At 11:00am today, SCEPA Faculty Fellow Rick McGahey will testify before the New York City Council's Civil Service and Labor Committee on the economic effects of expanding paid sick leave. His written testimony on behalf of Int. 0001-2014.
Statement on the Economic Effects of Expanding Paid Sick Leave
Hearing of the Civil Service and Labor Committee
Of the New York City Council
February 14, 2014
Dr. Richard McGahey
Milano School of International Affairs, Management, and Urban Policy
and the Schwartz Center for Economic Policy Research (SCEPA), The New School
My thanks to Chairman Miller and members of the committee and Council for this opportunity to testify. I am here to strongly support legislation expanding paid sick days to New York City workers at firms with five or more employees and to strengthen the law in other ways.
I am a labor economist with a PhD in Economics, currently teaching in The New School's policy program. I have a long history working on labor policy issues, having served as Chief Economist for the U.S. Senate Committee on Labor and Human Resources, and as Economic Policy Advisor to Senator Edward Kennedy (D-MA). In the federal executive branch, I was nominated by President Bill Clinton and confirmed by the Senate as Assistant Secretary for Policy at the U.S. Department of Labor.
My empirical conclusions are based, in part, on written testimony I submitted last year in support of the original legislation.
The legislation under consideration expands New York's historic paid sick days legislation to include workers at businesses with five or more employees and strengthens the law in other important respects. The legislation is unlikely to create any significant negative economic impact, and, in fact, could create positive economic gains for businesses and provide significant benefits to workers. I have four points supporting the legislation:
Lauren Schmitz, a New School Economics PhD student and former SCEPA research assistant was awarded a grant from the National Science Foundation (NSF) for her dissertation, "The Impact of Working Conditions on the Health of an Aging Workforce."
Her research examines the relationship between work and health over the life cycle to better understand how various working conditions influence health disparities as workers age.
The NSF Doctoral Dissertation Improvement grant is a highly competitive federal research grant that allows doctoral students to undertake significant data-gathering projects and conduct field research.
Schmitz is creating a unique data set linking restricted W-2 earnings records from the Social Security Administration's Master Earnings File to both data on health and employment outcomes in the Health and Retirement Study (HRS) and data on objective job demands from the Department of Labor's Occupational Information Network (O*NET).
Analysis on a comprehensive set of working conditions over the course of a worker's career will contribute to a better understanding of how occupation affects health in the years leading up to retirement
by Rick McGahey, SCEPA Faculty Fellow
As the new Congressional term gets underway, one of President Obama's priorities is to regain "fast track" authority (FTA) for foreign trade pacts, so he can pursue the Trans-Pacific Partnership (TPP), a 12-nation deal involving Pacific Rim nations. (I discussed this today on MSNBC's "The Cycle."
"Fast track" authority allows the President to submit a final deal to Congress, where they can only vote up or down on the whole package, and can't amend it. Although some think this is the only way a trade deal can be enacted, others criticize the procedure as anti-democratic, and favoring special interests that can negotiate trade benefits in secret.
Democratic and Republican Congressional leaders who are close to some business interests are supporting fast track. But led by Sander Levin (D-MI,) the senior Democrat on the House Ways and Means Committee, many Democrats oppose FTA and the TPP in its current form. Levin has called for a different type of authority, with more Congressional involvement, more transparency over negotiations, preservation of labor and environmental standards, and procedures to address currency manipulation that favors exports into the U.S.
Opponents of TPP fear that labor and environmental standards will be weakened even further, while pharmaceutical companies will get increased patent and copyright protection, making medicines more expensive, especially in the developing world.
Stay tuned. Trade is a volatile issue, especially in an election year, and there is a big divide between President Obama and Congressional Democrats on this one; last November, 151 of the 200 Democrats in the House sent Obama a letter saying they would not renew FTA in its current form.
The New School Economics Professor (and SCEPA Faculty Fellow) Anwar Shaikh was honored by the Pescarabruzzo Foundation, which recently awarded him the International NordSud award. The award, established to encourage economic innovation through dialogue and collaboration, is for his published work in the Journal of Post-Keynesian Economics, titled "Reflexivity, Path Dependence, and Disequilibrium Dynamics." The paper discusses George Soros's theory of reflectivity and focuses on the interactions between expected, actual and fundamental variables.
The New School - University of Massachusetts Amherst
Economics Graduate Student Workshop 2013
On November 9 and 10, SCEPA and The New School's economics department joined with the economics department of the University of Massachusetts Amherst to host a graduate student workshop. The topics included development, growth and distribution economics, financial economics, methodology, economics of banking, long-run growth patterns, and inequality. The workshop culminated with a roundtable focused on rethinking microeconomics.
Carol Hymowitz of Bloomberg News introduces us to Tom Palome, former Vice President for Oral-B, in her September 23, 2013, article, "At 77 He Prepares Burgers Earning in a Week His Former Hourly Wage."
At age 77, Tom is working two minimum wage jobs just to make ends meet. At the height of his career he was making over six figures a year, paid off his mortgage and put his kids through college.
Like 60% of seniors, Tom did not have enough saved for retirement. After his employer relocated to the west coast, Tom opened a consulting firm. Because he was self-employed, he didn't have a 401(k) account or tax-deferred IRA. Without a retirement savings plan, he managed to save $90,000. Investment experts estimate that retirement savings should be 10-20 times more than their annual working salary. So, while not nearly enough for retirement, he lost most of it in the 2008 financial crisis.
This article describes our ridiculous approach to retirement, where "59 percent of households 65 and older currently have no retirement account assets, according to Federal Reserve data analyzed by the National Institute on Retirement Security."
"'People who built successful careers, put their kids through college and saved what they could, are still facing downward mobility," said Teresa Ghilarducci, an economist at The New School, who has studied the finances of seniors."
"It's about to get worse. Right behind the current legions of elderly workers is the looming baby boomer generation, who began turning 65 in 2011 and are reaching that age at a rate of about 8,000 a day. They're the first generation expected to fund their own retirements, even as they live longer lives."
Outsourcing Economics, the title of a new book by Will Milberg and Deborah Winkler, has a double meaning. First, it is about the economics of outsourcing. Second, it examines the way economists have understood globalization as a pure market phenomenon and as a result, they have "outsourced" its negative social side effects to other disciplines to articulate and repair. This book discusses the embedded relationship that exists between the state and the market, and by what means the structure of the relationship dictates the distribution of gains from globalization. Milberg and Winkler demonstrate how the power and profits generated as a result of globalization creates a power asymmetry, with a concentration of wealth and income among a few at the top.
Additionally, they find that offshoring allows firms to reduce domestic investment and focus on finance and short-run stock movements. They point out that the term 'development' has become synonymous with 'upgrading' in global value chains. However, upgrading allows a larger firm to easily move their operations to less expensive states or firms. This forces offshore firms to keep their costs as low as possible, causing investment instability through increased capital mobility without improving wages or labor standards. As a result, offshoring reduces employment and increases income inequality in countries without worker protection policies.
The Center for European Economic Research, one of the leading research institutes in Germany, appointed SCEPA Faculty Fellow Willi Semmler as a Research Associate. This summer, he was the keynote speaker for their Conference on Recent Developments in Macroeconomics.
His keynote speech was based on his paper, "The Macroeconomics of the Fiscal Consolidation in the European Union," that found the European Union's austerity policies neglected to take into account the consequences of reducing social safety nets. Fiscal austerity was imposed in the European Union assuming the multiplier effect would be weak, and fiscal consolidation would be swift. The multiplier effect measures the impact government spending or tax cuts has on the overall economic activity of a state.
Semmler argues that the effects of the fiscal multiplier are larger in recession and weaker during economic expansions. This means that government spending increases can stimulate the economy in a recession, but also that spending cuts and financial market stress can make the effects of austerity policies even more severe. Semmler shows that the size of the multiplier and the success of debt stabilization depend on a country's system of government and economic environment, including financial stress, credit spreads, the vulnerability of the banking system, monetary policy actions, the state of internal and external demand, exchange rates and so on.
On June 24, 2013, University of Massachusetts Amherst Economics Professor Nancy Folbre described the retirement crisis as sinking rowboats. Her point is clear - our current 401(k)-dominated retirement system doesn't work for the individual doing yeoman's work trying to get to retirement security.
She backs up this statement with numerous reports and data, including the National Institute on Retirement Security, books by Jacob Hacker and SCEPA Director Teresa Ghilarducci, the Center for Retirement Research at Boston College, the Transamerica Center for Retirement Studies, and the Economic Policy Institute (EPI). These sources support Folbre's conclusion, that we need a retirement security system that puts us all in the same boat...an ocean liner.
Every country is worried about investing retirement funds correctly, and every country wants to minimize risks to the taxpayer so there aren’t large, unknown bills in the future. In the United States, we use our tax code far more than other countries to encourage savings and other socially beneficial behavior. We spend billions of dollars to incentivize saving for retirement through 401(k)’s and I.R.A.’s. That costs us a huge amount of money without much effect in creating a secure retirement system. In fact, America’s voluntary system means that nearly six out of 10 workers are not in pension or 401(k) plans.