Blog postings by CEPR staff and updates on the latest briefings and activities at the Center for Economic and Policy Research.

Tuesday night, Rachel Maddow and David Cay Johnston revealed Donald Trump's 2005 two-page Form 1040 on air. Before revealing the form, Maddow made an extended argument that Donald Trump must release his complete tax returns in order to disclose all potential conflicts of interest from his business empire, including potentially income from foreign governments. 

We agree — but tax returns are merely a starting point for understanding Trump’s business partners.

In one example, Maddow pointed to a sketchy real estate deal with a Russian oligarch. Donald Trump purchased a piece of property in Florida for $40 million in 2005. Just three years later, Trump sold the property for $100 million to a Russian oligarch (i.e., a rich Russian businessperson closely tied to Putin’s government) named Dmitry Rybolovlev.

Trump's 150% return on investment in just three years would be suspiciously large even if the real estate magnate had bought an undervalued property and improved it. However, Rybolovlev actually quickly tore down the 62,000 square foot mansion and sold it off in three pieces. How the value of the property appreciated so quickly is a mystery, especially as the Florida’s real estate market was collapsing.

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Overall, January’s unemployment numbers show that the current unemployment rate is only 0.1 percent higher than the June 2007 unemployment rate. This is good news for many American workers, as it suggests that the labor market has fully recovered from the last recession; however a recent CEPR post on prime-age employment goes into more detail of why that might not be entirely true. But when just analyzing the unemployment rate through varying demographics, CEPR found that some workers have fared better than others.

Teen unemployment (workers 16 to 19 years), although still significantly higher than that of adult workers, has actually dropped below 2007 levels. Black teens in particular now have 3.3 percent lower unemployment. White teen unemployment rates have also decreased 0.8 percent. Both remain high, and the unemployment rate for black teen workers is nearly double that of white teen workers. Black teen workers also experienced a greater increase in unemployment from 2009 to 2011 than white teens, with their highest unemployment rate 46.1 percent in 2010.

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Over the past three decades, there have been two major changes in how young people spend their time. First, rates of both high school and college enrollment have gone up, leading to an increase in the share of 16–24 year-olds enrolled in formal schooling:

Share of Americans Ages 16–24 Enrolled In School

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The employment rate for prime-age workers (ages 25-54) inched up to 78.3 percent in February, a new high for the recovery, as the economy added 235,000 jobs. This is 0.5 percentage points above its year-ago level. Most of the rise has been among women, with an increase in the prime-age employment-to-population ratio (EPOP) of 0.8 percentage points to 71.6 percent over the last year. The rise among men over this period has been just 0.2 percentage points.

This rise is noteworthy since it suggests that there are more workers being pulled into the labor force as the recovery continues, even as the unemployment rate has remained relatively stable. If this trend continues, it indicates that the labor market can continue to tighten without creating inflationary pressure.

Other data in the report are consistent with a labor market that still has considerable slack. While the number of people working part-time involuntarily fell by 136,000 in February, it is still well above pre-recession levels. (Voluntary part-time is well above pre-recession levels, presumably due to the ability of workers to get insurance outside of employment through the Affordable Care Act.)

The percentage of workers who are unemployed because they voluntarily quit their jobs fell for the third consecutive month. At 10.7 percent of the unemployed, this key measure of workers' confidence in their job prospects is closer to recession levels than full employment.

Wage growth also appears to be slowing somewhat. Year-over-year growth in the average hourly wage was 2.8 percent in February, but if we compare the average of the last three months (December-February) with the prior three months (September-November) the annualized rate of wage growth was just 2.5 percent. This does not support the view that wage growth is accelerating. It is also important to remember that employers are shifting compensation from health care to wages, so wage growth is likely exceeding the rate of growth of labor compensation.

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Guidelines from the Department of Housing and Urban Development recommend that households spend no more than 30 percent of their income on housing. The reality, however, is that over half of U. S. households spend more than that. A burden which the department notes can cause households to struggle to afford “necessities such as food, clothing, transportation and medical care”.

rawlins rent 2017 02 27 1

CEPR compared Fair Market Rent for a one-bedroom appartment in some of the U.S.’s largest metropolitan areas to monthly income based on each city’s minimum wage to get a more accurate picture of housing costs for the majority of the population.

Unsurprisingly, San Francisco, CA wins as the “most unaffordable” city to live in based on this data analysis. One month of full-time minimum wage work at $13 an hour would net the worker $2,080 and their fair market rent would be $2,411, or 116 percent of their monthly income. This disparity puts San Francisco a full 30 percentage points above second-place contender, Philadelphia. At the opposite end of the spectrum, full-time minimum wage workers in Dallas, TX earn $1,160 at $7.25 per hour and pay 41 percent of it, $679, in fair market rent. This is the lowest percentage of any of the cities analyzed, although it is still well above the 30 percent federal guideline.

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In 2010 Wisconsin elected Scott Walker as governor, a conservative Republican. At this time, Republicans also controlled both houses of Wisconsin’s legislature. Neighboring state Minnesota elected Mark Dayton, a liberal Democrat. Democrats also controlled both houses of Minnesota’s legislature. Both governors were re-elected in 2014.

The two governors took their states on diametrically opposed courses. Walker cut taxes and paid for them with cuts to spending in education and a number of other areas. He also deliberately confronted the state’s public sector unions. He prohibited contracts requiring that all the workers who benefit from a union contract pay for their representation, along with several other measures designed to weaken unions. Later he signed legislation applying the same restriction to private sector contracts.

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Many have a renewed interest in the shrinking of manufacturing and other traditional blue-collar jobs since Donald Trump won the 2016 presidential election. White working class voters in several large Midwestern states that Democrats had previously carried voted for Trump by large margins. The Blue-Collar Jobs Tracker (BCJT), launched by CEPR, will track the progress of the Trump administration in bringing back these jobs both to the country as a whole and in the states that saw the biggest job loss in the last quarter century. For this analysis, the industries tracked are manufacturing, mining, and construction.[1]

The National Trend in Blue-Collar Employment

In 1970, blue-collar jobs were 31.2 percent of total nonfarm employment. By 2016, their share had fallen to 13.6 percent of total employment. While blue-collar jobs have been declining as a share of total employment over this whole period, this was mostly due to the growth in total employment. The number of blue-collar jobs did not change much through most of this period. In 2000 there were 24.6 million blue-collar jobs, only slightly below the peak of 25.0 million in 1979. However the numbers plunged in the next decade due to the impact of the exploding trade deficit and the 2008-2009 recession. Blue-collar jobs fell to 17.8 million in 2010 and have since rebounded modestly to 19.6 million in the most recent data.

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Millionaires are getting a late valentine from Social Security in 2017. The taxes that support the program — which provides retirement, disability, and survivor benefits to millions of Americans —only apply to the first $127,200 that someone makes at their job (up from $118,500 in 2016). Wage income above this $127,200 cap is not subject to the tax. So, someone who makes $1,000,000 a year would stop paying into the program on February 16th.

But the vast majority of the population makes under $127,200 per year, and so they pay the 6.2 percent Social Security payroll tax for the entire year. This means that those that make over $127,200 have a lower effective tax rate than those that make under the cap. Put another way, the poorer have a higher tax burden, as a percentage of their income, than the rich when it comes to Social Security. (CEPR's new report details who would pay more if the tax cap of $127,200 were scrapped.)

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Last summer the Center for American Progress released a report on the problems with the Unemployment Insurance (UI) system in the United States. They cited, among other things, the historically low number of jobless workers who received UI benefits in 2015 – just 27 percent. The two main criteria that determine a worker’s eligibility for benefits are the duration of their unemployment (most states cap UI at 26 weeks) and that they lost their job involuntarily[1].

However, during severe recessions, workers may be unemployed for much longer than 26 weeks, as was the case in the recent downturn. An analysis of trends in unemployment shows that long-term unemployment is one of the main reasons for the decrease in the percentage of the unemployed receiving benefits.

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According to Vox and the Washington Post, the Trump Administration is considering an Executive Order that would have a profound impact on the current system of lawful, family-based immigration. To understand what’s at stake, it’s helpful to first know some of the legal and historical background. Under current law, immigrants seeking a visa to become lawful permanent residents on family-based and certain other grounds can have their applications denied if they are found “likely to become a public charge.” In very rare cases, green card holders living in the United States may be deported if they become public charges during their first five years in the United States.

Who is a public charge? The term is an archaic one. It pre-dates federal immigration law and was typically used in the 1800s to refer to someone (regardless of their citizenship or immigration status) who was a “charge” of the state. In short, someone the government had taken charge of — typically in an almshouse — in a sense roughly akin to being a ward under the control and care of the government.

The power to deny entry to immigrants who were deemed likely to become public charges was first added to federal immigration law in 1882, a few months before the adoption of the Chinese Exclusion Act. As immigration historian Hidetaka Hirota documents in a timely new book, the origins of federal immigration law denying entry on public-charge grounds were in cultural and class prejudice, particularly against Irish immigrants.

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In 2012, Republican presidential candidate Mitt Romney famously commented that 47 percent of Americans were “dependent on government” because they didn’t pay any federal income taxes. He went on to explain that his job was “not to worry about those people.”

Journalists and other public figures often claim that only the rich pay taxes, supporting this with the argument that the rich pay the vast majority of federal income taxes. However, federal income taxes are just one part of the broader tax code. When we consider other types of federal taxes as well as state and local taxes, it becomes clear that the overall tax code isn’t extremely progressive – in other words, it doesn’t “soak the rich,” and it certainly doesn’t let the poor off the hook.

The aforementioned “47 percent” do pay substantial state and local taxes, but even ignoring these taxes, it’s worth noting that income taxes represent just half of all federal tax revenue:

buffie tax code 2017 02 06 table 1

In fiscal year 2013 – the last year for which we have full federal, state, and local data – the federal government raised over $2.6 trillion in total tax revenue. It also raised an additional $134 billion in funds from other sources, most notably customs duties, remittances from the Federal Reserve, and miscellaneous fees and fines. About $1.3 trillion of revenue came from the progressive federal income tax, while another $274 billion came from the progressive corporate profits tax. Estate and gift taxes, which are also progressive, accounted for $19 billion, equivalent to just 0.7 percent of federal tax revenue.

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When people pay their insurance premiums every year, they are hoping that those premiums will cover future expenses. Specifically, that their health insurance companies will cover their bills if they fall ill, their car insurance companies will cover their bills if they get into an accident, etc. While any one individual may pay more or less in premiums than they receive in benefits, the insured population as a whole should generally break even.

However, there is one avenue through which the entire insured population can lose out: overhead costs. Higher overhead costs leave consumers paying more in premiums even when they aren’t receiving more in benefits. In this sense, insurance companies with high overhead costs are similar to expensive middlemen.

Relative to the size of the economy, Americans are paying more in insurance overhead than they did forty years ago. The figure below shows consumer spending on “net insurance” – overhead costs for insurance companies – from 1975 to 2015 for the four major types of insurance. (Because we don’t have a measure of “net insurance” for life insurance companies, total costs are used as a proxy.)

buffie overhead 2017 02 01
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The unemployment rate inched up by 0.1 percent in January to 4.8 percent, as the economy reportedly added 227,000 jobs. The modest change in the unemployment rate was also associated with a rise in the employment-to-population ratio (EPOP) to 59.9 percent. This is equal to the previous high for the recovery in March of last year. The jobs growth figure was somewhat higher than had generally been expected, but is somewhat offset by the fact that the two prior months' numbers were revised down by 39,000.

While the rise in the EPOP is good news, it is still well below pre-recession levels. The drop remains low even when looking at prime-age workers (ages 25-54), with the EPOP for prime-age men 2.7 percentage points below its pre-recession peaks and the EPOP for women down 1.5 percentage points. The EPOP for African Americans hit a new high for the recovery, at 57.5 percent. While these data are erratic, the January figure is more than a full percentage point above the year-round average for 2016.

Other data in the household survey were mixed, notably there was a substantial decline in the share of unemployment due to voluntary quits. The January percentage was 11.4 percent, 1.1 percentage point below its November peak.

The payroll job increases were driven by a jump of 45,900 in retail and 36,000 in construction. The January job gains were likely in part attributable to weather, as there were few serious snowstorms in the northeast and Midwest in the period preceding the reference week.

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During the height of the 2008-2009 recession, there was considerable debate about the origins of the soaring unemployment rate. The New York Times and other major media outlets said that the problem was mostly low demand, pointing out that there were more people searching for jobs than companies searching for workers. During the recession, companies decreased their monthly hiring by about a third, despite the fact that the number of Americans searching for work had more than doubled.

The data mostly indicate that workers weren’t choosing to stay unemployed; rather, they were losing their jobs and having trouble finding new ones. This can be seen most clearly by looking at the ratio of unemployed job losers to unemployed job leavers. Unemployed job losers are out of work because they lost their previous job; unemployed job leavers are out of work because they voluntarily left their last job. In 2006, there were roughly four unemployed job losers for every one unemployed job leaver; by early 2010, that ratio had shot up to nearly 11-to-1. This indicates that the vast majority of the drop in employment during the recession was due to companies laying off workers, not to workers leaving their jobs. Moreover, this phenomenon held true for every major demographic group, as can be seen in the figure below:

buffie rawlins dont blame 2017 01 27 01

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Opponents of amendments to the 1990 Clean Air Act (CAA) argued that increased regulations would damage the economy, leading to a loss of jobs and output. However, the legislation’s passing produced nowhere near the economic devastation predicted. Instead, projections by the Environmental Protection Agency (EPA) expect the benefit of the CAA amendments to reach a cumulative total of 2.0 trillion dollars by 2020 or a bit less than 0.5 percent of GDP for this period. For comparison, the estimated cost of complying with CAA regulations is 65 billion dollars or less than 0.02 percent of GDP over this thirty year period. That is $30.77 of benefit for every dollar spent on regulation.

rawlins clean air act 2017 01 fig 1

In 2020 alone, the amendments are expected to prevent over 230,000 early deaths. Those prevented deaths come in the form of decreased adult and infant mortality from exposure to the ozone and fine particle pollution. They also estimate a decrease in chronic bronchitis, acute myocardial infarction, and asthma exacerbation. The amendments will decrease emergency room visits by 120,000, prevent 5,400,000 missed school days, and 17,000,000 lost work days.

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A surge in the trade deficit held GDP growth to just 1.9 percent in the 4th quarter of 2016, bringing the growth rate for the full year to 1.9 percent, the same rate as 2015. The growth rate in final demand in the quarter was even worse, at 0.9 percent, as inventories accumulation added a full percentage point to growth in the quarter. The 2016 GDP growth brought the average for the eight years of the Obama administration to 1.8 percent.

A striking aspect of this report is the weak evidence of any inflationary pressures in spite of the tightening labor market in recent years. The overall GDP deflator increased at a 2.1 percent annual rate in the 4th quarter. The core personal consumption expenditure deflator targeted by the Federal Reserve Board rose at just a 1.3 percent annual rate. There is no evidence of any upward trend in this measure which remains well below the Fed's 2.0 percent target rate.

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In October of 2009, the national unemployment rate peaked at 10 percent; as of December 2016, it was down to 4.7 percent. The Federal Reserve Board voted last month to raise interest rates in part due to this low rate, and the decrease in unemployment has generally been hailed as a sign of recovery. But how accurately do those numbers reflect the current employment situation for most workers? This post looks at prime-age employment rates for several different demographic groups to create a clearer picture of how the recession and recovery affected American workers.

The unemployment rate only includes workers who have been actively seeking jobs during the last four weeks. However, due to the severity and duration of the most recent recession, many prospective workers simply gave up looking and were not counted in the unemployment rate. To account for these “missing workers”, this post analyzes the employment rate instead of the unemployment rate. By using the prime-age employment rate – the employment rate for workers ages 25 to 54 – it avoids any bias attributable to the aging of the population.

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As Dean Baker notes, the NYT has a story up today on the drop in women’s labor force participation rates since 2000. It’s a useful piece, but incorrectly notes that "men dominate the disability rolls." In fact, 49 percent of people receiving Social Security Disability Insurance as worker beneficiaries are women, and women are 47 percent of adults with disabilities receiving Supplemental Security Income. Finally, while Temporary Assistance isn’t a disability program per se, substantial numbers of parents receiving Temporary Assistance have a disability, and nearly all of them are mothers.

Part of the confusion here may be due to the fact that men who are out of the labor force are more likely than women to give an illness or disability as the reason. But many more women are out of the labor force, and as the table below shows, the absolute number of women reporting not working due to a disability (3.6 million) is slightly larger than the number of men (3.5 million). 

Finally, it’s important to note that disability benefits have not been an important factor contributing to declines in men’s or women’s labor force participation. As Dean notes, the real problems here are on the demand side of the labor market, as well as weak labor market institutions and the absence of work-family supports like quality, affordable child care and paid family leave.

 
Prime-Age Adults Who Did Not Work in 2015 by Reason and Sex
  Men
(Number)
Percentage Women
(Number)
Percentage
Ill or disabled 3,526,717 53% 3,567,269 23%
Taking care of home/family 814,162 12% 9,232,809 60%
Going to school 1,121,192 17% 1,318,703 9%
Retired 659,918 10% 769,744 5%
Other 584,916 9% 397,325 3%
Total 6,706,905 100% 15,285,850 100%

Source: IPUMS CPS ASEC (2016).

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The Labor Department reported little change in the unemployment or employment rates in December, as job growth slowed slightly to 156,000 in the month. The unemployment rate edged up from 4.6 percent to 4.7 percent, but this is well within the margin of error of the survey. The overall employment-to-population ratio (EPOP) remained unchanged at 59.7 percent. The same is true for the EPOP for prime-age workers, which remained at 78.2 percent for the third consecutive month. This is more than 2 full percentage points below the pre-recession peak and almost four percentage points below the 2000 peak.

Some good news in the report is that involuntary part-time employment continues to edge down, while more people are choosing to work part-time. The number of people working part-time, for economic reasons, fell slightly to 5,600,000 in December. It is now down by almost 2.2 million from December of 2013, before the key provisions of the Affordable Care Act took effect. By contrast, the number of people choosing to work part-time has continued to rise, presumably because they no longer need to get insurance from their employer. It now stands at 21,250,000, more than 2.4 million above its pre-recession level.

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While the U.S. is the birthplace of the Internet, it currently falls behind other countries in making high quality broadband connections widely available.

The OECD’s overview on broadband connectivity shows the U.S. provides costlier and lower quality broadband than other countries. Furthermore, the U.S. trails most other countries in percentage of people with broadband subscriptions.

Broadband costs
The figure above illustrates the number of broadband subscriptions per 100 inhabitants in a series of high-income OECD countries. Switzerland tops the list, with almost 52 subscriptions per 100 residents. On the other end of the spectrum, only 31 percent of inhabitants have a broadband subscription in the U.S. The only country with a lower broadband subscription rate is Japan, at 30 percent.

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The International Monetary Fund (IMF) recently released two papers assessing the impact of an aging population on productivity growth, one looks at Europe, the other one at Japan. Their argument is simple: an aging population also means an overall older and less productive workforce.

The IMF’s Japan study supports this finding by showing that prefectures that are aging faster experienced slower economic growth than prefectures with higher population growth. They make the point that the faster aging is to blame for the slower growth; however, this does not take into account that young people tend to move to urban areas where there is  higher productivity growth.

If we compare countries rather than regions,  this link is no longer apparent. Looking at population and productivity growth for a series of OECD countries, there is no obvious connection between these two measures.

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