Category Archive for: Social Insurance [Return to Main]

Tuesday, March 31, 2015

'Generous Welfare Benefits Make People More Likely To Want to Work, Not Less'

Not so sure this is conclusive -- it seems like the survey question could have been sharpened:

Generous welfare benefits make people more likely to want to work, not less: Survey responses from 19,000 people in 18 European countries, including the UK, showed that "the notion that big welfare states are associated with widespread cultures of dependency, or other adverse consequences of poor short term incentives to work, receives little support."
Sociologists Dr Kjetil van der Wel and Dr Knut Halvorsen examined responses to the statement 'I would enjoy having a paid job even if I did not need the money' put to the interviewees for the European Social Survey in 2010.
In a paper published in the journal Work, employment and society they compare this response with the amount the country spent on welfare benefits and employment schemes, while taking into account the population differences between states.
The researchers, of Oslo and Akershus University College, Norway, found that the more a country paid to the unemployed or sick, and invested in employment schemes, the more its likely people were likely to agree with the statement, whether employed or not. ...
The researchers also found that government programmes that intervene in the labour market to help the unemployed find work made people in general more likely to agree that they wanted work even if they didn't need the money. In the more active countries around 80% agreed with the statement and in the least around 45%. ...
"This article concludes that there are few signs that groups with traditionally weaker bonds to the labour market are less motivated to work if they live in generous and activating welfare states.
"The notion that big welfare states are associated with widespread cultures of dependency, or other adverse consequences of poor short term incentives to work, receives little support.
"On the contrary, employment commitment was much higher in all the studied groups in bigger welfare states. ..."

Thursday, March 26, 2015

Social Insurance Makes America More Entrepreneurial

I've made this point several times myself, i.e. that social insurance can promote entrepreneurship, but it's worth making again:

Welfare Makes America More Entrepreneurial: ... Pundits and researchers often note the negative correlation between government spending and entrepreneurship, both within the U.S. and internationally, and conclude that growth requires trimming social welfare programs. Jim Manzi of the National Review, for example, a thoughtful commenter on economic policy, wrote last year that, “we must accept some amount of social dislocation in return for innovation.” But correlations can be misleading. A series of more recent studies challenge the view that larger or more activist government necessarily threatens entrepreneurship. In fact, that may get the relationship precisely backwards.
Entrepreneurs are actually more likely than other Americans to receive public benefits, after accounting for income, as Harvard Business School’s Gareth Olds has documented. And in many cases, expanding benefit programs helps spur new business creation. ...
Take food stamps. ... It seems that expanding the availability of food stamps increased business formation by making it less risky for entrepreneurs to strike out on their own. Simply knowing that they could fall back on food stamps if their venture failed was enough to make them more likely to take risks.
Food stamps are not an isolated case. ...

The mechanism in each case is the same: publicly funded insurance lowers the risk of starting a business, since entrepreneurs needn’t fear financial ruin. ...

Monday, March 23, 2015

'Congressional Budget Plans Get Two-Thirds of Cuts From Programs for People With Low or Moderate Incomes'

The true goal of Republican's "deficit fetishism":

Congressional Budget Plans Get Two-Thirds of Cuts From Programs for People With Low or Moderate Incomes, by Richard Kogan and Isaac Shapiro, CBPP: The budgets adopted on March 19 by the House Budget Committee and the Senate Budget Committee each cut more than $3 trillion over ten years (2016-2025) from programs that serve people of limited means. These deep reductions amount to 69 percent of the cuts to non-defense spending in both the House and Senate plans.
Each budget plan derives more than two-thirds of its non-defense budget cuts from programs for people with low or modest incomes even though these programs constitute less than one-quarter of federal program costs. Moreover, spending on these programs is already scheduled to decline as a share of the economy between now and 2025.[1]
The bipartisan deficit reduction plan that Alan Simpson and Erskine Bowles (co-chairs of the National Commission on Federal Policy) issued in 2010 adhered to the basic principle that deficit reduction should not increase poverty or widen inequality. The new Congressional plans chart a radically different course, imposing their most severe cuts on people on the lower rungs of the economic ladder. ...

Friday, March 20, 2015

Paul Krugman: Trillion Dollar Fraudsters

Why do Republicans use "magic asterisks" in their budget proposals?:

Trillion Dollar Fraudsters, by Paul Krugman, Commentary, NY Times: By now it’s a Republican Party tradition: Every year the party produces a budget that allegedly slashes deficits, but which turns out to contain a trillion-dollar “magic asterisk” — a line that promises huge spending cuts and/or revenue increases, but without explaining where the money is supposed to come from.
But the just-released budgets from the House and Senate majorities break new ground. Each contains not one but two trillion-dollar magic asterisks: one on spending, one on revenue. And that’s actually an understatement. If either budget were to become law, it would leave the federal government several trillion dollars deeper in debt than claimed, and that’s just in the first decade. ...
The modern G.O.P.’s raw fiscal dishonesty is something new in American politics... And the question we should ask is why.
One answer you sometimes hear is that what Republicans really believe is that tax cuts for the rich would generate a huge boom and a surge in revenue, but they’re afraid that the public won’t find such claims credible. So magic asterisks are really stand-ins for their belief in the magic of supply-side economics, a belief that remains intact even though proponents in that doctrine have been wrong about everything for decades.
But I’m partial to a more cynical explanation. Think about what these budgets would do if you ignore the mysterious trillions in unspecified spending cuts and revenue enhancements. What you’re left with is huge transfers of income from the poor and the working class, who would see severe benefit cuts, to the rich, who would see big tax cuts. And the simplest way to understand these budgets is surely to suppose that they are intended to do what they would, in fact, actually do: make the rich richer and ordinary families poorer.
But this is, of course, not a policy direction the public would support... So the budgets must be sold as courageous efforts to eliminate deficits and pay down debt — which means that they must include trillions in imaginary, unexplained savings.
Does this mean that all those politicians declaiming about the evils of budget deficits and their determination to end the scourge of debt were never sincere? Yes, it does.
Look, I know that it’s hard to keep up the outrage after so many years of fiscal fraudulence. But please try. We’re looking at an enormous, destructive con job, and you should be very, very angry.

Thursday, March 12, 2015

'The Truth About Entitlements'

Projections of budget problems in the future are about health care costs, and there is improvement on that front:

The Truth About Entitlements, by Paul Krugman: As part of another project, I was looking at CBO historical budget data, and realized that you can summarize a lot about all those much-denounced “entitlements” with this figure:

Credit: Congressional Budget Office

Here, income security is mainly EITC, food stamps, and unemployment benefits, plus a few other means-tested aid programs. Health is all major programs — Medicare, Medicaid/CHIP, and at the very end the exchange subsidies.
What this chart tells you right away:
1. The “nation of takers” stuff is deeply misleading. Until the economic crisis, income security had no trend at all. ...
2. When people claimed that spending was exploding under Obama, the only thing actually happening was a surge in income-support programs at a time of genuine distress. People smirked knowingly and declared that everyone knew that the bump in spending would become permanent; it didn’t.
3. If there is a long-run spending problem, it’s overwhelmingly about health care. And we have lately been making remarkable progress on that front.

More on the same topic from the CBPP:

Low-Income Programs Not Driving Nation’s Long-Term Fiscal Problem, by Robert Greenstein, Isaac Shapiro, and Richard Kogan: Low-income programs are not driving the nation’s long-term fiscal problems, contrary to the impression that a narrow look at federal spending during the Great Recession and the years that immediately followed might leave. Lawmakers should bear this in mind as they consider proposals that may emerge in coming weeks for deep cuts in this part of the budget.

Figure 1

Low-income program spending grew significantly between 2007 and 2010 in response to the severe economic downturn, helping to mitigate its worst effects. Since peaking in 2010 and 2011, federal spending on low-income programs other than health care has fallen considerably and will continue to fall as a percent of gross domestic product (GDP) as the economy more fully recovers. By 2018, it will — based on Congressional Budget Office estimates — drop below its average over the past 40 years, (from 1975 to 2014) and continue declining as a share of GDP after that. [1]  (See Figure 1.)
As a result, these programs do not contribute to the nation’s long-term fiscal problems. ...

Tuesday, February 24, 2015

'Disability Insurance: An Essential Part of Social Security'

Kathy Ruffing at the CBPP:

Disability Insurance: An Essential Part of Social Security: With a House subcommittee holding a hearing tomorrow on the future of Disability Insurance (DI), policymakers need to understand that DI is an essential part of Social Security.
Social Security is much more than a retirement program.  It pays modest but guaranteed benefits when someone with a steady work history dies, retires, or becomes severely disabled. Although nobody likes to think that serious sickness or injury might knock them out of the workforce, a young person starting a career today has a one-third chance of dying or qualifying for DI before reaching Social Security’s full retirement age. ...
DI’s eligibility criteria are strict (...most applications are denied) and its benefits modest..., on average, only about half of their lost earnings... DI beneficiaries are far likelier to be poor or near-poor than other Americans. ...  And at age 66, DI beneficiaries are seamlessly switched to retirement benefits without filing a fresh application. ...
Despite ... close links, the disability program’s trust fund is separate from the retirement and survivor program.  There’s no longer any good reason for that — the 1979 Advisory Council recommended a merger of the trust funds — but lawmakers instead have relied on periodic reallocations of tax revenue between the two programs to shore up whichever trust fund needed it.  They need to do so again to prevent a sudden, 20-percent cut in payments to vulnerable DI beneficiaries in 2016.
The need to replenish DI isn’t a crisis, nor would reallocating simply “kick the can down the road” as some contend.  Instead it’d allow lawmakers to focus on the real task:  assembling a package of revenue increases and modest benefit reforms to preserve long-term solvency for all of Social Security.  Americans of all ages and incomes support Social Security and are willing to pay for it.

Monday, February 23, 2015

'Even Better Than a Tax Cut'

Larry Mishel:

Even Better Than a Tax Cut: With the early stages of the 2016 presidential campaign underway and millions of Americans still hurting financially, both parties are looking for ways to address wage stagnation. That’s the good news. The bad news is that both parties are offering tax cuts as a solution. What has hurt workers’ paychecks is not what the government takes out, but what their employers no longer put in — a dynamic that tax cuts cannot eliminate. ...
Yes, a one-time reduction in taxes through, say, expanded child care credits or a secondary earner tax break, as Democrats propose, could help families. But as wages continue to stagnate, it is impossible to continuously cut taxes and still pay for things like education and social programs for the growing population of older Americans. ...
Contrary to conventional wisdom, wage stagnation is not a result of forces beyond our control. It is a result of a policy regime that has undercut the individual and collective bargaining power of most workers. Because wage stagnation was caused by policy, it can be reversed by policy, too.

Wednesday, February 11, 2015

'The Disability Insurance Non-Crisis'

Republicans and misguided centrist Democrats are coming after Social Security. One target is disability insurance. However:

The Disability Insurance Non-Crisis, CBPP: Although the Senate Budget Committee will hold a hearing tomorrow titled “The Coming Crisis: Social Security Disability Trust Fund Insolvency,” Disability Insurance (DI) is not, in fact, in crisis.
Here, briefly, are the facts...

Tuesday, February 10, 2015

Why Social Insurance Is a Necessary Part of Capitalism

I have a new column:

Why Social Insurance Is a Necessary Part of Capitalism:

It's a defense of social insurance against Republican attempts to dismantle it.

Thursday, February 05, 2015

How Many of the Unemployed Receive Unemployment Compensation?

The percentage may not be as high as you think, and is currently at the lowest level since at least 1972 (click on the figure for a larger, clearer version):

Nelp 1
[More here.]

Friday, January 23, 2015

'Who is Moving Out of the U.S. Labor Force?'

Tyler Cowen:

Who is moving out of the U.S. labor force?: Read the recent testimony of Robert E. Hall (pdf):

Most of the decline in participation occurred among teenagers and young adults. The finding that these effects tend to be larger in more prosperous families points strongly away from much of a role for rising influence of benefit programs, because these programs, especially food stamps, are only available to families with incomes well below the median.

So what is going on here? Could it be “culture”? Hall cites, suggestively, time use surveys showing that sleep and personal consumption of video are up strongly.

Wednesday, January 07, 2015

'Getting It Wrong on Disability Insurance'

It didn't take Republicans long to begin their assault on Social Security:

Getting It Wrong on Disability Insurance, by Kathy Ruffing, CBPP: I’ve explained that a new House rule will make it harder to reapportion payroll taxes between Social Security’s retirement and Disability Insurance (DI) trust funds to avert a one-fifth cut in benefits to severely impaired DI recipients in late 2016.  In a revealing statement, co-sponsor Representative Tom Reed (R-NY) says the change is designed to prevent Congress from “raiding Social Security to bail out a failing federal program.”  He’s doubly wrong.
First, far from “failing,” DI has grown mostly in response to well-understood demographic and program factors like the aging of the baby boom, and the program’s trustees have long anticipated the need to replenish the trust fund next year...  Second, DI isn’t distinct from Social Security; it’s an essential part of Social Security.
Social Security is much more than a retirement program.  It pays modest but guaranteed benefits when someone with a steady work history dies, retires, or becomes severely disabled. ...
Statements like Representative Reed’s implicitly attempt to pit Social Security retirement and disability beneficiaries against each other. ...

Sunday, January 04, 2015

'Who Bears Risk?'

Chris Dillow:

Who bears risk?: There's one aspect of the collapse of City Link that deserves more attention than it gets - that it undermines the conventional idea that firms' owners are risk-takers.
Better Capital's stake in the firm took the firm of a secured loan, which means they'll get first dibs on its residual value. Thanks to this, Jon Moulton, Better Capital's manager claims to stand to lose only £2m - which is a tiny fraction of his £170m wealth.
By contrast, many of City Link's drivers had to supply capital to the firm in the form of paying for uniforms and van livery, and are unsecured creditors who might not get back what they are owed. Many thus face a bigger loss as a share of their wealth than Mr Moulton. In this sense, it is workers rather than capitalists who are risk-takers. This point is not, of course, specific to City Link. ...
There are two implications of all this. First, it means that the idea that capitalists are brave entrepreneurs who deserve big rewards for taking risk is just rubbish. ... Secondly, it suggests that ownership might in some cases lie in the wrong hands. ... This is yet another case for worker ownership.
This in turn reminds us of a cost of inequality; sometimes, ownership is in the wrong hands simply because the most efficient owners can't afford to buy the firm.
All this poses the question: are there policy measures, other than worker ownership, which could ensure a more equitable bearing of risk? One answer would be policies to achieve serious full employment. Full employment would allow workers to reject job offers which expose them to excessive risk....
Secondly, we need a more redistributive welfare state. The welfare state is not a scheme whereby "we" pay for "scroungers". It is instead an insurance mechanism. It is a means of pooling human capital risk... The fact that many workers suffer a massive drop in income when they lose their jobs suggests the welfare state isn't providing enough insurance.
Of course, all these ways of improving risk-bearing fall outside the Overton window. 

Wednesday, December 17, 2014

A Big Safety Net and Strong Job Market Can Co-Exist. Just Ask Scandinavia.

Neil Irwin:

A Big Safety Net and Strong Job Market Can Co-Exist. Just Ask Scandinavia: It is a simple idea supported by both economic theory and most people’s intuition: If welfare benefits are generous and taxes high, fewer people will work. ... Here’s the rub, though: The idea may be backward.
Some of the highest employment rates in the advanced world are in places with the highest taxes and most generous welfare systems, namely Scandinavian countries. The United States and many other nations with relatively low taxes and a smaller social safety net actually have substantially lower rates of employment. ...
In short, more people may work when countries offer public services that directly make working easier, such as subsidized care for children and the old; generous sick leave policies; and cheap and accessible transportation. ...
And this analysis may leave out some other factors... Robert Greenstein, the president of the Center on Budget and Policy Priorities, notes that wages for entry-level work are much higher in the Nordic countries than in the United States, reflecting a higher minimum wage, stronger labor unions and cultural norms that lead to higher pay. ... Perhaps more Americans would enter the labor force if even basic jobs paid that well, regardless of whether the United States provided better child care and other services. ...

Wednesday, December 03, 2014

Social Insurance Guaranteed

I was looking for an old post of mine on social insurance and entrepreneurship to complement this post today from Nick Bunker when I came across this from September of 2005 (slightly edited). Maybe I wasn't one of the people yelling loudly that the Great Recession was about to hit, but I did warn that "Things happen," so be ready when they do:

...The discussion concerning Social Security has, in my view, largely underplayed the role the government has to play in guaranteeing the social insurance aspect of the system, particularly from those in favor of private accounts. When all shocks that hit people are individual so that there are winners and losers, but overall the winners and losers balance, then it is possible for people to voluntarily enter into arrangements where the individual risks are shared and thus largely eliminated (abstracting for the moment from market failure problems in social insurance markets). Conversely, if people want to bear the risks individually, they can. This system works fine for time periods when shocks are small and idiosyncratic. But what about large disasters such as a hurricane that floods New Orleans, or a Great Depression that guts an entire economy?

The Social Security program grew out of a time when there was a large aggregate shock, a shock that resulted in the Great Depression. The Great Depression affected people collectively, it wasn’t just a few unlucky individuals balanced somewhere else by winners. It’s been hard for me to see how private accounts would help when stock market values fall, as they did after the crash of 1929, to one sixth their pre-crash values. Without some sort of social support from the government, such as it is, people would be much worse off after such events. How will personal accounts and individual accountability rebuild schools or bridges in New Orleans? How will private accounts or even the private sector rescue the elderly from rooftops or provide security against looters? They won’t. For large collective shocks the government, not the private sector induced purely by profit, must stand ready to act as the "insurer of last resort."

To have a social security system that falls apart when you most need it, when there are large disasters affecting entire regions or economies, is not optimal. Personal accounts would not have withstood the stock market crash associated with the Great Depression. Why do we want to implement a social support system that fails when it is needed the most? I don’t think any of us believes we should leave it to individuals to bear the full cost of the disaster caused by Hurricane Katrina, i.e. that government should not be involved at all. We all know that government has a role to play in this disaster, the cry from all sides is that the government is doing too little, not that it is doing too much. Things may not be perfect with government involved, and there is certainly room for improvement, but things would be even worse if government did not get involved at all. And just as the government has an essential role to play in this disaster, it will also have an essential role to play when the next big shock, whether it’s financial, natural, or human induced, hits us in the future. Social insurance systems aren’t just for the next few years, they must survive as long as the country does. Social insurance must survive the big shocks, and for that to happen the government must, in the end, provide the insurance.

If you think such large shocks cannot happen again, that big shocks such as a Great Depression will never, ever happen again to anyone ever, think about the events in any one hundred year time period. Things happen.

'Entrepreneurship, Down-Side Risks, and Social Insurance'

In 2009 I argued:

...A more extensive social safety net can reduce the risk of attempts at entrepreneurship. If there is an extensive social safety net to fall back upon if things don't work out, you might be more willing to quit the job you hate (the one with health insurance for the kids) and sink everything you have into a small business that you've always wanted to run. But I'm not sure the data above support this interpretation, i.e. that there is an obvious positive association between the strength of social insurance and the prevalence of small business. But it is highly suggestive, and regressions that control for other cross-country differences could help to settle the issue.

Nick Bunker discusses a paper that provides supporting evidence:

Entrepreneurship, down-side risks, and social insurance, Washington Center for Equitable Growth: When Americans talk about entrepreneurs, or at least the reasons for becoming one, the possibility of great success is most often the first topic of discussion. The great wealth that company founders such as Bill Gates or Mark Zuckerberg amassed certainly make the idea of starting a business more attractive to potential entrepreneurs. But according to a new National Bureau of Economic Research working paper, we should be paying more attend to the down-side risks when it comes to fostering entrepreneurship.
The new paper, by economists John Hombert and David Thesmar of HEC Paris, David Sraer of the University of California-Berkeley, and Antoinette Schoar of the Massachusetts Institute of Technology, looks at a reform in the French unemployment insurance system enacted in 2002. The reform allowed unemployed workers who start a new business to keep the right to their unemployment benefits for up to three years. They could use the accrued benefits to make up the difference between their business’s revenue and the level of benefits they would have otherwise received.
The four researchers find that the policy change acted as a sort of entrepreneurship insurance. Workers who before would have been hesitant to start a business may be more likely to do so now that they had some protection against downside risk. The new paper documents that the rate at which firms were created increased by 25 percent after the 2002 reform....
They also find that ... the evidence points toward these new entrepreneurs being capable businesspeople who just needed a safety net before starting a business. What’s more, these new firms had a positive impact on the overall economy. ...
Many U.S. policymakers and economists are worried about the decline in entrepreneurship and business creation. They might want to consider investigating whether alleviating the down-side risks to starting a company can help solve that problem.

Thursday, November 20, 2014

'Encouraging Work: Tax Incentives or Social Support?'

Tim Taylor:

Encouraging Work: Tax Incentives or Social Support?: Consider two approaches to encouraging those with low skills to be fully engaged in the workplace. The American approach focuses on keeping tax rates low and thus providing a greater financial incentive for people to take jobs. The Scandinavian approach focuses on providing a broad range of day care, education, and other services to support working families, but then imposes high tax rates to pay for it all. In the most recent issue of the Journal of Economic Perspectives, Henrik Jacobsen Kleven contrasts these two models in "How Can Scandinavians Tax So Much?" (28:4, 77-98). Kleven is from Denmark, so perhaps his conclusion is predictable. But the analysis along the way is intriguing.
As a starting point, consider what Kleven calls the "participation tax rate." When an average worker in a country takes a job, how much will the money they earn increase their standard of living? The answer will depend on two factors: any taxes imposed on what they earn, including, income, payroll, and sales taxes; and also the loss of any government benefits for which they become less eligible or ineligible because they are working. In the Scandinavian countries of Denmark, Norway, and Sweden, this "participation tax rate" is about double what it is in the United States. ...
A standard American-style prediction would be that countries where gains from working are so low should see a lower level of participation in the workforce. That prediction does not hold true in cross-country data among high-income countries. ...
What explains this pattern? Kleven argues that just looking at the tax rate isn't enough, because it also matters what the tax revenue is spent on. For example, the Scandinavian countries spend a lot of money on universal programs for preschool, child care, and elderly care. Kleven calls these "participation subsidies," because they make it easier for people to work--especially for people who otherwise would need to find a way to cover or pay for child care or elder care. The programs are universal, which means that their value expressed as a share of income earned means much more to a low- or middle-income family than to a high-income family. ...
Any direct comparisons between the United States (population of 316 million) and the Scandinavian countries of Denmark (6 million), Norway,  (5 million) and Sweden (10 million) is of course fraught with peril. Their history, politics, economies, and institutions differ in so many ways. You can't just pick up can't just pick up long-standing policies or institutions in one country, plunk them down in another country, and expect them to work the same way.
That said, Kleven basic conceptual point seems sound. Provision of good-quality preschool, child care and elder care does make it easier for all families, but especially low-income  families with children, to participate in the labor market.   In these three Scandinavian countries, the power of these programs to encourage labor force participation seems to overcome the work disincentives that arise in financing and operating them. This argument has nothing to do with whether preschool and child care programs might help some children to perform better in school--although if they do work in that way, it would strengthen the case for taking this approach.
So here is a hard but intriguing hypothetical question: The U.S. government spends something like $60 billion per year on the Earned Income Tax Credit, which is a refundable tax credit providing income mainly to low-income families with children, and almost as much on the refundable child tax credit. Would low-income families with children be better off, and more attached to the workforce, if a sizeable portion of the 100 billion-plus spent for these tax credits--and aimed at providing financial incentives to work--was instead directed toward universal programs of preschool, child care, and elder care?

Or we could raise taxes on the wealthy, cut defense spending, etc., etc. and then ask which if the two programs it would be better to enhance (or in what proportions), the EITC and other tax credits or the "universal programs of preschool, child care, and elder care." If the programs are complementary and insufficient, as I believe they are, then neither should be cut to enhance the other (though I would choose the Scandinavian model if I had to pick on of the two to augment).

Saturday, October 11, 2014

'Hiatt Hysterical Over Losing His Schtick'

Barkley Rosser feels "sorry for Fred." Sort of:

Hiatt Hysterical Over Losing His Schtick: Poor Fred Hiatt. For years, this Editor of the Editorial page of the Washington Post has made his named appearances on the editorial page (he daily bloviates the main ed lead anonymously) only to call for cutting Social Security, and occasionally Medicare as well. This has been his schtick for many years. Now it is over, but he fails to recognize it. ...
So, I feel sorry for Fred. Beating up on seniors who have paid in their taxes for what they are getting has been the one an only topic that has inspired him to write columns under his own name for many years. The new projections of lower deficits, good news to most of us, simply do not register with him. Actually, they probably do. But Krugman is right. As much as anybody, he is the longstanding VSP in DC who has been whining for years about cutting Social Security and Medicare, whose excuse for this argument has simply disappeared, but he and his pals simply are not willing to face the new facts.

Tuesday, September 30, 2014

'Why Have Policymakers Abandoned the Working Class?'

I have a new column:

Why Have Policymakers Abandoned the Working Class?, by Mark Thoma: The risks associated with a negative economic shock can vary widely depending on the wealth of a household. Wealthy households can, of course, absorb a shock much easier than poorer households. Thus, it’s important to think about how economic downturns impact various groups within the economy, and how policy can be used to offset the problems experienced by the most vulnerable among us.
When thinking about the effects of an increase in the Fed’s target interest rate, for example, it’s important to consider the impacts across income groups. I was very pleased to hear monetary policymakers talk about the asymmetric risks associated with increasing the interest rate too soon and slowing the recovery of employment and output, versus raising rates too late and risking inflation. ...
But there is more to it than this. ...

Friday, September 26, 2014

'Long-term Unemployed Struggle as Economy Improves'

The long-term unemployed need more help than they are getting:

Long-term Unemployed Struggle as Economy Improves: While the unemployment rate for people out of work for six months or less has returned to prerecession levels, the levels of unemployment for workers who remain jobless for more than six months is among the most persistent, negative effects of the Great Recession, according to a new national study at Rutgers. In fact, one in five workers laid off from a job during the last five years are still unemployed and looking for work, researchers from the John J. Heldrich Center for Workforce Development found.

Among the key findings of "Left Behind: The Long-term Unemployed Struggle in an Improving Economy":

  • Approximately half of the laid-off workers who found work were paid less in their new positions; one in four say their new job was only temporary.
  • Only one in five of the long-term unemployed received help from a government agency when looking for a job; only 22 percent enrolled in a training program to develop skills for a new job; and 60 percent received no government assistance beyond unemployment benefits.
  • Nearly two-thirds of Americans support increasing funds for long-term education and training programs, and greater spending on roads and highways in order to assist unemployed workers.

As of last August, 3 million Americans, nearly one in three unemployed workers, have been unemployed for more than six months and more than 2 million Americans have been out of work for more than a year...

This research provides a detailed record of the enduring effects of the Great Recession on the unemployed and long-term unemployed five years after the economy started growing again in June 2009.

The survey also found that:

  • More than seven in 10 long-term unemployed say they have less in savings and income than they did five years ago.
  • More than eight in 10 of the long-term unemployed rate their personal financial situation negatively as only fair or poor.
  • More than six in 10 unemployed and long-term unemployed say they experienced stress in family relationships and close friendships during their time without a job.
  • Fifty-five percent of the long-term unemployed say they will need to retire later than planned because of the recession, while 5 percent say the weak economy forced them into early retirement.
  • Nearly half of the long-term unemployed say it will take three to 10 years for their families to recover financially. Another one in five say it will take longer than that or that they will never recover.

..."These long-term unemployed workers have been left behind to fend for themselves as they struggle to pull their lives back together."

Wednesday, September 24, 2014

'Hungry Children in America'

Tim Taylor:

Hungry Children in America: One child in five in the United States lives in a "food insecure" household. Craig Gundersen and James P. Ziliak lay out the evidence in "Childhood Food Insecurity in the U.S.: Trends, Causes, and Policy Options,"  a Fall 2014 Research Report written for The Future of Children. ...

Unsurprisingly, families that are poor are more likely to experience food insecurity. But perhaps more surprisingly, the connection from poverty to food insecurity is by no means ironclad. After all, the U.S. spends over $100 billion on food-related programs for the poor, including food stamps, school lunches and breakfasts and others. As the authors write:

Clearly, the risk for child food insecurity drops quickly with income. But even at incomes two and three times the poverty level, food insecurity is quite high. Moreover, almost 60 percent of children in households close to the poverty line are in foodsecure households. This suggests that income is only part of the story and that other factors also contribute to children’s food security.

As the authors dig into the data on children living in food-insecure households, the theme that keeps emerging is the quality of parenting the children receive. ...

The takeaway lesson, at least for me, is that food stamps and school lunches do help to reduce food insecurity, as do programs that provide income support to those with low incomes. But when the adults in a household are having trouble managing their own lives, children end up suffering. The answers here are straightforward to name, if not always easy to do, like finding ways to get food to children directly (perhaps by expanding school food programs to the summers and weekends) and to help parents in low-income households learn how to stretch their limited resources.  As I have argued before on this website, for many children, the parenting gap they experience may be limiting their development even from a very young age.

Friday, September 19, 2014

'The Political Economy of a Universal Basic Income'

Since I posted the original, it's only fair to post the response:

The political economy of a universal basic income, by Steve Waldman, Interfluidity: So you should read these two posts by Max Sawicky on proposals for a universal basic income, because you should read everything Max Sawicky writes. (Oh wait. Two more!) Sawicky is a guy I often agree with, but he is my mirror Spock on this issue. I think he is 180° wrong on almost every point. ...

'Home Free?'

James Surowiecki:

Home Free?, by James Surowiecki: In 2005, Utah set out to fix a problem that’s often thought of as unfixable: chronic homelessness. The state had almost two thousand chronically homeless people. Most of them had mental-health or substance-abuse issues, or both. At the time, the standard approach was to try to make homeless people “housing ready”: first, you got people into shelters or halfway houses and put them into treatment; only when they made progress could they get a chance at permanent housing. Utah, though, embraced a different strategy, called Housing First: it started by just giving the homeless homes.
Handing mentally ill substance abusers the keys to a new place may sound like an example of wasteful government spending. But it turned out to be the opposite: over time, Housing First has saved the government money. ...

Friday, September 12, 2014

'In Defense of Social Insurance'

MaxSpeaks:

In defense of social insurance: On Twitter I said: “The basic income movement is an attack on the strongest political pillar of social-democracy: social insurance.” I’ve inveighed against the Universal Basic Income in the past, so here I go again. Another edition of old man yelling at clouds.
Throughout history, in certain communal settings some variant of the Marxian “From each according to his abilities, to each according to his needs,” has applied. In a naive sense, the UBI is not far off from that ideal. What economists call a demogrant* — a fixed, unrestricted, unconditional transfer payment to every individual (to each according to his needs**) — would presumably be financed by some kind of progressive tax (from each according to his abilities). I have no quarrel with the ideal. The problem is that it’s an utter fantasy that beclouds thinking about more plausible social policies. It’s a distraction from the need to defend really-existing social insurance and to attack the devolution of the safety net (about which a bit more below). ...

Wednesday, August 13, 2014

'Cutting Jobless Benefits Did Not Boost Employment'

It's okay to help people:

EPI and AEI Agree: Cutting Jobless Benefits Did Not Boost Employment, by Joshua Smith, EPI: Perhaps Hell has not frozen over, but it appears that someone down there may have leaned on the thermostat. That’s right, the Economic Policy Institute and the American Enterprise Institute are in lock-step agreement on an important fiscal policy matter.
During the Great Recession and its aftermath, the federal government acted to help victims of the severe downturn by funding programs that extended unemployment benefits—to up to 99 weeks in some cases, up from the standard 26 weeks. As the economic recovery continued, weak as it was for many in the working class, many lawmakers on the right began to believe that these extended benefits were a drag on employment—the theory being that government checks reduced the incentive for recipients to find a job, and that cutting off this lifeline would compel unemployed workers to look harder for work and perhaps take jobs they may not have accepted if the benefits had continued. Relying on this premise, Congress allowed the federally-funded Emergency Unemployment Compensation program to lapse last December.
Now, more than seven months later, data are available to test this idea. Coming from perspectives that diverge greatly along the ideological spectrum, scholars at both AEI and EPI have come to the conclusion that this “bootstraps” theory is incorrect—curtailing jobless benefits did not boost employment. ...

Saturday, July 26, 2014

'Are the Rich Coldhearted?'

Why are so many of the rich and powerful so callous and indifferent to the struggles of those who aren't so fortunate?:

Are the Rich Coldhearted?, by Michael Inzlicht and Sukhvinder Obhi, NY Times: ... Can people in high positions of power — presidents, bosses, celebrities, even dominant spouses — easily empathize with those beneath them?
Psychological research suggests the answer is no. ...
Why does power leave people seemingly coldhearted? Some, like the Princeton psychologist Susan Fiske, have suggested that powerful people don’t attend well to others around them because they don’t need them in order to access important resources; as powerful people, they already have plentiful access to those.
We suggest a different, albeit complementary, reason from cognitive neuroscience. On the basis of a study we recently published with the researcher Jeremy Hogeveen, in the Journal of Experimental Psychology: General, we contend that when people experience power, their brains fundamentally change how sensitive they are to the actions of others. ...
Does this mean that the powerful are heartless beings incapable of empathy? Hardly..., the bad news is that the powerful are, by default and at a neurological level, simply not motivated to care. But the good news is that they are, in theory, redeemable.

Friday, July 25, 2014

'Devolution Number Nine'

In case you missed this in today's links, it's worth noting explicitly:

Devolution Number Nine, by MaxSpeak: Rep. Paul Ryan (R-Crazy) has a new plan to fight poverty..., the common theme throughout the report is to convert Federal programs into block grants. A block grant is a fixed pot of money provided to a state or local government for broadly-defined purposes. Ryan’s report is at pains to assert that the conversion would not entail spending cuts. This could not be further from the truth.
The story goes back to the days of Richard Nixon. I told it here. ... The short version is that a program or programs converted to a block grant is being set up to wither away. Block grants are designed through formulas to grow slowly or not at all, despite the likelihood that whatever the included programs were aimed at typically costs more to deal with every year. There are also two malignant political dynamics at work. One is that ... block grants transfer control to state governments. They have the fun of spending the money, Congress has the fun of raising the taxes to pay for it. The other is that the more vague — “flexible” — the purposes of the grant, the less focused is its political support. ...
The transfer of program responsibility from the Federal government to the states is known as devolution. It is the standard way of attacking domestic spending for social purposes, going back to Richard Nixon’s dismantling of the original, more interesting War on Poverty launched by Lyndon Johnson. ...

Tuesday, July 15, 2014

Improving Social Insurance Can Narrow the 'Opportunity Gap'

I have a new column:

Improving Social Insurance Can Narrow the “Opportunity Gap”: The justification for social insurance programs that protect workers is usually based upon the fact that employment in capitalist economies is subject to substantial variation due to cyclical fluctuations and structural change. Economic systems such as socialism have much less variation in employment since everyone, pretty much, is guaranteed a job. But the growth rate of output in those systems is not as high as it is in capitalist economies, and that leads to a lower average standard of living. 
Why not enjoy the benefits of a capitalist system while minimizing its costs through the use of social insurance programs that insulate workers from harm when they lose their jobs for one of these reasons? ...
We don’t do enough to insulate workers from the fluctuations in employment inherent in capitalist economies. ...
Doing more to help workers affected by economic downturns and structural change is not the only way in which social insurance could be improved. There other risks, in particular the risk of unequal opportunity, that are baked into capitalist systems. ...

Does Extending Unemployment Benefits Raise Joblessness?

Me, at MoneyWatch:

Can unemployment benefits raise joblessness?: Did the extension of unemployment compensation during the Great Recession cause joblessness to go up? ...

The latest research on this topic from Katharine Bradbury of the Federal Reserve Bank of Boston ... finds that unemployment does go up when unemployment benefits are extended, but the question is why. Does it discourage workers from taking jobs, or discourage them from leaving the labor force?

Bradbury pointed out that the earlier research shows it's mostly the latter, that extending unemployment benefits causes workers to stay in the labor force longer before dropping out. No notable impact was found on their willingness to take available jobs. ...

Sunday, June 29, 2014

'The Prospects for Egalitarian Capitalism'

Dan Little:

Thelen on the prospects for egalitarian capitalism:
source: Kathleen Thelen, Varieties of Liberalization (kl 3310)
There is a version of economic historical thinking that we might label as "capitalist triumphalism" -- the idea that the institutions of a capitalist economy drive out all other economic forms, and that they tend towards an ever-more pure form of unconstrained market society. "Liberalization," deregulation, and reduction of social rights are seen as economically inevitable. On this view, the various ways in which some countries have tried to ameliorate the harsh consequences of unconstrained capitalism on the least well off in society are doomed -- the welfare state, social democracy, extensive labor rights, or universal basic income (link). Through a race to the bottom, any institutional reforms that impede the freedom and mobility of capital will be forced out by a combination of economic and political pressures.
The graphs above demonstrate the current structural differences among Denmark, Sweden, Germany, Netherlands, and USA when it comes to training and income support for the unemployed and underemployed. It is visible that the four European economies devote substantially greater resources to support for the unemployed than the United States. And on the triumphalist view, the states demonstrating more generous benefits for the less-well-off will inevitably converge towards the profile represented by the fifth panel, the United States.
Kathleen Thelen is a gifted historical sociologist who has studied the institutions of labor education and training throughout the past twenty years. Her book How Institutions Evolve: The Political Economy of Skills in Germany, Britain, the United States, and Japan is an important contribution to our understanding of these basic economic institutions, and it also sheds important light on the meta-issues of stability and change in important social institutions. With James Mahoney she also edited the valuable collection Explaining Institutional Change: Ambiguity, Agency, and Power on this topic.
Thelen's most recent book, Varieties of Liberalization and the New Politics of Social Solidarity addresses the question of capitalist triumphalism. (That isn't a term that she uses, but it seems descriptive.) She locates her analysis within the "varieties of capitalism" field of scholarship, which maintains that there is not a single pathway of development for capitalist systems. "Coordinated" capitalism and neoliberal capitalism represent two poles of the space considered by the VofC literature.
From the beginning, the VofC literature challenged the idea that contemporary market pressures would drive a convergence on a single best or most efficient model of capitalism. (kl 228)
Thelen is interested in assessing the prospects for what she calls "egalitarian" capitalism -- the variants of capitalist political economy that feature redistribution, social welfare, and significant policy support for the less-well-off. She focuses on several key institutions -- industrial relations, vocational education and training, and labor market institutions, and she argues that these are particularly central for the historical issue of the development of capitalism towards harsher or gentler versions.
Different varieties of liberalization occur under the auspices of different social coalitions, and this has huge implications for the distributive outcomes in which many of us are ultimately interested. (kl 243)
This point is key to her view of the plasticity and path-dependency of basic economic institutions: these institutions change as a result of economic imperatives and the strength of various social groups who are in a position to influence the form that change takes. "The conclusions I reach here are based on a view of institutions that emphasizes the political-coalitional basis on which they rest" (kl 259). But there is no simple calculus proceeding from power group to institutional outcome; instead, the results for institutional change are a dynamic consequence of strategy, coalition, and constraint.
I suggest that the institutions of egalitarian capitalism survive best not when they stably reproduce the politics and patterns of the Golden Era, but rather when they are reconfigured -- in both form and function -- on the basis of significantly new political support coalitions. (kl 330)
A key finding in Thelen's analysis is that "coordinated" capitalism and "egalitarian" capitalism are not the same. Coordinated capitalism corresponds to the models associated with social democracies of the 1950s and 1960s, the "Nordic" model. But Thelen holds that egalitarian capitalism can take more innovative and flexible forms and may be a more durable alternative to neoliberal capitalism.

Is a more "egalitarian" capitalism possible? The data on labor markets that Thelen presents shows that there are major differences across OECD economies when it comes to wage inequality. Here is a striking chart:
Source: Thelen, Figure 3.3. Share of Employees in Low-Wage Work, 2010
Fully a quarter of US workers are employed in low-wage work in 2010. This is about double the rate of Denmark and quadruple the rate of low-wage workers in Sweden. Plainly this reflects a US economy that is creating substantially greater numbers of low-income people than any other OECD country. And yet all of these countries are capitalist economies, some with rates of growth that are higher than the United States. This demonstrates that there are institutional and policy choices available that are consistent with the imperatives of a capitalist market economy and yet that give rise to more egalitarian outcomes than we observe in the US, Canada, and the UK.
A key element in common among the more egalitarian labor outcomes that Thelen studies (Netherlands, Denmark, Sweden, Germany) is the expansion of part-time work, mini-jobs, and "flexi-curity". This phenomenon reflects a combination of liberalization (relaxation of work rules and requirements of long labor contracts), with a set of arrangements that allows a smoother allocation of labor to jobs and an improvement in income and security for the lower end of the labor market. This trend is part of what Thelen calls a strategy of "embedded flexibilization", which she regards as the best hope for a pathway towards equitable capitalism.
Thelen closes with a realistic observation about the uncertain coalitional basis that is available in support of the policies of embedded flexibilization. Xenophobic tendencies in countries like the Netherlands and Denmark have the potential for destroying the social consensus that currently exists for this model, and the leaders of nationalistic anti-immigrant parties have made this a key to their efforts at political mobilization (kl 5541). Maintenance of these policies will require strong political efforts on the part of progressive coalitions in those countries, and organized labor is key to those efforts.
This analysis is deeply international and comparative, but it has an important consequence for the political economy of the United States: where are the coalitions that can help steer our economy towards a more egalitarian form of capitalism?
(Readers may be interested in an earlier discussion of the Nordic model; link.)

Thursday, June 12, 2014

'The Social Impact of Fiscal Policy Responses to Crises'

Contractionary fiscal policy in recessions is contractionary (contrary to those who advocate "expansionary austerity). It also worsens social indicators (though for some undermining the social safety net is one of the goals of austerity):

The social impact of fiscal policy responses to crises, by Carlos A. Vegh and Guillermo Vuletin, Vox EU: Fiscal policy in many developing countries is typically procyclical. Expansionary in good times and contractionary in bad times, these policies often amplify business cycles. The most convincing explanations for such practices seem to be limited access to international credit markets during bad times and political pressures that tend to encourage too much public spending during boom periods (Calderon and Schmidt-Hebbel 2008). Whatever the reason, the pattern is well documented (see Frankel, Vegh, and Vuletin 2011 on the spending side and Vegh and Vuletin 2013a on the tax side). In particular, contractionary fiscal policy in bad times seems to have increased the severity and duration of crises (Vegh and Vuletin 2013b).

Ironically, the procyclicality of fiscal policy has also become a hotly debated issue in the context of the current crises in Europe, with influential economists such as Olivier Blanchard (IMF Chief Economist) arguing that fiscal multipliers in the Eurozone have been underestimated by the IMF and others and thus that the contractionary effects of fiscal austerity have been considerably higher than typically believed (Blanchard and Leigh 2013).

Counting the social impact

Lost in much of the discussion on fiscal-policy procyclicality has been the social impact of contractionary fiscal policy during recessions – things such as:

  • the poverty rate,
  • income inequality,
  • the unemployment rate, and
  • domestic conflict.

In a recent research paper we look at how the fiscal-policy responses to GDP crises have affected social indicators such as those listed above (Vegh and Vuletin 2014). We find that contractionary fiscal policy during crises has tended to worsen social indicators both in Latin America and, more recently, in the Eurozone, which calls into question recent claims on ‘expansionary fiscal austerity.’ ...

Policy conclusions

While many Latin American countries have ‘graduated’ from procyclical to countercyclical fiscal responses to GDP crises, many industrial economies (like Greece, Ireland, Italy, and Portugal) followed contractionary fiscal policies in the aftermath of the Global Crisis. Our work finds that countercyclical fiscal policies tend to soften the undesirable effects of GDP crises on social indicators such as poverty, income inequality, unemployment, and domestic conflict. On the other hand, austerity policies tend to worsen all of these social indicators.

This evidence supports the desirability of pursuing expansionary fiscal policies in times of distress – which may mean postponing for some time needed structural fiscal adjustment – rather than embarking on fiscal austerity in the midst of a recession. ...

Wednesday, May 28, 2014

'Unemployment Insurance and Disability Insurance in the Great Recession'

From the NBER Digest:

Unemployment Insurance and Disability Insurance in the Great Recession: At the end of 2012, 8.8 million American adults were receiving Social Security Disability Insurance (SSDI) benefits. The share of the American public receiving SSDI has more than doubled since 1990. This rapid growth has prompted concerns about SSDI's sustainability: recent projections suggest that the SSDI trust fund will be exhausted in 2016.
SSDI recipients tend to remain in the program, and out of the labor market, from the time they are approved for benefits until they reach retirement age. This means that if unemployed individuals turn to disability insurance as a source of benefits when they exhaust their unemployment insurance (UI), the long-term program costs can be substantial. Some have suggested that the savings from avoided SSDI cases could help to finance the cost of extending UI benefits, but little is known about the interaction between SSDI and UI.
In Unemployment Insurance and Disability Insurance in the Great Recession, (NBER Working Paper No. 19672), Andreas Mueller, Jesse Rothstein, and Till von Wachter use data from the last decade to investigate the relationship between UI exhaustion and SSDI applications. They take advantage of the variability of UI benefit durations during the recent economic downturn. The duration of these benefits was as long as 99 weeks in 2009, remained protracted for several years, then was shortened substantially in 2012. The authors focus on the uneven extension of UI benefits during and after the Great Recession to isolate variation in the duration of these benefits that is not confounded by variation in economic conditions more broadly.
The authors find very little interaction between UI benefit eligibility and SSDI applications, and conclude that SSDI applications do not appear to respond to UI exhaustion. While the authors cannot rule out small effects, they conclude that SSDI applications do not respond strongly enough to contribute meaningfully to a cost-benefit analysis of UI extensions or to account for the cyclical behavior of SSDI applications.
The authors suggest that the tendency for the number of SSDI applications to grow when the economy is weak may reflect variation in the potential reemployment wages of displaced workers, or changes in the employment opportunities of the marginally disabled that influence the evaluation of an SSDI applicant's employability. These channels are not linked to the generosity or duration of UI benefits, and they imply that more stringent functional capacity reviews of SSDI applicants may not reduce recession-induced SSDI claims if these claims reflect examiners' judgments that the applicants are truly not employable in the existing labor market.

Monday, May 26, 2014

Paul Krugman: Europe’s Secret Success

Europe's social safety net is doing its job:

Europe’s Secret Success , by Paul Krugman, Commentary, NY Times: ...Europe’s financial and macroeconomic woes have overshadowed its remarkable, unheralded longer-term success in an area in which it used to lag: job creation.
What? You haven’t heard about that? Well, that’s not too surprising. European economies, France in particular, get very bad press in America. Our political discourse is dominated by reverse Robin-Hoodism — the belief that economic success depends on being nice to the rich, who won’t create jobs if they are heavily taxed, and nasty to ordinary workers, who won’t accept jobs unless they have no alternative. And according to this ideology, Europe — with its high taxes and generous welfare states — does everything wrong. So Europe’s economic system must be collapsing, and a lot of reporting simply states the postulated collapse as a fact.
The reality, however, is very different. Yes, Southern Europe is experiencing an economic crisis... But Northern European nations, France included, have done far better than most Americans realize. In particular, here’s a startling, little-known fact: French adults in their prime working years (25 to 54) are substantially more likely to have jobs than their U.S. counterparts. ... Other European nations with big welfare states, like Sweden and the Netherlands, do even better. ...
Oh, and for those who believe that out-of-work Americans, coddled by government benefits, just aren’t trying to find jobs, we’ve just performed a cruel experiment using the worst victims of our job crisis as subjects. At the end of last year Congress refused to renew extended jobless benefits... Did the long-term unemployed who were thereby placed in dire straits start finding jobs more rapidly than before? No — not at all. Somehow, it seems, the only thing we achieved by making the unemployed more desperate was deepening their desperation.
I’m sure that many people will simply refuse to believe what I’m saying about European strengths. After all, ever since the euro crisis broke out there has been a relentless campaign by American conservatives (and quite a few Europeans too) to portray it as a story of collapsing welfare states, brought low by misguided concerns about social justice. And they keep saying that even though some of the strongest economies in Europe, like Germany, have welfare states whose generosity exceeds the wildest dreams of U.S. liberals. ...
The truth is that European-style welfare states have proved more resilient, more successful at job creation, than is allowed for in America’s prevailing economic philosophy.

Tuesday, May 20, 2014

'Taking Away Unemployment Benefits Doesn’t Make People Get Jobs'

ThinkProgress:

No, Taking Away Unemployment Benefits Doesn’t Make People Get Jobs, by Bryce Covert: When 1.3 million long-term unemployed people lost benefits because Congress let the program lapse, some claimed that taking away the checks would encourage people to go out and get a job. That isn’t panning out for the 74,000 people who are no longer getting checks in Illinois.
In January, one month after they lost benefits, 64,000 of them, or 86 percent, were still unemployed, according to an analysis of wage records by the Illinois Department of Employment Security (IDES). February was similar: 61,3000 people were still unemployed, or 82.7 percent of the original group. That means two months later, four out of five people who were cut off from benefits still weren’t bringing in wages.
“This notion that temporary unemployment benefits provide people a reason not to return to work really needs to end because it is not supported by the data,” IDES Director Jay Rowell said.
Other natural experiments have shown that, rather than spurring a flurry of hiring, cutting off benefits can have disastrous consequences. ...

Tuesday, May 13, 2014

'What Is Social Insurance? Take Two'

James Kwak:

What Is Social Insurance? Take Two: More than a year ago I wrote a post titled “What Is Social Insurance?”... In that post, I more or less took the mainstream progressive view: programs like Social Security are risk-spreading programs that provide insurance against common risks like disability, living too long, poor health in old age, and so on....
I still think that social insurance programs ... provide risk-spreading insurance when viewed over a long time horizon. So from a lifetime perspective, the insurance function means that most people are made better off, even though a program as a whole may be a zero-sum game in dollar terms. But ... a crucial feature of social insurance is that it is redistributive in the short term (in an ex ante sense, not the trivial ex post sense that is true of all insurance) but risk-spreading in the long term. I happen to think that the world would be a better place if we considered the long term and, therefore, decided to maintain these programs. But I don’t think it’s obviously true that a lifetime perspective is correct and a one-year perspective is incorrect.
In particular, if you think that Social Security won’t be around when you retire, then you would logically take a short-term perspective in which you pay taxes but never receive benefits (unless you go on disability, or you die while Social Security still exists). Then you should rationally want to eliminate Social Security as soon as possible. Conversely, if you believe that Social Security will be around when you retire, then you will evaluate the whole thing, including its insurance value, which will make you more likely to vote for it. So it’s not surprising that a major component of the anti-Social Security campaign consists of trying to convince young people (who ordinarily gain the most from insurance, since they face the most uncertainty) that Social Security cannot exist when they retire.
If you want to read more, the draft chapter is up on SSRN. Enjoy.

Just one comment. I wish he'd made it clear that the worries about Social Security not being there for the young of today are unfounded.

Wednesday, April 16, 2014

'Supply, Demand, and Unemployment Benefits'

When in need of a quick post, Paul Krugman is always a good source:

Supply, Demand, and Unemployment Benefits: Ben Casselman points out that we’ve had a sort of natural experiment in the alleged effects of unemployment benefits in reducing employment. Extended benefits were cancelled at the beginning of this year; have the long-term unemployed shown any tendency to find jobs faster? And the answer is no.
Let me ... ask, how was it, exactly, that reduced benefits were supposed to encourage employment in the first place?
Making the unemployed miserable arguably increases labor supply, as workers become ... more willing to take whatever job they can find. But the US labor market in 2014 isn’t constrained by supply, it’s constrained by demand: ...firms ... have no need for as many hours of work as workers are willing to give.
So make the long-term unemployed more desperate; so what? They can’t do anything to increase the amount of work demanded, and in fact their reduced purchasing power reduces labor demand.
You might imagine that the long-term unemployed, through their desperation, might take jobs away from existing workers — but ... there’s no evidence that this is happening. ...

Wednesday, April 09, 2014

'Long-Term Unemployment Is Elevated Across All Education, Age, Occupation, Industry, Gender, And Racial And Ethnic Groups'

Who are the long-term unemployed? From Heidi Shierholz at the EPI:

Long-Term Unemployment Is Elevated Across All Education, Age, Occupation, Industry, Gender, And Racial And Ethnic Groups, by Heidi Shierholz: Today’s Economic Snapshot shows that long-term unemployment is elevated for workers at every education level. ... The long-term unemployment rate is between 2.9 and 4.3 times as high now as it was six years ago for all age, education, occupation, industry, gender, and racial and ethnic groups. Today’s long-term unemployment crisis is not at all confined to unlucky or inflexible workers who happen to be looking for work in specific occupations or industries where jobs aren’t available. Long-term unemployment is elevated in every group, in every occupation, in every industry, at all levels of education.
Elevated long-term unemployment for all groups, like we see today, means that today’s long-term unemployment crisis is not due to something wrong with these workers, it is due to the fact that businesses across the board simply haven’t needed to significantly increase hiring because they haven’t seen demand for their goods and services pick up enough to warrant it.
Nevertheless, Congress allowed federal unemployment insurance to expire at the end of 2013, and over two million workers have lost their unemployment benefits since then. In the first sign of progress in months, yesterday the Senate reinstated a temporary five-month extension of federal unemployment insurance. It will, however, face an uphill battle in the House. In considering this measure, the House should not ignore the fact that our long-term unemployment crisis is not the fault of individual unemployed workers failing to exert enough effort or flexibility in their job search. It is instead due to more than six years of weak hiring on the part of businesses, who simply don’t need more workers because they don’t have enough demand for their products.

Wednesday, March 26, 2014

'The EITC Is No Substitute for the Safety Net'

From the CBPP:

Why the EITC Is No Substitute for the Safety Net, CBPP: The Earned Income Tax Credit is a critically important and highly effective part of the safety net, but it can’t — and wasn’t meant to — stand alone as our answer to poverty, according to our new commentary.  Here’s the opening:

House Budget Committee Chair Paul Ryan’s recent report on safety net programs rightly praised the Earned Income Tax Credit (EITC) for reducing poverty and promoting work.  But, Ryan’s report criticizes much of the rest of the safety net.  And, over the past several years, Chairman Ryan’s budget plans have targeted low-income programs such as SNAP (formerly food stamps) and Medicaid for extremely deep cuts.  While it’s heartening to hear Chairman Ryan trumpet the EITC’s success, the EITC alone can’t do what’s needed to ameliorate poverty and hardship./p>

The things that the EITC — and its sibling the Child Tax Credit, which helps offset the cost of raising children — can’t do without other safety net programs include:

  • help people who are out of work or can’t work;
  • help families get health care;
  • help families on a monthly basis;
  • serve as an effective automatic stabilizer for the economy in recessions; and
  • keep large numbers of people out of “deep poverty,” or above half the poverty line.

...

Wednesday, March 19, 2014

'The Voluntarism Fantasy'

In case you missed this in the daily links, a topic that comes up here often, the need for government sponsored social insurance:

The Voluntarism Fantasy, by Mike Konczal: Ideology is as much about understanding the past as shaping the future. And conservatives tell themselves a story, a fairy tale really, about the past, about the way the world was and can be again under Republican policies. This story is about the way people were able to insure themselves against the risks inherent in modern life. Back before the Great Society, before the New Deal, and even before the Progressive Era, things were better. Before government took on the role of providing social insurance, individuals and private charity did everything needed to insure people against the hardships of life; given the chance, they could do it again.
This vision has always been implicit in the conservative ascendancy. It existed in the 1980s, when President Reagan announced, “The size of the federal budget is not an appropriate barometer of social conscience or charitable concern,” and called for voluntarism to fill in the yawning gaps in the social safety net. It was made explicit in the 1990s, notably through Marvin Olasky’s The Tragedy of American Compassion, a treatise hailed by the likes of Newt Gingrich and William Bennett, which argued that a purely private nineteenth-century system of charitable and voluntary organizations did a better job providing for the common good than the twentieth-century welfare state. This idea is also the basis of Paul Ryan’s budget, which seeks to devolve and shrink the federal government at a rapid pace, lest the safety net turn “into a hammock that lulls able-bodied people into lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives.” It’s what Utah Senator Mike Lee references when he says that the “alternative to big government is not small government” but instead “a voluntary civil society.” As conservatives face the possibility of a permanent Democratic majority fueled by changing demographics, they understand that time is running out on their cherished project to dismantle the federal welfare state.
But this conservative vision of social insurance is wrong. It’s incorrect as a matter of history; it ignores the complex interaction between public and private social insurance that has always existed in the United States. It completely misses why the old system collapsed and why a new one was put in its place. It fails to understand how the Great Recession displayed the welfare state at its most necessary and that a voluntary system would have failed under the same circumstances. Most importantly, it points us in the wrong direction. The last 30 years have seen effort after effort to try and push the policy agenda away from the state’s capabilities and toward private mechanisms for mitigating the risks we face in the world. This effort is exhausted, and future endeavors will require a greater, not lesser, role for the public. ...[continue]...

Monday, March 17, 2014

Paul Krugman: That Old-Time Whistle

Conservatives "can’t bring themselves to acknowledge the reality of what’s happening to opportunity in America":

That Old-Time Whistle, by Paul Krugman, Commentary, NY Times: ...Paul Ryan, chairman of the House Budget Committee and the G.O.P.’s de facto intellectual leader ... attributed persistent poverty to a “culture, in our inner cities in particular, of men not working and just generations of men not even thinking about working.” He was, he says, simply being “inarticulate.” How could anyone suggest that it was a racial dog-whistle? Why, he even cited the work of serious scholars — people like Charles Murray, most famous for arguing that blacks are genetically inferior to whites. Oh, wait.
Just to be clear, there’s no evidence that Mr. Ryan is personally a racist, and his dog-whistle may not even have been deliberate. But it doesn’t matter. He said what he said because that’s the kind of thing conservatives say to each other all the time. And why do they say such things? Because American conservatism is still, after all these years, largely driven by claims that liberals are taking away your hard-earned money and giving it to Those People.
Indeed, race is the Rosetta Stone that makes sense of many otherwise incomprehensible aspects of U.S. politics. ...
One odd consequence of our still-racialized politics is that conservatives are still, in effect, mobilizing against the bums on welfare even though both the bums and the welfare are long gone or never existed. Mr. Santelli’s fury was directed against mortgage relief that never actually happened. Right-wingers rage against tales of food stamp abuse that almost always turn out to be false or at least greatly exaggerated. And Mr. Ryan’s black-men-don’t-want-to-work theory of poverty is decades out of date. ...
The ... sociologist William Julius Wilson has documented, the flight of industry from urban centers meant that minority workers literally couldn’t get to those good jobs, and the supposed cultural causes of poverty were actually effects of that lack of opportunity. Still, you could understand why many observers failed to see this.
But over the past 40 years good jobs for ordinary workers have disappeared, not just from inner cities but everywhere: adjusted for inflation, wages have fallen for 60 percent of working American men. ...
These awkward facts have not, however, penetrated the world of conservative ideology. ... And since conservatives can’t bring themselves to acknowledge the reality of what’s happening to opportunity in America, they’re left with nothing but that old-time dog whistle. Mr. Ryan wasn’t being inarticulate — he said what he said because it’s all that he’s got.

Tuesday, March 11, 2014

Inequality in Capitalist Systems

New column:

Inequality in Capitalist Systems Is Not Inevitable, by Mark Thoma: Capitalism is the best economic system yet discovered for giving people the goods and services they desire at the lowest possible price, and for producing innovative economic growth. But there is a cost associated with these benefits, the boom and bust cycles inherent in capitalist systems, and those costs hit working class households – who have done nothing to deserve such a fate – very hard. Protecting innocent households from the costs of recessions is an important basis for our social insurance programs.
It is becoming more and more evident that there is another cost of capitalist systems, the inevitable rising inequality documented by Thomas Piketty in “Capital in the Twenty-First Century, that our social insurance system will need to confront. ...

Friday, March 07, 2014

Paul Krugman: The Hammock Fallacy

We don't do enough to help people escape poverty:

The Hammock Fallacy, by Paul Krugman, Commentary, NY Times: Hypocrisy is the tribute vice pays to virtue. So when you see something like the current scramble by Republicans to declare their deep concern for America’s poor, it’s a good sign, indicating a positive change in social norms. Goodbye, sneering at the 47 percent; hello, fake compassion.
And the big new poverty report from the House Budget Committee, led by Representative Paul Ryan, offers additional reasons for optimism. Mr. Ryan used to rely on “scholarship” from places like the Heritage Foundation. ... This time, however, Mr. Ryan is citing a lot of actual social science research.
Unfortunately, the research he cites doesn’t actually support his assertions. Even more important, his whole premise about why poverty persists is demonstrably wrong.
To understand where the new report is coming from,... recall something Mr. Ryan said two years ago: “We don’t want to turn the safety net into a hammock that lulls able-bodied people to lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives.” ...
What does scholarly research on antipoverty programs actually say? ... Mr. Ryan would have us believe that the “hammock” created by the social safety net is the reason so many Americans remain trapped in poverty. But the evidence says nothing of the kind.
After all, if generous aid ... perpetuates poverty, the United States — which treats its poor far more harshly than other rich countries, and induces them to work much longer hours — should lead the West in social mobility... In fact,... America has less social mobility...
And there’s no puzzle why: it’s hard for young people to get ahead when they suffer from poor nutrition, inadequate medical care, and lack of access to good education. The antipoverty programs that we have actually do a lot to help people rise. For example, Americans who received early access to food stamps were healthier and more productive... But we don’t do enough... The reason so many Americans remain trapped in poverty isn’t that the government helps them too much; it’s that it helps them too little.
Which brings us back to the hypocrisy issue. It is, in a way, nice to see the likes of Mr. Ryan at least talking about the need to help the poor. But somehow their notion of aiding the poor involves slashing benefits while cutting taxes on the rich. Funny how that works.

Wednesday, March 05, 2014

'The New Paul Ryan Report on Poverty and Safety Net Programs'

What do you think of Tyler Cowen's comments on the Ryan poverty report?

The new Paul Ryan report on poverty and safety net programs: I read much of the document last night, here are a few comments...

I found myself in agreement with much of what he says.

Thursday, February 20, 2014

'How Well Did Social Security Mitigate the Effects of the Great Recession?'

I started blogging during the Social Security wars of the Bush administration. Looks like it's a good thing reason prevailed:

How Well Did Social Security Mitigate the Effects of the Great Recession?, by William B. Peterman and Kamila Sommer: Abstract: This paper quantifies the welfare implications of the U.S. Social Security program during the Great Recession. We find that the average welfare losses due to the Great Recession for agents alive at the time of the shock are notably smaller in an economy with Social Security relative to an economy without a Social Security program. Moreover, Social Security is particularly effective at mitigating the welfare losses for agents who are poorer, less productive, or older at the time of the shock. Importantly, in addition to mitigating the welfare losses for these potentially more vulnerable agents, we do not find any specific age, income, wealth or ability group for which Social Security substantially exacerbates the welfare consequences of the Great Recession. Taken as a whole, our results indicate that the U.S. Social Security program is particularly effective at providing insurance against business cycle episodes like the Great Recession.

Tuesday, February 18, 2014

'Families Need Insurance for Wages and for Family Responsibilities'

Miles Corak:

... Wage inequality and stagnant earnings are issues firmly stapled to the political agenda. But lack of stability and predictability in incomes and other resources matters too, and the last few decades—and especially the last few years—of the US labor market and family life have been marked by increased risk and turbulence.

Public policy for social mobility needs to support not just the adequacy of incomes, but also their volatility, and fill a need for both wage insurance and family responsibility insurance. ...

More here.

Tuesday, February 11, 2014

'Inequality and Indignity'

Paul Krugman:

Inequality and Indignity: ... Let’s talk ... about dignity.
It’s all very well to talk vaguely about the dignity of work; but the idea that all workers can regard themselves as equal in dignity despite huge disparities in income is just foolish. When you’re in a world where 40 money managers make as much as 300,000 high school teachers, it’s just silly to imagine that there will be any sense, on either side, of equal dignity in work. ...
Now, one way to enhance the dignity of ordinary workers is through, yes, entitlements: make it part of their birthright, as American citizens, that they get certain basics such as a minimal income in retirement, support in times of unemployment, and essential health care.
But the Republican position is that none of these things should be provided, and that if somehow they do get provided, they should come only at the price of massive government intrusion into the recipient’s personal lives — making sure that you don’t take advantage of health reform to work less, requiring that you undergo drug tests to receive unemployment benefits or food stamps, and so on.
In short, while conservatives may preach the dignity of work, their actual agenda is to deny lower-income workers as much dignity — and personal freedom — as possible.

Monday, February 10, 2014

Paul Krugman: Writing Off the Unemployed

Why have politicians turned their backs on the unemployed?:

Writing Off the Unemployed, by Paul Krugman, Commentary, NY Times: Back in 1987 my Princeton colleague Alan Blinder published a very good book titled “Hard Heads, Soft Hearts.” It was, as you might guess, a call for tough-minded but compassionate economic policy. Unfortunately, what we actually got — especially, although not only, from Republicans — was the opposite. And it’s difficult to find a better example of the hardhearted, softheaded nature of today’s G.O.P. than ... the filibuster to block aid to the long-term unemployed.
What do we know about long-term unemployment in America?
First, it’s still at near-record levels. ... Yet extended unemployment benefits, which went into effect in 2008, have now been allowed to lapse. As a result, few of the long-term unemployed are receiving any kind of support.
Second, if you think the typical long-term unemployed American is one of Those People — nonwhite, poorly educated, etc. — you’re wrong... College graduates ... are actually a bit more likely than others to join the ranks of the long-term unemployed. ...
Third, in a weak job market long-term unemployment tends to be self-perpetuating, because employers in effect discriminate against the jobless. ...
What all of this suggests is that the long-term unemployed are mainly ... ordinary American workers who had the bad luck to lose their jobs ... at a time of extraordinary labor market weakness...
So how can politicians justify cutting off modest financial aid to their unlucky fellow citizens?
Some Republicans justified last week’s filibuster with the tired old argument that we can’t afford to increase the deficit. Actually, Democrats paired the benefits extension with measures to increase tax receipts. But in any case this is a bizarre objection at a time when federal deficits are not just falling, but clearly falling too fast, holding back economic recovery.
For the most part, however, Republicans justify refusal to help the unemployed by asserting that ... people aren’t trying hard enough to find jobs, and that extended benefits are part of the reason..., a fantasy at odds with all the evidence. ...
And this imperviousness to evidence goes along with a stunning lack of compassion. .... Being unemployed is always presented as a choice, as something that only happens to losers who don’t really want to work. ...
The result is that millions of Americans have in effect been written off — rejected by potential employers, abandoned by politicians whose fuzzy-mindedness is matched only by the hardness of their hearts.

Sunday, February 09, 2014

Who Benefits from Benefits?

Chris Dillow:

Who benefits from benefits?: In the "debate" about welfare benefits, there's one point which is underweighted but so obvious that I'm embarrassed to mention it - that some form of welfare is beneficial not just to its recipients, but to capitalists.
Rightists like to point out - correctly - that the burden of taxes doesn't necessarily fall upon those who nominally pay it: corporation tax, for example, is paid by workers and not just capitalists.
But just as there's tax incidence, so there is benefit incidence; the benefits of benefits don't flow merely to their nominal recipients. ...

Wednesday, January 22, 2014

'The Political Economy of Populism'

Paul Krugman:

A Note on the Political Economy of Populism: All indications are that President Obama will make inequality the central theme of his State of the Union address. Assuming he does, he will face two different kinds of sniping. One will come from the usual suspects on the right, shrieking “class warfare”. The other will come from a variety of people, some of them well-intentioned, arguing that while sure, inequality is an issue, the crucial thing now is to get the economy growing and create more jobs; these people will argue that populism is a diversion from the main issue.
Here’s why they’re wrong.
First of all, even on the straight economics inequality and job creation aren’t completely separable issues. ...
Beyond that, there’s the political economy.
It has been painfully obvious, to anyone willing to see (a group that unfortunately doesn’t include a large part of the press corps) that deficit obsession hasn’t really been about deficits — it has been about using deficits as a club with which to smash to welfare state, and hence increase inequality. ...
Conversely, talking about the need to help struggling families is ... a way to shift the focus away from deficit obsession, and pave the way at least for a relaxation of austerity, if not actual stimulus.
And I think we also have to face up to an awkward political reality: moderate populism has a broad popular constituency, Keynesian macroeconomics doesn’t..., the public doesn’t “get” macroeconomics; lines like “American families are having to tighten their belts, so the government should too” still resonate. You could blame Obama for not using the bully pulpit to teach the nation why this is wrong, and I wish he had made more of a stand. Still, the fact is that this is just a hard story to get across...
So if I were Obama, I’d do what he’s apparently doing: focus on inequality, which is a valid and popular issue, and use it indirectly to move macro policy in the right direction too.

To follow up on the previous post, capitalism is the best economic system yet discovered for producing economic growth, but it also concentrates risk and causes people to face hardship through no fault of their own (e.g. a recession that puts someone out of work, someone who shows up for work everyday and does their job well). The solution to this is for either the private sector or the government to provide insurance against these risks -- and market failures mean it is generally the government that must step in. Yes, that means transfers from the winners to the less fortunate, much as those with fire insurance who have good outcomes -- no fire -- find their insurance premiums transferred to those who do have the bad luck to experience a fire. But the risks inherent in the system that makes those at the top so wealthy, and those at the bottom so miserable must be attenuated through government provided insurance. Unemployment insurance is a good example of this, but more social insurance is needed to protect the vulnerable from risks they had no hand in creating (e.g. the financial crisis caused great pain for workers who had nothing at all to do with creating the problems that caused the Great Recession, while those who benefitted from the lead up to the crisis and had a hand in causing it, those who are doing very well now, whine incessantly if they are asked to help to reduce the hardship of the innocent).

'Brookings EITC Proposal Mostly Moves in the Wrong Direction'

As a follow-up to my recent article arguing that a combination of the minimum wage and EITC is the best approach to helping low income households:

Brookings EITC Proposal Mostly Moves in the Wrong Direction, by Shawn Fremstad, CEPR: [Shared via Creative Commons]: Isabel Sawhill and Quentin Karpilow of the Center on Children and Families at the Brookings Institution recently proposed what they call a “no-cost” way to reduce poverty and inequality. The proposal combines an increase in the minimum wage with some fairly radical and mostly unwise changes to the Earned Income Tax Credit.

It certainly makes sense to increase the minimum wage substantially. As economist Arindrajit Dube estimates in a new and very thorough working paper, such an increase would “reduce the number of non-elderly living in poverty by around 4.6 million, or by 6.8 million when longer term effects are accounted for.” It also makes sense to combine a minimum wage with increased social insurance. As Dube notes: “in the presence of [negative] incidence effects [of the EITC on wages] due to increased labor supply, the optimal policy calls for combining tax and transfers like the EITC with a minimum wage.”

At first glance, it may seem like the Brookings proposal follows Dube’s prescription, combining a minimum wage increase with expanded EITC benefits for certain workers, particularly:

  1. young adults (ages 21 to 39) who do not have dependent children and are working at least 1,500 hours a year (around 29 hours a week if working all 52 weeks),
  2. married couples that include two workers as long as the lower-earning spouse works at least 1000 hours a year (just under 20 hours a week if working all 52 weeks), and
  3. certain families with very young children.

At the same time, however, the proposal would cut EITC benefits for many workers in certain groups, including:

  1. those with more than one child,
  2. those with older children, and
  3. childless workers who are over age 39 or work less than 1,500 hours a year.

Although Sawhill and Karpilow aren’t as explicit as they should be about the extent of EITC cuts in their plan, they do acknowledge that it: “prioritizes full-time work over part-time employment, young children over big families, and young single adults over older ones.” It would be helpful for them to be even more transparent and explicitly quantify the distributional effects of their redesign. How many workers would see their EITC benefits cut and by how much, and how many would see increases?

The Sawhill/Karpilow proposal has a number of moving parts, but in the remainder of this post I’m just going to focus on the changes they propose to the childless worker credit. It would be a very good idea to increase the childless worker EITC (in conjunction with increasing the minimum wage and tying it to inflation or some other index). ...

But it would be a very bad idea to make the childless worker EITC, as well as the separate spousal credit Sawhill and Karpilow propose, contingent on working nearly 30 hours a week year-round (or nearly 20 hours a week for spouses). Given how far we are from full employment (current U-6 unemployment is 13.1 percent) and the extent of the decline in labor force participation over the last five years, it makes little sense to redesign the EITC in a way that (theoretically) increases incentives for workers to go from part-time to near-full-time employment, but reduces incentives for going from no employment to at least some employment.

Moreover, it makes little sense to penalize the many part-time workers who are working part-time for reasons that are quite sound and have positive externalities (caring for a family member with a disability or a child, going to school part-time, etc.) or for reasons beyond their control, such as a disability, illness, lack of available full-time work, etc. ...

Sawhill/Karpilow would also change age eligibility for the childless worker EITC (currently ages 25-64) by extending eligibility to workers age 21-24, but eliminating it for those age 40-64. They don’t provide any rationale for this cut, despite the extraordinary inequities it would create. A personal example: when my mother became a "childless worker" in her late 40s after the last of her children left the nest, she completed an A.A. degree with straight A’s, and then went on to work in a series of poorly compensated, dead-end jobs at K-Mart and in home health care, until serious health issues made even half-time work impossible. If the Sawhill/Karpilow proposal had been in place when she was still alive and working in her late 40s and early 50s, she would have lost eligibility for the modest EITC she received, while a 20-something worker doing the same work as her would have a received credit of around $1,600. 

Finally, while “target efficiency” isn't a particularly big concern of mine ... it should be noted that the ... target efficiency of the Sawhill/Karpilow EITC proposal is unclear. They say that the combination of raising the minimum wage and their EITC proposal would lift 3.4 million people out of poverty, but they don’t explain how much of this is due to the EITC proposal by itself. The Dube estimate I noted about suggests that the vast majority of the anti-poverty effect could be due to increasing the minimum wage. And various elements of the Sawhill/Kapilow proposal would cut EITC benefits for workers with below-poverty income..., while increasing them for other workers. 

We should increase the EITC, especially for workers without dependent children, and the minimum wage as a way to reduce poverty and inequality. But the Brookings plan is not the way to do it.