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 almost nine million unemployed—5.6 percent of the labor force—and four job seekers for each available job. In addition, there are roughly 10 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.
In the Media | July 2016
Pavlina R. TchernevaThe New York Times, July 11, 2016. All Rights Reserved.
Though job growth surged in June, by and large, this recovery has been the slowest in postwar history and 7.8 million people continue to look, unsuccessfully, for work.
There is nothing inevitable or natural about jobless recoveries....
Read more: http://www.nytimes.com/roomfordebate/2016/07/11/are-we-ready-for-the-next-recession/keep-unemployment-from-mushrooming-with-preventative-policies
In the Media | June 2016Bloomberg, June 7, 2016. All Rights Reserved.
Research Associate Pavlina R. Tcherneva argues against a universal basic income policy and in favor of a job guarantee in this interview with Bloomberg’s Joe Weisenthal. Click here for the video.
Policy Note 2015/7 | November 2015
Demographic Trends in US Labor Force Participation
US labor force participation has continued to fall in the wake of the Great Recession. Improvements in the US unemployment rate reflect the fact that more people are falling out of the labor force, not a stronger labor market. Controlling for changes in the demographic makeup of the workforce (i.e., gender, age, education, and race), Research Scholar Fernando Rios-Avila investigates trends in labor force participation across and within groups between 1989 and 2013. He finds that not all groups have lost ground equally, while participation rates for some groups have actually increased. Understanding these patterns in labor force participation is a necessary first step toward crafting effective policy responses.Download:Associated Program:Author(s):Related Topic(s):
Research Project Reports | May 2015This addendum to our June 2014 report, “Responding to the Unemployment Challenge: A Job Guarantee Proposal for Greece,” updates labor market data through 2014Q3 and identifies emerging employment and unemployment trends. The overarching aim of the report, the outcome of a study undertaken in 2013 by the Levy Institute in collaboration with the Observatory of Economic and Social Developments of the Labour Institute of the Greek General Confederation of Labour, is to provide policymakers and the general public research-based evidence of the macroeconomic and employment effects of a large-scale direct job creation program in Greece, and to invite critical rethinking of the austerity-driven macro policy instituted in 2010 as a condition of the loans made to Greece by its eurozone partners.Download:Associated Program(s):Author(s):Related Topic(s):
Public Policy Brief No. 138 | October 2014To mobilize Greece’s severely underemployed labor potential and confront the social and economic dangers of persistent unemployment, we propose the immediate implementation of a direct public benefit job creation program—a Greek “New Deal.” The Job Guarantee (JG) program would offer the unemployed jobs, at a minimum wage, on work projects providing public goods and services. This policy would have substantial positive economic impacts in terms of output and employment, and when newly accrued tax revenue is taken into account, which substantially reduces the net cost of the program, it makes for a comparatively modest fiscal stimulus. At a net cost of roughly 1 percent to 1.2 percent of GDP (depending on the wage level offered), a midrange JG program featuring the direct creation of 300,000 jobs has the potential to reduce the unemployed population by a third or more, once indirect employment effects are taken into account. And our research indicates that the policy would do all this while reducing Greece’s debt-to-GDP ratio—which leaves little room for excuses.Download:Associated Program(s):Author(s):Related Topic(s):
Research Project Reports | June 2014
This report presents the findings from a study undertaken by the Levy Institute in 2013 in collaboration with the Observatory of Economic and Social Developments of the Labour Institute of the Greek General Confederation of Labour. It uses as background the 2011 Levy Institute study “Direct Job Creation for Turbulent Times in Greece,” which focused on the need for direct job creation to address rising unemployment. The focus in this report, however, is different. Here, the aim is to make available to policymakers and the broader public research-based evidence of the macroeconomic and employment effects of a large-scale program of direct job creation program—a cost-effective and proven policy response. The ultimate goal of this undertaking is to draw urgently needed attention to the worsening levels of unemployment in Greece, and to invite critical rethinking of the austerity-driven macro policy instituted in 2010.Download:Associated Program(s):Author(s):Related Topic(s):
In the Media | April 2014
By Victoria MacGraneThe Wall Street Journal, April 9, 2014. All Rights Reserved.
Federal Reserve Governor Daniel Tarullo on Wednesday said policy makers should proceed cautiously in judging when inflationary pressures are building in the economy, given uncertainty that surrounds just how much slack remains in the labor market.
Mr. Tarullo placed himself in the camp of Fed Chairwoman Janet Yellen, saying he believes the labor market is still operating well short of its potential and associating himself with her March 31 speech explaining the reasons why.
Given there is some debate over how to measure labor market slack, “we are well advised to proceed pragmatically,” he said in a dinnertime speech prepared for delivery at a conference organized by the Levy Institute of Bard College.
He stressed Fed officials should await actual evidence that labor markets had tightened enough to trigger inflationary pressures that could push inflation above the Fed’s 2% inflation target. The Commerce Department’s personal consumption expenditures price index, the Fed’s favored measure of inflation, was up 0.9% in February from a year earlier. The Labor Department’s consumer price index, an alternative measure, was up 1.1%.
“But we should not rush to act preemptively in anticipation of such pressures based on arguments about the potential increase in structural unemployment in recent years,” he said.
There is a vigorous debate at the central bank and among economists generally over the extent of remaining slack in the labor market. Minutes from the Fed’s March 18-19 policy meeting released Wednesday showed that while officials generally agreed slack persisted, they disagreed about how much and how well the unemployment rate reflects the degree of slack.
In her March 31 speech, Ms. Yellen pointed to several factors beyond the jobless rate that suggest the labor market is still quite weak, including the large number of long-term jobless and the seven million Americans who are working part-time but would prefer full-time jobs.
Mr. Tarullo suggested he’s not worried economic growth will suddenly take off and leave the Fed flat-footed and fighting rising inflation. “The issue of how much structural damage has been suffered by the labor market is of less immediate concern today in shaping monetary policy than it might have been had we experienced a period of rapid growth during the recovery,” he said.
In light of the economy’s modest performance since the end of the recession, “it seems less likely that we will experience a growth spurt in the next couple of years that would engender concerns about rapid wage pressures and changes in inflation expectations,” Mr. Tarullo said.
Mr. Tarullo’s comments came within the context of a speech raising concerns about “troubling” long-term trends in the U.S. economy, including falling productivity growth and rising inequality.
The Fed’s efforts to battle recession help lay the groundwork for a stronger, more dynamic economy, Mr. Tarullo said. “But there are limits to what monetary policy can do in counteracting” the longer-term trends he is worried about.
Mr. Tarullo said the federal government could address some of the challenges through investment, especially in ways that help “those who have seen their share of the economic pie shrink.” Early childhood education, job training programs, infrastructure and research are areas that could boost the long-term prospects for the U.S. economy, said Mr. Tarullo.
Working Paper No. 789 | March 2014
The Road Not Taken
It is common knowledge that John Maynard Keynes advocated bold government action to deal with recessions and unemployment. What is not commonly known is that modern “Keynesian policies” bear little, if any, resemblance to the policy measures Keynes himself believed would guarantee true full employment over the long run. This paper corrects this misconception and outlines “the road not taken”; that is, the long-term program for full employment found in Keynes’s writings and elaborated on by others in works that are missing from mainstream textbooks and policy initiatives. The analysis herein focuses on why the private sector ordinarily fails to produce full employment, even during strong expansions and in the presence of strong government action. It articulates the reasons why the job of the policymaker is, not to “nudge” private firms to create jobs for all, but to do so itself directly as a matter of last resort. This paper discusses various designs of direct job creation policies that answer Keynes’s call for long-run full employment policies.Download:Associated Program:Author(s):Related Topic(s):