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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.
The December 2014 employment report issued today by the U.S. Department of Labor reports the unemployment rate for workers over the age of 55 - those looking for work - at 3.9%. More than 1.35 million workers over age 55 were pounding the pavement looking for a job.
These figures mark a decline in the unemployment rate of older workers from 4.5% in November, when more there were 1.53 million workers over age 55 in search of work. However, the proportion of older workers with jobs did not change; the employment-to-population ratio remained at 38.3%.
Rather than signaling that a significant number of unemployed workers found work, the decline in the unemployment rate for older workers may be due to the fact that 112,000 workers over age 55 left the labor force in December.
SCEPA research has found that older people who lose their jobs are at a higher risk of remaining unemployed and withdrawing permanently from the labor force. This involuntary early retirement leaves older workers at risk of poverty as well as a loss of health insurance years before they are eligible for Social Security benefits. SCEPA estimates this costs the government between $10.5 and $9.4 billion per year in income, food and health support.
This week's Worldly Philosopher, Raphaele Chappe, questions the inequality in investor returns.
As discussed at great length in prior posts, Piketty has argued that inequality is directly linked to the return on capital r exceeding the growth rate of the economy g. Yet a fascinating (perhaps controversial, and less discussed) claim is that the average rate of return on capital is not the same for all investors depending on the size of the portfolio – in short, contrary to the efficient market hypothesis, some investors do earn higher returns in the long run.
Piketty points to the fact that the wealthiest individuals in the world have earned annual returns of 6.8% per year since 1987, compared to the world average of 2.1%. Using university endowments as a case study, he also points to higher endowments earning higher returns in the long run (see Tables 12.1 and 12.2 in Piketty, 2013). Other research confirms that rich universities are getting better returns and do seem to benefit from better asset selection abilities.
Finance tells us that higher returns for wealthier investors could be achieved in two ways. First, by taking on more "risk" and investing in stocks with higher "beta," or products with embedded leverage (such as derivatives). Second, by getting a higher return per unit of risk than what should be expected given the beta. This second component is known as the "alpha," measuring the return above the risk-adjusted performance of a benchmark index and (supposedly) a measure of the skill of the active asset manager. We can imagine that factors such as better information (or even insider information), arbitrage opportunities, or advanced tax planning can generate considerable alpha. Piketty points to significant economies of scale associated with the size of the portfolio.
Do higher returns to high net-worth individuals or institutions come from an ability to take more risk or from higher alphas?
This week's Worldly Philosopher, Kyle Moore, exposes the disproportionate burden raising the retirement age would put on Black Americans.
Recent years have seen a spike in both traditional and social media coverage of violence against black youths. The creation of the viral hashtag #BlackLivesMatter, most recently associated with the Ferguson, MO police killing of unarmed black teenager Michael Brown, captures this shift in public attention towards the long prevalent issue.
There is another segment of the black population whose lives are being undervalued in 2014. Elderly blacks' lives are not properly accounted for as changes to retirement policy are considered in Washington. Policymakers are using the fact that the "average" American's life span is increasing to justify raising the retirement age to 70, in spite of black Americans not sharing equally in this increase in life span. If black lives do indeed matter for the old as well as the young, then policymakers will have to grapple with the persistent and growing disparities in life span and sickness between the elderly black and white populations.
Black Americans Live Shorter Lives than White Americans—For Men, the Gap is Growing
Even though the "average" American is living longer at age 65, there are still significant gaps in life span between elderly black and white American men and women. In a policy note on racial disparities in longevity (life span) and mortality (risk of death), I look at the creation of a gap in expected years of life between black and white men at age 65. Starting in 1950, this gap in longevity has grown steadily to almost two years in 2010. For women the changes have been more mixed, with a gap in life span growing between 1950 and 1980, and shrinking between 1980 and 2010 to a one year difference.
Black Americans Don't Make it to Retirement Without Activity Limitations
In a follow-up note on racial disparities in morbidity (sickness), I look at black and white Americans' expected years free from activity limitations in relation to the current full retirement age. While Whites can expect to live 67 years without being somehow debilitated by sickness, just barely reaching the current full retirement age, Blacks can only expect about 61 years. This means elderly Blacks face the reality of having to either work while physically impaired, or applying for often stigmatized disability benefits.
If #BlackLivesMatter to Policymakers, Retirement Policy Should Account for Racial Disparities
Throughout the two policy briefs mentioned and a longer white paper on the subject, I discuss what researchers consider to be the major causes for these trends, and potential ways to reverse them. Differences in socioeconomic status account for over two-thirds of the gap in life span and for a significant portion of the differences in activity limitations as well. That being said, measures to address gaps in income and education level could go a long way towards increasing black American life spans and decreasing their rates of sickness.
The creation of the viral hashtag #BlackLivesMatter provides an opportunity to hold our government responsible for ensuring that black American life is adequately valued, no matter the age. Just as both traditional and social media have brought attention to young black life being cut short through direct violence, we should also direct our attention to the conditions leading to elderly black life being cut short indirectly. These conditions, as well as the realities faced by elderly black Americans, need to inform policymakers' decisions as they consider changes to retirement policy.