Category Archives: Economy

Helping America’s distressed communities recover from the COVID-19 recession and achieve long-term prosperity

Source: Timothy J. Bartik, Brookings Metropolitan Policy Program, September 2020

From the summary:
Even before the COVID-19 recession, distressed communities across the United States lacked sufficient jobs. The pandemic’s effects will further damage these local areas, while pushing even more places into economic distress. Without intervention, even a robust national recovery may leave many communities behind. Communities’ responses will be hindered by a lack of resources, and their residents will suffer from lower earnings and increased social problems.

As a solution, this paper proposes a new federal block grant to create or retain good jobs in distressed communities and help residents access these jobs. The block grant would provide long-term flexible assistance to increase local earnings and ensure those gains are broadly shared.

COVID-19 Economic Crisis: By State

Source: Michael EttlingerJordan Hensley, University of New Hampshire, Carsey School of Public Policy, September 18, 2020

KEY FINDINGS
Every state in the country is well down from its February employment levels. Thirty-nine states have lost over 5% of their jobs and the same number of states are still down more jobs than during the Great Recession.

Thirty-three states added fewer jobs in August than they did in July.

In every state lower wage industries have lost far more jobs than high wage industries.

Hard hit states with more COVID-19 cases in August saw worse job growth.

Labor, Poverty, and Power

Source: Cambridge Now Blog, September 3, 2020

Countries around the world are struggling with the economic repercussions of the pandemic, and the United States in particular has recorded levels of unemployment not seen since the Great Depression. While the CARES Act, passed by Congress and signed by President Trump in March, provided $600/week in supplemental income to some workers, this benefit lapsed at the end of July and no replacement program has been enacted, leaving millions in a state of housing and food insecurity. At the same time, states have made cuts or are considering steep cuts to Medicaid and other social safety programs precisely as need surges, with millions of Americans losing health insurance along with their jobs. A disproportionate number of those who are at risk are Black Americans and people of color who worked—or still work, in some cases, but at minimum wage—in industries without organized labor, which has also been in decline over the past several decades in the United States. Indeed, the precarious position of low-wage workers and the unemployed stands in contrast to legislation designed to protect businesses and employers—for example, a $25 billion bailout to the airline industry, or the GOP Liability Shield Bill, which would give employers sweeping immunity against Covid-19 related lawsuits brought by employees.

We spoke to several Cambridge University Press authors and editors about the legal, political, and historical factors that explain these converging crises and make low-income and unemployed Americans especially vulnerable. We also asked about connections between calls to end anti-Black racism and to reinvigorate organized labor, and, more generally, how anti-labor and anti-poor measures have exacerbated the systemic effects of racism.

What Is the Remedy for State and Local Fiscal Squeeze During the COVID-19 Recession? More Debt, and That Is Okay

Source: James W. Douglas, Ringa Raudla, The American Review of Public Administration, Special issue: Double Issue Dedicated to COVID-19, Volume 50 Issue 6-7, August-October 2020
(subscription required)

From the abstract:
The COVID-19 crisis is placing a tremendous fiscal squeeze on state and local governments in the United States. We argue that the federal government should increase its deficit to fill in the fiscal gap. In the absence of sufficient federal assistance, we recommend that states suspend their balanced budget rules and norms and run deficits in their operating budgets to maintain services and meet additional obligations due to the pandemic. A comparison with Eurozone countries shows that states have more than enough debt capacity to run short-term deficits to respond to the crisis.

COVID-19 and the Higher Education Quandary

Source: Dante DeAntonio, Regional Financial Review, August 2020
(subscription required)

COVID-19 has wreaked havoc across nearly every part of the U.S. and global economy. While higher education has typically been insulated from the business cycle—and sometimes has even been the beneficiary of economic downturns—the current pandemic-induced recession has hit the sector head on.

The Next Recovery: Regional Leaders and Laggards

Source: Adam Kamins, Regional Financial Review, August 2020
(subscription required)

With the national COVID-19 recession having officially ended, the varying nature of the recovery across regions has become an increasingly important consideration. Some key short- and long-term considerations are examined in order to determine which places are best positioned in the years ahead.

Early Evidence on the Impact of COVID-19 and the Recession on Older Workers

Source: Truc Thi Mai Bui, Patrick Button, Elyce G. Picciotti, NBER Working Paper No. 27448, June 2020

From the abstract:

We summarize some of the early effects and discuss possible future effects of the COVID-19 pandemic and recession on the employment outcomes of older workers in the United States. We start by discussing what we know about how older workers faired in prior recessions in the United States and how COVID-19 and this recession may differ. We then estimate some early effects of the COVID-19 pandemic and recession on employment and unemployment rates by age group and sex using Current Population Survey data. We calculate employment and unemployment rates multiple ways to account for the complicated employment situation and possible errors in survey enumeration. We find that while previous recessions, in some ways, did not affect employment outcomes for older workers as much, this recession disproportionately affected older workers of ages 65 and older. For example, we find that unemployment rates in April 2020 increased to 15.43% for those ages 65 and older, compared to 12.99% for those ages 25-44. We also find that COVID-19 and the recession disproportionately affected women, where women have reached higher unemployment rates than men, which was consistent for all age groups and unemployment rate measures we used.

Revenue securing certain US state and local debt will weaken as coronavirus slows economy and travel

Source: Moody’s, March 30, 2020
(subscription required)

Tax revenue used to repay state and local special tax debt — debt secured by specific tax revenue streams such as hotel or car rental taxes — will rapidly decline amid the coronavirus-related economic downturn. A state or local government with a dedicated reserve fund or the ability and willingness to cover a gap in pledged revenue bolsters the credit quality of certain special tax debt.

Fortifying Main Street: The Economic Benefit of Public Pension Dollars in Small Towns and Rural America

Source: Dan Doonan, Maryna Kollar, Nathan Chobo, Tyler Bond, National Institute on Retirement Security, March 2020

From the summary:
As many small towns and rural communities across America face shrinking populations and slowing economic growth, a new report finds that one positive economic contributor to these areas is the flow of benefit dollars from public pension plans. In 2018, public pension benefit dollars represented between one and three percent of gross domestic product (GDP) on average among the 1,401 counties in 19 states studied.

These findings are detailed in a new study, Fortifying Main Street: The Economic Benefit of Public Pension Dollars in Small Towns and Rural America.

This new report finds that public pension benefit dollars also account for significant amounts of total personal income in counties across the nineteen states studied. For all 1,401 counties in this study, pension benefit dollars represent an average of 1.37 percent of total personal income, while some counties experience more than six percent of total personal income derived from pension dollars.

The report’s key findings are as follows:

  • Public pension benefit dollars represent between one and three percent of GDP on average in the 1,401 counties studied.
  • Rural counties and counties with state capitals have the highest percentages of populations receiving public pension benefits.
  • Small town counties experience a greater relative impact both in terms of GDP and total personal income from public pension benefit dollars than rural or metropolitan counties.
  • Rural counties experience more of an impact in terms of personal income than metropolitan counties, whereas metropolitan counties experience more of an impact in terms of GDP than rural counties.
  • Counties with state capitals are outliers from other metropolitan counties, likely because there is a greater density of public employees in these counties, most of whom remain in these counties in retirement.
  • On average, rural counties have lost population while small town counties and metropolitan counties have gained population in the period between 2000 and 2018, but the connection between population change and the relative impact of public pension benefit dollars is weak.

Incentivizing the Missing Middle: The Role of Economic Development Policy

Source: Carlianne Patrick, Heather M. Stephens, Economic Development Quarterly, OnlineFirst, Published February 28, 2020
(subscription required)

From the abstract:
The shrinking middle class and increasing income polarization in the United States are issues of concern to policy makers and others. Economic development incentives are a key policy tool used at the state and local levels to promote local economic growth, and, presumably, provide employment opportunities. However, these incentives may have unintended consequences that may be contributing to the decline of the middle class. The authors combine detailed industry-level detail on incentives with proprietary county-level industry employment data and two methods for defining middle-class industries. Using an instrumental variable approach, the authors estimate how differential economic development policies affect middle-class jobs. The authors find evidence that incentivizing creative-class and high-wage industries may be contributing to the hollowing out of the middle class. Without hurting employment in other industries, targeting working-class and middle-wage industries alleviates this trend, while reducing incentives on creative-class and high-wage industries could help increase working and middle-class employment.