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- 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.
Economic growth can be a rising tide to lift all boats, so we are told. Advocates for cutting Social Security benefits by raising the retirement age imply that economic growth will create jobs for older workers left to work longer. But the data debunks this myth: America’s fastest growing cities have the highest rates of unemployment for older workers.
Nationally, this morning’s job report from the Department of Labor reported an October unemployment rate of 3.5% for older workers (aged 55-64). But in the 10 cities with the highest gross metropolitan product (GMP) growth in 2014, the numbers are worse, with 5.6% of older workers unable to find jobs, as compared to a metropolitan average of 4.0%.
Economic growth is not a quick solution to the difficulties faced by older workers who can’t afford to retire. Why? The factors that drive economic growth – a booming tech and finance sector, for example - don’t necessarily produce jobs for older workers. In fact, industry specialization - a key driver of growth - could explain why older workers struggle in booming cities.
The 10 cities with the highest growth in output, over 5.5%, have a higher demand for technology jobs and significantly higher demand for finance, insurance and real estate jobs than the national average. For example, Austin, Texas, and San Jose, California, are home to expanding technology sectors, but recorded unemployment rates for older workers of over 12%. If high growth becomes dependent on jobs requiring knowledge of cutting-edge software at a time when firms are less willing to train workers, older workers will continue to be at a disadvantage in the labor market.
Instead of raising the retirement age, consigning older workers to an unfriendly labor market and increasing risk of old-age poverty, Americans need Guaranteed Retirement Accounts (GRAs), a reliable and effective method to save for retirement.
In “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?
In “How to Help the Middle Class Retire Comfortably at No Extra Cost,” SCEPA Director Teresa Ghilarducci discusses the federal government’s main tool for encouraging retirement savings: tax expenditures. At $120 billion per year, tax breaks for retirement savings represent the second largest federal tax expenditure, just below health insurance and above mortgage interest and charitable giving.
Unfortunately, this money is not spent equitably or effectively. The majority of it accrues to the top 20% of earners, who are more likely to have employer-sponsored retirement savings accounts and have higher taxes to avoid. Recent research shows these tax breaks aren’t having their intended effect. High-earners who benefit from them would be saving anyway, and just shift their money to retirement accounts to lower their tax rates.
This money could be better spent. Instead of giving most of the $120 billion to wealthy households to encourage saving they would have done anyway, we should divvy it up equally to support everyone’s need to save for retirement. This would amount to about $800 per worker per year, which would give workers around $100,000 in savings by the time they retire.
While we still need a comprehensive solution to the retirement crisis in the form of Guaranteed Retirement Accounts, reforming inefficient and ineffective tax breaks for retirement savings is a good start. It represents a huge increase for the roughly half of American households who have no retirement savings whatsoever.