Scholarly Publications

Economics of Means-Tested Transfer Programs in the United States, Volume I, Robert A. Moffitt, ed. Chicago: University of Chicago Press. 2016.

Abstract

The Earned Income Tax Credit is a federal refundable tax credit designed to encourage work, offset federal payroll and income taxes, and raise living standards for low- and middle-income working families. Introduced in 1975, the EITC has grown to be one of the largest and least controversial elements of the U.S. welfare state, with 26.7 million recipients sharing $63 billion in total federal EITC expenditures in 2013.

Journal of Labor Economics, 34(3):663-704. April 2016.

Abstract

We provide the first estimates of the effects of minimum wages on employment flows in the US labor market, identifying the impact by using policy discontinuities at state borders. We find that minimum wages have a sizable negative effect on employment flows but not on stocks. Separations and accessions fall among affected workers, especially those with low tenure. We do not find changes in the duration of nonemployment for separations or hires. This evidence is consistent with search models with endogenous separations.

Journal of Economic Perspectives 30(3):85-108. Summer 2016.

Abstract

Economists often use test scores to measure a student’s performance or an adult’s human capital. These scores reflect nontrivial decisions about how to measure and scale student achievement, with important implications for secondary analyses. For example, the scores computed in several major testing regimes, including the National Assessment of Educational Progress (NAEP), depend not only on the examinees’ responses to test items, but also on their background characteristics, including race and gender. As a consequence, if a black and white student respond identically to questions on the NAEP assessment, the reported ability for the black student will be lower than for the white student—reflecting the lower average performance of black students. This can bias many secondary analyses. Other assessments use different measurement models. This paper aims to familiarize applied economists with the construction and properties of common cognitive score measures and the implications for research using these measures.

Forthcoming

Abstract

In this paper, we review the most prominent provision of the federal income tax code that targets low-income tax filers, the Earned Income Tax Credit (EITC), as well as the structurally similar Child Tax Credit (CTC). We frame the paper around what we see as the programs’ goals: distributional, promoting work, and limiting administrative and compliance costs. We review what is known about program impacts and distributional consequences under current law, drawing on simulations from the Tax Policy Center. We conclude that the EITC is quite successful in meeting its three goals. In contrast, most of the benefits of the CTC go to higher income households. In addition to analyzing current law, we assess possible reforms that would reach groups – for the EITC, those without children; for the CTC, those with very low earnings – who are largely missed under current policy.

Journal of Labor Economics 34 (S1, pt. 2):S445-S475. January 2016.

Abstract

Social Security Disability Insurance (SSDI) awards rise during recessions. If marginal applicants are able to work but unable to find jobs, countercyclical Unemployment Insurance (UI) benefit extensions may reduce SSDI uptake. Exploiting UI extensions in the Great Recession as a source of variation, we find no indication that expiration of UI benefits causes SSDI applications and can rule out effects of meaningful magnitude. A supplementary analysis finds little overlap between the two programs’ recipient populations: only 28% of SSDI awardees had any labor force attachment in the prior calendar year, and of those, only 4% received UI.

Industrial Relations: A Journal of Economy and Society, 54(4):622–647. October 2015.

Abstract

We exploit more than 20 years of changes in state-level tipped wage policy and estimate earnings and employment effects of the tipped wage using county-level panel data on full-service restaurants (FSR). We extend earlier work by Dube, Lester, and Reich (2010) and compare outcomes between contiguous counties that straddle a state border. We find a 10-percent increase in the tipped wage increases earnings in FSRs about 0.4 percent. Employment elasticities are sensitive to the inclusion of controls for unobserved spatial heterogeneity. In our preferred models, we find small, insignificant effects of the tipped wage on FSR employment.

American Economic Review: Papers & Proceedings, 105(5):171-176. May 2015.

Abstract

Unemployment Insurance benefit durations were extended during the Great Recession, reaching 99 weeks for most recipients. The extensions were rolled back and eventually terminated by the end of 2013. Using matched CPS data from 2008-2014, we estimate the effect of extended benefits on unemployment exits separately during the earlier period of benefit expansion and the later period of rollback. In both periods, we find little or no effect on job-finding but a reduction in labor force exits due to benefit availability. We estimate that the rollbacks reduced the labor force participation rate by about 0.1 percentage point in early 2014.

American Economic Review 105(1):100-130. January 2015.

Abstract

Teacher contracts that condition pay and retention on demonstrated performance can improve selection into and out of teaching. I study alternative contracts in a simulated teacher labor market that incorporates dynamic self-selection and Bayesian learning. Bonus policies create only modest incentives and thus have small effects on selection. Reductions in tenure rates can have larger effects, but must be accompanied by substantial salary increases; elimination of tenure confers little additional benefit unless firing rates are extremely high. Benefits of both bonus and tenure policies exceed costs, though optimal policies are sensitive to labor market parameters about which little is known.

Industrial Relations: A Journal of Economy and Society, 54(4):538-546. October 2015.

Abstract

I provide here a historical overview of the impact of minimum wage legislation, enacted over 75 years ago in the Fair Labor Standards Act (FLSA) of 1938 and as amended subsequently on numerous occasions.

Given elected officials’ caution today about raising the minimum wage in bad economic times, the timing of the passage of the FLSA is remarkable. After a long and heated political debate, Congress passed the FLSA in 1938, establishing a nationwide minimum wage of $0.25 per hour, with increases to $0.30 in 1939 and to $0.40 in 1945. Importantly, the federal minimum wage established a floor, not a ceiling. States and localities could enact higher minimum wages—although none did until the 1980s.

Reich, Michael. “The Effects of Minimum Wages on the Economy and on Inequality.” In conference volume, Wage Policies for a Better Future: Minimum Wage Regimes and Income-Led Growth in Comparative

Monthly Labor Review, US Bureau of Labor Statistics. September 2014.

Abstract

A study using Current Population Survey data shows that, from 1996 to 2012, elementary, middle, and high school teachers earned less than other college graduates, but the gap was smaller for public school teachers and smaller still if they had union representation; moreover, the mitigating effects are stronger for female than male teachers, so the within-gender pay gaps are much larger for male teachers.

Journal of Economic Issues, 48(2). June 2014.

In When Mandates Work, Michael Reich, Ken Jacobs, and Miranda Dietz, eds. University of California Press. January 2014.

Abstract

Most of the first wave of living wage ordinances that were enacted in the mid-1990s involved minimum pay scales that were substantially above federal and state minimum wages. Typically they set a standard of $8.00 or more per hour when the minimum wage was $5.15. Policy makers gen- erally assumed that a living wage policy could not work in trade-based goods- or service-producing sectors that were subject to the forces of tech- nological change and global competition. Consequently, living wage ordi- nances typically covered only workers on municipal service contracts, or only about 3 percent to 5 percent of the low-wage workers in a city. The implementation of these ordinances often involved granting numerous waivers and exemptions, further reducing their impact. Consequently, the first ordinances were thought to have small spillover impacts on the local low-wage labor market (Freeman 2005).

In When Mandates Work, Michael Reich, Ken Jacobs, and Miranda Dietz, eds. University of California Press. January 2014.

Abstract

Beginning in the late 1990s, the City of San Francisco enacted a notable series of laws designed to improve pay and benefits, expand health care access, and extend paid sick leave for low-wage San Francisco residents and workers. Remarkably, and despite many warnings about dire negative effects, these new policies raised living standards significantly for tens of thousands of people, and without creating any negative effects on employment. While modest by most European and Canadian standards, San Francisco’s policies represent a bold experiment in American labor market policies that provides important lessons for the rest of the United States.

In When Mandates Work, Michael Reich, Ken Jacobs, and Miranda Dietz, eds. University of California Press. January 2014.

Abstract

In November 2003 San Francisco voters passed a ballot proposition to enact a minimum wage covering all employers in the city. The new standard set a minimum wage at $8.50 per hour—over 26 percent above the then-current California minimum wage of $6.75—and an annual adjustment for cost of living increases (reaching $10.55 in 2013). This standard, which first became effective in late February 2004, constituted the highest minimum wage in the United States and the first implemented universal municipal minimum wage in a major city. In a prospective study of this policy, Reich and Laitinen (2003) estimated that about 54,000 workers, amounting to 10.6 percent of the city’s workforce, would receive wage increases, either directly or indirectly, if such a policy were adopted and that the increased wage costs on average would amount to about 1 percent of business operating costs.

In When Mandates Work, Michael Reich, Ken Jacobs, and Miranda Dietz, eds. University of California Press. January 2014.

Abstract

As a result of the policies discussed in this book, tens of thousands of low-wage workers in San Francisco receive higher pay. They are not as compelled to come to work when they are sick, and they are more able to take care of their loved ones when they are sick. An even larger number of workers have greater access to health care services. They no longer face discrimination in benefits based on their sexual orientation.

When Mandates Work, Michael Reich, Ken Jacobs, and Miranda Dietz, eds. University of California Press. January 2014.

Abstract

Starting in the 1990s, San Francisco launched a series of bold but relatively unknown public policy experiments to improve wages and benefits for thousands of local workers. Since then, scholars have documented the effects of those policies on compensation, productivity, job creation, and health coverage. Opponents predicted a range of negative impacts, but the evidence tells a decidedly different tale. This book brings together that evidence for the first time, reviews it as a whole, and considers its lessons for local, state, and federal policymakers.

Journal of Human Resources 48(3):510-544. Summer 2013.

Abstract

Analysts often examine the black-white test score gap conditional on current family income. We describe a method for identifying the gap conditional on the family’s permanent income. Current income explains only about half as much of the black-white test gap as does permanent income, and the gap among families with the same permanent income is only 0.2 to 0.3 standard deviations in two commonly used samples. When we add permanent income to the controls used by Fryer and Levitt (2006), the unexplained gap in third grade shrinks below 0.15 SDs, less than half of what is found with their controls.

Think Tank Review, National Education Policy Center, Boulder Colorado. January 2013.

Abstract

The Gates Foundation’s Measures of Effective Teaching (MET) project was a multi-year study of thousands of teachers in six school districts that concluded in January 2013. This review addresses two of the final MET research papers. One paper uses random assignment to test for bias in teachers’ value-added scores. The experimental protocol was compromised, however, when many students did not remain with the teachers to whom researchers had assigned them; other students and teachers did not participate at all. This prevents conclusive answers to the questions of interest. The second paper examines how best to combine value-added scores, classroom observations, and student surveys in teacher evaluations. The data do not support the MET project’s premise that all three primarily reflect a single general teaching factor, nor do the data support the project’s conclusion that the three should be given roughly equal weight. Rather, each measure captures a distinct component of teaching. Evaluating teachers requires judgments about which components are the most important, judgments that are not much informed by the MET’s masses of data. While the MET project has brought unprecedented vigor to teacher evaluation research, its results do not settle disagreements about what makes an effective teacher and offer little guidance about how to design real-world teacher evaluation systems.

Industrial and Labor Relations Review 65(3):467-500. June 2012.

Abstract

Four years after the beginning of the Great Recession, the labor market remains historically weak. Many observers have concluded that “structural” impediments to recovery bear some of the blame. The author reviews such structural explanations, but after analyzing U.S. data on unemployment and productivity, he finds there is little evidence supporting these hypotheses. He finds that the bulk of the evidence is more consistent with the hypothesis that continued poor performance is primarily attributable to shortfalls in the aggregate demand for labor.

Phi Delta Kappan 93(6):8-15. March 2012.

Abstract

Popular modes of evaluating teachers are fraught with inaccuracies and inconsistencies, but the field has identified better approaches.

Estudios de Economía Aplicada, 30(1). 2012.

Abstract

The surprising increase in U.S. unemployment in the Great Recession and the persistence of long-term unemployment in the economic recovery pose important questions for employment policy. Why did unemployment grow more than forecast? Is the character of long-term unemployment the result of cyclical or structural causes? I discuss eight policy changes that would reduce the ranks of the unemployed and that would improve the efficiency of the labor market. Most of these proposals do not add big-ticket items to the Federal budget; their merits are independent of the question of how large the federal deficit should be at this time.

Brookings Papers on Economic Activity, 143-210. Fall 2011.

Abstract

More than 2 years after the official end of the Great Recession, the labor market remains historically weak. One candidate explanation is supply-side effects driven by dramatic expansions of unemployment insurance (UI) benefit durations, to as long as 99 weeks. This paper investigates the effect of these extensions on job search and reemployment. I use the longitudinal structure of the Current Population Survey to construct unemployment exit hazards that vary across states, over time, and between individuals with differing unemployment durations. I then use these hazards to explore a variety of comparisons intended to distinguish the effects of UI extensions from other determinants of employment outcomes. The various specifications yield quite similar results. UI extensions had significant but small negative effects on the probability that the eligible unemployed would exit unemployment. These effects are concentrated among the long-term unemployed. The estimates imply that UI extensions raised the unemployment rate in early 2011 by only about 0.1 to 0.5 percentage point, much less than implied by previous analyses, with at least half of this effect attributable to reduced labor force exit among the unemployed rather than to the changes in reemployment rates that are of greater policy concern.

Industrial Relations: A Journal of Economy and Society 50(2):205-240. April 2011.

Abstract

Traditional estimates that often find minimum wage disemployment effects include controls for state unemployment rates and state- and year-fixed effects. Using CPS data on teens for the period 1990–2009, we show that such estimates fail to account for heterogeneous employment patterns that are correlated with selectivity among states with minimum wages. As a result, the estimates are often biased and not robust to the source of identifying variation. Including controls for long-term growth differences among states and for heterogeneous economic shocks renders the employment and hours elasticities indistinguishable from zero and rules out any but very small disemployment effects. Dynamic evidence further shows the nature of bias in traditional estimates, and it also rules out all but very small negative long-run effects. In addition, we do not find evidence that employment effects vary in different parts of the business cycle. We also consider predictable versus unpredictable changes in the minimum wage by looking at the effects of state indexation of the minimum wage.

Journal of Public Economics 95(1-2):149-163. February 2011.

Abstract

In the early 2000s, a highly selective university introduced a “no-loans” policy under which the loan component of financial aid awards was replaced with grants. We use this natural experiment to identify the causal effect of student debt on employment outcomes. In the standard life-cycle model, young people make optimal educational investment decisions if they are able to finance these investments by borrowing against future earnings; the presence of debt has only income effects on investment decisions. We find that debt causes graduates to choose substantially higher-salary jobs and reduces the probability that students choose low-paid “public interest” jobs. We also find some evidence that debt affects students’ academic decisions during college. Our estimates suggest that recent college graduates are not life-cycle agents. Two potential explanations are that young workers are credit constrained or that they are averse to holding debt. We find suggestive evidence that debt reduces students’ donations to the institution in the years after they graduate and increases the likelihood that a graduate will default on a pledge made during her senior year; we argue this result is more likely consistent with credit constraints than with debt aversion.