Category Archives: Economy

Declining Dynamism in the U.S. Labor Market

Source: David W. Perkins, CRS Insight, IN10506, June 15, 2016

Many observers have noted that certain measures of the U.S. labor market “dynamism” or “fluidity” including job reallocation, worker churn, and geographic labor mobility—have been declining for the past 20 years or more. The ability of U.S. workers to flow between jobs has been a defining feature of the economy since the end of World War II, and a reduction in labor market fluidity could have negative implications for unemployment, wage growth, and productivity. Economists have proposed several possible explanations for the decline in labor market dynamism, but the effect of these potential factors is unclear….

The Price We Pay: Economic Costs of Barriers to Employment for Former Prisoners and People Convicted of Felonies

Source: Cherrie Bucknor and Alan Barber, Center for Economic and Policy Research (CEPR), June 2016

From the abstract:
Despite modest declines in recent years, the large and decades-long blossoming of the prison population ensure that it will take many years before the United States sees a corresponding decrease in the number of former prisoners. Using data from the Bureau of Justice Statistics (BJS), this report estimates that there were between 14 and 15.8 million working-age people with felony convictions in 2014, of whom between 6.1 and 6.9 million were former prisoners.

Prior research has shown the adverse impact that time in prison or a felony conviction can have on a person’s employment prospects. In addition to the stigma attached to a criminal record, these impacts can include the erosion of basic job skills, disruption of formal education, and the loss of social networks that can improve job-finding prospects. Those with felony convictions also face legal restrictions that lock them out of many government jobs and licensed professions.

Assuming a mid-range 12 percentage-point employment penalty for this population, this report finds that there was a 0.9 to 1.0 percentage-point reduction in the overall employment rate in 2014, equivalent to the loss of 1.7 to 1.9 million workers. In terms of the cost to the economy as a whole, this suggests a loss of about $78 to $87 billion in annual GDP. Some highlights of this study include:
• Between 6.0 and 6.7 percent of the male working-age population were former prisoners, while between 13.6 and 15.3 percent were people with felony convictions.
• Employment effects were larger for men than women, with a 1.6 to 1.8 percentage-point decline in the employment rate of men and a 0.12 to 0.14 decline for women.
• Among men, those with less than a high school degree experienced much larger employment rate declines than their college-educated peers, with a drop of 7.3 to 8.2 percentage points in the employment rates of those without a high school degree and a decline of 0.4 to 0.5 percentage points for those with college experience.
• Black men suffered a 4.7 to 5.4 percentage-point reduction in their employment rate, while the equivalent for Latino men was between 1.4 and 1.6 percentage points, and for white men it was 1.1 to 1.3 percentage points. This paper updates earlier CEPR research that also examined the impact of former prisoners and those with felony convictions on the economy.
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Press release

Fiscal Health of Large U.S. Cities Varied Long After Great Recession’s End

Source: The Pew Charitable Trusts, American Cities Project, Issue Brief, April 2016

From the overview:
Though the U.S. economy improved for a fourth straight year in fiscal year 2013, many big cities faced constrained budgets because of weak property tax revenue growth and cuts in federal and state aid.

This brief focuses on the cities that anchor the nation’s largest metropolitan areas. The fiscal health of the cities varied considerably in fiscal 2013, depending on their circumstances. Still, a number of trends emerge concerning the cities’ revenue, spending, and reserves.

The analysis, based on audited city financial statements, continues work undertaken by The Pew Charitable Trusts’ American cities project following the Great Recession, which ran from late 2007 through mid-2009. For this multiyear series, Pew has examined data in the financial statements of the central city in each of the nation’s 30 largest metro areas (as defined by the 2010 census). Though included in previous analyses, Cincinnati was excluded from the most recent look at revenue, spending, and reserves because city officials changed its fiscal year in 2013. That resulted in financial documents that covered only six months and made it impossible to compare financial information to previous years or to other cities included in the analysis.

A separate brief, “Issuance of New Money Bonds Remains Low in Large U.S. Cities,” looks at trends in city bond issuances through 2014….

Lights, Camera, but No Action? Tax and Economic Development Lessons From State Motion Picture Incentive Programs

Source: Michael Thom, The American Review of Public Administration, Published online before print June 5, 2016
(subscription required)

From the abstract:
Despite mixed results, state government use of targeted economic development programs has escalated. This study evaluates the impact of motion picture incentive programs, an array of tax incentives employed by over 40 states to entice film and television productions out of California and New York, on labor and economic conditions from 1998 through 2013. Results suggest that sales and lodging tax waivers had no effect on any of four different economic indicators. Transferable tax credits had a small, sustained effect on motion picture employment levels but no effect on wages. Refundable tax credits had no employment effect and only a temporary wage effect. Neither credit affected gross state product or motion picture industry concentration. Incentive spending also had no influence. These findings demonstrate the heterogeneous impacts of different incentives offered under a single program and should inform future economic development policy design.

American Capitalism’s Great Crisis

Source: Rana Foroohar, Time, May 12, 2016

….America’s economic problems go far beyond rich bankers, too-big-to-fail financial institutions, hedge-fund billionaires, offshore tax avoidance or any particular outrage of the moment. In fact, each of these is symptomatic of a more nefarious condition that threatens, in equal measure, the very well-off and the very poor, the red and the blue. The U.S. system of market capitalism itself is broken. That problem, and what to do about it, is at the center of my book Makers and Takers: The Rise of Finance and the Fall of American Business, a three-year research and reporting effort from which this piece is adapted….. America’s economic illness has a name: financialization. It’s an academic term for the trend by which Wall Street and its methods have come to reign supreme in America, permeating not just the financial industry but also much of American business. It includes everything from the growth in size and scope of finance and financial activity in the economy; to the rise of debt-fueled speculation over productive lending; to the ascendancy of shareholder value as the sole model for corporate governance; to the proliferation of risky, selfish thinking in both the private and public sectors; to the increasing political power of financiers and the CEOs they enrich; to the way in which a “markets know best” ideology remains the status quo. Financialization is a big, unfriendly word with broad, disconcerting implications…..

Report on the Economic Well-Being of U.S. Households in 2015

Source: Board of Governors of the Federal Reserve System, May 2016

From the press release:
American families overall reported continued mild improvement in their financial well-being in 2015 although many families were struggling financially and felt excluded from economic advancement, according to the Federal Reserve Board’s latest Report on the Economic Well-Being of U.S. Households.

The report, based on the Board’s third annual Survey of Household Economics and Decisionmaking, presents a contrasting picture of the financial well-being of U.S. families. Aggregate-level results show several signs of improvement. Sixty-nine percent of respondents said they are either “living comfortably” or “doing okay,” up 4 percentage points from 2014 and up 6 percentage points from 2013. Seventy-seven percent of non-retired adults without a disability are confident that they have the skills necessary to get the kind of job that they want now–an increase of 10 percentage points from the 2013 survey results….

Why Did The Job Cross The Road?

Source: NPR, Planet Money, Podcast, Episode 699, May 4, 2016

States across the country are at war right now. A war over jobs. They are competing with each other to get companies to move within their borders. Politicians love to call this “job creation.”

States dangle incentives like tax breaks, training programs, freshly paved roads. According to one study, states all over the country are spending $70 billion a year to “create” jobs. But is it really creating a job if it came from a few miles away across the state border?…

The Cost of Kelo: Property Taxes, Public Use, and Subjective Value

Source: Thomas J. Miceli, Public Finance Review, Vol. 44 no. 4, July 2016
(subscription required)

From the abstract:
This article examines the economic implications of the definition of public use advanced by the Supreme Court in the case of Kelo v. City of New London. In its ruling, the Court asserted that the Fifth Amendment public use requirement is satisfied if the taking in question, even if for private ends, promises enhanced jobs and tax revenues for the community. This article first reviews the law and economics of public use and then argues that the Court’s justification creates the potential for an alliance between local governments and developers that will increase the risk of overuse of eminent domain. Underlying this risk is the unobservability of landowners’ subjective values, which requires local governments to rely on market value as the basis for property taxation