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

Ben Casselman has a NYT piece today discussing new research finding the Great Recession has had a lasting impact on prime-age employment and earnings. It’s a good piece on what looks like important research, but in one paragraph, Casselman cites other research he says links employment among men “in particular” to opioids, disability insurance, and video games. This is the most recent example of something Dean Baker wrote about last year: “implying that the problem of people dropping out of the labor force is a story about men is seriously misleading.”

To the points Dean made last year, I’d add a few more.

First, among prime-age adults, working-class women (HS or less) have fared even worse than working-class men, both in the aftermath of the Great Recession and since 2000. The employment rate for prime-age working-class women is about 8.2 percentage points lower today than in 2000; for prime-age working-class men, it’s 6 percentage points lower. As a result, the large employment gap between working-class men and women is wider today than in 2000.

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This is the third in a series of blog posts based on the CEPR report, Organizational Restructuring in U.S. Healthcare Systems: Implications for Jobs, Wages, and Inequality, that examines the experiences of healthcare workers over a decade of change from 2005 to 2015.

Jobs in the two largest nonprofessional occupation groups ― medical technicians and health aides and assistants ― grew 17.2 percent and 20.0 percent respectively, and in 2015 the number of workers in these jobs reached 5.5 million. Yet median real wages of medical technicians working full-time, full-year in hospitals fell from $22.00 in 2005 to $21.60 in 2015; in outpatient facilities, their pay fell from $17.84 to $17.67. Median real wages of health aides and assistants employed full-time, full-year fell from $14.87 to $14.72 in hospitals and were flat in outpatient facilities, rising by a penny from $14.27 to $14.28 between 2005 and 2015.

The most widely cited explanation for low and stagnant wages is that workers with these earnings must be poorly educated. The assumption, especially for workers earning less than $15 an hour, is that most of them have a high school degree or less. Workers are led to believe that post-secondary education is the key to a pay raise. For healthcare workers in these occupations, however, wages stagnated or fell despite a decline in the share of the least educated workers and an increase in the share of those with a college degree or more.

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Amid threats to the huge gains in insurance coverage under the ACA — most recently, the failed Graham-Cassidy Senate bill — a growing number of people, politicians, and policymakers on the left have begun to push for even bolder, more expansive national health care programs. In the past two months alone, Senator Sanders has pushed forward with his Medicare for All plan, while in the House, Representative Schatz has introduced a Medicaid for All bill and Representative Conyers has moved forward with his single-payer proposal. Medicare for All has also come close to passage at the state level in California and New York.

Proposals like these are vital steps in moving the public debate to a point where universal coverage is seen as politically viable. Bold initiatives are necessary to build public support for broader coverage and wider acceptance of health care paid for by the government due to resistance from the health care industry and the stigma sometimes associated with government-provided health care. For example, the ACA, while far less ambitious than single-payer programs, not only led to wider acceptance and support for Medicaid it also won over a number of physicians and health care professionals once opposed to the Obama initiative.

However, there are many details that need to be addressed before any of these more ambitious plans can be put in place. While other wealthy nations have single-payer-type systems, these programs were all implemented in countries with much lower health care spending than is currently the case in the U.S. The enormity of the task of moving toward a single-payer system is a strong argument for getting there incrementally.

One step could be lowering the age of eligibility to 55 and/or including minors, with the option for others to buy into the system along the lines recently proposed by Senator Bernie Sanders and 16 co-sponsors. However, if we were to go this route, there would need to be changes to the current Medicare program, most importantly, the out-of-pocket cost of Medicare for individuals.

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In the Wall Street Journal on Tuesday, Nick Timiraos highlighted a paper, published by the Mercatus Center, that points to a “rising number of men in their prime working years…who are getting federal disability benefits” as “one big contributor” to the long-term decline in men’s labor force participation. I haven’t read the paper yet, but in an earlier CEPR blog post, I highlighted one of the weaknesses of these kinds of claims: at least over the last two decades, the number of mid-age men (30–49 years old) receiving Social Security Disability Insurance has been flat, even as the number not in the labor force increased by a million. Certainly, we need to do more to allow people with disabilities to work and prosper economically, including expanding and strengthening Medicaid, but cutting Social Security and other benefits for people with disabilities will do little to further that goal.

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Donald Trump will soon make a decision on whether to reappoint Janet Yellen as chair of the Federal Reserve Board or to pick someone else. This decision is getting far less attention than it deserves.

The Fed makes an enormous difference in the lives of tens of millions of people, especially low- and moderate-income people. Its decisions on interest rate policy can determine how many people in the country have jobs. If the Fed raises interest rates and slows the rate of job creation, the people who are most affected are the most disadvantaged in society. Blacks, Hispanics, and the less educated will be the ones who are most likely to be denied jobs as a result of higher interest rates.

Furthermore, a weaker labor market also reduces the bargaining power of those who do have jobs. This means that they will get lower wages than if we had a lower unemployment rate.

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In his column today (also discussed by Dean here), Eduardo Porter writes: “as Professor [Alan] Krueger noted, once workers stop looking for a job, it is tough to draw them back in. 'After they leave the labor market,’ he said, ‘people reorganize their lives.'"

If meant to apply to all people not in the labor force, this is too sweeping.

In a working paper, Chen Song and Chao Wei compare unemployed adults with non-disabled, non-retired (NDNR) adults who are not in the labor force. They find that NDNR men who are not in the labor force look a lot like men who are in the labor force and unemployed.

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This is the second in a series of blog posts based on the CEPR report, Organizational Restructuring in U.S. Healthcare Systems: Implications for Jobs, Wages, and Inequality, that examines the experiences of healthcare workers over a decade of change from 2005 to 2015.

Examining wage trends in hospitals by gender and race/ethnicity we observe that the real median hourly wage of full-time, full-year workers increased for every demographic group over the decade. However, with the exception of white women and Asian/other women, the real wage increases came to less than one dollar an hour. White women’s real median wage increased by $1.24 between 2005 and 2015, Asian/other women saw an increase of $1.50 over that time period.

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As we previously pointed out, the most disadvantaged segments of the labor market benefit disproportionately from low unemployment. This shows up both in terms of getting a disproportionate share of the job growth and also from seeing more rapid wage growth as a result of the tightening of the labor market they face.

The logic is straightforward. When the economy goes into a slump, it is more likely that a retail clerk or person on the factory floor will lose their job than a manager or a highly educated professional, like a doctor or dentist.

This means that when the unemployment rate soars, as it did in the Great Recession, it is the workers at the bottom of the ladder who are at greatest risk of losing their jobs. They are also the ones who see the largest loss in pay, as their bargaining power diminishes with their employment opportunities.

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The Congressional GOP is taking one last shot at repealing the ACA. One of the negative consequences of repeal that has gotten little attention is the impact it would have on disabled people’s ability to work.

Before the ACA, non-elderly adults had limited avenues to public health insurance. If they had a severe disability and received Social Security Disability Insurance for two years, they were eligible for Medicare. If they received Supplemental Security Income, a program that limits eligibility to severely disabled people with very low incomes and assets of $2,000 or less, they could qualify for Medicaid. For disabled adults not receiving SSI, the income limits were even stricter. Thus, working even a modest amount could mean the loss of health insurance.

In states that adopted the ACA’s Medicaid expansion, disabled workers are not subject to an asset limit and can earn considerably more without putting their coverage at risk.

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While the benefit from lower unemployment in terms of more people having jobs is pretty straightforward, there is also a benefit to workers in the form of higher wages. The basic story is that lower unemployment means a tighter labor market and therefore more rapid wage growth.

The relationship between low unemployment and more rapid wage growth shows up most clearly for more disadvantaged workers. When the economy goes into a slump, it is more likely that a retail clerk or person on the factory floor will lose their job, than a manager or a highly educated professional, like a doctor or dentist.

This means that when the unemployment rate soars, as it did in the Great Recession, it is the workers at the bottom of the ladder who are at greatest risk of losing their jobs. They are also the ones who see the largest loss in pay, as their bargaining power diminishes with their employment opportunities.

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Healthcare, which accounts for 12.8 percent of private sector employment is one of the most important sources of jobs in the economy. In our report, Organizational Restructuring in U.S. Healthcare Systems: Implications for Jobs, Wages, and Inequality, we examine in great detail what has happened to workers over the decade from 2005 to 2015 as the consolidation of hospitals and the decentralization of health services and jobs accelerated.

In this blog post, we examine broad trends in employment and wages. Overall in health care, private sector employment grew by 20 percent from 2005 to 2015. Hospitals continue to provide the lion’s share of Jobs, but employment grew by just under 10 percent in this decade, more slowly than in healthcare overall. By contrast, employment in the much smaller outpatient care sector increased by almost 60 percent – six times faster than in hospitals.

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The drop in employment rates among workers — and especially men — without college degrees has been widely noted. The employment rate for men over the age of 25, with just a high school diploma is down by more than 5.0 percentage points compared with its pre-recession level in 2007. It is down by more than 7.0 percentage points when compared to its 2000 level.

While this drop in employment rates is not in dispute, the explanation is. The predominant view in the economics profession is that the drop is explained mostly by changes in the labor market and changes in the motivations of this group of men.

The labor market explanation hinges on the idea that the spread of technology has reduced the need for workers without more education. We need fewer people now to dig ditches or to turn screws on assembly lines. This argument holds that the declining employment rate among men is part of a long-term trend, so we shouldn’t find the drop in recent years surprising.

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Two years ago, in August of 2015, the national unemployment rate stood at 5.1 percent. This was at or below widely accepted estimates of the non-accelerating inflation rate of unemployment or NAIRU. This meant that if these estimates were right, the inflation rate would start to increase if the unemployment rate fell further or possibly even if it stayed at its 5.1 percent level.

As it turns out, the unemployment rate has continued to fall and stood at 4.3 percent in August of 2017. Inflation has remained steady or even fallen slightly. By all measures, it is below the 2.0 percent rate targeted by the Federal Reserve Board.

Many economists, including some at the Fed, wanted to raise interest rates enough to prevent any further decline in unemployment out of concerns over inflation. Fortunately, the Fed did not go along with this position.

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The Bureau of Labor Statistics reported that the economy added 156,000 jobs in August, somewhat less than most economists had expected. This figure, combined with downward revisions of 41,000 to the prior two months data, brought the average over the last three months to 185,000. The household survey also showed some evidence of weakness with the unemployment rate edging up to 4.4 percent and the employment-to-population ratio falling back 0.1 percentage point to 60.1 percent. Perhaps more noteworthy was a drop of 0.3 percentage points in the employment rate of prime-age (ages 25 to 54) workers to 78.4 percent.

Other data in the household survey were mostly positive. The number of people involuntarily working part-time fell by 27,000; it is now only slightly larger as a share of the workforce than before the recession. The number of people choosing to work part-time went up by 187,000, reaching a new high. This number has increased by more than 2.6 million since the end of 2013 when the Affordable Care Act took effect. It indicates that many people are taking advantage of the opportunity to get insurance outside of employment and therefore opting to work part-time.

Wage growth continues to be moderate, with the average hourly wage up 2.5 percent over the last year. The annual rate of increase in the average hourly wage, comparing the last three months with the prior three months, is also 2.5 percent. As a result of the weak growth in the hourly wage and a modest decline in the length of the average workweek, average weekly earnings actually fell slightly in the month.

The job growth in the establishment survey was unusually concentrated in the good producing sector, which accounted for 70,000 new jobs. Manufacturing led the way with a gain of 36,000, of which 13,700 were in autos. Construction added 28,000 jobs, an unusually large gain. Mining added 6,500 jobs as a result of a gain of 6,800 jobs in support activities for mining. Coal mining jobs were unchanged and now stand 2,100 above their year-ago level. Job growth in health care was just 20,200, down from an average of about 27,000 over the last year. Job growth in restaurants was also weak at 9,200.

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Trump’s Medicare trustees recently released their report on the health of Social Security and Medicare. Trump’s trustees reported that there was a sharp improvement in the projections of Medicare’s finances during the Obama administration – this is notable because it signals bipartisan agreement that the projected shortfall is markedly smaller than what policymakers were looking at a decade ago.

Some critics of the Obama administration questioned the validity of this projection and accused the Trustees, four out of six of whom are political appointees of the president, of manipulating the numbers for political purposes. These critics claimed that Obama’s trustees were deliberately understating the financial problems facing Medicare over its planning horizon.

For this reason, the fact that the 2017 Trustees report largely confirms the drop in the shortfall projected by the Obama trustees is very important. In fact, the 2017 report shows an even better picture for Medicare, with a projected shortfall of just 0.64 percent of payroll over the 75-year planning period.

This new projection implies that almost 82 percent of the projected shortfall was eliminated by economic and policy changes during the Obama years. In fact, this figure understates the true improvement since the 75-year horizon starting in 2017 includes years that are considerably worse for the program demographically than 75-year horizon that began in 2007.

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Since 2014, 14 million workers have gained access to paid sick days. Breakdowns of this finding, part of the latest National Compensation Survey conducted by the Bureau of Labor Statistics (BLS), show across-the-board increases in workers' ability to take time off when they are ill without facing financial burden. State and local laws, now totaling 40 (seven states, two counties, and 31 cities), have been instrumental in extending paid sick leave benefits to more workers.

More workers now have access to paid sick days

According to the BLS report, 72 percent of civilian workers, or 97.3 million people, have access to paid sick days as of March 2017, compared with 83.3 million people (65 percent) in March 2014. Over just three years, access expanded by seven percentage points, with 14 million additional workers covered. As shown below, the increase in access since 2014 covers all groups but is particularly strong for part-time workers and those earning lower wages.

PSD
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The Bureau of Labor Statistics reported the economy added 209,000 jobs in July, somewhat more than what the consensus estimated. The revisions to the prior two months data were largely offsetting, so bringing the three month average to 195,000. The strong job growth brought the unemployment rate back down to the 4.3 percent rate reached in May, the low for the recovery. There was also a slight uptick in the employment-to-population ratio to 60.2 percent, a new high for the recovery.

Some of the other data in the report were more mixed. While the single month wage growth was strong at 9 cents per hour, this is a very erratic figure. The rate over the last twelve months was 2.5 percent.

Furthermore, the average wage for the last three months compared with the prior three months grew at just a 2.3 percent annual rate. While this is a very modest deceleration, clearly it is not possible to make the case that wage growth is accelerating in spite of the relatively low unemployment rate.

The percentage of unemployment due to voluntary quits fell back to 10.9 percent. By comparison, this figure was over 12.0 percent in 2006 and 2007 and peaked at more than 15.0 percent in 2000. The low share of quits suggests that workers are not confident in their labor market prospects.

It is also worth noting that the data continue to refuse to comply with the skills shortage story. The employment rate for college grads actually fell 0.2 percentage points in July and is unchanged over the last year. By contrast, the employment rate for those with just a high school degree is up by 0.8 percentage points over the last year.

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The healthcare sector is one of the most important sources of jobs in the economy. It accounts for nearly 18 percent of GDP and almost 14 percent of private sector jobs. It is the only sector that consistently added jobs during the Great Recession.

Overall industry employment grew by 20 percent between 2005 and 2015 and in 2016 it added 381,000 jobs, more than any other industry. Despite strong employment growth, however, median real wages of full-time, full-year healthcare workers declined 2.4 percent between 2005 and 2015 – falling 49 cents an hour from $20.22 to $19.73. This decline in real wages was led by the decline in pay for black women.

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Last week four prominent Republican economists, John Cogan, Glenn Hubbard, John Taylor, and Kevin Warsh released a short paper arguing that it would be possible to have substantially more rapid growth if we cut taxes and reduced regulation. A big part of their story was that we would see substantially more labor force participation if workers faced lower tax rates, and therefore got to keep a larger share of their pay.

While there are many factors that affect people’s decision to work other than tax rates, such as before tax pay and access to child care, it is worth looking at what happened to employment in the years following the tax cuts put in place by President George W. Bush in 2001. This is an interesting question because President Clinton raised taxes in 1993, although the tax increase almost exclusively affected upper income people. Nonetheless we can compare a higher tax period, 1993-2001, with a lower tax period, 2001-2012. Taxes for high-end earners rose in 2012.

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With the release of the annual Social Security and Medicare trustees’ report, President Trump’s appointees endorsed sharp improvements in Medicare’s financing that occurred under former President Obama. Medicare had a projected shortfall of 3.54 percent of covered payroll (over a 75-year planning period) during the last year of the Bush administration, now it is down to just 0.64 percent.

This development should give pause to those who wish to fundamentally restructure Social Security and Medicare based on these projections. A lot changed over the eight years of the Obama administration and even more can change over 75 years. This is worth taking into account when looking at Social Security’s 75-year shortfall, which is at 2.83 percent of payroll under the intermediate scenario.

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Back in the 1990s stock bubble it was common for analysts to say things like price-to-earnings ratios (PE) no longer mattered. They were right, at least for a while, as the stock valuations of companies like AOL and Priceline soared way beyond anything that could conceivably be justified by current or future earnings.

Of course after a while, price-to-earnings did come to matter, as the stock market lost half its value from its peak in March of 2000 to its trough in the summer of 2002. The tech heavy Nasdaq lost close to 80 percent of its value. Many of the big tech enthusiasts were wiped out in this crash. While it might seem old-fashioned, people presumably value stock based on how much earnings a share commands, not the beauty of the stock certificate or how cool the company is.

With this in mind, it is interesting to think about what the Amazon future might look like given that it now has a market capitalization of roughly $480 billion with current profits of roughly $2.6 billion. This gives it a price-to-earnings ratio of 184 to 1.

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