Time’s Money Magazine features recent research led by ReLab Director Teresa Ghilarducci on the damaging effects of income shocks on retirement savings in, “Here's How Much a Job Loss Now Will Cost You by Retirement.”

Income shocks are pervasive, with 96 percent of Americans experiencing at least four in their working years. For example, a drop of 10 percent or more four times in your life can reduce retirement savings by $25,000 on average. This average is higher for low-income Americans, whereas wealthier Americans have healthy emergency funds to draw from. Ghilarducci challenges the notion that the retirement crisis is due to poor savings habits. Less privileged Americans have few options when unexpected hardship hits before retirement.

New School Economics Professor Sanjay Reddy is offering a free online course in microeconomics in collaboration with the Institute for New Economic Thinking (INET). Titled, "Advanced Microeconomics for the Critical Mind," the class will transcend the narrow and technical nature of modern microeconomics to present a holistic survey of the discipline. Professor Reddy will engage students in a wide range of topics to help them better understand the foundations and implications of modern microeconomic theory. You can watch a preview of the course material.

Professor Reddy received his PhD from Harvard University in 2000. His research focuses on development economics, international economics, and economic philosophy. Teaching Assistant Raphaele Chappe received her LLM from New York University and came to The New School after eight years as an attorney in the financial services industry.

Classes begin October 3rd. The course is free and registration is open to anyone interested.

 MG 2813SCEPA is proud to congratulate New School Economics PhD Heather Boushey on her appointment as chief economist of Hillary Clinton’s transition team, formally called the Clinton-Kaine Transition Project.

Boushey serves as executive director and chief economist of the Washington Center for Equitable Growth and a senior fellow at the Center for American Progress. Previously, she worked at the Joint Economic Committee, the Center for Economic and Policy Research, and the Economic Policy Institute.

Her recent book, “Finding Time: The Economics of Work-Life Conflict,” reflects her research focus on inequality, women, and social policy. The book presents a history of how the social and political environment has shaped the complicated economic lives of families. In response, she lays out policy proposals necessary for Americans to find the time they need and businesses to attract productive workers. Boushey presented her findings at The New School as SCEPA’s 2016 annual Schwartz lecturer. She also joined us in 2014 to give a powerful response to Thomas Piketty’s presentation of his book, “Capital in the Twenty-First Century.”

Boushey received her PhD in Economics from The New School for Social Research in 1998. Working with Economics Professor Anwar Shaikh,her dissertation was titled, "The Social Structures of Insulation: The Relationship Among Unemployment, Discrimination and Social Policy."

David HowellLydia DePillis, writing for the Washington Post’s WonkBlog, quotes economist David Howell, professor of urban policy at The New School, in “The $15 Minimum Wage Sweeping the Nation Might Kill Jobs - and that’s Okay.”

While liberal economists agree the minimum wage should be raised, they differ over how high it should go. Mark Levinson, chief economist at the Service Employees International Union (SEIU), is a vocal proponent of a national $15 per hour minimum wage. Alan Krueger, a former Obama Administration official, supports a $12 per hour minimum, but worries that $15 would lead to job loss in some parts of the country.

Howell offers a different perspective. “Why shouldn’t we in fact accept job loss? What’s so bad about getting rid of crappy jobs, forcing employers to upgrade, and having a serious program to compensate anyone who is in the slightest way harmed by that?” he told DePillis. Howell is a proponent of a program similar to Trade Adjustment Assistance (TAA), which helps workers who lose their jobs to foreign trade.

University of Massachusetts Amherst economist Gerald Friedman is at the center of a heated debate on the economic impact of presidential candidate and U.S. Senator Bernie Sanders’ economic platform and the role of outside policy experts in political campaigns.

Friedman analyzed Sanders’ proposals and found large, positive economic effects from increased government spending, such as a real GDP-growth rate of 5.3%, which is higher than the U.S. economy has ever sustained. To some, Friedman’s results seem implausible. However, his GDP growth rate is the result of standard modeling techniques and the size a consequence of the scale and scope of Sanders’ ambitions.

In response, four former chairs of the Council of Economic Advisors (CEA) under Presidents Obama and Clinton called on Sanders to distance himself from Friedman’s proposals on the basis of their apparent implausibility. Rather than disputing Friedman’s methods, they claimed the exorbitant results risk damaging the Democrats’ reputation as the “party of evidence-based economic policy.” The former CEA economists equated Friedman’s conclusions regarding the growth rate with the “grandiose predictions” made by outside experts supporting Republican’s economic proposals, including those using a supply-side, tax-cut model to support the growth potential of tax cuts.

In a series of blog posts, New York Times columnist Paul Krugman supported the position of the former CEA chairs, questioning both Friedman’s and Sander’s motives.

In turn, the CEA letter and Krugman’s columns generated a backlash of their own. Jamie Galbraith responded with an open letter. Friedman himself wrote directly to Krugman and Mother Jones’ Kevin Drum summarized the controversy.

New School economists and scholars are dedicated to scrutiny and debate, and believe this process should apply to Friedman’s results just as it should apply to any economist’s results. In this case, the quick jump to questioning political motives appears to have skipped over this exercise in rigor that is the hallmark of economists’ professional ethos.

This is why we have invited Gerald Friedman to speak at The New School Department of Economics seminar series at 4:00pm on May 3, 2016. Friedman’s lecture is tentatively titled, “What would Sanders Do? Or, How a Naive College Professor Stumbled into a Professional and Media Buzzsaw." The lecture will be held at 6 East 16th Street in room 1009.

Sanjay ReddyWhat’s the best way to evaluate international differences in living standards? How can we compare the value of 100 dollars to an American with 100 taka to a Bangladeshi?

In the November 17, 2015 seminar hosted by SCEPA and The New School Economics Department, New School Economics Professor Sanjay Reddy presented his research on the most appropriate choice of price index. According to Reddy, the most commonly used price indices are deeply flawed. However, with careful reasoning, informative and honest indices are achievable.

Reddy is critical of the most widely used methods for constructing price indices. While cynics claim that a perfect index number doesn’t exist, so anything goes, Reddy argues that certain indices are most appropriate for certain circumstances. Just as we use scales to measure weights and rulers to record heights, we should use different indices for different purposes as long as they fit the task at hand and are used consistently. For example, you can’t answer the question “who’s taller?” by measuring one person’s height and another’s weight.

The most widely used approach to constructing price indices is a “representative agent” model, where researchers assume that individuals are rational utility-maximizers, and infer budget constraints and utility functions from observed consumption behavior. According to Reddy, this approach is unconvincing. It may not be an accurate description of how people make decisions, and it fails to satisfy the axioms of the consumer choice theory on which it relies.

Instead, Professor Reddy proposes a set of criteria from which a more reliable price index can be constructed. His own project, The Global Consumption Consumption and Income Project (GCIP), aims to provide a more comprehensive understanding of how a country’s well-being evolves over time and can be compared internationally.

The AtlanticIn “What Happens When Low-Wage Workers are Given a Stake in Their Own Company,” SCEPA Director Teresa Ghilarducci writes about Texas grocery chain HEB’s recent announcement that it will give 15% of the company to its 55,000 employees.

HEB workers who meet a certain tenure threshold will get an equity stake valued at 3% of their salary and an additional $100 in stock per year going forward.

HEB’s move is not without support. Economists on both the left and right advance the idea of efficiency wage theory, or employers offering compensation above market rate to attract talent and reduce turnover. Social theorists have long discussed how worker ownership gives workers a stake in the success of their company. John Stuart Mill advocated industrial cooperatives, and Robert Owen experimented with utopian communities during the industrial revolution. More recently, Democratic presidential candidate Hillary Clinton has proposed a tax break that would encourage companies to share profits with their workers.

But HEB’s decision is best viewed in the context of recent developments in the labor market. The unemployment rate is finally approaching its pre-crisis level, and activists are becoming increasingly vocal about low pay and poor working conditions. If this is what workers get when the unemployment rate is 5%, what might happen if it falls even further?

declarationSCEPA Economist Willi Semmler joined 266 economists from 44 countries in signing the Economists Declaration on Universal Health Coverage, calling on global policymakers to "prioritize universal health care coverage as an essential pillar of sustainable development." Semmler, a professor of economics at The New School, directs SCEPA's Economics of Climate Change project. 

As the United Nations meets this week to adopt 17 sustainable development goals, the declaration urges the international body to prioritize a "pro-poor pathway to universal health coverage" and calls for increased domestic funding, donor country commitments, and political leadership to advance necessary reforms. The economists estimate the benefits of investing in basic health care will be 10 times greater than the costs. 

The declaration was convened by the Rockeller Foundation and led by Harvard Professor and former US Treasury Secretary Larry Summers. 

Aleksandr Gevorkyan, Professor of Economics at St. John's University and New School PhD, joined with Otaviano Canuto from the World Bank to call for the creation of a Migration Development Bank (MDB).

With 250 million migrants in 2015, the authors cite the need for "an internationally recognized and functional institutional financial framework that would systematize the positive economic impacts of migration and remittances for developing countries while smoothing capital and labor flows."

Using Eastern Europe and the Former Soviet Union as case studies, they show how an MDB would provide an institutional framework for remittances and build the possibility for development in migrants' home countries.

Their article was published by Huffington Post, EconoMonitor and Seeking Alpha.

SCEPA Economists at DFG ConferenceThe German Research Foundation (DFG) awarded grants to seven SCEPA economists to support research on wealth and disparity in the United States and Germany. SCEPA Faculty Fellows Willi Semmler, Mark Setterfield, Christian Proaño, Teresa Ghilarducci, Rick McGahey, Research Economist Joelle Saad-Lessler, and NSSR Dean William Milberg are among the experts chosen for funding.

Semmler and Setterfield will research the trends, policies, and macroeconomic implications of inequality. Proaño's research focuses on experimental economics, entrepreneurship, and inequality. Milberg will analyze research from Lederer and other German University in Exile scholars who studied labor markets and inequalities. Ghilarducci, McGahey, and Saad-Lessler will research employment and retirement outcome inequalities in the two countries.