the effects of pandemic UI programs differ from the effects of Unemployment Insurance at more typical levels of generosity? Prior to 2020, we find that increases in UI generosity modestly increased the wages of new hires from unemployment, with larger effects at the bottom of the wage distribution, and reduced hiring rates. New hires from employment and continuously employed workers also experience wage gains due to increases in UI generosity, suggesting that macroeconomic channels are likely important for transmitting wage effects. During and after the pandemic, however, wages were minimally responsive to UI generosity throughout the distribution and for all types of workers, and we find no evidence of effects on hiring.

Occupational Choice and the Intergenerational Mobility of Welfare

Corina Boar, New York University; Danial Lashkari, Federal Reserve Bank of New York

Abstract: How does parental income shape labor market outcomes? Standard measures of intergenerational mobility typically focus on earnings as the main outcome, but parental income
may also influence children’s access to more fulfilling careers. Using U.S. survey data, we
show that children from higher-income families are significantly more likely to select occupations offering greater nonmonetary qualities, such as autonomy, intellectual stimulation, and workplace respect. To explain this pattern, we develop and estimate a model where parental resources allow children to prioritize occupational quality over earnings. When we adjust earnings to compensate for the monetary equivalent of these desirable qualities, intergenerational mobility falls by 15 percent to 35 percent, revealing that traditional income-based measures overstate the equality of opportunity. Finally, we document recent labor market shifts toward higher-quality occupations that raise our compensated measure of intergenerational mobility, suggesting structural changes that may have led to more equal distributions of opportunity.

Who Bears Climate Change Damages? Evidence from the Gig Economy

Anna Papp, Columbia University

Abstract: This paper provides the first causal evidence that gig economy platforms enable consumer adaptation to climate change while shifting climate-related damages to workers. Across diverse markets and climates (the United Kingdom, Germany, France, and Mexico), I leverage detailed transaction data and labor force surveys and exploit exogenous variation in daily maximum temperatures. On hot days relative to moderate days, I find an 8 percent to 16 percent increase in food-delivery expenditures and a similar decline in dine-in restaurant spending, driven primarily by higher-income consumers. On these days, food-delivery workers work 1.7 hours more on average, exposing them to material health risks. Yet I find that their hourly wages do not increase, despite the flexibility of wages in this setting. This response to heat is unique to platform-based work. I show that worker beliefs are the main mechanism: Platform workers believe that declining tasks—particularly during periods of peak demand such as hot days—deprioritizes them for future work. My findings raise broader questions about algorithmic fairness and highlight environmental equity concerns from unequal access to climate adaptation.

The Macroeconomics of Tariff Shocks

Adrien Auclert, Stanford University; Matthew Rognlie, Northwestern University; Ludwig Straub, Harvard University

Abstract: We study the short-run effects of import tariffs on Gross Domestic Product and the trade balance in an open-economy New Keynesian model with intermediate input trade. We find that temporary tariffs cause a recession whenever the import elasticity is below an openness-weighted average of the export elasticity and the intertemporal substitution elasticity. We argue this condition is likely satisfied in practice because durable goods generate great scope for intertemporal substitution and because it is easier to lose competitiveness on the global market than to substitute between home and foreign goods. Unilateral tariffs do tend to improve the trade balance, but when other countries retaliate, the trade balance worsens and the recession deepens. Taking into account the recessionary effect of tariffs dramatically brings down the optimal unilateral tariff level derived in standard trade theory.

A Large-Scale Evaluation of Merger Simulations

Vivek Bhattacharya, Northwestern University; Gastón Illanes, Northwestern University; Avner A. Kreps, Northwestern University; José D. Salas, Northwestern University; David Stillerman, American University

Abstract: We conduct merger simulations for a set of 37 U.S. consumer packaged-goods mergers consummated over a decade, which allows us to directly compare the predictions from these simulations to realizations of prices. We find that the unilateral price effects computed by the merger simulations are poor predictors of the realized changes in prices. This is true both across mergers and across different geographic markets within a merger. We rule out changes in product assortment as a possible explanation for all but a few mergers. In ongoing work, we are expanding our sample and evaluating the performance of more flexible models of demand.

This research was funded in part by Equitable Growth.

Benefits, Barriers, and Strategies for High Road Worker Ownership

Danny Spitzberg, University of California, Berkeley

Abstract: California, the world’s fifth-largest economy, has a unique history of worker ownership and many promising futures. What should we learn from worker-owned firms, high-road employment, and organized labor? How can worker ownership improve job quality, firm performance, and community well-being? This presentation introduces research and analysis for California’s Promote Ownership by Workers for Economic Recovery, or POWER, Act, published in February 2025. This presentation covers the benefits, barriers, and strategies of High Road Worker Ownership, or HRWO, an original, evidence-based framework that unites the most promising elements of high-road employment and worker-owned business models to improve both job quality and firm performance. This presentation focuses on two specific strategies: certifying HRWO businesses and advisors to create new markets and funding umbrella groups that provide back-office services and technology support to multiple businesses. The session will also include a Q&A focus on opportunities for governments, philanthropies, and economic development organizations.

The Macroeconomic Effects of Supply Chain Shocks: Evidence from Global Shipping Disruptions

Diego Känzig, Northwestern University; Ramya Raghavan, Northwestern University

Abstract: This paper studies the macroeconomic consequences of global supply chain disruptions, focusing on maritime choke points critical to international trade. We identify supply chain shocks based on disruptions at key locations such as the Suez and Panama canals, using narrative accounts and high-frequency financial data. These shocks lead to a significant and persistent increase in shipping costs, which, in turn, has substantial economic consequences. Economic activity falls significantly and producer and consumer prices rise persistently. The persistently elevated shipping costs also lead to a sluggish expansion of the world merchant fleet and a significant increase in measures of supply chain shortages, but are not associated with changes in geopolitical risk, consistent with our interpretation of exogenous supply chain disruptions. We use our estimates to discipline a network model of the U.S. economy and estimate key input elasticities.

This research was funded in part by Equitable Growth.

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ASSA 2026 Round-up: Day 2

Posted on by Emilie Openchowski
""

Yesterday was the second day of the 2026 annual meeting of the Allied Social Science Associations, which is organized by the American Economic Association. The 3-day conference, held in Philadelphia this year, features hundreds of sessions covering a wide variety of economics and other social science research. This year, Equitable Growth’s grantee network, Steering Committee, and Research Advisory Board and their research are well-represented throughout the program, featured in many different sessions of the conference.

Below are lightly edited abstracts from some of the papers and presentations that caught the attention of Equitable Growth staff during the second day of this year’s conference, with links to the sessions in which the papers were presented.

Come back tomorrow morning for highlights from day three, and check out yesterday’s post for highlights from the first day.

Hiring Discrimination Against Transgender Job Applicants in the U.S. Labor Market

Emily Beam, University of Vermont; Ivy Stanton, University of Mannheim

Abstract: Discrimination against transgender individuals harms their well-being and contributes to lower incomes and higher poverty rates. Access to employment opportunities is a critical determinant of lifetime earnings and other outcomes, yet surveys document frequent discrimination against transgender individuals. While recent studies show hiring discrimination against transgender applicants, analyses examining intersections with gender and race remain limited, as does research on geographic variation, particularly given differences in state and local anti-trans policies. We conducted a correspondence study to measure discrimination against transgender applicants and examine how it varies with applicant gender and race. We submitted roughly 5,600 resumes for entry-level jobs in food and retail sectors across 49 markets in 2023–2024. We signaled gender identity and race through names, pronouns, and statements about differently gendered legal names to indicate transgender identity. We measured differences in callback rate between cisgender and transgender applicants and examined results by gender identity (cisgender and transgender women and men, as well as nonbinary applicants) and race (Black vs. White applicants). Additionally, we tested for heterogeneity between more and less trans-friendly states, using data on recently introduced or passed state-level anti-trans legislation. This research provides large-scale experimental evidence on how gender identity, race, geography, and policy environments intersect in labor market discrimination. The results identify which demographic groups and geographic areas face the most severe employment discrimination, informing targeted policy interventions to protect transgender job-seekers.

Race, Ethnicity, and Nonpayment of Unemployment Insurance: The Role of the Employer

Marta Lachowska, Institute for Employment Research; Stephen A. Woodbury, Michigan State University

Abstract: This study examines whether Unemployment Insurance claimants who are Black, Hispanic, or Asian are more likely than White claimants to have their claims disputed by an employer or ultimately denied by the UI agency—issues that are central to ongoing concerns about equity in access to UI benefits. Using UI administrative wage and claim records from Washington state from 2005 to 2013, we estimate the extent to which differences in claim disputes and denials across racial and ethnic groups can be explained by observable differences in worker characteristics, claim characteristics (such as conditions of job separation), and employer behavior. Our primary interest is in the role employers play in these outcomes. We estimate linear probability models of dispute or denial, including indicators for race and ethnicity, characteristics of the claimant and the claim, and a leave-one-out measure of the employer’s average dispute or denial rate. We first apply the decomposition method developed by Gelbach (2016) to quantify the importance of differences in claimant characteristics versus employer behavior. We condition on employer-specific dispute and denial rates to assess whether workers of different racial and ethnic backgrounds systematically sort across employers. Second, we conduct a “switcher” analysis of workers with multiple UI claims filed with different employers, which isolates the influence of employer behavior on disputes and denials. In particular, we examine whether the impact of an employer’s probability of disputing a claim varies with the worker’s race or ethnicity. We also examine whether differences by race and ethnicity in employer-dispute rates ultimately lead to differences in UI denial rates or whether the UI agency is able to mitigate the effects of employer behavior. We conclude by discussing the implications of employer-driven disparities for the functioning of the UI system.

This research was funded in part by Equitable Growth.

The “Great Reshuffling” and Entrepreneurship

Matthew Denes, Carnegie Mellon University; Spyridon Lagaras, University of Illinois; Margarita Tsoutsoura, Washington University in St. Louis

Abstract: The COVID-19 pandemic accelerated a paradigm shift in labor markets toward nontraditional employment arrangements, with flexibility increasingly developing into a critical differentiating factor. We study the impact of the “Great Reshuffling” on transitions into entrepreneurship using administrative data from U.S. tax returns. We find a large increase in entry to entrepreneurship, particularly for women and women with dependents. We examine the role of child care disruptions, remote-work availability, and displacement, finding support in favor of the pandemic-driven increase in child care responsibilities as a primary factor. We show that transitions are persistent and lead to higher income for women. The pandemic shifted the composition of firms in the economy toward digital retail stores. Firms started by women survive more and have higher profitability. Overall, the results indicate that the pandemic shifted individuals’ preferences toward work.

This research was funded in part by Equitable Growth.

Monopolizing Minds: How M&As Stifle Innovation Through Labor Market Power

Alex Xi He, University of Maryland; Jing Xue, Georgia State University

Abstract: This paper argues that mergers and acquisitions reduce inventors’ innovation incentives and outputs by increasing firms’ labor market power and limiting the rents inventors can capture. We test this mechanism using individual-level longitudinal data from the U.S. Census Bureau. We find that, at both target and acquiring firms, inventors exposed to greater increases in labor market concentration—particularly in already-concentrated markets—produce fewer patents, earn lower wages, and exhibit reduced job mobility following mergers. In aggregate, the negative impact of increased labor market power on inventor productivity outweighs the potential benefits from innovation synergies. Overall, our findings highlight the critical role of labor market dynamics and inventor incentives in evaluating the innovation consequences of mergers and aquisitions.

Artificial Intelligence and the Labor Market

Menaka Hampole, Yale University; Dimitris Papanikolaou, Northwestern University; Lawrence D.W. Schmidt, Massachusetts Institute of Technology; Bryan Seegmiller, Northwestern University

Abstract: We leverage recent advances in natural language processing to construct measures of workers’ task exposure to AI and machine learning technologies over the 2010 to 2023 period, varying across firms and time. Using a theoretical framework that allows labor-saving technology to affect worker productivity both directly and indirectly, we show that the impact on wage earnings and employment can be summarized by two statistics. First, labor demand decreases in the average exposure of workers’ tasks to AI technologies. Second, holding the average exposure constant, labor demand increases in the dispersion of task exposures to AI as workers shift effort to tasks not displaced by AI. Exploiting exogenous variation in our measures based on preexisting hiring practices across firms, we find empirical support for these predictions, together with a lower demand for skills affected by AI. Overall, we find muted effects of AI on employment due to offsetting effects: Occupations highly exposed to AI experience relatively lower demand compared to less exposed occupations, but the resulting increase in firm productivity increases overall employment across all occupations.

Gender, Race, and Online Platform Work in the U.S.: An Intersectional Analysis

Rachel Marie Brooks Atkins, St. John’s University; Quentin Brummet, NORC University of Chicago; Katie Johnson, NORC University of Chicago

Abstract: This study uses data from the Entrepreneurship in the Population Survey to measure the prevalence, earnings, and motivations for online platform work by race, gender, and their intersection. Though online platform work represents an important segment of the labor market, prior studies often fail to adequately capture its demographic nuances. Our analysis reveals gender and racial disparities in prevalence of online platform work. Earnings data show significant disparities, with women and racial minorities disproportionately concentrated in lower-income categories. White men dominate higher-earning brackets. Motivations for platform work also vary. Women frequently cite flexibility and a desire to supplement pay. Black workers pursue platform work for their primary source of income and to fulfill their entrepreneurial ambitions, while Hispanic workers emphasize career transitions and autonomy. This analysis also investigates the intersectional nature of labor market participation in the gig economy and suggest that the structural inequalities of traditional employment are mirrored, and in some cases amplified, in online platform work. Policymakers and researchers must address these disparities to ensure equity in the evolving digital labor market.

Did the Pandemic Spur the Creation of Jobs in the Transportation and Warehousing Sector that Benefitted Black Workers without College Degrees in the U.S.?

Michelle Holder, City University of New York

Abstract: The economic recovery in the United States after the onslaught of the COVID-19 pandemic included considerable job growth in the transportation and warehousing industrial sector: This sector gained 838,000 jobs on an annualized basis from 2019 to 2023, accounting for nearly 1 in 4 jobs added after the economy regained the total number of jobs lost during the pandemic. While the U.S. economy experienced strong job growth through 2024, the industrial mix of jobs changed after 2019; the number of jobs in transportation and warehousing grew by 11 percent from 2019 to 2023, while employment in sectors such as leisure and hospitality and retail sales remained below their pre-pandemic levels during the same time period. Given employment growth in transportation and warehousing, as well as the representation of Black workers in this sector, this research seeks to address the following three questions: Did the pandemic spur the creation of jobs in the transportation and warehousing sector jobs that benefitted Black workers, particularly those who do not possess a college degree? Did Black women benefit from this sector’s job growth, and, if not, why not? Were the jobs being created in transportation and warehousing “good” jobs, defined in this research as offering compensation that was not predominantly low-wage, as well as providing health insurance benefits, fair working conditions and full-time employment?

Effects of Fair Workweek Laws on Labor Market Outcomes

Joseph Pickens, United States Naval Academy; Aaron Sojourner, W. E. Upjohn Institute for Employment Research

Abstract: This paper models Fair Workweek regulations that require employers to provide employees with schedule predictability (via advance notice of their work schedule and premium payments for short-notice changes) and access to hours (meaning they must offer open hours to existing employees before hiring new workers). We develop a theoretical model of employers’ responses to these provisions and their implications for employment. Guided by the model, we estimate the effects of a recently adopted Fair Workweek regulation in New York City’s fast-food sector using a synthetic difference-in-differences design. We find a null effect.

Electric Vehicle Policies in the Inflation Reduction Act: When Do Climate Provisions and Industrial Policy Goals Align?

Yongjoon Park, University of Massachusetts-Amherst; Yichen Christy Zhou, Clemson University; Joshua Linn, University of Maryland

Abstract: It is becoming increasingly common to package environmental policies with industrial policies that promote domestic manufacturing, businesses, and jobs. Recent examples include the Inflation Reduction Act’s electric vehicle tax credits in the United States and the Green Deal Industrial Policy in the European Union. These policies intend to “kill two birds with one stone,” yet these two goals may not necessarily align. This study examines whether the dual objectives of EV subsidies in the IRA—reducing greenhouse gas emissions and boosting domestic vehicle production—exhibit synergies or create conflicts. Whether these goals are complementary or create trade-offs, and whether these subsidies are efficient, crucially depends on what eligible electric vehicles replace, particularly how consumers substitute between eligible electric cars and other vehicles (e.g., other energy/fuel-efficient electric vehicles, domestically produced gasoline vehicles). To provide useful policy implications, it is crucial to obtain accurate estimates of the substitution patterns between products for the consumer. Therefore, we estimate a structural model of new vehicle demand and supply in the United States while incorporating information on production location, which we then use to simulate policy counterfactuals.

Preschool as Child Care: Head Start Duration Expansions and Maternal Employment

Chloe Gibbs, University of Notre Dame; Esra Kose, University of California, Merced; Maria Rosales-Rueda, University of Delaware

Abstract: Early childhood care and education settings serve two purposes simultaneously: supporting children’s development and early learning and facilitating parents’ gainful activities. We examine how access to full-day Head Start programs affects maternal labor supply, leveraging a recent funding eligibility rule that expanded the duration of Head Start programs. In 2016, the U.S. Department of Health and Human Services announced the availability of supplemental funds to extend the duration of Head Start programming. Head Start grantees serving fewer than 40 percent of their center-based slots for a full school day and full school year were eligible to apply. Our analysis leverages this policy threshold and combines data on Head Start enrollment and center locations with parents’ employment data from the annual American Community Survey from 2008 to 2020. We first demonstrate that the 2016 funding availability significantly increased full-time Head Start enrollment. Next, using variation in access to full-day Head Start across place and time, we find that single mothers of preschool-aged children increase their labor force participation and work more hours per week. Our findings provide new evidence on the broader effects of early childhood investments on mothers’ economic opportunities.

One Giant Leap: Emancipation and Aggregate Economic Gains

Richard Hornbeck, University of Chicago; Trevon Logan, Ohio State University

Abstract: We characterize American slavery as inefficient, whereby emancipation generated substantial aggregate economic gains. Coercion distorted labor markets, raising the marginal cost of labor substantially above its marginal benefit. Production came at immense costs imposed on enslaved people that reduced aggregate economic surplus (the total value of output minus total costs incurred). Costs of enslavement are inherently difficult to quantify, which leads to a wide range of quantitative estimates from this conceptual shift, but we calculate that emancipation generated aggregate economic gains worth a 4 percent to 35 percent increase in U.S. aggregate productivity (or worth 7–60 years of technological innovation). Emancipation decreased output but decreased costs substantially more, illustrating the substantial potential for aggregate economic gains in the presence of severe sectoral misallocation.

State Tax Policy, Health Outcomes, and Racial Animus

Krista Ruffini, Georgetown University; Bradley L. Hardy, Georgetown University

Abstract: The United States is a federal system in which federal, state, and local governments share responsibilities for raising tax revenue and investing in public goods. This decentralized system means that states have considerable autonomy in determining how to structure their revenue base in progressivity and levels and what types of goods and services (and for whom) to spend this revenue on. At the same time, there is substantial variation in health outcomes across states, and, within states, Black individuals tend to have worse average health outcomes than non-Hispanic White individuals, even after accounting for factors such as socioeconomic status. Despite substantial cross-state variation in both the availability of public goods and the progressivity of state tax systems, there is relatively little work examining how these state level decisions shape child health and health inequities by race and ethnicity. This paper fills this gap in knowledge by providing some of the first evidence describing the relationship between state taxes, public goods, and child health. We explore measures of health separately by race and ethnicity in order to explore the extent to which tax and transfer policies shape health inequities. We find that more progressive tax systems at the state level are also associated with more robust state safety nets. Tax and transfer policies that serve lower-income households are also associated with better infant health along multiple dimensions and lower racial health inequities.

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ASSA 2026 Round-up: Day 1

Posted on by Emilie Openchowski
""

Yesterday was the first day of the 2026 annual meeting of the Allied Social Science Associations, which is organized by the American Economic Association. The 3-day conference, held in Philadelphia this year, features hundreds of sessions covering a wide variety of economics and other social science research. This year, Equitable Growth’s grantee network, Steering Committee, and Research Advisory Board and their research are well-represented throughout the program, featured in many different sessions of the conference.

Below are lightly edited abstracts from some of the papers and presentations that caught the attention of Equitable Growth staff during the first day of this year’s conference, with links to the sessions in which the papers were presented. Equitable Growth also organized a paper session on the first day of the conference focused on innovation and labor market dynamics, which was chaired by our former AEA Summer Economics Fellow April Burrage of Stanford University.

Come back tomorrow morning for highlights from day two and Tuesday morning for highlights from day three.

Franchising and Labor Standards Compliance in the Fast-Food Industry

Gonçalo Costa, Harvard University; Daniel Schneider, Harvard University; David Weil, Brandeis University and Harvard University

Abstract: Over the past decades, the U.S. labor market has been transformed by increasing fissuring and a breakdown of traditional employment relations, raising the specter of workers losing the protections of core labor standards. One common model of fissured work is franchising, found broadly in the economy but especially in food service. Theory and prior evidence suggest that this form of fissuring may lead to noncompliance with labor standards, but limited data on franchise structure and direct measurement of violations have proved an impediment to research on this topic. We use novel employer-employee linked survey data on labor standards violations combined with administrative data on franchise density to investigate how franchising affects compliance with labor standards in the fast-food industry. We find that companies with a greater density of franchise establishments exhibit significantly higher rates of labor law violations. The effects are particularly pronounced for newer workplace regulations, such as fair workweek and paid sick leave laws. These findings are robust across specifications with varying measures of franchise status and confounding factors. Furthermore, we employ event study analyses examining differential compliance patterns around the implementation of fair workweek, paid sick leave, and minimum wage requirements. Our results carry implications for the strategic targeting of labor standards enforcement.

Path Dependence in the Labor Market: The Long-run Effects of Early Career Occupational Experience

Adam Isen, Johns Hopkins University; Jesse Bruhn, Brown University; Jacob Fabian, Brown University; Matthew Gudgeon, Tufts University; Aaron Phipps, U.S. Military Academy – West Point

Abstract: We study the causal effect of early career occupational experiences on labor market outcomes. To do so, we pair more than two decades of administrative tax data with internal personnel records from the largest employer of young adults in the United States: the U.S. Army. Soldiers work in a diverse and varied set of military occupations, including noncombat roles such as mechanics, legal services, financial specialists, cooks, dental hygienists, police officers, and network/computer specialists. Eligibility is determined by test score cut-offs, which we leverage in a series of 37 regression discontinuity designs. We find that early career occupational experiences generate a substantial amount of path dependence, with point estimates that suggest a 19 percentage point increase in the likelihood of being observed in an identical or closely related occupation as much as 20 years later. We also find highly heterogeneous yet predictable effects on long-run wages. Implied changes in occupational earnings premia explain more than 60 percent of the causal variation in earnings, with slope estimates that suggest improvements in average occupational wage rates are tightly linked to actual causal effects on earnings. Changes in nonroutine and routine task intensity also explain causal wage gains; however, educational attainment and union density do not. Taken together, our results highlight the importance of early career occupational experience as a key channel for promoting long-run economic success among young adults who are not college bound.

Does Racial Hierarchy Really Harm Everyone?  Relative Status Envy and the Economics of Reparative Reforms

David McMillon, Emory University

Abstract: This paper contributes to stratification economics by examining the conditions under which reparative race-focused reforms improve macroeconomic output, material conditions (consumption), and social welfare. While recent high-profile studies claim that equitable reforms would boost Gross Domestic Product, many rely on static accounting, ignoring behavioral feedback and relative intergroup status envy. I develop a dynamic representative agent model in which groups derive utility from relative status, face wage and human capital distortions, and choose endogenous effort. A planner uses proportional taxation to finance reforms for the disadvantaged group, rebating revenues as transfers. I derive conditions for reforms to generate increased aggregate output, Pareto consumption gains, and Pareto welfare gains, given status-envy parameter γ. Using a literature-based calibration, most of the policy space enhances GDP and consumption for both groups. Fewer policies even generate Pareto welfare gains, despite significant status envy—suggesting equity, productive efficiency, and political feasibility can coexist for appropriately designed reparative reforms. The optimal policy raises GDP by 42 percent with Pareto-consumption gains. However, it only Pareto-improves Welfare if γ ≤ 0.41—interpretable as a willingness to pay at most 41 cents to block one dollar of exogenous disadvantaged gains. Beyond a larger threshold, a welfare-maximizing planner rejects the output-maximizing reform, and every percent increase in status envy reduces GDP gains by 0.24 percent. This illustrates tension between output-based and preference-based efficiency, highlighting how normative definitions shape what it means for an equitable policy to be “efficient” under racial hierarchy.

This research was funded in part by Equitable Growth.

Worker Rights in Collective Bargaining

Benjamin Arold, University of Cambridge; Elliott Ash, ETH Zurich; W. Bentley MacLeod, Yale University; Suresh Naidu, Columbia

Abstract: This paper proposes novel natural language methods to measure worker rights from collective bargaining agreements for use in empirical economic analysis. Applying unsupervised text-as-data algorithms to a new collection of 30,000 CBAs from Canada in the period 1986–2015, we parse legal obligations (e.g., “the employer shall provide…”) and legal rights (e.g., “workers shall receive…”) from the contract text. We validate that contract clauses provide worker rights, which include both amenities and control over the work environment. Companies that provide more worker rights score highly on a survey indicating pro-worker management practices. Using time-varying province-level variation in labor income tax rates, we find that higher taxes increase the share of worker-rights clauses while reducing pre-tax wages in unionized firms, consistent with a substitution effect away from taxed compensation (wages) toward untaxed amenities (worker rights). Further, an exogenous increase in the value of outside options (from a leave-one-out instrument for labor demand) increases the share of worker rights clauses in CBAs. Combining the regression estimates, we infer that a one-standard-deviation increase in worker rights is valued at about 5.7 percent of wages.

Labor Supply Responses to Income: Evidence from Child Tax Benefits

Jacob Goldin, University of Chicago; Tatiana Homonoff, New York University; Neel Lal, University of Chicago; Ithai Lurie, U.S. Department of Treasury; Katherine Michelmore, University of Michigan; Matthew Unrath, University of Southern California

Abstract: Many U.S. social programs condition benefit eligibility on work. Eliminating work requirements would better target benefits to the neediest families but would also attenuate pro-work incentives. We study how expanding child tax credits to nonworkers affects maternal labor supply, using administrative tax records and variation in state credit eligibility from quasi-random birth-timing. We employ a novel method for using placebo analyses to maximize the precision of our regression discontinuity estimator. Eliminating work requirements causes very few mothers to exit the labor force; our 95 percent confidence intervals exclude reductions more than one-third of 1 percent.

The Macroeconomic Effects of Climate Policy Uncertainty

Diego Känzig, Northwestern University; Konstantinos Gavriilidis, University of Stirling; Ramya Raghavan, Northwestern University; James H. Stock, Harvard University

Abstract: We develop a novel measure of climate policy uncertainty based on newspaper coverage. Our index spikes during key U.S. climate policy events—including presidential announcements on international agreements, congressional debates, and regulatory disputes—and shows a recent upward trend. Using an instrument for plausibly exogenous uncertainty shifts, we find that higher climate policy uncertainty decreases output and emissions while raising commodity and consumer prices, acting as supply rather than demand shocks. Monetary policy counteracts these inflationary pressures, affecting the transmission of climate policy uncertainty. Firm-level analyses show stronger declines in investment and research and development when firms have higher climate change exposure.

How Much Will Global Warming Cool Global Growth?

Ishan Nath, Federal Reserve Bank of San Francisco; Valerie A. Ramey, Hoover Institution; Peter J. Klenow, Stanford University

Abstract: Does a permanent rise in temperature decrease the level or growth rate of GDP in affected countries? Differing answers to this question lead prominent estimates of climate damages to diverge by an order of magnitude. This paper combines indirect evidence on economic growth with new empirical estimates of the dynamic effects of temperature on Gross Domestic Product to argue that warming has persistent, but not permanent, effects on growth. We start by presenting a range of evidence that technology flows tether country growth rates together, preventing temperature changes from causing country-specific growth rates to diverge permanently. We then use data from a panel of countries to show that temperature shocks have large and persistent effects on GDP, driven in part by persistence in temperature itself. These estimates imply projected future global losses of 8 percent to 13 percent of GDP from unabated warming, which is at least three to six times larger than level effect estimates and 25 percent to 70 percent smaller than permanent growth effect estimates, with larger discrepancies for initially hot and cold countries.

Hell with the Lid Off: Racial Segregation and Environmental Equity in America’s Most Polluted City

Spencer Banzhaf, North Carolina State University; William Mathews, University of Pittsburgh; Randall Walsh, University of Pittsburgh

Abstract: This study examines the changing relationship between racial segregation and environmental equity in Pittsburgh from 1910 to 1940. Utilizing newly digitized historical data on the spatial distribution of air pollution in what was likely America’s most polluted city, we analyze how racial disparities in exposure to air pollution evolved during this period of heightening segregation. Our findings reveal that Black residents experienced significantly higher levels of pollution compared to their White counterparts and that this disparity increased over time. We identify within-city moves as a critical factor exacerbating this inequity, with Black movers facing increased pollution exposure. In contrast, European immigrants, who were also initially exposed to relatively high levels of pollution, experienced declining exposure as they assimilated over this time period. We also provide evidence of the capitalization of air pollution into housing markets. Taken as a whole, our results underscore the importance of considering environmental factors in discussions of racial and economic inequalities.

This research was funded in part by Equitable Growth.

Do Unions Decrease Earnings Inequality?

Phanindra V. Wunnava, Middlebury College; Austin Gill, Analysis Group

Abstract: One of the notable economic trends since the late 1980s is a dramatic rise in earnings inequality. Several researchers conclude that a significant source of earnings inequality is due to a large decrease in the unionized fraction of the labor force. The main focus of this paper is to investigate impact of union density, unemployment, and demographic characteristics on income inequality (i.e., Gini index). Preliminary results, based on a panel of Metropolitan Statistical Areas in the United States between 2010 and 2021, indicate that the union membership rate has a countering effect on growing income inequality. Demographic controls also seem to affect income inequality. By disaggregating union density, we find the magnitude of its effect on income inequality is larger in the private sector relative to the public sector. The overall effect of union density on Gini is driven by the private sector due to its larger share of employment. Accordingly, the recent upswing in private-sector union drives with the backdrop of a tight labor market may have an important role to play in reducing inequality in the coming years.

The Long Run Economic Effects of Medical Innovation and the Role of Opportunities

Sonia Bhalotra, University of Warwick; Damian Clarke, Universidad de Chile; Atheendar Venkataramani, University of Pennsylvania

Abstract: We leverage introduction of the first antibiotic therapies in 1937 to examine impacts of pneumonia in infancy on adult education, employment, disability, income, and income mobility, and identify large impacts on each. We then examine how racial segregation in the pre-Civil Rights era moderated the long-run benefits of antibiotics among Black Americans. We find that Black Americans born in more segregated states reaped smaller and less pervasive long-run benefits despite sharp drops in pneumonia exposure. Our findings demonstrate causal effects of early life health on economic mobility and the importance of an investment-rewarding institutional environment in realization of the full potential of a healthy start.

Who Owns the Idea? Enforceability of Property Rights and Inventor Mobility

April Burrage, Stanford University

Abstract: Who owns the idea when innovation occurs outside the scope of an employee’s formal job duties? This paper examines how changes in the enforceability of employer intellectual property rights affect inventor mobility. Using inventor-patent panel data and a difference-in-differences research design, the paper studies how shifts in legal ownership shape inventor mobility and the organization of inventive activity across firms.

Climate Change and Market Power

Hui Zhou, University of Rhode Island; Shanjun Li, Cornell University; Ivan Rudik, Cornell University; Enjie Ma, Cornell University

Abstract: Rising temperatures and increasingly frequent heatwaves are among the most prominent and well-documented manifestations of climate change. While recent studies show that extreme heat reduces firm productivity, the implications on market power remain largely unexplored, which represents an important research gap as shifts in market power can carry substantial welfare implications. Our study aims to fill this gap by examining the impact of temperature extremes on market power and the resulting welfare implications. Our empirical analysis draws on detailed firm-level balance sheet and geo-location data from ORBIS, combined with high-resolution weather information, covering 12 European countries from 2000 to 2020. We begin by analyzing how temperature extremes affect firm market shares and market concentration. The results provide strong and robust evidence that extreme heat increases local market concentration by shifting market share from smaller to larger firms. In addition, extreme heat reduces firm productivity while increasing the average mark-up. The effects are heterogeneous across firms: Productivity losses are concentrated among small firms, whereas increases in mark-ups are observed among large firms. To quantify the impact on welfare, we develop a stylized heterogeneous firm model à la Melitz (2003), which explicitly incorporates the heterogeneous effects of climate shocks on firm productivity across different firm sizes. To capture how these heterogeneous impacts lead to market share reallocation and changes in firm mark-ups, we adopt a variable elasticity of substitution framework, which allows for endogenous markup following Atkeson and Burstein (2008). The quantification exercise shows that the climate change productivity shock we observed from 2000 to 2020 leads to a welfare loss equivalent to 0.124 percent of manufacturing sector Gross Domestic Product in Europe, with substantial variation across countries. More importantly, if we ignore the role of reallocation and variable demand elasticity, we can misstate the welfare cost of climate change.

AEA Summer Program with Two Interventions: Experiential Learning and Formal Mentoring

Gerald Daniels, Howard University; Jevay Grooms, Howard University; Rhonda V. Sharpe, Women’s Institute for Science, Equity and Race; Omari Swinton, Howard University

Abstract: This paper evaluates the American Economic Association Summer Training Program, hosted at Howard University from 2021 to 2025. Program collaborators included the Women’s Institute for Science, Equity and Race, and economics faculty collaborator, the U.S. Federal Reserve Board. The program provided rigorous foundational and advanced graduate-level courses in microeconomics, econometrics, mathematical methods, and research methodology, taught by distinguished economists, as well as an Inclusive Peer Onsite Distance Mentoring Program. Participants engaged in experiential learning with leading organizations from the public and private sectors and benefited from research mentorship by Nobel Laureate David Card. The mentoring program provided comprehensive academic support, graduate school preparation, GRE training, and professional networking. The evaluation uses placement outcomes, participant feedback, and historical placements of those who participated in the summer program at previous institutions to assess the program’s effectiveness. Findings indicate that the program significantly enhanced students’ academic skills, graduate school readiness, and career trajectories, demonstrating its effectiveness in preparing participants for successful entry into doctoral programs and professional roles within economics.

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Equitable Growth event highlights the path forward to rebuild the U.S. administrative state

Posted on by Maria Monroe
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Microsoft Copilot helped draft this column.

The Washington Center for Equitable Growth recently convened scholars, practitioners, and advocates for an Equitable Growth Presents event, titled “Reimagining the Federal Government: Building Capacity for a Democratic Future.” The discussion explored how to rebuild and modernize U.S. governance amid unprecedented challenges—and why doing so is essential for democracy and broadly shared economic growth.

Opening the event, Korin Davis, Equitable Growth’s director of academic programs, underscored the stakes. Federal institutions—from labor boards to statistical agencies—are being dismantled through budget cuts, mass layoffs, and threats to their independence from the executive. These developments, Davis warned, jeopardize not only democratic norms, but also economic growth and the government’s ability to deliver for Americans.

Davis then emphasized that the challenges to these democratic norms also may create an opportunity to design a 21st century government that is responsive, democratic, and effective. She highlighted Equitable Growth’s longstanding efforts to bridge academia and policy, from funding research to creating pathways for scholars to serve in government.

Diagnosing the governance crisis and charting a path forward

The audience then heard from K. Sabeel Rahman, a professor at Cornell Law School and former head of the White House Office of Information and Regulatory Affairs in the Biden administration. His keynote framed the current moment as a reactionary vision of U.S. society marked by three troubling trends:

  • Dismantling of government: Hollowing out federal agencies and social insurance programs through legislative cuts to federal agency funding, mass civil servant firings, and attempts to unwind investments in clean energy and consumer protections
  • Weaponization of the state: Expanding coercive state powers, including politicized enforcement and surveillance from federal agencies such as the Federal Communications Commission, the U.S. Department of Justice, and the White House Department of Government Efficiency
  • Personalization of power: Unconstitutionally centralizing authority in the presidency, eroding checks and balances, and enabling arbitrary decision-making

Rahman noted decades of underinvestment, outdated systems, and judicial constraints that have hobbled government capacity as underlying these three trends and called for a bold, three-part agenda to address these issues. First, he recommended building state capacity and governance structures that can effectively tackle modern challenges, such as climate change, economic inequality, and the growing tech oligarchy that creates massive concentration of economic power.

Next, Rahman argued, as he has elsewhere, for containing the current authoritarian slide that undermines U.S. democracy, including pushing back on the massive surveillance apparatus in the U.S. Department of Homeland Security, which has enabled the immigration raids and detailed tracking of targets that we see today. And lastly, he urged a return to democratic policymaking through meaningful public participation and responsive-yet-effective governance. Rahman urged attendees to think about engaging voters more and better so they regain trust in government’s ability to provide services to Americans and address their concerns.

From vision to implementation: How to rebuild the administrative state

The event then featured a panel discussion, moderated by Equitable Growth’s Associate Director of Academic Programs Christian Edlagan and featuring Rahman alongside Zach Liscow, a professor at Yale Law School, and Kyleigh Russ, director of Democracy Works 250 at Democracy Forward. Their conversation moved from diagnosis to practical strategies for reform.

Liscow kicked things off by emphasizing that rebuilding government effectiveness requires tackling two core problems: excessive procedural hurdles and insufficient government resources, including personnel. He cited his own research on U.S. infrastructure, showing that the cost to build interstate highways tripled between the 1960s and 1980s for no apparent reason aside from laws that required more costly procurement and construction methods.

He then raised his research on investing in high-quality workers who can carry out government projects the most effectively. His studies find that focusing more on quality—by recruiting top talent, making hiring easier, and paying higher wages—more than pays for itself, even though it is perhaps more costly up front.

Russ then focused on people-centered strategies and reforms to rebuild the federal government’s ability to deliver for the American people. She underscored that the Trump administration’s challenges to democratic governance have brought many of these issues to the fore but that they have been brewing for many decades because of past policy choices and a lack of meaningful reform to civil service.

Russ highlighted Democracy Forward’s four-step process for achieving the goal of administrative reform. The organization is embarking on a national listening tour to gather input from Americans and civil servants about what they want from government and how it is—or often is not—showing up for them. They are also working on reimagining workforce policies to create a policy library where ideas for reform can live and be tapped.

The third project is a talent program to attract and recruit the best and brightest Americans to civil service. And the fourth project is a nationwide fellowship program designed to assess what has happened to federal agencies, why it matters, and offer actions and solutions to reverse the damage that the U.S. government has undergone.

Edlagan asked the panelists for specific examples of how these ideas can be put into practice and any lessons that have been learned. Russ mentioned Engaged California, which is a listening tool in the state that allows constituents to explain how policies are landing with them, and the PACT Act of 2022 that substantially expanded veterans’ health care and disability benefits, and was largely based on direct input from veterans on their needs.

Liscow raised two examples of how addressing procedural hurdles and personnel challenges can restore state capacity to support citizens. He discussed Massachusetts’ green line light rail project, which suffered from delays and high costs until former Gov. Charlie Baker simplified the system’s proposed design and hired top talent, paying high salaries to attract quality workers. Liscow also talked about how Pennsylvania Gov. Josh Shapiro has passed permitting reforms, which have dramatically cut red tape through executive action.

Rahman highlighted federal actions, such as the Federal Trade Commission’s banning of noncompete clauses in 2024, which worked to reduce racial and gender disparities across the economy, from high-skill sectors to low-wage industries—until the agency, under a new FTC chair, vacated the rule in 2025. He explained that despite the common misconception of a trade-off between deep civic engagement or fast-acting government, redesigning institutions can, in fact, help strike more balance.

Audience questions sparked rich discussion on several themes:

  • Balancing participation and speed: Rahman and Liscow agreed that early, broad engagement—rather than late-stage lawsuits—can improve administrative legitimacy without slowing progress. Russ added that technology and social media should be leveraged for inclusive, real-time feedback.
  • Civil service resilience: Russ emphasized defending existing workers while planning systemic reform, noting the need to merge cultures between long-time staff and new talent. The panelists also agreed that the time to start doing this work of rebuilding the administrative state is now.
  • Role of research: Panelists urged scholars to produce actionable, accessible research that delves into both upstream policy design and downstream policy effects. Liscow highlighted the impact of practical papers on implementation, while Russ called for compelling narratives showing why government matters in people’s lives.
  • Public-sector unions: The panelists agreed that public-sector unions are necessary and support workers, but that collective bargaining can also make it hard to fire ineffective workers or recruit top outside talent. There is a balance that needs to be struck to ensure good governance is achieved.
  • Public trust in expertise: All agreed that academics must communicate clearly, stick to evidence, and pair facts with relatable examples to rebuild credibility.

Looking ahead: Optimism for the future?

Edlagan closed the panel with a request for the panelists to describe the most important first step in achieving a more hopeful vision for the U.S. administrative state in the next governing moment. Russ emphasized the importance of listening and gathering input from civil servants and communities across the country. Liscow urged a focus on implementation rather than high-level policy design to make operations more effective. And Rahman argued for being explicit about what kind of democracy we all want to live in—one in which everyone is treated fairly and equally and has access to the same opportunities.

Watch the full event video on our YouTube page.

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Expanding eligibility for Unemployment Insurance helps low-income U.S. workers find better jobs

Posted on by Maria Monroe
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Unemployment Insurance serves as a critical income support program for U.S. workers who lose their jobs through no fault of their own. It is also a valuable tool to stabilize the U.S. economy and support workers during recessions and other periods of economic uncertainty.

Within the field of labor economics, it is a well-established finding that more robust Unemployment Insurance benefits lead workers to delay finding work after losing their jobs. At the same time, there is little evidence to date that extended periods of time to search for new jobs allow workers to find better reemployment opportunities. Together, these two empirical insights may discourage policymakers from making UI benefits more generous except amid severe economic downturns, as happened in 2020 during the COVID-19 pandemic and recession.

The reality is more nuanced and may reflect the limits of the comparisons this past research has made. Indeed, our recent study, published in Equitable Growth’s Working Paper series, reveals that expanding UI eligibility for low-income workers largely avoids this presumed trade-off between extended UI benefits and unemployed workers delaying their job search. Specifically, we find that workers who receive Unemployment Insurance minimally delay finding new jobs in the short term, but that short delay ultimately leads them to work more overall as they find more stable and higher-paying jobs.

working paper

The Benefits of Unemployment Insurance For Marginally Attached Workers

By Casey McQuillan, Brendan Moore,

October 21, 2025

Our paper compares workers who received Unemployment Insurance with those who did not, whereas most earlier studies compare UI recipients with different weekly benefit amounts or potential durations. This distinction matters because receiving Unemployment Insurance changes workers’ weekly job search requirements and gives them access to reemployment services.

Further, while past research has largely examined higher-income workers or the broader pool of UI claimants, we focus on workers with less stable employment and lower incomes—those who are only marginally attached to the U.S. labor force. The effects of Unemployment Insurance may differ across these groups, especially since workers with fewer financial resources and less consistent work may respond differently to the support and structure that UI benefits provide.

The benefits of Unemployment Insurance for workers marginally attached to the U.S. labor market

In all U.S. states and the District of Columbia, eligibility for Unemployment Insurance requires sufficient periods of employment through workers’ formal labor market experience, reflecting the program’s design as an insurance system. Unemployment Insurance in the United States is run as a state-federal partnership, with the federal government setting broad program requirements and individual states determining benefit eligibility, amounts, and duration for their residents. In Washington state, for example, where we focused our study, workers must accumulate at least 680 hours of work in the year prior to their job loss to qualify for UI benefits.

This threshold creates a sharp eligibility cutoff, which we use to compare workers who barely meet the requirement to those who narrowly fall short of it. This allows us to identify the effect of receiving UI benefits on job search and reemployment outcomes. Critically, this comparison isolates the effects of receiving UI benefits for these marginally attached workers—not just the benefit payments, but also the program’s institutional features, such as mandatory work search requirements and access to public employment services.

We find that receiving UI benefits only slightly lengthens the time it takes unemployed workers to find new jobs, but it has large payoffs once workers return to the labor force. Workers who receive Unemployment Insurance are less likely to find immediate reemployment in the same quarter in which they lose their jobs. Yet these workers then go on to work about 15 more full-time weeks and earn roughly $14,000 more over the next 2 years, compared to similar workers who miss out on UI benefits, representing 37 percent and 50 percent increases, respectively.

Indeed, not only do our results suggest that receiving UI benefits leads to more hours worked and higher earnings, but also that this effect grows over time. The cumulative effect of receiving Unemployment Insurance on hours worked plateaus after five quarters, whereas the effect on earnings continues to increase over time.

Importantly, we also find evidence that these gains reflect that workers who received Unemployment Insurance found more stable and higher-paying jobs. We detect a discontinuity in these outcomes at the UI eligibility threshold, which we attribute to the discontinuity in the receipt of UI benefits. More precisely, our results show that UI recipients switch jobs less frequently—working for 1.6 fewer employers over that period—and earn about $3 more per hour when back at work.

Measuring the value of expanded UI eligibility

To weigh the costs and benefits of expanding UI access and lowering the eligibility threshold, we use the marginal value of public funds framework, which allows us to compare the cost-effectiveness of different policies. This framework calculates the ratio of how much workers value a dollar of spending on a particular policy divided by the net cost of that policy to the government. A marginal value of public funds above 1 suggests the program delivers more value to recipients than it costs taxpayers.

In our study, we estimate Unemployment Insurance’s marginal value to be about 2.5, suggesting that every dollar spent on expanding UI benefits creates $2.50 of value. By comparison, previous marginal value estimates for raising weekly UI benefit amounts range from 0.43 to 1.03, while extending the maximum duration of UI benefits ranges from 0.45 to 0.83. This discrepancy suggests that expanding UI to marginally attached workers may be substantially more cost-effective than the reforms typically considered and previously evaluated.

On the benefits side, newly eligible low-income workers receive UI payments that help them manage expenses and maintain stability while unemployed. Additionally, these workers find better jobs when they return to employment. On the cost side, the government covers the payments to newly eligible workers, but part of this expense is recouped through tax revenue on these workers’ higher earnings. Our calculations thus imply that expanding eligibility for these low-income workers specifically is the most cost-effective UI policy studied to date.

Lessons for state policymakers

Though our study takes place in Washington state, the lessons extend well beyond it. To develop policy recommendations, we consider which states have UI programs that most closely resemble Washington’s and which states are well-positioned to expand UI, given the strength of their trust funds, which cover the costs of Unemployment Insurance. Notably, Washington has both the most stringent UI eligibility requirement in the country and the highest minimum weekly UI benefit.

We first identify 11 states that come reasonably close to Washington’s eligibility threshold of 680 hours worked in the year prior, based on how many hours a minimum-wage worker would need to work in order to be eligible in that state. Five of these states also offer comparable weekly benefits to Washington state. These states are Utah, Arizona, Kansas, Ohio, and Maine, and they stand out as strong candidates for UI reform. A large share of the low-wage or part-time workers in these states currently fall short of qualifying for Unemployment Insurance, missing out on substantial benefits.

At the same time, these states have the fiscal capacity to broaden access to UI benefits due to the strong position of their UI trust funds. Indeed, all 11 states we identified in this exercise are operating with a healthy UI trust fund balance and thus are in a positive fiscal position for their policymakers to expand Unemployment Insurance without immediate pressure to raise employer payroll taxes or cut other benefits to cover the additional costs.

Conclusion

Our findings challenge previous research that found more generous Unemployment Insurance simply prolongs unemployment, at least for low-income workers. Instead, we show that broadening access to UI benefits can help marginally attached workers find stable, higher-paying jobs without imposing significant costs on state budgets. These results suggest that policymakers should seriously consider expanding UI access by lowering the eligibility threshold as a cost-effective way to support these workers.

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U.S. social insurance programs support workers and economic growth

Posted on by Maria Monroe
""

Since coming to power in early 2025, Republican majorities in Congress have shifted resources away from the nation’s social insurance programs, most notably to offset the cost of H.R. 1, the most regressive budget bill in decades. These actions threaten the health care coverage of 11 million people on Medicaid and 4.5 million people receiving nutrition assistance.

Meanwhile, the Trump administration has simultaneously inhibited the nation’s economic activity under the weight of tariffs and economic uncertainty, dragging down national consumer sentiment as Americans weather historically high costs of living and a weakened U.S. labor market. Then, there is the impending expiration of the Affordable Care Act’s premium tax credits that help Americans afford health care, which will price millions of families out of coverage as their monthly insurance premiums skyrocket beginning January 1, 2026.

Roughly 11 percent, or 36 million Americans, including more than 10 million children, were living in poverty (with an annual income of $31,812 for a family of four) in 2024. Despite the disproven—but still commonly held—belief that poverty is a result of personal failings, poverty in the United States is largely driven by policy choices and contextual factors.

Importantly, there is substantial mobility into and out of poverty year to year—even during periods of labor market contraction. During the Great Recession of 2007–2009, for example, a substantial number of Americans moved out of poverty within a year: Forty-one percent of those living in poverty in the United States in 2007 were no longer living in poverty the following year.

Social insurance—the programs, services, and benefits that provide critical support for low-income families to access necessities, such as safe housing, sufficient food, and adequate health care—promotes economic stability by helping individuals and families weather periods of diminished income or unemployment. These programs provide other widespread positive benefits for the U.S. economy, too, enabling people to take positive economic risks, such as starting a business or going back to school to develop their human capital. These risks fuel innovation that, in turn, supports greater productivity across the economy.

Social insurance programs are traditionally thought of as programs that people “pay into” through dedicated taxes that they can later receive as benefits based on those contributions, such as Unemployment Insurance and Social Security. In this column, social insurance programs also refer to programs traditionally thought of as means-tested, income-transfer programs, such as the Supplemental Nutrition Assistance Program, and direct cash assistance funded by the Temporary Assistance for Needy Families program. These programs protect Americans’ shared economic security by cushioning the blow when households experience unforeseen, unavoidable, or unfortunate losses of income.

When people cannot quickly find employment after a professional setback, they not only suffer from those lost wages but also can experience additional long-term economic damage in diminished wages across the course of their careers, known as “scarring,” if they face persistent unemployment. Overcoming such long-term joblessness can be challenging for workers, as they potentially suffer from decaying skills, limiting their competitiveness in the job market. Further, the loss in human capital limits the growth of the U.S. economy in the short term and reduces future economic output. 

In a healthy economy, money needs to flow and circulate. When households experience losses in personal income, they often pull back on consumer spending and tap into their personal savings. Yet many of the lowest-income Americans are increasingly struggling to save a portion of their incomes, due to a combination of factors, including stagnant wages outpaced by increasing costs of living. Such spending reductions by households can spark communitywide economic effects, as more households are impacted by a poorly performing labor market or as more households anticipate a risk of impending layoffs. Local businesses then feel the impact of fewer customers with fewer dollars to spend—effects that can snowball across local communities.

Social insurance programs help households get back on their feet quickly and re-engage in the economy, stabilizing local economies. A 2025 analysis of one direct cash assistance program in Flint, Michigan, found that every dollar invested in families produces an additional 60 cents to $3 that circulates in the local economy. Yet without robust social programs to support household spending on basic needs when experiencing a loss in income or during moments of economic downturn, the cumulative effects can be self-reinforcing and lead to wider impacts.

This is why—beyond the well-documented ways in which reducing poverty is good for society by improving health outcomes and well-being, particularly for children—there is also an economic imperative to help households maintain their standards of living when they experience financial setbacks. Many social programs in the United States do just that on a regular basis, offering nutrition assistance, housing support, health insurance coverage, direct cash assistance, and more to tens of millions of Americans who would not otherwise be able to afford basic necessities.

But despite their social and economic benefits, U.S. social insurance programs are a patchwork quilt, with some states being more or less generous with benefits or eligibility, even for programs funded in part by the federal government, as is the case with Unemployment Insurance, for instance. These variations not only increase inequality and reduce the efficiency of these programs, but also increase the likelihood that Americans end up falling through the cracks. This unnecessarily harms individual households and limits the collective ability of the U.S. workforce to weather economic hardships.

Take, for example, the Temporary Assistance for Needy Families program, a federal block grant that, among other things, funds state-administered cash assistance for low-income families. On average, these funds only reach 1 out of every 5 eligible families in the United States, greatly limiting the program’s potential to help families get back on their feet when they experience setbacks. Lack of resources at the household level is particularly harmful for children. In the long term, experiencing poverty as a child has broad economic costs and is linked to a range of worse outcomes, including worse health and lower lifetime earnings.

In order to foster a resilient and dynamic economy that supports economic growth, U.S. social insurance programs must be able to help individuals, families, and workers stay resilient and successfully navigate moments of financial difficulty. The strength of these programs are particularly salient in moments of broad economic uncertainty such as the one many Americans are currently facing.

Rather than cut funding for social insurance programs that help low-income families and individuals, policymakers can tap into proven policy solutions, such as expanding Unemployment Insurance, improving the Supplemental Nutrition Assistance Program, bolstering Medicaid, and offering direct cash assistance to help households navigate tough economic times and protect U.S. economic growth and prosperity. The economics are clear: Robust social programs not only are good for individual families’ well-being, but also bolster economic resilience and, in turn, reinforce economic growth and local economies across the country.

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Equitable Growth hosts Econ 101 virtual event on how U.S. social insurance programs boost economic mobility

Posted on by Emilie Openchowski
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Microsoft Copilot helped draft this event recap.

The Washington Center for Equitable Growth recently hosted its latest Econ 101 briefing aimed at providing in-depth evidence for policymakers on how U.S. social insurance programs boost economic mobility and support broad-based economic growth. This briefing on November 20 was primarily for state policymakers, highlighting the importance of federal funding flowing to their states and how they can leverage those funds more effectively.

The Econ 101 briefing featured insights from Priyanka Anand, associate professor at George Mason University and a nonresident scholar at Equitable Growth, and Megan Rivera, a fellow for policy and advocacy at Equitable Growth. The event opened with a review of the role and purpose of social insurance programs, how they fit into the broader safety net in the United States, and the role of the states in designing and running some of these programs.

Rivera then turned to an explanation of the government’s role in social programs and their impact on poverty. She emphasized that many U.S. families often move in and out of low-income status and why government-run programs such as Unemployment Insurance are essential for these families because private markets cannot adequately provide protections against risks due to falling earnings. These programs not only support families in times of need but also, in our consumer-driven economy, ensure that households can participate and strengthen both local and national economic growth.

Anand then outlined the major U.S. social insurance programs, including Social Security, Medicare, disability insurance, and Unemployment Insurance, as well as means-tested programs such as Medicaid, the Supplemental Nutrition Assistance Program, various tax credits, and the Temporary Assistance for Needy Families program. Together, these programs provide cash benefits, health coverage, food assistance, and tax credits to tens of millions of U.S. households.

Anand then reviewed the benefits of these programs. She pointed out how Medicaid, for example, reduces infant mortality, improves high school graduation rates, and raises adult incomes. Similarly, she noted how nutrition assistance reduces food insecurity and improves children’s long-term health and educational outcomes. This research underscores the programs’ role in promoting both family well-being and economic stability.

Anand then highlighted that since the 1996 welfare reforms, social insurance programs have increasingly emphasized work requirements and in-kind transfers over direct cash assistance. Recent legislation, for example, including the Fiscal Responsibility Act of 2023 and the 2025 Republican budget bill, expanded work requirements across many different social programs. These requirements mean fewer families in need of assistance can qualify for these programs.

Anand then turned to present her own research with Robert Moffitt of Johns Hopkins University, which details the movement from a need-based welfare system toward a work- based welfare system. Anand reviewed how this shift presents challenges in the face of unfavorable U.S. labor market conditions. Federal Medicaid spending, for example, is projected to decrease by $900 billion over the next decade, and states also will face new responsibilities for SNAP funding. Staffing shortages at Social Security Administration field offices may reduce access to in-person services as well.

Rivera then discussed her work on the Temporary Assistance for Needy Families program, which highlights that fewer families than ever before are receiving direct TANF cash assistance. Indeed, TANF funds currently reach only about 1 in 5 eligible U.S. households, despite more than $7.7 billion in unobligated federal TANF funds sitting in state reserves across the United States.

Rivera explained that this vast pool of unspent TANF dollars comes down to the block grant structure of the program, meaning these federal funds are provided to states with considerable flexibility on how to spend the money and with limited oversight. This allows states to accumulate billions of dollars in funds without a federal requirement to spend the money. Reversing this trend and utilizing those dollars to support families would be a major step forward in reducing poverty in the United States.

Anand and Rivera closed the briefing by urging policymakers to protect funding for programs that sustain household consumption, such as nutrition assistance and home energy assistance. They also raised the possibility of exploring new revenue sources to expand low-income support programs, such as universal child care, which can strengthen labor force participation and economic growth.

Audience members then had an opportunity to ask questions. Several of them inquired about how data—and limited releases of federal economic data due to the recent federal government shutdown and other budget cuts—may impact means testing or other eligibility questions, as well as the determinations of benefits. Anand emphasized how important federal data are to target programs accurately to those who need support, as well as to determine whether that support is working as it should.

Another question focused on Anand’s paper with Johns Hopkins’ Moffitt regarding how work requirements affect labor market participation. Anand responded that labor force participation rates have not changed among formerly eligible families, meaning work requirements do not necessarily lead to people rejoining the workforce in higher numbers in order to satisfy the work requirements. Rather, these families mostly just do not receive the benefits to which they used to be entitled.

The Econ 101 briefing underscored that social insurance programs are not only vital for family well-being but also for sustaining U.S. economic growth and mobility. By safeguarding these programs, policymakers at all levels of government can ensure that U.S. households have the stability they need to contribute to a stronger, more inclusive economy.

Access the presentation slides here.

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Uncertainty created by ever-changing tariff policies harms U.S. economic growth

Posted on by Maria Monroe
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The approaches to international trade taken by the first and now second Trump administrations have been an endless jumble of tariff negotiations and ever-changing policies. Since 2018, duties have been imposed, revised, suspended, and reinstated, leaving U.S. businesses unsure of whether to plan for protectionism or relief. Though change has been a true constant of the Trump tariffs thus far, another larger pattern also has emerged of the U.S. economy caught in perpetual uncertainty about the rules that govern it, creating a drag on economic growth.

Tariff rates offer one of the most easily quantifiable signs of this limbo. In the U.S. trade dispute with China, for example, the average U.S. tariff on Chinese goods rose from about 3 percent in early 2018 to as high as 127 percent in May 2025, before being reduced to roughly 47 percent by as of the end of October.

Even within North America, firms are left guessing which rules will hold and which will change next. For Canada and Mexico—the two geographically closest trading partners of the United States—the story is only slightly less erratic than for China. Under the United States-Mexico-Canada Agreement—the trade agreement negotiated by President Donald Trump in his first term to replace the North American Free Trade Agreement—qualifying goods still move across the three countries’ borders duty-free, but noncompliant imports (such as goods that contain a large share of non-North American materials) now face tariffs as high as 35 percent for Canada and 25 percent for Mexico.

These taxes on imports (and the retaliatory tariffs that U.S. exports now face in many markets around the world) carry real economic costs. The Organisation for Economic Co-operation and Development expects U.S. economic growth to slow to 1.8 percent this year and 1.5 percent next year, down from 2.8 percent in 2024.

Though these tariffs’ effects on the prices of consumer goods have been modest so far, as carveouts cut effective tariff rates and firms drew down inventories built in anticipation of the tariff hikes, my research on the pass-through of these costs, along with work by others, shows that further pain is probably coming. While firms may be slow to pass cost shocks through into prices, we find that when they do, they raise prices in sizable increments. That means that whichever tariffs survive the impending U.S. Supreme Court ruling on the legality of the administration’s tariffs, they will eventually lead to rising prices—and will spark higher inflation. These higher prices likely will not only curtail U.S. imports but also reduce the buying power of consumers overall, further slowing U.S. economic growth.

Tariffs, however, are only the visible tip of the iceberg. Beneath them is a wider pattern of policy unpredictability: unprecedented government interventions, shifting regulatory signals, and an increasingly blurred line between business decision-making and political favors. Consider that the federal government has taken a 10 percent equity stake in Intel Corp., a major U.S. technology firm, in a move that signals to companies they may now count on (or fear) more direct government involvement. Adding to that is the pressure on companies to channel “contributions” or support to particular political projects, including reports of corporate donations tied to a new presidential ballroom where the East Wing of the White House used to be.

What do global firms such as Apple Inc., Boeing Co., or Ford Motor Co. really expect when they engage in these interactions? How many board decisions or capacity expansions are stalled while firms await signals about which favors will matter or which policies will be enforced? And where does this leave the young, innovative firms that fuel economic growth but lack the resources or political access to secure a seat at these tables? The result is less a freeze than a slow-motion paralysis: The increasing cost and risk of committing to large, irreversible investments—building new factories, making additional hires, and spending on research and development, to name a few—means that many firms adopt a “wait-and-see” posture, leaving the U.S. economy in limbo.

That uncertainty spreads beyond the plant floor. It shows up in exporters holding back entry into foreign markets that may close abruptly. It shows up in firms choosing to relocate or outsource rather than invest domestically, simply because the rules may change. And it shows up on farms, where producers must decide whether to plant next year’s crops expecting new bailouts or renewed access to foreign buyers. Uncertainty does not appear in the Gross Domestic Product tables the way tariffs do, but its drag on investment may prove more consequential.

A survey of business executives conducted by the Federal Reserve Bank of Atlanta this year, for example, finds that 40 percent of executives plan to reduce hiring and 45 percent expect to scale back capital investment over the next 6 months due to policy uncertainty. The cost of this uncertainty is economic potential left on the table: job offers never made, plant expansions that never break ground, and business owners spending precious time reading political tea leaves instead of innovating new products and improving operations.

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Tariffs impact U.S. industries differently, with manufacturing the most exposed

By Christopher Bangert-Drowns,

July 29, 2025

Even if a future presidential administration unwinds the current tariff regime, the shadow of this era will persist as an enduring sense that markets move at the mercy of politics. The expectation that government can intervene, favor certain firms, or reverse course overnight may outlast the tariffs themselves. Just ask the Trump administration’s favored industries—from semiconductors to steel, or the farmers who relied on bailout checks when export markets closed—how easily political proximity translated into protection. That impulse will not be confined to one political party: The same tools of industrial favoritism could tempt a left-of-center administration to steer direct grants or regulatory policy toward its own priorities in ways that feel more like picking winners than correcting externalities.

That expectation may prove to be the costliest legacy of all—a long shadow of uncertainty that may continue to shape how U.S. businesses invest, hire, and grow for decades to come. Such uncertainty not only harms the industries the tariffs purportedly protect, but also creates a drag on longer-term U.S. economic growth. In the end, the consequences of the Trump administration’s tariffs are not simply elevated tax rates but also pervasive economic uncertainty and political favoritism—a combination that may shape the U.S. economy long after the tariffs themselves are gone.

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