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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.
Dr. Lauren Schmitz, a New School Economics PhD and National Institute on Aging postdoctoral research fellow at the University of Michigan, joined ReLab's Political Economy of Aging series to present her research on the interplay between historical measures of average schooling at the state level in childhood and genetic propensity for educational attainment on years of education, degree completion, and lifetime earnings.
Her study, summarized below, finds that inequality in educational outcomes by genotype emerges among individuals who were educated in states with lower average educational attainment during their primary schooling years.
The Political Economy of Aging speaker series is a forum for academics and practitioners to share and engage in cutting edge research in social policy and the political economy of aging. The series is designed to forge interdisciplinary connections and examine how to progressively manage an aging society. The series is sponsored by SCEPA's Retirement Equity Lab, led by economists and retirement experts Teresa Ghilarducci and Tony Webb.
This study exploits administrative earnings records matched to detailed genetic and sociodemographic data in the Health and Retirement Study (HRS) to estimate whether the educational environment, as captured by state-level differences in average years of schooling, modify the associations between genetic propensity for educational attainment and individual schooling, and genetic propensity for educational attainment and lifetime earnings.
To capture the complex genetic architecture that underlies the bio-developmental pathways, behavioral traits, and evoked environments associated with educational attainment, we calculate polygenic scores (PGSs) for respondents in the HRS derived from a recent genome-wide association study (GWAS) for years of schooling.
We find evidence that both individual genetic endowment and the state-level educational environment contribute to individual schooling and lifetime earnings, with limited evidence for any interaction between them. The exception is completion of a secondary degree, where we find that individuals educated in states with higher average educational attainment during their primary schooling years were more likely to obtain a GED or high school degree—regardless of genotype—whereas individuals raised in states with below average educational attainment were approximately 7 to 24 percent less likely to obtain a secondary degree than individuals with similar PGSs in higher achieving states.
January Unemployment Report for Workers Over 55
The Bureau of Labor Statistics (BLS) today reported a 3.5% unemployment rate for workers ages 55 and older in January, a decrease of 0.1 percentage points from December.
The low headline unemployment rate hides a racial gap in the physical job demands faced by older workers. At all income levels, older black workers are more likely to experience physical demands at work than older white workers, including requirements to lift heavy loads, stoop, kneel or crouch during most of the workday.
The racial gap, which exists at all wage levels, is largest among older low wage workers. The gap among those earning less than $22 an hour is 22 percentage points, with 62% of Blacks in physically demanding jobs compared to 40% of Whites. For workers earning between $22 and $40 an hour, the gap is 11 percentage points, with 43% of Blacks are in physically demanding jobs compared to 32% of Whites. The racial gap persists even for higher earners. For those in the top 20% of the earnings distribution making more than $40 an hour, the gap is 8 percentage points, with 24% of older Blacks are in physically demanding jobs, compared to 16% of older Whites.
This persistent racial gap means that proposals to increase Social Security’s Early Retirement Age would require black workers to continue to do physically demanding work at older ages. To enable all workers to retire - whether due to physical necessity or choice - policymakers should both expand Social Security and create Guaranteed Retirement Accounts (GRAs). GRAs are are individual accounts requiring contributions from both employees and employers throughout a worker’s career. They provide a safe, effective vehicle for individuals to accumulate personal retirement savings and receive lifelong income as a supplement to Social Security.
On December 8, a month after the election, President-Elect Donald Trump used Twitter to attack a white male steelworker - a representative of the voting block that tipped the election in his favor. For his part, Chuck Jones, president of United Steelworkers Local 1999 in Indianapolis, started the fight by calling the President-elect a liar. Jones claimed that only 800 Carrier heating and air conditioning jobs would not be moving to Mexico, rather than the “more than 1,000 jobs” Trump claimed to save.
Notably, President-elect Trump blamed unions for manufacturing job losses. In the 1970s, unions were blamed for being uncompetitive, and unions fell over themselves to negotiate concessions. But most research showed the concessions mostly raised profits and made it cheaper for companies to close down and move jobs. So the jobs left faster. Smashing unions didn’t work. In Ohio, for instance, workers couldn’t compete with Chinese labor markets.
So what to do? How to keep good paying jobs in the United States?
The Carrier deal lifts up the one question taxpayers and voters have to answer. How much should a president, governor, or mayor pay to keep a job in the United States?
Vice President-elect Mike Pence, the current Governor of Indiana, gave Carrier $7 million in tax breaks from Indiana taxpayers. That is under $9000 per job. But the total cost to Indiana could run well beyond $7 million should the Carrier deal replicate previous practices of hiding the full costs of such agreements in various state accounts and budgets. But transparency issues aside, is it economically worthwhile for states to offer tax breaks as an incentive for companies to remain in-state, and at least preserve the incomes of a portion of their work force?
A consensus among economists from a variety of perspectives holds that subsidizing individual firms is wasteful, doesn’t boost long-term prosperity, and creates “economic war among the states.” In 1994, economists at the Federal Reserve Bank of Minneapolis argued against the practice because state tax incentives drain public budgets, create unhealthy competition to move businesses from one location to another, and ignore the economic fundamentals that determine optimal business location. The conventional economic view is that states and cities can compete by offering lower overall taxes and regulations, and other advantages such as lower crime rates, more effective transportation, and a better-educated labor force.
Many economists argue against giving particular firms tax breaks because most go to big firms. Big firms often exploit their economic position to capture “rents” of various sorts, including tax and regulatory advantages not available to smaller businesses. And subsidy policies are often allied with calls for lower overall taxes and broader attacks on minimum wages, unions, and other labor policies. Their combined effect is to depress incomes.
Instead, the economy could be boosted more by strengthening public sector and labor bargaining power and tying tax breaks to clear, measurable benefits that, if not met, can result in those tax breaks being recaptured, or “clawed back.”
The only major economists who have argued for firm-specific tax breaks are Michael Greenstone and Enrico Moretti, who found that winners of inter-state competition to host industry can see increases in related property values without significant overall revenue loss. But their research covers the construction of new plants rather than subsidies to existing ones, and the dominant finding is that plant-specific subsidies—such as those to Carrier—are inefficient rents captured by healthy, large firms, with little benefit flowing to employees.
Some analyses go further, finding that state subsidies increase inequality by strengthening anti-union, anti-regulation, “low-road” employers relative to other companies.
Economists are likely to offer a more nuanced and contextual view of the agreement and the issues it raises than the President-elect did at his Carrier event. While around 800 Carrier jobs in Indiana jobs will now be retained, over a thousand more will still move to Mexico, despite a large, non-transparent tax giveaway that will cost Indiana taxpayers millions of dollars. And economists of all stripes concur that such giveaways are bad policy that will do little to help the state’s industrial workers, while eating into public budgets needed for investments in infrastructure and education, which are essential in the longer-term recipe for healthy, equitable growth.
By Rick McGahey, former assistant secretary of labor, and Teresa Ghilarducci, economics professor at The New School for Social Research. Originally appeared in the Huffington Post.