Employment Policy and Labor MarketsIn 2001, the US economy entered a seventh consecutive year of expansion and unemployment rates were at 30-year lows. Yet, not all shared in the employment boom. Levy Institute research has found that between 1995 and 1999, only 217,000 jobs—of the more than 13 million created—went to the half of the population holding a high school degree or less; the remaining jobs went to those with at least some college education. Today, in an ever-tightening economy, there are more than 16 million unemployed—10 percent of the labor force—and four job seekers for each available job. In addition, there are roughly 17 million full-time workers whose wages place them at or below the official poverty line. Clearly, there is room for improvement on the jobs front.
In response to this problem, Levy Institute scholars have proposed a full-employment, or job opportunity, program that would employ all who are willing to work and increase flexibility between economic sectors, thereby lowering the social and economic costs of unemployment. This program is preferable to proposed alternatives such as a reduction of the workweek or employment subsidies, neither of which is sure to raise employment—and both may have serious side effects. Other labor market policies studied by Levy Institute scholars include the effects of technology on earnings, and the effects of an increase in the minimum wage on hiring practices and earnings.
Working Paper No. 774 | September 2013
Turkish economic growth has been characterized by periodic crises since financial liberalization reforms were enacted in the early 1990s. Given the phenomenally low female labor force participation rate in Turkey (one of the lowest in the world) and the limited scope of the country’s unemployment insurance scheme, there appears to be ample room for a female added worker effect as a household strategy against unemployment shocks under economic crises. Using micro data from household labor force surveys for the 2004–10 period, we examine the extent to which an unemployment shock to the primary male earner instigates female members of the household to move from nonparticipant status to labor market participation.
This paper differs from the earlier few studies on the added worker effect in Turkey in a number of aspects. First, rather than simply basing the analysis on a static association between women’s observed participation status and men’s observed unemployment status in the survey period, we explore whether there is a dynamic relationship between transitions of women and men across labor market states. To do this, we make use of a question introduced to the Household Labor Force Survey in 2004 regarding the survey respondent’s labor market status in the previous year. This allows us to explore transitions by female members of households from nonparticipant status in the previous year to participant status in the current year, in response to male members making a transition from employed in the previous period to unemployed in the current period. We explore whether and to what extent the primary male earner’s move from employed to unemployed status determines the probability of married or single female full-time homemakers entering the labor market. We estimate the marginal effect of the unemployment shock on labor market transition probability for the overall sample as well as for different groups of women, and hence demonstrate that the effect varies widely depending on the particular characteristics of the woman—for example, her education level, age, urban/rural residence, and marital and parental status.
We find that at the micro level an unemployment shock to the household increases the probability of a female homemaker entering the labor market by 6–8 percent. The marginal effects vary substantially across different groups of women by age, rural or urban residence, and education. For instance, a household unemployment shock increases by up to 34 percent the probability that a university graduate homemaker in the 20–45 age group will enter the labor market; for a high school graduate the probability drops to 17 percent, while for her counterpart with a secondary education the marginal effect is only 7 percent.
Our estimate of the total (weighted) number of female added workers in the crisis years shows that only around 9 percent of the homemakers in households experiencing an unemployment shock enter the labor market. Hence we conclude that, while some households experiencing unemployment shocks do use the added worker effect as a coping strategy, this corresponds to a relatively small share. We attribute this finding to the deeply embedded structural constraints against female labor market participation in Turkey.Download:Associated Program:Author(s):Serkan Değirmenci İpek Ilkkaracan
In the Media | May 2013
Interview by Kostas KalloniatisEleftheritypia, May 19, 2013. All Rights Reserved.
Youth unemployment is just one part of the wider problem of unemployment and of course requires specialized interventions to tackle it, according to Rania Antonopoulou, professor at Bard College, director of the research division for gender equality of the Levy Economics Institute, and associate researcher with the Labour Institute of the GSEE.
Antonopoulos considers largely inadequate, if not hypocritical, the recent interest of the European political leadership in youth unemployment and considers the motivation to be in part fear of the risk of social explosion (recent media statements by Draghi, Barroso Leta, etc., provide support for this claim).
She informs us that in the eurozone in 2012 there were 3.4 million unemployed young people aged 15–24, but roughly four times more unemployed were between 25 and 54 years old (12.6 million), with the result that young people constitute 27 percent of this total unemployed (up to 54 years old). In Greece, respectively, young unemployed stood at 173,000 persons in 2012, as compared to 950,000 unemployed aged 25–54 years, comprising a mere 18.2 percent.
Antonopoulos underlines a crucial difference, especially for policy, between:
A. the unemployment rate: for youth it was 55.3 percent in Greece in 2012; namely, for every 100 employed and unemployed young people, 55.3 were unemployed, when for the 24–54 age working age population group this rate was 23.4 percent;
B. the ratio of unemployment to the total population of a certain age group, which includes everyone (the employed, the unemployed, and those not looking for work): for the young in Greece was only 16.2 percent in 2012 due to the fact that the vast majority are students, soldiers, etc. (i.e, a rate that is much less than the rate of unemployment) when the comparable number for ages 24–54 years was 20 percent ( much closer to their corresponding unemployment rate above); and
C. the share of the unemployed by age group among the total number of persons that are unemployed, which for the young unemployed in Greece amounted in 2012 to 14.4 percent, which means that the remaining 85.6 percent of the unemployed were 25 years of age or older.
Now, for Mr. Barroso and Co. the most important criterion is the unemployment rate. But for Ms. Antonopoulos the most important measure for guiding policy is the last measure, the share by age composition of the unemployed.
With all this, Antonopoulos does not claim that there is no need to pay attention to youth unemployment or university graduates seeking their first job. Instead, she proposes that equal attention, perhaps more attention, needs to be directed to those who lost their jobs and are not as young.
Therefore, she believes that the issue of unemployment in general needs to be addressed with anti-austerity pro-growth policies based on domestic demand stimulus, and that a focus in this particular period exclusively on youth unemployment based on erroneous calculations or political considerations (supposedly in response to the lost generation) is misguided. Priority should be given to the creation of an employer-of-last-resort policy—like the New Deal—capable of designing employment programs that match the capabilities of the unemployed to social needs, with the assistance of the trade unions, local communities and their elected governments, and the unemployed themselves.
For youth unemployment, she indicated that specialized interventions along the lines of current interventions in Sweden and Finland are appropriate.
Book Series | April 2013
By Hyman P. Minsky | Preface by Dimitri B. Papadimitriou | Introduction by L. Randall WrayAlthough Hyman P. Minsky is best known for his ideas about financial instability, he was equally concerned with the question of how to create a stable economy that puts an end to poverty for all who are willing and able to work. This collection of Minsky’s writing spans almost three decades of his published and previously unpublished work on the necessity of combating poverty through full employment policies—through job creation, not welfare. Minsky was an American economist who studied under Joseph Schumpeter and Wassily Leontief. He taught economics at Washington University, the University of California–Berkeley, Brown University, and Harvard University. Minsky joined the Levy Economics Institute of Bard College as a distinguished scholar in 1990, where he continued his research and writing until a few months before his death in October 1996. His two seminal books were Stabilizing an Unstable Economy and John Maynard Keynes, both of which were reissued by the Levy Institute in 2008. Minsky held a B.S. in mathematics from the University of Chicago (1941) and an M.P.A. (1947) and a Ph.D. in economics (1954) from Harvard. He was a recipient in 1996 of the Veblen-Commons Award, given by the Association for Evolutionary Economics in recognition of his exemplary standards of scholarship, teaching, public service, and research in the field of evolutionary institutional economics.
This book was made possible in part through the generous support of the Ford Foundation and Andrew Sheng of the Fung Global Institute.
Published By: Levy Economics Institute of Bard College
In the Media | April 2013
By Dimitri B. PapadimitriouLos Angeles Times, April 5, 2013. All Rights Reserved.
The government can and should increase the deficit to return us to prosperity. Without such outlays we can’t get enough GDP growth to seriously attack unemployment.
Just before the congressional spring break, a Senate budget proposal to decrease, but not eliminate, the deficit over 10 years was denounced as “pro debt” by an Alabama senator. It was the kind of proud and loud anti-deficit rhetoric that, no matter how nonsensical, plays nicely into Washington group-think on the subject.
The deficit has arguably gained the distinction of being the single most widely misunderstood public policy issue in America. Just 6% (6!) of respondents in a recent poll correctly stated that it had been shrinking, which has in fact been the case for several years, while 10 times more, 62%, wrongly believed that it’s been getting bigger.
Despite prevailing notions in the capital and throughout the nation, those of us at the Levy Economics Institute—along with many other analysts and economists—have concluded that the deficit should be increased.
Why add to the deficit right now? Jobs. Our economic models clearly show that without increased government outlays we’ll be unable to generate enough GDP growth to seriously attack unemployment. If we tried to balance the budget through tax hikes, our still-recovering economy would be hurt. That leaves a temporarily bigger deficit as an important option.
A mutation in the link between growth and jobs makes the issue urgent. While we are seeing some economic growth, the unemployment rate is not responding as strongly to the gains as it did in the past.
This slow job growth—today’s “jobless recovery”—isn’t an outlier. It’s a phenomenon that has been increasing over the last three decades, with jobs coming back more and more slowly after a downturn, even when GDP is increasing. The weak employment response has been an almost straight-line trend for more than 30 years.
Our institute’s newest econometric models show that each 1% boost in the GDP today will create, roughly, only a third as much improvement to the unemployment rate as the same 1% rise did in the late 1970s.
Traditionally, we’ve assumed that GDP growth would be followed by an employment surge. The break in that link is now very clear. It’s especially worrisome this year, with only a small GDP rise universally anticipated.
The Federal Reserve, for one, just reduced its growth outlook to 2.8% at most for 2013. The shallow recovery we’re seeing may indeed continue through 2014 and beyond. Since employment now consistently lags well behind GDP, we’ll have a long slog before we reach pre-crisis unemployment levels (below 4.6%). Some Federal Reserve officials believe it might take three years just to get from today’s 7.7% down to 6.5%. Full employment would still be nowhere in sight.
The quantitative data are telling us that without a stimulus, we can’t expect a strong employment lift. But instead of stimulus, we’re devising federal budgets that cut spending and lay off workers. The sequester is expected to depress GDP growth by perhaps half a percentage point—when we know that more growth than ever will be needed to raise employment—and cost anywhere from 700,000 to more than 1 million jobs.
Slower government spending is one reason that post-recession growth has been below par compared with other recoveries, Fed Vice Chair Janet Yellen has argued. As government outlays and employment have shrunk, the contribution of public funds to national growth has also fallen. By our estimates, that contribution now stands at about zero. That’s another data point indicating that federal deficits need to be increased.
To better understand the changing relationship between growth and jobs, the Levy Institute recently looked at three scenarios through 2016: what the results might be of a small, medium or large stimulus. A strong stimulus was clearly the most effective option, since it had a powerful, positive influence on employment growth and, in the long term, on deficit reduction. Of course, that route is completely unfeasible in the current political climate. But we saw that even a small amount of deficit spending could help put the recovery on track if it were combined with a mix of private investment, increased exports and good policy alternatives.
That points toward a way forward. Increasing the deficit while our economy is fragile is not “pro deficit,” any more than a family with a 30-year home mortgage is “pro debt.” To reclaim a phrase that deficit hawks have tried to make their own, it is “sensible and serious.” The federal government can run a deficit, as it almost always has, to help the nation return to prosperity.
With our new understanding of the fraying tie between GDP growth and jobs, we know that millions of Americans are on course for an agonizingly slow march out of joblessness unless we make a move. The nature of slumps and recoveries has changed, and the policies to manage them need to change too.
Dimitri B. Papadimitriou is president of the Levy Economics Institute of Bard College and executive vice president of Bard.
In the Media | January 2013
Daily Freeman, January 7, 2013. All Rights Reserved.
ANNANDALE-ON-HUDSON, N.Y. — The Association for Social Economics has awarded Pavlina R. Tcherneva, research associate at the Levy Economics Institute of Bard College and assistant professor of economics at Bard, the 2013 Helen Potter Prize.
The prize was created and endowed by the Association for Social Economics in 1975 and is awarded each year to a promising scholar of social economics for authoring the best article in The Review of Social Economy. Tcherneva is being awarded the prize for her article “On-the-spot Employment: Keynes’s Approach to Full Employment and Economic Transformation” published in the March 2012 issue.
She will be presented with the award at the Association for Social Economics presidential breakfast to be held in San Diego, Calif., this month. For more information, visit www.socialeconomics.org.
Tcherneva conducts research in the fields of modern monetary theory and public policy, and has collaborated with policymakers from Argentina, Bulgaria, China, Turkey, and the United States on developing and evaluating various job-creation programs.
Her current research examines the nexus between monetary and fiscal policies under sovereign currency regimes and the macroeconomic merits of alternative stabilization programs. She has also examined the role, nature, and relative effectiveness of the Federal Reserve’s alternative monetary policies and the American Recovery and Reinvestment Act during the Great Recession.Associated Program:
Working Paper No. 732 | September 2012
The Employer of Last Resort as an Institution for Change
Over the past decade and a half the ability of the employer-of-last-resort (ELR) proposal to deliver full employment and price stability has been discussed at length in the literature. A different issue has received relatively little attention—namely, the concern that even when the ELR produces these macroeconomic benefits, it does so by offering “low-paying” “dead-end” jobs, further denigrating the unemployed. In this context, the important buffer stock feature of the ELR is misconstrued as a hydraulic mechanism that prioritizes macroeconomic stability over the program’s benefits to the unemployed.
This paper argues that the two objectives are not mutually exclusive by revisiting Argentina’s experience with Plan Jefes and its subsequent reform. Plan Jefes is the only direct job creation program in the world specifically modeled after the modern ELR proposal developed in the United States. With respect to macroeconomic stability, the paper reviews how it exhibits some of the key stabilizing features of ELR that have been postulated in the literature, even though it was not designed as an unconditional job guarantee. Plan Jefes also illustrated that public employment programs can have a transformative impact on persistent socioeconomic problems such as poverty and gender disparity. Women—by far the largest group of program beneficiaries—report key benefits to their communities, families, children, and (importantly) themselves from participation in Jefes.
Argentina’s experience shows that direct job creation programs that offer employment at a base wage can have the unique capacity to empower and undermine prevailing structures that produce and reproduce poverty and gender disparities. Because the latter two problems are multidimensional, the ELR cannot be treated as a panacea, but rather as an important policy tool that remedies some of the most entrenched and resilient causes of poverty and gender inequality. The paper examines survey evidence based on narratives by female participants in Jefes to assess these potentially transformative aspects of the ELR proposal.Download:Associated Program:Author(s):Related Topic(s):
In the Media | September 2012
By Brian Ianieri
Press of Atlantic City, September 24, 2012. All Rights Reserved.
The number of public workers and the amount of their wages in southern New Jersey fell in 2011, ending nearly a decade of steady increases as federal, state and local governments shed employees, recently released U.S. Bureau of Labor Statistics data show.
Government jobs in Atlantic, Cape May, Cumberland and Ocean counties fell 6 percent in 2011 from the prior year, eliminating nearly 1,700 positions at all levels of government, according to the preliminary data.
The role of government as an employer has been redefined following the recession, as budget-strapped municipalities and states deal with plummeting revenues, dropping property values and weak economies.
Monetary savings (about $23 million less in wages) have resulted, but also higher unemployment in southern New Jersey, which has the weakest labor market in the state. Cumberland and Atlantic counties had New Jersey’s highest unemployment rates this summer.
"I have members right now saying, ‘Can you get me a job?’ And there's no new work,” said Marcus King, president of Egg Harbor City-based Teamsters Local 331 union, which represents various public workers at local and county jobs in Cape May and Atlantic counties, including Hamilton Township, Linwood, and Egg Harbor City.
“We did get hit hard, and I can't blame the towns because they're trying to hang in there as well, but it hurts our members,” King said. cq “The employees we represent aren't the higher paid salaries. We represent the clerks, the public works guys that take care of the towns. ... When we lose those jobs, there's a greater impact.”
Some economists say governments cutting back on workers is slowing the recovery, adding to unemployment when private sector job creation is too weak to compensate for it.
Others argue growing government and soaring debt are holding the economy back.
The public sector — which makes up nearly 8 percent of the regional work force — took a drubbing in 2011.
The federal government reduced manpower 9 percent in Atlantic, Cape May, Cumberland and Ocean counties, while the state reduced jobs 8 percent.
The local government work force — including municipalities, schools and counties — was reduced by 4 percent, but represented the largest number of jobs lost since it is the majority of government workers.
Private sector jobs remained about the same during that period.
Job losses in the region had a smaller impact on budgets, where total wages of federal, state and local workers combined dropped less than 2 percent from 2010 to 2011 and remained higher than in 2009, labor data show. With fewer workers, the average annual pay for area government workers increased from 2010 to 2011, nearly $10,000 in some areas in state and federal government.
The size of government and pay of its workers is a hot-button topic, but employment cuts have a cost, said Heidi Shierholz, cq labor market economist at the Economic Policy Institute in Washington, D.C.
“It’s a massive drag on the economy,” she said. “There may be an idea there’s a ton that can be cut with no pain, that there’s a huge fraud-and-abuse line you could just cut. People think there are a lot of cuts that can take place without actually harming the economy, and it’s just not true.”
Among local government workers in Atlantic County, 5 percent of positions — or about 250 jobs — were eliminated in 2011. Cape May County workers likewise saw 5 percent of local government jobs lost, while there was a 7 percent fewer in Cumberland County and a 3 fewer cut in Ocean County.
The public sector had been spared from more drastic cuts the two prior years in part because of the American Recovery and Reinvestment Act of 2009. The federal stimulus helped the public sector support employment, said Gary Burtless,cq labor economist at the Brookings Institution, a Washington, D.C.-based research institute.
When the money ran out, the impacts on public jobs became more evident.
Burtless said the federal unemployment rate would look better had jobs in the public sector simply remained stagnant, and even lower had it grown with the population.
“If the government industry had done as well as the construction industry — which also added no jobs, and the construction industry remains very depressed — we would have an unemployment rate 0.7 percentage points lower,” he said.
Tad DeHaven is a budget analyst for the Cato Institute, a Washington, D.C.-based policy research organization promoting limited government.
DeHaven said taxpayer money that funds public salaries s ultimately hinders the private sector and the economy.
“Money that went to a government employee’s salary is money that could have gone to the baker down the street or the movie theater. You just can’t look at is as you have a loss of a government employee, the loss of a salary-paying job. You had to take money out to the economy to begin with to pay the government to begin with.”
Public and private sector employees cannot be viewed the same way, he said.
"Businesses that don't make a profit go out of business, and wages and benefits are going to reflect that accordingly," he said. "When government spends too much money, they issue more debt, and they can increase taxes."
Dimitri Papadimitriou, president of the Levy Economics Institute of Bard College in New York, disagrees. He said cutting public jobs is the wrong way to recover from a recession.
“It’s always very easy to suggest the private sector should be the driver of economic growth,” he said, “but it will only be the driver if the prospects and expectations and forecasts of the future are more euphoric ...This is the time not to do this cutting, but actually to promote employment and in some ways to increase public-sector employment.”
The prolonged economic slump makes this recovery much different than previous ones, said Michael Busler,cq a Richard Stockton College of New Jersey business professor and a fellow at the William J. Hughes Center for Public Policy.
“After the 1981 recession, we were adding over 400,000 jobs per month, and there were two months we added over one million jobs. If we could get that kind of growth, the loss in the public sector would be negligible,” he said.
“If the economy was recovering the way it traditionally does after a steep recession, the answer is yes, the private sector could compensate for that. The problem is the recovery has been so slow,” he said.Associated Program: