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

Back in November, John Schmitt and I wrote a report that estimated the number of people in the United States that have ever been to prison or convicted of a felony. We were interested in the number because a prison record or a felony conviction is a major impediment to employment. We concluded that there were about 6 million people with a prison record and somewhere between 12 and 14 million with felony convictions. Our calculations suggested that the difficulties that these groups face in the labor market probably reduce employment by 1.5 million jobs and cost the economy about $60 billion a year in lost output.

This week, the National Employment Law Project (NELP) has put out a study dealing with a broader group – those who have a criminal record of any kind, including arrests for misdemeanors and felonies, whether or not they were ultimately convicted of the crime. The estimates produced by the report's authors, Michelle Natividad Rodriguez and Maurice Emsellem, suggest that there are 65 million people in the United States with a criminal record. NELP notes that people with criminal records often face difficulty in finding a job because of overly broad (and sometimes illegal) criminal background checks. As the report says:

"In the right situations, criminal background checks promote safety and security at the workplace. However, imposing a background check that denies any type of employment for people with criminal records is not only unreasonable, but it can also be illegal under civil rights laws. Employers that adopt these and other blanket exclusions fail to take into account critical information, including the nature of an offense, the age of the offense, or even its relationship to the job."

While the report notes "a promising shift in policy and practice" towards "fairer and more accurate criminal background checks for employment," perhaps what is most discouraging is that existing anti-discrimination laws are often not being enforced, at the federal, state, or local level. NELP lays out four recommendations that would steer our country towards more reasonable employment screening procedures: 1) That the federal government enforce existing protections relating to background checks, 2) that the federal government adopt fair hiring policies for federal employment and contracting, serving as a model for all employers, 3) that state and local governments certify that their hiring policies comply with federal regulations and launch employer outreach and education campaigns, and 4) that employers take a more active stance in promoting fair hiring policies, for both their own and workers' best interests.

The authors highlight the compelling, obvious reason for following these recommendations: "millions of deserving workers will have a fairer shot at employment, allowing them to contribute to their communities and help rebuild America’s economy."

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This week, the LMPRR features reports from Center for Economic and Policy Research, Center on Wisconsin Strategy, Economic Policy Institute, UCLA Institute for Research on Labor and Employment, and National Employment Law Project.

Center for Economic and Policy Research and Center on Wisconsin Strategy

The Wisconsin Retirement System is One of the Healthiest in the Country

Center for Economic and Policy Research

The Wage and Employment Impact of Minimum-Wage Laws in Three Cities

John Schmitt and David Rosnick

Economic Policy Institute

Farm Exports and Farm Labor: Would a Raise for Fruit and Vegetable Workers Diminish the Competitiveness of U.S. Agriculture?

Philip Martin

The State of Working America's Wealth, 2011: Through Volatility and Turmoil, the Gap Widens

Sylvia A. Allegretto

UCLA Institute for Research on Labor and Employment

An Opportunity Not Taken...Yet: U.S. Labor and the Current Economic Crisis

Chris Tilly

National Employment Law Project

65 Million “Need Not Apply”: The Case for Reforming Criminal Background Checks for Employment

Michelle Natividad Rodriguez and Maurice Emsellem

Political Economy Research Institute

Unemployment Benefits and Work Incentives: The U.S. Labor Market in the Great Recession

David R. Howell and Bert M. Azizoglu

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As CEPR economists Dean Baker, Eileen Appelbaum and Mark Weisbrot have written here, here, here and here, work-sharing is a policy that has helped many countries keep their unemployment rates lower during the recession.

In a nutshell, Dean's work-sharing tax credit proposal would pay employers to keep workers' pay constant while reducing hours. For example, rather than laying off 10% of her employees, an employer would reduce all of her workers' hours by 10% and get a tax credit to keep their pay whole.

Some critics claim that recent (weak) job growth in the economy means that work-sharing is no longer needed. But this misses the fact that the reported jobs numbers are the *net* total of jobs created and lost. Since employers both hire and fire workers, work-sharing would help by preventing some of the millions of layoffs that happen every month.

Yesterday, the Census Bureau's Business Dynamics Statistics (BDS) released a report with a graph of job creation and destruction rates since 1980 that nicely illustrates this point.


As Census explains:

Figure 1 shows the BDS patterns of gross job creation and gross destruction rates for the U.S. private sector from 1980 through 2009.... It is evident from Figure 1 that there is always a swift pace of U.S. gross job creation and destruction. The difference between the two determines whether the economy expands or contracts (i.e., the difference is, by definition, equal to the net employment growth rate of the economy).

...It also is evident from Figure 1 that job creation and job destruction tend to move in opposite directions during expansions and contractions. All of the recessions since 1980 experienced a large increase in job destruction in one or more years, accompanied by a decline in job creation.

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Even former President Bill Clinton thinks that structural unemployment – unemployment stemming from a mismatch between job seekers' skills and job requirements – is an important cause of unemployment today. One oft-cited cause of structural unemployment is "housing lock," which happens when unemployed workers can't move to where the jobs are because they can't sell their houses in depressed housing markets.

However, according to a recent CEPR analysis of data from the January 2010 Displaced Workers Survey (DWS), staying rates for displaced workers in states where house-price declines were steepest have not been significantly different from those in states where there was little or no change in house prices.

If housing lock existed, we would expect to see the inter-state migration rates to fall after the housing bubble burst in 2007. But, as economists Greg Kaplan and Sam Schulhofer-Wohl recently showed, inter-state migration rates have not responded in any obvious way to the recession. Instead, they've continued on their same long-term path evident from 1996.

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The NYT treated us to this column from a recent college grad complaining about the prospect that he will be faced with higher taxes to pay for his parents' and grandparents' Social Security and Medicare. The idea that our children and grandchildren are going to be poorer on average than we are is a regular theme of much of the budget reporting and advocacy work (think Peter Peterson funded enterprises) that we see regularly.

It is of course absurd on its face, as all economists and budget analysts know. Real per capita disposable income has risen at average rate of just under 2.0 percent year as shown in the chart below.


Source: Bureau of Economic Analysis.


All projections show that real per capita disposable income will continue to rise, meaning that future generations will on average be richer than we are today and much richer than our parents and grandparents' generations. Of course there is an issue of inequality, if most of the gains from growth go to the Goldman Sachs-Mark Zuckerberg types, then most today's children may not be much better off than their parents and grandparents, but that is an issue of inequality within generations, not between generations.

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The Republican proposals to slash the budget seem to work from the premise that if we fire government employees that we will induce private employers to hire more workers. This runs directly opposite to the idea behind the stimulus, that if the government stimulated demand by spending money and/or cutting taxes it would create more jobs. Interestingly, there is new research that indicates that the stimulus did raise employment. In fact, it seems that its effect was even larger than the Obama administration had predicted.

But the Republicans seem uninterested in these research findings. They instead claim that the best way to create private sector jobs is by having the government fire workers and spend less.

It is difficult to follow the logic of this view. If we think of a cross section of employers – hospitals, construction companies, car factories, retail stores and restaurants – which ones on this list do we think will hire more workers after a big round of federal budget cuts and layoffs?

Do we think that hospitals will suddenly rush out and hire more nurses and doctors because because of the National Institutes of Health is cutting funding for cancer research? Will Wal-Mart expand its sales staff because the government is laying off people from Head Start? These stories don’t seem very plausible.

Undoubtedly some of the government employees losing their jobs will be experienced and highly educated workers who private employers will be anxious to hire, but this will generally be for positions that would have existed in any case. These former government employees will simply be displacing other workers who would have held these jobs; there will not be new jobs in the private sector created for them.

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One of the most e-mailed articles on the New York Times webpage today is "Report Urges Even Higher Global Retirement Ages," about a new OECD report, “Pensions at a Glance 2011.”  The article summarizes the report:

Retirement ages in advanced economies will have to rise more than currently planned if countries hope to cover the increase in costs caused by aging populations, a global economic organization warned Thursday....

In a report, the organization said that by 2050, the average age in industrialized countries for drawing pensions would reach 65 for both sexes. This represents an increase of about 1.5 years for men and 2.5 years for women from current levels.

Question: When will the OECD bring their own pension scheme into accordance with their recommendations?  According to the OECD's salaries and benefits webpage, OECD staff can start receiving reduced pensions at the ripe old age of 51:

The maximum age for retirement is 65, but staff members are entitled from the age of 63, and after at least 10 years of service, to a pension amounting to 2% of the final basic salary per year of service up to a maximum of 70 per cent for 35 years of service. A reduced pension can be paid to retiring staff members from the age of 51.

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This week, we post links to reports from Center for American Progress, Center for Economic and Policy Research, Center on Budget and Policy Priorities, Demos, Economic Policy Institute, and National Employment Law Project.

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Earlier this week, my colleague John Schmitt and I released a paper, “Deconstructing Structural Unemployment,” highlighting some additional data that counters the argument coming from some quarters that what we are seeing today is a dramatic increase in structural rather than cyclical unemployment. We used data from the Bureau of Labor Statistics’ Displaced Workers Survey to show that even though construction workers were more likely to become displaced over the three years 2007-2009, they were strikingly similar to other workers in terms of finding new work, being geographically mobile, and taking pay cuts in new jobs. We also looked at whether or not “housing lock” – immobility caused by decreases in housing prices – might be contributing to structural unemployment, and found that the effects are miniscule and, regardless, not caused by structural problems in the labor market.

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Andrew Sullivan has put forward a dramatic proposal for means testing Social Security. He wants to eliminate all Social Security benefits for individuals with non-Social Security incomes above $40,000. In addition, he wants to raise the retirement age to 70. Let's take these in turn.

First, $40,000 is probably a bit low for most people's definition of wealthy. Most people probably don't think of firefighters and nurses as wealthy, but we don't live in Mr. Sullivan's world.

So, in the interest of dealing with projected deficits in the years ahead, rather than taxing the rich, taxing financial speculation, fixing the health care system, or cutting defense, Mr. Sullivan wants to use a "Social Security" tax on the wages of middle class workers to pay for shortfalls elsewhere in the budget. I look forward to seeing candidates running on this platform.

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The deficit hawks are acting like they just got a shot of steroids. William Gross, the head of Pimco, sold off the government bond holdings of their largest investment fund. The deficit hawks are claiming this as evidence that the sky is now falling and that we have to take steps now to Social Security, Medicare and other important programs.

Before we throw current and future retirees overboard, we may first want to ask a few questions about Mr. Gross's qualifications as an oracle. As a first point, if he was really all-knowing, he would have sold off his bonds in early October when the interest rate on 10-year Treasury bonds was 2.41 percent. If he waited until January and the interest rate had risen to 3.39, then he cost his investors a lot of money. He could have sold these bonds at a much higher price when the interest rate was lower.

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The latest government report on job openings and labor turnover – the JOLTS report – makes an important point. Recent improvements in the labor market – employment gains and the falling unemployment rate – owe little to an increase in hiring by employers. Instead, they result mainly from a decline in involuntary separations – layoffs and firing – of workers. Making it possible for workers to keep their jobs is important to the economic recovery.

Routine illnesses can threaten workers’ employment. Too many workers still face an impossible choice: take off from work to care for themselves or their kids when illness strikes and risk losing their jobs or risk their health or that of their children and come into work. A surprisingly high two-fifths of all workers, and three-quarters of low-wage workers, have no paid sick days at all. And most workers who do have paid sick days can’t use them to care for a sick child. Routine illnesses create a crisis for these workers and their families.

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This week, we post links to reports from Center for Economic and Policy Research, Demos, Economic Policy Institute, National Employment Law Project, and Political Economy Research Institute.

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With the recent spate of attention to public sector workers, here's a (hopefully handy!) summary of CEPR resources about them and public pension funds:

The Origins and Severity of the Public Pension Crisis

This paper shows:

  • Most of the pension shortfall using the current methodology is attributable to the plunge in the stock market in the years 2007-2009.
  • The argument that pension funds should only assume a risk-free rate of return in assessing pension fund adequacy ignores the distinction between governmental units, which need be little concerned over the timing of market fluctuations, and individual investors, who must be very sensitive to market timing.
  • The size of the projected state and local government shortfalls measured as a share of future gross state products appear manageable.

Returns on Public Pensions: What Rates Should We Assume?
An explanation that state pension plans should make their projections based on the expected value of their stock holdings. For a fund assuming 3% inflation, that translates into the nominal 9.5-10.0% yield that most assume for the portion of their funds held in stock.

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This week, we post links to reports from Center for American Progress, Center on Budget and Policy Priorities, Center for Law & Social Policy, Economic Policy Institute, The Joint Center for Political and Economic Studies, and Political Economy Research Institute.

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It seems that Andrew Biggs, at the American Enterprise Institute, is taking issue with my argument on the rate of return that public pensions should assume on the portion of their assets held in stock. (The rate of return on the asset is the same issue as the rate of discount applied to future liabilities. I use rates of return just because it makes the discussion easier to follow.)

To start, we should be clear on what exactly is at issue. Andrew and I are not debating the expected rate of return on stocks. Both of us agree that the pension funds are at least close to the mark in their assumptions on stock returns. Rather, Andrew feels that their return assumption does not correctly account for the risk associated with stock returns. He notes that the higher return on stocks comes in exchange for higher risk. Since the pension obligation is an absolute commitment, he argues that pensions should assume a risk-free rate of return on their assets.

My contention is that because a state or local government is essentially an infinitely lived entity, it need not be as concerned about the variance in returns as individuals. Therefore state pension plans can make their projections based on the expected value of their stock holdings.

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The economy generated 192,000 new jobs in February, knocking the unemployment rate down to 8.9 percent, according to the latest Bureau of Labor Statistics report. The unemployment rate has now dropped by 0.9 percentage points in the last three months. According to BLS' establishment survey, job growth during this period has averaged just 136,000, which is only slightly faster than the 90,000 rate needed to keep pace with the growth of the labor force.

It is difficult to reconcile the sharp drop in unemployment with the weak job growth. Generally, the establishment survey is much more accurate since it has a far larger sample and it is benchmarked every year to unemployment insurance data, which provide a near census of payroll employment. Other data in the establishment survey are consistent with the picture of modest job growth. However, there is nothing to suggest the strong job growth necessary to restore full employment. At the rate of job growth over the last three months, it would take almost 14 years to get back to normal rates of unemployment.

For more, check out our latest Jobs Byte.

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Conservatives have tried to argue that the problem state and local governments face is that the public-sector employees have used union power to pull away from the rest of us. What has really happened over the last 30 years is almost the opposite. Since the end of the 1970s, the policy changes that got into full swing under Ronald Reagan have actually pulled the bottom out of the private sector. The public sector isn't pulling ahead --the private sector is falling behind the standard that it long provided.

As an example, the figure here shows the share of workers in the private sector and in state and local governments that have employer-provided health insurance where the employer pays at least a portion of the premium. In 1979, the earliest year of data available, the private, state, and local sectors were not far apart. (Then, as now, state and local employees tend to be older and have more education, two factors that are highly correlated with better pay and benefits.) Over the next 30 years, the health-insurance coverage rates remained essentially unchanged for state and local government workers. But, the share of private-sector workers with employer-provided health insurance fell more than 15 percentage points --from over 70 percent to just under 55 percent.


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Since the Great Recession was formally declared over in June 2009, the economy has experienced only two quarters of above-trend growth in real GDP – growing at an annual rate of 5.0 percent in the fourth quarter of 2009 and 3.7 percent in the first quarter of 2010. For the rest of 2010, real GDP growth was disappointing – a point driven home in the recent downward revision of fourth quarter GDP growth from 3.2 to 2.8 percent. Employment -- which in February 2011 was still below its December 2007 level by nearly than 7.5 million jobs -- will add just 2 million jobs this year at this rate of growth. That’s a scant 1 million more jobs than are needed to keep up with the growth of the working age population, and will reduce unemployment by just half a percent over 2011.

The economic problem is clearly one of slack demand. The pain experienced by workers as a result of the slow growth in real GDP is palpable. Yet, there is no leadership in Washington and no grassroots political pressure to renew, let alone expand, government stimulus measures. Quite the contrary: Fiscal policy in 2011 and 2012 looks set to embrace spending cuts that will reduce the rate of real GDP growth below CBO’s forecasts of 3.1 percent in 2011 and 2.8 percent in 2012 – rates of growth already too low to make much of a dent in the unemployment rate. Unemployment in the CBO projections is expected to end 2011 above 9 percent and 2012 above 8.

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Structural unemployment – unemployment stemming from a mismatch of workers' skills and job requirements – has been cited in mainstream media as the main cause of current, high unemployment. Data from the National Federation of Independent Business (NFIB), however, suggest that structural unemployment is not what is ailing the economy. The graph below draws on data from the NFIB's monthly survey from December 2007 (the official start of the recession) to January 2011. Each month, the NFIB asks its sample of small businesses to state the single most important problem facing their business today. Since the recession began, respondents overwhelmingly have cited "poor sales," suggesting that today's unemployment is primarily due to a lack of demand. "Quality of labor," the factor most consistent with structural unemployment, barely made the list.


In fact, as the recession deepened, "poor sales"  became increasingly important, while "quality of labor" was cited less and less often. Furthermore, through an analysis of the NFIB data, we looked at the indicators that had the largest increase since and decrease since 2007, and they ended up being  "poor sales" and "quality of labor" respectively. These findings suggest that the current, high unemployment is indeed cyclical and not structural.

Add a comment, a project of the Annenburg Public Policy Center, wrongly attacked a number of prominent Democrats for correctly pointing out that Social Security does not contribute to the deficit. The people attacked included New York Senator Charles Schumer, Senate Majority Whip Richard Durbin, and President Obama’s Budget Director Jacob Lew.

This point should be pretty straightforward. Under the law, Social Security is financed by a designated tax, the 12.4 percent payroll that workers pay on their first $107,000 of income each year. The money raised through this tax is used to pay benefits. Any surplus is used to buy U.S. government bonds. All funding for the program comes either from this tax or from the bonds held by the program’s trust fund. (The Social Security system is also is credited with a portion of the income tax paid on Social Security benefits.)

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