A blog post by researchers at the Federal Reserve Bank of New York has been making the rounds today, arguing that much of the decline in the employment to population ratio (EPOP) since the Great Recession began is actually reflecting changing demographics of the workforce. The researchers (Samuel Kapon and Joseph Tracy) argue that the overall U.S. EPOP in recent years should have been expected to fall relatively rapidly simply because so many U.S. workers were reaching typical retirement ages and were voluntarily leaving paid work. Given this, they claim that the overall EPOP is a misleading labor market indicator if it’s large fall and subsequent non-recovery is taken as evidence that a demand shortfall continues to keep aggregate demand further beneath the economy’s productive potential than other labor market measures—like the overall unemployment—are currently indicating.

I don’t think this is right.

First, as Matthew Klein has noted on Twitter, the same reasoning doesn’t apply if we just look at the EPOP for prime-age working adults—those between 25 and 54. It seems hard to imagine why lots of these workers would be voluntarily retiring starting right at the beginning of the Great Recession. And yet this measure shows the same sharp decline and subsequent very slow recovery as the overall measure.

Second, a key piece of the method used by Kapon and Tracy to estimate the “trend” EPOP actually answers the question that should be answered by the data. This is how they describe one aspect of their method for constructing the trend:

“… we adopt the normalization that over the thirty-one years in our data sample any business-cycle deviations between the actual and the adjusted E/P ratios will average to zero.”

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After two years of debate and foot-dragging, the House and Senate have finally agreed on a farm bill—one that comes with a ten-year price tag of $956 billion. Despite being widely referred to as “the farm bill,” most (almost 80 percent) of the spending in the Agriculture Act of 2014 (its official name) is actually for nutrition programs. And most of that 80 percent goes to fund the Supplemental Nutrition Assistance Program (SNAP, also known as food stamps).

This isn’t to say the other $200 billion in the farm bill—the sections that more closely relate to actual farms—is not worth commenting on. It is. Among other controversies, a vastly disproportionate share of crop insurance subsidies —which were significantly increased in the bill—accrues to the largest (and richest) farm operators.

The big controversy within the bill, however, is the $8.5 billion cut from SNAP over the next decade. The cuts come from a tightening of the eligibility and benefit rules. Many of these are small-bore: prohibiting deducting the costs of medical marijuana when determining a household’s discretionary income and thus its level of SNAP benefit, disallowing households with large lottery or gaming winnings from receiving SNAP benefits, ensuring violent ex-felons receive benefits only if they follow the terms of their parole, and so on. (CBPP has an excellent rundown of such provisions.)

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Since the end of the Great Recession, Maryland’s economy has slowly healed. The state has gained back all of the jobs lost in the downturn, and Maryland’s unemployment rate of 6.1 percent is down significantly from its high of 8.0 percent in early 2010. Yet despite this improvement, there are still considerable challenges facing Maryland workers and families. Population growth since December 2007 means that the state needs to create more than 180,000 jobs just to get back to the unemployment rate preceding the recession.1 Furthermore, wages have fallen significantly for the majority of Maryland workers, particularly for low-wage workers—real wages at the 20^th percentile declined by a nation-leading $1.24 since 2009. Raising Maryland’s minimum wage would combat these downward wage trends and put much-needed money in the pockets of low-income workers who are likely to spend that additional income right away. Given current economic conditions, where tepid consumer demand is holding back employment growth, this additional consumer spending would provide a modest, but meaningful boost to Maryland’s economy.

The Maryland Minimum Wage Act of 2014 (SB 331 and HB 295), similar to a proposal we analyzed last year, would raise Maryland’s minimum wage from the current $7.25 per hour to $10.10 per hour by 2016. It would also increase the tipped minimum wage from 50 percent to 70 percent of the full minimum wage, and index both wage rates to rise automatically with the cost of living. The data show that this proposal would improve the well-being of thousands of working families in Maryland, while injecting almost half a billion dollars into the economy.

Download the PDF version of this analysis

This analysis provides an overview of the economic impact and demographic details of the workers who would benefit from the proposed increase in the minimum wage, examining their gender, age, race and ethnicity, educational attainment, work hours, family composition, and other characteristics. It also details the estimated economic activity and job-creation impacts that would result from raising the Maryland minimum wage to $10.10.

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In his State of the Union Address, President Obama said that because “ninety-eight percent of our exporters are small businesses, new trade partnerships with Europe and the Asia-Pacific will help them create more jobs.” This suggests that small businesses will benefit most from trade, but that is not the case. In fact, two-thirds of U.S. exports are generated by multinational companies (domestic and foreign) operating in this country, as shown in the figure below. These massive firms also generated more than two thirds of U.S. imports and an even larger share of the job-destroying U.S. goods trade deficits.

And therein lies the not so hidden underbelly of international trade and investment deals that the president has consistently refused to discuss: job displacing imports. A surge of imports from low wage countries has driven down wages for working people in the United States. In fact, imports are responsible for 90% of the growth in the college/noncollege wage gap since 1995.

Those same multinational companies were the biggest supporters of trade and investment deals with Mexico, Korea and China, deals that have cost U.S. workers nearly four million jobs in the past two decades. Now, the multinationals are demanding that the president complete trade deals with nearly a dozen countries in Asia and Latin America (the TPP), and a new trade and investment deal with Europe (the TTIP) that will open our markets to goods made by millions of low wage workers in Eastern Europe.

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Speaker of the House John Boehner has just released the Republican Party’s anxiously awaited and very brief “Standards for Immigration Reform.” President Obama and the Democrats, and the Senate generally, have needed a dancing partner to get immigration reform passed, move the country forward, and give it an economic boost by granting legal status and citizenship to the nearly 12 million unauthorized immigrants who are living in the shadows. Although it’s far from a concrete legislative proposal, the Standards released today at least give us a hint of what the Republican caucus might eventually be willing to vote on.

My initial reaction to the Standards can be summed up as, “You’ve come a long way, baby.”

Boehner laid out six specific Standards. Much of it is unobjectionable and looks very similar to what passed in the Senate’s comprehensive immigration bill (S. 744) in the summer. The section titled “Border Security and Interior Enforcement Must Come First” is vague and takes a jab at administrations from both parties for not adequately enforcing immigration laws, and takes a thinly veiled swipe at President Obama by noting that presidents should not be able to “unilaterally stop immigration enforcement.” This of course, ignores the nearly two million deportations the president’s Department of Homeland Security (DHS) has carried out, much to the chagrin of his progressive supporters and immigration advocates. The “Employment Verification and Workplace Enforcement” and “Implement Entry-Exit Visa Tracking System” sections are also vague, but broadly call for E-Verify and entry-exit visa system reforms like those in S. 744. One notable exception is the Republicans’ insistence that the entry-exit system be biometric. (Whether such a system should be biometric was a main topic of contention during the Senate’s debate on S. 744.)Read more

Yesterday morning, I had the honor of participating in a Democratic Steering and Policy Committee hearing, hosted by Leader Nancy Pelosi, in the Cannon House Office Building. Appearing with Lilly Ledbetter—whose story of pay discrimination went all the way to the Supreme Court and ultimately resulted in new legislation in 2009 named after her—and Laura Miu, a psychological counselor, who recently experienced pay discrimination, I was able to share recent research by the Institute for Women’s Policy Research (IWPR), which I lead, and by the Economic Policy Institute (EPI), the think tank that provides the last word on virtually all topics related to American workers. The briefing attracted 20 members of Congress, including Representatives Rosa DeLauro and Robert Andrews, who co-chair the Steering and Policy Committee, and Representatives Donna Edwards and Doris Matsui, who chair and vice-chair, respectively, the Democratic Women’s Working Group. IWPR’s research was originally released in January when it appeared in the latest Shriver Report, A Woman’s Nation Pushes Back from the Brink, produced in partnership with the Center for American Progress. EPI’s research was published as an update in December 2013 of an earlier paper last spring that details the impact of an increase in the minimum wage to $10.10 per hour.

The economic progress women have made in the past five decades is enormous. Women have entered many occupations that had been virtually closed to them, now earn more over their lifetimes, and contribute more to family income and to the economy as a whole than ever before.

But there is still a long way to go. Despite the passage of the Lilly Ledbetter Fair Pay Act of 2009, which makes it easier for women to sue for equal pay—avoiding a similar plight as the bill’s namesake, when she learned she was earning vastly unequal pay near the end of her career—progress toward closing the pay gap has stagnated. Since 2000, the wage ratio has remained around 76.5 percent. If trends of the past five decades are projected forward, it will take almost another five decades—until 2058—for women to reach pay equity.

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The last six months of 2013 saw the headline GDP growth rate reach 3.7 percent. That’s a healthy number. Not gangbusters (we really have seen growth rates over 5 percent for a year or more in previous recoveries where there was slack in the economy comparable to what persists today), but undeniably healthy.

So what’s to be glum about?

Strip out the contribution of inventory investments and exports, and add in (rather than subtract) the value of imports. This is a measure of real “final sales to domestic purchasers,” or, what is sometimes called domestic demand. It’s a measure of how much demand from households, businesses, and governments is growing—and since the economy’s problem remains a huge shortfall of this demand relative to productive potential, it’s a key barometer of health.

Domestic demand growth for the last six months of 2013 was only half as fast as headline GDP growth (1.8 percent).

Key evidence that this slow rate of domestic demand growth is keeping us from making good progress in closing the gap between aggregate demand and potential supply (and closing this gap really should be the operative definition of “full recovery”) is the stubbornness of core price growth—the year over year change in the “market-based” deflator for core (i.e., excluding food and energy) price deflator for personal consumption expenditures was 1.1 percent for the last three quarters of 2013. This is well below the too-conservative target of 2 percent inflation often assumed to be guiding monetary policymakers. In short, this is a clear sign of an economy not climbing rapidly back to full employment.

Are there any reasons to be less glum about 2014? For sure.

The big one is that federal fiscal policy will no longer be actively throttling growth. It knocked nearly a full percentage point off the fourth quarter growth rate. To be clear, fiscal policy won’t aid growth in 2014, instead it will provide a very slight drag rather than an anvil-heavy drag. This is what counts as progress in today’s fiscal policymaking. But, we’ll take what we can, I guess.

Details of the president’s new retirement plan emerged today, and it’s nothing to get excited about. On the bright side, it’s refreshing to see a focus on investment risk, since many 401(k) participants invest too aggressively based on the mistaken belief that cumulative returns average out over time, while risk-averse people may be put off from saving altogether.

However, cautious savers already have convenient access to low- or no-risk investment options, either through existing retirement accounts or by purchasing Treasuries through automatic payroll deduction. What the myRA plan does is offer a modest tax break for investing in a Treasury bond fund similar to one available to federal workers. The tax benefit is modest because it is based on taxes that would otherwise be paid on investment earnings, which would likely be low.

MyRA accounts would be structured like Roth IRAs, with taxes paid up front. Another selling point of the president’s plan is that participants would be able to change their minds and withdraw their money without paying a penalty, encouraging participation by risk-averse low-income workers. However, this would also likely lead to significant pre-retirement leakage. Finally, participants would earn slightly higher investment returns than they would by investing in short-term Treasury bills without being locked in to a longer-term investment.

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Rick Snyder, the Republican Governor of Michigan recently introduced a new plan to “jump-start” the economically suffering city of Detroit. He proposes that over the next five years, the government authorize the granting of 50,000 EB-2 green cards—i.e., immigrant visas granting legal permanent resident (LPR) status in the employment-based, second preference category—to foreign workers who hold advanced degrees or have “exceptional ability” and are willing to live and work in Detroit. This could either be done by creating additional new immigrant visas, or by reallocating existing ones. There’s no question that Detroit needs many more people to move into its empty spaces and increase its tax base dramatically. But is this the way to do it? It’s an interesting idea worth exploring, but the mechanics of it would be complicated, the numbers are probably unrealistic, and the politics will undoubtedly be messy. It also takes the focus off the 18 percent of workers in Detroit who are unemployed, and those who are seeing their pensions plundered. With that being said, here are some of the main issues at play.

Allocating new or existing immigrant visas to an individual city or state has never been done in the United States. However, it is not unprecedented. Many Canadian provinces are able to sponsor permanent residence visas for immigrants who agree to live and work in the sponsoring province (what’s known as the Provincial Nominee Program). If enacted in the United States, an important question to consider would be the visa’s terms and conditions: Immigrants granted an EB-2 can live and work anywhere they wish, so to restrict them to Detroit, the government would have to make the visa provisional; that is, make it revocable if the holder doesn’t live and work in Detroit.

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In his State of the Union address last night, President Obama articulated some core truths that ought to guide economic policy, with lines like “the best measure of opportunity is access to a good job,” and “Say yes.  Give America a raise.”

We need policies to create more jobs, but we must insure that they’re good jobs, with benefits and decent pay that can support a family and fuel economic growth based on what people earn on the job, as opposed to what households borrow or “gain” in asset bubbles.

The president highlighted the problem of stagnant wages, noting that “women hold a majority of lower-wage jobs—but they’re not the only ones stifled by stagnant wages.” This is absolutely true. I illustrated this point recently by pointing out that the share of young (ages 25-34) men earning poverty-level wages ($11.29 in 2012) had doubled from 1979 to 2012, jumping from 10.8 to 25.5 percent. Young women were even more likely to earn poverty-level wages, with 31.1 percent doing so in 2012. There’s been some, but not much, progress for women on this front, since a third earned poverty-level wages in 1979.

This is not news to us at EPI—we’ve focused on job quality and wage stagnation since our founding in 1986, and pounded on these themes in the twelve editions of the State of Working America and numerous other works. Generating better jobs and better pay is the key to addressing inequality and strengthening and expanding the middle class. Unfortunately, we have only seen broad-based wage growth for a few years (the late 1990s) over the last four decades. Over the last ten years there has been no wage growth for the vast majority of workers, white collar or blue collar, among college and high school graduates. We cannot get where we want to go unless different wage dynamics are generated and that has to be a central focus of economic policy. The president’s call for Congress to pass the Harkin-Miller minimum wage bill was absolutely right, as is his executive order requiring federal contractors to pay $10.10. Providing income to working families through a robust social insurance system, and work supports such as an improved EITC, are also pillars of economic growth and living standards.

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