Large employers in the United States can have significant impacts on the local labor markets in which they operate, not only affecting their employees directly but also spilling over to other workers living and laboring nearby. Recent research by Ellora Derenoncourt of Princeton University and Clemens Noelke and David Weil of Brandeis University, for example, finds that voluntary minimum wage increases among large employers, such as Amazon.com Inc. and Target Corp., spilled over and led to wage increases for other workers in the same commuting zone.
Yet a new Equitable Growth working paper by grantee Justin Wiltshire of University of California, Davis finds the converse is also true. He finds that the expansion of a particular “low-road” employer—Walmart Inc.—offering low wages leads to a negative spillover in wages and decreased employment in a local labor market. This new evidence features clever empirical analysis of the opening of Walmart Supercenters around the country, compared to locations where a Supercenter was proposed but blocked, adding to a growing body of evidence on the prevalence of monopsony dynamics across the U.S. labor market suppressing wages and limiting employment.
Walmart has long been the largest private-sector employer in the United States. According to the new analysis by Wiltshire, the expansion of Walmart—and, in particular, the opening of Walmart Supercenters—accounted for half of retail employment growth since their beginning in the late 1980s, accounting for 2.5 percent of all employment growth in this time period.
Walmart also is notable for remaining a low-road employer—not following the lead of other retail giants in establishing a higher minimum wage. With low wages and poor job quality, Walmart faces an estimated employee turnover rate of 70 percent per year. Walmart’s demand for labor to match their high turnover rates, paired with its persistent low wages, indicates that Supercenters may be monopsonistic employers that set wages below the rates that would exist in a more competitive labor market.
While it’s intuitive that a large low-road employer such as Walmart may negatively impact local labor markets, previous research found mixed evidence due to methodological limitations in the research and what is known as endogeneity biases. Endogeneity biases occur when examining the impact of, say, a Walmart opening in a particular location makes it difficult to delineate between the impact of that Walmart itself and whether Walmart’s expansion was itself impacted by local conditions ripe for the expansion of a big box store and low-road employer.
Wiltshire seeks to overcome this bias in his new working paper. Using an illuminating empirical design, he is able to better test the direct impact of a Walmart expansion by constructing a so-called stacked-in-event-time synthetic control estimator of locations, economic parlance for identifying the counties where a Walmart Supercenter was proposed and blocked—making up the “donor pool” in the “synthetic control”—compared to those locations where a Supercenter was successfully opened. The group of counties with a proposed, but not realized, Supercenter presumably have similar attributes to counties in which a Supercenter was opened.
To conduct the empirical study, Wiltshire uses data from the Quarterly Census of Employment and Wages from the U.S. Bureau of Labor Statistics for county-level labor market outcomes, Dunbar Market Indicators data for Walmart locations and its employment and sales, and Tax Policy Center data on minimum wages. Using these data sources, Wiltshire finds that the entrance of a Walmart Supercenter increases retail employment by 2.2 percent in a county during the year of entry and by 1.4 percent by the fifth year.
Yet a Supercenter entrance into a county also reduces aggregate employment levels by 2.9 percent and reduces labor force participation by 1.4 percent by the fifth year. Furthermore, the simultaneous retail employment growth with aggregate county employment decline means that the Supercenter increased employment concentration in a county over time. Retail earnings increase by 1.5 percent at the time of Supercenter entry then fall back to pre-entry levels, while county level earnings decline by 5.2 percent by 5 years after entry.
Because earnings decline for both goods-producing and service-providing industries, Wiltshire hypothesizes that perhaps wages in goods-producing industries are impacted by monopsony buyer power vis-à-vis suppliers. In short, labor market conditions got worse, with fewer people working and lower average wages in the years following the opening of a Walmart Supercenter, compared to other, similar counties that were successfully able to block expansion.
One implication of monopsony is that increases to the minimum wage or wage increases driven by collective bargaining among monopsonistic employers can lead to a simultaneous increase in earnings and employment levels at employers operating in monopsonistic labor markets. This can be the case because noncompetitive labor markets are operating under capacity with deadweight loss, defined as the inefficient allocation of resources since the economy is underproducing and undercutting the wages of workers.
Wiltshire continues his analysis by examining the impact of the 1996–1997 federal minimum wage increase on counties that already had a Walmart Supercenter. Five years after the minimum wage increase, Supercenter counties experienced increases in both retail and aggregate employment of roughly 5 percent, alongside an increase of 5 percent to 8 percent in aggregate earnings and 4 percent to 5 percent in retail earnings. These results are consistent with Walmart exercising monopsony power in these counties and the ability of labor market policy to reduce the monopsony power of employers to keep wages lower than market rates.
This study of Walmart clearly quantifies the negative impact of monopsony for workers and the local economies where they work. While previous research on monopsony has found more evidence of monopsonistic wage-setting pressure for relatively high-wage workers who are more likely to be specialized and have fewer outside options, such as registered nurses in the highly consolidated healthcare industry, large dominant low-road employers in local labor markets are a case in which monopsony also impacts low-wage workers.
In these instances, policy tools such as increasing the minimum wage are good for workers and good for the entire economy, with the ability to increase earnings and employment in a win-win. Furthermore, improving income supports for low-wage workers may improve their mobility out of poor-quality jobs. And in a monopsonistic labor market, ensuring that workers have the ability to exercise voice and bargain for higher wages is a critical tool in balancing employer wage-setting power that has plagued the labor market—which, in turn, will lead toward broadly-shared growth.
Economic inequality in the United States continued to rise over the first two decades of the 21st century, according to new data from the U.S. Bureau of Economic Analysis—a trend that builds upon the sharp divergence between the fortunes of the truly rich and the rest of society that began around 1980. As we enter the fourth straight decade of rising income and wealth inequality and their attendant social inequities—such as the widening gulfs in college attendance and life expectancy—U.S. policymakers, now more than ever, need more accurate data to deal with the baleful consequences of inequitable growth.
Most of this rise in inequality occurred before 2000, but the latest data show that U.S. households are still slowly drifting apart from one another. December’s BEA data release expanded the bureau’s distributional data series to cover 2000 through 2019, where it previously only covered 2007 through 2018. These more complete data encompass the entirety of two business cycles: the dot-com bubble-induced recession of 2001 and subsequent expansion, and the Great Recession of 2007–2009 and subsequent expansion, before the arrival of the coronavirus pandemic and ensuing recession in 2020.
Until the Bureau of Economic Analysis extends the series backward further, it’s difficult to say how increases in inequality now compare to those that happened in the 1980s and 1990s—but two things are clear. First, inequality continues to rise. Second, these data are critical to understanding the consequences of economic inequality in the United States.
This issue brief provides analysis of the most recent release. The evident utility of the data series, as shown here, demonstrates why the Bureau of Economic Analysis should request more resources from Congress to expand and improve this dataset, especially by adding more current data that would allow us to analyze trends now, rather than 2 years in the past.
What the latest economic data show about rising economic inequality
The U.S. economy is in its fourth decade of expanding inequality. One way to see this is to compare average growth in incomes to the growth realized within particular income brackets. Average growth in disposable personal income over the period from 2000 to 2019 was about 2.3 percent but ranged as high as 2.7 percent for those in the top 10 percent of household income and as low as 1.6 percent for the lowest-income households. Even within the top 10 percent, there is significant dispersion: The top 1 percent had an average growth rate of about 3.3 percent. (See Figure 1.)
Figure 1
As Figure 1 shows, “headline” personal income growth figures—those that are most commonly reported by analysts, the media, and other sources—overstate the actual growth experienced by virtually all U.S. households. Only the top decile exceeds headline growth. Headline growth is simply an average, and in an age of inequality, the average is largely determined by very rapid income growth for the highest incomes.
These differences add up over a 20-year window: A household experiencing the same income growth rate as top 1 percent of households would end the 20-year period with income 20 percent higher than if they had instead experienced just average growth. The difference between experiencing the income growth of a bottom 10 percent household in this period or experiencing average growth is a 15 percent income premium over the period. And this represents just a small part of the run-up in inequality that started sometime around 1980. The Bureau of Economic Analysis should continue to extend the series back in time, so comparisons to this period can be made.
The federal statistical system needs to be resourced to expand and continue reporting on inequality
Four decades of rising inequality calls for a more robust policy response to ensure broad-based growth in the U.S. economy. An important first step is to develop the data infrastructure to track growth in inequality over time, so that policymakers can monitor and respond to the problem, and voters can hold them accountable to producing strong growth for all U.S. households.
Existing data series are insufficient. One of the few reports by the federal government on economic inequality is the U.S. Census Bureau’s September Income and Poverty Report. The Bureau of Economic Analysis has already significantly improved on this report by using a more comprehensive income concept, releasing more granular income groups (the Census Bureau releases quintiles), and fully accounting for income in one national account (the Bureau of Economic Analysis fully accounts for all Personal Income). But there is much more to do.
Congress must give the Bureau of Economic Analysis the resources to continue developing this work. There are three important avenues for further development of this product. First, the current BEA product underestimates top incomes because it does not account for capital gains. This is not an intentional omission but rather a reflection of the fact that capital gains are not included in any national accounts.
Economists Thomas Piketty at the Paris School of Economics and Emmanuel Saez and Gabriel Zucman at the University of California, Berkeley, in their pathbreaking 2018 article on distributional national accounts, attempted to mitigate this omission by using National Income as their income concept. National Income includes retained corporate earnings, which Piketty, Saez, and Zucman argue can act as a proxy for unrealized capital gains.
Distributing retained corporate earnings, however, requires making several simplifying assumptions that may be prone to error. Statistical agencies should research a separate series of the distribution of capital gains that is compatible with the distributional personal income data. Economist Jacob Robbins at the University of Illinois at Chicago defines a measure of Gross National Capital Gains that could be a model for such a data series.
Second, these data must be released on a shorter delay. Currently, the Bureau of Economic Analysis plans to release these data once a year in December, adding data for the period 2 years prior. This is what happened last month—2019 data were released in 2021. This is a useful tool for understanding the near past, but it will not help policymakers make real-time decisions, and it will not help households understand and respond to the economic conditions they currently face.
There are challenges with publishing more current data, but they are surmountable. With proper resources and a willingness to impute and model current data, BEA staff can release this data series at a higher frequency and with less latency.
Finally, expanding this new data series back in time to include the 1980s and 1990s would enable policymakers to have an even better grasp of rising economic inequality trends over generations. This year’s data release demonstrates how much policymakers can learn about inequality in the U.S. economy—and how much more they could learn if the data were released more frequently and collated over longer periods of time.
Examining U.S. income inequality over the past 20 years
U.S. households at different levels of earnings had significantly different experiences of the past 20 years, with the top 1 percent experiencing more income growth. Those with high incomes saw more immediate and deeper drops in income during recessions, while those with lower incomes were partially supported by government “transfers,” economic parlance for social infrastructure programs such as Unemployment Insurance that underpin the economy during downturns. But the flip side is that low-income households experienced years of stagnation after recessions had subsided, with very little of overall economic growth accruing to those in the bottom half of the income distribution despite moderate headline growth. (See Figure 2.)
Figure 2
Figure 2 shows income growth in each year subdivided into four groups that some researchers and academics commonly use. They are the bottom half of all income earners in the distribution, the next 40 percent of earners (50th to 90th percentile), the next 9 percent at the top (90th to 99th percentile), and the top 1 percent. The blue portion of each bar shows the amount of growth that benefitted earners in the bottom half of the distribution. Warm colors—yellow, red, and orange—show the amount of growth in each year that accrued to the top.
U.S. households move between deciles frequently. The Bureau of Economic Analysis does not follow people over time, so those in the bottom 50 percent of income in one year may not be there the next year. This means these data do not chart economic mobility, only the shape of the overall income distribution. But the overall shape of the distribution is important. When wages for the bottom 50th percentile aren’t increasing, it means that there is little wage growth in the kinds of jobs occupied by those with low educational attainment, young workers, and those in vulnerable populations. The U.S. economy used to deliver real growth to this end of the distribution, but for the past four decades, it has been increasingly stingy.
Households in the bottom 50 percent of the income distribution experienced relatively little growth in incomes over the past 20 years: Over that entire period, the bottom 50 percent of the distribution captured just 20 percent of all growth, even though they represent half the population. Meanwhile, the top 10 percent—a group just one-fifth the size of the bottom 50th percentile—captured 37 percent of overall growth. (See Figure 3.)
Figure 3
This pattern was stable across the two economic expansions in this time period. The expansion after the Great Recession was slightly more equal, with the top 1 percent of income earners benefitting less, compared to other groups, but differences were slight.
The BEA data series also provides detail on how particular components of income, such as wages, transfers, or business income, changed for households in each decile of income. Looking at fluctuations in these components is a useful way to understand how the economy works for U.S. households at different points on the economic ladder.
Households in the bottom half of the income distribution, for example, are largely dependent on wages and government transfers. In 2019, wages represented 49 percent of positive income for this group, and government transfers made up another 40 percent (you can see all the components that make up personal income here), with most other components contributing very little to incomes of the bottom 50 percent of income earners. So, fluctuations in overall income for this group are largely due to wages and transfers. (See Figure 4.)
Figure 4
The top panel of Figure 4 shows annual growth in each component, while the bottom panel shows cumulative growth. The majority of all growth for this group came from growth in government transfers. Wage growth contributed 30 percent of all growth for the group, while the contribution of all other income sources was negligible.
The “upper 40” group of households derive most their income from wages, but government transfers still provided about 13 percent of income for this group in 2019. Unsurprisingly, the relative importance of these two categories for income growth is flipped for this group of households, compared to “bottom 50” households. Over the 2000–2019 period, 64 percent of income growth for this group came from growth in wages, but the Great Recession hit the wages of this group particularly hard. Subsequent years saw a rapid recovery. Transfers accounted for about 26 percent of all growth for this group over this time period. Yet this group did earn some interest and dividend income, accounting for about 8 percent of income. (See Figure 5.)
Figure 5
The top 10 percent of households by income have the most diverse sources of income. Although wages are still important for this group, making up about 51 percent of positive sources of household income, these households also have significant amounts of business income and interest and dividends income. About 27 percent of all growth over the period came from interest and dividends, while about 20 percent of growth came from business income. (See Figure 6.)
Figure 6
Conclusion
The BEA distributing personal income data series has progressed rapidly in just a couple of years. Every year has seen significant improvements in the statistical methodology and the amount and types of data available.
The current product allows for useful analysis of the recent past, with important applications to current policy debates. Knowing how growth in the economy is distributed is just as important as knowing how much the economy is growing. Congress must resource this effort, so the Bureau of Economic Analysis can expand the data series. This should include:
Improve frequency and latency: The bureau should investigate ways to decrease the lag in the release of estimates. Right now, data are released in December for 2 years prior. In December 2022, we will get data for 2020, giving us our first glimpse of the coronavirus pandemic, yet this lag is too long. Ideally, estimates would be released quarterly, putting this product on the same footing as GDP growth.
Extend the time series back: There also is significant value in having a complete history of inequality in the modern U.S. economy. The bureau should make efforts to extend the data series back in time to allow comparisons with earlier eras.
Account for capital gains: Although this has traditionally not been the purview of the bureau, capital gains are increasing and contribute significantly to economic inequality. The Biden administration or Congress should consider tasking the bureau or another agency with tracking this trend.
Together, these three steps would vastly improve our nation’s economic statistics and enable policymakers to act on the harmful consequences of four decades of rising economic inequality.
Workers often need paid time away from their jobs, whether they are experiencing a short-term flu, undergoing a surgery and recovery that will last a few weeks, caring for an ill family member, or welcoming a new child to their family. In the United States, two distinct types of paid time off can be used to address family and health needs—paid sick time and family and medical leave—though there is no federal guarantee for either one, meaning some workers do not have access to them.
Paid sick time allows workers to address short-term needs, such as going to a doctor’s appointment or recovering from the flu. Paid family and medical leave allows workers to address longer-term needs, from caring for a new child or a sick family member to addressing one’s own serious medical need, such as cancer. This issue brief describes both types of paid time off and their impacts on the broader U.S. economy. It then provides information about which workers can access paid sick time and paid family leave through their employers as well as the federal legislation that has been proposed to broaden access.
What is paid sick time, and how does it affect economic growth?
Paid sick time, also commonly referred to as paid sick days or paid sick leave, typically lasts for days or weeks, and can even be taken by the hour. (See Table 1.)
Table 1
Paid sick time is typically used when a worker experiences an illness or injury that lasts a short time or when a worker needs to address a short-term care need of a loved one. It may also be used during preventative medical care appointments. Some employers voluntarily offer paid sick time to their workers, and currently 36 states and localities require that employers provide paid sick time, though workers have no federal right to paid sick time.
When employers choose to offer paid sick time, or are required to, their workers usually accrue that time as they work. For instance, an employer may offer 1 hour of paid sick time for every 30 hours that an employee works. When an employee has worked for 240 hours, they will have accrued 8 hours of paid time off to use when a health need arises. Additionally, some state and local paid sick time laws have a feature called “job protection,” which means that it is illegal for an employer to terminate an employee for using their paid sick time.
While the primary purpose of paid sick time is to allow workers to address short-term medical needs without suffering economic hardship, it also leads to broad economic and public health benefits because paid sick time is associated with decreases in the spread of communicable diseases. Local paid sick time laws, for example, have been found to reduce influenza-like infections by 30 percent to 40 percent. Similarly, when the federal government enacted a temporary, coronavirus-specific paid sick time policy in 2020 through the Families First Coronavirus Response Act, states where workers gained new access to the emergency paid sick leave program saw COVID-19 cases drop by 56 percent. (See Figure 1.)
Figure 1
As we have seen during the coronavirus pandemic, controlling communicable disease is essential to ensuring that workers are able to produce goods and services and that consumers will purchase those goods and services—in other words, to ensuring that large parts of the economy can function normally. The onset of the coronavirus pandemic was accompanied by an unprecedented drop in Gross Domestic Product precisely because the spread of infection hindered workers’ ability to work and consumers’ ability to consume.
Paid sick time policies also have been shown to reduce rates of worker turnover, which leads to productivity gains for businesses. When paid sick time policies are implemented, research shows that businesses do not cut other employer-provided benefits and are thus likely to be able to absorb the average cost of providing the benefits—2.7 cents per worker per hour, according to one study—with relatively little trouble.
What is paid family and medical leave, and how does it affect economic growth?
Paid sick time is important, but it is not well-suited to cover longer absences. When workers need weeks or months away from work to care for a new child or address a serious medical condition that they or a family member face, they turn to paid family and medical leave.
As seen above, in Table 1, there are three major components to paid family and medical leave:
Paid medical leave to address one’s own serious medical condition, also known as temporary disability insurance
Paid caregiving leave to care for a loved one with a serious medical condition
Paid parental leave to care for and bond with a new child who has joined a family through birth, adoption, or foster care placement
Employers may choose to offer just one or two types of paid leave, but most of the states with paid leave programs offer comprehensive paid family and medical leave: all three types.
Pay for family and medical leave can be offered voluntarily by employers, who provide benefits directly or through third parties, such as private temporary disability insurance providers. Additionally, in 9 states and the District of Columbia, workers can access state paid leave programs, which offer workers partial wage replacement during their time away from work. Some state programs also offer job protection, so that workers can be confident that they can return to their jobs following their time off.
There is no federal program that provides paid family and medical leave to workers across the United States, though unpaid leave is available to some workers through the Family and Medical Leave Act of 1993 and the Americans with Disabilities Act. Eligible workers can access job protection through these laws at the same time that they access pay from their employer or state paid leave program, where available.
By allowing workers paid time off to address their family and medical needs, paid family and medical leave programs can contribute to macroeconomic growth. Paid leave programs, for example, can increase labor force participation, particularly among women, which is a key driver of economic growth. Evidence from California indicates that under the state’s paid leave law, new mothers are 18 percentage points more likely to be working a year after the birth of their child. (See Figure 2.)
Figure 2
Other research finds that the availability of paid caregiving leave also affects work effort, either by increasing labor force participation or by increasing the number of hours worked among employed caregivers. Given these benefits, perhaps it comes as no surprise that research repeatedly shows that small businesses appreciate government paid family and medical leave programs.
Paid family and medical leave programs also strengthen the human capital of the next generation through improvements in child well-being, such as decreases in rates of attention deficit/hyperactivity disorder, obesity, and ear infections and the hearing problems they cause, along with increases in parents’ time helping children with reading and homework.
Who can access these types of leave, and what legislation might broaden access?
Despite the health and economic benefits of paid sick time and paid family and medical leave, many workers cannot access these types of paid time off.
Access to paid sick time is broad—but not universal—among the civilian workforce as a whole: Seventy-eight percent of workers can access paid sick time through their employer. But paid sick time is out of reach for the typical low-income worker. Only 4 in 10 workers in the lowest-paid jobs, who are disproportionately workers of color, have access to paid sick time.
Access to paid family and medical leave is even less common. Only 1 in 5 workers have access to paid family leave through their employers, and the figure drops to around 1 in 20 for the lowest-paid workers.
Federal legislation has been proposed to address these gaps in access. The Build Back Better Act, which was passed by the U.S. House of Representatives last year but remains stalled in the U.S. Senate, includes a proposal to establish a paid family and medical leave program, but does not include a paid sick time policy. Coronavirus-specific paid sick time was available until the end of 2020 through the Families First Coronavirus Response Act, and the Healthy Families Act would extend a broader guarantee of paid sick time.
Because legislation that guarantees paid sick time and legislation that guarantees paid family and medical leave both allow workers to take needed time away from work without financial hardship, these policies are often conflated. Understanding the distinction between them, however, is important to conducting rigorous research and policy analysis—and ultimately to ensuring that policies are passed that ensure that workers can access leave to address whatever health issue they or a loved one faces, thus encouraging long-run economic growth and benefitting the overall U.S. economy.
The Washington Center for Equitable Growth is increasing its efforts and resources to help tackle the enduring challenges to diversify the economics profession, as well as expanding and strengthening the diversity of lived experiences represented by the scholars with whom we engage.
Equitable Growth mainly provides financial support and professional resources to academics through our grantmaking and Dissertation Scholars program. To expand these resources, we recently developed new programming to support and further the careers of scholars from historically underrepresented and disadvantaged groups in the economics profession, as well as early career researchers.
We are now a host institution for the American Economic Association Summer Economics Fellowship program, which is a partnership of the AEA Committee on the Status of Women in Economics Profession, the Committee on the Status of Minority Groups in the Economics Profession, and host institutions. The program aims to support early career scholars from historically excluded groups in economics. As a host institution, we provide a stipend for a fellow to spend 12 weeks in the summer to conduct research and engage in career and professional development activities.
Our inaugural fellow, Rachel M. B. Atkins, a Provost’s Postdoctoral fellow at the Stern School of Business at New York University, described the experience as “extremely helpful for my career goals both because of [Equitable Growth’s] vast network and also by expanding my horizons regarding the types of available career opportunities for someone with my skillset.”
In addition, Equitable Growth hosted two “brown bag” research presentations: one that featured the two finalists of the AEA Summer Fellowship and the second featuring Atkins. Both brown bags provided these early career scholars an opportunity to receive feedback on their ongoing research from a select group of experts as discussants and audience members, including from our Steering Committee.
Equitable Growth is now participating in the AEA Summer Training program as well, specifically as an “experiential learning” host of two undergraduate students to expose them to professional work outside of academia for Ph.D. economists. The program, currently hosted at Howard University, prepares students for doctoral programs in economics and related disciplines through intensive coursework in microeconomics, math, econometrics, and research methods.
As many as 20 percent of doctorates awarded to students from underrepresented racial and ethnic backgrounds in economics over the past 20 years are graduates of the program. As a host organization, we provide students trainings on topics such as editing and networking, arrange meetings with high-profile economists and members of our academic network, and provide hands-on experience to build skills.
Last year’s experiential learning participants met with U.S. Department of Labor chief economist Janelle Jones and Equitable Growth’s President and CEO Michelle Holder. They also authored columns based on academic papers on intergenerational mobility and neighborhood economic disparities that were published on our website. Patrick Edwards, a student at the Rochester Institute of Technology and the author of the column on neighborhood economic disparities, said of his participation in the program:
I was able to pursue work related to my own interests and interact with staff at all levels of the organization. Despite the short stint, I was able to develop my skills in policy writing for a broad audience and learn about the numerous opportunities available to economists interested in policy work outside of academia.
Equitable Growth also increased our efforts to bring attention to the resources and support we offer to a broader array of scholars, after having worked to make it easier to access information about our grantmaking and what makes for a successful application. To reach a broader audience, for example, in 2021, we engaged more deeply at regional economic conferences, including the Western Economic Association Conference and the Southern Economic Association Conference and will engage this year at the upcoming Midwestern Economic Association Conference. Regional conferences provide valuable ways to introduce funded research and funding opportunities to scholars in various phases of their careers and from an array of backgrounds.
We also organized sessions to provide scholars with information and tips on how to write successful grant proposals. At the Southern Economic Association conference, we organized one such session with the Russell Sage Foundation. The speakers—Stephen Glauser at RSF, Ann Huff Stevens, dean of the College of Liberal Arts at the University of Texas at Austin, Andria Smythe, assistant professor of economics at Howard University, and myself—touched upon how best to foster interdisciplinary collaboration and methodological diversity, increase the number of successful applicants from members of underrepresented groups, and tackle the unique challenges posed by the ongoing pandemic and racial reckoning that have disproportionately impacted communities of color in the United States.
To help expand our network of interdisciplinary scholars, Equitable Growth organized activities at both the Labor and Employment Relations Association Conference and the American Sociological Association annual meeting. At the annual ASA convening, for example, we hosted a professional development workshop on best practices for writing successful grant proposals for research on inequality. The session, led by Equitable Growth’s Academic Programs Director Korin Davis and Mellon/ACLS public fellow Aixa Alemán-Díaz, featured a panel discussion with Elisabeth Jacobs, deputy director of WorkRise at the Urban Institute (and formerly a director at Equitable Growth) and Equitable Growth grantees and accomplished sociologists Nathan Wilmers of the Massachusetts Institute of Technology and Harvard University’s Daniel Schneider. The workshop elevated how different funding opportunities around inequality research provide a host of benefits—monetary and nonmonetary—that range from networking to writing for different audiences and other opportunities with media and policymakers.
David Mitchell, director of government and external relations, provided an overview of our funding opportunities and policy engagement support for scholars at the annual AEA Summer Mentoring Pipeline Conference in June 2021, and Academic Programs Director Davis was a panelist at a professional development session on tips for grant seeking and grant writing at CeMENT’s annual workshop, which is aimed at mentoring women and nonbinary faculty in tenure-track positions in economics.
Another way Equitable Growth is supporting and providing resources for early career scholars is through an “office hours” initiative, whereby interested grant applicants can request a meeting with staff to discuss their research and ask questions specific to their project and situation. The goal is to level the playing field, so scholars outside of our network or with little grant-seeking experience can get input and advice to put together a competitive application.
And there’s more work on the horizon. We are developing a plan to provide more regular mentorship opportunities for early career scholars at academic conferences, as well as more brown bag presentations with members of our academic and policy networks. In addition, Equitable Growth will be piloting free, hands-on grant-writing workshops for economics Ph.D. students at select minority-serving institutions to make our grantmaking and programming more accessible.
Equitable Growth will continue to hold ourselves accountable to cultivating more inclusive pathways by continuing to measure our progress, as well as supportingorganizations that steadfastly work to cultivate racial, ethnic, and gender diversity in the economics profession.
Apply to our programs
Equitable Growth is currently accepting applications for the Dissertation Scholars program in response to our annual Request for Proposals. Application materials include a curriculum vitae, a six-page proposal describing your research project, a two-page statement of work, and two letters of recommendation. Dissertation Scholar applicants who are not selected for the program are automatically considered for a doctoral grant.
For the Summer Economics Fellows program, applicants are asked to apply directly through the main AEA program website. Applicants interested in joining Equitable Growth should indicate this preference on the application form. In addition to the application form, a resume and a one-page description of your proposed research is required. We encourage applicants interested in joining Equitable Growth to include goals on how spending time with us would further both your career and research, especially as those goals relate to policy engagement, in the comment box on the application form.
For the Summer Training program, applicants are asked to apply directly through the main AEA program website. Applicants are paired with host institutions by the program organizers.
Summer Training program applications should be received by January 31, 2022. Summer Economics Fellowship program applications should be received by February 1, 2022. Dissertation Scholar applications should be received by January 26, 2022.Doctoral/postdoctoral grant proposals should be received by March 21, 2022.
The daily economic news cycle is awash with stories these days about the threat of automation and artificial intelligence to the future of work for hundreds of millions of U.S. workers. Amid near-hysteria over ostensibly widening “skills gaps” and deepening labor shortages in key U.S. production and services industries—stories that are especially scary as the coronavirus pandemic enters its third year—workers across the country are hearing that these technologies are inexorably destroying their sources of livelihoods now and well into the future.
These stories could not be more pessimistic about the future of work in our nation. And they couldnot bemore wrong. The reason? Technology is not like gravity. Workplace automation and artificial intelligence technologies do what the humans who design and deploy them are rewarded to have them do. Those rewards can be changed.
To be sure, workers’ fears of technological change aren’t without basis. Yet the biggest technology opportunities have always augmented the work of humans, rather than replaced it altogether. New technological breakthroughs could amplify this trend, combining machine efficiency with human empathy to make people’s interactions more efficient and effective. Artificial intelligence and machine learning will enable teams of people to learn much faster than before.
Before I detail the kinds of steps that need to be taken and detail the kinds of evidence-based research that could be conducted to make this happen, it makes sense to first briefly walk through why so many falsely believe that technology and automation are taking over our jobs.
A key contributor to common fears regarding technology is that the jobs of working people without bachelor’s degrees—which some pejoratively and wrongly view as “unskilled” occupations—are considered most likely to be eclipsed by computers, automation, and artificial intelligence and are first in line to be automated. Some say that these kinds of workers need to be “upskilled” to find work in the current and post-pandemic U.S. economy, or they will be “replaced by the robots.”
Another common denominator in this fear about the future of work is the experience many of us face when applying for jobs. Despite a record number of open jobs, getting hired hasn’t gotten any easier for the millions searching for work. It also is readily apparent that outdated hiring practices screen out qualified applicants such that “the endless quest to make hiring efficient has rendered it inefficient,” explain Rani Molla and Emily Stewart at Vox.
First and foremost, the idea that workers in our economy are unskilled is false. In fact, employers play a lead role in building these kinds of destructive automation processes—ones that, by and large, do not benefit them or their employees and prospective new hires. And employers can play a lead role in dismantling these practices by being held accountable for how they use these technologies for their own benefit and for the greater prosperity of U.S. workers and their families and the broader U.S. economy.
With the rise of automated hiring processes, many companies use “bachelor’s degree” as a keyword search in their applicant tracking system, which omits candidates before any human gets to consider them. This one choice automatically screens out approximately 60 percent of all U.S. workers. But it’s not the applicant tracking system that is choosing how or who to screen; it is the humans behind it. The equitable answer to this hiring inefficiency is to look for talented individuals who are “Skilled Through Alternative Routes,” or STARs, by removing out-of-date barriers and letting workers shine because of their skills.
National awareness and validation for the STARs talent category is growing—just last week, The New York Timesprofiled new insights on STARs from our latest report, “Rise with the STARs,” which quantifies the damage done by two decades of rising career barriers to more than 70 million U.S. workers skilled through alternative routes. These STARs don’t have bachelor’s degrees, but they have gained skills through community colleges, military service, training programs, skills bootcamps, and on-the-job learning.
Two papers in the National Bureau of Economic Research build on the body of work about STARs, including:
“Searching for STARs,” which segments and presents the more than 30 million STARs with trajectories to higher wages based on their skills
“Skills, Degrees and Labor Market Inequality,” which presents rigorous quantitative analysis to show workers with bachelor’s degrees have dramatically better access to higher-wage occupations than STARs, exacerbating inequality between these groups
In this way, individuals’ skills will be augmented by technology, enabling them to succeed in more valuable, reconfigured jobs that meet real needs. As a result, workers will need to be trained to perform what Federal Reserve economists have called “opportunity occupations,” or those that require modest upskilling and pay more than their previous jobs. Businesses that create the conditions for these kinds of augmented technologies to flourish will deliver more overall productivity. They will be rewarded for the rapid reskilling of their workforces, enabling more inclusive innovation, creativity at every level, greater openness to change, better earnings, and more fulfilling experiences for workers and their managers alike.
Indeed, employers have already automated many routine tasks in the workplace. Today, most of what workers get paid for is effective interactions, such as communicating, problem-solving in teams, learning what users value, and finding the “sweet spots” that make companies and their customers better off. These kinds of tasks will be enhanced, not replaced, by technology.
Policymakers also need to come to grips with the institutional blockers to progress. Policies need to be put in place so that the use of technology improves the experiences, earnings, opportunities, and outcomes of working Americans and their families. In short, policymakers and economists alike need to stop blaming the tools and start fixing the rules. We need to make technology an empowering tool in the hands of workers—not because of luck, but through deliberate choices, including long-term investments, by our government, industry, and citizenry.
There is a key role for scholars to help us understand how best to handle the transformation of workplaces due to automation and artificial intelligence. The Washington Center for Equitable Growth, through its grant giving and its network of scholars, is a place where researchers come together and analyze the causes and consequences of the multiple dimensions of inequality, including in U.S. workplaces and across the U.S. workforce. The impact of technology on our lives—and on the future of meaningful work—is the result of research, investment, regulatory action, and business-model choices that are made by people. Together, we can make the future of work one of hope and prosperity, not disillusionment and despair.
Direct government payments to individuals are now a standard part of U.S. fiscal policymakers’ recession-fighting toolkit. Three rounds of so-called economic impact payments from the federal government have been paid out since the onset of the coronavirus pandemic and the subsequent recession set in, with the most recent round concluding at the end of 2021. These payments built off similar payments made in several earlier periods of economic weakness, including the “tax rebates” of 2001 and 2008.
In legislating direct payments to individuals, U.S. policymakers generally have had two goals in mind: first, boosting the macroeconomy by stimulating aggregate demand and, second, mitigating recession-related harm to individuals. Many academic papers have studied the effects of these economic impact payments and earlier rounds of such payments. Most of this research has been aimed at estimating the spending response, also known as the marginal propensity to consume out of the payments.
These three studies look at the initial months following the payout of economic impact payments and estimate marginal propensities to consume out of nondurable goods that range from 0.1 to 0.5, implying that households put between 10 cents and 50 cents of every dollar they received toward purchases of nondurable goods. This research has informed us generally about how the spending of the average household responds when it receives an infusion of cash and points to higher propensities for households with low levels of liquid assets.
In a recession-fighting context, these research results are helpful because they speak to the stimulus impact of the measures—the boost to aggregate spending. This aggregate response reflects not only the spending directly spurred by the receipt of these payments but also additional outlays arising because new spending produces more income for those producing the goods and services produced, or the so-called multiplier effect. Having estimates of the marginal propensity to consume and multiplier effects is crucial for assessing how a fiscal package with direct payments to individuals and households will affect the aggregate economy and also for thinking about how to target future payments, so they have the most effect on the overall economy.
Much less of the research on the three coronavirus-recession-linked economic impact payments and earlier rounds of such payments has focused on the more general question of how this type of countercyclical fiscal policy helps to protect households from harm that might otherwise result from a weak economy. Such harm includes the immediate hardship that might arise from the loss of jobs or incomes and the degree to which such losses create longer-term scars that put households on weaker economic and financial footing for years to come.
A natural extension of this type of research on the marginal propensity to consume would be a consideration of the degree to which economic impact payments, as well as support from more traditional programs such as Unemployment Insurance, helped households in different parts of the income distribution smooth their consumption in the face of the massive job losses caused by the pandemic. Many households had low levels of liquid assets going into this period. Indeed, economist Neil Bhutta at the Federal Reserve Board and his co-authors find that close to half of households had insufficient financial buffers to cover their expenses were they to lose their income for 6 months, allowing for the receipt of standard Unemployment Insurance benefits.
The high degree of consumption volatility that might arise from unexpected shocks to income when households have little financial buffer has been documented to have large welfare costs. In their 2020 study, “Wealth, Race, and Consumption Smoothing of Typical Income Shocks,” Peter Ganong at the University of Chicago and his co-authors find that consumption volatility is particularly high among households with Black and Hispanic heads, who tend to have low levels of liquid wealth.
Relatedly, the question of the degree to which these measures helped households avoid food and housing insecurity is a critical one. These types of insecurity are disruptive and difficult for families in an immediate sense but can also have much longer-lasting consequences, particularly for children. UC Berkeley’s Hoynes and Diane Whitmore Schanzenbach at Northwestern University underscore, in a 2018 literature review, how food insecurity can harm the future economic prospects of children through its adverse effects on cognitive and physical development. Otherstudies by the two scholars and Douglas Almond at Columbia University have documented specific harms along these lines.
Housing instability also is likely to have long-run consequences for children through the resulting instability in schooling and perhaps other channels (economist John Eric Humphries at Yale University and his co-authors show that evictions can also have lasting consequences for adults via its effects on credit access). And, tellingly, the 3 percentage point drop in the child poverty rate in 2020 hints that economic impact payments and other parts of the pandemic fiscal response improved outcomes along these lines. Additional research, however, that more rigorously documents these linkages would bolster the case for deploying such measures in the next economic downturn.
The three recent rounds of economic impact payments and other fiscal support measures probably also allowed many U.S. households to avoid setbacks in their finances that might otherwise have resulted from long periods of not working during the pandemic. The scarring of household balance sheets after the Great Recession of 2007–2009 is documented in research, such as a 2018 study by Federal Reserve Board economists Lisa Dettling and Joanne Hsu, titled “A Wealthless Recovery? Asset Ownership and the Uneven Recovery from the Great Recession.” Dettling and Hsu show that 2016 levels of average working-age family wealth were more than 30 percent below 2007 levels for families in the lower two-thirds of the income distribution. Such scarring is viewed as one reason why the overall economy took so long to recover from that downturn, with the unemployment rate only returning to its pre-recession lows in early 2017.
Economists Olivier Armantier, Leo Goldman, Gizem Koşar, and Wilbert van der Klaauw at the Federal Reserve Bank of New York document that many recipients of economic impact payments reported saving their payments or using them to reduce debt. And another study by economists at JPMorgan Chase & Co. shows higher cash bank account balances since the coronavirus pandemic began. This evidence suggests that fiscal support during the pandemic may have left many households on stronger financial footing, compared with their experiences during the Great Recession. But more research is needed on the degree to which families’ balance-sheet improvements have persisted and also on whether family balances sheets have been strengthened mostly for well-off households or whether the improvements extended to the households in the lowest part of the income distribution, which traditionally have faced the most economic precarity.
In sum, more research on economic impact payments and other pandemic-related income support programs that go beyond the marginal propensity to consume would help policymakers better understand the near-term and longer-term impact of these measures on U.S. households. More research would also help them design an effective fiscal response in the next economic downturn. It is worth remembering, too, that helping individual households better weather economic fluctuations has benefits for the broader U.S. economy. It creates a stronger consumer base that can hasten economy recovery and leaves households in a better position over the longer run to participate in the labor force, invest in skills, start businesses, and otherwise boost the productive capacity of the economy.
Equitable Growth is committed to building a community of scholars working to understand how inequality affects broadly shared growth and stability. To that end, we have created the monthly series, “Expert Focus.” This series highlights scholars in the Equitable Growth network and beyond who are at the frontier of social science research. We encourage you to learn more about both the researchers featured below and our broader network of experts.
One of our missions since Equitable Growth was founded in 2013 is to make evidence-backed policy the norm in the United States, centering innovative research from academics across disciplines to inform policy decision-making. It goes without saying that economic data is central to this work—which is why Equitable Growth is excited to continue seeding and supporting academic research that advances our understanding of economic measurement in 2022.
This month’s installment of Expert Focus highlights exemplary economic data collection, creation, and linking projects that cut across Equitable Growth’s issue areas, from fighting poverty and inequality to enforcing U.S. antitrust laws, and from addressing the racial wealth divide to bolstering the macroeconomy. These projects make economic data more accessible for both researchers and policymakers, provide for cross-sector analyses, and can inform policy that will foster strong, stable, and broad-based economic growth for all.
The scholars profiled below are all Equitable Growth grantees from diverse backgrounds, various disciplines, and at all stages of their careers. Learn more about Equitable Growth’s funding opportunities via our annual grants program.
Martha Bailey is a professor of economics at the University of California, Los Angeles and a faculty research associate at the National Bureau of Economic Research. Her research focuses on labor economics, demography, and health in the United States. Her recent studies examine the short- and long-term effects of anti-poverty programs, as well as the implications of contraception on women’s career and childbearing decisions and outcomes. Bailey leads UCLA’s Longitudinal, Intergenerational Family Electronic Micro-database, or LIFE-M database, which combines four generations of U.S. individuals’ vital records—such as birth, marriage, and death certificates—with their U.S. Census Bureau data. LIFE-M achieves an unprecedented level of historical record data linkage, which Bailey has co-authored studies about in recent years.
Bailey received two Equitable Growth grants, including one in 2020 (with Paul Mohnen at the University of Michigan and Shariq Mohammed at Northwestern University) focused on measuring intergenerational mobility in the United States. This project is a massive undertaking to produce a set of economic data on mobility going back to 1900, extending the scope of previous studies that typically use data from the mid-20th century. It also uses Social Security Numerical Identification files, which are more detailed than census records, allowing for more and better-quality data linkages, including the ability to study geographic, racial, and gender mobility disparities.
Simcha Barkai
Boston College
Simcha Barkai is an assistant professor of finance at Boston College, where he studies the competition between firms in the United States and implications for the macroeconomy. He also studies the decline in the labor share of income since the 1980s. Barkai is a junior fellow at the George J. Stigler Center for the Study of the Economy and the State at the University of Chicago, a research institute dedicated to promoting the power of markets to enhance people’s well-being.
Barkai—alongside co-authors Tania Babina at Columbia University, Jessica Jeffers at the University of Chicago’s Booth School of Business, Ezra Karger at the Federal Reserve Bank of Chicago, and Ekaterina Volkova at the University of Melbourne—is currently compiling a comprehensive database of U.S. antitrust enforcement actions against firms and individuals in the United States between 1890 and 2017. The data will then be linked to industry-level economic outcomes and restricted firm-level tax records. This project—for which Barkai and Karger received an Equitable Growth grant in 2019—will advance the existing knowledge base on the effects of antitrust enforcement on economic output and outcomes.
Jamein Cunningham
Cornell University
Jamein Cunningham is an assistant professor in the Department of Policy Analysis and Management and the Department of Economics at Cornell University. His research interests center on four broad themes: the intersectionality of institutional discrimination, access to social justice, crime and criminal justice, and race and economic inequality. Cunningham is a co-creator, alongside Rob Gillizeau at the University of Victoria, of the Racial Uprisings Lab, which is working to create a database of all racialized uprisings in the United States since 1991, with a particular emphasis on the Black Lives Matter movement.
Cunningham recently co-authored a working paper and accompanying column with Robynn Cox at the University of Southern California and Alberto Ortega at Indiana University that examine the link between affirmative action litigation, the racial composition of U.S. police forces, and police killings of civilians. He also received an Equitable Growth grant in 2020, alongside Jose Joaquín Lopez at the University of Memphis, to study the connection between civil rights enforcement and socioeconomic outcomes of communities of color. This innovative project will track enforcement at the court level and link it to individual and household-level data on labor market outcomes and intergenerational mobility, and then create a comprehensive dataset to determine how presidential judicial appointees have influenced civil rights enforcement over time.
David Johnson
University of Michigan, Ann Arbor
David Johnson is a research professor at the University of Michigan, Ann Arbor. He is also the director of the Panel Study of Income Dynamics, the longest-running household panel survey in the United States and a cornerstone of data infrastructure for social science research, having been used in more than 6,800 peer-reviewed publications and by at least nine federal agencies. Johnson is a member of Equitable Growth’s Research Advisory Board and previously worked for several years in the federal statistical system. His research focuses on the measurement of inequality and mobility, poverty measurement, and the effect of tax rebates, among others.
In 2014, he and his co-authors—Equitable Growth’s Jonathan Fisher, Timothy Smeeding at the University of Wisconsin-Madison, and Jeffrey Thompson at the Federal Reserve Bank of Boston—were awarded an Equitable Growth grant to study how income and wealth inequality affect consumption and saving in the United States. One of the resulting working papers from this grant, “Inequality in 3D: Income, consumption, and wealth,” produced a groundbreaking method for researchers investigating and modeling inequality by using economic data on well-being along three conjoint dimensions—inequality, consumption, and wealth—for the same U.S. households. Their findings show that looking at economic data on inequality through just one of these dimensions understates the level and growth of economic inequality.
Jacob Robbins
University of Illinois at Chicago
Jacob Robbins is an assistant professor of economics at the University of Illinois at Chicago, where he specializes in inequality and macroeconomics. His research uses theory and data to better understand key economic trends in the United States. Since the start of the coronavirus pandemic, for instance, he has written about both the importance of a bold economic response to avoid an economic depression and has studied the impact of COVID-19 lockdown policies on retail spending. Robbins was a Dissertation Scholar at Equitable Growth from 2017–2018 and has received two Equitable Growth grants to study various aspects of consumption and inequality in the United States—including one in 2020 to develop a novel dataset that measures individual holdings of public equities and fixed-income assets using IRS data in order to track U.S. wealth inequality.
Most recently, in 2021, Robbins was awarded funding, along with Loujaina Abdelwahed of The Cooper Union, to examine U.S. economic insecurity amid the coronavirus recession using real-time data on the impact of the pandemic on consumer spending inequality. Robbins and Abdelwahed will release their aggregate data publicly at the state and county levels along with quarterly reports, providing other researchers and policymakers with a valuable new data source.
Jennifer Romich
University of Washington
Jennifer Romich is a professor in the School of Social Work at the University of Washington and the director of the West Coast Poverty Center. Her research centers on family economic stability and well-being, particularly among low-income workers and families, household budgets, and household interactions with public policy. Some of her recent projects include an investigation of the income of families involved with the child welfare system and mixed-method evaluations of the Seattle Paid Safe and Sick Time Ordinance and $15 minimum wage.
In 2019, she and her co-authors—UW colleagues Scott Allard, Heather Hill, and Mark Long—were awarded an Equitable Growth grant to support their work developing the Washington Merged Longitudinal Administrative dataset, which links demographic information to employment records and public program administrative data, such as state Unemployment Insurance records. The dataset, which contains information on more than 10 million individuals dating back to 2000, will be used to measure the impact of minimum wage laws on earnings inequality. Its innovative methodology is replicable for other scholars looking to analyze a range of policy interventions on household income and program participation.
Equitable Growth is building a network of experts across disciplines and at various stages in their career who can exchange ideas and ensure that research on inequality and broadly shared growth is relevant, accessible, and informative to both the policymaking process and future research agendas. Explore the ways you can connect with our network or take advantage of the support we offer here.
The United States is one of only three high-income countries in the world that does not have a universal paid sick leave program available to its workforce. Although an emergency federal leave program was temporarily enacted under the Families First Coronavirus Response Act at the start of the coronavirus pandemic in March 2020 and then extended through September 30, 2021, it has now expired—despite the ongoing public health crisis now about to enter its third year.
In the absence of a nationwide paid sick leave program, over the past decade, many U.S. states and localities have implemented their own sick leave mandates. Thirty-six U.S. jurisdictions have laws that enable eligible workers to accrue paid time off from their employer; typically, workers earn 1 hour of paid sick time per 30 to 40 hours worked with the employer. These individual sick time accounts can be used when the worker or a family member experiences a short-term illness, and unused sick time rolls over to the next year.
Likewise, some U.S. employers voluntarily offer paid sick leave as a benefit, creating inequality in coverage across jobs and industries. In fact, data from the U.S. Bureau of Labor Statistics show that 97 percent of private-sector workers in finance and insurance occupations have access to paid sick leave, compared to just 49 percent of those in the food-services and accommodation industries.
This situation not only creates structural labor market inequities in which predominately lower income workers, disadvantaged workers, and workers of color lack access to paid sick leave. Limited and unequal access to paid sick leave also leads to undesirable outcomes for the economy as a whole, such as when unmet sick leave needs induce workers to quit their jobs, contributing to the current labor shortage, or make workers feel obligated to show up at work sick, contributing to the spread of infectious diseases.
Despite some misleading rhetoric, empirical studies do not find that sick pay mandates lead to economically significant employment losses or wage reductions at the regional labor market level. In fact, providing sick leave can even offset firms’ higher labor costs, as worker access to sick leave reduces presenteeism—showing up to work while sick. Further, surveys in jurisdictions with sick leave mandates suggest generally positive employer experiences with these programs
In our new working paper, “Mandated Sick Pay: Coverage, Utilization, and Welfare Effects,” we expand the previous literature that examines the U.S. labor market effects of guaranteed sick pay. We use firm-level data specifically designed and used by the federal government to pinpoint labor compensation, including benefits, to estimate the impact of these policies on employers’ provision of sick leave, worker utilization rates, labor costs, and other worker benefits.
We find that state-level sick pay mandates effectively increase the number of U.S. employers who offer paid sick leave to their employees. Worker access to sick pay increases by 18 percentage points within 2 years of the policy being adopted. (See Figure 1.)
Figure 1
This increase in coverage, we find, leads employees to use roughly 2 additional paid sick days per year, on average. At the same time, however, we find that approximately 1 in 5 workers still lacks access to sick pay even after the law is implemented. Further research is required to determine if this gap is a result of employer noncompliance, a lack of awareness that the policy exists, or any other factors.
In terms of the impact on other employee benefits, we find no evidence that they are curbed by employers in response to providing paid sick leave. These benefits, including paid vacation and holiday time off or group benefit policies, such as health or dental insurance, are valuable to employees, but U.S. employers are generally not required to provide them. Additionally, we do not find that employers cut hours worked for employees or reduce wages as a result of paid sick leave policies.
Our study uncovers modest increases in sick leave costs to employers. On average, employers incur an additional 2.7 cents per worker per hour to cover the cost of sick leave. For marginal firms newly covered by state-level policies, employers incur an additional 21 cents per worker per hour due to the new policies. In addition, employers may incur other indirect costs that we cannot measure—in productivity losses or reduced morale, for example, when workers are out sick. in contrast, employers may also accrue indirect savings if, for example, they increase rates of worker retention or reduce costs associated with workplace illness and presenteeism.
Indeed, our findings on the modest cost of sick leave are complemented by other research that examines the cost savings to businesses that are associated with these laws. A recent study by Heather Hill at the University of Chicago’s School of Social Service Administration on the impact of paid sick leave on job separation rates finds that it reduces the probability that a worker leaves their job by at least 2.5 percentage points, or 25 percent, with the strongest effects seen among working mothers and workers who do not receive paid time off for vacation.
Additionally, research suggests that businesses save on labor costs that no longer arise from presenteeism and the resulting enhanced productivity, and thus profitability, of workers who are all in good health.
Paid sick leave guarantees also are seen by many public health experts as one of the strongest tools in stopping the spread of infectious diseases. Researchshows that paid sick leave reduces the spread of influenza. More recently, two other studies on the emergency paid sick leave program enacted under the Families First Coronavirus Relief Act show that it slowed the spread of the coronavirus by encouraging workers to stay at home when sick. And an OECD report from July 2020 argues that paid sick leave is “an effective social and employment policy response to protect income, health and jobs through the COVID-19 crisis.”
Paid sick leave policies not only improve public health outcomes but also support workers dealing with medical emergencies, lower rates of presenteeism, reduce inequality, likely boost worker productivity, and strengthen worker ties to the labor market. Sick pay also comes at a relatively low price-tag for employers. Importantly, it offers potential cost savings for employers through reduced sickness in the workplace, better worker moral and commitment to firms, or lower costs due to reduced turnover rates. It may even boost demand for products and services as customers generally appreciate when firms treat their employees well and generally dislike interactions with sick employees.
Policymakers should continue to advocate for, enact, and enforce sick pay policies as a cost-effective means of protecting the health of the public and strengthening the U.S. economy.
In the current debate among economists and policymakers in the United States about the causes of inflation, one of the most persistent and most deeply rooted questions is whether today’s round of price increases are, fundamentally “macroeconomic” in scope—meaning they are happening because there is a general excess of demand over supply. Despite findings from both journalists and the White House that swelling industry profits and bottlenecks in the industries supplying pandemic-shaped demand are the main forces behind recent price increase, there is remarkable insistence from senior officials in both political parties that general fiscal restraint should be the stabilization instrument of choice.
“Ultimately inflation is a macroeconomic problem,” writes Jason Furman, the former head of President Barack Obama’s Council of Economic Advisers, in The Wall Street Journal. He attributes rising prices to the “oversize and poorly designed” coronavirus recession rescue packages of December 2020 and March 2021. In TheWashington Post, former Clinton administration U.S. Treasury Secretary Larry Summers describes the present moment as one of an “overheating economy” caused by “far too much fiscal stimulus and overly easy monetary policy.”
Sen. Pat Toomey (R-PA), the ranking member of the Senate Banking Committee, echoes this interpretation. “Congressional Democrats’ extreme Leftist policies are contributing to the price hikes hitting Americans’ wallets,” he said in late November. Democrats, he continued, are “pushing a multi-trillion dollar reckless tax-and-spend plan that will contribute to more inflation and damage our economy.”
Across the ideological spectrum, influential voices today echo the complaint heard during the Cold War most frequently among Southern Democrats, Midwest small business leaders, and Western insurgents of the Republican Party: Sustained non-defense-related government spending and low interest rates increase inflationary pressures, in turn destabilizing the U.S. economy and society. As the late Arizona Senator and Republican Party presidential candidate Barry Goldwater complained during the late 1960s, “the essential item in the inflation we are experiencing is government spending.” Preparing his California gubernatorial campaign stump speech in 1966, Hollywood actor Ronald Reagan said the same: “The real cause of inflation is government spending.”
To the extent this conventional wisdom about inflation is rooted in historical knowledge, it is the latent memory of this conservative diagnosis of the previous serious bout of inflation, which began with the escalation of the Vietnam War in 1965 and extended through the two import-driven oil-price spikes in 1974 and 1979. This view holds that the prolonged period of rising prices in the 1960s and 1970s was fundamentally an error in the “indirect” macroeconomic management of fiscal and monetary policy, meaning there was too much government spending and borrowing costs that were too low due to lax monetary policy.
This interpretation was wrongheaded then—see Figure 1—and it is wrong now.
Figure 1
First of all, it is historically and economically wrong that the previous round of sustained inflation was driven by Congress spending uncontrollably on “social programs”—nondefense expenditures and government transfers such as food stamps, the Aid to Families with Dependent Children program, and the Medicare and Medicaid programs. In fact, austerity measures taken to varying degrees by the Nixon, Ford, and Carter administrations coincided with accelerating price increases. Indeed, during the 1970s, small increases in what we would today call “social infrastructure” spending were actually associated with the subsiding of inflation.
Secondly, there is good evidence that the microeconomic and macroeconomic management tools used by the Kennedy and Johnson administrations in the 1960s to stem price increases—a surgical and largely voluntary attempt to encourage certain industries to follow wage and price guidelines, per the direction set by fiscal policy—were working to a large degree, according to the late economist Arthur Okun as detailed in his 1970 book, The Political Economy of Prosperity. It wasn’t until the Nixon administration eschewed these tactics that the U.S. economy experienced real price escalation—an inflationary spiral that continued under the Ford and Carter administrations due to their own misplaced reliance on fiscal austerity, exacerbated by two sharp import-driven energy price spikes.
Combined, these historical and economic facts provide an important lesson to today’s policymakers. Namely, fiscal austerity is not an antidote to today’s inflation. Instead, austerity will likely exacerbate aggressive wage hikes and profit taking, and the inflation that can produce.
This column will walk through this history to demonstrate why the lessons mislearned in the 1970s about austerity policies, if repeated now, could well result in the same inflationary spiral and economic volatility that marked that era in U.S. economic history.
The history of fiscal austerity and monetary restraint as anti-inflation tools
It was the misguided belief that the inflation of the 1970s was, at root, a macroeconomic problem that led the Nixon, Ford, and Carter administrations to restrain government spending. Each of these administrations leaned toward fiscal and monetary contraction to slow rising prices—but it did not work. Fiscal contraction only exacerbated a decade of high unemployment by inducing three recessions and prolonging business uncertainty, while discretionary monetary policy drove wild swings in construction, antagonizing building contractors, homeowners, and workers across the nation. (See Figure 2.)
Figure 2
It is important to emphasize that the federal government’s share of Gross Domestic Product declined persistently throughout the inflationary years of the 1970s. While the defense share of GDP drove the overall decline in the federal share—due to the end of the Vietnam War and détente with the Soviet Union and the People’s Republic of China—this is even true when considering only nondefense expenditures and transfers, which fiscal hawks then, as now, invariably target for criticism rather than defense spending. Indeed, the nondefense share of GDP fluctuated very little during the 1970s. (See Figure 3.)
Figure 3
It was these fiscal austerity drives that created the “stag” in stagflation. This was deliberate policy—and recognized as such at the time. After the 1972 elections, for example, the Nixon administration put an economy-breaking ceiling on federal expenditures, which the Ford administration tried to continue until the 1974 recession forced up unemployment claims.
This was the original “sequestration” move by fiscal-policy hawks—the 1973 “impoundment” of congressionally appropriated funds that the Nixon White House used to starve public institutions across the U.S. economy, long before the 113th U.S. Congress in 2013, led by then-Speaker of the House Paul Ryan (R-WI). Of course, threats by fiscal hawks to shut down the U.S. government to curtail federal spending have been regular features of U.S. politics since the 1990s, as the general decline in the federal tax-revenue share of GDP coincided with skyrocketing U.S. income and wealth inequality.
There was no dramatic and sudden increase in federal social infrastructure spending during the 1970s. The increases in the so-called transfer-payment share of GDP that did occur were only during recessions. Opportunistically, many politicians and conservative intellectuals defined the decade’s political culture through misplaced and often racist popular caricatures of “welfare queens” and the “undeserving” unemployed collecting public Unemployment Insurance. Yet across the decade, the growth of transfers was moderate and gradual, and intentionally slowed to keep pace with the growth of the private sector. (See Figure 4.)
Figure 4
So, what caused stagflation in the 1970s?
It’s clear that fiscal macroeconomic restraint did not cure inflation during the 1970s. But what caused the steady rise in prices? Most historians agree with contemporary journalistic accounts that the inflation grew out of President Lyndon Johnson’s decision to escalate the Vietnam War in July 1965 without moving the U.S. economy to a “war footing”—by not instituting excess-profits taxes, wage-price controls, or, at the very least, a wartime income-tax increase to accompany the war. The only “bump” in federal expenditures during the previous period of inflation occurred in defense spending. (See Figure 5.)
Figure 5
Less understood is the burst of price and wage increases in 1969 and 1970, when the Nixon administration entered office and renounced the Kennedy and Johnson administrations’ program of shaping production in key markets and planning wage-price guidelines. These efforts by the two Democratic administrations in effect maintained progressive fiscal policies to sustain high employment and expand social infrastructure programs. In exchange, the largest unions of the AFL-CIO agreed to moderate wage demands.
Likewise, the Kennedy and Johnson administrations encouraged the largest and most efficient companies capable of influencing product and services prices in their markets to pass on productivity increases in the form of lower prices and higher capacity utilization, rather than taking them as monopolistic profits.
When Marilyn Monroe sang “Happy Birthday, Mr. President” to John F. Kennedy in May 1962, her lyrics actually sang the praises of enforcing price guidelines in the steel industry:
For all the things you’ve done/ The battles that you’ve won/ The way you deal with U.S. Steel/ And our problems by the ton/ We thank you so much.
The incoming Nixon administration campaigned against this principle. Under the flag of “free enterprise” guided by hands-off government macroeconomic policies, the White House ended all microeconomic interventions, such as wage and price guidelines and exhortations. In the process, the 3 percent rate of inflation under President Johnson became a 6 percent rate of inflation under President Richard Nixon.
When the Nixon administration, in August 1971, did stabilize the economy after the 1970 recession—by tellingly using a formal wage-price freeze and phased price-control program—it paired its “incomes policy” with an acceleration of government spending timed to a climax in November to December 1972—the moment of presidential election. Incomes policy broadly refers to the kind of social compacts forged by governments, the private sector, and labor unions in Western Europe at the time to tame inflation without inducing a recession.
This history is often written as if such planning efforts were pursued in lieu of macroeconomic fiscal-monetary guidance, but nothing could be further from the truth. They were always described by their administrators as “supplementary” and temporary—and, if anything, it is this reticence to engage in incomes policies that explains their historical weakness in the United States. What’s more, the inflation that exploded during 1973—for 10 months before the first foreign oil shock—resulted from their immediate repeal and the shifting of the stabilization program to a purely macroeconomic basis.
In the moment of political victory in January 1973, the Nixon administration rejected its temporary incomes policy and turned dramatically toward austerity, defunding what remained of the Johnson-era Office of Economic Opportunity, the core office responsible for administering the War on Poverty programs, and imposing a ceiling on congressional appropriations. The result was an explosion of prices, as U.S. corporations rebuilt profit margins squeezed by the 16 months of government price regulations.
Then, after 10 months of this unstable domestic situation, the first “oil shock” slammed the U.S. economy. Orchestrated by the ambitious and suddenly powerful Organization of Petroleum Exporting Countries, or OPEC, the price hike came in opposition to U.S. foreign policy—specifically, in response to the October 1973 Yom-Kippur War between Israel, Egypt, and Syria. Inflation, for the first time, entered double-digit territory by 1975.
To be sure, there were real policy errors that allowed this runaway bout of inflation to happen—but they were microeconomic as much as macroeconomic errors. Just when austerity was imposed to reduce demand, the Nixon administration released controls over profit margins and allowed producers to recoup revenues in price increases. By freeing the corporate sector to drive up prices swiftly and sharply before supply had caught up to the administration’s election-year demand, the Nixon White House produced double-digit inflation.
But in neither 1972 nor in 2021 would it be reasonable to argue that the U.S. economy was experiencing a general excess of demand. Unemployment at the time persisted in many cities then, as now, demonstrating that the existing level and composition of demand was inadequate for achieving full employment. The composition of demand in both situations included enough bottleneck sectors to drive rising prices—famously, wheat and corn prices after the 1972 détente grain deals with the Soviet Union, as well as petroleum and steel prices.
Some of these sudden price spikes resulted from inadequate forward planning. Then-White House adviser Donald Rumsfeld and U.S. Department of Agriculture Secretary Earl Butz rejected the pleas of the Cost-of-Living Council to expand planned acreage for 1972 and 1973, before and after the rush of purchases by the Soviet Union. Other spikes, such as petroleum, were rooted in deeper geopolitical shifts driving the terms of trade with the developing world. Amid these sector-specific price increases, fiscal-monetary restraint exacerbated wide areas of unemployment, particularly in many cities and among people of color—as our memory of the era’s “urban crisis” attests.
Yet the misinterpretation of the inflationary pressures in the 1970s persists today. As Harvard’s Summers has written elsewhere about this era, “The first attempts to contain inflation were too timid to be effective, and success was achieved only with highly determined policy. A crucial step was the abandonment of the idea that the problem was structural in nature rather than driven by macroeconomic policy.” Summers is wrong. The mistakes made in the 1970s were precisely the limitations placed on the expansionary fiscal and monetary policies required for effective sectoral planning.
Lessons to be learned from the causes of stagflation in the 1970s
The persistence of the misinterpretation of inflationary pressures in the 1970s is worth considering today. In the period since the 1970s, the macroeconomic prescription for inflation has been to induce a recession that is long and deep enough to stop prices from rising. To work, proponents of this macro-only approach argue, the policy must be well-telegraphed to the public, unwavering in its implementation, and, until only recently, free of any microeconomic policies that might distract from the imperative of fiscal-monetary restraint.
This is different than the contending claims of price controllers then, and of experts today urging more extensive planning. From their perspectives, inflation persists because incomes policies—rather than the induced recessions of 1970 and 1974—were not given enough time to work. Rising prices are, after all, a traditionally business-friendly incentive to expand production and capacity. If supply is to increase without higher prices, then the simplest alternative is to produce for the market at a loss, offset by subsidies from the public budget. But this can subject producers’ incomes to public supervision, and that didn’t happen during the late 1970s.
When President Gerald Ford’s austerity policies failed to stabilize the U.S. economy, the Carter administration sought to manage a rapid recovery through a private-sector growth program. To induce private investment and expand capacity, this program relied on the incentives of private corporate earnings through unregulated profits and tax cuts—in particular, a capital gains tax cut in 1978. Amid inherited cost increases, this private-investment and profit boom came at the expense of personal consumption in the form of even higher inflation. Between 1977 and 1979, as the gross private investment share of GDP increased from 18 percent to 21 percent, personal consumption in the economy actually fell. (See Figure 6.)
Figure 6
As a share of national income, wages and salaries fell steadily in the 1970s. The surge in private investment accelerated the development of the Gulf Coast petroleum industry and financed a wave of construction across the Sunbelt. But the resulting business boom itself pushed up the general price level, with neither personal consumption expenditures nor the federal-spending share of GDP rising during the Carter years.
In fact, if any correlation between nondefense spending and price levels can be drawn from the 1970s, it is that inflation subsided when nondefense spending expanded, as detailed in Figures 2 and 3 above.
This makes sense when one considers the institutional factors bearing on the determination of wages. When workers’ consumption of basic services is stabilized by public programs, they have less incentive to seek to squeeze it out of their profit-seeking employers, particularly if existing wage differentials are perceived to be equitable. Such perceptions of equity were rare during the 1970s, but there is likewise little evidence that any aggressive union wage offensive drove the decade’s inflation.
In fact, that decade’s upsurge in labor militancy and strike action was purely defensive, as workers sought—with decreasing effectiveness—to defend their real incomes amid the supply-shortage and profit-driven inflation, particularly during the Carter administration era’s economic expansion. (See Figure 7.)
Figure 7
Before the so-called Volcker Shock began in 1979, the incomes policies that sought to stabilize and to direct shares of the U.S. economy were the cutting edge of macroeconomic policy discussion. During both World War II and the Korean War, subsidies to producers selling under controlled prices performed an economically analogous function of coordinating the growth of money incomes to the limits of real output. But whereas the Truman, Kennedy, and Johnson administrations had been willing to move toward this direction by managing wages and prices, and while even the Nixon administration opportunistically used this playbook, the Carter administration did not. Instead, the Carter administration’s growth program relied on the incentives of private corporate earnings to induce investment and expand capacity. (See Figure 8.)
Figure 8
Conclusion
If the U.S. economy today cannot sustain expanded public investments in physical and social infrastructure or support higher incomes for working people, then the appropriate response to today’s inflation may well be to bring demand down to the lower levels of pandemic-restricted supply. This option, of course, is neither politically feasible nor economically responsible.
But there is evidence that public investments can tame current price pressures, not least because of the experience of the late 1960s, the early 1950s, and, of course, during World War II. Advocates of fiscal restraint today may consider a national U-3 unemployment rate (defined as unemployed people actively looking for work) of 4.2 percent as a sign there are too many jobs and too few workers to fill them, risking a runaway inflation. But the economywide rate of capacity utilization (the key measure of U.S. economic capacity) is still well-below its pre-pandemic level.
According to the Federal Reserve’s survey of production and capacity, utilization has measured around 76 percent since the summer of 2021, compared to 79 percent and 80 percent in the low-inflation years of 2014 and 2018. In November, the U.S. Bureau of Labor Statistics reported the U-3 unemployment measure much higher than the national average, from 5.1 percent in Chicago and 5.4 percent in Houston to 6.3 percent in New York City and 7.1 percent in Los Angeles.
Then, there’s the fuller U-6 unemployment measure, which includes those working part time for economic reasons. It remains at a staggering 7.8 percent nationally. The U.S. labor market, in short, is nowhere near maximum employment.
The upshot: The production of goods and services in the U.S. economy can expand because there is excess capacity and underemployment. It is not shortages that are driving up prices in every market—though in select bottlenecks, there are capacity constraints that can and do ripple out through the supply chain. Rather, it is the general increase in producer profits and wages that is taking place as corporations take advantage of what many see as a temporary condition of government stimulus and workers seek to rectify perceived historical wrongs.
The answer, then, is for U.S. government fiscal policies to continue to support physical and social infrastructure spending amid the continuing coronavirus pandemic. These policies will sustain a high level of demand in the U.S. economy to encourage market forces and should be complemented by plans to prepare where markets fail. For those who believe the nation can supply the changing demands of a more egalitarian society, maintaining a high level of government spending is an indispensable condition.
But should the notion persist that inflation is essentially a macroeconomic problem that warrants the macroeconomic solution of reduced spending through raising interest rates and curtailing public budgets, then that needed demand will not be available for producers to meet. Without it, the vision of remaking the U.S. economy will go nowhere, economically or politically.
— Andrew Elrod holds a Ph.D. in history from the University of California, Santa Barbara and is a 2016 Washington Center for Equitable Growth grantee. Elrod, in the fall of 2021, completed his dissertation on the history of wage and price controls in the United States between 1940 and 1980. He works in the research department at UTLA, a 36,000-member public-sector labor union in Los Angeles.
Yesterday was the third and final day of the annual meeting of the Allied Social Science Associations, which is organized by the American Economic Association. The conference, held virtually again this year due to the ongoing coronavirus pandemic, 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 60 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 third 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.
Click here to review the highlights from day one, and here for highlights from day two.
Abstract: It is evident that both male and female workers in medium/larger establishments not only receive higher wages but also have a higher probability of participating in benefit programs than those in smaller establishments. This reinforces the well-documented “size” effect. Further, the firm-size wage effects are much larger for men than women. The union wage effect decreases with establishment size for both genders. This supports the argument that large nonunion firms pay higher wages to discourage the entrance of unions (i.e., the “threat” effect argument). In addition, the union wage premium is higher for males across firm sizes relative to females. This implies that unions in the large establishments may have a role to play in achieving a narrowing of the gender union wage gap. Further, given the presence of noticeable gender differences in estimated union effects on benefits—such as health insurance, maternity leave, life insurance, and retirement—unions should not treat both genders similarly.
Martina Jasova, Columbia University-Barnard College; Caterina Mendicino, European Central Bank; Ettore Panetti, University of Naples Federico II; Dominik Supera, University of Pennsylvania
Abstract: We show that softer monetary policy reduces labor income inequality via the credit channel. For identification, we exploit administrative matched datasets in Portugal—employee-employer and credit register—and monetary changes since the Eurozone creation in 1999. We find that softer monetary policy conditions reduce labor earnings differentials across firms and workers in the economy. Small and young firms increase workers’ wages the most and the effects are particularly strong for firms that are more levered. We also find that workers that benefit the most from looser monetary policy are young, educated, and female. Similar results also hold for firm-level employment and workers’ total hours worked. Our findings uncover a central role for the firm balance sheet and the bank lending channels of the transmission of monetary policy to labor income inequality, with state-dependent effects that are substantially stronger during crisis times. Note: This research was funded in part by Equitable Growth.
Emily Nix, University of Southern California; Martti Kaila, University of Helsinki; Krista Riukula, ETLA Economic Research
Abstract: Does job loss cause less economic damage if your parents are higher income, and what are the implications for intergenerational mobility? In this paper, we show that following a layoff, adult children born to parents in the bottom 20 percent of the income distribution have almost double the unemployment, compared with those born to parents in the top 20 percent, with 50.5 percent higher present discounted value losses in earnings. Second, we show that the unequal impacts of job loss are larger when the economy is growing than when it is in recession. Third, we show that these disparate impacts of job loss have important implications for inequality and intergenerational mobility. They increase the 80:20 income inequality ratio for those impacted by 5.2 percent and increase the rank-rank coefficient by 23 percent, implying large reductions in intergenerational mobility. In the last part of the paper, we explore mechanisms and show that much of these differences in the impacts of job loss between children of low- and high-income parents can be explained by “baked in” advantages.
Sara Chaganti, Federal Reserve Bank of Boston; Erin Graves, Federal Reserve Bank of Boston
Abstract: Job quality—not just the fact of having a job, but also the conditions of the job—is a central concern for workers individually and for U.S. social policy. Going into the pandemic, a strong body of research showed that while the economy was generating lots of jobs, the quality of these jobs was increasingly poor, and this was especially the case for jobs held by non-White and female workers. The pandemic spotlighted not just economic inequality but also work inequality, where workers vary in wages and important working conditions. Policymakers are now committing to a recovery from the pandemic that includes equitable distribution of quality jobs. In this paper, we outline a policy-oriented framework for understanding job quality and options for improving it. First, we conceptualize a functional definition of job quality, one that defines a job less by its features than by the role it serves in people’s lives. We suggest that the essential function of a quality job is that the conditions of the job itself advance worker well-being. Second, we describe the conditions that make a job a quality job, distinguishing those that are endemic to the job and those that are conventionally (though not necessarily) tied to the job in the U.S. context. Third, we advance our argument that specific and deliberate post-Fordist policy interventions shifted the ecology of our labor (and product) markets, and these shifts created incentives to drive down the quality of jobs, especially for those workers with the least social and economic power. Finally, we identify policy responses—public, private, and cross-sectoral—that may increase the numbers of and equitable access to good jobs: jobs that advance worker well-being and strengthen contemporary links between worker well-being and conditions of the job.
Peter Q. Blair, Harvard University; Darwyyn Deyo, San Jose State University; Jason F. Hicks, University of Minnesota; Morris M. Kleiner, University of Minnesota
Abstract: We collect data on the origins and evolution of state laws affecting the ability of people with criminal records to be issued an occupation license. The data range from year of initial licensure, which occurred as early as the mid-19th century, to 2020 for 30 occupations ranging across different industries but currently requiring licensure in all states. Additionally, we collected data on universal criminal records-occupational licensing, or CROL, requirements, which are requirements that apply to all occupations requiring licensure in a state. These requirements were typically enacted in states from the mid-1970s through the late-2010s. The CROL requirements we collected include (1) good moral character clauses, which allow licensing authorities to reject applicants who are deemed to not be of good moral character, (2) criminal records restrictions, which prevent an individual from being issued an occupational license due to a previous conviction, (3) the requirement of a relationship between an offense and the tasks and duties of an occupation, (4) consideration of rehabilitation, and (5) limitations on scope of inquiry, which limit the ability of licensing authorities to consider certain criminal records. We will describe how the distribution of CROL requirements varies across states, occupations, and industries. Additionally, we will describe how the stringency of the requirements have changed through time. We are using the data to examine the effects of different CROL requirements on labor market outcomes of minority populations who have disproportionate felony conviction and incarceration rates. Additionally, we are examining the political economy of CROL requirements by identifying the social, political, and economic factors that lead to the enactment of these requirements. Note: This research was funded in part by Equitable Growth.
Nina Roussille, London School of Economics; Elizabeth Linos, University of California, Berkeley; Sanaz Mobasseri, Boston University
Abstract: This study examines how working with White co-workers affects turnover rates for Black employees in a large professional services firm. Black employees are 10 percentage points more likely to turnover within 2 years, relative to similar White employees in the same office, whose average turnover rate is 21 percent. Drawing on conditional random assignment to their initial project for more than 9,000 newly hired employees in the United States, we find that a one standard deviation (20 percent) decrease in the percentage of White co-workers in the initial project decreases turnover for Black women (but not Black men, other non-White, or White employees) by 10 percentage points. We further collect performance review and talent surveys of employees to understand the mechanism behind this result. Early results suggest that when Black women are assigned to initial projects with more White co-workers, they are less satisfied at work and receive more negative performance evaluations: Evaluators are more likely to identify them as “at risk of low performance” and are less willing to “always want the [given employee] on their team.” We are currently collecting information on network formation and promotion at the firm to understand how the initial project assignment impacts career evolution at the firm.
Ingrid Haegele, University of California, Berkeley
Abstract: Women are vastly underrepresented in leadership positions, but little is known about when and why gender gaps in representation first emerge in the leadership hierarchy. This study uses novel personnel data from a large manufacturing firm to document that gender differences in applications for first-level leadership positions create a key bottleneck in women’s career progression. Women are not less likely to learn about job openings at the firm and do not experience lower hiring likelihoods than male applicants. Instead, gender differences in revealed preferences for leading a team account for women’s lower propensities to apply for first-level leadership positions. Women who rise to the first leadership level are not less likely than men to apply to or to receive subsequent promotions, rejecting the common notion that a glass ceiling at higher-level leadership positions is the key barrier to gender equality.
Dania V. Francis, University of Massachusetts Boston; Thomas Mitchell, Texas A&M University; Darrick Hamilton, TheNew School for Social Research; Bryce Wilson Stucki, nonaffiliated
Abstract: In this paper, we estimate the value of lost Black agricultural land. Countless Black farmers fell victim to violent dispossession of their land prior to the Civil Rights reforms of the 1960s. Many more, however, lost land due to discriminatory federal farm credit policies, and the discriminatory implementation of federal, state, and local agricultural policies, before, during, and after the Civil Rights era. We use Census of Agriculture data on Black ownership of agricultural land from 1910 to 1997 to estimate the present value of average yearly land losses to Black land owners. By our most conservative estimate, the dispossession of Black agricultural land resulted in the loss of hundreds of billions of dollars of Black wealth. However, in addition to its production value, land also has value as collateral for investing in education and other business ventures. Taking this additional value of land into account, depending on multiplier effects, rates of returns, and other factors, the value of lost Black agricultural land reaches into the trillions.
Vicki Bogan, Cornell University; Sarah Wolfolds, Cornell University
Abstract: Recent estimates indicate that approximately 9 million households in the United States are unbanked, with an additional 24.5 million households being classified as underbanked. In this paper, we focus on intersectionality, specifically the intersection of race and gender, to better understand the probability of being unbanked and underbanked in the United States. Additionally, we look at which drivers could be chief contributors to this type of financial exclusion. We find that while White men and White women have similar levels of engagement with the banking system, Black women are significantly more likely than Black men to be both unbanked and underbanked.
Anastasia Zervou, University of Texas at Austin; Aarti Singh, University of Sydney; Jacek Suda, Narodowy Bank Polski and Warsaw School of Economics
Abstract: We study the effects of monetary policy shocks on the growth (rates) of employment, hiring, and earnings of new hires across firms of different sizes. We find that a lower-than-expected policy rate increases hiring and employment growth in all firms, but it does so more in larger firms. We also find that as a consequence of a surprise monetary expansion, earnings of newly hired employees grow in a similar rate in all firms. In our empirical analysis, we use the publicly available Quarterly Workforce Indicators and employ local projections to compute impulse responses of the labor market variables to high frequency monetary policy shocks. We control for differential effects of monetary policy across industries and for differential effects of state unemployment across firm sizes. We also include a robustness exercise that corrects the reclassification bias. Using firm size as a proxy for financing constraints, we employ a theoretical model with heterogeneous firms, the financial accelerator channel, a working capital constraint, and an upward slopping marginal cost curve, as previously used in the literature. We incorporate in the model our empirical finding that the growth of earnings of new hires increases after monetary policy expansion. This new channel suggests that large firms increase hiring and employment growth more than small firms after a monetary policy expansion because large firms finance the wage increase cheaper than what small firms do. We find that our empirical results are consistent with our theoretical framework as long as the combined effect due to varying steepness of the marginal cost curve and the change in wages is stronger than the financial accelerator channel.
Amanda Starc, Northwestern University; Thomas Wollmann, University of Chicago
Abstract: Entry represents a fundamental threat to cartels. We study the extent and effect of this behavior in the largest price-fixing case in U.S. history, which involves generic prescription drugmakers. We observe abrupt increases in generic drug prices linked to the collusive conduct of manufacturers. We link information on the cartel’s internal operations to regulatory filings and market data. A pairwise testing procedure shows that prices during the cartel period are consistent with collusion. Prices after an antitrust investigation are still consistent with collusion; enforcement alone does not discipline firm behavior. Yet we find that collusion induces significant entry, which, in turn, reduces prices, although regulatory approvals delay most entrants by 2–4 years. We find that reducing regulatory delays and fees would have reduced drug expenditures by billions of dollars.
Abstract: Dual-earner couples’ decisions of where to live and work often result in one spouse—the trailing spouse—experiencing earnings losses at the time of a move. This paper examines how married couples’ migration decisions differentially impact men’s and women’s earnings and the role that policy can play in improving post-move outcomes for trailing spouses. I use panel data from the NLSY97 and a generalized difference-in-differences design to show that access to Unemployment Insurance for trailing spouses increases long-distance migration rates by 1.9 percentage points to 2.3 percentage points (38 percent to 46 percent) for married couples. I find that women are the primary beneficiaries of this policy, with higher UI uptake following a move and higher annual earnings of $4,500 to $12,000 3 years post-move. I then build and estimate a structural model of dual-earner couples’ migration decisions to evaluate the effects of a series of counterfactual policies. I show that increasing the likelihood of joint distant offers substantively increases migration rates, increases women’s post-move employment rates, and improves both men and women’s earnings growth at the time of a move. However, unconditional subsidies for migration that are not linked to having an offer in hand at the time of the move reduce post-move earnings for both men and women, with stronger effects for women. Note: This research was funded in part by Equitable Growth.
Ana Costa-Ramon, University of Zurich; Anne-Lise Breivik, Norwegian Tax Authority
Abstract: We provide novel evidence on the impact of a child’s health shock on parental labor market outcomes. To identify the causal effect, we leverage long panels of high-quality Finnish and Norwegian administrative data and exploit variation in the exact timing of the health shock. We do this by comparing parents across families in similar parental and child age cohorts whose children experienced a health shock at different ages. We show that these families are comparable and were following very similar trends before the shock. This allows us to use a simple difference-in-differences model: We construct counterfactuals for treated households with families who experience the same shock a few years later. We also exploit this variation in an event study framework. We find a sharp break in parents’ earnings trajectories that becomes visible just after the shock. The effect is stronger for mothers than for fathers and is driven by health shocks that need persistent care after the event. We also document a strong impact on parents’ mental well-being.
Claudia Goldin, Harvard University; Sari Pekkala Kerr, Wellesley College; Claudia Olivetti, Dartmouth College
Abstract: Women earn less than men, and that is especially true of mothers relative to fathers. Much of the widening occurs with family formation. We estimate two earnings and hours gaps: (1) that due to the “motherhood penalty,” which is the difference between the earnings and hours of women who are currently mothers and those who are not; and (2) that due to the “parental gender gap,” which is the difference in outcomes between mothers and fathers. Women with young children work far fewer hours per week than do others. But what happens on the “other side of the mountain,” as the children grow up and eventually leave home? The answer is that women work more hours and transition to higher-earning positions. The motherhood penalty is greatly reduced, and by their 50s, women with and without children earn nearly the same amount. But fathers manage to maintain their relative gains and do monumentally better than mothers, women without children, and men without children. Fathers earn almost 7 log points more per child regardless of their age, whereas mothers lose more than 10 log points per child, holding hours of work constant.
David Cutler, Harvard University; Leemore Dafny, Harvard University; David Grabowski, Harvard University; Steven Lee, Brown University; Christopher Ody, Analysis Group
Abstract: The landscape of the U.S. healthcare industry is changing dramatically as healthcare providers expand both within and across markets. While federal antitrust agencies have mounted several challenges to same-market combinations, they have not challenged any nonhorizontal affiliations—including vertical integration of providers along the value chain of production. The Clayton Act prohibits combinations that “substantially lessen” competition; few empirical studies have focused on whether this is the source of harm from vertical combinations. We examine whether hospitals that are vertically integrated with skilled nursing facilities, or SNFs, lessen competition among SNFs by foreclosing rival SNFs from access to the most lucrative referrals. Exploiting a plausibly exogenous shock to Medicare reimbursement for SNFs, we find that a 1 percent increase in a patient’s expected profitability to a SNF increases the probability that a hospital self-refers that patient (i.e., to a co-owned SNF) by 2.5 percent. We find no evidence that increased self-referrals improve patient outcomes or change post-discharge Medicare spending. Additional analyses show that when integrated SNFs are divested by their parent hospitals, independent rivals are less likely to exit. Together, the results suggest vertical integration in this setting may reduce downstream competition without offsetting benefits to patients or payers.
working paper
post
post
