Our projects are designed to empower policy makers to create positive change. With a focus on collaboration and outreach, we provide original, standards-based research on key policy issues.
SCEPA joined with the Economic Policy Institute on Capitol Hill to brief congressional staff and policy experts on tax expenditures, or incentives given through the tax code without scrutiny by Congress.
SCEPA economists are working on the prospects for a more progressive economic order to emerge from the shock of the recession. They have published papers and documents that place current events in a longer-term context as well as policy proposals to deal with short-term concerns. They are also documenting the emerging discussion of how the discipline of economics is reacting to the Great Recession and the questioning of conventional economic analysis.
Lance Taylor, a SCEPA Faculty Fellow, presents an overview of his new book, Maynard’s Revenge, in a Google Tech Talk.
The book, published this November by Harvard University Press, is a timely analysis of mainstream macroeconomics, posing the need for a more useful and realistic economic analysis that can provide a better understanding of the ongoing global financial and economic crisis.
The government spends $143 billion through tax breaks in an effort to expand pension coverage and security. Yet, over half of the American workforce does not have a pension. Retirement insecurity hurts business plans, workers’ lives and retiree well-being. Reform is needed.
SCEPA’s Guaranteeing Retirement Income Project, sponsored by the Rockefeller Foundation and in collaboration with Demos and the Economic Policy Institute, has a plan to guarantee safe and secure retirement income for all Americans.
- Published on Tuesday, September 30, 2014
This article appeared on Huffington Post's Money blog on September 30, 2014, and as a letter to the editor under the Wall Street Journal's headline, "There Really is a Huge Retirement Crisis Developing."
The Retirement Crisis is Real
The retirement crisis is anything but imaginary. In a recent working paper, we find that only 44% of workers in the United States have access to a retirement plan at work. Except for workers with defined benefit plans, most middle class U.S. workers will not have adequate retirement income - 55% of near-retirees will only have Social Security income at age 65.
Yet, in a Wall Street Journal opinion piece titled, "The Imaginary Retirement Income Crisis," Andrew Biggs and Sylvester Schieber make a number of startling and misleading claims.
Not Enough Retirement Income
First, they claim that the average U.S. retiree has an income equal to 92% of the average American income. Yet, the latest data from the American Community Survey show that the median income of U.S. retirees1 is less than $16,000 compared to the median American worker's income of $31,000 – hardly 92%.2 Retired workers received an average of $1,294 per month in Social Security benefits as of December 2013. That adds up to a paltry $15,528 per year – far from a princely sum to live on when one's medical bills and the expenses of old age are racking up.
Social Security Supports a Stabile Economy
Second, Biggs and Schieber assert that if Social Security benefits are increased, the country will likely experience lower employment and saving rates. Our new study shows the exact opposite. Social Security benefits actually boost the economy during recessions as beneficiaries maintain spending power in a downturn.
Downward Mobility in Retirement
Third, Biggs and Schieber rightly use a reasonable measure of adequacy - retirees' ability to maintain living standards, which compares retirement income to work earnings. They refer to a Social Security Administration's Office of Retirement and Disability Policy (ORDP) report to note that in 2012 the income of the median 67-year-old exceeded his career average earnings. But it would be a mistake to make much of this statement. The median 67-year-old in the ORDP report is taken from a pool of individuals who continue to work and thus have higher earnings and higher years of education than the typical 67-year-old. Recent work by Gary Burtless shows that 67-year-old men with professional degrees are three times more likely to be working than men with a high school education or less. This ORDP pool from which the median is drawn also includes individuals who are claiming Social Security benefits. This helps explain why their incomes appear higher than their career averages.
Less Retirement Income for Gen-Xers
Fourth, Biggs and Schieber claim that the typical Gen-X (born between 1966 and 1975) household will have higher replacement rates than Depression-era birth cohorts. This claim is misleading because it uses an unorthodox measure of replacement rates. The ORDP report actually shows that the more common measure, wage-adjusted replacement rates, has deteriorated over time. Depression and WWII-era birth cohorts have replacement rates of 95% and 98%, while future retirees (born between 1966 and 1975) will have projected replacement rates of 84%.
It is very interesting that Biggs and Schieber decide to use the cited ORDP report to claim that the retirement crisis is imaginary. One of the major findings of this report is that gains in retirement income are largely going to higher socioeconomic groups (whites, the college educated, high earners, and workers with strong labor force attachments). In the age of inequality, the retirement crisis is real.
People need more savings for retirement. Mandatory, protected, and regulated individual accounts in addition to a robust Social Security system will ensure that all Americans have an adequate retirement income and can choose to work or not in their old age.
1U.S. retirees are defined as Americans who are older than 60, are out of the labor force, and had no income from earnings.
2The median worker is defined from a sample of Americans 60 years of age or younger, who were in the labor force.
- Published on Friday, September 26, 2014
On October 3, 2014, SCEPA hosted a discussion with economist and author Thomas Piketty (included in economist Brad DeLong's blog as a "Must Watch"). Piketty's best-selling book, Capital in the Twenty-First Century, serves as a watershed example of the dual contradictions of capitalism and proves that the last century was characterized by a sharp divergence between social classes. He warns that the main driver of inequality—the tendency of returns on capital to exceed the rate of economic growth—threatens to generate extreme inequalities that stir discontent and undermine democratic values.
Much like Piketty's work, economists at The New School for Social Research strive to analyze the dynamics of capitalism using historical and empirical analysis and, through SCEPA, its policy implications. Following Piketty's remarks, New School Professor Anwar Shaikh and Executive Director and Chief Economist at the Washington Center for Equitable Growth Heather Boushey presented their own comments and joined in a panel discussion to answer the question, where do we go from here?
Thomas Piketty, Capital in the 21st Century
Anwar Shaikh, Inequality and Social Structure: Comments on Piketty
- Published on Thursday, September 04, 2014
Do government programs help the economy?
Looking at data from 1971 through 2012, a SCEPA Working Paper, 'How 401(k) Plans Make Recessions Worse' (soon to be published in a research volume by the Labor and Employment Relations Association), found that Social Security, unemployment insurance, disability insurance, Medicare and federal taxes are indeed good for the economy. Specifically, these programs have a stabilizing effect on the economy. By increasing consumer spending in recessions and reducing it in times of expansion, they dampen the wild swings of the business cycle.
On the other hand, 401(k) plans are destabilizing to the economy. They reduce consumer spending in recessions as savers lose 401(k) wealth in the stock market, and they increase spending in expansions when inflated 401(k) accounts make people feel wealthier.
Consumer spending is important because it translates into jobs. During a recession when overall spending is down, the unemployment rate rises. But Social Security, disability insurance, Medicare, income taxes, and unemployment insurance keep the unemployment rate from rising even higher.
Christina Romer and David Romer also found that Social Security and other government transfer payments have a positive impact on consumption in their paper, Transfer Payments and the Macroeconomy: The Effects of Social Security Benefit Changes, 1952-1991. SCEPA's research takes this one step further by documenting how 401(k) plans reduce the efficacy of these automatic stabilizers and result in higher unemployment rates during recessions.