Policy Implications from Rising Economic Inequality

By and ·November 13, 2018
Reed College and University of California, Berkeley

Policy Implications from Rising Economic Inequality

The Issue:

Progressive tax policy and a social safety net that invests in those at the bottom of the income distribution play a role in mitigating widening inequality in the United States. However, policy has not reacted to the widening gap between rich and poor with countervailing responses in these areas. In ...

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Assessing the Impact of the Tax Cuts and Jobs Act (VIDEO)

By ·October 29, 2018
Reed College

The Issue:

The Tax Cuts and Jobs Act was among the biggest tax overhauls the U.S. has seen in recent decades. Now, nearly one year on, Kimberly Clausing at Reed College and Eduardo Porter of the New York Times look at the most recent fiscal figures to discuss what we can tell about the impact the tax cuts have had.

What this Means:

It is still too early to gauge the impact of the TCJA, but the experience of other countries that have lowered corporate tax rates in the hopes of boosting investment and wages isn't encouraging. For the U.S., the tax rate reduction is benefiting companies that already had excess profits, and is unlikely to significantly alter their investment decisions. And for companies looking to finance investment through debt, under the TCJA debt-financed investments are less favorably treated.

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How Can We Know if There is Discrimination in Hiring?

By ·October 27, 2018
University of California, Irvine

The Issue:

Groups of workers that differ by personal characteristics such as gender, race, ethnicity, sexual orientation, past criminal record, physical appearance or disability often exhibit measurable differences in wages and employment. Using experiments, economists are finding evidence of pervasive discrimination in hiring for most groups that experience lower wages, as well as other groups.

The Facts:

  • There has been a difference of 20 percent between the earnings of black and white men in the past decade, and a persistent pay gap between men and women, currently at 22 percent. However, it is difficult to assess how much of this gap is due to discrimination. Differences in labor market outcomes between groups may arise for a range of other reasons, such as differences in average experience or education between groups.
  • As an alternative approach, there has been substantial growth in research that conducts experiments to uncover labor market discrimination. These experiments focus on hiring rather than wages or promotions. Broadly they have participants evaluate candidates that differ only by the characteristic under investigation, for example, by race to study racial discrimination, but otherwise to be identical in characteristics that matter for the job.
  • Experimental research generally indicates that hiring discrimination is pervasive. For example, a recent study found compelling evidence that older workers experience age discrimination in hiring for lower-skilled types of jobs: the callback rate for an administrative job was 47 percent lower among older women as compared to younger women, and 30 percent lower for a sales job for older men as compared to younger men. Experimental research does not indicate that women are uniformly discriminated against in hiring decisions. Instead, the evidence suggests hiring discrimination consistent with sex stereotyping of jobs: Men are less likely to be hired for a female-dominated job, while women are less likely to be hired for a male-dominated job.

What this Means:

Many people think that discrimination is wrong, and the law reflects this. Moreover, discrimination is likely to create economic inefficiencies as qualified members of groups that suffer discrimination are not matched to jobs that make the most use of their abilities and talents. But to combat discrimination, we need to know the sources and the extent of the problems in order to design effective policies. Well-intentioned policies can have unforeseen adverse consequences. For example, "Ban the Box", a popular policy that prevents employers from asking about someone’s criminal record until late in the job application process, had the unintended consequence of reducing employment opportunities for young, low-skill black men who did not have criminal convictions.

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A Snapshot of the Undocumented Population in the United States (VIDEO)

By ·October 18, 2018
Williams College

The Issue:

Despite the attention given to recent increases in detentions of unauthorized immigrants at the border, the unauthorized population living in the United States has been relatively stable at between 11-12 million over the past decade.

What this Means:

Stricter border enforcement over the past couple of decades has meant that undocumented immigrants are less likely to come and go, meaning that they are more likely to settle and more likely to have been in the U.S. for ten years or more.

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Flood Insurance in a World with Rising Seas

By , and ·October 15, 2018
Queens College, City University of New York

The Issue:

Flooding is a major cause of damage and property loss to homeowners in the wake of hurricanes. Even absent major weather events, flooding has become an issue for coastal communities. Yet most homeowners insurance policies do not cover damage from floods and federal flood insurance is deeply in the red, owing $23 billion as of 2016.

The Facts:

  • Rising sea levels have increased the risk of coastal flooding, becoming the most economically damaging impact of climate change for many coastal locations. At the same time, there has been a large increase in population in shoreline counties in the United States.
  • Lack of flood coverage by private insurance markets, prompted the U.S. government to create the National Flood Insurance Program (NFIP) in 1968. Properties located on the 100-year floodplain are required to purchase flood insurance if they have federally-backed mortgages or have received FEMA assistance in the past.
  • The existence of federally subsidized insurance means that homeowners do not bear the full cost of owning a property in an area at high risk of flooding. The NFIP has not generated sufficient funds to fully cover losses. This has been exacerbated by several weather events that have generated losses that dwarf those of the 1980s and 1990s (see chart).
  • Congress passed the Biggert-Waters Flood Insurance Reform Act in 2012, which planned to eliminate subsidies to flood insurance rates and phase out a number of exemptions. Vigorous public opposition prompted Congress to pass the 2014 Grimm-Waters Act, which repealed some mandates of the 2012 Act and slowed down rate increases.
  • Increases to flood insurance rates would be expected to result in lower house values for the properties affected, as owners face higher costs. However, we did not find an effect of increases in insurance premia on the values of floodplain properties in Virginia Beach and Miami-Dade as of 2016. In our data, properties that were newly classified as being high-risk in Virginia Beach and New York did not see a reduction in sale prices. However, houses that were removed from the high risk classification experienced a large price appreciation in both markets, showing that flood maps can impact housing values.

What this Means:

The availability of subsidized flood insurance may have muted the effects of the increase in flood risk in the last decades on housing values. The appropriate policy response to the challenges arising from sea level rise will not be the same everywhere. Fortification and resiliency measures will be appropriate in some areas, but “graceful depopulation” will be the optimal response in other areas. In the latter cases, the NFIP is the most promising tool at the hands of the federal government to incentivize households and businesses to gradually relocate toward less flood-prone areas. The recent reforms to the NFIP go in the right direction. There is a lot at stake. Billions of dollars in damage from future flooding episodes, loss of life and unmeasurable human suffering.

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How Do Occupational Licensing Rules Affect the Health Care Sector?

By , and ·October 9, 2018
Emory University and The Hamilton Project, Brookings Institution

The Issue:

Health care professionals work within the boundaries of state licensing rules which vary from one state to another. Could changing these rules help reduce costs and increase availability of health care without having an adverse effect on the quality of health care services?

The Facts:

  • Scope-of-practice rules, which govern the permissible conduct of physician assistants and advanced practice registered nurses, often restrict what nurses and other non-physician health care workers can do, and determine to what extent they must be supervised by physicians.
  • There has been a movement toward loosening restrictions. For example, the number of states allowing certified nurse midwives to practice independently and write prescriptions more than tripled from 9 to 29 between 1994 and 2017.
  • Proponents of the trend argue that loosened restrictions allow advanced practice providers to supply care that is similar in quality as that of physicians while improving the efficiency of the system and reducing the costs. Opponents contend that quality of care may suffer given the shorter length of training and clinical experience required of these professionals relative to that of physicians.
  • Research finds that the quality of health care services has not suffered when scope of practice restrictions on health professionals have been relaxed. In fact, several studies have found that relaxing some of these laws is associated with better health outcomes, such as a decrease in emergency room use when nurse practitioners practice independently. And, there is evidence that maternal and infant health care outcomes are somewhat better when certified nurse midwives practice independently as women in these states have lower rates of cesarean sections and of pre-term and low birth weight births.
  • There is some evidence that fully authorized scope of practice can allow for a more efficient use of health care professionals’ time, resulting in both lower health care costs and increased access to health care services.

What this Means:

Reducing the restrictions that scope-of-practice rules place on advanced practice registered nurses and physician assistants is likely associated with sizable benefits for the public. Many restrictions that are not uniformly applied across the United States — including those limiting practitioner autonomy and the ability to write prescriptions — do not appear to be justified by better health care outcomes. Given that these limitations hinder access to care and impose costs on providers themselves and on the flexible operation of health-care labor markets, they generally do not seem to provide benefits that exceed their costs.

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