Every month the U.S. Bureau of Labor Statistics releases data on hiring, firing, and other labor market flows from the Job Openings and Labor Turnover Survey, better known as JOLTS. Today, the BLS released the latest data for June 2021. This report doesn’t get as much attention as the monthly Employment Situation Report, but it contains useful information about the state of the U.S. labor market. Below are a few key graphs using data from the report.
The quits rate rose to 2.7 percent in June as 3.9 million workers quit their jobs.
The vacancy yield increased slightly in June but remained low, as job openings reached a series high of 10.1 million and hires rose to 6.7 million.
The job openings rate increased to 6.5 percent in June, with job openings remaining particularly elevated for the manufacturing industry and for leisure and hospitality, but low for the financial activities sector.
The ratio of unemployed workers to job openings decreased to 0.9 in June, approaching pre-coronavirus recession levels.
With a slight increase in the unemployment rate and the job openings rate rising to a series high, the Beveridge Curve continues to move in atypical territory, compared to previous business cycles.
1. Getting social insurance to people who need it during the coronavirus pandemic also entails getting a lot of extra resources to people who really do not need it. Why? Precisely because the income support infrastructure in the United States is so weak. We could have done the income support job much more cheaply and fairly amid the pandemic. Not that I regret the effort. I do not regret it at all. But continuous improvement is the watchword. And there is a huge amount that we could have done beforehand, and that we could do now, to improve our nation’s social infrastructure. Read Liz Hipple and Alix Gould-Werth, “Weak income support infrastructure harms U.S. workers and their families & constrains economic growth,” in which they write: “People in the United States access income support from a wide range of programs. … Many people who need this support are blocked from accessing it. During the COVID-19 crisis, the existing income support infrastructure has been wholly insufficient. … What is it, precisely, that stops people from accessing income supports? … Eligibility rules are too strict. Benefits are too hard to access even when people are eligible. Benefits amounts are too low. … These weaknesses in our nation’s income support system prevent the U.S. economy from reaching its full potential through lowered labor force participation, a weakened macroeconomy during economic recessions, and underinvestment in the human capital of the next generation of workers.”
Worthy reads not from Equitable Growth:
1. The Washington Center for Equitable Growth is co-hosting EconCon 2021, to be held on October 6 and 7. Register now. This has been among the very top events that I have attended. Highly recommended—and they have a very interesting virtual platform this year. Here are some of the details: “Building an Economy that Works for All of Us: A virtual conference where you will hear from and connect with experts, organizers, and advocates shaping our economy. Now more than ever, we need once-in-a-generation policy changes and transformative investments in our communities. And they are possible if we can marshal the political will to enact needed policy change. Come connect, learn, and share what it will take for us to build an economy that works for all of us! EconCon is co-hosted by Center for American Progress, Center for Popular Democracy, Community Change, Dēmos, Economic Policy Institute, Economic Security Project, Groundwork Collaborative, Omidyar Network, Roosevelt Institute, and Washington Center for Equitable Growth.”
This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.
Equitable Growth round-up
The coronavirus pandemic and resulting recession led to an unprecedented level of government investment in income support programs in the United States, from emergency Unemployment Insurance to an expanded Child Tax Credit, among others. These programs provide necessary support for U.S. households and workers but have long been underfunded, leading many of those who need this aid unable or prevented from accessing it. Liz Hipple (now at the Joint Economic Committee) and Alix Gould-Werth explain the three main barriers to these programs: eligibility rules that are too strict, benefits that are too hard to access even for those eligible, and benefit levels that are too low. These weaknesses, they write, reduce labor force participation, weaken the macroeconomy during recessions, and result in underinvestment in the next generation of workers—not to mention that most American adults will face a personal need for income support at some point in their lives. Comparing overly complex income support programs such as Temporary Assistance for Needy Families with Social Security and Medicare, Hipple and Gould-Werth show that income supports can be easily accessible to broad swathes of the population, and that the programs that are harder to access are intentionally so because of structural racism and discrimination in U.S. institutions and systems.
Tuesday, August 3 was Black Women’s Equal Pay Day, which recognizes that Black women in the United States have to work from the start of January 2020 through August 2, 2021 to earn as much as White men earned in 2020 alone. Equitable Growth pulled together a list of recent research on pay disparities that Black women face in the U.S. economy and the implications of this persistent income inequality. The scholars behind the research listed include our incoming President and CEO Michelle Holder, among others. For more about Black Women’s Equal Pay Day and how to address the economic inequalities that it marks, Kate Bahn and Carmen Sanchez Cumming’s piece from 2020 provides some answers.
The U.S. Bureau of Labor Statistics today released new data on the U.S. labor market during the month of July. Bahn and Sanchez Cumming put together five graphics highlighting important trends in the data. They then analyze the data in more detail, particularly the trends in employment in the construction sector.
The National Bureau of Economic Research is now more than halfway through its summer institute, an annual 3-week conference featuring discussions and paper presentations on specific subfields of economics, including measuring poverty, the costs of climate change, and systemic discrimination among large employers. Equitable Growth compiled a list of paper abstracts that caught our attention throughout the third and final week, including research from our grantee network and members of our Steering Committee and Research Advisory Board. For highlights from the first week of the NBER Summer Institute 2021, click here. For coverage of the second week, click here.
Links from around the web
Today’s employment numbers are encouraging, writes Neil Irwin in The New York Times’ The Upshot blog. This job market growth hasn’t been seen in the past three recessions and appears to reflect a rapidly healing economy. Irwin runs through the numbers and explains why, in almost all categories, this month’s report indicates a positive trend. Irwin then details the implications of the gains—namely, that despite the complaints from business owners about labor shortages, Americans are getting back to work.
New data from the Bureau of Labor Statistics show that working mothers spent the equivalent of a full-time job on child care in 2020 during the coronavirus pandemic—while also working at the same time. In fact, the data show that moms of young children spent an average of 8 hours per day on child care and 6 hours working, writes The 19th’s Chabeli Carrazana, and fathers spent around 5 hours on child care while working 8-hour days. This isn’t altogether surprising, Carrazana continues, considering that women often take on the majority of household responsibilities and that hundreds of thousands of women left the labor force last year to care for their children in the wake of school and day care closures. The lack of options for child care combined with the pandemic’s outsize impact on female-dominated industries such as hospitality and care are what led to the first so-called “shecession” in the United States, Carrazana explains, and even with recent gains in the labor market, there’s still a long road to full recovery for women workers.
Millions of Americans—almost 20 percent of adults, more than 60 percent of whom are women—provide unpaid and informal care to their loved ones with physical or mental health needs in the United States. Many of these family caregivers have been left behind amid the pandemic, without access to much-needed supports. Vox’s Katherine Harmon Couragedescribes the findings of a recent survey showing widespread and alarming rates of anxiety, depression, and other mental health issues. She tells the story of caregivers who have had to manage the challenges of not only caring for their family members but also nursing home outbreaks and other care disruptions—and the toll it has taken on their mental health. Courage provides several options for policymakers to raise awareness about the difficulties family caregivers are facing and provide support for these vital players in the U.S. economy. The United States truly can’t afford to neglect caregivers, she writes, because there is “neither the budget nor the professional labor force to replace them.”
The recovery in the labor market continued to pick-up steam as the U.S. economy added 943,000 jobs last month, according to the most recent Employment Situation Summary released today by the U.S. Department of Labor’s Bureau of Labor Statistics. The unemployment rate fell from 5.9 percent in June to 5.4 percent in July and the share of the U.S. population ages 25 to 54 with a job—a measure known as the prime-age employment-to-population ratio—climbed from 77.2 percent to 77.8 percent.
These indicators reflect that last month was a very strong one for the U.S. economy, yet the labor market has not fully recovered and millions of workers continue to experience the economic pain brought about by the coronavirus pandemic. The prime-age employment-to-population ratio, for instance, continues to be 2.6 percentage points below its February 2020 level. While the labor force participation rate rose slightly with respect to the previous month, at 61.7 percent it is at the same level it was in August 2020.
This most recent U.S. labor market data show that across race and ethnicity the unemployment rate for Black workers fell 1 percentage point between mid-June and mid-July, although at 8.2 percent, it continues to be higher than for any other major racial or ethnic group and the labor force participation rate of Black workers declined in July. The jobless rate for Latinx workers is at 6.6 percent, for Asian American workers at 5.3 percent, and for White workers at 5.2 percent.
By race, ethnicity, and gender, the latest data show that among workers 20 years of age or older, employment continues to be down the most for women of color. In July 700,000 fewer Black women and 594,000 fewer Latina women had a job than in February 2020—a decline of 6.9 percent and 5 percent, respectively. (See Figure 1.)
Figure 1
Across industries, July’s employment gains were led by the leisure and hospitality sector, which added 380,000 jobs. Government, education and health services, and professional and business services also saw important gains, creating 240,000, 87,000, and 60,000 jobs, respectively.
But while many industries experienced robust job growth in the past few months, construction is one of the two major sectors to have actually experienced declines in net employment this summer, though the sector did add 11,000 workers in July. An incomplete and uncertain recovery in the industry is likely to be particularly tough on Latinx workers, who represent 30 percent of the construction workforce despite accounting for less than 18 percent of all U.S. workers. Between mid-April and mid-July the construction industry shed 18,000 jobs—significantly more than the 1,400 jobs lost in the utilities sector. (See Figure 2.)
Figure 2
What is slowing down job growth in the construction industry? Part of the answer is that despite a hot housing market, supply chain disruptions and rising cost of key materials are putting the brakes on new construction, especially in the non-residential sector. According to a recent survey by the Federal Reserve Bank of Minneapolis, big price increases for important inputs such as wood, steel, and aluminum are the major factors driving uncertainty and dampening demand for future projects.
The construction industry fared better during the coronavirus recession than in previous downturns, but long-term challenges remain
Employment in goods-producing sectors such as construction tends to be especially sensitive to fluctuations in the business cycle. The reason is that during downturns, a slowdown in economic activity translates into reduced demand for new construction projects, creating a negative feedback loop in which uncertainty further depresses investment and puts workers at risk of losing their jobs.
The coronavirus recession, however, hit service-providing industries much harder, and job losses in construction have been less severe than in the last economic crisis. During the Great Recession of 2007–2009 and the housing market crash of 2008–2011, the construction industry lost 2.3 million jobs from the peak of employment in mid-2006 to the trough of employment in early 2011. While the economy-wide peak-to-trough job losses were much greater during the coronavirus recession than during the Great Recession and its aftermath, the drop in construction employment was not as dramatic. (See Figure 3.)
Figure 3
Yet changes brought about by the pandemic could drive long-term disruptions to the industry. A Bureau of Labor Statistics analysis estimates that if a shift to telework lowers demand for new office space, job growth in the construction sector will slow down in the coming decade. Weak employment growth in this sector would reduce opportunities for what a team of researchers at The Brookings Institution call “skyway occupations”—jobs that have relatively low barriers of entry, often do not require a college degree, offer opportunities for career advancement, and which can act as stairways for better, higher-paying jobs.
The construction sector is an example of the ways in which the coronavirus crisis made already precarious work even more insecure
Workers in big occupations within the industry such as construction laborers are among the most likely to experience injuries and illnesses at work. A study by researchers at the University of California, San Francisco finds that workers in this occupation also are among the most exposed to the coronavirus. Latinx workers, who represent a large share of the industry’s workers, have higher injury and fatality rates than the overall workforce. And climate change and excessive heat are making construction work even more dangerous.
That foreign-born workers are also overrepresented in the industry means that some of the workers more likely to need employment protections such as paid sick leave are also among the least likely to access those benefits. Illegal misclassification of workers as independent contractors and unpredictable gaps in work also reduce construction workers’ earnings and reduce their economic security. According to a report by the Workers Defense Project on the working conditions of construction workers in the South and Southwest, a whopping 55 percent of workers do not have access to workers’ compensation and 53 percent reported that they do not have access to employer provided health insurance.
Research also shows that construction saw an especially large increase in minimum wage violations during the Great Recession. The research points to the need to have an effective enforcement of labor protections always, and especially during downturns such as the coronavirus recession.
In addition, Latinx workers, Black workers, women workers, and self-employed construction workers all experienced disproportionate employment declines at the onset of the recession—more evidence that even within industries, already vulnerable workers have been more exposed to the economic pain brought about by the coronavirus crisis.
Per the latest Employment Situation Summary, the U.S. economy continues to be 5.7 million jobs down compared to February 2020 at the start of the coronavirus recession. After months of robust but uneven job gains, economic policy priorities for rebuilding the U.S. economy must center job quality. Policymakers have coalesced around the need for physical as well as care infrastructure, but the workers who will build the country’s much-needed roads, schools, hospitals and other care facilities, and homes often face increasingly dangerous working conditions and little economic security. To meet the construction needs of the present and future, construction workers need strong and enforced labor standards and robust unions.
Perhaps most immediately, they need access to workplace benefits, including health insurance and sick leave, as they continue to work in an ongoing pandemic. Ensuring construction workers are fairly compensated and do their jobs under safe working conditions will both promote the creation of good-quality opportunities, job security, and boost economic growth.
On August 6, the U.S. Bureau of Labor Statistics released new data on the U.S. labor market during the month of July. Below are five graphs compiled by Equitable Growth staff highlighting important trends in the data.
Prime-age employment rates increased to 77.8 percent in July from 77.2 percent in June, reflecting significant employment growth over the month.
Black and Latinx unemployment rates declined by 1.0 and 0.8 percentage points in July, larger than the decline for both White and Asian American workers, but are still at an elevated level.
Unemployment fell for workers of all education levels, but partially reflecting a decrease in labor force participation among high school graduates and workers with some college education.
Employment growth continues to be led by leisure and hospitality, which lost the most jobs in the pandemic, but there were also strong gains in education, likely reflecting disrupted patterns of seasonal hiring during the recession.
As unemployment declined overall, an increasing proportion of unemployed workers have either voluntarily left their jobs or are reentering the labor force.
The coronavirus public health emergency and resulting economic recession brought into stark relief the engrained problems with the system of income support for U.S. workers and their families. People in the United States access income support from a wide range of programs, including Social Security, Unemployment Insurance, the Earned Income Tax Credit, and the Temporary Assistance to Needy Families program, to name a few.
Despite the number of programs that make up our income support system, many people who need this support are blocked from accessing it. During the COVID-19 crisis, the existing income support infrastructure has been wholly insufficient for providing relief to those who needed it.1 And while the pandemic-specific income supports delivered through the Coronavirus Aid, Relief, and Economic Security, or CARES, Act and related programs successfully blunted some of the worst pain of the pandemic, they also failed to deliver for all who needed income support due to sustained underinvestment in these key income support programs over the past half-century.2
The coronavirus health and economic crisis is being felt widely by millions of U.S. workers and their families, yet people across the country face crises of their own every day no matter the broader economic or public health outlook. Whether it’s a personal or national crisis, the inability to access income support programs to weather unexpected storms has serious consequences, especially for many workers of color, women, and their families. Indeed, the coronavirus recession exposed already deep inequalities in access to income supports along lines of race and gender.3
What is it, precisely, that stops people from accessing income supports? There are three main barriers:
Eligibility rules are too strict.
Benefits are too hard to access even when people are eligible.
Benefits amounts are too low.
No matter one’s place in the income distribution at any given time, these weaknesses in our nation’s income support system prevent the U.S. economy from reaching its full potential through lowered labor force participation, a weakened macroeconomy during economic recessions, and underinvestment in the human capital of the next generation of workers. What’s more, all of us are likely to face a personal need for income support at some point over the course of our lives.
So, let’s examine the challenges confronting the United States’ system of income supports. Then, we will turn to examining why these are problems both for our economy at large and ourselves as individuals.
Problems with our current system of income support
We define income supports as those programs that transfer cash to households (including both social insurance programs that make transfers based on past earnings among other criteria, social welfare programs that make transfers based on current income and wealth levels among other criteria, as well as income transfers made through the tax system) and in-kind transfer programs that relieve pressure on household budgets and effectively provide income support (for example, when households receive food or housing support they no longer need to spend their limited income on food and housing and can instead use that cash to cover other needs). Together these distinct types of programs create our nation’s system of income supports. Let’s examine the challenges confronting our income support system across each of the three criteria mentioned before: eligibility, accessibility, and adequacy.
Eligibility rules are too strict
Despite fallacious stereotypes about profligacy in income support programs, it is actually intentionally quite hard to access them in the first place.4 Eligibility criteria typically screen out many people based on their family status, asset levels, age, or ability status. Simply by getting married, maintaining a modest “rainy day” fund, or keeping a reliable car, a person can lose eligibility for an income support program.5
Additionally, to access many income support programs, a person must be employed—despite the fact that lacking income may be the factor that is preventing a person from maintaining employment.6 If a person cannot afford transportation or child care, for example, it can be difficult to stay employed.
Since the 1990s, changes to our income support system have only further tied eligibility to work requirements, with the replacement of Aid to Families with Dependent Children with the Temporary Assistance for Needy Families program and the creation of the Earned Income Tax Credit. Even the Supplemental Nutrition Assistance Program, or SNAP, colloquially known as food stamps, has work requirements.7
While many people with inadequate incomes are indeed active participants in the labor force, others may have caretaking obligations, health challenges, or face discouragement in the search for employment situations that are safe.8 When workers hit a moment in their lives when they are unable to be in the labor force, this may actually be the time they need income support the most.
Benefits are too hard to access
But even among people who meet all the eligibility requirements for income support, the rate at which they access those benefits remains low.
The low proportion of eligible people accessing UI benefits provides a salient example of how systems and processes that are out of date or purposefully difficult to navigate keep people from accessing the income support they need and are eligible for.9 In the spring of 2020, an unprecedented number of workers were laid off as a result of the coronavirus recession and applied for Unemployment Insurance. More than 1 in 7 American workers applied for income support through the UI program.10
Yet poorly designed systems for applying for benefits, from understaffed phone lines to arcane websites, meant that millions of workers waited weeks to get the payments they were eligible for, if they got them at all. 11States make choices about whether to invest resources in improving system accessibility, and racism appears to shape these choices. Rates of UI access are low in states with a greater share of Black workers.12 (See Figure 1.)
Figure 1
Many headlines highlighted the difficulty faced by workers who lost their jobs through no fault of their own in accessing Unemployment Insurance during the early days of the pandemic, but this is not the only example of the challenges of claiming income support for which one is eligible. In all public health and economic contexts, people struggle to travel to Social Security Administration field offices to complete disability applications, complete the paperwork necessary to recertify for the Supplemental Nutrition Assistance Program, and correctly document their work participation to remain eligible for the Temporary Assistance for Needy Families program.13
The many difficulties people eligible for income support face is a policy choice, not an inevitability of bureaucratic programs.14 There are examples of income support programs with high take-up rates, such as the Earned Income Tax Credit and Social Security. The EITC has a nearly 80 percent take-up rate, and 97 percent of elderly Americans receive Social Security benefits.15
A key reason for the high take-up rates for these two income support programs is the lack of red tape. Filing one’s taxes once a year and submitting an initial application are all that is required to receive these sources of income support. In stark contrast to programs with lower take-up rates, such as Unemployment Insurance and Temporary Assistance for Needy Families, there is no regular ongoing process that people have to go through to prove their eligibility. Indeed, the relative absence of bureaucratic hurdles associated with claiming tax credits is a factor that influenced Congress’ recent passage of legislation that provides income support to children delivered through through periodic payments of a fully refundable Child Tax Credit during 2021.16
Benefit amounts are too low
Even people who surmount the obstacles of meeting eligibility requirements and navigate the process required to gain access to income support find that the income is insufficient to help meet their basic needs. The maximum monthly amount that a family of four with no income receives from the Supplemental Nutrition Assistance Program is $680, or $5.48 per person per day.17 Families with any income at all receive less than this.
Despite being a social insurance program, Unemployment Insurance also doesn’t begin to provide enough income to make up for the wages lost when a job is lost.18 Indeed, in no state are regular UI benefits sufficient to cover a person’s basic needs of housing, food, child care, transportation, healthcare, taxes, and other necessities such as clothing and school supplies.19 (See Figure 2.)
Figure 2
The income support provided by the Temporary Assistance to Needy Families program leaves a family of three below half of the poverty line in almost every state and is time-limited, as its name suggests.20Racism also shapes the level of support this program provides: States with a greater share of Black residents provide lower levels of income support through the Temporary Assistance to Needy Families program than states with fewer Black residents.21
Figure 3
A weak system of income support harms the entire U.S. economy
A weak system of income support harms individual workers and their families, who, at some point in their lives, experience the vicissitudes of life without adequate income. This weak system also harms the overall strength and growth potential of the U.S. economy.
During recessions, for example, income support acts as an “automatic stabilizer.”22 This means the use of income support programs, such as Unemployment Insurance and SNAP, increases during recessions as workers are laid off and apply for them to help replace their lost incomes.
This kind of income support not only helps those individual workers and their families in need, but also ensures people are still able to purchase goods and services during an economic downturn, which softens the aggregate impact of recessions on the economy.23 Indeed, increased government spending on Unemployment Insurance during the Great Recession of 2007–2009 boosted overall Gross Domestic Product: For every $1 spent on extending UI benefits, we saw an additional $1.61 in economic activity.24
Other income support programs, including the Temporary Assistance for Needy Families program, could also play this important countercyclical role, but policymakers have so eroded the program’s effectiveness that TANF income support does not respond swiftly when a recession hits.25 When any of these programs are difficult to access or have low benefit amounts, their efficacy as automatic stabilizers is blunted.
Another way a strong income support system strengthens the economy is via its positive impacts on U.S. labor market outcomes. Research shows that access to paid leave,child care support, and EITC income support all increase women’s labor force participation rates.26
Another example comes from the UI system, which researchshows improves workers’ “job matching.”27 This means that with more time, people are able to find jobs that are a better match for their skills. This doesn’t just benefit individual workers in terms of higher earnings. Better job matching also benefits the whole economy in the form of increased efficiency, productivity, and higher revenue on those higher earnings.
Weaknesses in our current system of income support also hurt the human capital development of workers, as well as the children of workers.28 This means the economic consequences of a weak system of income support aren’t just felt in the present but also extend into the future. An extensive body of research spanning decades shows the importance of childhood environments for human capital development.29
Human capital plays a crucial role in determining future education and earnings outcomes. Underinvesting in children’s human capital development today means less-educated and lower-earning workers in the future, which depresses the economy’s potential growth.
New research shows how widespread the economic benefits of just a single income support program—specifically, SNAP—can be.30 Hilary Hoynes, an economist at the University of California, Berkeley, and her co-authors find that children with early access to food assistance grew up to be better-educated and have healthier, longer, and more productive lives. This economically benefits all of us in the form of higher tax revenue, lower future expenditures on income support programs, and lower expenditure on the criminal justice system.
Our nation needs a strong system of income support because nearly everyone will need it at some point in their lives
The issues discussed above with eligibility requirements, access difficulty, and income adequacy are all examples of how our current system of income support is failing to meet the needs of so many people in the United States. Such inadequacies are not abstract issues. While a common perception is that only a small proportion of U.S. residents have unmet need for income support, evidence shows that the vast majority of people in the United States are at risk of a change in income that would lead them to experience poverty for 1 to 2 years.31
Nearly everyone at some point in their lives will experience an unmet need for income support. Contrary to racist portrayals of who actually uses and benefits from income support programs, the experience of poverty is actually something that the majority of people in the United States will face in their lifetimes.32
Research by Mark Rank at Washington University in St. Louis and Thomas Hirschl at Cornell University finds that between the ages of 25 and 60, 54 percent of U.S. residents will experience poverty or near poverty at least once.33 Further, 61.8 percent of U.S. residents will spend a year below the 20th percentile of the income distribution, and 42.1 percent will spend a year below the 10th percentile. (See Figure 4.)
Figure 4
Another way to think about this is through the construct of risk. Americans have a 54 percent chance of experiencing poverty at least once during adulthood. This is more than the chance of having appendicitis or getting divorced over the course of a lifetime.34
As economists Jesse Rothstein at UC Berkeley and Sandra Black at Columbia University argue, it is inefficient to have families self-insure against unpredictable risks they cannot reasonably calculate for themselves, such as the chances of losing a job or sufficiently saving for retirement.35 Either way, many families are not in a position to set aside substantial savings in case they experience a dip in income that pushes them under the poverty line.36
Even if families were in such a position, Black and Rothstein explain, “The federal government can provide social insurance protections at a much lower overall cost, and by removing major risks from families’ own balance sheets, enable families to stretch their market earnings further.” This kind of social infrastructure also allows for increased consumption overall.
Because most people will need income support at some point in their lives, and despite all the barriers our current system of income support puts up to accessing support, nearly all people in the United States will access income support programs at some point over the course of their lives. Analysis by the Urban Institute finds that in any given month, nearly 1 in 5 people benefit from SNAP, Supplemental Security Income, TANF, public or subsidized housing, the Women, Infants, and Children, or WIC, program, or the Child Care and Development Fund.37
In addition, analysis by the White House Council of Economic Advisers found that over the 32-year period from 1978 to 2010, more than one-third of all people received support from one of just three of these income supports: the Supplemental Nutrition Assistance Program, the Temporary Assistance for Needy Families and its predecessor programs, or Supplemental Security Income.38 Taking into account additional income support and social infrastructure programs such as school lunches, WIC, or disability insurance, among others, the percentage rises to nearly half of all households. This doesn’t mean that support levels are adequate or that workers and their families will receive income support every time they need it. But it does illustrate the breadth of people that need income support at some point in their lives.
Indeed, the U.S. Treasury Department recently found that when you consider Medicare and Social Security, nearly every single U.S. household receives some form of income support.39 This is an especially important example to keep in mind because, unlike most income support programs, Medicare and Social Security are the two components of our social infrastructure that are easiest to access when needed. Eligibility for Medicare is automatic at age 65 and may not even require a separate enrollment process for people already receiving Social Security.40 Similarly, Social Security’s nearly universal design and eligibility requirements mean that almost every member of the U.S. population will receive its benefits at some point. This makes Social Security the largest anti-poverty program in the United States.41
As the Medicare and Social Security case studies show, it is possible to design an income support system that easily reaches broad swathes of the population. So why do some programs reach so few people? This is an intentional policy choice, informed by ourracist history as well as our racist present.42 To prevent Black people in the United States, as well as other people of color, from accessing income support programs we restrict their availability.43 Policymakers make this choice despite the overwhelming evidence that nearly every person in the United States will at some point in time need a strong income support system, regardless of the racial group to which they claim membership.
Conclusion
The U.S. system of income support is inadequate to support U.S. workers and their families. This is an issue because it constrains and limits the overall strength of the U.S. economy, unnecessarily deepening recessions, depressing labor force participation, and harming future growth potential by underinvesting in the human capital of the next generation of workers. The problem is also personal: At some point, everyone will need some form of income support, whether it is to weather a job loss or illness or to be assured of a secure retirement.
By broadening eligibility, increasing the level of income support, and removing barriers to access, policymakers can strengthen these systems of income support in ways that will both help everyone weather the inevitable vicissitudes of life with less undue suffering, as well as strengthen the overall U.S. economy in ways that will pay dividends for all of us.
On July 12, the National Bureau of Economic Research kicked off its summer institute, an annual 3-week conference featuring discussions and paper presentations on specific subfields of economics, including measuring poverty, the costs of climate change, and systemic discrimination among large employers. This year’s NBER event is being held virtually due to the coronavirus pandemic and is being livestreamed on YouTube.
We’re excited to see Equitable Growth’s grantee network, Steering Committee, and Research Advisory Board and their research well-represented throughout the program. Below are abstracts (in no particular order) of some of the papers that caught the attention of Equitable Growth staff during the third and final week of the conference. Click here for a round-up from week 1, and here for the week 2 round-up.
Abstract: Recent theory stresses the role of new job types (“new work”) in counterbalancing the erosive effect of task-displacing automation on labor demand. Drawing on a novel inventory of eight decades of new job titles linked to U.S. census microdata, we estimate that the majority of contemporary employment is found in new job tasks added since 1940, but that the locus of new task creation has shifted—from middle-paid production and clerical occupations in the first four post-WWII decades, to high-paid professional and, secondarily, low-paid services since 1980. We hypothesize that new tasks emerge in occupations where new innovations complement their outputs (“augmentation”) or market size expands, while conversely, employment contracts in occupations where innovations substitute for labor inputs (“automation”) or market size contracts. Leveraging proxies for output-augmenting and task-automating innovations built from a century of patent data and harnessing occupational demand shifts stemming from trade and demographic shocks, we show that new occupational tasks emerge in response to both positive demand shifts and augmenting innovations, but not in response to negative demand shifts or automation innovations. We document that the flow of both augmentation and automation innovations is positively correlated across occupations, yet these two faces of innovation have strongly countervailing relationships with occupational labor demand.
Note: This research was funded in part by Equitable Growth.
Abstract: We study the results of a massive nationwide correspondence experiment sending more than 83,000 fictitious applications with randomized characteristics to geographically dispersed jobs posted by 108 of the largest U.S. employers. Distinctively Black names reduce the probability of employer contact by 2.1 percentage points, relative to distinctively White names. The magnitude of this racial gap in contact rates differs substantially across firms, exhibiting a between-company standard deviation of 1.9 percentage points. Despite an insignificant average gap in contact rates between male and female applicants, we find a between-company standard deviation in gender contact gaps of 2.7 percentage points, revealing that some firms favor male applicants while others favor women. Company-specific racial contact gaps are temporally and spatially persistent, and negatively correlated with firm profitability, federal contractor status, and a measure of recruiting centralization. Discrimination exhibits little geographical dispersion, but two-digit industry explains roughly half of the cross-firm variation in both racial and gender contact gaps. Contact gaps are highly concentrated in particular companies, with firms in the top quintile of racial discrimination responsible for nearly half of lost contacts to Black applicants in the experiment. Controlling false discovery rates to the 5 percent level, 23 individual companies are found to discriminate against Black applicants. Our findings establish that systemic illegal discrimination is concentrated among a select set of large employers, many of which can be identified with high confidence using large-scale inference methods.
“Economic impacts of tipping points in the climate system” Simon Dietz, London School of Economics and Political Science James Rising, University of Delaware Thomas Stoerk, London School of Economics and Political Science Gernot Wagner, New York University, Equitable Growth grantee
Abstract: Climate scientists have long emphasized the importance of climate tipping points like thawing permafrost, ice sheet disintegration, and changes in atmospheric circulation. Yet, save for a few fragmented studies, climate economics has either ignored them, or represented them in highly stylized ways. We provide unified estimates of the economic impacts of all eight climate tipping points covered in the economic literature so far, using a meta-analytic integrated assessment model, or IAM, with a modular structure. The model includes national-level climate damages from rising temperatures and sea levels for 180 countries, calibrated on detailed econometric evidence and simulation 1 modelling. Collectively, climate tipping points increase the social cost of carbon, or SCC, by around 25 percent in our main specification. The distribution is positively skewed, however. We estimate an approximately 10 percent chance of climate tipping points more than doubling the SCC. Accordingly, climate tipping points increase global economic risk. A spatial analysis shows that they increase economic losses almost everywhere. The tipping points with the largest effects are dissociation of ocean methane hydrates and thawing permafrost. Most of our numbers are probable underestimates, given some tipping points, tipping point interactions, and impact channels have not been covered in the literature so far, but our method of structural meta-analysis means that future modelling of climate tipping points can be integrated with relative ease, and we present a reduced-form tipping points damage function that could be incorporated in other IAMs.
Abstract: This paper studies how a national minimum wage and firm- and sector-specific wage floors affect racial earnings disparities. Our context is the Brazilian economy, characterized by persistently high racial disparities, a tradition of extensive sectoral bargaining, and the availability of detailed labor force surveys and administrative matched employer-employee data with information on race. We first analyze the effect of the large increase in the minimum wage that occurred between 1999 and 2009. Using a variety of research designs and identification strategies, we obtain three main findings. First, the increase in the minimum wage erased the racial earnings gap up to the 10th percentile of the national wage distribution and up to the 30th percentile in the poorest region, the Northeast. Second, there is no evidence of a significant reallocation of workers from the formal sector to the informal sector. This can be explained by the fact that the minimum wage is de facto binding in the informal sector (with the exception of agriculture, domestic workers, and the self-employed). Third, we do not find evidence of significant disemployment effects, or of Whites-non-Whites labor-labor substitution. As a result, the minimum wage increases of the 2000s led to a large decline in the economywide racial income gap in Brazil. The second part of the paper studies the effect of negotiated firm- and sector-specific wage floors. Our preliminary results suggest a more nuanced picture. First, within firms, non-White workers appear slightly more likely to be in occupations not covered by a wage floor. Second, we find significant dynamic effects of the introduction of wage floors on the composition of the workforce, with a growing employment share in occupations not covered by wage floors in subsequent years. Taken together, these results suggest that comprehensive and uniform labor standards such as the minimum wage may be among the most powerful labor market institutions to reduce racial earnings disparities.
Note: This abstract is from an earlier version of this paper. For updated details, please click here.
Abstract: This paper evaluates the hypothesis that, in setting wages, firms respond to costly signals by workers when such costs are informative of their values to the firms. For workers who become mothers, uncertainty about their future values can influence firms’ decisions to distribute career and promotion opportunities. Consequently, workers may forgo paid parental leave even when there is no human capital depreciation associated with taking leave. I build a signaling model with a continuous choice of leave period when such choice is restricted due to the maximum allowed paid leave duration. Using administrative data from Denmark and a parental leave policy extending the maximum allowed duration of parental leave, I show how a leave extension affects wages, hours, and promotion opportunities for workers whose signaling ability changes with the extension. In contrast to human capital theory, an individual can take longer leave but gain in wages when the larger choice set allows more workers to signal their type. The paper provides evidence of the labor market consequences of parental leave-taking due to signaling and the importance of asymmetric information in shaping parental leave choice.
Note: This abstract has been updated; we previously included an earlier version.
“Legal Representation in Disability Claims” Hilary Hoynes, University of California, Berkeley, NBER, Equitable Growth Steering Committee member Nicole Maestas, Harvard University, NBER Alexander Strand, Social Security Administration
Abstract: Legal representatives play a large and growing role in the Social Security Disability Insurance adjudication process, earning fees totaling $1.2 billion in 2019. Long ubiquitous in appellate hearings, disability representatives—including attorneys and nonattorneys—have begun appearing more frequently at the beginning of cases, during the initial review. This development has raised questions about the motives of disability law firms, which are sometimes perceived to prioritize their own interests in response to incentives in the fee structure set by the Social Security Administration. At the same time, these concerns have revealed just how little is understood about the value of legal representation for claimants in disability cases. We comprehensively investigate the impact of legal representation on case outcomes when representatives are engaged from the initial stage. Our analysis is made possible by new administrative data identifying representatives appointed to disability claims at the initial and appellate levels. To address selection into representation, we instrument for initial representation using geographic and temporal variation in disability law firm market shares in the closely related but distinct appellate market. Among applicants on the margin of obtaining representation at the initial level, representation improves case outcomes and administrative efficiency across several metrics. Legal representation increases the probability of initial award by 23 percentage points, reduces the probability of appeal by 60 points, and induces no detectable change in the ultimate probability of award (including appeals). This pattern indicates that legal representation in the initial stage leads to earlier disability awards to individuals who would otherwise be awarded benefits only on appeal. Furthermore, by securing earlier awards and discouraging unsupported appeals, representation reduces total case processing time by nearly 1 year. Our analysis explores several mechanisms.
Abstract: Global warming is a worldwide and protracted phenomenon with heterogeneous local economic effects. In order to evaluate the aggregate and local economic consequences of higher temperatures, we propose a dynamic economic assessment model of the world economy with high spatial resolution. Our model features a number of mechanisms through which individuals can adapt to global warming, including costly trade and migration, and local technological innovations and natality rates. We quantify the model at a 1 degree × 1 degree resolution and estimate damage functions that determine the impact of temperature changes on a region’s fundamental productivity and amenities depending on local temperatures. Our baseline results show welfare losses as large as 19 percent in parts of Africa and Latin America but also high heterogeneity across locations, with northern regions in Siberia, Canada, and Alaska experiencing gains. Our results indicate large uncertainty about average welfare effects and point to migration and, to a lesser extent, innovation as important adaptation mechanisms. We use the model to assess the impact of carbon taxes, abatement technologies, and clean energy subsidies. Carbon taxes delay consumption of fossil fuels and help flatten the temperature curve but are much more effective when an abatement technology is forthcoming.
Abstract: This paper uses administrative data from Washington state to quantify the role of employers in the incomplete take-up of Unemployment Insurance, or UI. Consistent with previous literature, we find that nearly half of the workers who appear to be UI-eligible do not claim UI. Moreover, we also find a steep income gradient in claiming. Distinctively, we find substantial dispersion in both firm-level UI claim rates and appeals (of UI claims) rates. Firm-level claim and appeals rates are negatively correlated, which is consistent with a deterrent effect of firms’ appeals on workers’ claiming. We also find that claims and appeals rates are tightly related to workers’ pre-separation wage rates, and that firm fixed effects explain a large share of the income gradient in take-up and appeals. We show that if firms with below-median firm effects in claims rates had the median claims rate, then take-up would increase by about 6 percentage points. We estimate a simple model of experience rating and claims, and use it to discuss some targeting properties of UI and find the changes in experience rating that would achieve similar increases in take-up.
Abstract: I estimate the effect of corporate acquisitions on facility-level toxic air pollution and its firm-level distribution. I use event study designs that exploit variation in the timing of acquisition among target facilities, since acquisition is endogenous to the operation and emissions of polluting facilities. I find emissions fall dramatically in the years after an acquisition among Toxic Release Inventory-reporting facilities in the United States for the period 2001–2019 and suggest changes in plant-level operations drive observed decreases. I also find evidence of increased inequality in emissions among target plants after acquisition and shifts in pollution toward less-advantaged neighborhoods. These findings suggest consolidation in sectors with negative externalities may reduce levels of the externality but increase inequality in its exposure.
Abstract: This paper investigates how the earnings of young workers are affected by the intergenerational transmission of employers, which refers to individuals working for the same employer as a parent. My analysis of survey and administrative data from the United States indicates that 7 percent of young workers find their first stable job at the same employer as a parent. Using an instrumental variables strategy that exploits exogenous variation in the availability of jobs at the parent’s employer, I estimate that working for the same employer as a parent increases initial earnings by 31 percent. The earnings benefits are attributable to parents providing access to higher-paying employers. Individuals with higher-earning parents are more likely to work for the employer of their parent and experience greater earnings benefits conditional on doing so. Thus, the intergenerational transmission of employers amplifies the extent to which earnings persist from one generation to the next. Specifically, the elasticity of the initial earnings of an individual with respect to the earnings of their parents would be 10 percent lower if no one worked for the employer of a parent.
“Worker Beliefs About Rents and Outside Options” Simon Jäger, Massachusetts Institute of Technology, Equitable Growth grantee Christopher Roth,University of Cologne Nina Roussille, London School of Economics and Political Science Benjamin Schoefer, University of California,Berkeley, Equitable Growth grantee
Abstract: We measure workers’ beliefs about rents and outside options in a representative sample of German workers and compare these beliefs with proxies for actual outside options. While subjective worker rents are large—14 percent of salary, on average—they do not stem from workers’ subjective wage premia at their current firm, but are entirely derived from nonwage amenities. When comparing workers’ subjective outside options against objective measures of pay premia from matched employer-employee data, we find that many workers mistakenly believe their current wage is representative of the external labor market—objectively low-paid (high-paid) workers are overpessimistic (overoptimistic) about their outside options. If workers had correct beliefs about outside options, 13 percent of jobs would not be viable at current wages, concentrated in the low-wage segment of the labor market. Finally, we show that in an equilibrium model, misinformation about outside options gives employers monopsony power.
“What Drives Prescription Opioid Abuse? Evidence from Migration” Amy Finkelstein, Massachusetts Institute of Technology, NBER, Equitable Growth grantee Matthew Gentzkow, Stanford University, NBER Dean Li, Massachusetts Institute of Technology Heidi Williams, Stanford University, NBER, Equitable Growth grantee
Abstract: We investigate the role of person- and place-specific factors in the opioid epidemic by developing and estimating a dynamic model of prescription opioid abuse. We estimate the model using the relationship between cross-state migration and prescription opioid abuse among adults receiving federal disability insurance from 2006 to 2015. Event studies suggest that moving to a state with a 3.5 percentage point higher rate of opioid abuse (roughly the difference between the 20th and 80th percentile states) increases the probability of abuse by 1 percentage point on-impact, followed by an additional increase of 0.3 percentage points per subsequent year. Model estimates imply large place effects in both the likelihood of transitioning to addiction and the availability of prescription opioids to the addicted. Equalizing place-based factors would have reduced the geographic variation in opioid abuse by about 50 percent over our 10-year study period. Reducing place effects on addiction transitions to the 25th percentile would have twice the impact on opioid abuse after 10 years as the analogous reduction in place effects on availability to addicts, though the comparison is reversed in the first few years.
Abstract: This paper studies the impact of the Great Migration on children. We use the complete count 1940 census to estimate selection-corrected place effects on education for children of Black migrants. On average, Black children gained 0.8 years of schooling (12 percent) by moving from the South to North. Many counties that had the strongest positive impacts on children during the 1940s offer relatively poor opportunities for Black youth today. Opportunities for Black children were greater in places with more schooling investment, stronger labor market opportunities for Black adults, more social capital, and less crime.
1. Read this policy analysis by former Equitable Growth senior policy advisor Liz Hipple to understand what it would mean if the federal Child Tax Credit becomes permanent, Back in March, in “The child allowance will pay dividends for the entire U.S. Economy far into the future,” she wrote: “Economists, other social scientists, and policymakers alike already know from research into other, similar income support programs, such as the Earned Income Tax Credit and the Supplemental Nutrition Assistance Program, that increasing the economic resources that families have helps them make investments in their children’s human capital development, which, in turn, improves children’s school performance and completion and boosts their future earnings. A 2018 study finds that an extra $1,000 in the Earned Income Tax Credit increases the probabilities of children graduating high school by 1.3 percent, completing college by 4.2 percent, and being employed as a young adult by 1 percent, and grows their earnings by 2.2 percent. Other recent research finds that a $1,000 tax credit increases children’s math and reading scores by 6 percent to 9 percent of a standard deviation. These are just two examples of the extensive body of research into the positive effects of the EITC on children’s human capital, with future benefits of higher earnings accruing both to the beneficiaries, as well as the wider economy in the form of increased tax revenue on those higher earnings.”
Worthy reads not from Equitable Growth:
1. A very good point from Diane Lim about the Biden administration needing to think less of where the aggregate demand sweet spot is and thinking more of what the optimal demand sectoral mix is. Read her “Will the infrastructure bill fail to create jobs where we most need them?,” in which she writes: “Two months. That’s how long our most recent economic recession … lasted … February to April 2020. … Does the latest policy effort focused on physical infrastructure (predominately roads and bridges) funding make sense given the economic condition it is intended to treat? … Consumer demand is largely back, especially in the leisure and hospitality sector. … The trouble with… leading with the physical infrastructure investments and not the family investments in caregiving and other “human infrastructure” is that it might not create the kinds of jobs in the industries and occupations where our economy is still operating below our full capacity.”
2. Smart words about how to create a robust semiconductor sector for our post-industrial economy from Laura Tyson and John Zysman. Read their “America’s Vital Chip Mission,” in which they write: “This year’s semiconductor shortages underscore the need for a comprehensive strategy. … Competitive market conditions must prevail throughout the industry, because excessive market power in any one segment can jeopardize supply … [so] the US should cooperate closely with the European Union, Japan, Singapore, Israel, and others who form core parts of its secure supply base. … [This] does not mean preventing China from purchasing or selling semiconductors on global markets, or from developing its own semiconductor industry in ways that do not violate global trade and investment rules. Weaponizing trade and investment restrictions to thwart China’s long-run semiconductor ambitions will be costly and counterproductive.”
Tomorrow is Black Women’s Equal Pay Day. This day recognizes that Black women in the United States have to work from the start of January 2020 through August 2, 2021 to earn as much as White men earned in 2020 alone. This fundamental fault line in the U.S. labor market is due to centuries of structural racism—the skeins of which remain glaringly evident today.
In this column, we look at what recent data-driven research tells policymakers and the U.S. public about this persistent income inequality. The scholars behind this body of research include Michelle Holder, the incoming president and CEO of the Washington Center for Equitable Growth, several other leading women economists such as associate professor of economics at Bucknell University Nina Banks, and Equitable Growth Research Advisory Board member William Darity, Jr., as well as Equitable Growth grantee Darrick Hamilton.
Research by Michelle Holder, along with Janelle Jones, the chief economist at the U.S. Department of Labor, and Thomas Masterson, research scholar and director of applied micromodeling at the Levy Institute of Bard College, explores how the COVID-19 pandemic affected Black women’s employment. The authors propose that Black women disproportionately lost jobs at the onset of the pandemic due to their strong attachment to the U.S. workforce, their overrepresentation in industries that were hit hard during the early months of the health and economic crises, and their overrepresentation in low-wage jobs such as the cashier occupation. Holder, Jones, and Masterson then put forward a pandemic-recovery policy agenda, which includes providing direct cash assistance and income support programs such as expanded Supplemental Nutrition Assistance Program and increased Unemployment Insurance benefits.
Further research by Michelle Holder finds that Black women face at least two reinforcing wage divides, one on the basis of race and another one on the basis of gender. What Holder has termed the “double gap” also captures how the racial and gender wage gaps faced by Black women undervalue their economic contribution and translate into cost savings for the private, for-profit sector. Using three quantitative methodologies, Holder estimates that in 2017, Black women involuntarily forfeited about $50 billion in wages.
Black women have made important progress in the U.S. labor market, yet they still face barriers that hurt their economic outcomes. In this article, Michelle Holder reviews academic literature about Black women and work, including research on the racial wage divides Black women face in the nursing profession, the differentials in income and earnings volatility Black women experience vis-à-vis White women, and the role of affirmative action and equal opportunity laws on labor market disparities.
Associate professor of economics at Bucknell University Nina Banks argues that collective work such as community activism is disproportionately done by Black women and other marginalized women, whose communities are more likely to lack access to public and private resources and services. Banks develops a framework that centers Black women’s experiences at the center of analysis, highlighting how, despite its social and economic value, the unpaid collective work Black women do to care for others in their communities has been historically overlooked and unaccounted for.
Marlene Kim at the University of Massachusetts Boston demonstrates that Black men make 12 percent less and Black women 27 percent less than White men with similar human capital characteristics such as level of educational attainment and potential work experience. Further, Kim finds that Black women not only seem to face an earnings penalty because of their race and an additional earnings penalty because of their gender, but they also experience an additional penalty because of the interaction of their race and gender.
In another paper, Marlene Kim finds that because of their race, Black women earn 7 percent less than otherwise-similar White women. Kim finds that even though an important chunk of this penalty can be attributed to occupational segregation—Black women’s overrepresentation in lower-paying jobs—they earn less than their White counterparts even when they work in the same occupation.
Mark Paul of New College of Florida, Khaing Zaw of Duke University, Darrick Hamilton of the New School, and William Darity Jr. of Duke University also use an intersectional lens to examine the wage gaps faced by Black women. The team of economists finds that Black women do not experience a single gender or a single race penalty, but rather that the interplay of both socially salient identities affects their wages in a multiplicative way. They find that Black women receive 64 cents on the dollar, compared to White men, and that Black women face a penalty of about 20 cents on the dollar due to discrimination in the labor market.
In this research, Olga Alonso-Villar and Coral del Rio Otero at the University of Vigo in Galicia, Spain track the evolution of the occupational segregation of Black women in the United States from 1940 to 2010. They find that occupational segregation—measured as the share of Black women who would need to switch jobs for their occupational distribution to match with the occupational distribution of all other workers in the U.S. workforce—fell sharply between 1940 and 1980, declined slightly between 1980 and 2000, and remained flat in the first decade of the 21st century. Particularly in the 1960s and 1970s, progress toward greater occupational integration was accompanied by important improvements in Black women’s well-being.
Chandra Childers, study director at the Institute for Women’s Policy Research, analyzes the occupational distribution of Black women aged 40 and older. Childers finds that despite important progress in terms of educational attainment and a shift away from domestic and agricultural work and toward clerical and professional occupations since the 1940s, Black women continue to be concentrated in a narrow number of occupations, many of which pay low wages. Furthermore, many of the occupations in which older Black women are overrepresented are either low-quality jobs, in which workers tend to lack access to job security and employment benefits—such as the home health aides occupation—or jobs that have a high potential risk for automation or displacement due to other technologies—such as office clerks.
This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.
Equitable Growth round-up
In April, the Supreme Court in AMG Capital Management LLC v. Federal Trade Commission unanimously struck down the Federal Trade Commission’s authority to require companies to give up profits they earn by violating U.S. antitrust laws and to require companies to compensate the victims of those violations. These two remedies—disgorgement and restitution, respectively—are the focus of two new Competitive Edge posts.
In one, Michael Kades takes a glass-half-empty view of the Court’s decision, arguing that it deprives the FTC of a critical deterrent of anticompetitive conduct. Kades explains how disgorgement has been used, albeit sparingly, in cases brought against pharmaceutical companies and successfully prevented certain anticompetitive conduct across the industry. It also tends to speed up the litigation process, which saves costs and resources for the Federal Trade Commission. As such, Kades writes, the Supreme Court’s ruling benefits big companies that cause the most harm and will have a troubling impact on antitrust enforcement, unless Congress takes action to reestablish the FTC authority.
Conversely, Andrew I. Gavil takes a glass-half-full approach, arguing that the Supreme Court’s ruling may end up opening the door to broader applications of the U.S. antitrust laws. Gavil highlights the textualist nature of the Court’s decision and how it could be applied to the antitrust laws, particularly the Clayton Antitrust Act of 1914. He gives a brief background on the Clayton Act and its relationship to the Sherman Antitrust Act of 1890, before turning to an analysis of the law and its reach through a textualist lens.
Each month, Equitable Growth highlights scholars working to understand how inequality affects economic growth in a series called Expert Focus. This month, Adrian Narayan and David Mitchell look at a group of academic researchers who joined the Biden administration to advance evidence-backed policy ideas to combat inequality and ensure strong, stable growth for all Americans. Narayan and Mitchell emphasize not only that Equitable Growth staff joined various agencies in the executive branch, but also how many academic network members, contributors, and speakers from previous Equitable Growth events decided to being their diverse experience and expertise to the administration.
The National Bureau of Economic Research is now more than halfway through its summer institute, an annual 3-week conference featuring discussions and paper presentations on specific subfields of economics, including wealth taxation and tax evasion, market structure and competition, and labor market inequalities. Equitable Growth compiled a list of paper abstracts that caught our attention throughout the second week, including research from our grantee network and members of our Steering Committee and Research Advisory Board. For highlights from the first week of the NBER Summer Institute 2021, click here. For coverage of the third and final week, be sure to check back on Monday, August 2.
New analysis reveals that states that cut expanded federal Unemployment Insurance benefits early are not actually experiencing a hiring boom. States that did not cut UI payments had the same pace of hiring as those that did cut them early, writeThe Washington Post’s Heather Long and Andrew Van Dam. Interestingly, though, states that did cut benefits are seeing changes in who is getting hired, with fewer teenagers securing employment and higher rates of hiring for those workers ages 25 and older. The analysis focuses on small restaurants and hospitality businesses, which, Long and Van Dam note, will probably face extended hiring challenges. This is largely because of the ongoing health threat posed by the coronavirus, continuing caregiving needs, and the prevalence of workers leaving their pre-pandemic industries in search of new opportunities. These three trends are likely more to blame for the hiring slump in hospitality than extended UI benefits, according to several experts that Long and Van Dam interview.
Coronavirus relief programs will cut the U.S. poverty rate almost in half this year, compared to pre-pandemic levels, with the number of poor Americans set to fall by nearly 20 million. The country has never cut poverty so rapidly before, writesThe New York Times’ Jason DeParle. This is all the more impressive considering the economy has more than 6 million fewer jobs now than it did before the pandemic and ensuing recession. But, DeParle continues, with many programs either already ended or set to expire soon, many of the families who have benefitted may find themselves back in poverty, or near the poverty line. DeParle tells the story of a few such families and their struggles amid the coronavirus pandemic.
President Joe Biden’s recent executive order designed to increase competition and reduce market concentration, along with several pieces of bipartisan antitrust legislation in Congress, suggest that U.S. antitrust regulators are focused on addressing the problem of “bigness.” But, Molly Wood asks in The Atlantic, why is Microsoft Corp. often left of the list of Big Tech companies—Amazon.com Inc., Apple inc., Facebook Inc., and Alphabet Inc.’s Google unit—that typically get the most scrutiny for their anticompetitive behavior? Microsoft, as big as the others, has largely escaped run-ins with the antitrust laws since its high-profile lawsuit in the 1990s. And technically, Wood points out, it’s not illegal under these laws to be big, or even to be a monopoly, unless the company uses its position to drown out competition or charge unfairly high prices. Wood examines the circumstances surrounding the lack of antitrust cases brought against Microsoft. She ultimately makes the case that it should be the test of the Biden administration and antitrust regulators’ will to increase competition, break up tech companies, and scrutinize acquisitions: “If bigness alone is the problem, Microsoft is the truest test of all.”
