Brookings: Experts - Elisabeth Jacobs

Addressing Long-Term Unemployment for America’s Next Generation of Workers

Elisabeth Jacobs and Joshua Bleiberg — Mon, 25 Mar 2013 17:18:00 -0400

The labor market news this month has been impressive, with above-expected job creation numbers, a continued dip in the unemployment rate, and falling jobless claims all giving reason for optimism about the state of the economic recovery. However, the encouraging top-line figures mask persistent fragility in the labor market. Notably, long-term unemployment remains stubbornly high, particularly for young workers. Early jobs are critical for establishing future earnings and employment trajectories, thus the health of the labor market for younger workers may serve as a harbinger for the economy’s longer-term vibrancy. Young jobseekers continue to face historically poor employment prospects, and the employment picture for these workers has not improved at the same pace as other age groups. While the conversation in Washington has focused on budget politics, policymakers who lose sight of the challenges facing young workers do so at great risk to the future health of the American economy. In addition to safeguarding basic protections for the long-term unemployed, Congress can help jobless younger workers by protecting and expanding AmeriCorps.

Long-term unemployment for young workers during the Great Recession spiked to historic levels, and remains at record-high rates even during today’s increasingly robust recovery.[i] Typically, long-term unemployment (defined as workers looking for a job for between six months and one year), has returned to pre-recession levels by this point in an economic recovery. Yet in February, 44 months into the current recovery, persistent unemployment amongst 20 to 24 year old jobseekers was 237% of historic rates. 646,000 young workers were out of work for six months or more.

Number of 20-24 Year Olds Unemployed for 27-51 Weeks (Seasonally Adjusted)

While extended unemployment remains a significant problem for the labor market as a whole, the depth of the problem for younger workers is particularly troubling due to the slow pace of improvement for this group. On average, long-term unemployment has decreased by 41 percent for all workers from its peak. Yet, for 20 to 24 year-old job-seekers, the extended unemployment rate has declined by just 23 percent since its peak. The older the worker, the more rapid the rate of improvement in the long-term unemployment rate relative to its peak. For instance, long-term unemployment has fallen far more sharply for prime-age workers: a 46 percent drop for 35 to 44 year olds, and a 59 percent drop for 45 to 54 year olds.[ii]

Percent Change in the Number of People Unemployed for 27-51 Weeks from Peak (Seasonally Adjusted)

Long-term unemployment for young job seekers has long-lasting impacts. Unemployment today predicts unemployment tomorrow, in addition to enduring impacts on earnings, particularly for those with long durations of joblessness.[iii] Recent research finds that unemployed young workers experience persistent effects on employment prospects for at least a decade, and highlights the long-term negative impact on earnings and employment prospects for college students who graduate during a recession.[iv] Long durations of unemployment for youth are likely to exacerbate these negative effects. For instance, workers in the early stages of their careers develop social networks that allow for upward career mobility, via internal promotion or external transition to a better position. Young workers also learn more about the labor market while on the job, discovering their strengths and weaknesses, as well as their personal preferences regarding industry and occupation. As a result, workers’ early jobs may be particularly important for establishing “job fit.” Prolonged joblessness at the beginning of a worker’s career may be particularly deleterious due to its negative impact on this iterative process. Effective and efficient matching of workers to jobs is a key element for a productive workforce for the future, thus prolonged joblessness for youth should be of particular concern to those worried about the country’s long-term economic growth.

Protecting basic unemployment benefits, including the federal long-term unemployment benefits program, is a key first step that will not only benefit young jobseekers, but also the many older workers who continue to face challenges in the labor market. However, youth unemployment can be tackled through other avenues as well. Policymakers should address long-term unemployment among young people through an expansion of the AmeriCorps program – or, at a bare minimum, by protecting this program from cuts. AmeriCorps hires recent college graduates and others to address the critical needs in American communities. Corps members receive valuable labor skills. A study from the University of Texas found that participants in AmeriCorps were more likely to report they had basic work skills than their peers.[v] Furthermore, the program provides much needed support to communities still recovering from the Great Recession. For example, AmericCorps-funded CityYear corps members serve as tutors, mentors, and after-school programming staff for elementary school students in cash-strapped public schools in Detroit, where public funding has been slashed due to the deep impacts of the recession and slow recovery.

The budget sequester is slated to cut several thousand positions from AmeriCorps in the coming months.[vi] Prior to the sequester, AmeriCorps’ budget had already been trimmed by eight percent in the wake of the recession.[vii] Recent Republican budget proposals have zeroed out funding for the volunteer program. AmeriCorps is a relatively inexpensive federal program, costing about one billion dollars a year (compared to, for instance, $718 billion in annual defense spending), and yielding meaningful impacts for both its participants and the communities that it serves. Instead of slashing the program, Congress should signal a renewed commitment to America’s young workers and economically-devastated communities through a renewed and reinvigorated investment in AmeriCorps.

[i] Unless otherwise noted, long-term unemployment is defined as jobseekers who have been looking for work for 6 to 12 months. Young worker are defined as those ages 20-24.

[ii] It is worth noting that the decline in long-term unemployment for youth out of work for a year or more has been relatively commensurate with the drop in this rate for other age groups. This may be because young workers are dropping out of the labor market after a year of joblessness, or because younger workers are likely to take dead-end jobs rather than continuing to search for a job well-suited to their skill set. In either case, the more impressive decline in rates of long-term unemployment for 20-24 year olds out of work for a year or more is not necessarily a positive story about the labor market for these young workers. Another possible reason is the wording of the BLS survey. It is possible that young people who had fulltime unpaid internships would answer the questions as if they were not seeking gainful employment.

[iii] Arulampalam, Wiji, Paul Gregg, and Mary Gregory. "Unemployment scarring."The Economic Journal 111.475 (2008): 577-584.

[iv] Gregg, Paul. "The impact of youth unemployment on adult unemployment in the NCDS." The Economic Journal 111.475 (2008): 626-653; Kahn, Lisa B. “The Long-Term Labor Market Consequences of Graduating From College in a Bad Economy.” Labour Economics 17.2 (2010): 303-316.

[v] Grimm Jr, Robert T., Kevin Cramer, and Nathan Dietz. "AmeriCorps' Impact on Participants" Journal of Policy Analysis and Management 28.3 (2009): 394-416.

[vi] Cohen, Rick. “Sequestration’s Impact: The AmeriCorps Case Study.” Non-Profit Quarterly. March 4, 2013.

[vii] Ibid. A portion of this budget cut was due to the expiration of stimulus funding.

Authors

Elisabeth Jacobs
Joshua Bleiberg

Creating a Virtuous Circle: Workforce Development Policy as a Tool for Improving the Prospects of America’s Unemployed Workers

Elisabeth Jacobs — Wed, 13 Feb 2013 00:00:00 -0500

In the 2013 State of the Union Address, the president stressed the strong bond between quality education and job security. In keeping with the correlation between investing in workers and resultant economic gain, Elisabeth Jacobs outlines the need for job training opportunities for displaced workers, with a focus on the long-term unemployed, and analyzes ideas behind positive economic reinforcement of, what she terms, the “virtuous circle.” This cycle, Jacobs writes, includes investing in a culture of “lifetime learning,” creating more productive and profitable employees, and therefore improving the prospects of America’s unemployed workers and their families. She also addresses the policies currently in place for serving the unemployed, and offers a set of suggestions for future reforms that would better serve the large population of out-of-work individuals who could be expected to benefit from improvements to the nation’s workforce development policy architecture.

As Jacobs notes, the latest jobs reports suggest that the labor market is continuing its slow but steady recovery. For the first time in three years, the unemployment rate is below 8 percent. The private sector added 5.1 million jobs between 2009 and 2012, and nearly a third of that job growth occurred last year alone. Yet unemployment, particularly long-term unemployment, remains at near-crisis levels. While Washington’s attention has shifted away from jobs and onto deficits, 12.3 million people remain unemployed, 4.7 million have been out of work for six months or more, and over 3 million people have been out of work for a year or longer. These remain historically high figures, and suggest that the labor market’s woes continue to inflict real pain on many American workers and their families.

To combat these troubling economic trends, Jacobs offers the following reforms to bolster the career prospects of the unemployed:

• Funding workforce development services

• Developing approaches to mitigate the (perceived) opportunity cost of training for displaced workers

• Shoring up funding for community colleges, the backbone of the nation’s adult education system

• Incentivizing employer-based training for unemployed workers

• Creating meaningful “bridge to work” programs

• Expanding the availability of wage insurance

• Emphasizing effective evaluation to track performance and better understand results

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Elisabeth Jacobs

Obama Should Use the State of the Union to Refocus Economic Policy on Equitable Growth and Full Employment, Not Deficits

Elisabeth Jacobs — Fri, 08 Feb 2013 13:33:00 -0500

Much of Washington’s punditry class has already issued a collective yawn over the prospects of the State of the Union, arguing (probably correctly) that the President’s inaugural was far more inspiring and interesting than anything we are likely to hear on Tuesday night. Yet the upcoming speech provides an important and rare opportunity for the newly re-elected president. While the proximity to last month’s inaugural festivities will probably depress viewership, it is still reasonable to expect that more than 30 million Americans will tune in on February 12 to hear what their commander-in-chief has to say. The State of the Union represents one of few moments of collective popular engagement in American politics. It is all too easy for those in Washington who spend their days following the political debates to forget this critical fact.

With so many Americans tuning in to hear what he has to say, what should President Obama offer? A renewed focus on equitable economic growth and full employment as his top economic policy priority, above and beyond the deficit.

With the looming sequester deadlines and yet another narrowly-averted (for now) debt ceiling crisis, the entire economic policy debate in Washington seems to have shifted from reviving a sputtering economy to solving the deficit problem. Yes, the deficit is a problem. Yes, we need to get serious about fixing it. But there are three big reasons why the wholesale post-election shift in attention from a rapid return to full employment to the long-term deficit issue is dangerous, and the President would do well to use the SOTU to refocus attention on the issue of full economic recovery.

First, as Brookings’ Henry Aaron argues, the most serious problem facing the American economy today is the still-soft labor market. Unemployment, particularly long-term unemployment, is crippling today’s output and is likely to have reverberations for decades to come. Yes, the long-term structural deficit will cause problems if left unattended. But Washington is dangerously close to making prospective deficits “a damaging obsession,” as former U.S. Treasury Secretary Larry Summers warns, at the expense of seriously addressing the critical issues of unemployment, and equitable economic growth. Failure to successfully tackle these contemporary problems will make the long-term deficit problem far worse. The SOTU gives the President an opportunity to recast his economic policy priorities in this light, refocusing the debate on jobs and growth.

Second, the nature of the current Congress means that the President is unlikely to get anything resembling a “big deal” on the deficit. Republicans in Congress have proven time and time again that they are not willing to negotiate, especially when it comes to taxes. The extreme contemporary polarization of the Republican congressional delegation makes a good deficit deal incredibly unlikely. Focusing on deficit policy is unlikely to yield a salutary outcome, thus it is probably best to get something small done (i.e. avoid the sequester, which would choke off spending at precisely a time when the economy continues to need a boost) and simply move on. On Tuesday night, President Obama would do well to reframe budget politics in terms of incremental progress, and remind Americans of all the other important work that Washington has to do on economic policy.

Third, while public opinion suggests that the deficit is indeed an important priority for many, jobs and economic growth that benefits all Americans rank high as well. For the millions of viewers tuning in on Tuesday night to hear what the President has to say about his priorities, the message that will resonate most is one that speaks to their immediate economic concerns. Four out of five Americans have been impacted by job loss – either through their own or a family member’s or friend’s job loss. Consumer confidence is deteriorating, especially consumers’ labor market outlook. Many viewers are still struggling with the consequences of the Great Recession, and will be looking for their president to offer a governing vision that speaks to their kitchen-table worries. While the election may be over, politics is an eternal game. For now, the everyday concerns of broad swaths of the public align well with what ought to be the main concerns of policymakers. On Tuesday night, President Obama would do well to recognize and speak to this fact.

In the State of the Union, President Obama has an opportunity to harness the power inherent in one of America’s rare moments for collective democratic ritual, and to channel it toward refocusing his economic message for the coming term. He is the only Democratic president to be twice elected with the popular vote – the only other president to achieve this feat of democracy was President Reagan. The State of the Union provides President Obama with an opportunity to use the power of the bully pulpit to shape America’s collective vision for its economic priorities. Let’s hope he does so.

Authors

Elisabeth Jacobs

Image Source: © Lucy Nicholson / Reuters

The Future of Federal Workforce Development Policy

Wed, 12 Dec 2012 09:30:00 -0500

Event Information

December 12, 2012
9:30 AM - 11:00 AM EST

Saul/Zilkha Rooms
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

The overhaul of the Workforce Investment Act (WIA) in the late 1990s put in place a new framework to provide federal job training programs to workers and to “improve the quality of the workforce, reduce welfare dependency, and enhance productivity and competitiveness.” Reauthorization of WIA is long overdue, as the Act’s provisions technically expired nearly a decade ago. Yet Congress failed to act this year, and, as a result, America has no clear workforce development strategy at precisely the time when our economic future depends on it. Today’s record-high levels of long-term unemployment mean that job training will be critical for America’s future economic success. Many employers complain of a “skills gap” between the skills demanded by available jobs and those held by jobseekers, and individuals seeking training are often unable to obtain the skills they need to enter (or re-enter) the workforce on a path to economic security.

On December 12, Brookings hosted a discussion on the future of federal workforce development policy in the context of long-term joblessness, slow labor market recovery, and a fragile middle class. Moderated by Fellow Elisabeth Jacobs, a panel of experts examined current federal policy, promising proposals for updating existing policy to meet current labor market challenges, and political obstacles preventing progress toward a system that best meets the needs of both workers and employers.

Women and the Economy: Key Election Issues

Elisabeth Jacobs — Mon, 05 Nov 2012 00:00:00 -0500

The anemic American economy has had a preeminent role in the presidential campaign dialogue. Both candidates have railed about spending, entitlements and taxes and now that election day is here, it’s time to see whose words will resonate with voters, notes Fellow Elisabeth Jacobs.

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Women and the Economy: Key Election Issues

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Elisabeth Jacobs

Understanding America’s White Working Class: Their Politics, Voting Habits, and Policy Priorities

Elisabeth Jacobs — Mon, 05 Nov 2012 00:00:00 -0500

In the final days of the 2012 presidential campaign, myriad news reports have turned their attention to the white working class, a group of diminishing size but considerable political clout. Indeed, as a prominent story focused on the white working class in the New York Times declared last week, the “Ohio working class may offer [the] key to Obama’s re-election.” Whites without a college degree make up a substantial share of the population in several key swing states – for example, 43 percent in Ohio, and 40 percent in Florida, both well above the national average of 35 percent. Ohio is of particular interest, given that Republicans have never won a presidential contest without it. Current polls suggest a neck-and-neck race, although Obama has maintained a small but consistent edge in the state polls for months; the most recent simple average of likely voter polls in Ohio shows Obama up by 2.4 points over between October 22 and November 1.

Given the perceived importance of white working class voters in key swing states, especially must-win Ohio, it comes as no surprise that the 2012 political debate over the partisan preferences of the working class has been heated. Indeed, white working class politics have been the source of controversy for years, with pundits, journalists, and political scientists all weighing in with a version of the story. Perhaps the most dominant narrative over the last several election cycles is the idea that Democrats “lost” the white working class, who focus on cultural issues (e.g. “God, guns, and gays”) at the expense of their economic self-interest. Indeed, President Obama’s 2008 off-the record remarks that economically-distressed are Americans “bitter” and “cling to guns or religion” dogged him throughout the last campaign. The Romney campaign has tried hard to re-ignite the issue in 2012 as a response to the devastating recordings of Governor Romney’s dismissal of 47 percent of Americans as free-loading dependents. With the dominance of the economy in the 2012 campaigns, the “God, guns, and gays” narrative has receded, but the broader question remains: Are Democrats losing ground with the white working class? And, in general, do white working class voters prioritize cultural issues over economic self-interest when making electoral decisions?

Scholars have weighed in on the political behavior of the white working class. And, unlike many academic disputes, the friction amongst political analysts focused on white working class politics occasionally creates sparks that fly out of the academy and onto the pages of national newspapers. Most recently, political psychologist Jonathan Haidt’s “Why Working Class People Vote Conservative” sparked a vigorous debate well-summarized by Thomas Edsall in an online New York Times article. Haidt argues that most working class people in the United States vote Republican. In response, political scientist Andrew Gelman counters that, in fact, working class Americans overwhelmingly vote Democratic. Haidt responded by more clearly defining the population of interest: he meant the white working class, defined as white employed Americans without a college degree. Defined this way, he argues, white working class Americans have indeed defected from the Democratic Party. Political scientist Larry Bartels provides yet another counter-argument, suggesting that the defection from the Democratic Party represents a regional story about Southern white working class voters, rather than a national trend.

Much of the debate is one of definitions; the political behavior of the “white working class” look somewhat different depending on how white working class is defined. This piece aims to contribute to that debate by examining white working class politics over time, based on both a review of the extant academic literature and new analyses. In keeping with several major past academic contributions, it concludes that while the white working class is somewhat less supportive of Democratic presidential candidates than it has been in past decades, the story is largely a regional one. In other words, many Southern white working class voters may have lost their appetite for the Democratic Party in the wake of the Civil Rights movement, but Democratic presidential candidates have performed at about the same rate in the rest of the country in recent contests as they have in the past. Moreover, while white working class voters may be more culturally conservative than their non-working-class identified white peers, they are more economically liberal – and they typically prioritize economics over cultural ideology when making a presidential vote choice.

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Understanding America’s White Working Class

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Elisabeth Jacobs

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The Vice Presidential Debate: A Live Web Chat with Elisabeth Jacobs

Wed, 10 Oct 2012 12:30:00 -0400

Event Information

October 10, 2012
12:30 PM - 1:00 PM EDT

Online Only
The Brookings Institution

Washington, DC

As the 2012 presidential campaign enters its final weeks, voters will see the vice presidential candidates spar about domestic and foreign policy issues. Vice President Joe Biden and Republican challenger Congressman Paul Ryan face off this Thursday in their only debate. Throughout the campaign, the running mates served as surrogates for the presidential candidates, but this week the focus will be squarely on them. What kind of performance can we expect from the candidates, and will the debate have a significant impact on the outcome in November? Does the vice presidential debate even matter?

On October 10, Brookings expert Elisabeth Jacobs responded to questions and comments in a live web chat moderated by Vivyan Tran of POLITICO.

12:30 Vivyan Tran: Welcome everyone, let's get started.

12:30 Elisabeth Jacobs: Hello, everyone. Thanks for joining me today!

12:30 Comment from Jesse: Did last week’s jobs numbers help Obama recover from the first debate? How can Biden use them tonight to make more progress in the polls for the Obama-Biden campaign?

12:33 Elisabeth Jacobs: Last week's job numbers definitely opened up a window for the Obama campaign to clarify their messaging around the economy and the recovery, and VP Biden has a chance to do that in the debate tomorrow night. Governor Romney (and Rep. Ryan) has been hammering the Administration on the fact that the unemployment rate has been 8% or higher since Obama took office, for instance, and now that's no longer the case. It's a simple psychological point, maybe, but a potentially significant one. The Administration has had a tough time convincing the public that the recovery is real, and that their policies have made a difference. Last week's jobs numbers help make that case more clearly, and Biden has a chance to really amplify that message tomorrow night.

12:34 Comment from Sarah: I’ll ask the most obvious – does the VP debate matter?

12:37 Elisabeth Jacobs: That's a great question. The simple answer is probably a flat-out "no," although it sure doesn't feel that way given the media attention given to debates! The consensus amongst political scientists is that debates—not just VP debates, but presidential debates, too—just don't change election outcomes. Debates can change the polls, but typically not in a fundamental way that decides the election. All that said, I do have a few caveats. First, just because debates haven't "mattered" (in the sense of deciding election outcomes) in the past doesn't mean that they won't ever matter in the future. This year could somehow be the anomaly! But that's unlikely, and it's certainly not likely that the VP debate will be the deciding event. Second, just because debates don't decide election outcomes doesn't mean they don't matter. They're a key opportunity for political ideals and policy ideas to be front-and-center in the public dialogue, and they give candidates an opportunity to spell out what they're all about. So they're an important part of American democracy, even if they don't decide the winner.

12:38 Comment from Jon: What mistakes did Obama make that Biden can learn from?

12:44 Elisabeth Jacobs: President Obama made a few mistakes in his debate against Governor Romney that Vice President Biden is likely to learn from, I think.

First, President Obama's apparent strategy of trying to stay "presidential"—cool, calm, collected—came off to many viewers (or pundits, at a minimum) as boredom, disengagement, and condescension. Biden will want to avoid that, and he'll likely work hard to really connect with viewers. This is likely to be easier for Biden than it was for Obama for a few reasons. First, he's not the president—he's the VP. So he doesn't face the same challenge of maintaining his official "face." Second, he's got a reputation for being a friendly, warm guy, so he's likely to build off of that to connect with viewers in a meaningful way. Finally, it's worth noting that several media sites just prior to the Presidential debate had started hammering on President Obama as an "angry black man." President Obama had to be very careful not to seem like the caricature that some corners of the media had presented him to be, and he may have over-corrected here. VP Biden just doesn't face the same challenges.

Second, President Obama just didn't hit back aggressively against the new "Moderate Mitt" that showed up at the debate. He missed numerous opportunities to point out half-truths (or flat-out misstatements/lies) in Romney's statements, especially on issues like health care, Medicare, and taxes. It almost seems as though he was so taken aback by Romney's new persona that he wasn't quite sure how to respond. Biden is likely to have learned his lesson and prepped for this—he's likely to be deeply versed in policy details and ready to call Paul Ryan out on inconsistencies, untruths, half-truths, and the like.

12:45 Comment from Ben: The first presidential debate seemed to focus heavily on taxes, economy and health care. Are there other issues you think the VP candidates will focus on tomorrow?

12:49 Elisabeth Jacobs: I think the candidates are likely to focus on the issues you've mentioned in tomorrow's debate—taxes, the economy, health care—given how central they are in voters' minds. But I wouldn't be surprised to see Biden bring up foreign policy, given his historic strength in this area (and Ryan's relative weakness). I also would look for Biden to bring up women's issues —an area that was essentially absent from last week's presidential debate, but one that is quite strong for Democrats. Biden has a strong history here—he is the father of the Violence Against Women Act, for instance. And Ryan's extremism on women's health issues, including reproductive rights, is a galvanizing issue for Democrats. Given that the post-debate polls show Romney closing the gender gap amongst voters, I wouldn't be surprised to see Biden reminding women of all of the reasons why they were supporting the Democrats in such strong numbers prior to the debate. Finally, I'm sure that Ryan will hammer the deficit, given his strong history in tackling this issue.

12:49 Comment from Rosslyn: If you were Joe Biden, what would be your ultimate goal for tonight? Paul Ryan?

12:54 Elisabeth Jacobs: The most important thing both candidates can do is not screw up. It's really as simple as that. The only way that the VP debate is likely to *really* matter is if one of the two candidates makes a major gaffe.

Of course, both campaigns likely have substantive goals for the VP contenders. Biden is likely to work hard to communicate a clear message from the Administration, one that clarifies their economic vision and emphasizes shared prosperity and a bright future for the middle class. He's likely to work hard to illustrate the inconsistencies and half-truths peddled by his opponents, and to highlight how their agenda balances the economy on the back of the middle class and the poor in service of the wealthy. He's also likely to try hard to charm the "average Joe," and we'll almost certainly hear a story about a "little boy named Joey from Scranton, PA."

Ryan is likely to try to goad Biden into making one of his classic gaffes—everyone in America who has been paying attention for the last four years knows that Biden is prone to making Onion-worthy comments when he's speaking off-the cuff. But he's also likely to try to make a case for his party as the responsible party of efficient, small government. He's likely to paint the Administration as ineffective, and to downplay the recovery and magnify the nation's sustained economic challenges.

12:55 Comment from Craig: Everyone’s expecting Biden to make a big gaffe. Do you think he’ll embrace that perception and let his personality fly? Or will he try to tone it down and be more professional?

12:57 Elisabeth Jacobs: That's a great question—and it's hard to know! Joe Biden is a smart guy, and so is Paul Ryan. Biden's main task is to make clear that he's a serious man, and I think there are ways of having it both ways. He can be charming, and also smart. Kind of a like a respected but wise-cracking grandfather figure, maybe?

12:57 Comment from Guest: Polling shows recently that Obama is losing ground to Romney on the issue of Medicare. Do you think that will motivate Biden to hammer Ryan harder on his Medicare plan or skirt the issue?

1:02 Elisabeth Jacobs: Romney has attacked President Obama for cutting $700 billion from Medicare through cost-savings. Yet Ryan has embraced exactly this policy, and that position is well-documented and on-the-record. I think Biden is likely to hammer home this inconsistency in the Romney/Ryan playbook. He'll clarify that those cost-savings are simple efficiencies with bi-partisan consensus, and they won't impact seniors' access to health insurance or health care. And he'll point out that the Romney/Ryan plan to voucherize/privatize Medicare would take away guaranteed health insurance for the nation's seniors—anyone over 55, according to their campaign.

All of this is a long way of saying that I think Biden would be missing an opportunity if he didn't attack Ryan on Medicare. The Obama campaign has lots to gain based on the facts here.

1:02: Elisabeth Jacobs: Thanks so much for joining me today. I'll be live-tweeting tomorrow night's debate, and you can follow me on Twitter at @jacobselisabeth.

1:02 Vivyan Tran: Thanks for the questions everyone. See you next week.

What the Jobs Report Means for Romney and Obama

Elisabeth Jacobs — Fri, 05 Oct 2012 13:46:00 -0400

Today’s jobs report from the Bureau of Labor Statistics is full of encouraging news. Payrolls added 114,000 jobs, and unemployed fell to 7.8 percent. Unlike last month’s improvement in the unemployment rate, this month’s decline was due to more job seekers finding work, rather than more folks giving up and dropping out of the labor market entirely. And both the July and August jobs numbers were revised upwards significantly. In the third quarter of 2012, the economy added an average of 146,000 jobs per month. That’s a significant improvement over the second quarter of 2012, when monthly jobs growth averaged just 67,000 jobs per month.

The brightening labor market picture is encouraging news to many, especially the 12 million Americans who remain unemployed. It’s also encouraging news for Democrats, who have had a gloomy few days in the wake of President Obama’s weak performance in the first presidential debate against Governor Romney earlier this week. President Obama can now say that the unemployment rate is lower than it was during his first full month in office. One of Governor Romney’s favorite talking points – that unemployment has been over 8 percent for nearly four years under President Obama’s watch – is no longer valid.

Perhaps even more importantly, the positive jobs numbers are likely to truncate the positive news cycle that the Romney campaign was enjoying in the wake of Governor Romney’s aggressive debate performance. The Romney camp was badly in need of a positive swing in coverage. Indeed, the last month has been rough for both the candidate and the campaign, as a dull convention, repeated gaffes from the candidate, and reports of campaign disarray dominated the headlines. The polls in key swing states reflect deep problems for Governor Romney’s victory prospects. Yet the debate performance generated the first positive news cycle in weeks, and Romney’s prospects appeared to be on the rise. InTrade, the popular prediction market, showed Governor Romney’s likelihood of victory up by 29 percent in the morning following the debate. Today’s positive jobs numbers may shift the news cycle considerably, with attention quickly moving away from the debate and towards the bright signs for the economy. Trading on InTrade this morning hints at the implications of this move, as the Obama rally following the strong jobs report is substantially bigger than the debate-induced slump. (It’s worth noting that President Obama’s chances of victory have remained significantly above Governor Romney’s throughout the last few months; even after the debate, Obama was favored over Romney 65-35.)

More bad news for Governor Romney: the scholarly consensus is that debates just don’t matter much for election outcomes. Economic fundamentals do, and what matters most is that the economy is moving in the right direction. An improving economic landscape is good news for an incumbent. Unfortunately for President Obama, research suggests that voters’ impressions of the economic trajectory are essentially locked-in by April of the election year. This means that today’s positive jobs report is unlikely to be the knock-out blow that delivers Obama another four years in the White House. But it’s likely to reorient the media – and the messaging – of the campaign. Given the mood in the wake of the debate, that’s not a bad thing for Team Obama.

Authors

Elisabeth Jacobs

Image Source: © Mike Blake / Reuters

Is It Time to Reform Executive Compensation and Stock Option Grants?

Thu, 27 Sep 2012 10:00:00 -0400

Event Information

September 27, 2012
10:00 AM - 11:30 AM EDT

Saul/Zilkha Rooms
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

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In recent decades, executive compensation has increasingly shifted toward a model tied to stock option grants. As a result, many corporations fixate on short-term stock gains, harming the nation’s ability to innovate and build a long-term focused, sustainable economy. This trend in executive compensation raises the question of whether there are better ways to reward executives and make them more accountable to shareholders, stakeholders, and society.

On September 27, Governance Studies at Brookings hosted a forum on executive compensation practices and the links to economic vitality. A panel of experts discussed the changes in corporate pay since 1980 and how they have affected companies’ long-term viability, as well as possible solutions that would encourage executives to focus on long-term business goals and growth.

After the program, speakers took audience questions.

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Is It Time to Reform Executive Compensation and Stock Option Grants?

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The Effects of Racial Preferences in Higher Education on Student Outcomes

Fri, 21 Sep 2012 08:45:00 -0400

Event Information

September 21, 2012
8:45 AM - 1:45 PM EDT

Falk Auditorium
Brookings Institution
1775 Massachusetts Avenue NW
Washington, DC 20036

Next month, the U.S. Supreme Court will hear oral arguments in Fisher v. University of Texas, the first case the Court has taken up in a decade on the use of race in higher education admissions. The case has generated ninety-two amicus briefs, one of the highest totals for any Supreme Court case in history. The Court is expected to issue a ruling in the high-stakes case that restricts racial preferences more sharply than its 2003 rulings in Grutter v. Bollinger and Gratz v. Bollinger. As opposed to 2003, many of the arguments in the current affirmative action debate focus not on the competition between races for spots at an elite school, but on whether racial preferences actually benefit their recipients.

On September 21, the Governance Studies program at Brookings hosted a half-day conference examining new research on the actual effects of racial preferences upon students. Do racial preferences help more blacks and Hispanics become scientists and engineers, or do they push students away from STEM majors? Do they tend to increase or decrease minority graduation rates? How do they affect student learning? Did California’s ban on racial preferences in the 1990s change enrollments by black and Hispanic students or affect their grades and graduation rates?

After each panel, participants took audience questions.

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In the Wake of the Great Recession, Don’t Lose Sight of the Big Picture

Elisabeth Jacobs — Thu, 15 Mar 2012 14:59:00 -0400

While last week’s strong employment report brought welcome news about the nation’s uneven economic recovery, the American economy faces a set of broader challenges that may prove even more difficult to address.

Surveying a large body of economic data, this paper contends that many of today’s problems reflect accelerations of troublesome longer-term trends:

The country is burdened by high levels of economic inequality and insecurity that the Great Recession amplified, rather than caused.
Upward mobility, particularly for those at the bottom of the income distribution, continues to fall short as compared to other Western nations.

Finally, this paper addresses that all was not well in the pre-recession economy and the next administration faces the dual task of nurturing a fragile economic recovery and developing a strategy that restores economic prosperity for all Americans.

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Elisabeth Jacobs

Addressing Challenges Beyond Economic Growth

Elisabeth Jacobs — Wed, 07 Mar 2012 00:00:00 -0500

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Editor's Note: For Campaign 2012, Martin Baily wrote a policy brief proposing ideas for the next president on stimulating America’s economic growth. The following paper is a response to Baily’s piece by Elisabeth Jacobs. Karen Dynan also prepared a response arguing that the housing finance system must be reformed in order to introduce greater certainty into the market.

No reasonable analyst will dispute Martin Baily’s insistence on the necessity of restoring economic growth. But the American economy faces a set of broader, longer-term economic challenges that growth alone will not solve. The country is burdened by high levels of economic inequality and insecurity, which the Great Recession certainly amplified but which it did not cause. Upward mobility, particularly for those at the bottom of the income distribution, continues to fall short as compared to other Western nations. The next administration thus faces the task not only of nurturing a fragile economic recovery, but also of developing a strategy that restores economic prosperity for all Americans.

As Baily says, the near-term problem facing the economy remains weak consumer demand. The ratio of job seekers to job openings remains greater than 4 to 1, more than twice its level in the first month of the Great Recession. In simple terms, there are far more unemployed workers than there are available jobs in today’s economy. Job losses during the Great Recession were so deep that we will need a historically high pace of job growth to return the labor market to its pre-recession levels of employment.

Yet, all was not well in the pre-recession economy.

The period between the end of World War II and the early 1970s was one of broad prosperity, where rapid economic growth translated into broadly shared prosperity. Up and down the income ladder, Americans’ incomes roughly doubled between the late 1940s and the early 1970s. By contrast, the period from the 1970s through the present is characterized by slower economic growth and wildly disparate levels of growth across the income distribution. Income growth for households on the middle and lower rungs of the ladder has slowed sharply, while incomes at the top have continued to soar.

The slow growth of the average American family’s income is a central piece of the decades-long story of rising economic inequality. Women’s increased labor-force participation explains nearly all of the growth in married couples’ family income since the 1970s. Median household income actually fell in the 2000s. Men’s earnings have stagnated (or, according to one widely-cited analysis, declined), while male employment rates have dropped sharply. The result is a highly polarized economy, and a shrinking middle class.

The Great Recession did not create these basic facts, which threaten myriad pernicious impacts. Persistent inequality may hinder a return to economic growth, as stagnant wages for the majority will mean that the bulk of Americans are simply unable to consume at the level that the economy depends on for growth. One study suggests that inequality may have been a driving force behind the financial crisis that precipitated the Great Recession. Others have argued that high levels of economic inequality have the potential to unravel the fabric of democracy by depressing voter turnout and civic engagement and eroding trust in government. And inequality may make upward mobility—the essence of the American Dream—unattainable for many.

America is built on the idea that anyone – regardless of family background – can work hard and succeed beyond one’s parents’ wildest dreams. Yet, research surveying economic mobility over the last several decades suggests that there are reasons to question whether there are serious cracks in the American Dream.

Some studies of intergenerational mobility ask whether those whose parents were at the top (or bottom) of the income distribution relative to America as a whole remain in the same place in adulthood. These studies consistently find that the United States is far more class-bound than our national narrative asserts. In a perfectly mobile America, a child born into a household in the bottom fifth of the income distribution would be no more likely to end up as an adult in the bottom fifth of the income distribution than would be a child born into the top fifth of the income distribution. But, Brookings economist Julia Isaacs points out that about 40 percent of children raised in the bottom of the distribution are unable to escape the bottom. And others have argued that the same holds for a variety of other measures of mobility, including family wealth. America today is not an “equal opportunity” society. Indeed, one study found that Denmark, Finland, Sweden and the United Kingdom all perform better in terms of relative intergenerational mobility than does the United States.

These troubles with economic mobility in America pre-date the Great Recession and raise thorny economic issues requiring the attention of the next administration.

The Great Recession has created enormous economic insecurity for today’s families. Yet economic insecurity in the United States, too, has been slowly rising for decades. A growing body of research tracking the fortunes of Americans over time – relying on repeated looks at the same set of families, rather than simply point-in-time snapshots – suggests that the risk of a substantial short-term loss of income has been on the rise since the 1970s. Much of this rise occurred in the period between the 1970s and the 1990s. Recessions certainly increase the risk of short-term losses. But, the research suggests an underlying structural change as well, as each successive recession has driven the likelihood of severe income losses ever higher. The most recent recession has simply accelerated a preexisting trend.

The resonance of the Occupy Wall Street protest movement’s message of “We Are the 99 Percent” suggests that the issues outlined above resonate with the American public. President Obama’s widely cited Osawatomie, Kansas speech spoke directly to these issues of economic inequality, insecurity and opportunity, as did his 2012 State of the Union address’s repeated use of the “fairness” meme. Republican presidential candidate Rick Santorum routinely cites data on the problems with upward mobility in America, and Republican frontrunner Mitt Romney has grappled with how to campaign as a “regular guy,” despite having grown up wealthy and made millions in his own right. Issues of economic justice that reach well beyond the question of how to restore economic growth have already begun to define the 2012 campaign. The pressing question is how to restore economic growth that benefits all Americans while at the same time promoting economic security and economic opportunity. Whichever candidate prevails in November would do well to face these challenges head-on.

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Elisabeth Jacobs

Campaign 2012: Strategies for Economic Growth

Wed, 07 Mar 2012 10:00:00 -0500

Event Information

March 7, 2012
10:00 AM - 11:30 AM EST

Falk Auditorium
The Brookings Institution
1775 Massachusetts Ave., NW
Washington, DC

Follow @BICampaign2012

As the United States continues its slow recovery from a deep recession and many Americans struggle to find jobs, the economy is at the forefront of voters’ minds heading into the 2012 election. Given the continued policy gridlock in Congress, economic growth is arguably the most urgent policy challenge facing the next president. But the policy prescriptions are complex, requiring strategies to address the shrinking middle class, reduced consumer demand, the housing market, the national deficit and America’s role in the global economy.

On March 7, the Campaign 2012 project at Brookings held a discussion of America’s economic growth, the third in a series of forums that will identify and address the 12 most critical issues facing the next president. Ben White of POLITICO moderated a panel discussion with Brookings experts Martin Baily, Karen Dynan and Elisabeth Jacobs, who presented recommendations to the next president.

After the program, panelists took questions from the audience.

You can follow the conversation on this event on Twitter using the hashtag #BIEconomy or on our @BICampaign2012 Twitter feed.

Download papers from the event:

Restoring Economic Growth, by Martin Neil Baily
Addressing the Problems in the U.S. Housing Market, by Karen Dynan
Addressing Challenges Beyond Economic Growth, by Elisabeth Jacobs

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@ Brookings Podcast: Why German Labor Policies Fare Better than America's

Elisabeth Jacobs — Fri, 03 Feb 2012 13:39:00 -0500

German workers have weathered the global financial crisis better than their counterparts in the U.S., with much lower unemployment and a stronger economy. Despite being called “the sick man of Europe” in the 1980s, Germany's long-term labor policies and investments in skilled workers have paid off in recent years, says expert Elisabeth Jacobs.

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State of the Union 2012: Politics and Policy

Wed, 25 Jan 2012 10:30:00 -0500

Event Information

January 25, 2012
10:30 AM - 12:30 PM EST

Falk Auditorium
The Brookings Institution
1775 Massachusetts Ave., NW
Washington, DC

On January 25 – the day after President Obama delivered his State of the Union address before a polarized Congress – Brookings hosted a discussion exploring how the president’s speech could impact critical policy challenges facing the nation during this contentious presidential election year. The first panel, moderated by Senior Fellow Thomas Mann, examined a range of domestic and global issues; participants included Karen Dynan, Martin Indyk, Eswar Prasad and Robert Puentes.

The panelists agreed the president's speech focused on domestic economic policy, and specifically on proposals to spur sustainable economic growth. Karen Dynan said the speech offered a laundry list of policy options, but that it lacked a clear narrative on how to "address our labor market problems in the short term and our budget deficit in the long term."

Thomas Mann noted the political challenges of deficit reduction. "Leading with his chin on a broad plan for deficit reduction in the face of Republican tax proposals that would dramatically cut taxes would set him up politically to lose the election," Mann said.

To achieve the president’s goals on exports, manufacturing, infrastructure and energy, Robert Puentes cited the need to harness energy at the state and metropolitan levels. "We need to go to the heart of the American economy—the states and metros—to capture their innovation and momentum," said Puentes.

Addressing global economic and trade issues, Eswar Prasad said the president’s speech made very clear the U.S. will not tolerate unfair competition from other countries, with China being the primary competitor. "It’s going to be important to be very tough on China," said Prasad.

Martin Indyk said President Obama was tough and clear on Iran, but that the United States is in a very tense and dangerous period. "In an extreme scenario, the president could well order a military strike," Indyk said. "In order to try to prevent that from happening, the president is focused on trying to get the international community behind these very strong, crippling sanctions."

During the second panel, William Galston, Elisabeth Jacobs and Pietro Nivola put the speech into the context of the 2012 election and examined how growing mistrust of government may shape the presidential campaign.

"The President eloquently invoked the ideology of fairness, solidarity, collective action and common purpose," said William Galston. "But given the pervasive mistrust of government today, it’s unclear what will happen when these themes run up against the individualist and libertarian values espoused by many independent voters."

This event was live tweeted using the hashtag #BISOTU.

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The American Workforce and Growth through Innovation

Alan Berube, Gary Burtless, William A. Galston, Elisabeth Jacobs and Adam Looney — Tue, 17 Jan 2012 10:13:00 -0500

While unemployment in the United States is declining slowly, millions of Americans still lack jobs and policymakers at the national, state and metro levels are working to find ways to increase job creation and employment. In papers written for the January 13 "Fostering Growth through Innovation" event, William Galston, Gary Burtless, Adam Looney, Alan Berube and Elisabeth Jacobs—examining the persistent problem of unemployment from a range of perspectives—agree that the United States must address the growing mismatch between the skills the marketplace demands and the skills the existing workforce currently has.

The Polarization of the U.S. Employment Market
William Galston, Senior Fellow, Governance Studies

Pervasive changes in the structure of the U.S. economy have combined with epochal shifts in the global economy to put pressure on the model of success that has guided the United States since the end of World War II, and American workers have been hit hard.

MIT economist David Autor has traced what he terms the “polarization” of the U.S. employment market. Principally in response to the rapid development of low-cost information technology, both ends of the employment spectrum—high-skill, well-compensated managerial, professional, and technical occupations and low-skill service occupations—have expanded, while medium-skill jobs have declined as a share of the total. The mechanism is straightforward: information technology makes it possible to replace workers performing many routine tasks, whether in the office or on the factory floor, with computerized systems directed by fewer, higher-skilled workers. Two sorts of jobs are exempt from this logic: personal services involving face to face relations between human beings (think aides in nursing homes), and tasks requiring creativity and problem-solving abilities.

International trade and offshoring, Autor shows, are the other great drivers of workforce polarization. “Many of the tasks that are ‘routine’ from an automation perspective are also relatively easy to package as discrete activities that can be accomplished at a distant location by comparatively low-skilled workers for much lower wages,” he says. In short, the combination of information technology and globalization makes it possible either to move routine tasks out of the United States or to eliminate them altogether. And the declining domestic demand for these mid-range jobs means that workers who remain in such occupations are likely to experience a continuing squeeze in compensation.

Although political dysfunction is not the source of these adverse pressures on the U.S. workforce—which millions of Americans feel directly—it largely explains why we have done so little to counter them, much less the many more indirectly perceived trends weakening the American economy. Two linked but distinct political developments are key—the growing polarization between the political parties and the diminished capacity of Congress to address difficult issues.

Read William Galston's paper »

The Employment Skills Mismatch
Alan Berube, Senior Fellow and Research Director, Metropolitan Policy Program

At the metropolitan level, workers’ educational levels relative to the demand for education among area occupations mattered for unemployment during the recession. Comparing the average level of educational attainment among a metro area’s working-age adults to the average level of education possessed nationwide by workers in the metro area’s occupations, one study shows that, from 2005 to 2011, metro areas with larger-than-average gaps between education demand and supply had unemployment rates 1.4 percentage points higher than other metro areas. This was similar to average unemployment rate differences over the same period between metro areas with more versus less resilient industries.

Where might an under-supply of skilled workers be a problem? The map below shows four types of metro areas that either face particular challenges around workforce skills, industry demand, both or neither. The two types of areas exhibiting education gaps include places like Philadelphia, Little Rock, and San Antonio. They escaped the worst of the recession’s effects because of concentrations in relatively stable industries, but may face obstacles to reducing unemployment today because employers’ demand for educated workers may outstrip the local supply. By contrast, places like Augusta, Baton Rouge, Los Angeles and Memphis appear to face a double-whammy–hard-hit industries and a relative lack of educated workers—as they try to reduce unemployment.

These figures do not necessarily contradict the above evidence that skills mismatch explains relatively little of the short-run problems facing the U.S. labor market. In fact, most of what these metropolitan figures may capture is longer-running gaps between worker education and employer demand that contributed to higher-than-average rates of unemployment even before the recession. Overall, a metro area’s education gap explains about half the variation in its average unemployment rate from 2005 to 2010, but just 20 percent of the unemployment increase it experienced from 2007 to 2009.

In this way, the Great Recession shone a bright light on a longer-running issue confronting many major metropolitan labor markets: the need to continuously upgrade the education and skills of the workforce to ensure broadly shared labor market prosperity.

Read Alan Berube's paper »

Educational Achievement and Employment
Gary Burtless, Senior Fellow, Economic Studies
Adam Looney, Policy Director, The Hamilton Project, and Senior Fellow, Economic Studies

As a result of the continuing shortfall in aggregate demand, joblessness is falling at an unacceptably slow pace from an unacceptably high level. The unemployment rate has exceeded 8% for the past 34 months, a record span in the post-war era. It may not dip below that high level anytime soon. The anemic pace of American job creation means that laid off workers face unprecedented problems finding work. The sharp drop in employment represents a vast waste of human potential. Experience from past recessions suggests that the career interruptions suffered by jobless workers can reduce their potential earnings for a decade or more.

But even before the high rates of unemployment and falling household incomes brought on by the Great Recession, many Americans were struggling in the labor market. In 2007, before the recession began, the median male worker had not seen a noticeable improvement in real wages for more than a generation. Because of stagnant wages among men who work and rising rates of male joblessness, the median 25-to-64-year-old male now earns roughly one-quarter less than his counterpart in 1969. The anemic improvement in median earnings has dramatically slowed the improvement in middle class living standards compared with the early post-war period era.

The challenges workers face over the longer-term have many causes. One of these is technological change, which has allowed machines and computers to take on a growing role in routine production and clerical tasks. Other factors include globalization, which expand the effective worldwide supply of labor that competes with low- and middle-skill U.S. workers. Crucial labor market institutions, such as unions and the minimum wage, have weakened and now provide less protection to workers who have modest skills. A common characteristic of these developments is that they have made the role of skills and education more important in the determination of an individual worker’s wages and employment opportunities.

The evidence suggests that skills and education are increasingly important is reflected in a wide variety of labor market indicators. Workers with the lowest levels of formal schooling have experienced the largest declines in employment and earnings over the past few decades. In the early 1960s the average hourly wage of college graduates was approximately 1.4 times the hourly wage of high school graduates. New evidence on the rising polarization of job opportunities suggests that the growth prospects of different kinds of jobs are diverging, based on job-specific tasks as well as the level of overall skill required to obtain the job. In recent years, advances in information technology and communications methods have significantly increased the demand for the cognitive, decision-making, and interpersonal skills of managers and professionals who are adept at performing abstract, non-routine tasks. The same technical advances have reduced the relative demand for routine clerical, analytical, and mechanical tasks that can now be performed more cheaply with the assistance of machines, such as personal computers, or by poorly paid workers outside the United States.

Technical advance has been less successful in reducing the need for people who perform some of the economy’s least-well paid tasks, many of which require the on-the-spot presence of a manual worker. A variety of low-skill, low-pay, service sector occupations fit this description—health aides, security guards, hospital orderlies, cleaners, and fast food servers. The result has been a long-term rise in the relative demand for very highly skilled workers who can perform abstract, non-routine tasks, comparative stability in the demand for workers with the lowest skills, and a decline in the relative demand for workers with a middle range of skills.

Read Gary Burtless and Adam Looney's paper »

The German Labor Market
Elisabeth Jacobs, Fellow, Economic Studies

In short and simple terms: Germany had effective labor market strategies for weathering the Great Recession because of the incentive structures created by its political economy, which encourages long-view strategic thinking and investments by employers, and the resultant strong and diverse coalition of support for active government labor market policies. The United States does precisely the opposite, encouraging short-view thinking and offering little or fragmented support for active labor market policy.

The “old” German model—highly inflexible labor markets and highly generous social insurance and social welfare policies—was responsible for decades of sclerosis in both the German economy and the German labor market. Yet the American model—extremely flexible labor markets and relatively stingy social insurance and social welfare policies—is arguably responsible for the devastating impact of the economic contraction on the U.S. labor market. Moreover, the American system has generated a highly polarized workforce and remarkably high levels of earnings and income inequality over the last several decades. Based on Germany’s recent economic success in the aftermath of a set of sweeping reforms, it is worth considering whether the Germans have hit upon a “sweet spot” along the continuum of labor flexibility/inflexibility, as well as along the continuum between economic security and promoting opportunity. If this is indeed the case, the question then becomes how to best incentivize this behavior in the United States.

Read Elisabeth Jacobs' paper »