- On Capitol Hill
- On Wall Street
- In the Press
- Policy Reform Work
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.
New School Economics Professor Lance Taylor thinks most economists are missing the big picture.
In an interview with Lynn Parramore of the Institute for New Economic Thinking (INET), Taylor describes the major problem in the field of economics as the division between micro and macro - between our understanding of the economic behavior of individuals and markets and our understanding of the behavior of entire economic systems.
The first problem Taylor discusses is how the split between macro and micro makes forecasting imprecise at best. From the perspective of macroeconomics, people’s behavior in certain circumstances is unpredictable--like when housing prices fall and the financial system coagulates. It’s no surprise that the profession was caught off guard by the financial crisis of 2008. Without new theory and forecasting techniques, they’ll likely be surprised by the next one.
Another problem is the growing divide between the haves and the have-nots. Taylor is cautiously optimistic on the debate about inequality, which Thomas Piketty's book and the Occupy Movement elevated to popular discussions. There is still a major disjunction between economists who believe that inequality is driven by factors such as merit, education and opportunity, and those who believe that social relations and the legal system play an important role.
Lance has published a new report criticizing mainstream approaches to growth and inequality, and proposes a new, more realistic way of thinking about it. As he describes in the video, growing inequality is driven by conflict over profits. Over the past 40 years, he says, “the bargaining position of companies has improved relative to the bargaining position of workers.” There is no economic law that means this must be so. Rather, it’s because unions have been weakened and industry groups have consolidated their power, both of which are determined by social values and the legal system. Until workers get their bargaining power back, incremental changes in the minimum wage or the provision of employer-sponsored benefits won’t go very far toward lessening inequality.
The impetus to tackle economic problems must come from the political sphere. It could take another crisis, either a credit crunch or major climatic event, to shock the system enough. But we shouldn’t just react. We need to prepare for problems and destabilizing trends before they fully materialize. Financial crises cause recessions and impoverish workers, but climate change threatens our ability to occupy the planet in the manner to which we have become accustomed. Waiting around isn’t worth the risk.
The retirement crisis is forging unlikely alliances. The New York Times’ Mark Miller writes about how SCEPA director Teresa Ghilarducci and Blackstone President Tony James have joined forces to advocate for replacing 401(k)s with a mandatory retirement savings program on top of Social Security.
Since Dr. Ghilarducci first proposed Guaranteed Retirement Accounts (GRA) in 2009, the effort for reform has gained steam as policymakers recognize the chasm between what experts recommend people save and what they actually do. Most Americans, even in the upper-middle class, have saved nowhere near enough for retirement.
The will for reform is present abroad and at home. Britain, Australia, and New Zealand implemented mandatory retirement programs within the last generation - to great success. In Britain, workers can expect to receive 71% of their salary in retirement. Three U.S. states have enacted universal pension plans since 2012, and another 23 are considering a variety of proposals. According to Ghilarducci, state action is a response to federal inaction, and state policymakers would prefer federal reform.
Last month, the U.S. Treasury debuted its myRA program, which makes government-sponsored starter IRA’s widely available. However, because myRAs are voluntary and small, their impact will be limited. Nonetheless, the program reflects a broad recognition of the need for reform. The Ghilarducci-James alliance is another indicator that a comprehensive federal plan is both necessary and possible.
Today’s unemployment report - while good news for the overall economy - reveals that the number of older people in the labor market continues to outpace population growth. While we all know the number of older people is increasing as the Baby Boomers hit retirement age, this isn’t a story about demographics. It’s about a larger percentage of older workers relying on the labor market.
You can see this trend in both the shrinking unemployment rate for older workers and the increase in their labor force participation rate. In November, the unemployment rate for older workers was 3.7%, one of the lowest since the beginning of the recovery in 2010. More people are working or looking for work.
The labor force participation rate, like the unemployment rate, includes both those looking for work as well as those who have jobs. In November, the participation rate for workers 55+ was about 40.2%, close to its peak of 40% in 2012. In 1995, only about 30% of workers over 55 participated in the labor force, an increase of 124% over the past 20 years. As a result, the labor market is flooded with 35 million older workers. In contrast, the number of prime-age workers (those between 25 and 54 years old) has not grown as fast as the prime-age population. The labor force participation rate of prime-age workers fell to about 80.7% from 80.8% in 1995.
Why are more older workers in the labor market? Given the crisis in retirement savings, some are unable to leave due to inadequate savings, the increase in 401(k)-type plans, and the lack of affordable health insurance.
Cutting Social Security benefits through raising the retirement age leaves work as the primary solution to the shortfall in retirement wealth. While it may look good to see an increasing demand for jobs among older people in an expanding economy, this rosy scenario doesn’t account for bargaining power. If the surge in older workers continues, the job market for all workers takes a hit in lower wages and increased competition between old and young.
The solution is to ensure retirement income through Guaranteed Retirement Accounts. This benefits both old and young. Older workers would have the choice to retire at their current standard of living and younger workers will see an increase in the supply of jobs.