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

In December 2007, the Congressional Budget Office (CBO) released an update to its Long-Term Budget Outlook. The 2007 edition indicated that greater spending on Medicare and Medicaid would lead to a substantial increase in federal spending over the coming decades, as shown in Figure 1:

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In November 2014, over one hundred women were elected to the United States Congress for the first time in history. While this may be a historically significant event, women are still far less likely than men to ever work in Congress.

In many ways, what is happening in Congress illustrates what is happening in the economy more generally. While the gender employment gap has been shrinking for decades, significant disparities remain. The most recent data from the Bureau of Labor Statistics indicate that the employment rate of prime-age men is about 14 percentage points higher than the employment rate of prime-age women. (“Prime-age” refers to the ages 25 to 54. These are the years in which people are the most likely to be employed.)

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The following reports on labor market policy were recently released:


Economic Policy Institute

High Quality Child Care is Out of Reach for Working Families
Elise Gould, Tanyell Cooke


National Women’s Law Center
Chartbook: Women’s Overrepresentation in Low-Wage Jobs
Anne Morrison, Katherine Gallagher Robbins


Institute for Women’s Policy Research

Amidst Disappointing Job Growth, Men Gain 3 of 5 Jobs Added in September
IWPR


CLASP
Using Post-College Labor Market Outcomes
Anna Cielinski


National Employment Law Project

U.S. Department of Labor Home Care Rule: What’s Next?
NELP

Federal Minimum Wage & Overtime Protections for Home Care Workers
NELP


Roosevelt Institute

Local and State Business Registration Schemes: An Enforcement Lever to Strengthen Employer Compliance with Labor Standards and to Facilitate Worker Organizing
Haeyoung Yoon


Schwartz Center for Economic Policy Analysis the New School

Confronting Low Pay: Minimum Wage Policy and Employment in the U.S. and France
David R. Howell, Bert M. Azizoglu, Anna Okatenko

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A previous CEPR blog post titled “The U.S.A. as Number 1?” raised the question of whether the U.S. has the biggest economy in the world.

In terms of national income, the United States is no longer number one—that title now belongs to China, which surpassed the U.S. for the first time last year. Many commentators have noted, correctly, that the U.S. still has a much greater level of per capita GDP (income per person) than China. But if we are to judge economies by this standard, the U.S. still isn’t number one.

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On August 2, 2011, Congress passed the Budget Control Act, which aimed to reduce federal spending through 2021. In the months preceding passage of the Act, members of Congress debated what percentage of spending cuts should come from the military. Implicit in this debate was a subtler question: how do we determine what level of military spending is appropriate?

In determining how to best answer this question, the U.S. may want to learn from the answers provided by other countries. We can compare military spending in the U.S. with military spending throughout the rest of the world to determine if our military spending is abnormally high, abnormally low, or about what we’d expect given our national income.

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In his 2014 State of the Union address, President Obama discussed the fact that women workers are paid far less than their male colleagues: “That is wrong. And in 2014, it’s an embarrassment. Women deserve equal pay for equal work!”

Some commentators have criticized President Obama’s statement, arguing that the gender pay gap doesn’t account for occupational choices or differences in hours worked. Consider the critique about occupational choices: if women choose to work in low-paying occupations, a substantial gender pay gap can exist even if women are paid the same as men in every occupation. If this is true, we can’t honestly argue that women are being treated worse than men.

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Over at the White House blog, Council of Economic Advisers Chairman Jason Furman posted an interesting graph on the latest job numbers. It depicts manufacturing employment, with the number of jobs indexed to 100 during the last month for each of three different recessions:

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The Labor Department reported the economy created just 142,000 jobs in September, well below most forecasts. Furthermore, the prior two months' numbers were revised down as well, bringing the average for the last three months to 167,000. In addition, there was a drop in the length of the average workweek of 0.1 hour causing the index of aggregate hours to decline by 0.2 percent. This drop, combined with a modest fall in the average hourly wage, led to a 0.3 percent decline in the average weekly wage.

The household survey also showed a weak picture of the labor market. While the unemployment rate was unchanged there was a drop of 0.2 percentage points in both the labor force participation rate and the employment to population ratio. The share of unemployment due to people who voluntarily quit their jobs remained at the low 9.8 percent rate of August, a level typically seen in recessions. The one piece of clear good news in the survey was a drop of 447,000 in the number of people working part-time for economic reasons. This number is erratic, but this is an unusually large one-month decline.

On the whole this report suggests the labor market is considerably weaker than had been generally believed. It is likely to make it much more difficult for the Federal Reserve Board to raise rates this year.

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The following newsletter highlights CEPR’s latest research, publications, events, and much more.

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The following reports on labor market policy were recently released:


Center for American Progress

To Fight Inequality, Support Women’s Work
Judith Warner

State Paid Leave Administration
Sarah Jane Glynn


Economic Policy Institute

Disability and Employment Revisited
Monique Morrissey


National Employment Law Project

Ban the Box: U.S. Cities, Counties, and States Adopt Fair Hiring Policies
Michelle Natividad Rodriguez, Nayantara Mehta

Fair Chance Hiring Best Practice: Delaying Inquires Until Conditional Offer
Michelle Natividad Rodriguez, Nayantara Mehta


Urban Institute

Negative Returns: How State Pensions Shortchange Teachers
Chad Alderman, Richard W. Johnson

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Dear readers,

By now you have probably heard of Martin Shkreli, the former hedge fund manager turned drug company CEO who raised the price of the prescription drug Daraprim from $13.50 per pill to $750.

While he has recently backpedaled and said that he would back off the huge price hike, the story highlighted the issue of the high cost of prescription drugs in this country. There is growing consensus that something needs to be done to prevent this and other forms of price gouging from happening in the future. But what? And how?

Martin Shkreli

 

Fortunately CEPR has the answer. CEPR Co-director Dean Baker has been writing on this issue for years. Dean has repeatedly called for public financing of drug trials and he has repeatedly shown that patent protection for pharmaceutical companies has contributed to growing economic inequality.

Patent monopolies can allow drug companies to charge prices that are 100 times or more the free market price. The Hepatitis-C drug Sovaldi sells in the United States for $84,000. The generic version is available in India for less than $1,000. State Medicaid programs can pay to send patients to India, along with one or more family members, and still have tens of thousands of savings that can be shared with beneficiaries. (Dean Baker)

Just this past week, he was in the New York Times’ Room for Debate with a piece titled “End Patent Monopolies on Drugs.” He also penned an op-ed that asked “Will President Obama Stand Up to the Drug Thugs?” As Dean points out over and over, the problem is government policy that redistributes wealth upwards, not simply the “free market” at work.

We are writing to ask you to contribute to CEPR so that we can continue to produce research and analysis that provides real policy solutions to issues like run-away prescription drug prices. As the tale of the former hedge fund manager/CEO shows, the people on the “other side” — those who reap enormous profits from prescription patents or who simply jack up the price of existing drugs because they can (we know Daraprim was off patent) — are the same people who shower lawmakers with contributions and keep the media coffers filled with advertising revenue. Meanwhile, non-profit groups like CEPR struggle to meet increasing expenses, relying only on foundation grants and donations from people like you to fund our entire operation.

Please click here and donate today. We are facing an uphill battle. But it is one worth fighting, and we need your help to continue the fight.

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Thanks for your support,

Dean, Mark, and CEPR staff

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Various news outlets have been reporting on the case of Farid Fata, the former hematologist and oncologist who has been sentenced to 45 years in prison after being found guilty of Medicare fraud. In many ways, the term “Medicare fraud” understates the severity of Fata’s misconduct: over the course of six years, Fata reportedly over-treated a number of his patients in ways that were harmful to their health, all for the sake of personal gain. In total, 553 of Fata’s patients received $35 million in needless chemotherapy. Some of the patients had cancer and were terminally ill; in these cases, Fata prolonged their misery with unnecessary chemo. Many were forced into bankruptcy to pay for this treatment. In other instances, Fata lied to perfectly healthy, cancer-free patients, telling them that they had cancer and needed chemotherapy. The results for many of his patients were disturbing (from Newsweek):

Fata also bamboozled patients into receiving additional doses of the immunosuppressive drug rituximab even after they were successfully treated for their lymphoma — in some instances, for as long as three years. By the time Fata was arrested, their immune systems had been permanently devastated. Others were left with decaying jaws and never-ending bouts of intense pain by the bone cancer–fighting drug Zometa.

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The following reports on labor market policy were recently released:


Economic Policy Institute

Wrong Question Answered Badly: Industry Data Can’t be used to Infer Individuals’ Productivity
Josh Bivens, Lawrence Mishel

Poverty Day Numbers Show the Need for Higher Wages
David Cooper

Income Stagnation in 2014 Shows the Economy is not Working for Most Families
Lawrence Mishel, Alyssa Davis


Center for Economic and Policy Research

The Fed’s Decision to Hold is a Victory for Workers
Dean Baker


National Employment Law Project

Ain’t No Sunshine: Fewer than One in Eight Unemployed Workers in Florida is Receiving Unemployment Insurance
George Wentworth, Claire McKenna


Institute for Women’s Policy Research

The Gender Wage Gap: 2014
Ariane Hegewisch, Heidi Hartmann


Center on Wage and Employment Dynamics

Contra Costa Country’s Proposed Minimum Wage Law: A Prospective Impact Study
Ken Jacobs, Annette Bernhardt, Ian Perry, Michael Reich


Center on Wisconsin Strategy

Putting Families First in Wisconsin: Analyzing Paid Leave Insurance Program
Laura Dresser, Chris Reynolds

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The following reports on labor market policy were recently released:


Economic Policy Institute

H-2B Wage Rule Loophole Lets Employers Exploit Migrant Workers
Daniel Costa

New Census Data Show No Progress in Closing Stubborn Racial Income Gaps
Valerie Wilson

The WAGE Act Will Help Strengthen Worker Protections, Raise Wages, and Improve Working Conditions
Ross Eisenbrey


National Women’s Law Center

Chart Book: The Women in the Low-Wage Workforce May Not Be Who You Think
Anne Morrison, Katherine Gallagher Robbins


Institute for Women’s Policy Research

Women Gain 107,000 Jobs in August and Men Gain 66,000 Jobs
IWPR

Access to Paid Sick Time in Prince George’s County, Maryland
Jessica Milli, Daria Ulybina

The Gender Wage Gap: 2014
Ariane Hegewisch, Heidi Hartmann


CLASP

Volatile Job Schedules and Access to Public Benefits
Liz Ben-Ishai

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Michael Hiltzik at the Los Angeles Times recently reported on the much-talked-about shortage of STEM workers, or workers in fields that predominantly deal with science, technology, engineering, and mathematics (STEM). He notes that many studies indicate that the shortage of STEM workers is imagined. He also discovered that many of the companies that complain about their inability to find STEM workers are, paradoxically, laying off large numbers of them.

It is difficult to believe that there is a shortage of these workers when there is a substantial amount of slack in the labor market. More than seven years after the start of the Great Recession, the employment-to-population ratio, or employment rate, is still down 2.5 percentage points for prime-age (25 to 54) workers.

Like other supposed labor shortages, if there were a real shortage, wages would be expected to grow. This is because employers would compete over a small number of workers, and they would need to raise wages to attract those workers.

The Bureau of Labor Statistics Occupational Employment Statistics program tracks the average wage of STEM occupations dividing them into four subdomains. These consist of a Health subdomain, a Social Science subdomain, an Architecture subdomain, and a Life and Physical Science, Engineering, Mathematics, and Information Technology subdomain (this last subdomain is where most technology workers would fall). The chart below shows the year-over-year nominal wage growth for the occupations in those four subdomains.

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It’s not news that the federal minimum wage in the United States is far below that of other rich countries. The Economist provided a new perspective on this by creating a nice chart that showed the minimum wage at exchange rate values versus GDP per capita at purchasing-power parity (PPP) of select countries. There is a strong trend upwards as GDP per capita increases, meaning that richer countries tend to have higher minimum wages.

The U.S. is a notable outlier in the chart, with the federal minimum wage of $7.25 an hour much lower than the trend would predict for a country as rich as the U.S. Indeed, many U.S. states have higher minimum wages, and the chart shows that these wages, while higher, follow a slower upward trend.

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A little over a month ago, while giving testimony before the U.S. House of Representatives, Federal Reserve (Fed) Chair Janet Yellen weighed in on whether or not monetary policy can be used to fight racial inequality in the economy:

“So, there really isn’t anything directly that the Federal Reserve can do to affect the structure of unemployment across groups, and unfortunately, it’s long been the case that African-American unemployment rates tend to be higher than those of on average among—in the nation as a whole. It reflects a number of different sources of disadvantage that are operative there.”

It’s true that many aspects of the racial divide in employment aren’t affected by monetary policy. The Fed can’t eradicate discriminatory hiring practices, racial inequality in the criminal justice system, or disparities in the quality of public schools. Nonetheless, it’s clear that the Fed can play at least some role in helping to create a more equal society.

The Federal Reserve has a dual mandate to pursue maximum employment and stable inflation. If the Fed were to raise interest rates—as some commentators are urging—it would have the effect of destroying jobs (and increasing the debt) for the sake of lowering inflation. This is despite the fact that inflation has been running below the Fed’s 2.0 percent annual target and is actually falling.

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There is considerable research showing that unions benefit the workers who join them, and this is especially so for lower paid workers, African Americans, immigrants, and women. Workers represented by unions get higher wages, and are also more likely to enjoy benefits like paid sick days, paid holidays, and paid vacation than their non-union counterparts.

Data from the Bureau of Labor Statistics show that 85 percent of unionized workers have access to paid sick leave, while only 62 percent of non-union workers have access. Unionized workers also have greater access to paid holidays (80 percent) compared to non-union workers (74 percent). The data show no gap in the percentage who enjoy paid vacation, but this is likely brought down by the large number of unionized teachers, who have school breaks but not discretionary paid vacation.

In addition to the benefits they win for their members, unions have taken the lead in promoting laws that benefit workers more generally. A notable item in this long history of advocating for all workers is the passage of the Fair Labor Standards Act (FLSA) in 1938. The FLSA made the forty-hour work week the law for most workers across the country. Workers who put in overtime were also entitled to a premium of at least 50 percent above their base pay. The FLSA also established the federal minimum wage.

These days, unions continue to fight for policies that benefit all workers. This is very clear looking at the adoption of laws guaranteeing paid sick leave. The United States is the only rich country in the world that does not guarantee paid sick leave on a national level. But in smaller jurisdictions where unions are well-represented there has been significant progress towards requiring employers to provide them. The same trend is evident with respect to paid family leave—leave for to provide care for family members or arrangements for their welfare—and for laws that raise the minimum wage above the federal minimum wage of $7.25.

The three graphics below show the laws across the country that guarantee paid sick leave and paid family leave, and the laws that mandate a minimum wage higher than the federal level by $0.50 or more. State-level jurisdictions are divided by color in three roughly equal groups based on the percent of workers in that jurisdiction who are represented by unions. (Click on the graphics for an interactive version. Clicking on the jurisdictions provides detailed information about the laws.)

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The union membership rate tracks the percentage of all workers who are members of a union. In 1955, the membership rate peaked at 35 percent. Union membership remained strong until the late 1960s. In 1970, the membership rate stood at 29.1 percent. Since then it has fallen steadily. The most recent data from the Bureau of Labor Statistics shows a nationwide membership rate of 11.1 percent. There have been a number of negative impacts that correlate with the decline in union density. One of the clearest is an increase in income inequality.

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The Wall Street Journal reported last Friday that private equity “firms’ stakes in a dozen publicly traded energy exploration-and-production companies have lost more than $18 billion in value since last summer, when oil prices began their slide from more than $100 a barrel.” These losses are just the tip of the iceberg. In addition to money-losing investments in publicly-traded companies, private equity funds sponsored by these PE firms have lost money on the privately held energy companies in their portfolios.

Now some of these funds are doubling down on their bets on the energy sector betting on the direction energy prices are likely to go. PE funds have raised hundreds of billions of dollars to make new energy investments—about $150 billion in 2013–2015 alone as the figure below shows—and they need to invest all that dry powder.

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