Matt Yglesias

Obama Administration Endorses Paid Sick Leave

It’s not quite the high-profile issue that health care or climate change is, but there’s been some interesting developments recently on the quest to get paid sick leave for all of America’s workers. The fact that many American workers get no sick leave whatsoever is rarely discussed in elite circles, most likely because, as Steven Greenhouse has highlighted with this chart, the phenomenon is quite class bound:

Advocates for changing the situation have made headway in terms of linking the issue to fears about the spread of H1N1 flu. Does it really serve even the interests of prosperous professionals to live in a country where low-wage food service workers, for example, are likely to show up at work while sick and infect everyone else? This was discussed at a recent CAP panel featuring, among others, Vice President Joe Biden and Domestic Policy Council chief Melody Barnes where they seemed generally supportive. But things took another important step forward today in the somewhat obscure venue of the Senate HELP Committee’s Subcommittee on Children and Families where Seth Harris, Deputy Secretary from the Labor Department, came to offer a strong statement of support for paid sick leave:

In conclusion, it is clear that while much has been done to help prepare for a national health emergency like 2009 H1N1, more is needed to help protect the economic security of working families who must choose between a pay check and their health and the health of their families. That is why the Administration supports the Healthy Families Act and other proposals that advance workplace flexibility and protect the income and security of workers. I appreciate your time today, and I am happy to answer any questions you may have.

It’s worth observing that this bill would, among other things, be a specific boon to parents since it would allow you to take sick leave in order to take care of a sick child. You’d think that might be the kind of thing “pro-family” conservatives would be interested in along with us godless socialists.

Graduating During a Recession Has Big, Long-Lasting Negative Consequences

Over the summer, there was a tendency for rising senior interns to ask me if I had any advice for someone set to be graduating into the face of a horrible recession. Unfortunately, the best advice I can think of is “hope the United States rapidly becomes more committed to equality and social justice” because the empirical evidence is that you’re screwed. Peter Orszag at the OMB Blog reminds us:

The chart below illustrates this effect: a one percentage point increase in the national unemployment rate is associated with a 6 to 7 percent loss in initial wages. The annual wage loss declines over time, but is still statistically significant 15 years later. Comparing the wages earned by the class of 1982 (a peak unemployment year) with the wages of the class of 1988 (a peak employment year) over the first 20 years of a career, the wage difference resulted in a difference of nearly $100,000 in cumulative earnings in net present value.

The long-term effect isn’t just a residual of low first-year wages: the author suggests that poor job match, lower prestige placements, and fewer opportunities for training and promotion also play a role. Other researchers have found similar effects: Oreopolous et al find persistent wage effects for Canadian college graduates; Bowlus and Liu find persistent wage effects for high school graduates moving directly into the work force, and other studies assess how the macroeconomy affects impact newly minted MBAs and economics PhDs.

Fifteen years later! If you’re graduating from college this spring, you’ll be sitting around at the age of thirty-five still suffering from the fact that Susan Collins, Olympia Snowe, Ben Nelson, and Kent Conrad decided to make the stimulus bill stingier in order to better bolster their credentials as preening centrists. When thinking about short-term inflation-unemployment tradeoffs, this sort of thing is crucial to keep in mind. Inflicting a high unemployment rate on the population has incredibly punitive and deleterious long-run consequences for young people.

The Long-Term Unemployed

Alan Berube offers this look at long-term unemployment:

While national data don’t reveal exactly where those 5 million workers live, recently released data from the Census Bureau offer a window on the labor markets that were already highly troubled in 2008, which almost certainly contain outsized shares of the long-run unemployed today. This map examines two measures for the 100 largest metro areas in the United States in 2008: unemployment (the share of adults not employed and actively looking for work), and labor force participation (the share of adults employed OR actively looking for work). It restricts these measures to working-age adults (age 25 to 64) who have a high school diploma or less, the educational group most severely impacted by the downturn. Where unemployment rates were already high in 2008, or labor force participation rates were low (signaling dropouts from the labor market), problems are likely to be even greater in 2009.

It seems very unlikely that any more than a tiny fragment of the unemployed in these areas have obtained a job in 2009, so these are going to be loci of very long-term unemployed people. And evidence suggests that there are specific challenges associated with getting people back into the labor market who’ve been out for a long time. If someone gets laid off in a brief downturn, then when an upswing comes firms will want to hire people and he’ll go to work. But people who stay out of employment for long enough tend to be very resistant to getting back in after a certain point in a way that can be a drag on the economy and the social fabric as a whole for quite a while.

The Rise and Fall of the Secretary

Job Voyager is a cool tool that lets you see the share of the American workforce that’s been in different job categories over time. Behold the rise and fall of the secretary:

Voicemail, email, cell phones, smart phones, and laptops are rapidly making this occupational category obsolete. Also interesting to note that as of Mad Men’s 1963 we still hadn’t arrived at Peak Secretary occurred in the 1970 Census and secretaries were a larger proportion of the population in 1990 than they had been in 1950.

Unemployment Insurance and Employment

Apparently Michelle Malkin went on This Week and, in the course of arguing against an extension of Unemployment Insurance benefits said that Larry Katz believes such an extension would increase unemployment. Turns out that Katz believes no such thing.

Of course it’s hard to deny that, in isolation, the availability of unemployment benefits has some disemployment effect. I know of at least one person who decided to take advantage of severance money, pre-existing savings, and U to finish his novel rather than try to locate the not-so-appealing positions available in the depths of a recession. But this is primarily relevant when unemployment is low. If you get laid off when the economy is near to full employment, the available of UI money lets you act a bit less desperate and gives you more chance to seek out different job possibilities. That probably increases frictional unemployment somewhat but it seems like a price worth paying.

Amidst mass unemployment things probably look different. The first impact of cutting off UI payments would be that recipients will have have to scrimp even more on their purchases. You’d get a rise in home foreclosures and loan defaults, a decline in consumer spending, and a new wave of layoffs. You would also, yes, somewhat hasten the pace at which people become willing to accept jobs at market-clearing (i.e., low) wages but completely aside from the human suffering involved in this process in the first instance you’d be increasing the number of unemployed people. Most of all, as long as the total level of employment is shrinking there’s only so much impact worker-side desperation could possibly have on the economy. At the moment, we’re really still in a situation where we should be all about avoiding tipping points that push us toward a truly bleak macroeconomic picture, and Unemployment Insurance and other safety net measures are an important part of that.

Tyler Cowen’s European Vacation

Discussing the contrasting vacation models of the United States (little vacation) and Europe (lots of vacation), Tyler Cowen sees a tight link to family size with the European approach fitting well with smaller families. Maybe so, but I have some doubts that there’s an actual causal relationship here. There’s quite a lot of variation between OECD countries in terms of paid leave policies. This is the mandatory number of paid vacation days in different countries (the United States is zero):

Leading the pack are Finland, France, Norway, and Sweden all of whom have birth rates that exceed the European Union average. In general, if you compare the United States to Europe you see a more statist economic model on the other side of the Atlantic going with lower birthrates. But if you look within Europe you see more statist economic models going along side the higher birthrates in France and northern Europe, while the relative-less-statist economies of southern and eastern Europe are associated with very low birthrates.

Personally, I’m more a fan of policies to introduce paid family leave than to mandate paid vacations (as I’ve said before, there’s really no such thing as a paid vacation).

US Unemployment Benefits in International Context

Gary Burtless has an interesting paper reviewing the social safety net measures in the American Recovery and Reinvestment Act. If you read the paper you’ll see that even though these elements of ARRA have gotten less discussion than the state aid and infrastructure elements, boosts in safety net spending are actually the largest segment of ARRA spending. For blogging purposes, though, I really just wanted to reproduce this chart showing how relatively stingy unemployment benefits are in the United States:

In addition to being relatively stingy, unemployment insurance in many ways fails to protect people from the most salient economic risks. Older workers tend to earn more money than younger workers, in part because over the years they’ve acquired sector- and firm-specific skills that their younger colleagues lack. When they get laid off, however, these skills become devalued and even when recovery comes it’s often difficult to get a new job that’s as remunerative as the old one. This, in turn, encourages the political system to focus a lot of preservation of the status quo which winds up reducing long-run growth potential. Gene Sperling’s idea of comprehensive wage insurance would help solve this issue and do a lot of good.

Providing Paid Family Leave Through Social Security

I’ve done a couple of posts recently on the United States’ anomalous lack of a national system of paid parental leave. And as it happens, today CAP senior economist Heather Boushey has released a paper about creating a national system of paid family and medical leave, a slightly broader concept than parental leave. Of course you could try to do this by simply mandating that employers offer paid leave to their employees. But a proposal along those lines would generate substantial opposition and almost certainly get watered down with various kinds of exemptions for small employers and would likely do little for part timers, contract employees, the self-employed, etc. Boushey’s idea is to mandate the “leave” (as with the current Family and Medical Leave Act) but to finance the “paid” part through the Social Security system which already makes structurally similar payments via its disability provisions.

Watch her discuss the idea:

This is good stuff. Right now the health and energy debates are sucking up the oxygen on the Hill, but it’s necessary for folks to start talking about and building support for and understanding of further social policy innovations. The hope, after all, is to keep progressive policy flowing in 2010, 2011, and beyond.

Paid Parental Leave

Reader T.H. said this chart of paid parental leave in different countries is inaccurate, and sends this more up-to-date chart, based on Sakiko Tanaka’s 2005 article “Parental leave and child health across OECD countries” ([p F7-F28] Economic Journal Volume 115 Issue 501):

The baseline point, however, remains the same. It’s standard for countries to offer a certain amount of mandatory paid parental leave as a recognition of the special role parents play in our society (in effect, this measure lowers everyone’s wages slightly and then provides a benefit only to parents, thus enacting a small transfer of resources from non-parents to parents). In the United States, everything must surrender beneath the all-powerful God of flexible labor markets, and “pro-family” conservatives seem fine with that.

Paid Parental Leave for Federal Workers

The House is scheduled to vote today on H.R. 626, the Federal Employees Paid Parental Leave Act of 2009. The bill would provide four weeks of paid parental leave to federal employees. A similar bill passed the House last year, so passage is all-but-guaranteed. Jim Webb, who’s sponsoring the Senate version of the bill, has a fact sheet out that’s useful. When the bill moved through committee, The Washington Post covered conservatives objections, whereby basically the right doesn’t think it’s worth devoting any resources whatsoever into improving working conditions for federal employees. That makes sense if you put zero value on the ability of federal agencies to do perform their functions effectively, but not so much for the rest of us.

A larger issue, of course, is the general lack of paid parental leave in the United States. In most developed countries some form of paid leave is mandatory:

This is basically a recognition on the part of everyone from Japan to Norway to Canada that having a child isn’t just a random consumption choice that we should leave entirely up to the free market. Parents have a special social role to play, and it’s important to all of us to put them in a position to play it well. You might think that family values loving conservatives would see this as perhaps a bigger problem than whether or not gay couples in New Hampshire can get married.

Here’s some earlier CAP work on paid leave in California and family policy (including paid leave) in the UK.