ASSA 2023 Round-up: Day 1

Posted on by Emilie Openchowski
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Yesterday was the first day of the 2023 annual meeting of the Allied Social Science Associations, which is organized by the American Economic Association. The 3-day conference, held in person in New Orleans 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 more than 80 different sessions of the conference.

Below are 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 and which relate to the research interests laid out in our current Request for Proposals. We also include links to the sessions in which the papers were presented.

Come back tomorrow morning for more highlights from day two, and Monday morning for highlights from day three.

“What’s in a Background Check? Evaluating the Impact of Limiting the Criminal Record Information”

Amanda Agan, Rutgers University; David Autor, Massachusetts Institute of Technology, Equitable Growth grantee and Research Advisory Board member; Emma Rackstraw, Harvard University

Abstract: Criminal histories used for employment screening serve as a barrier to employment for a large fraction of men, people of color, and workers without college degrees. To enable “fair chance” hiring, employers may filter which criminal background data are visible to hiring adjudicators, potentially suppressing minor or older charges and convictions. Theory and existing evidence point to potentially ambiguous effects of information suppression on hiring of workers with criminal histories, however, since decision-makers may compensate for the absence of information by using group characteristics to infer it. We have partnered with a background check company to study the effects of policies that alter the set of criminal records available to adjudicators. Using a quasi-experimental approach, we assess how suppressing a subset of the detailed criminal background data presented to adjudicators affects hiring of workers with and without criminal histories.

“Labor Market Impacts of Reducing Felony Convictions: Evaluating Observational Approaches with Quasi- and Randomized Experiments”

Amanda Agan, Rutgers University; Andrew Garin, University of Illinois at Urbana-Champaign, Equitable Growth grantee; Alexandre Mas, Princeton University, Equitable Growth contributing author; Crystal Yang, Harvard University; Dmitri Koustas, University of Chicago

Abstract: We study the labor market impacts of California’s Proposition 47, which reduced certain nonviolent felony convictions to misdemeanors. We use data from San Joaquin County, where agencies proactively implemented the law without informing affected individuals or requiring them to petition the court themselves, and administrative tax records. To estimate the effects of reductions on employment, we use quasi-random ordering of reductions and a field experiment in which we notified a subset of individuals about their proactive reduction.

“Wealth, Race, and Consumption Smoothing of Typical Income Shocks”

Peter Ganong, University of Chicago, Equitable Growth grantee; Damon Jones, University of Chicago, Equitable Growth grantee; Pascal Noel, University of Chicago, Equitable Growth grantee

Abstract: We study the consumption response to typical labor income shocks and investigate how these vary by wealth and race. First, we estimate the elasticity of consumption with respect to income using an instrument based on firmwide changes in monthly pay. While much of the consumption-smoothing literature uses variation in unusual windfall income, this instrument captures the temporary income variation that households typically experience. In addition, because it can be constructed for every worker in every month, it allows for more precision than most previous estimates. We implement this approach in administrative bank account data and find an average elasticity of 0.23, with a standard error of 0.01. This increased precision also allows us to address an open question about the extent of heterogeneity by wealth in the elasticity. We find a much lower consumption response for high-liquidity households, which may help discipline structural consumption models.

We use this instrument to study how wealth shapes racial inequality. An extensive body of work documents substantial racial and ethnic wealth gaps. However, less is known about how these gaps translate into differences in welfare on a month-to-month basis. We combine our instrument for typical income volatility with a new dataset linking bank account data with race and Hispanicity. We find that Black households cut their consumption 50 percent more, and Hispanic households cut their consumption 20 percent more, than White households when faced with a similarly sized income shock. Nearly all of this differential pass-through of income to consumption is explained in a statistical sense by differences in liquid wealth. Combining our empirical estimates with model, we show that temporary income volatility has a substantial welfare cost for all groups. Because of racial disparities in consumption smoothing, the cost is at least 50 percent higher for Black households and 20 percent higher for Hispanic households than it is for White households.

Note: This research was funded in part by Equitable Growth.

“Unionization, Employer Opposition, and Establishment Closure”

Samuel Young, Massachusetts Institute of Technology, Equitable Growth grantee; Sean Wang, Massachusetts Institute of Technology, Equitable Growth grantee

Abstract: We study the effect of private-sector unionization on establishment employment and survival. Specifically, we analyze National Labor Relations Board union elections from 1981–2005 using administrative Census data. Our empirical strategy extends standard difference-in-differences techniques with regression discontinuity extrapolation methods. This allows us to avoid biases from only comparing close elections and to estimate treatment effects that include larger margin-of-victory elections. Using this strategy, we show that unionization decreases an establishment’s employment and likelihood of survival, particularly in manufacturing and other blue-collar and industrial sectors. We hypothesize that two reasons for these effects are firms’ ability to avoid working with new unions and employers’ opposition to unions. We test this hypothesis for manufacturing elections and find that the negative effects are significantly larger for elections at multiestablishment firms. Additionally, after a successful union election at one establishment, employment increases at the firm’s other establishments. Both pieces of evidence are consistent with firms avoiding new unions by shifting production from unionized establishments to other establishments. Finally, we find larger declines in employment and survival following elections where managers or owners were likely more opposed to the union. This evidence supports new reasons for the negative effects of unionization we document.

“Small Business and the Minimum Wage”

Jesse Wursten, KU Leuven; Michael Reich, University of California, Berkeley, Equitable Growth grantee

Abstract: Discussions of minimum wages often take as axiomatic that they generate more difficult adjustment issues for small businesses. To test this assumption, we provide the first systematic causal examination of minimum wage effects on pay, employment, and hours throughout the relevant firm size distribution. Our study first examines effects by firm size in the private sector as a whole, using teens and low-education workers as proxies for affected workers. We then examine effects in the three three-digit industries with the highest percentages of low-wage workers: restaurants, grocery stores and lodging, as well as in other low-wage industries. Our data on the size of businesses come from the Quarterly Workforce Indicators, the Current Population Survey, and County Business Patterns. We exploit the variation generated by federal and state minimum wage changes between 1990 and 2019, and use three difference-in-differences specifications.

We find larger wage increases among smaller businesses. But we generally do not detect significant effects in any of our business size bins on employment, hours, or number of businesses. These results pertain both for the most-affected workers in the private sector as a whole and for each of the three low-wage industries. We are unable to detect wage or employment effects in other low-wage industries. Our results are not affected by pre-trends, and they pass multiple robustness tests. These findings cast doubt on the concerns of some small business advocates with regard to minimum wage policy and on the need for special tax provisions for small businesses when minimum wages are increased.

“New Frameworks to Define the Political Economy of Corporations”

Lenore Palladino, University of Massachusetts Amherst, Equitable Growth in Conversation interviewee

Abstract: It is critical to distinguish what a corporation is—an economic institution that has special attributes granted by the state that distinguish it from other businesses—from what a firm does: produce goods and services for consumption, some in a more innovative manner than others. The theory of the corporation as an innovative enterprise, engaged in productive innovation by producing higher-quality goods and services for lower unit costs, explains what makes corporations successful producers. Theories of the business corporation as a “real entity” or “enterprise entity” describe its attributes with reference to other types of structures. Shareholder primacy competes with the theory of the enterprise entity and stakeholder theory for a vision of what a corporation is and whose interests it should service but does not describe well what a corporation does—for that, we need a theory of innovation.

This article explores economic theories of production, innovation, and growth that are based on the elements of what has enabled corporations to succeed or fail and the social conditions that have enabled those dynamics to play out inside the walls of the business. I contrast theories of innovation with several strands of theories describing what the corporation is and therefore who should have power within it: shareholder primacy, rooted in the neoliberal theory of the markets, and stakeholder theory, as developed in progressive law and in business and management scholarship. While we focus on the theory of the innovative enterprise as the best framework for what a firm does, the theories of innovation as they were developed in the 20th century did not carefully consider the question of negative externalities—the pollution and resource extraction created by what the corporation does—from the periphery to the center.

“Incarcerating Race: The Incarceration Penalty and the Racial Wealth Gap ”

Aaron Colston, Duke University; William Darity, Duke University, Equitable Growth grantee and Research Advisory Board member; Raffi Garcia, Rensselaer Polytechnic Institute; Lauren Russell, Harvard University, 2021–22 Equitable Growth Dissertation Scholar; Jorge Zumaeta, Florida International University

Abstract: We investigate the impact of household exposure to incarceration on household income and wealth accumulation. While most research focuses on the direct financial impact of incarceration on an individual in the form of removal from the labor force or the penalty of a criminal record on subsequent employment, this study sheds light on the impact of incarceration on wealth accumulation. Our findings show a statistically significant racial gap in earnings and net worth and an incarceration penalty on earnings and wealth accumulation. Interestingly, the White-Black racial household income and wealth gaps disappear when the reference group is White people with incarceration exposure. This reveals that statistically speaking, the size of the racial gap is equivalent to the incarceration penalty. Our racial gap decompositions based on incarceration exposure also corroborate these results. We find no statistically significant difference in the earnings between Black people with and without incarceration exposure. These findings suggest that society’s association of Blackness with criminality has a similar wealth effect to that of the incarceration penalty.

“Intergenerational Mobility using Income, Consumption, and Wealth ”

Jonathan Fisher, Washington Center for Equitable Growth; David S. Johnson, National Academies of Sciences, Engineering, and Medicine, Equitable Growth grantee and Research Advisory Board member

Abstract: We use 50 years of the Panel Study of Income Dynamics to study the intergenerational correlation in income, consumption, and wealth for the same individuals to answer the question: Is intergenerational mobility similar across the three resource measures? Income exhibits the highest intergenerational correlation, or lowest mobility, followed closely by consumption and a larger difference for wealth. This primary result holds across three measures of the intergenerational correlation: the rank-rank slope, the intergenerational elasticity, and the Gini index of mobility. Our findings highlight the importance of using the same sample to study the three measures, as our consumption rank-rank slope is higher than the income rank-rank slope found in the literature, but our consumption rank-rank slope is lower than our own income rank-rank slope.

These results paint a more complete picture of intergenerational mobility. Relative mobility is lowest for income, followed by consumption and wealth. However, we find that high wealth in childhood supplements low income or low consumption in childhood, increasing upward mobility for those with low income or consumption in childhood. Thus, wealth acts as a buffer against low income or consumption as a child. We also look at differences between White children and Black children. We find that if all children experienced the level of intergenerational mobility that Black children experience, the United States would compare much more favorably to the high mobility experienced in Nordic countries.

“Fiscal Policy and Households’ Inflation Expectations: Evidence from a Randomized Control Trial”

Olivier Coibion, University of Texas at Austin, National Bureau of Economic Research; Yuriy Gorodnichenko, University of California, Berkeley, National Bureau of Economic Research; Michael Weber, University of Chicago, National Bureau of Economic Research, Equitable Growth contributing author

Abstract: Rising government debt levels around the world are raising the specter that authorities might seek to inflate away the debt. In theoretical settings where fiscal policy “dominates” monetary policy, higher debt without offsetting changes in primary surpluses should lead households to anticipate this higher inflation. Are household inflation expectations sensitive to fiscal considerations in practice? We field a large randomized control trial on U.S. households to address this question by providing randomly chosen subsets of households with information treatments about the fiscal outlook and then observing how they revise their expectations about future inflation, as well as taxes and government spending. We find that information about the current debt or deficit levels has little impact on inflation expectations but that news about future debt leads them to anticipate higher inflation, both in the short run and long run. News about rising debt also induces households to anticipate rising spending and a higher rate of interest for government debt.

“Mergers & Acquisitions under Common Ownership ”

Miguel Antón, IESE, Equitable Growth grantee; Florian Ederer, Yale University, Equitable Growth grantee; Bruno Pellegrino, University of Maryland, Equitable Growth grantee; Mireia Giné, IESE, Equitable Growth grantee

Abstract: We provide new facts about the cross-section and evolution of mergers and acquisitions for U.S. public firms. Using a general equilibrium model with a hedonic demand system and data on institutional ownership, we document the degree of product market competition and common ownership among merging and nonmerging firms. We then quantify how the effects of mergers on profits, consumer surplus, and total surplus are affected by common ownership and shareholder value maximization motives.

“Employment Shocks, Unemployment Insurance, and Caregiving”

Yulya Truskinovsky, Wayne State University, Equitable Growth contributing author

Abstract: Working Americans are increasingly taking on various caregiving roles for family members. Considering the COVID-19 pandemic, the impact of job loss and income support on the labor supply, economic well-being, and caregiving behavior of families with care needs is a pressing policy question. This paper considers caregiving during periods of (involuntary) unemployment and, specifically, the role of Unemployment Insurance on caregiving. Although caregiving increases following job separations, more generous UI benefits reduce the likelihood that workers who are laid off provide family care. The effect is the largest for adults between ages 40 and 65, for men, and for unmarried individuals. In the context of a rapidly aging U.S. population, this analysis provides knowledge about how social insurance policies that provide wage replacement support working families with growing long-term care needs.

“Closing the Racial Gap or Keeping Up Appearances? Labor Force Participation and Demographic Change”

Karl Boulware, Wesleyan University; Kenneth Kuttner, Williams College

Abstract: The gap between Black and White labor force participation has narrowed dramatically over the past 30 years, where post-pandemic Black participation has reached parity and even slightly surpassed that of White workers. This paper is the first to seek to understand why this has happened. We show that the apparent improvement is largely a function of demographic trends rather than improved labor market opportunities. Participation rates among the young of both sexes and prime-age Black males remain well below those of White workers. However, there has been some convergence in youth participation rates, particularly for young Black women.

“Impact of State-Level Changes in Paid Family Leave Policies: Evidence from New Jersey and New York”

Rachel M.B. Atkins, St. John’s University, 2021 Equitable Growth American Economic Association summer economics fellow; Tracy Freiburg, St. John’s University; Kier Hanratty, Pace University

Abstract: In this paper, we examine the impact of paid family and medical leave policies on entrepreneurship and employment outcomes. Our analysis exploits the variation in the timing of when the bordering states of New Jersey and New York implemented their PFML policies. We employ a difference-in-differences research design using census-tract level data from the American Communities Survey to evaluate whether these policies impacted employment and entrepreneurship (measured using self-employment levels). We also investigate whether the effects of the PFML programs varied by subgroups, including race and gender. Additionally, we explore whether there were differential effects on business owners and workers operating in low-income versus high-income neighborhoods or in high-margin industries versus low-margin industries. Overall, we seek to evaluate whether marginalized communities experienced positive or negative effects from PMFL programs.

“Climate Policy, Financial Frictions, and Transition Risk”

Garth Heutel, Georgia State University; Stefano Carattini, Georgia State University; Givi Melkadze, Georgia State University

Abstract: We study climate and macroprudential policies in an economy with financial frictions. Using a dynamic stochastic general equilibrium model, featuring both a pollution market failure and a market failure in the financial sector, we explore transition risk—whether ambitious climate policy can lead to macroeconomic instability. It can, but the risk can be alleviated through macroprudential policies—taxes or subsidies on banks’ assets. Then, we explore efficient climate and macroprudential policy in the long run and over business cycles. The presence of financial frictions affects the steady-state value and dynamic properties of the efficient carbon tax. A policy portfolio with both a carbon tax and macroprudential policies yields the efficient outcome.

The day before the 2023 ASSAs kicked off, Equitable Growth’s Director of Labor Market Policy and chief economist Kate Bahn organized a plenary session on reproductive and labor rights in the United States at the International Confederation of Associations for Pluralism in Economics conference. The session featured Bahn, alongside Mayra Pineda-Torres of the Georgia Institute of Technology, Yana van der Meulen Rodgers of Rutgers University, Paddy Quick of St. Francis College, and Nina Turner of the Institute for Race, Power, and Political Economy. The panelists discussed new approaches to our understanding of the intersection of economics and reproductive rights and ways to apply economics work to support movement building.

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Equitable Growth’s Jobs Day Graphs: December 2022 Report Edition

Posted on by Austin Clemens

On January 6 the U.S. Bureau of Labor Statistics released new data on the U.S. labor market during the month of December. Below are five graphs compiled by Equitable Growth staff highlighting important trends in the data.

The employment rate for prime-age workers increased from 79.7 percent in November to 80.1 percent in December as total nonfarm employment rose by 223,000.

Share of 25- to 54-year-olds who are employed, 2007-2022. Recessions are shaded.

Private-sector employment continued to rise in December, while public-sector employment has recovered more slowly and remains below pre-pandemic levels.

U.S. public- and private-sector employment indexed to average employment in 2007

The unemployment rate decreased to 3.5 percent in December and remains higher for Black workers (5.7 percent) and Latino workers (4.1 percent), compared to White workers (3.0 percent) and Asian American workers (2.4 percent).

U.S. unemployment rate by race, 2019-2022. Recessions are shaded.

Involuntary part-time work, which represents part-time workers who would prefer full-time work, increased in December, but remains low relative to levels over the past five years.

Percent change in voluntary and involuntary part-time U.S. employment compared to January 2018

Employment in many sectors is now back to or surpassing pre-pandemic levels, including construction, retail, and educational services. Employment in leisure and hospitality has yet to recover despite rising by 67,000 jobs in December.

Employment by selected major U.S. industries, indexed to industry employment in February 2020 at the beginning of the COVID-19 recession (shaded).

Diversity in Economics video series uplifts diverse voices and research in economics and social sciences

Posted on by Maria Monroe

A key priority of the Washington Center for Equitable Growth is supporting researchers from underrepresented backgrounds and at various points along their career ladders, contributing to the broader effort to increase diversity in economics and social science research.

Equitable Growth supports a diverse group of scholars in our annual grantmaking cycle, as well as by participating in the American Economic Association Summer Economics Fellowship program and the AEA Summer Training program. We publish racial and ethnic data on the makeup of our staff, advisory bodies, grantees, and event speakers on our website, highlighting the progress we’ve made and what still needs to be done. We also participate in regional and interdisciplinary academic conferences, organizing panels that advise scholars who may be inexperienced or do not have access to mentorship or networking opportunities on how to successfully submit a grant proposal.

There is no doubt these efforts and others launched across the economics and social sciences fields are having an impact, in terms of who is now doing research, which topics they are researching, and how that research is conducted. But much more work is needed. To further this goal, in 2022, Equitable Growth launched its Diversity in Economics video series.

Through this project, we have learned about what draws people from historically disadvantaged backgrounds to work in economics by interviewing researchers about their experiences and the challenges they face. The video interviews additionally seek solutions to the longstanding issues of attracting and retaining more diverse scholars to the field. One way we do this is by soliciting advice from interviewees on such topics as how to make sure there is acceptance and inclusion of diverse voices and research and how we can uplift more diverse voices and research once these scholars enter the economics and social sciences professions.

The Diversity in Economics video series highlights the existing—and growing—pool of talented voices in economics and social sciences, and seeks to build on that progress by drawing attention to what has worked thus far and why.

To date, three video installments have been released as part of the series. Just a few takeaways from these first interviews include:

  • The importance of diverse perspectives in providing additional motivation and points of view on what problems specifically should be studied and how to study them
  • The value of the different contributions of each demographic group and subgroup, and of the variety of their lived experiences that inform their important insights
  • The necessity of diversity not only in who studies economics, but also in who teaches it and how they teach it
  • The need for pathways, opportunities, funding, and mentorship to be more available and accessible to increase diversity in both economics and the social sciences

These videos feature members of Equitable Growth’s academic network who come from traditionally underrepresented backgrounds in the field. The series seeks to uplift diverse voices to broaden ideas about who is an economist and what economists study.

Below are our first three featured scholars in our Diversity in Economics video series.

Carlos Fernando Avenancio-León

University of California, San Diego assistant professor of finance Carlos Fernando Avenancio-León is an economist who focuses on finance, labor economics, and group inequality. He received an Equitable Growth grant in 2018 to study how political enfranchisement impacts economic outcomes and has also researched racial inequalities in property taxation, finding that misvaluations in local property tax assessments more heavily burden Black and Latino households in the United States.

Watch “Diversity in Economics: I never thought about becoming an economist” below.

Robynn Cox

Robynn Cox is an assistant professor in the School of Public Policy at the University of California, Riverside. Her research centers on the economics of crime, health economics, and labor economics, particularly the social and economic consequences of mass incarceration. She has written extensively for Equitable Growth’s website, including on racial inequities in U.S. criminal justice policy, the impact of affirmative action on police killing of civilians, and the negative effects of residential racial segregation in Northern U.S. cities.

Watch “Diversity in Economics: Creating inclusive, integrated spaces in economics” below.

Candace Miller

University of North Carolina, Charlotte’s Candace Miller is an assistant professor of sociology and organizational science. She studies race and ethnicity, urban sociology, and culture, and is currently working on a book that examines the impacts of gentrification on Black- and White-owned businesses in Detroit. In 2018, she received an Equitable Growth grant to further this research on urban revitalization, race, and entrepreneurship, going beyond the typical research focus on residential gentrification to look at the effects on small business owners.

Watch “Diversity in Economics: I’m always attuned to how people are experiencing the economy” below.

These and future installments of the Diversity in Economics video series can be found on Equitable Growth’s YouTube page (specifically in this playlist) or on our website. These videos provide perspective on how the economics and social sciences fields can become more inclusive and supportive of diverse scholars and nontraditional research.

If you have questions for any of the featured scholars, or would like to be included in this series or nominate a scholar to be included, please reach out to Maria Monroe at mmonroe@equitablegrowth.org.

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JOLTS Day Graphs: November 2022 Edition

Posted on by Carmen Sanchezcumming

Every month the U.S. Bureau of Labor Statistics releases data on hiring, firing, and other labor market flows from the Job Openings and Labor Turnover Survey, better known as JOLTS. Today, the BLS released the latest data for November 2022. This report doesn’t get as much attention as the monthly Employment Situation Report, but it contains useful information about the state of the U.S. labor market. Below are a few key graphs using data from the report.

The quits rate remained relatively steady in November 2022, increasingly slightly to 2.7 percent as 4.2 million workers quit their jobs.

Quits as a percent of total U.S. employment, 2001–2022. Recessions are shaded.

With the number of job openings (10.5 million) and hires (6.1 million) remaining at similar levels to the previous month, the vacancy yield stayed at 0.58 in November.

U.S. total nonfarm hires per total nonfarm job openings, 2001–2022. Recessions are shaded.

There were 0.57 unemployed workers for every job opening in November, reflecting the relatively steady state of the unemployment rate and the job openings rate.

U.S. unemployed workers per total nonfarm job opening, 2001–2022. Recessions are shaded.

The Beveridge Curve, which shows the relationship between job openings and unemployment, likewise did not reflect any movement in November 2022.

The relationship between the U.S. unemployment rate and the job openings rate, 2001–2022.

Overall job openings remained near 10.5 million in November, but declined in sectors such as education and health services, financial activities, and leisure and hospitality.

Job openings by selected major U.S. industries, indexed to job openings in February 2020
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The importance of understanding how job quality affects U.S. workers and the entire economy, and how to boost access to good jobs

Posted on by Emilie Openchowski
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Even during economic expansions and periods of robust employment growth, millions of workers in the United States face economic insecurity and precarious working conditions. Low pay, safety hazards, lack of bargaining power, unstable schedules, discrimination and harassment at work, little access to benefits, surveillance and lack of privacy, and insufficient opportunities for upward career advancement all affect a substantial share of the U.S. labor force and all reduce job quality for workers.

And because most research finds that overall job quality in the United States has declined over the past four decades, lack of access to good employment opportunities both exacerbates existing economic disparities and generates challenges for robust and broad-based economic growth.

Studying job quality acknowledges that research should go beyond top-line statistics, such as employment growth and the unemployment rate, when analyzing the state of the labor market. Additionally, even though pay is an important—and perhaps the most important—component of a good job, there are other employment attributes that shape workers’ experience, opportunities, and employment outcomes. These nuances are part of what makes this topic so ripe for future research that can contribute to the existing body of work on job quality.

As both a rich area for research and a topic of interest for policymakers, a number of government agencies, research centers, and academics have attempted to define and study job quality. In 2022, for instance, the U.S. Department of Labor published a list of good-job principles through its Good Jobs Initiative. These principles include fairness in recruitment and hiring; access to family-sustaining employment benefits; diversity, equity, inclusion, and accessibility at work; empowerment and representation through unions and bargaining power; job security and working conditions; a healthy organizational culture; adequate pay; and opportunities to acquire skills and career advancement.

Similarly, in 2019, Gallup developed a 10-part job-quality index that includes characteristics such as level of pay, pay predictability, stable hours, control over hours and location, benefits, advancement opportunities, and job security by asking thousands of workers about the job traits they care most about.1 Other entities, such as the Organisation for Economic Co-operation and Development and the University of Buffalo’s School of Management, also have developed good-job indices to assess and measure the availability of high-quality jobs in the U.S. labor market.

There is a robust body of research on job quality, but many questions remain unanswered

In addition to these initiatives by government agencies and research centers, a number of economists, sociologists, and management scholars have identified and studied several factors that are related to job satisfaction and worker well-being. Economist Dani Rodrik at Harvard University, for instance, recently released a policy report on how to leverage industrial policy to create good jobs. Other academic researchers have examined dignity at work, hours of work, relationships with co-workers and supervisors, autonomy, pay transparency, perceptions of fairness, and the alignment between workers’ values and the content of their work.

Several scholars have studied the economic dynamics, institutions, and structural forces that can affect job quality more broadly. For instance, the term “fissured workplace,” coined by David Weil at Brandeis University, captures how businesses began to outsource and contract out services that were previously done by employees. By breaking down traditional employee-employer relationships, workplace fissuring makes it easier for firms to avoid complying with labor standards and regulations, disrupts career ladders, makes employer-sponsored benefits more difficult to access, and leads to a drop in earnings in the outsourced jobs.

Likewise, academics are examining the causes and consequences of job polarization, or the falling share of middle-wage jobs and the rising share of low- and high-paying jobs in the U.S. labor market. Others study the role of international trade policy and shifts in the industrial composition of the U.S. economy, pointing to the relative decline in manufacturing jobs as an important driver of slow wage growth and the decline of workers’ bargaining power. And other researchers focus on the decline of unions and waning institutional support for organized labor as key factors behind growing inequality and falling job quality.

Yet another branch of research studies disparities in access to high-quality employment opportunities. These inequities include outright employment discrimination, differences in workers’ vulnerability to monopsony power, occupational segregation, occupational crowding, and the devaluation of work disproportionately done by historically marginalized workers. Relatedly, there is a robust body of research studying how the enactment of the Civil Rights Act, affirmative action policies, and access to public-sector jobs affect the employment outcomes of workers of color and women workers.

The Washington Center for Equitable Growth’s 2023 Request for Proposals offers funding opportunities for scholars examining various drivers of economic inequality, including these and other aspects of job quality. We are especially interested in research that looks at some of the following questions and areas of study:

  1. The relationship between job quality and economic growth: Has overall job quality in the United States declined or increased? What are the best metrics and definitions to measure job quality? What economic dynamics can spark the creation—or destruction—of high-quality jobs? How do market forces and institutions affect job quality? How has the U.S. occupational structure changed over time, and what are the implications of that change for workers and economic growth? How does job quality relate to aggregate productivity and economic growth?
  2. Where are, and who has access to, good jobs: What role does race, ethnicity, and gender play in clustering workers in high- or low-quality jobs? To what extent is occupational segregation a manifestation or a driver of labor market disparities? What role do industries and occupations, such as the public sector, play in stalling or promoting economic mobility? What challenges and opportunities do phenomena such as technological change and climate change present for the creation of high-quality jobs? What is the relationship between mechanisms for collective bargaining and job quality?
  3. How to boost job quality: How can government better enforce labor standards? How does union coverage affect job-quality attributes? Are deterrence mechanisms an efficient way to push back against violations to labor standards? How can technology be leveraged to boost job quality? What is the evidence that, and what are the mechanisms through which, income supports and social infrastructure improve job quality? How does labor law affect job quality (just-cause vs. at-will employment, for example)?

For more information on how to apply, deadlines and requirements, and who is eligible for Equitable Growth funding, please visit the 2023 Request for Proposals website.

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A missed opportunity to expand the Child Tax Credit will affect U.S. families and the broader economy now and for years to come

Posted on by Emilie Openchowski
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Earlier this week, the U.S. Congress released its proposed omnibus bill that funds the federal government through September 2023 and makes various other reforms to the nation’s retirement system, antitrust laws, and election integrity rules. Several policymakers had been hopeful that a bipartisan deal could be reached to include an expansion to the Child Tax Credit in the bill, bringing back this largely successful pandemic-era policy. Yet, unfortunately, gridlock prevailed in Washington once again, and such a deal did not come to pass.

The lack of bipartisan support and action for this important income support program in the 117th Congress will have short- and long-term consequences—not only for families with children, but also for the broader U.S. economy’s growth and productivity.

The Child Tax Credit is a benefit that allows certain families with children to reduce their federal taxable income based on their number of dependents under age 18. The goal of the tax credit is to offset some of the costs of raising a family in the United States, giving parents more financial breathing room in the present. The Child Tax Credit also is essential for longer-term and broad-based economic growth because it ensures that children’s needs are met in childhood so they can become productive adults in the future.

Until the COVID-19 pandemic, the Child Tax Credit excluded 6 million children from the program due to its earnings requirements for parents. But in March 2021, in response to the ongoing pandemic and economic crises, Congress passed, and President Joe Biden signed, a temporary CTC enhancement that expanded eligibility for more families. The enhancement made the tax credit fully refundable and eliminated the earnings requirement, while also raising the amount that could be claimed per child and establishing a monthly payment schedule, rather than a lump sum paid as part of a household’s tax refund at the end of the year.

These changes had far-reaching benefits for families, particularly low-income households that were struggling to get by as the pandemic continued wreaking havoc on the economy and the care sector. Yet the enhancements were allowed to expire at the end of 2021, and the economic benefits that went along with them—such as cutting U.S. child poverty rates by almost half—were consequently undone.

Research repeatedly shows that income transfers such as the Child Tax Credit improve well-being for families with children. Studies show that the families who qualified for the enhanced tax credit in 2021 had lower rates of food insecurity, an easier time affording expenses, and were more able to make their housing payments. Other researchers find that the expansion reduced medical hardship for low-income families. And a large body of literature on financial transfers similar to the Child Tax Credit likewise shows beneficial impacts on children in the areas of health and education outcomes, as well as adulthood earnings.

The 2021 CTC enhancements not only increased benefit levels the most for those low-income families who most needed the support, but it also had limited or no detrimental effects on parents’ work in the short term. A recently released report by Alex Bell of the University of California, Los Angeles reviews several different studies that examined the potential impact of the enhanced CTC payments on various aspects of parents’ labor supply or employment. Bell explains that most of the studies find small or no statistically significant effects, indicating that the enhancements did not deter parents from working.

This is particularly interesting when considering that the goal of the Child Tax Credit is to offset the costs of raising children. Boosting labor supply has been a goal of other income support programs, such as child care subsidies and the Earned Income Tax Credit, but that is not the objective of the Child Tax Credit. As such, policymakers need only be concerned about decreases in parents’ labor supply to the extent that those reduced work hours decrease the total amount of money parents have to spend on their children. There is no evidence that is the case.

Economic experts also have largely rejected claims that an expanded Child Tax Credit would increase inflation. Just last week, Equitable Growth Steering Committee member Alan Blinder led an open letter voicing support for expanding the tax credit, arguing that “the expanded monthly refundable Child Tax Credit, at under 0.4 percent of GDP, is simply too small to meaningfully increase inflation, but it will help families meet rising costs.” Other signatories included Equitable Growth Steering Committee members Robert Solow and Hilary Hoynes and Equitable Growth Research Advisory Board member Robert Reich.

Another benefit of the 2021 expansion of the Child Tax Credit was its contribution to improving the racial and socioeconomic equity of the program. One study shows that prior to 2021, one-third of children lived in families that did not qualify for the tax credit because their household earnings were too low, and that these children were largely children of color, rural children, and young children. The elimination of an earnings requirement and full refundability of the enhanced Child Tax Credit brought these families into eligibility.

Research shows that these short-run benefits of an expanded CTC program are just one part of the story. The Child Tax Credit also has long-term implications for the economy and labor force, as the children who benefit experience improved well-being in adulthood and thus end up boosting U.S. productivity and economic growth when they become adults.

Additionally, the CTC enhancements can improve children’s chances of upward mobility, which increases their future earnings—and thus the future tax base. And studies of other, similar income support programs show that families with more economic resources can invest more in their children’s human capital development, which improves educational outcomes and school completion rates, and consequently boosts adulthood earnings.

In short, a growing body of research finds broad benefits for families, children, and the overall economy of expanding access to the Child Tax Credit.

All of this underscores why policymakers’ inability to cement this program into the U.S. social infrastructure system is a disappointing display of the partisanship that often plagues policy debates. Luckily, this session of Congress is not the last one in which action can be taken on this issue.

Indeed, policymakers can still decide to extend this essential income support in the new year, when the 118th Congress is sworn in. To do so would benefit not only millions of families in the United States, but also long-term productivity and economic growth overall.

Posted in Uncategorized

New digital tools demonstrate the promise of measuring well-being in the United States

Posted on by Maria Monroe
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This summer, the Washington Center for Equitable Growth partnered with New America, the Justice, Health & Democracy Impact Initiative at Harvard University, and the U.S. Departments of Commerce and the Treasury to lead a sprint with The Opportunity Project, a U.S. Census Bureau program that leverages open data to solve challenges facing the nation. Through a 14-week technology development sprint, nongovernmental solutions teams worked with federal data stewards to build digital tools that measure household and community well-being in new and more accurate ways.

Our collaboration was motivated by the continuous challenges to individual and shared well-being in the United States in recent years. The forces of a global pandemic, an intensifying climate crisis, and persistent racial and economic inequality have exposed vulnerabilities in U.S. social and economic systems that can be attributed in large part to our single-minded focus on growing Gross Domestic Product at all costs.

Some of the downsides of GDP are well-understood. For example, GDP, as an aggregate statistic, does not account for who is actually benefiting from economic growth. And economic growth that accrues mostly to the top of the income distribution is of little use for most U.S. households. When those at the bottom don’t share in the fruits of economic growth, they are left vulnerable to recessions, pandemics, and natural disasters.

But GDP has many other blind spots. The COVID-19 pandemic, in particular, demonstrates that overall economic success alone is insufficient for protecting the health and well-being of a nation’s citizens. While the quality of data on COVID-19 deaths by country varies, GDP per capita does not appear to be a predictor of fewer COVID-19 deaths. If anything, it may be positively related to deaths.

A country’s ability to cope with a future pandemic or the reality of climate change will ultimately require more than wealth. Building resiliency and sustainability into the economy and our communities can help. Ultimately, nations that prioritize short-run economic growth at any cost might be trading a resilient, healthy economy over the long run for temporary benefits now—a kind of economic sugar rush.

Measuring noneconomic markers of people’s well-being may also help us learn more about the relationship between economic success and the happiness of a nation’s residents. For instance, the Social Progress Imperative’s Livable Cities Tool—one of the digital products that was produced during this summer’s Opportunity Project sprint—shows that while economic and noneconomic well-being are correlated, some cities buck this trend, with these residents enjoying strong well-being despite fewer economic resources. These places provide intriguing examples of how governments can create policies that support human flourishing when resources are limited.

This column briefly explores the reasons many countries and places are starting to explore well-being measurement. It then details the four prototype tools that were developed in The Opportunity Project sprint that we led in concert with the U.S. Departments of Commerce and the Treasury.

Exploring metrics for well-being

The metrics of success that are commonly referenced in policy debates—such as GDP, unemployment, wage growth, and others—do not divulge much information about the traits that communities need to weather significant crises. They don’t tell us, for example, if residents of a nation have strong support networks, access to healthy food or public transportation, and other resources that could help them weather hardship.

Increasingly, research shows that these noneconomic metrics may have significant benefits for society. Many well-being frameworks, for example, try to capture the level of social connection between people within a community. Economists are increasingly realizing that noneconomic metrics such as these are, in fact, related to income, mortality, and a variety of other important life outcomes. A society with better well-being along these lines may be setting itself up for stronger long-run growth as its citizens build more human capital, are more productive, and live longer, healthier lives.

As such, some nations and intergovernmental organizations are starting to invest in developing well-being metrics that can be used to improve policymaking and identify areas of concern in communities. The United Kingdom’s Office of National Statistics, for example, now publishes regular updates on quality of life in the UK. New Zealand issues a well-being budget that directs investments around the nation with the goal of improving targeted areas of well-being. And the Organisation for Economic Co-operation and Development has launched its own Better Life Index, which rates and ranks member countries in 11 different well-being categories, both economic and noneconomic.

The United States does not have any formally agreed-upon, whole-of-government measures that align with various dimensions of well-being. It also lacks an official means to track household and community well-being. Yet there are a handful of promising efforts that indicate a potential shift in the coming years.

One such effort is the recently released Federal Plan for Equitable Long-Term Recovery and Resilience—a whole-of-government approach to the vital conditions for thriving people and places. This project has the potential to act as a bridge between a focus on resilience and broader well-being efforts. Additionally, some U.S. localities have started to adopt well-being indices, such as Santa Monica’s Wellbeing Index.

This paucity of data collection initiatives in the United States was part of the inspiration behind The Opportunity Project’s 14-week technological development sprints this summer. The prototype tools that came out of the exercise represent new and innovative ideas for how the government can measure well-being in the United States more accurately than GDP suggests.

Outcomes from The Opportunity Project’s 14-week sprint

Together, our sprint leadership team—compose of the Washington Center for Equitable Growth, New America, the Justice, Health & Democracy Impact Initiative at Harvard University, and the U.S. Departments of Commerce and Treasury—recruited four teams of technologists and data scientists, a team of cross-discipline expert advisors with deep knowledge and practice in the area of well-being measurement, and a dozen community leaders as user advocates, who were interviewed and consulted by solutions teams about their lived experience and perspectives on well-being.

Teams were tasked with using federal open data to build new digital tools, and we recruited 20 data stewards from across 14 federal government agencies to advise teams on the possibilities and gaps within existing data. Altogether, we identified 61 data sources across federal data and other relevant data sources spanning dozens of domains of life: the economy, community demographics, health, housing, transportation, education, crime, and more.

As part of The Opportunity Project, teams created public-facing digital tools that can help policymakers understand well-being in their communities and better utilize federal data to advance local well-being. All the teams are still developing and improving these tools, working to empower communities to better understand how decision-makers can lead with well-being in mind.

The products created by the four teams are the Economic Vulnerability Dashboard, the Wellbeing Infrastructure Tradeoffs Tool, the Livable Cities Tool, and the City Builder platform. Each is described in detail below.

Economic Vulnerability Dashboard

United for ALICE created the Economic Vulnerability Dashboard, or EVD, to help identify where it is hardest for asset-limited, income-constrained, employed, or ALICE, families to live and where there is the most support. (See Figure 1 for a preview of what the tool looks like.)

Figure 1

The Economic Vulnerability Dashboard identifies communities that offer more and less support for vulnerable families
The Economic Vulnerability Dashboard identifies communities that offer more and less support for vulnerable families

The dashboard quantifies local gaps in housing, jobs, and basic community resources in each area. To understand the geography of vulnerability and disaggregate indices that could conceal vulnerability, the dashboard utilizes comparisons between measures to map these gaps. It also generates profiles for individual communities and provides an action plan for addressing deficiencies in any particular indicator.

Wellbeing Infrastructure Tradeoffs Tool

A collaborative team led by the Full Frame Initiative developed the Wellbeing Infrastructure Tradeoffs Tool, or WITT. With the goal of empowering communities themselves to pursue “shovel-worthy rather than shovel-ready” infrastructure projects, the tool was created to identify trade-offs in city planning processes and ensure an inclusive and representative public feedback process. (See Figure 2 for a preview of what the tool looks like.)

Figure 2

The Wellbeing Infrastructure Tradeoffs Tool empowers communities to gather feedback on how potential infrastructure projects will impact residents
The Wellbeing Infrastructure Tradeoffs Tool empowers communities to gather feedback on how potential infrastructure projects will impact residents

The tool integrates participatory data from impacted community members, verifies representation to ensure populations are not over- or undersampled, and provides insights on how different populations—such as racial or socioeconomic subgroups—perceive the impact of the project on well-being differently. It also provides a map of community assets, such as parks and public facilities.

Livable Cities Tool

The Social Progress Imperative and its partners built the Livable Cities Tool to help communities link economic conditions to social outcomes, identify and learn from peer cities, and facilitate informed decision-making. In addition to geospatial overlays for 67 different well-being indicators, the heart of the tool is a framework for decision-making and city-specific scorecards to understand the well-being of a city’s constituents—especially the relationship between social and economic indicators—and identify opportunities for areas for investment and improvement. (See Figure 3 for a preview of what the tool looks like.)

Figure 3

The Livable Cities Tool links cities’ economic conditions and social outcomes to improve decision-making by local government officials
The Livable Cities Tool links cities’ economic conditions and social outcomes to improve decision-making by local government officials

City Builder platform

While already an established tool, Citi Ventures’ City Builder platform used the sprint as an opportunity to evaluate how information about community and resident well-being is communicated to stakeholders interested in place-based investing. By adding additional measures of well-being and information on how the indicators have changed over time, City Builder aims to empower users to better understand well-being within a community. (See Figure 4 for a preview of what the tool looks like.)

Figure 4

The City Builder data platform helps users learn about localities where they might want to make place-based investments
The City Builder data platform helps users learn about localities where they might want to make place-based investments

Significant challenges to reporting on well-being remain

While The Opportunity Project sprint generated impressive tools that communicate and promote well-being in new ways, the experience also highlights the significant challenges to deploying well-being metrics more broadly.

Some of these barriers are data infrastructure challenges, such as the fact that many federal datasets are not currently updated frequently enough or don’t provide detail at the appropriate local level. There are also myriad planning questions that will require interagency cooperation to solve, including aligning on the dimensions of well-being, clearly delineating how the siloed federal statistical agencies will each contribute to the projects, and building deeper partnerships between federal and local leaders to empower communities to drive data and measurement needs as they define well-being in their particular contexts.

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GDP 2.0: Measuring who prospers when the U.S. economy grows

By Austin Clemens,

July 11, 2023

Economic research is increasingly finding that communities where residents have strong social connections, access to built and natural spaces that foster mental and physical health, and opportunities to learn and grow throughout their lives can play an important role in fostering economic growth and resilience. We hope the data projects from this Opportunity Project sprint can serve as useful prototypes for federal and local policymakers who are thinking about the broader implementation of well-being metrics.

– Elizabeth Garlow is a senior fellow at New America. Austin Clemens is the director of economic measurement policy at the Washington Center for Equitable Growth. Tony Guidotti is the Justice, Health, and Democracy fellow at the Edmond and Lily Safra Center for Ethics at Harvard University.

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Fighting tax evasion by the wealthy can raise revenue and restore the integrity of the U.S. tax system

Posted on by Emilie Openchowski
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Recent estimates suggest that as much as $36 billion a year in taxes are unpaid by Americans hiding wealth abroad, and more than $50 billion more is lost due to corporations shifting taxable profits offshore. To tackle this thorny problem, the Inflation Reduction Act of 2022 provides about $80 billion to the IRS for greater tax enforcement, expressly targeting the top “1 percent” of high-income, high-wealth individuals.

Now, however, the incoming Republican-led majority in the U.S. House of Representatives wants to rescind that IRS funding, either outright or by reducing the annual appropriations level for the IRS, when the new 118th Congress convenes early next year. The most charitable explanation is that the House Republicans are resigned to letting billions of taxes go unpaid because cracking down on these abuses would be too intrusive or resource-intensive.

Our new paper, “Different From You and Me: Tax Enforcement and Sophisticated Tax Evasion by the Wealthy,” reviews recent research showing that tax evasion and legally dubious forms of tax avoidance by wealthy individuals and large corporations represent an important and pressing challenge for the IRS, which needs more funding, not less, to tackle this problem. The research shows that the wealthy are adept at using sophisticated tactics to reduce their tax bills, but we argue that the IRS has tools at its disposal to combat this problem. Investing in tax enforcement targeting the high-wealth population could make taxes in the United States more progressive, raise revenues to fund vital public programs, and restore public confidence in the U.S. tax system.

Tax enforcement policy is a multistage process. Congress writes the tax code that defines tax liabilities and penalties for evasion, and the U.S. Department of the Treasury writes regulations to refine these rules. Then, the IRS collects information with which to assess these liabilities, and it conducts audits. The audit process itself consists of multiple steps, from selection of whom to audit, examination of tax returns, assessment of any additional taxes and penalties due, resolution of disputes in case of disagreements, and, finally, collection of additional taxes due.

Weaknesses at any step of this enforcement process can lead to the loss of substantial tax revenue. Poorly written regulations, for example, can create legal gray areas that make audits more difficult and disputes more likely. Likewise, a lack of resources for disputes can embolden taxpayers to take aggressive positions that reduce their taxes.

Wealthy actors are particularly well-equipped to exploit weaknesses at any stage of the enforcement process because they have access to legal and financial intermediaries who can devise sophisticated schemes to reduce their tax burdens. Our new working paper documents how so many high-income and high-wealth taxpayers take actions to make their evasion more difficult to detect—for example, by masking evasion within complex business entities and/or offshore structures. They also have the resources to scan the tax code for gray areas and legal avoidance opportunities, and to fight back and undertake lengthy, costly legal battles were the IRS to dispute the legality of their tax positions.

We review the research on the tax enforcement process in the paper, and we present two illustrative examples. First, offshore tax evasion is perhaps the most widely publicized method used by the wealthy to evade taxes. To tackle offshore evasion, governments over the past 15 years have enacted new international cooperation policies, soliciting information from offshore financial institutions. Based on the evidence we review, these efforts have made some progress in mitigating offshore tax evasion, but some wealthy taxpayers can dodge these new policies by restructuring their portfolios and reallocating wealth across jurisdictions.

Our second example involves gray area avoidance—exploiting ambiguities in tax law, such as the case of “syndicated conservation easements.” The law around conservation easements allows landowners to donate development rights on their land for conservation purposes and then, to claim an income tax deduction equal to “fair market value” of their donation. But because the legal standard for a fair market value in this domain is weak, many landowners claim income tax deductions far out of proportion to real fair market values.

Such gray area avoidance can be fought case by case, by disallowing abusive deductions and litigating the resulting disputes, or by reforming the law to shut down abusive schemes more directly. Unable to make major changes to the rules themselves, the IRS has so far mainly taken the first approach, resulting in a grueling series of court battles.

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Tax evasion at the top of the U.S. income distribution and how to fight it

By Daniel Reck, Max Risch, Gabriel Zucman,

March 22, 2021

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Why the Inflation Reduction Act is key to strong, broad-based U.S. economic growth

By David S. Mitchell,

August 16, 2022

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The relationship between taxation and U.S. economic growth

By Corey Husak,

June 30, 2021

With this new understanding of sophisticated strategies used by the wealthy to dodge taxes, we suggest six ways to conduct tax enforcement targeting high-income, high-wealth taxpayers and the businesses they own. This multipronged approach includes:

  • Facilitating robust information sharing, especially sharing information on all types of assets and capital income of the wealthy across national borders
  • Investing fiscal resources in deep, thorough tax audits of these individuals
  • Allocating additional fiscal resources toward litigating tax disputes
  • Pursuing substantial penalties for the most egregious tax evaders
  • Monitoring aggressive tax sheltering schemes and undertaking frequent legal reforms to shut them down
  • Promoting whistleblower disclosures to identify “blind spots”—types of evasion of which authorities might not yet know or be aware

A multipronged approach such as this is essential to limiting tax evasion and dubious tax avoidance by the wealthy. But the IRS cannot implement such an approach without the funds provided by the Inflation Reduction Act.

The next wave of tax enforcement research should further evaluate these types of policy interventions. We acknowledge in our working paper that the task outlined above might seem daunting. Yet we also document that high-quality enforcement policy targeting high-income, high-wealth individuals can raise substantial tax revenue, in turn providing fiscal resources the federal government could invest in policy to promote more equitable U.S. economic growth.

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How the new Global Repository of Income Dynamics database sheds light on income inequality and economic mobility

Posted on by Maria Monroe
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Economists have long known that a rigorous understanding of inequality is only possible with high-quality data. To this end, developments in economic models since the 1970s have helped advance our understanding of the distribution of earnings, as well as the dynamics of earnings—or how the income of an individual evolves over time. Nevertheless, important gaps in the research literature remain, most notably regarding subpopulations and income dynamics across time.

The Global Repository of Income Dynamics, or GRID—a new open-access, cross-country database that contains a wide range of micro statistics on income inequality, income dynamics, and mobility—helps to fill these research gaps. In a recent working paper published by Equitable Growth, the leaders of the GRID project—Fatih Guvenen of University of Minnesota, Luigi Pistaferri of Stanford University, and Giovanni L. Violante of Princeton University—introduce GRID as part of a recent special issue of Quantitative Economics and present some top-level trends in global income inequality and income dynamics from the GRID statistics. These trends only begin to scratch the surface, insofar as the database provides hundreds of thousands of summary statistics for a broad range of income dynamics.

The authors note there are four key features of GRID: It is longitudinal, administrative, granular, and harmonized. Taken as a whole, these features comprise a unique dataset that enables researchers to make cross-country comparisons more efficiently and provides rich administrative microdata that would otherwise be prohibitively costly or infeasible to collect and analyze. The four features also provide their own specific advantages.

First, GRID being longitudinal means that researchers can study the dynamics of an individual’s income over time, rather than static snapshots of distributions, as is the case with cross-sectional inequality measures. Longitudinal statistics are crucial for welfare analyses and designing social insurance programs. For instance, the authors cite a common disadvantage of a cross-sectional snapshot: the inability to draw welfare inferences from a constant poverty rate. A constant 10 percent poverty rate across two subsequent years is compatible with 10 percent of the population being permanently poor or with the entire population facing a 10 percent chance every year of falling into poverty. With cross-sectional data, the two cases are indistinguishable, whereas with longitudinal data, one can follow the fortunes of people over time.

Second, GRID’s administrative data has advantages over survey data for research on income inequality and income dynamics. Since U.S. administrative data are collected from Social Security records or similar retirement income programs in other nations, as well as from general tax records, the common disadvantages of survey data are avoided, such as sample attrition, smaller sample sizes, and measurement errors. To be sure, the authors note administrative data have its own disadvantages, such as cases in which the informal sector is large in certain countries. Nevertheless, the authors also note that in these cases, survey data can be used to supplement analyses, as was done by economist Daniela Puggioni of the Bank of Mexico and co-authors in their study of the evolution of income inequality in Mexico.

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Measuring economic outcomes for all U.S. workers and their families will hold policymakers accountable to creating broad-based growth

By Austin Clemens,

October 7, 2021

report

2023 Request for Proposals

November 9, 2022

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

By Austin Clemens,

July 7, 2022

Third, GRID is granular, meaning it provides micro statistics on income inequality, income fluctuations, and economic mobility for finely defined subpopulations. Computing disaggregated statistics is especially important because it is well-documented that different groups do not experience income inequality and macroeconomic dynamics uniformly. With disaggregated data, researchers can examine what geographic regions are being left behind, whether persistent systemic race and gender divides are narrowing, how an economy is performing for old and young workers alike, and much more.

Lastly, GRID is harmonized, meaning the data from different sources are combined so they can be viewed in a comparable way. Specifically, all statistics for all countries are produced by one unique master code in GRID, which ensures that a long list of small, but potentially critical, steps are carried out the same way in each country. This allows researchers to make cross-country comparisons efficiently and makes adding additional countries to GRID easier in the future.

The research that GRID helps open up is extensive. Not only can these statistics be useful in a wide range of inequality research, as the breadth of topics in the special issue of Quantitative Economics suggests, but they can also help inform other kinds of quantitative analyses whose structural models rely on income dynamics as a key input. As research on economic inequality trends continues to develop, it is imperative for this type of high-quality data to be accessible so researchers can advance new research questions and deepen our understanding of inequality.

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Why workplace dignity is valuable to U.S. workers, employers, and the broader economy

Posted on by Maria Monroe
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The role of employment in the lives of many U.S. workers and their families is more than just a way to provide for oneself and one’s loved ones. Jobs are shaped by both social networks and social norms that influence decision-making. Different occupations come with varying social status. And our daily work can deeply affect our well-being through shaping stress and associated health effects. These are just a few of many other characteristics that make labor so unique in the economy.

Across these different attributes of employment, it is clear that an understanding of the role of dignity and empowerment at work is a key economic question that has been underexplored in the field of economics. Yet research from other fields and interdisciplinary work can provide some critical insights to guide U.S. policymakers in promoting good jobs, in which workers have both power and dignity at work while contributing to broadly shared and robust economic growth.

In a new Equitable Growth working paper, titled “Power and Dignity in the Low-Wage Labor Market: Theory and Evidence from Wal-Mart Workers,” Arindrajit Dube of University of Massachusetts Amherst and Suresh Naidu and Adam Reich of Columbia University bring insights from sociological research applied to economics methods to dig into precisely what dignity at work means and how it shapes job quality for low-wage workers at the notoriously low-road employer Walmart Inc. The researchers are interested in how subjective perceptions of dignity at work are a workplace amenity, similar to other job characteristics, and how job characteristics—including dignity, as well as standard benefits such as paid time off—are valued as substitutes or complements to each other.

Underlying these questions are questions about how power imbalances within workplaces lead to inefficiencies where in-demand job characteristics are undersupplied in a noncompetitive labor market. And, as noted, the field of economics has a sparse literature on dignity at work.

One notable exception, cited by Dube, Naidu, and Reich, is work by Roland Benabou of Princeton University and Jean Tirole of the Toulouse School of Economics. In their 2009 paper, “Over My Dead Body: Bargaining and the Price of Dignity,” they define dignity as a motivated belief in one’s own productivity, which, in turn, shapes bargaining outcomes between workers and employers. In a bargaining model with dignity, outcomes are different than the equilibrium predicted in simplistic supply-and-demand model with workers maximizing income and employers minimizing costs to maximize profits.

Moving beyond the simplistic economic model where narrowly defined rationality reigns supreme, this subjective belief in one’s own productivity does not mean that workers and employers are, for one reason or another, irrational in their bargaining over wages because neither is solely motivated by maximizing income or minimizing costs. There may be fundamental flaws in either party’s decision-making, to be sure, and these internal belief distortions may lead to efficiency losses because it is difficult to correct for flaws in self-perception.

While it might help to “knock down a peg” the overhyped beliefs of the unproductive worker, for example, there is also a risk of reducing the confidence of productive workers, which would result in them potentially being paid less than the value they create and would reinforce deadweight loss through wage suppression. In an economy with imbalanced information between workers and employers and other power disparities in the bargaining process, the latter outcome may be more likely. In these circumstances, policymakers recognizing intrinsic imperfections in these economic dynamics gives them more space to correct them through policymaking, such as by raising the wage floor or enforcing workplace protections.

Outside of economics, there is a rich sociological literature on dignity at work. Randy Hodson’s 2001 book, Dignity at Work, reviews 200 workplace ethnographies that investigate job satisfaction, finding themes of autonomy, co-worker relationships, and supervision over one’s work—which Dube, Naidu, and Reich subsequently center as their definition of workplace dignity. In “Power and Dignity in the Low-Wage Labor Market,” the researchers follow Reich’s previous qualitative survey work in his 2018 book with Peter Bearman, Working for Respect: Community and Conflict at Walmart. They essentially scale-up the findings of Reich and Bearman’s ethnographic work on Walmart workers by using how they define dignity at work in qualitative interviews mapped on to a large-scale survey.

The co-authors use the Qualtrics survey methods developed by The Shift Project, which was spearheaded by demographers and sociology professors Danny Schneider of Harvard University and Kristen Harknett of University of California, San Francisco. And, with a novel dataset, Dube, Naidu, and Reich are able to begin to estimate the value of nonwage amenities to workers. In their framework, workers maximize the combination of wage and nonwage amenities, including dignity at work measured by perceptions of supervisor fairness or friends at work, alongside other workplace benefits, such as paid time off or sufficient work hours.

Yet when the population of workers have different preferences for the combinations of job characteristics, firms will tend to shape job offers to attract the last-hired worker, which may not be an efficient outcome for the average worker at that workplace. One hypothetical case-in-point made by the three co-authors is if an employer needs to recruit just one more worker and that worker has a higher-than-average rate of substitutability between wages and work amenities, whereas other workers may find them imperfect substitutes that can’t just be traded for one another, then amenities will end up being underprovided and wages overprovided for the average worker preferences at that establishment.

Additionally, the co-authors include in their model that workers can quit in response to better job offers, yet the arrival rate of better job offers may be imperfect due to search frictions, or the difficulty in finding an adequate offer. Each of these features of the model are consistent with the framework of monopsony, where imperfect labor markets leave room for policy intervention to raise wages and benefits for more efficient outcomes.

Dube, Naidu, and Reich are then able to estimate the value of nonwage amenities by pairing wage and amenity offers at other hypothetical jobs with wages and amenities at the Walmart workers’ current jobs and the likelihood of receiving such an offer and then quitting one’s current job. They are able to estimate what job attributes matter, just how much in dollar terms, and how they impact the likelihood of quitting in an imperfectly competitive labor market. Some of the nonwage amenities that impact the likelihood of quitting the most are sufficient work hours, how fair and respectful a supervisor is, paid time off, and commute time.

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How a large employer’s low-road practices harm local labor markets: The impact of Walmart Supercenters

By Kate Bahn,

January 28, 2022

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Minimum wages and the distribution of family incomes in the United States

By Arindrajit Dube,

April 26, 2017

Vision 2020

Wage and employment implications of U.S. labor market monopsony and possible policy solutions

By Sydnee Caldwell, Suresh Naidu,

February 18, 2020

They also examine whether wage and nonwage amenities are substitutes or complements for each other by comparing how valuable a nonwage amenity is at the average wage and then at a 10 percent higher wage, seeing if the wage increase does or does not affect how much a worker values a nonwage amenity. What they find is that, overall, nonwage amenities are complements to wages, meaning the value of nonwage amenities increases when wages go up. In particular, they demonstrate how much workers value sufficient work hours, paid time off, and increases in commute time when wages go up. Amenities related to time increase in value at higher wages.

What is clear is that dignity and power at work matter beyond simple dynamics of workers seeking higher wages and businesses trying to keep costs low to increase profits. These other attributes and dynamics paint a more complex picture, but one that may ring true to all workers who experience the social aspects of their jobs.

This exciting new paper demonstrates the strength of cross-disciplinary methods to bring more clarity to complex labor market dynamics than relying on traditional methods of any one field. What’s more is what this insight can tell policymakers. In an extension of this analysis in the paper, the co-authors’ findings about complementarities shed light on how minimum wage increases impact workers, finding that Walmart employers do not reduce other nonwage amenities when wages increase.

All of these findings are consistent with the underlying framework of monopsony. Understanding the complex ways that people interact with their jobs through research with cutting-edge techniques across social research fields can be helpful for policymakers and businesses alike to improve job quality, reduce turnover, and foster broadly shared economic growth and prosperity.

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