Do Disability Benefits Reduce Work Effort?
(This is the third of six blog posts on disability.)
In two earlier blog posts, I look at evidence compiled in Senate testimony by Stanford economist Mark Duggan arguing that financial incentives are driving a growth in disability rolls. I cite research showing that disability benefits aren’t growing relative to earnings and that age-adjusted disability incidence isn’t rising, though there has been a modest increase for women offset by a modest decline for men.
This isn’t surprising, because as we’ll see in today’s blog post, even research cited by Duggan and other critics shows that disability receipt has a negligible impact on work effort. Very few beneficiaries would be able to support themselves by working if they weren’t receiving benefits, based on the dismal employment prospects of rejected applicants who were on the margin of being accepted.
Though Duggan and other critics claim disability insurance reduces employment, the Social Security Disability Insurance (SSDI) program creates strong incentives for beneficiaries to stay in, or return to, the workforce. Beneficiaries are allowed to earn up to $1090 a month (the current threshold for “substantial gainful activity”) with no reduction in benefits. Since most disabled beneficiaries rely on modest government benefits for most of their incomes (see the Center on Budget and Policy Priority’s informative chartbook), the fact that fewer than 10 percent avail themselves of this opportunity suggests that for most, even part-time or intermittent work isn’t an option. Another 4 percent are able to resume “substantial gainful activity” as their health and job prospects improve. Though the latter will forgo cash benefits if they remain gainfully employed above the SGA threshold for more than 12 months, they retain health benefits regardless of earnings for a longer period and are eligible for expedited reinstatement of cash benefits if their earnings drop. In short, the SSDI program is designed to encourage beneficiaries to return to or stay in the workforce.
The Game Is Rigged Against Hardworking Americans
The referee might miss an occasional handball, but a soccer game isn’t rigged in favor of one group of players over another. Unlike a soccer game, the most powerful economic actors have rigged the labor market against everyday hardworking Americans. The weak economy following the Great Recession and its aftermath came on the heels of three decades of the systematic reduction of workers bargaining power in the workplace. It’s no surprise then that this morning’s Job Openings and Labor Turnover Survey (JOLTS) report shows that the quits rate remains depressed as workers continue to be stuck in jobs that they would leave if they could.
The figure below shows the hires, quits, and layoff rates through May 2015. The layoff rate shot up during the recession but recovered quickly and has been at pre-recession levels for more than three years. The fact that this trend continued in May is a good sign. That said, not only do layoffs need to come down before we see a full recovery in the labor market, but hiring also needs to pick up–the hires rate dipped slightly in May, and is still below where it was at the end of 2014. It had been generally improving, but has shown concerning signs as of late and still remains significantly below its pre-recession level.
Note: Shaded areas denote recessions. The hires rate is the number of hires during the entire month as a percent of total employment. The layoff rate is the number of layoffs and discharges during the entire month as a percent of total employment. The quits rate is the number of quits during the entire month as a percent of total employment. Source: EPI analysis of Bureau of Labor Statistics Job Openings and Labor Turnover SurveyHires, quits, and layoff rates, December 2000-May 2015
Month
Hires rate
Layoffs rate
Quits rate
Dec-2000
4.1%
1.4%
2.3%
Jan-2001
4.4%
1.6%
2.6%
Feb-2001
4.1%
1.4%
2.5%
Mar-2001
4.2%
1.6%
2.4%
Apr-2001
4.0%
1.5%
2.4%
May-2001
4.0%
1.5%
2.4%
Jun-2001
3.8%
1.5%
2.3%
Jul-2001
3.9%
1.5%
2.2%
Aug-2001
3.8%
1.4%
2.1%
Sep-2001
3.8%
1.6%
2.1%
Oct-2001
3.8%
1.7%
2.2%
Nov-2001
3.7%
1.6%
2.0%
Dec-2001
3.7%
1.4%
2.0%
Jan-2002
3.7%
1.4%
2.2%
Feb-2002
3.7%
1.5%
2.0%
Mar-2002
3.5%
1.4%
1.9%
Apr-2002
3.8%
1.5%
2.1%
May-2002
3.8%
1.5%
2.1%
Jun-2002
3.7%
1.4%
2.0%
Jul-2002
3.8%
1.5%
2.1%
Aug-2002
3.7%
1.4%
2.0%
Sep-2002
3.7%
1.4%
2.0%
Oct-2002
3.7%
1.4%
2.0%
Nov-2002
3.8%
1.5%
1.9%
Dec-2002
3.8%
1.5%
2.0%
Jan-2003
3.8%
1.5%
1.9%
Feb-2003
3.6%
1.5%
1.9%
Mar-2003
3.4%
1.4%
1.9%
Apr-2003
3.6%
1.6%
1.8%
May-2003
3.5%
1.5%
1.8%
Jun-2003
3.7%
1.6%
1.8%
Jul-2003
3.6%
1.6%
1.8%
Aug-2003
3.6%
1.5%
1.8%
Sep-2003
3.7%
1.5%
1.9%
Oct-2003
3.8%
1.4%
1.9%
Nov-2003
3.6%
1.4%
1.9%
Dec-2003
3.8%
1.5%
1.9%
Jan-2004
3.7%
1.5%
1.9%
Feb-2004
3.6%
1.4%
1.9%
Mar-2004
3.9%
1.4%
2.0%
Apr-2004
3.9%
1.5%
2.0%
May-2004
3.8%
1.4%
1.9%
Jun-2004
3.8%
1.4%
2.0%
Jul-2004
3.7%
1.4%
2.0%
Aug-2004
3.9%
1.5%
2.0%
Sep-2004
3.8%
1.4%
2.0%
Oct-2004
3.9%
1.4%
2.0%
Nov-2004
3.9%
1.5%
2.1%
Dec-2004
4.0%
1.5%
2.1%
Jan-2005
3.9%
1.4%
2.1%
Feb-2005
3.9%
1.4%
2.0%
Mar-2005
3.9%
1.5%
2.1%
Apr-2005
4.0%
1.4%
2.1%
May-2005
3.9%
1.4%
2.1%
Jun-2005
3.9%
1.5%
2.1%
Jul-2005
3.9%
1.4%
2.0%
Aug-2005
4.0%
1.4%
2.2%
Sep-2005
4.0%
1.4%
2.3%
Oct-2005
3.8%
1.3%
2.2%
Nov-2005
3.9%
1.2%
2.2%
Dec-2005
3.7%
1.3%
2.1%
Jan-2006
3.9%
1.3%
2.1%
Feb-2006
3.9%
1.3%
2.2%
Mar-2006
3.9%
1.2%
2.2%
Apr-2006
3.8%
1.3%
2.1%
May-2006
4.0%
1.4%
2.2%
Jun-2006
3.9%
1.2%
2.2%
Jul-2006
3.9%
1.3%
2.2%
Aug-2006
3.8%
1.2%
2.2%
Sep-2006
3.8%
1.3%
2.1%
Oct-2006
3.8%
1.3%
2.1%
Nov-2006
4.0%
1.3%
2.3%
Dec-2006
3.8%
1.3%
2.2%
Jan-2007
3.8%
1.2%
2.2%
Feb-2007
3.8%
1.3%
2.2%
Mar-2007
3.8%
1.3%
2.2%
Apr-2007
3.7%
1.3%
2.1%
May-2007
3.8%
1.3%
2.2%
Jun-2007
3.8%
1.3%
2.0%
Jul-2007
3.7%
1.3%
2.1%
Aug-2007
3.7%
1.3%
2.1%
Sep-2007
3.7%
1.5%
1.9%
Oct-2007
3.8%
1.4%
2.1%
Nov-2007
3.7%
1.4%
2.0%
Dec-2007
3.6%
1.3%
2.0%
Jan-2008
3.5%
1.3%
2.0%
Feb-2008
3.5%
1.4%
2.0%
Mar-2008
3.4%
1.3%
1.9%
Apr-2008
3.5%
1.3%
2.1%
May-2008
3.3%
1.3%
1.9%
Jun-2008
3.5%
1.5%
1.9%
Jul-2008
3.3%
1.4%
1.8%
Aug-2008
3.3%
1.6%
1.7%
Sep-2008
3.1%
1.4%
1.8%
Oct-2008
3.3%
1.6%
1.8%
Nov-2008
2.9%
1.6%
1.5%
Dec-2008
3.2%
1.8%
1.6%
Jan-2009
3.1%
1.9%
1.5%
Feb-2009
3.0%
1.9%
1.5%
Mar-2009
2.8%
1.8%
1.4%
Apr-2009
2.9%
2.0%
1.3%
May-2009
2.8%
1.6%
1.3%
Jun-2009
2.8%
1.6%
1.3%
Jul-2009
2.9%
1.7%
1.3%
Aug-2009
2.9%
1.6%
1.3%
Sep-2009
3.0%
1.6%
1.3%
Oct-2009
2.9%
1.5%
1.3%
Nov-2009
3.1%
1.4%
1.4%
Dec-2009
2.9%
1.5%
1.3%
Jan-2010
3.0%
1.4%
1.3%
Feb-2010
2.9%
1.4%
1.3%
Mar-2010
3.2%
1.4%
1.4%
Apr-2010
3.1%
1.3%
1.5%
May-2010
3.3%
1.3%
1.4%
Jun-2010
3.1%
1.5%
1.5%
Jul-2010
3.2%
1.6%
1.4%
Aug-2010
3.0%
1.4%
1.4%
Sep-2010
3.1%
1.4%
1.5%
Oct-2010
3.1%
1.3%
1.4%
Nov-2010
3.1%
1.4%
1.4%
Dec-2010
3.2%
1.4%
1.5%
Jan-2011
3.0%
1.3%
1.4%
Feb-2011
3.1%
1.3%
1.4%
Mar-2011
3.3%
1.3%
1.5%
Apr-2011
3.2%
1.3%
1.5%
May-2011
3.1%
1.3%
1.5%
Jun-2011
3.3%
1.4%
1.5%
Jul-2011
3.2%
1.3%
1.5%
Aug-2011
3.2%
1.3%
1.5%
Sep-2011
3.3%
1.3%
1.5%
Oct-2011
3.2%
1.3%
1.5%
Nov-2011
3.2%
1.3%
1.5%
Dec-2011
3.2%
1.3%
1.5%
Jan-2012
3.2%
1.3%
1.5%
Feb-2012
3.3%
1.3%
1.6%
Mar-2012
3.3%
1.3%
1.6%
Apr-2012
3.2%
1.4%
1.6%
May-2012
3.3%
1.4%
1.6%
Jun-2012
3.2%
1.3%
1.6%
Jul-2012
3.2%
1.2%
1.6%
Aug-2012
3.3%
1.4%
1.6%
Sep-2012
3.1%
1.3%
1.4%
Oct-2012
3.2%
1.3%
1.5%
Nov-2012
3.3%
1.3%
1.6%
Dec-2012
3.2%
1.1%
1.6%
Jan-2013
3.3%
1.2%
1.7%
Feb-2013
3.4%
1.2%
1.7%
Mar-2013
3.2%
1.3%
1.5%
Apr-2013
3.3%
1.3%
1.7%
May-2013
3.3%
1.3%
1.6%
Jun-2013
3.2%
1.2%
1.6%
Jul-2013
3.3%
1.2%
1.7%
Aug-2013
3.4%
1.2%
1.7%
Sep-2013
3.4%
1.3%
1.7%
Oct-2013
3.3%
1.1%
1.8%
Nov-2013
3.4%
1.1%
1.8%
Dec-2013
3.3%
1.2%
1.7%
Jan-2014
3.3%
1.3%
1.7%
Feb-2014
3.4%
1.2%
1.8%
Mar-2014
3.4%
1.2%
1.8%
Apr-2014
3.5%
1.2%
1.7%
May-2014
3.5%
1.2%
1.8%
Jun-2014
3.5%
1.2%
1.8%
Jul-2014
3.6%
1.3%
1.8%
Aug-2014
3.4%
1.2%
1.8%
Sep-2014
3.6%
1.2%
2.0%
Oct-2014
3.7%
1.2%
2.0%
Nov-2014
3.6%
1.1%
1.9%
Dec-2014
3.7%
1.2%
1.9%
Jan-2015
3.5%
1.2%
2.0%
Feb-2015
3.6%
1.2%
1.9%
Mar-2015
3.6%
1.3%
2.0%
Apr-2015
3.6%
1.3%
1.9%
May-2015
3.5%
1.2%
1.9%
Supreme Court: Fair Housing Act Bars Policies that Segregate, even if Segregation is not Intentional
In June, Supreme Court decisions on Obamacare and same-sex marriage overshadowed another important decision, this one on housing discrimination, confirming that the Fair Housing Act not only prohibits actions or policies that are intentionally bigoted, but also those that have the effect of disadvantaging minorities, even where no racist intent can be proven.
The decision, whose background and implications I have discussed in more detail for The American Prospect in “The Supreme Court’s Challenge to Housing Segregation,” was widely interpreted as a civil rights victory, but yesterday a New York Times editorial disagreed. Supreme Court experts on Scotusblog, the excellent independent journalistic enterprise devoted to covering the court and its decisions, had in the moments after the court’s opinion was handed down, also denied that the decision was an advance for civil rights. On closer examination, however, the Times/Scotusblog theory doesn’t hold up.
“This might seem to be a ‘liberal’ result”, the Times wrote, “except that 11 federal appeals courts had agreed on this reading for decades. There was no legal dispute, in other words, only the persistent efforts of some justices to reverse accepted law because they didn’t like it.” The Scotusblog experts also noted that although Justice Kennedy’s majority opinion endorsed a prohibition on policies that have a discriminatory effect, it also described so many conditions required for proof of discriminatory effects that it seemed to make it more difficult to win cases where only such effects, not intent, have been proven. In sum, the argument went, the fact that this case was heard at all was a civil rights defeat–it is quite unusual for the court to take up a case where all lower courts are in agreement–and although the civil rights opponents lost the case, it gave these opponents tools to narrow, if not eviscerate, the power of the Fair Housing Act.
Justice Kennedy’s warnings about the narrow circumstances in which policies can be prohibited because of their effects, without provable intent, were generally warnings that were already present in appellate and previous Supreme Court decisions–for example, that a policy does not violate civil rights laws simply because there are statistical differences in how it impacts minorities; it also must be “arbitrary, artificial, and unnecessary”.
In important ways, Justice Kennedy’s opinion may have breathed life into the Fair Housing Law that the law had not previously possessed. The opinion did so by effectively acknowledging that the “Fair Housing Act” is a euphemism–it is not really about “fair” housing, whatever that may mean, but about desegregated housing, which is what the Act was intended to roll back when it was adopted in 1968.
Professor Hubbard’s Claim about Wage and Compensation Stagnation Is Not True
How to combat the wage stagnation that has afflicted the vast majority of American workers has emerged as a key economic issue addressed in speeches and policy deliberations by politicians and candidates in both parties. This is a very positive development–as we at EPI have been saying for quite a while, wage stagnation ranks beside addressing global climate change as the key economic challenge of our time.
A New York Times editorial points out, however, that Glenn Hubbard, a leading conservative economist and key adviser to GOP candidate Jeb Bush, does not seem to believe there is a wage stagnation problem. As an earlier New York Times article pointed out: “Mr. Hubbard argued that ‘compensation didn’t stagnate,’ citing large increases that employers have paid out in health and pension benefits.”
Hubbard is definitely mistaken, as the New York Times indicates and as I demonstrate below by examining actual wage and benefit trends. Shifting the discussion from wages to compensation (wages and benefits) does not alter any of the salient facts about stagnant pay in recent years, especially for the typical worker or for low-wage workers, and not even for the ‘average’ worker (including high wage as well as low and middle-wage workers). In fact, there has been an even greater growth of inequality in total compensation than there has been in wages alone.
The intuition behind Hubbard’s claim is that the costs of benefits provided by employers–especially those for health care insurance–have risen rapidly, suggesting that compensation has risen far more quickly than wages. What this ignores, of course, is that many workers in the bottom half receive very few health or pension benefits and employers provide fewer and fewer workers with health insurance and pension benefits each year. Hubbard’s intuition also ignores that employers have actually cut back on some benefits, particularly pensions, with a concomitant decline in the quality of those benefits (such as by providing defined contribution rather than defined benefit plans).
How Overtime Rules Could Help the Middle Class
This post originally ran in the Wall Street Journal’s Think Tank blog.
The overtime rules the Obama administration announced Tuesday target genuine problems that middle-wage households face. They also do not require approval from Congress.
American workers’ hourly wage growth has nearly stagnated in recent decades. While this broad-based stagnation affects essentially thebottom 70% of the U.S. workforce, policy proposals to boost wage growth too often begin and end with increasing legislated minimum wages. Such minimum-wage increases, while important policies, generally will not filter up to most middle-class households.
One specific change that could help these middle-class households was proposed Tuesday: raising the salary threshold that determines eligibility for overtime pay.
This wonky-sounding change could have large ramifications: potentially giving 15 million workers rights to higher pay.
Public Sector Employment Is Stuck in the Doldrums
A big fat zero. That’s how many jobs the public sector added in June. Zero.
To be clear, zero is better than a negative number, which is what we saw for most of the recession. It looks like public sector job losses finally turned a corner in 2014, when the economy added 74,000 public sector jobs. But growth has flattened out in 2015, adding only 8,000 jobs so far this year.
As a direct result of austerity policy, public sector jobs are still nearly half a million down from where they were before the recession began. Moreover, this fails to account for the fact that we would have expected these jobs to grow with the population–taking that into consideration, the economy is short 1.8 million public sector jobs. This shortfall in public sector jobs in turn removes the multiplier effect on private sector demand, snowballing into an even slower recovery.
Paltry Wage Growth in June Is Another Sign the Economy Is Only Sputtering Along
Average hourly earnings held steady between May and June at $24.95 per hour, a paltry increase of 2.0 percent over June 2014. Annual growth of 2.0 percent is slow by any measure, but is certainly far below any reasonable wage target. In previous months, there had been some indication that wages might show signs of improvement, but this month’s disappointing report clearly illustrates that the economy has not tightened enough for strong wage growth.
Wage growth needs to be both stronger and consistently strong for a solid spell before we call this a strong economy. As shown in the figure below, nominal wage growth since the recovery officially began in mid-2009 has been low and flat. This isn’t surprising–the weak labor market of the last seven years has put enormous downward pressure on wages. Employers don’t have to offer big wage increases to get and keep the workers they need. And this remains true even as a jobs recovery has consistently forged ahead in recent years.
Given the continued slack in the economy, it’s unfortunate that the most effective policy lever at our disposal for generating a faster recovery–fiscal policy–has been pulled in the wrong direction for years now, with austerity dragging on growth over the recovery. The lack of prospects for any additional fiscal stimulus has only left us with monetary policy levers. Pressure is building on the Fed to reverse its monetary stimulus by raising short-term interest rates to slow the recovery in the name of stopping wage-fueled inflation. Today’s data provide further evidence that these rate hikes should not happen any time soon.
Nominal wage growth has been far below target in the recovery: Year-over-year change in private-sector nominal average hourly earnings, 2007-2016
| All nonfarm employees | Production/nonsupervisory workers | |
|---|---|---|
| Mar-2007 | 3.59% | 4.11% |
| Apr-2007 | 3.27% | 3.85% |
| May-2007 | 3.73% | 4.14% |
| Jun-2007 | 3.81% | 4.13% |
| Jul-2007 | 3.45% | 4.05% |
| Aug-2007 | 3.49% | 4.04% |
| Sep-2007 | 3.28% | 4.15% |
| Oct-2007 | 3.28% | 3.78% |
| Nov-2007 | 3.27% | 3.89% |
| Dec-2007 | 3.16% | 3.81% |
| Jan-2008 | 3.11% | 3.86% |
| Feb-2008 | 3.09% | 3.73% |
| Mar-2008 | 3.08% | 3.77% |
| Apr-2008 | 2.88% | 3.70% |
| May-2008 | 3.02% | 3.69% |
| Jun-2008 | 2.67% | 3.62% |
| Jul-2008 | 3.00% | 3.72% |
| Aug-2008 | 3.33% | 3.83% |
| Sep-2008 | 3.23% | 3.64% |
| Oct-2008 | 3.32% | 3.92% |
| Nov-2008 | 3.64% | 3.85% |
| Dec-2008 | 3.58% | 3.84% |
| Jan-2009 | 3.58% | 3.72% |
| Feb-2009 | 3.24% | 3.65% |
| Mar-2009 | 3.13% | 3.53% |
| Apr-2009 | 3.22% | 3.29% |
| May-2009 | 2.84% | 3.06% |
| Jun-2009 | 2.78% | 2.94% |
| Jul-2009 | 2.59% | 2.71% |
| Aug-2009 | 2.39% | 2.64% |
| Sep-2009 | 2.34% | 2.75% |
| Oct-2009 | 2.34% | 2.63% |
| Nov-2009 | 2.05% | 2.67% |
| Dec-2009 | 1.82% | 2.50% |
| Jan-2010 | 1.95% | 2.61% |
| Feb-2010 | 2.00% | 2.49% |
| Mar-2010 | 1.77% | 2.27% |
| Apr-2010 | 1.81% | 2.43% |
| May-2010 | 1.94% | 2.59% |
| Jun-2010 | 1.71% | 2.53% |
| Jul-2010 | 1.85% | 2.47% |
| Aug-2010 | 1.75% | 2.41% |
| Sep-2010 | 1.84% | 2.30% |
| Oct-2010 | 1.88% | 2.51% |
| Nov-2010 | 1.65% | 2.23% |
| Dec-2010 | 1.74% | 2.07% |
| Jan-2011 | 1.92% | 2.17% |
| Feb-2011 | 1.87% | 2.12% |
| Mar-2011 | 1.87% | 2.06% |
| Apr-2011 | 1.91% | 2.11% |
| May-2011 | 2.00% | 2.16% |
| Jun-2011 | 2.13% | 2.00% |
| Jul-2011 | 2.26% | 2.31% |
| Aug-2011 | 1.90% | 1.99% |
| Sep-2011 | 1.94% | 1.93% |
| Oct-2011 | 2.11% | 1.77% |
| Nov-2011 | 2.02% | 1.77% |
| Dec-2011 | 1.98% | 1.77% |
| Jan-2012 | 1.75% | 1.40% |
| Feb-2012 | 1.88% | 1.45% |
| Mar-2012 | 2.10% | 1.76% |
| Apr-2012 | 2.01% | 1.76% |
| May-2012 | 1.83% | 1.39% |
| Jun-2012 | 1.95% | 1.54% |
| Jul-2012 | 1.77% | 1.33% |
| Aug-2012 | 1.82% | 1.33% |
| Sep-2012 | 1.99% | 1.44% |
| Oct-2012 | 1.51% | 1.28% |
| Nov-2012 | 1.90% | 1.43% |
| Dec-2012 | 2.20% | 1.74% |
| Jan-2013 | 2.15% | 1.89% |
| Feb-2013 | 2.10% | 2.04% |
| Mar-2013 | 1.93% | 1.88% |
| Apr-2013 | 2.01% | 1.73% |
| May-2013 | 2.01% | 1.88% |
| Jun-2013 | 2.13% | 2.03% |
| Jul-2013 | 1.91% | 1.92% |
| Aug-2013 | 2.26% | 2.18% |
| Sep-2013 | 2.04% | 2.17% |
| Oct-2013 | 2.25% | 2.27% |
| Nov-2013 | 2.24% | 2.32% |
| Dec-2013 | 1.90% | 2.16% |
| Jan-2014 | 1.94% | 2.31% |
| Feb-2014 | 2.14% | 2.45% |
| Mar-2014 | 2.18% | 2.40% |
| Apr-2014 | 1.97% | 2.40% |
| May-2014 | 2.13% | 2.44% |
| Jun-2014 | 2.04% | 2.34% |
| Jul-2014 | 2.09% | 2.43% |
| Aug-2014 | 2.21% | 2.48% |
| Sep-2014 | 2.04% | 2.27% |
| Oct-2014 | 2.03% | 2.27% |
| Nov-2014 | 2.11% | 2.26% |
| Dec-2014 | 1.82% | 1.87% |
| Jan-2015 | 2.23% | 2.01% |
| Feb-2015 | 2.06% | 1.71% |
| Mar-2015 | 2.18% | 1.90% |
| Apr-2015 | 2.34% | 2.00% |
| May-2015 | 2.34% | 2.14% |
| Jun-2015 | 2.04% | 1.99% |
| Jul-2015 | 2.29% | 2.04% |
| Aug-2015 | 2.32% | 2.08% |
| Sep-2015 | 2.40% | 2.13% |
| Oct-2015 | 2.52% | 2.36% |
| Nov-2015 | 2.39% | 2.21% |
| Dec-2015 | 2.60% | 2.61% |
| Jan-2016 | 2.50% | 2.50% |
| Feb-2016 | 2.38% | 2.50% |
| Mar-2016 | 2.33% | 2.44% |
| Apr-2016 | 2.49% | 2.53% |
| May-2016 | 2.48% | 2.33% |
| Jun-2016 | 2.64% | 2.48% |
| Jul-2016 | 2.72% | 2.57% |
| Aug-2016 | 2.43% | 2.46% |
| Sep-2016 | 2.59% | 2.65% |
*Nominal wage growth consistent with the Federal Reserve Board's 2 percent inflation target, 1.5 percent productivity growth, and a stable labor share of income.
Source: EPI analysis of Bureau of Labor Statistics Current Employment Statistics public data series
The Drop in the Unemployment Rate Is Not a Sign the Tides are Turning
While job growth was decent in June (though the downward revisions to April and May were disappointing), the news on unemployment was actually less welcome. This might seem odd to say given that the unemployment rate dropped from 5.5 to 5.3 percent. But this drop in unemployment was not primarily driven by a rise in employment; instead it was mostly due to a drop in the labor force.
Here’s a breakdown of the data. In June, the number of unemployed workers fell by 375,000. Good news, right? Not so much. The labor force dropped by more than that amount, a fall of 432,000. The White House suggests the weaker numbers may be driven by the earlier-than-normal reference period, which might not be picking up as much as the usual June increase in summer employment, which is largely driven by youth employment. So, let’s turn to the prime-age workforce to get rid of those trends, which primarily affect younger workers and which also get rid of any declines driven by baby boomer retirement.
The prime-age employment-to-population (EPOP) ratio has been flat for the last four months at 77.2 percent. One would expect an improving economy to drive the prime-age EPOP upwards, and between October 2013 and February 2015 there was steady and decent progress on this front. But the recent stagnation has left prime-age EPOPs still far from fully recovered.
Employment-to-population ratio of workers ages 25-54, 2006-2015
| Month | Employment-to-population ratio |
|---|---|
| 2006-01-01 | 79.6% |
| 2006-02-01 | 79.7% |
| 2006-03-01 | 79.8% |
| 2006-04-01 | 79.6% |
| 2006-05-01 | 79.7% |
| 2006-06-01 | 79.8% |
| 2006-07-01 | 79.8% |
| 2006-08-01 | 79.8% |
| 2006-09-01 | 79.9% |
| 2006-10-01 | 80.1% |
| 2006-11-01 | 80.0% |
| 2006-12-01 | 80.1% |
| 2007-01-01 | 80.3% |
| 2007-02-01 | 80.1% |
| 2007-03-01 | 80.2% |
| 2007-04-01 | 80.0% |
| 2007-05-01 | 80.0% |
| 2007-06-01 | 79.9% |
| 2007-07-01 | 79.8% |
| 2007-08-01 | 79.8% |
| 2007-09-01 | 79.7% |
| 2007-10-01 | 79.6% |
| 2007-11-01 | 79.7% |
| 2007-12-01 | 79.7% |
| 2008-01-01 | 80.0% |
| 2008-02-01 | 79.9% |
| 2008-03-01 | 79.8% |
| 2008-04-01 | 79.6% |
| 2008-05-01 | 79.5% |
| 2008-06-01 | 79.4% |
| 2008-07-01 | 79.2% |
| 2008-08-01 | 78.8% |
| 2008-09-01 | 78.8% |
| 2008-10-01 | 78.4% |
| 2008-11-01 | 78.1% |
| 2008-12-01 | 77.6% |
| 2009-01-01 | 77.0% |
| 2009-02-01 | 76.7% |
| 2009-03-01 | 76.2% |
| 2009-04-01 | 76.2% |
| 2009-05-01 | 75.9% |
| 2009-06-01 | 75.9% |
| 2009-07-01 | 75.8% |
| 2009-08-01 | 75.6% |
| 2009-09-01 | 75.1% |
| 2009-10-01 | 75.0% |
| 2009-11-01 | 75.2% |
| 2009-12-01 | 74.8% |
| 2010-01-01 | 75.1% |
| 2010-02-01 | 75.1% |
| 2010-03-01 | 75.1% |
| 2010-04-01 | 75.4% |
| 2010-05-01 | 75.1% |
| 2010-06-01 | 75.2% |
| 2010-07-01 | 75.1% |
| 2010-08-01 | 75.0% |
| 2010-09-01 | 75.1% |
| 2010-10-01 | 75.0% |
| 2010-11-01 | 74.8% |
| 2010-12-01 | 75.0% |
| 2011-01-01 | 75.2% |
| 2011-02-01 | 75.1% |
| 2011-03-01 | 75.3% |
| 2011-04-01 | 75.1% |
| 2011-05-01 | 75.2% |
| 2011-06-01 | 75.0% |
| 2011-07-01 | 75.0% |
| 2011-08-01 | 75.1% |
| 2011-09-01 | 74.9% |
| 2011-10-01 | 74.9% |
| 2011-11-01 | 75.3% |
| 2011-12-01 | 75.4% |
| 2012-01-01 | 75.6% |
| 2012-02-01 | 75.6% |
| 2012-03-01 | 75.7% |
| 2012-04-01 | 75.7% |
| 2012-05-01 | 75.7% |
| 2012-06-01 | 75.7% |
| 2012-07-01 | 75.6% |
| 2012-08-01 | 75.7% |
| 2012-09-01 | 75.9% |
| 2012-10-01 | 76.0% |
| 2012-11-01 | 75.8% |
| 2012-12-01 | 75.9% |
| 2013-01-01 | 75.7% |
| 2013-02-01 | 75.9% |
| 2013-03-01 | 75.9% |
| 2013-04-01 | 75.9% |
| 2013-05-01 | 76.0% |
| 2013-06-01 | 75.9% |
| 2013-07-01 | 76.0% |
| 2013-08-01 | 75.9% |
| 2013-09-01 | 75.9% |
| 2013-10-01 | 75.5% |
| 2013-11-01 | 76.0% |
| 2013-12-01 | 76.1% |
| 2014-01-01 | 76.5% |
| 2014-02-01 | 76.5% |
| 2014-03-01 | 76.6% |
| 2014-04-01 | 76.5% |
| 2014-05-01 | 76.4% |
| 2014-06-01 | 76.8% |
| 2014-07-01 | 76.6% |
| 2014-08-01 | 76.8% |
| 2014-09-01 | 76.8% |
| 2014-10-01 | 76.9% |
| 2014-11-01 | 76.9% |
| 2014-12-01 | 77.0% |
| 2015-01-01 | 77.2% |
| 2015-02-01 | 77.3% |
| 2015-03-01 | 77.2% |
| 2015-04-01 | 77.2% |
| 2015-05-01 | 77.2% |
| 2015-06-01 | 77.2% |
| 2015-07-01 | 77.1% |
Source: EPI analysis of Bureau of Labor Statistics' Current Population Survey public data
As Summer Jobs Season Begins, Teens Make Headway for the First Time Since 2012
Summer is typically the time of year when we see the highest rates of employment for teens — young people between the ages of 16 and 19. This group includes new high school graduates along with others in search of an opportunity to earn a few extra dollars while out of school for the summer. Based on this month’s jobs report, the 2015 summer job market for teens is off to a better start than last year. According to seasonally unadjusted teen employment-to-population (EPOP) ratios, 32.1 percent of all teens found employment in June 2015, compared to 30.9 percent in June 2014 (Figure A). However, this may actually be an understatement of the June 2015 increase. The White House suggests that an earlier-than-normal reference week for this year’s survey is capturing a smaller share of the usual June gains. June teen employment rates were essentially flat between June 2012 and June 2014.
Unadjusted Employment-Population Ratio, 16-19 years old, (June only) 2000-2015
| Year | All | White | Black | Hispanic |
|---|---|---|---|---|
| 2000 | 51.4 | 56.3 | 31.6 | 40.7 |
| 2001 | 48.1 | 52.9 | 30.0 | 40.1 |
| 2002 | 44.6 | 48.7 | 28.5 | 36.7 |
| 2003 | 40.9 | 45.5 | 21.7 | 31.6 |
| 2004 | 40.2 | 44.5 | 22.5 | 31.4 |
| 2005 | 41.0 | 45.5 | 24.1 | 33.0 |
| 2006 | 42.1 | 46.3 | 27.0 | 33.5 |
| 2007 | 39.6 | 43.9 | 23.4 | 30.9 |
| 2008 | 37.1 | 41.4 | 21.4 | 32.0 |
| 2009 | 32.9 | 36.9 | 18.0 | 27.4 |
| 2010 | 28.6 | 32.1 | 15.2 | 21.0 |
| 2011 | 29.2 | 32.5 | 16.9 | 19.3 |
| 2012 | 30.5 | 34.0 | 19.2 | 25.4 |
| 2013 | 30.6 | 34.3 | 17.8 | 24.9 |
| 2014 | 30.9 | 34.0 | 18.4 | 24.6 |
| 2015 | 32.1 | 35.5 | 20.8 | 26.7 |
Source: EPI analysis of Bureau of Labor Statistics Current Population Survey public data series
Racial differences in teen employment rates mirror those of adults – 35.5 percent of white teens were employed in June, compared to 26.7 percent of Hispanic teens and 20.8 percent of black teens.
The relatively improved June 2015 numbers reflect the fact that this summer teens are entering a stronger job market than the last several years. The average rate of job growth during the 12 months preceding June 2015 (July 2014-June 2015) was 245,000 jobs/month compared to 221,000 jobs/month during the 12 months preceding June 2014 and 175,000 jobs/month during the 12 months leading up to June 2012 (Table 1). Also, the adult unemployment rate (age 20 and older) is lower heading into the summer of 2015 than in previous years – 5.0 percent in May.
Average annual monthly job growth during 12 months preceding June, and adult (age 20 or older) unemployment rate in May, 2010-2015
| Average monthly job growth during 12 months preceding June | Adult (age 20 or older) unemployment rate in May | |
|---|---|---|
| 2010 | -42,000 | 9.0% |
| 2011 | 114,000 | 8.5% |
| 2012 | 175,000 | 7.6% |
| 2013 | 196,000 | 6.9% |
| 2014 | 221,000 | 5.8% |
| 2015 | 245,000 | 5.0% |
Source: EPI analysis of Bureau of Labor Statistics Current Population Survey and Consumer Employment Statistics public data series
Despite the uptick in teen employment this June, employment rates for teens and prime age adults (age 25 to 54) remain well below pre-Great Recession levels. The longer-term pattern in June teen employment rates is consistent with the sharp decline in average annual teen employment rates since 2000. This partly reflects an ongoing increase in college enrollment (except for a post-2012 decline), but is also the result of relatively weaker labor markets that have persisted since 2000. Based on a recent EPI report, the share of young high school graduates, age 17 to 20, who are not working and not enrolled in school is also well above the 2000 rate.
Are Disability Benefits Becoming More Generous?
(This is the second of six blog posts on disability.)
In my previous blog post, I questioned Stanford economist Mark Duggan’s Senate testimony that workers’ financial incentives are driving a growth in Social Security Disability Insurance (SSDI) rolls. I showed that there had been no upward trend in age-adjusted disability incidence over the past 20 years, though there had been a modest increase for women offset by a modest decline for men.
Though age-adjusted incidence isn’t rising, it’s possible that financial incentives have prevented it from falling. This blog post will focus on Duggan and Massachusetts Institute of Technology economist David Autor’s claim that disability benefits are replacing a rising share of low-wage workers’ earnings. Though this is a plausible and widely accepted hypothesis, there is surprisingly little evidence to back it up. In any case, this assumes workers are weighing the costs and benefits of working versus applying for disability benefits–a lengthy and difficult process that results in nearly two out of three applicants being denied–even though it’s doubtful that many applicants could instead choose to work.
Are disability benefits becoming more generous? The average benefit awarded is roughly a third of the average wage, a ratio that has remained essentially unchanged since 1985. And as Harvard economist Jeffrey Liebman points out, rising inequality and other factors have reduced the value of disability benefits relative to productivity per worker. As a result, program costs increased only modestly over the three decades preceding the Great Recession as a share of GDP (from 0.55 to 0.68 percent) despite a much faster growth in enrollment.
Though benefits have just kept pace with wage growth and lagged productivity growth, Duggan and Autor (2006) hypothesize that benefits have risen relative to lower-wage workers’ earnings due to rising inequality and a progressive benefit formula. Lower-wage workers are more likely to apply for disability benefits because they tend to be in worse health, are more likely to be in physically demanding or dangerous occupations, and qualify for fewer jobs that accommodate disabilities.