1. What economic policy levers can we pull to make advancing technologies complements to work or skills and capabilities rather than substitutes for them? We cannot count on large, oligopolistic firms to do this job. While they can, by the nature of their business and market position, capture a substantial amount of the net returns from worker-substitute technologies, they cannot do the same thing for worker-complement technologies. There we must rely on the public and the nonprofit sectors, and we need to start doing so at scale as soon as possible. Please Register for our event on Tuesday, September 23, “A Future for All Workers: Technology & Worker Power,” featuring a keynote from SEIU International President Mary Kay Henry … and which will examine “how workplaces implement new technologies and the impact these technologies have on workers’ lives. How these technological changes are implemented, in turn, depends on the underlying economic and legal structures, as well as the extent to which workers are empowered to be full and active partners in technological adoption and integration.”
2. Fiscal automatic stabilizers are highly effective because they are state-dependent rather than time-dependent policies. We very much need to learn from and then generalize that state-dependent feature that makes those policies so effective and cost-effective. Read David Mitchell and Corey Husak, “How to replace COVID relief deadlines with automatic ‘triggers’ that meet the needs of the U.S. economy,” in which they write: “The next coronavirus relief bill can be written to keep critical benefits in place until they are no longer needed. So-called off-triggers that depend on economic data can ensure that benefits phase out as the economy recovers, not on a random date. There are a number of possible mechanisms that can serve as off-triggers … What was lacking in the Great Recession, and what is needed now, is a mechanism for ensuring that benefits remain available as long as they are necessary, with no need to wait for Congress to act. There are a number of solid, evidence-based ideas for such a mechanism. In 2019, the Washington Center for Equitable Growth and The Brookings Institution’s Hamilton Project published Recession Ready, a book of essays with comprehensive plans to strengthen automatic stabilizers, including recommendations for automatic triggers to activate supplemental benefits to families and state governments, and automatic triggers to turn them off.”
3. Policy mistakes and acts of malfeasance in one generation echo substantially into future history for very long periods of time. Read Jonathan Colmer and John Voorheis, “Reductions in air pollution have intergenerational consequences,” in which they write about their new working paper: “It was not only the children of women who benefited from regulatory reductions in exposure to air pollution during pregnancy, but also their grandchildren. The grandchildren of women who were exposed to lower levels of air pollution during pregnancy were more likely to attend college and less likely to drop out of high school 40 years later. A 10 percent reduction in prenatal exposure to particulate matter for individuals born around 1970 is associated with a 3.2 percentage point to 3.8 percentage point increase in the likelihood that their children attend college 40 years later. This corresponds to an 8 percent increase in attendance.”
Worthy reads not from Equitable Growth:
1. The rule of thumb I was taught—by Olivier Blanchard—is that one basis point increase in the long-term Treasury bond rate offsets 0.02 percentage points of national income’s worth of fiscal stimulus. A fiscal program that would notionally push $600 billion in annual national income would thus be offset by a 150 basis-point increase in long Treasury rates, which standard gearing suggests would be delivered by a 4.5 percent increase in the federal funds rate. A world in which appropriate monetary policy near a business-cycle peak is a 4.5 percent rather than a zero percent federal funds rate seems to me vastly preferable to our current secular-stagnation zero-lower-bound Fed-out-of-ammunition enormous-downside-risk world. It seems to me a place that we really do want to go. I do not understand this. I do not understand this at all. Read Olivier Blanchard, “In defense of concerns over the $1.9 trillion relief plan,” in which he writes: “If inflation were to take off, there would be two scenarios: one in which the Fed would let inflation increase, perhaps substantially, and another—more likely—in which the Fed would tighten monetary policy, perhaps again substantially. Neither of these two scenarios is ideal. In the first, inflation expectations would likely become deanchored, cancelling one of the major accomplishments of monetary policy in the last 20 years and making monetary policy more difficult to use in the future. In the second, the increase in interest rates might have to be very large, leading to problems in financial markets. I would rather not go there.”
2. Those who fear that a $15 an hour minimum wage is too risky a policy should have long since gotten behind an expansion of the Earned Income Tax Credit. In fact, those who advocate for a $15 an hour minimum wage should also be behind an EITC expansion. That is what the research says. Read Cynthia Miller and Lawrence F. Katz, “Biden wants to boost the EITC for workers without dependent children—What Does the Research Say?,” in which they write: “Many commentators have expressed the hope that the inequalities exposed by the pandemic will lead to renewed efforts to address them by expanding the social safety net and by providing basic protections for workers. An expanded EITC can be an effective part of this effort, increasing workers’ incomes (without depressing work effort) and putting them in a better position to recover from this crisis and weather the next.”
3. This was actually much more hopeful and positive than I thought it would be about political-economy and racial politics changes in the American north in the aftermath of the Great Migration of African Americans from the south. Read Alvaro Calderon, Vasiliki Fouka, and Marco Tabellini, “Racial diversity, electoral preferences, and the supply of policy; The Great Migration and civil rights,” in which they write: “The 1940–1970 Great Migration of African Americans … how resulting changes in the racial composition of local constituencies affected voters’ preferences and politicians’ behaviour … Democrats and union members supported blacks’ struggle for racial equality, but that backlash against civil rights erupted among Republicans and among whites more exposed to racial mixing.”
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
Big Agriculture has a big concentration problem, write Hiba Hafiz and Nathan Miller in this month’s installment of Competitive Edge. U.S. agricultural markets are one of the most highly concentrated industries in the country, with a small group of large corporations wielding incredible buy-side power, or monopsony power, leaving workers along the supply chain with low pay, tough working conditions, and limited ability to fight back. Hafiz and Miller run through the depths of the concentration in the Big Ag poultry, pork, and meat industries, and the anticompetitive and anti-labor effects that arise for workers from small farmers and hatchers to meat processing plant employees. The co-authors explain why policies and actions are needed to combat this monopsony power and suggest that President Joe Biden and his U.S. Department of Agriculture secretary nominee, former Iowa Gov. Tom Vilsack, do more to protect small farms and ensure good jobs.
On February 23, Equitable Growth is hosting a virtual event, “A future for all workers: Technology and worker power,” which will discuss the impact of technology in the workplace and its role in the future of work. The event will feature a keynote address by Mary Kay Henry, the international president of the Service Employees International Union, and two panels covering how workers can and do successfully use technology to amplify their power and voice, and how workers can bargain over how technological advancements may change their jobs. Kate Bahn previews the event in a recent post, which dives into the topic at hand, the speakers and panelists, and the urgency and relevance of discussing technology’s impact on workers. (Visit the event page to learn more and register to join us.)
Equitable Growth released a factsheet this week—the first in a series on executive actions that the new Biden administration could take—detailing how federal agencies should consider using their regulatory power to provide a countercyclical boost to the U.S. macroeconomy and fight the coronavirus recession. The factsheet notes how regulation could increase demand and lower unemployment by encouraging banks to make loans, companies to make investments, and people to spend money, and explains how pro-cyclical policy can delay much-needed boosts in local economies by discouraging spending among low- and middle-income families, which typically have a high propensity to consume. Equitable Growth also urges the Biden administration to create an office within the White House National Economic Council to coordinate effective countercyclical policy across the federal government, an action that can take effect via an update to the executive order that established the NEC.
Our second factsheet on executive actions examines how a new Office of Competition Policy could coordinate antitrust and competition policies across the federal government to combat market power. Growing market power disrupts the operation of free and fair markets, and harms consumers, businesses, and workers. It exacerbates inequality and compounds the harms of structural racism. For these reasons, the second factsheet in our series of executive action calls upon the new administration to establish a White House Office of Competition Policy within the Executive Office of the President, led by the National Economic Council and including membership from at least the Council of Economic Advisers, the Office of Information and Regulatory Affairs, the Office of Management and Budget, and the Domestic Policy Council.
Brad DeLong’s latest Worthy Reads highlights must-read content from Equitable Growth and elsewhere on the internet. This week, he revisits the important recession-fighting proposals Equitable Growth made in its Recession Ready book of essays in partnership with the Brookings Institution’s Hamilton Project, an assessment of the nation’s broken Unemployment Insurance system, and more.
Links from around the web
As people and firms rely more and more on certain internet-based services as a result of the pandemic and limited in-person activities, Big Tech giants have gained more and more market power and earned more and more profit. In fact, writesThe Wall Street Journal’s staff, as small businesses and brick-and-mortar stores struggle amid the coronavirus recession, and many fail to stay afloat, internet companies—already some of the largest corporations in history—are experiencing unprecedented growth. These gains are expected to outlast the pandemic and the recession, even if regulators act to try to limit this market concentration. The Journal staff look at how the big five tech companies—Apple Inc., Alphabet Inc. (Google’s parent company), Amazon.com Inc., Facebook Inc., and Microsoft Corp.—have fared over the past year and how each has tapped into emerging markets as a result of new demands from consumers amid the pandemic, expanding their market dominance to potentially irreversible levels.
As corporations grow bigger and richer, millions of Americans are still out of work—and new research indicates many of those jobs probably aren’t coming back even after the public health crisis passes. The Washington Post’s Heather Long reports that the pandemic is likely to change the nature of the economy and the labor force, requiring millions of workers to be retrained, recertified, or even shift careers or industries in order to find work. One reason for these permanent job losses, Long continues, could be the increase in automation that usually arises during recessions as employers look to cut costs and experiment with new technology during periods of high unemployment and layoffs. Amid the pandemic, economists predict that these trends could be further amplified as social distancing and other public health and safety measures are enforced to limit the number of people simultaneously working in a single place.
Many Americans who qualify for social safety net assistance do not receive it, or even apply for it, thanks to a complex, outdated system that prevents many from trying to access badly needed aid. Harin Contractor, Jamil Poonja, and Faiz Shakir at Vox outline the deficiencies of the U.S. social safety net to protect vulnerable Americans who are eligible to receive government-provided relief. These holes in the system have become ever more apparent amid the coronavirus pandemic, the co-authors write, and are ever more important to address as Congress and the Biden administration negotiate future coronavirus stimulus. If relief is to be effective and actually help those in need, the co-authors argue, it will be necessary to ensure greater coordination between government aid programs and implementing agencies, and the simplification of benefits and application processes.
The U.S. economy is plagued by a problem of excessive market power, stemming, in part, from years of weakened competition and antitrust enforcement. Growing market power disrupts the operation of free and fair markets, and harms consumers, businesses, and workers. It exacerbates inequality and compounds the harms of structural racism.
But it is not too late to change course. A bold vision—one that relies on Congress reengaging on competition policy, the antitrust enforcement agencies adopting an affirmative agenda to strengthen deterrence, and the federal government prioritizing competition more broadly—can restore competition and benefit the country.
Executive action
One critical way to promote competition as a federal government priority is to establish a new White House Office of Competition Policy. We often equate competition policy solely with antitrust enforcement. No doubt effective antitrust enforcement is critical to stopping the improper acquisition and abuse of market power. But, at the same time, laws and regulations can directly affect competition.
Just one case in point is the Federal Trade Commission’s Prescription Release rule, which requires eye doctors to provide patients with a copy of their prescription after the completion of an eye examination. The 1977 rule can be credited with the rise of an eyeglass retail industry separate from prescribing doctors. This rule is an important precondition for the business model of firms such as Warby Parker, EyeBuyDirect, and other prescription eyeglasses retailers.
The so-called eyeglass rule is but one example of how regulations and rules can affect competition. Too often, however, regulatory agencies miss opportunities to promote competition or, worse, issue rules that inadvertently, unnecessarily, or even intentionally undermine competition. For these reasons, the new administration should establish a White House Office of Competition Policy within the Executive Office of the President that is led by the National Economic Council and includes membership from at least the Council of Economic Advisers, the Office of Information and Regulatory Affairs, the Office of Management and Budget, and the Domestic Policy Council.
The role of the White House Competition Office would be to promote the whole government approach to improving competition in three ways.
Promote, throughout the federal government, the promulgation or amendment of rules designed to reduce barriers to entry, open industries to entrants, promote “truth in pricing,” improve the functioning of labor markets, or otherwise improve the functioning and competitiveness of markets. There are many opportunities across the government to repeat the success of the eyeglass rule, but they may be difficult to find or require competition expertise that an agency may lack. The Office of Competition Policy would work with the various agencies to identify opportunities to make markets function more competitively. It would also aid in helping to develop solutions.
Coordinate action by the U.S. Department of Justice or the Federal Trade Commission and other executive branch agencies, and independent regulatory commissions to tackle endemic competition problems in specific industries. Sometimes litigation and antitrust enforcement is the best solution to an anticompetitive problem. Other times, however, a regulatory agency, such as the Food and Drug Administration or the U.S. Department of Agriculture, can solve the problem more quickly and less expensively through regulation. When the FTC or DOJ identify a systemic competition problem, the Office of Competition Policy would coordinate with the relevant regulatory agencies to identify the most effective solution.
Monitor the rulemaking process so as to discourage or prevent rules that unnecessarily inhibit U.S. labor market mobility, market entry, or otherwise amount to anticompetitive uses of regulations. As it stands, the Office of Information and Regulatory Affairs, or OIRA, within the Office of Management and Budget reviews draft rules across the executive branch for their compliance with broader policies, including competition policy. A new White House Office of Competition Policy would participate in the OIRA regulatory review process, using its expertise to assist in reviewing draft rules with competitive consequences. This would strengthen a function already performed by the White House Council of Economic Advisers.
In these three ways, this new White House Office of Competition Policy would unify the Biden administration’s approach to competition policy and promote the importance of reinvigorated antitrust enforcement for consumers, workers, and marginalized communities.
Antitrust and competition issues are receiving renewed interest, and for good reason. So far, the discussion has occurred at a high level of generality. To address important specific antitrust enforcement and competition issues, the Washington Center for Equitable Growth has launched this blog, which we call “Competitive Edge.” This series features leading experts in antitrust enforcement on a broad range of topics: potential areas for antitrust enforcement, concerns about existing doctrine, practical realities enforcers face, proposals for reform, and broader policies to promote competition. Hiba Hafiz and Nathan Miller authored this contribution.
The octopus image, above, updates an iconic editorial cartoon first published in 1904 in the magazine Puck to portray the Standard Oil monopoly. Please note the harpoon. Our goal for Competitive Edge is to promote the development of sharp and effective tools to increase competition in the United States economy.
Yet former Iowa Gov. Tom Vilsack (D)—President Joe Biden’s nominee for secretary of the U.S. Department of Agriculture, the same position Gov. Vilsack held during the Obama administration—has come out against breaking up Big Ag firms. “There are a substantial number of people hired and employed by those businesses,” he said last year. “You’re essentially saying to those folks, ‘You might be out of a job.’ That to me is not a winning message.”
Gov. Vilsack couldn’t be more wrong on the economics. It is precisely Big Ag’s buyer power in agricultural markets—these firms’ “monopsony” power—that destroys jobs and suppresses small farmer and worker pay.
Economic theory describes monopsony power as market power on the buyside of the market—it’s the analogue of monopoly power on the sell side of the market. Artificially acquiring or maintaining market power is unlawful under the U.S. antitrust laws, regardless of whether it derives from the buy or sell side. And that’s because buy-side power can bejust associally harmful as sell-side power.
Firms insulated from competition in input markets can profitably suppress the pay to suppliers of goods, services, and labor below the value that those suppliers provide. And lower pay has broader economic outcomes. It means suppliers have weaker incentives to provide the same quantity of inputs or invest in capacity, innovation, and quality. So, monopsony power can decrease input suppliers’ pay and the quantity of inputs buyers purchase.
Monopsony power can also harm downstream consumers. Less input means less output, and less output means more scarcity and higher prices to downstream consumers than would otherwise exist under competitive conditions.1
Taking steps to mitigate buyer power through aggressive antitrust enforcement and appropriate regulation can be a win-win for input suppliers and downstream consumers. Competition among buyers helps ensure that suppliers are paid according to their value. And competition increases output incentives and ultimately lowers downstream prices as well.
The monopsony power of Big Ag poultry, pork, and meat companies
The buyer power of companies such as Tyson Foods Corporation, Cargill PLC, and Smithfield Foods Inc. comes from high levels of market concentration in the agricultural industry. Simply put: Big Ag faces too little competition when they hire workers or procure inputs such as chicken (Tyson), hogs (Smithfield), or cattle (Cargill) from smaller suppliers.
Big Ag’s concentration numbers at the local level are even more stark than at the national level. Most buying and processing of poultry, hogs, and beef happens locally to avoid high transportation and storage costs. Big Ag dominates local markets as the only buyers in town. More than 20 percent of poultry growers have only one local upstream buyer for poultry and 30 percent have only two.
Most hog growers face packer monopsony at the local level, with just one or twopackers offering them contracts. One telling case in point: After dominant meat processor JBS S.A. acquired Cargill’s pork processing operations in 2015, the American Antitrust Institute and a coalition of farmers’ unions projected that only two firms—Tyson and the merged JBS-Cargill pork processing unit—would buy and slaughter 82 percent of hogs in Illinois, Indiana, and surrounding states. Similarly, local cash markets for cattle typically feature no more than three or four packers.
Concentration at the local level means that Big Ag can artificially suppress pay to cattle producers, hog and poultry farmers, and processing plant workers below the value that their inputs provide to the industry.
Evidence of the effects of Big Ag poultry, pork, and beef companies’ monopsony power
Empirical evidence of the effects of Big Ag’s buyer power on rural communities and consumers nationally is mounting. Suppliers and processing workers suffer lower pay while downstream consumers are paying higher prices on essential food. Around “three-quarters of contract growers live below the poverty line,” and average-sized operators lose money 2 out of 3 years.
Then, there is the evidence of rising farm bankruptcy rates. Farm bankruptcies have steadily increased every year for the past decade, due, in part, to high U.S. farm debt. Small farmers are not the only ones being undercompensated—a 2000 U.S. Department of Labor survey found that 100 percent of poultry processing plants failed to comply with federal wage-and-hour laws.
Buyer power also enables processors to impose abominable working conditions without workers quitting. Even before the coronavirus pandemic, poultry processing workers suffered occupational illnesses at five times the rate of other U.S. workers. But their conditions plummeted during the pandemic, with immigrantworkers and workers of color suffering the most. A November 2020 study estimated livestock processing plants suffered 236,000 to 310,000 cases of COVID-19, the disease caused by the new coronavirus, and 4,300 to 5,200 deaths—3 percent to 4 percent of all U.S. deaths—with the majority related to community spread. Consumers have also suffer nationally by having to pay higherprices for meat products while facing fewer choices and lower quality.
More evidence of Big Ag’s buyer power emerges from high-profile U.S. Department of Justice and private enforcement actions against dominant Big Ag buyers in the poultry and pork industries for colluding to fix prices, rig bids, and suppress pay to growers and processing workers. High concentration levels make it easier for Big Ag firms to collude, and in June 2020, the Department of Justice indicted leading chicken industry defendants for price-fixing and bid-rigging in the broiler chicken market. Civil suits were filed against Tyson, Pilgrim’s Pride Corp., and others for price-fixing, wage-fixing, and using no-poach agreements in the markets for broiler chicken products, contract farmer services (contract farmers are farmers who grow chickens from chicks to market weight in long-term contracts with processors), and chicken-processing labor services.
The Department of Justice is currently investigating price-fixing and bid-rigging among dominant beef processors, too, and private plaintiffs have sued porkandbeef processors for allegedly colluding to lower prices paid to producers and raise prices for consumers. Current litigation against the poultry, pork, and meat cartels estimates that hundreds of thousands of workers suffer poverty wages from wage-fixing conspiracies.
Big Ag is able to exercise its buyer power through its industry-transforming supply chain restructuring that allows lead firms to extract rents at each layer of their supply chain for their profit, and most especially, fromsmall farmers and workers at the production level.2 Starting in the 1960s, poultry firms such as Tyson vertically integrated to own or control hatcheries, feed mills, veterinary care, slaughterhouses, processors, and sales contracts with poultry growers. The pork industry followed Tyson’s lead in the early 1980s, extending top-down ownership or control of hog production, packing, and processing in large-scale farms and processing facilities.
The only level of the supply chain not directly owned or operated by Big Ag chicken and pork producers is the growing stage, where Big Ag processors rely on small farmers to grow and raise the broilers and hogs provided by Big Ag-provided breeders, hatcheries, farrows, and weaners to slaughter weight. Still, Big Ag firms in these two meat sectors can squeeze these growers’ margins from above andbelow: Their inputs are supplied by Big Ag, and their product is sold to Big Ag.
Big Ag does this through contractual controls, forcing growers into one-sided production and marketing contracts while using their significant control over spot or cash markets to limit sales outside those contracts. Around 97 percent of chicken broilers are raised by contract growers in “take it or leave it” contractual arrangements; 63 percent of hogs were contractually raised in 2017, nearly double that in 1997.
These arrangements are crippling. Chicken growers’ production contracts require significant sunk investments—around $1 million in mostly debt-financing—and growers are required to purchase nearly all inputs, veterinary care, and technical assistance from vertically integrated buyers. Buyers can change or terminate contracts for almost any reason. Farmers sell their chickens in a “tournament system,” where their chickens compete for rankings with others given the same feed amount, but the ranking process lacks transparency—buyers weigh chickens behind closed doors and provide no standards for knowing whether a farmer is “getting the same inputs as the other farmers against whom the company makes him compete,” according to Lina Khan, then-policy analyst at the New America Foundation and now an assistant professor of law at Columbia Law School.
Big Ag buyers can retaliate against resistant farmers by refusing to renew contracts or sending bad feed or unhealthy chicks in future seasons—a system likened to “indentured servitude” by former chicken farmers suing Big Ag poultry firms. Contracts for hog growers also require significant capital investments, place much of the liability and risk for raising hogs on growers, and subject growers to unilateral buyer compensation-setting with limited transparency, and similarly allow retaliation through threats of contract termination or future substandard livestock or feed supply.
The beef industry is less vertically integrated than chicken and poultry. Beef packers find vertical supply chain ownership less profitable, yet these packers have achieved a degree of de facto control over the thousands of independent feedlots that supply them. Since the 1980s, and following meatpacker consolidation into the Big Four—Cargill, JBS, National Beef Inc., and Tyson Foods—the number of packing plants nationwide dropped 81 percent, and nearly a third of all the feedlots that purchase cattle from ranchers for fattening and resale to meatpackers have left the industry.
Among the feedlots that remain, most sign long-term contracts with the Big Four. More than 75 percent of packer cattle purchases come from long-term contracts with feedlots, up from 34 percent in 2004. Because most contract prices are pegged to outcomes in a subsequent cash market, this weakens packers’ incentives to bid aggressively in that cash market—bidding aggressively would just increase their payments for cattle already under contract.
So, in addition to alleged collusion among the Big Four beef packers to lower feeder pay—estimated at an average of 7.9 percent below average pay since 2015—feeders are also squeezed by the Big Four’s network of contracts and bidding schemes that the packers can profitably impose upstream.
Conclusion: Anti-monopsony action is urgently needed to protect workers and consumers
The economic theory is clear, and mounting empirical evidence backs it up: Big Ag’s monopsony power leads to fewer jobs, lower wages, and worse conditions dominating our nation’s food supply. And local farming communities are hurting. If U.S. Agriculture Secretary-nominee Vilsack wants to help rural communities—and reduce food prices for consumers in the bargain—he must get the economics right.
President Biden committed to strengthening antitrust enforcement to “help family farms and other small- and medium-sized farms thrive.” Before confirming Gov. Vilsack, Democratic senators must secure his public commitment to aggressively enforcing the Packers and Stockyards Act of 1921 and partnering with the U.S. Department of Justice to take on Big Ag’s buyer power. If keeping good jobs and sustainable business in rural America is the incoming administration’s priority, they can’t leave small farmers and workers to face Big Ag alone.
—Hiba Hafiz is an assistant professor of law at Boston College Law School. Nathan Milleris the Saleh Romeih associate professor at the Georgetown University McDonough School of Business.
It is not new that ideas about the role of technology in the future of work have been dominated by fears of robots taking over most of our jobs. As far back as the 19th century, Luddites destroyed machinery to protest against the new technologies they believed would render their skilled trades obsolete. In the current era, the most extreme narrative is that humans will be left out of work and society will lorded over by sophisticated computers.
Yet experience, research, and fresh thinking enable us today to begin thinking more realistically about the changing role of technology. How can data and new technologies be used by employers to undermine workers’ welfare and workplace power? How can workers deploy technology to advance their economic interests, and how can workers exercise their voice with respect to technological development and integration in workplaces to increase both productivity and fairness?
On February 23, the Washington Center for Equitable Growth will hold a virtual event, “A future for all workers: Technology and worker power,” at which researchers and advocates will discuss how technology is used to amplify or stifle the voice of workers in the United States, how U.S. workers bargain over the use of data and technology, and how policy can improve outcomes as technology changes the nature of work.
The advances of technology and the increasing sophistication of data in the workplace and elsewhere might sometimes seem overwhelming, but technological change has long been the norm for most workers, whether they sit at a desk or labor on a factory or warehouse floor. At issue are how workplaces implement change and the impact these technologies have on workers’ lives. How these technological changes are implemented, in turn, depends on the underlying economic and legal structures, as well as the extent to which workers are empowered to be full and active partners in technological adoption and integration.
The Equitable Growth event on February 23 will include two panels. The first will review how U.S. workers successfully use the tools of technology to engage with each other and with their employers to amplify worker voice. Panel members Dawn Gearhart of NDWA Labs, Steve Viscelli of the University of Pennsylvania, Meredith Whittaker of New York University’s AI Now Institute, and moderator Sam Harnett of KQED will describe the use of technology in current worker organizing practices, discuss what new tools are needed, and suggest policy changes needed to support and build worker power in a new economy.
The second panel will discuss how U.S. workers can bargain specifically over the way technological advancements change their jobs in order to optimize how workers and businesses adapt to change and thrive. Speakers will explore worker advocacy regarding new technologies, and they will discuss changes policymakers can make, through legislation and through administrative actions, to protect and strengthen workers’ ability to affect the way technology changes their jobs and workplaces. Panelists will be Abdirahman Muse of the Awood Center in Minneapolis, Julia Ticona of the University of Pennsylvania’s Annenberg School for Communication, Brishen Rogers of Temple University, William Spriggs of Howard University and the AFL-CIO, and journalist and author Sarah Jaffe, who will serve as moderator.
Mary Kay Henry, the international president of the Service Employees International Union, will deliver keynote remarks on how the U.S. labor movement leverages research and insights gained from advocacy efforts to better understand the changes that are coming and actively seek a future of work that benefits all workers.
This Equitable Growth event comes at a time of real hope that the long decline of worker power and union membership in the United States can be reversed. The percentage of workers in unions has declined dramatically since the 1950s, when 1 out of 3 workers was unionized. By 2019, only 1 in 10 workers was a union member. While changes in the law, court actions, and decreased enforcement of labor laws have played a big role in undermining worker power, recent technological advances share some of the blame. Information and monitoring technology enables employers to outsource certain tasks that previously were carried out within the business by company employees. This phenomenon, known as the fissured workplace, has reduced job quality, including benefits, and dramatically hindered workers’ ability to unionize.
The increasing use of algorithmic and artificial intelligence technologies increases pressures on workers to perform beyond their reasonable capacity, enables employers to profit off personal data, and allows employers to impose unpredictable and unfair schedules on them. But the same technologies can be used to the opposite effect, maximizing workers’ ability to be productive at work and at home, and protecting them from discrimination and unfair workplace practices. Policymakers can regulate these matters and bar discrimination based on the use of these technologies. These will be among the issues discussed at the upcoming Equitable Growth event.
Union organizing is all about community. Today, technology—social media, texting, email—seems to be the primary way most of us interact. So, it should be no surprise that organizers would be looking for the most effective ways to use technology to enhance worker power.
A relatively new app called WorkIt is being used by organizers in various industries. A good example of using an existing platform is the iconic 2018 strike by the teachers of West Virginia, which inspired strikes in several other states that became known as the “Red for Ed” movement and achieved significant wage gains for West Virginian teachers and other public employees. The use of a private Facebook group was critical to the organizing of the strike, providing both information and encouragement to its more than 24,000 members.
Members of the first panel at the upcoming Equitable Growth event will discuss not only the use of social media platforms but also other technologies. More broadly, they will discuss policy changes that have long been needed to restore workers’ ability to form and join unions and other labor organizations.
The second panel will examine why workers are generally at a disadvantage when it comes to dealing with technological change in the workplace. For the most part, the point of introducing new technologies is to increase productivity by increasing output and reducing labor costs by reducing the number of workers, suppressing wages, or both. A 2018 paper by then-Ph.D. candidate and Equitable Growth grantee Antoine Arnaud, now of the International Monetary Fund, shows that even a threat by an employer to automate can result in lower wages for workers, and, relatedly, that if only a few firms in a labor market automate, the possibility that others might can have a negative impact on wages throughout the market.
But there are historic examples of workers using their strength to help steer the implementation of new technologies in a way that minimizes the damage to their welfare. In his 2013 paper, titled “The Tip of the Spear: How Longshore Workers in the San Francisco Bay Area Survived the Containerization Revolution,” Peter Cole of Western Illinois University describes how the International Longshore and Warehouse Union forged agreements with the Pacific Maritime Association beginning in 1960 that governed how the West Coast shipping industry transformed to the highly productive use of specialized containers for shipping.
“Containerization” dramatically reduced the number of longshoremen needed for what had been the arduous work of loading and unloading ships, and the agreement did not prevent transformational changes that ended the union’s extraordinary control of working conditions prior to that date. Yet the mechanization and modernization agreement between labor and management prevented what could eventually have been the decimation of worker power. As Cole writes:
Today, in many ports beyond the West Coast as well, longshore workers remain unionized, with relatively high wages and surprising power that seems, to many, anachronistic in the 21st century’s hyper-charged capitalist world. Studying their history is a corrective to generalizations about the effects of technology and the role of unions in our time.
More recently, the Culinary Workers Local 226, affiliated with UNITE HERE, used the threat of a strike to reach strong agreements with Las Vegas hotels and casinos that addressed a number of issues related to technological advances. As Rachel Melendes of UNITE HERE told participants in a 2019 “Women and the Future of Work” convening organized by the Ford Foundation, Equitable Growth, and others, one of the agreement’s key provisions required the hotels and casinos to agree to pay workers during training on how to use new technologies before their introduction.
Speakers at Equitable Growth’s virtual event will cover all these issues and provide actionable items for policymakers, advocates, and the interested public alike. It will take place from 2:00 p.m. to 4:00 p.m. on Tuesday, February 23. Registration information is available here. We hope to see you there.
This factsheet has been adapted from Yair Listokin’s Vision 2020 essay and his 2019 book, Law and Macroeconomics: Legal Remedies to Recessions.
Overview
Traditional macroeconomic tools—fiscal policy from the U.S. Congress and monetary policy from the Federal Reserve—are critical but not sufficient responses to the current coronavirus recession. To round out the federal government’s actions to deal with the ongoing economic downturn, executive agencies should consider how their regulatory power can be aggressively leveraged to provide a much-needed, countercyclical boost to the ailing U.S. economy. Regulatory actions that encourage banks to lend, firms to invest, and consumers to spend can increase demand and reduce unemployment.
One case in point is the current regulation of utilities, implemented jointly by federal and state regulators. These rules tend to affect private-sector spending pro-cyclically by allowing for rate increases to compensate for reduced profits during recessions. As a result, retail prices for electricity, water, and trash collection increased during recent recessions. (See Figure 1.)
Figure 1
This pro-cyclical pricing effectively amounts to a tax increase on low- and middle-income families, which have a high propensity to consume, and is the exact opposite of how a smart recession-fighting, countercyclical policy would be designed. A better regulatory framework from a macroeconomic perspective would hold utility prices down during recessions but allow for higher utility prices—and profits—during economic expansions. This kind of regulation could be supported by guidance from the Federal Energy Regulatory Commission or state regulators. The state of Connecticut is pursuing a similar idea.
Other examples of regulatory actions the federal government could take to fight the coronavirus recession and other future economic downturns include:
The Federal Housing Administration, Fannie Mae, and Freddie Mac could reduce guarantee fees on government-backed mortgages or increase allowable loan amounts in order to jumpstart mortgage origination during economic downturns. The Biden administration also could reduce interest rates or pause payments for existing homeowners with government-backed mortgages.
The U.S. Department of Education could use its authority under the Higher Education Act to take a number of steps to reduce the burden of student loan debt during a recession, boosting the ability of otherwise struggling borrowers to spend. This could take the form of pausing payments or potentially cancelling some amount of outstanding student debt by executive action.
But knowing which of these, or other, countercyclical regulations to pursue, and predicting how the regulations will affect the macroeconomy demands expertise. Every regulator and administrator acting across many different sectors of the U.S. economy cannot be expected to have that needed expertise. As a result, effective countercyclical regulatory policy requires a coordinating office staffed by a mix of experts in macroeconomics and regulation.
President Joe Biden should create such an office, to be housed at the White House National Economic Council, by modifying the executive order that established the NEC. This new countercyclical regulatory policy office within the NEC would, in conjunction with macroeconomic experts throughout government:
Evaluate macroeconomic conditions and the ability of discretionary fiscal and monetary policies to respond to the business cycle
Instruct regulators to identify and implement countercyclical regulatory programs, including the reform of unintentionally pro-cyclical regulations
Importantly, the office’s purview would be limited to evidence-based, countercyclical regulations so as to not morph into a tool for indiscriminate deregulation.
Conclusion
Every federal regulatory program affects the business cycle. Countercyclical regulatory policy offers an infinite variety of macroeconomic policy options that are not subject to the constraints of monetary and fiscal policy. By paying attention to these effects and managing them through a new office within the National Economic Council, the Biden administration could stimulate the U.S. economy during the current recession and lay the groundwork for future administrations to do so as well.
1. If you haven’t read this, read it. If you have read it, re-read it now. My grandfather used to lament, to the end of his days, that his discipline had turned from “Public Administration” to “Political Science” over his lifetime. Political science, he thought, was a swamp of opinion and ideology that produced very little of value. In contrast there was a great deal that was know about Public Administration, and a great deal to study, and the tools to study it to learn more. Read Amanda Fischer and Alix Gould-Werth, “Broken Plumbing: How systems for delivering economic relief in response to the coronavirus recession failed the U.S. economy,” in which they write: “Four delivery systems [were] tasked with providing relief during the coronavirus recession—relief targeted to small and large businesses, Unemployment Insurance, direct payments to consumers, and paid leave programs … Looking at business rescue programs, we see pipes well-designed to flow easily to people with power, while the taps of the less powerful remain dry. Looking at Unemployment Insurance, we see the failure to invest in pipes, preventing these benefits from flowing smoothly to people who need them the most. Looking at direct payments, we see who profits when the plumbing is routed through costly private systems that twist and turn, enabling the powerful to siphon off of the plumbing. And looking at paid leave, we see what happens when policymakers build no pipes at all and suddenly need to turn on a spigot when the economy hits a drought.”
2. And if you haven’t read this, read it. If you have, re-read it. Practically everything in it is still very valuable, and we will hopefully have time and political energy to put all the recommendations into effect before the next recession comes to visit. Read Equitable Growth and the Hamilton Project, Recession Ready: Fiscal Policies to Stabilize the American Economy, in which they write: ‘Economic recessions are inevitable and they are painful, with harsh short-term effects on families and businesses and potentially deep long-term impacts on the economy and society. But we can ameliorate some of the next recession’s worst effects and minimize its long-term costs if we adopt smart policies now that will be triggered when its first warning signs appear. Equitable Growth has joined forces with The Hamilton Project to advance a set of specific, evidence-based policy ideas for shortening and easing the impacts of the next recession. In a new book, Recession Ready: Fiscal Policies to Stabilize the American Economy, experts from academia and the policy community propose six big ideas, including two entirely new initiatives and four significant improvements to existing programs, all to be triggered when the economy shows clear, proven signs of heading into a recession. These proposals (see more on each below) aim to strengthen and add to our automatic stabilizers: policies that inject money into the economy in a downturn and withdraw stimulus when the economy is strong. Congress should consider these policy proposals now because when the next recession appears on the horizon, it may be too late.”
Worthy reads not from Equitable Growth:
1. Hiring Ezra Klein may well be one of the very, very few really good decisions The New York Times’s editorial editors have made recently. I would note that much of what Ezra Klein fears in California are the consequences of immense wealth inequality—and would melt away if we could return to a properly social-democratic income distribution via an appropriate federal-level tax system. But this is very keen-eyed. Read Ezra Klein, “California Is Making Liberals Squirm,” in which he writes: “The California Environmental Quality Act wasn’t passed to stop mass transit—a fact California finally acknowledged when it recently passed legislation carving out exemptions. The profusion of councils and public hearings that let NIMBYs block new homes are a legacy of a progressivism that wanted to stop big developers from slicing communities up with highways, not help wealthy homeowners fight affordable apartments. California[‘s] … structures of decision making too often privilege incumbents who like things the way they are over those who need them to change … In California, taking that standard seriously might mean worrying less about the name on the school than whether there are children inside it—as Mayor Breed has been insisting. It might mean worrying less about the sign in the yard than the median home price on the block. And yes, it might mean worrying less about a cumbersome process that claims to be about environmental protection and more about how to speed along projects that will lead to environmental justice … If progressivism cannot work here, why should the country believe it can work anywhere else?”
2. The slowdown over the past 15 years in the rate at which the value of the stock of useful ideas about technology and organization has been growing in the global north is very worrisome. In order to figure out why it happened and how to repair it, we need to think straight about how our industrial research labs create and our corporation-based value chains deploy new ideas. And William Janeway has spent a lifetime working in this sector and thinking about it. Read his “Venture Capital in the 21st Century,” in which he writes: “In this eight-part lecture series, Bill Janeway investigates the relationship between venture capital and technological innovation, and the interdependent roles of entrepreneurial firms, the mission-driven State and financial speculation in the overall innovation system.”
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
As Congress continues negotiating the details of a new COVID-19 stimulus bill, David Mitchell and Corey Husak make the case for including automatic triggers rather than arbitrary cut-off dates for relief programs. President Joe Biden’s current proposal includes the latter—random dates at which point emergency benefits such as extended Unemployment Insurance will expire—but this idea is misguided and based on the idea that legislators can somehow predict when the recession will have abated. Mitchell and Husak argue that instead, lawmakers should include automatic stabilizers—triggers that moderate the level of aid programs provide based on specific economic trends and data that indicate the state of the economy. This policy idea was included in the 2019 book of essays published by Equitable Growth and The Brookings Institution’s Hamilton Project, Recession Ready, and has gotten traction recently. Mitchell and Husak detail several options proposed for implementing these on- and off-triggers, explaining how each one is designed and how it would benefit U.S. workers and their families. They urge policymakers in Congress to adopt one of the options in the coming COVID relief bill in order to ensure that those most vulnerable in this economic downturn are supported and able to provide for their families.
Since the Clean Air Act was passed in 1970, many studies show the benefits of reducing air pollution on outcomes from health and well-being to economic productivity for parents and children alike. Studies also reveal the disproportionate exposure to poor air quality among disadvantaged communities, highlighting the linkages between environmental justice and economic inequality. A new Equitable Growth working paper by Jonathan Colmer and John Voorheis looks at the long-term effects of the Clean Air Act and finds that not only did the law affect children of mothers who benefited from cleaner air during pregnancy as a result of the new regulations, but also the grandchildren of these mothers. The co-authors in an accompanying column explain how the mechanism through which the intergenerational effects of air pollution arise, finding little evidence that the improvements in grandchild outcomes are biologically inherited, but rather are likely driven by increased parental resources and investments. Colmer and Voorheis also detail the policy implications of their research, particularly on how future cost-benefit analyses of environmental regulations can take these intergenerational transmissions into account.
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. Earlier this week, the BLS released the latest data for December 2020. Kate Bahn and Carmen Sanchez Cumming put together four graphs highlighting the most important trends in the data.
Brad DeLong’s latest Worthy Reads column provides his takes on recent posts from Equitable Growth and around the web, covering some must-read content you may have missed.
Links from around the web
If the Great Recession of 2007–2009 taught policymakers anything, it is that stimulus legislation must be big and bold. Any coronavirus relief package must last as long as the pandemic does, writes Neel Kashkari in aWashington Post op-ed, and should be linked to the recovery of the job market. During the Great Recession, policymakers underestimated the depth of the crisis and were consistently surprised when things got worse, Kashkari explains. Today, rather than underestimating how bad the recession is, lawmakers risk underestimating how long it will last. Kashkari pushes for automatic triggers to tie fiscal support “to recovery of the job market rather than an arbitrary date.” And should the labor market actually rebound faster than what some public health experts are predicting, automatic triggers would shut off the aid gradually as things improve. Kashkari’s comparisons to the Great Recession paint a compelling picture for Congress to include automatic stabilizers in COVID relief legislation—or else, risk a repeat of the sluggish recovery and wage stagnation of the previous economic crisis.
A new project from The New York Times details the many challenges facing working parents amid the coronavirus recession and how they have been left to fend for themselves as the crisis persists. As is well-known, most household responsibilities fall on women and mothers more than other family members. In this series of articles and features, the Times looks in detail at the various ways in which mothers have been left behind, how they have been affected by the pandemic and recession, and the implications for women’s labor force participation in the future. The series also looks at the potential solutions offered by the Biden administration’s recovery plan—supports that some employers are offering to employees with children—alongside other solutions that would help working parents as they struggle to not only keep their jobs amid the recession, but also support their families and navigate the public health crisis.
The budget reconciliation process presents a prime opportunity to abolish the federal debt ceiling, argues Vox’s Dylan Matthews. The debt ceiling is essentially a hard limit on how much debt the U.S. government can take on and is typically adjusted based on tax and spending laws already passed by Congress. If Congress does not raise the debt ceiling, then the U.S. government cannot pay its legally mandated bills, and, in the worst-case scenario, the United States goes into default, triggering a global financial crisis. This arbitrary federal law has led to major and unnecessary political fights in the past, another of which would be devastating now, Matthews writes. Most wealthy countries around the world do not have legal limits on government debt and instead simply pass tax and spending legislation, issuing debt to make up any difference. Matthews lays out various ways that Democratic leadership in Congress and/or President Biden could follow in these footsteps and eliminate the debt ceiling, and focuses on why using the reconciliation process is the least politically fraught and most realistic option.
To strengthen the federal government’s response to the coronavirus pandemic and the resulting economic downturn, President Joe Biden seeks to enact his American Rescue Plan to stop the spread of the coronavirus and COVID-19, the disease caused by the virus, provide relief to devastated families and businesses, especially those headed by Black and Latinx Americans who are bearing the brunt of the economic pain, and stimulate the U.S. economy as it struggles to recover from recession.
President Biden’s far-reaching proposal includes a number of critical enhancements to key programs that support families and buttress consumption. But there is one problem: The Biden plan includes arbitrary cut-off dates that halt emergency programs regardless of the state of the U.S. economy. In a few instances, the plan allows for the possibility of automatic extensions, but it contains no specifics. No matter how high unemployment remains when these programs expire, Congress would be forced to go through yet another challenging and unpredictable legislative negotiation to continue them.
As we saw this past July, after some the provisions in the Coronavirus Aid, Relief, and Economic Security, or CARES, Act expired, and then again in December, when the remainder of those provisions ended, premature expirations of aid leave suffering families uncertain about putting food on their tables, exacerbate preexisting challenges facing program administrators, and undermine economic recovery as consumers cut back spending in fear of what might come next. Unemployment Insurance beneficiaries, for example, suffered from significant delays and lapses over the course of 2020 due to the various congressional stalemates, as well as the UI system’s chronic problems.
There is a solution to this problem. The next coronavirus relief bill can be written to keep critical benefits in place until they are no longer needed. So-called off-triggers that depend on economic data can ensure that benefits phase out as the economy recovers, not on a random date. There are a number of possible mechanisms that can serve as off-triggers, winding down enhanced benefits based on the state of the economy in individual states and nationally.
Automatic stabilizers
Programs that expand in a recession, such as Unemployment Insurance, are known as automatic stabilizers, as they help to stabilize a weak economy automatically. But policymakers and economists alike have seen time and time again that in past recessions—and the current one—the current structure of these programs provides too little too late to either stop the U.S. economy from declining or revitalize it so that workers are reemployed, wages rise, and families can feel secure. So, Congress routinely steps in to boost benefits—especially for programs such as Unemployment Insurance and the Supplemental Nutrition Assistance Program, formerly known as food stamps—and lengthen their duration. But the partisan wrangling that often afflicts Congress usually delays assistance at the beginning of a recession, and the assistance falls short. Then, Congress struggles to extend benefits, often letting the programs lapse for spells or prematurely pulling the plug altogether.
This was certainly true during and after the Great Recession of 2007–2009. As Rep. Don Beyer (D-VA) recently noted, “In the Great Recession, they re-upped Unemployment Insurance 13 different times. That’s 13 political battles between the House and the Senate, needing 60 votes and the president.” The result of inadequate and unreliable support from the federal government was a long, drawn-out recovery in which the U.S. labor market took years to recover its vitality and the economy was characterized by lagging employment, wage growth that was sluggish at best, and continuing anxiety and financial challenges for U.S. workers and their families.
Recession Ready
What was lacking in the Great Recession, and what is needed now, is a mechanism for ensuring that benefits remain available as long as they are necessary, with no need to wait for Congress to act. There are a number of solid, evidence-based ideas for such a mechanism. In 2019, the Washington Center for Equitable Growth and The Brookings Institution’s Hamilton Project published Recession Ready, a book of essays with comprehensive plans to strengthen automatic stabilizers, including recommendations for automatic triggers to activate supplemental benefits to families and state governments, and automatic triggers to turn them off.
Before the next recession, it will be important to establish on-triggers that automatically implement supplemental benefits without the need for new legislation when economic data make it clear that a recession is imminent or already occurring. But at this moment, what is important is that off-trigger mechanisms be included in the COVID relief legislation now being debated in Congress. The House and Senate have already seen the introduction of several bills that contain such mechanisms. Most of these proposals focus on the level of unemployment or on health conditions, either nationally or by state, and vary in technical ways. Fundamentally, however, they are all intended to sustain spending until job markets have sufficiently recovered.
Options for off-triggers
There are a number of ideas for ensuring that unemployed workers do not prematurely lose any of the special Unemployment Insurance benefits enacted by Congress when, on March 14, they would expire under current law, including extended benefits, supplemental payments, or the inclusion of workers who are usually not eligible for the program. These same ideas could be considered for when President Biden’s American Rescue Plan would end them at the end of September. Essentially, these off-triggers retain extended benefits until the economy improves to a sufficient level. (See Table 1.)
Table 1
Sens. Michael Bennet (D-CO) and Jack Reed (D-RI) and Reps. Beyer and Derek Kilmer (D-WA) introduced legislation in 2020 to extend and increase unemployment benefits. The legislation divides the states into six tiers based on their rate of unemployment and reduces or increases various types of benefits based on the tier where each state, as well as the District of Columbia, Puerto Rico, and other U.S. territories, falls over time, with additional benefits phasing out entirely when the 3-month moving average of their individual unemployment rate drops below 5.5 percent and the 3-month moving average of the national unemployment rate is below 5.5 percent and has been declining for 2 consecutive months.
They also propose to mix in a trigger based on public health, by supplementing weekly unemployment benefits by $600 (as opposed to the current $300 weekly supplement and the $400 weekly supplement proposed by President Biden) until the end of the COVID-19 National Emergency Act declaration first issued by former President Donald Trump in March 2020. The benefit would then decline to $450 for 13 weeks, and then to $300 or $200 depending on the state’s tier, ending completely in a state when the state’s 3-month moving average unemployment rate sinks below 7.5 percent and the 3-month moving average of the national unemployment rate is below 5.5 percent and has been declining for 2 consecutive months. The bill allows for the resumption of the $600 payment if the emergency declaration is extended or a new COVID-19 emergency occurs.
Another measure tied to unemployment benefits is a Recession Readyproposal by Gabriel Chodorow-Reich of Harvard University and John Coglianese of the Federal Reserve Board. The authors add two triggers to the normal extended Unemployment Insurance triggers to lengthen benefits for longer periods: to a total of 60 weeks (including the original 26 weeks) when a state’s unemployment rate crosses 9 percent and to 73 weeks when a state’s unemployment rate crosses 10 percent. This trigger is based simply on state unemployment rates.
Unemployment rates are also the basis for off-triggers for other proposed automatic stabilizers. Another Recession Ready proposal put forward by former Washington Center for Equitable Growth Director of Macroeconomic Policy Claudia Sahm suggested a system of annual direct stimulus payments during recessions. They would be triggered by a sustained rise in unemployment and would continue annually if the national unemployment rate stayed 2 percentage points above the level at the time of the first payment. Using the $2,000 payments enacted early during the pandemic as an example, the off-trigger would be achieved when the unemployment rate falls below 5.5 percent, which is 2 points higher than the rate in February 2020.
Similarly, Reps. Madeleine Dean (D-PA) and Matt Cartwright (D-PA) recently introduced the Payments for the People Act, which would send most families quarterly rather than annual payments. The amount would be based on the national level of unemployment, and their off-trigger is simple and not set by a formula. Payments would just continue until the national rate of unemployment falls below 5.5 percent for 2 consecutive months.
And then, there is legislation introduced by Sen. Bob Casey (D-PA) based on the Recession Ready Medicaid and Child Health Insurance Program proposal of former Chair of the President’s Council of Economic Advisers and current Equitable Growth Steering Committee member Jason Furman, Matthew Fiedler of The Brookings Institution, and Wilson Powell III of Harvard University. Rep. Susie Lee (D-NV) introduced a similar measure in the House, and the Take Responsibility for Workers and Families Act—a coronavirus relief measure introduced by House Democratic leadership in 2020—also contained a similar provision.
Both the legislation and the program by Furman and his co-authors establish on- and off-triggers related to state unemployment rates. They would make a state eligible for increased support in any quarter in which its unemployment rate exceeded a threshold level, set by a formula designed to ensure that it is targeted to serious downturns rather than small fluctuations in unemployment. The Furman proposal would make a state eligible for relief in any quarter in which its unemployment rate exceeded the 25th percentile of the distribution of the state’s unemployment rates over the preceding 15 years, plus 1 percentage point. The percentile measure is intended to approximate the state’s unemployment rate at full employment. This additional percentage point allows for normal fluctuations and ensures that the trigger is targeted to serious economic downturns.
The Casey and Lee bills differ somewhat in that the trigger is unemployment exceeding the lower of either the 20th percentile of the distribution of the state’s quarterly unemployment rates for the most recent 60-quarter period, plus 1 percentage point, or the state’s average quarterly unemployment rate for the previous 12-quarter period, plus 1 percentage point. Under all of these formulas, the amount of additional federal support would depend on the extent to which a state’s unemployment rate exceeded the threshold.
The increased support would continue based upon quarterly assessments of each state’s unemployment rate and would phase out using the same triggers. Effectively, as a state’s unemployment rate declined, its level of additional support would also decline, until the state fell below the initial threshold, at which point additional federal spending would cease.
The labor market indicators used for off-triggers generally use the traditional unemployment rate known as “U3,” which measures the number of people actively looking for work. But policymakers could choose to use other measures, such as “U6,” which includes discouraged and involuntary part-time workers; the prime-age employment-to-population ratio, or EPOP, which is a measure of the labor market participation rate of those ages 25 to 55; or even disaggregated versions of these statistics that focus on the employment prospects of historically disadvantaged groups that tend to lag behind national averages. There are pros and cons to each of the possible alternatives, but all of them would be an improvement on no triggers at all.
A different kind of off-trigger is proposed by Hilary Hoynes of the University of California, Berkeley and Diane Whitmore Schanzenbach of Northwestern University, whose Recession Ready proposal is to increase the Supplemental Nutrition Assistance Program’s maximum benefits by 15 percent during periods of high national unemployment. They propose an off-trigger similar to one included in the 2009 American Recovery and Reinvestment Act based on the food assistance program’s typical inflation indexing. Under their plan, the new maximum benefit would remain in place until inflation in food prices raised the previous maximum by that same amount, presumably a period of some years. At that point, when the original maximum benefit caught up with the 15 percent increase, the supplement would effectively disappear and benefits would resume increasing with inflation.
Conclusion
There are a number of ideas for Congress and the Biden administration to consider, but whatever they choose, it is important to note that the enactment of triggers in place of cut-off dates does not preclude additional action by Congress. When enhanced benefits or payments are set to expire automatically because of an off-trigger, but policymakers believe that conditions have not recovered sufficiently, Congress can bypass the trigger and keep additional spending in place. Or they can boost support even further by delivering, for example, monthly direct payments. Of course, the opposite is also true: Congress can determine that the economy has recovered sufficiently before an off-trigger is reached, and reduce or shut down the additional payments. Triggers are a backstop, not a replacement, for legislative action.
While they may be only a backstop, off-triggers are far superior to artificial stop dates. Because they don’t include such a date, including them in the next coronavirus package might increase the bill’s sticker price, as calculated by the Congressional Budget Office. But the cost, in human suffering and economic uncertainty, of an arbitrary and premature expiration date would surely be higher.
If relief and aid programs are inadequate, and if they depend on Congress returning again and again to extend them, then these measures are fighting with one hand tied behind their backs. Establishing off-triggers maximizes the power of relief measures and assures the workers and families depending on this support that Congress will not allow benefits to lapse. The new Congress and the new administration should enact them now, and let these programs do their essential work.
When the National Ambient Air Quality Standards were introduced in the United States 50 years ago as part of the 1970 Clean Air Act amendments, concerns about air pollution were largely focused on respiratory health and visible air quality. In the decades since, academics and policymakers alike have learned that the impacts of air pollution are more far-reaching, affecting many dimensions of health, economic productivity, and overall economic and social well-being. We also have learned that disadvantaged communities are disproportionately exposed to pollution along these same dimensions.
This new evidence demonstrates that environmental injustice and economic inequality need to be examined together. This increasing body of evidence on the broadly negative effects of air pollution suggests that differences in environmental quality may play an important role in driving and propagating economic disparities.
Children are especially vulnerable to the effects of air pollution. Growing evidence suggests that exposure to pollution and other environmental risks in early childhood can play a critical role in shaping economic opportunity, with persistent effects on health and well-being. Fortunately, improvements in air quality delivered by the Clean Air Act have been shown to deliver significant benefits to those directly affected, reducing infant mortality and increasing wealth and later-life earnings.
Our new working paper, titled “The Grandkids Aren’t Alright: The Intergenerational Effects of Prenatal Pollution Exposure,” further underscores the value of the Clean Air Act. We find that that it was not only the children of women who benefited from regulatory reductions in exposure to air pollution during pregnancy, but also their grandchildren. The grandchildren of women who were exposed to lower levels of air pollution during pregnancy were more likely to attend college and less likely to drop out of high school 40 years later. A 10 percent reduction in prenatal exposure to particulate matter for individuals born around 1970 is associated with a 3.2 percentage point to 3.8 percentage point increase in the likelihood that their children attend college 40 years later. This corresponds to an 8 percent increase in attendance, compared with the average college attendance rate.
To measure these outcomes, we use administrative and survey data from the U.S. Census Bureau, which allows us to construct more than 150 million parent-child links. We then take advantage of the structure of the 1970 Clean Air Act amendments as a natural experiment. These amendments designated counties that exceeded the newly instated National Ambient Air Quality Standards as “nonattainment” counties. These nonattainment counties were required to reduce particulate matter air pollution to come into compliance with the new standards.
We estimate that nonattainment counties delivered sharp and persistent reductions in particulate matter air pollution, relative to counties that were already in compliance, following the introduction of the Clean Air Act. Using this variation, we document that children born after the new regulations were introduced benefited from 9 months of additional clean air, compared to children who were born just before the new regulations passed. This allows us to isolate the effects of first-generation prenatal pollution exposure.
These reductions in prenatal pollution exposure not only benefitted those directly affected but also led to substantial increases in educational attainment for the children of those who were directly affected 40 years later.
How do the effects of prenatal exposure cross from one generation to the next? In addition to measuring the intergenerational effects of air pollution, we also explore the mechanisms through which intergenerational transmission arises.
On the one hand, the improvements in health associated with lower prenatal pollution exposure may have been inherited from one generation to the next—a biological transmission pathway. On the other hand, improvements in health may have translated into increased productivity and earnings as adults, providing a household environment that offered greater resources and opportunities. Using information on whether children are biological, adopted, or stepchildren, we find little evidence that the effects are biologically inherited. Instead, the intergenerational transmission mechanism appears to be driven by increased parental resources and investments.
Our findings have important policy implications. First, in considering the efficacy of current and future environmental regulations, it is important to account for broader economic considerations such as effects on education, productivity, and earnings. This suggests that future cost-benefit analyses of environmental regulations should incorporate these benefits for a more complete accounting of how reducing air pollution will affect society.
Second, our findings point to the importance of environmental quality in shaping economic opportunity. Not only do reductions in air pollution reduce disparities today, these benefits also are propagated from one generation to the next. Academics should further explore these linkages to help inform policymakers who are interested in increasing economic mobility by including improved environmental quality alongside traditional economic mobility mechanisms such as investments in education, transportation, and labor market opportunities. Recent action by the Biden administration, including Executive Order 14008, have turned the focus of environmental policy toward issues of environmental justice. Our results underline the importance of ensuring that disadvantaged communities benefit from improvements in environmental quality.
—Jonathan Colmer is an assistant professor of economics at the University of Virginia and director of the Environmental Inequality Lab. John Voorheis is a lead economist at the Center for Economic Studies at the U.S. Census Bureau.
