Macro Roundup

Baker/Gruber/Milligan build off their 2005 Quebec paper and finds the negative impacts of the Quebec program are persistent. Unsurprisingly outcomes were worse for the already marginal students and negative effects are primarily driven by boys, largest negative impact was in non-cognitive outcomes and criminality relative to cognitive outcomes

Core of paper, "...Our analysis extends the study of the impact of this universal child care program to children at older ages, looking for any persistence of the contemporaneous impacts in four spheres: noncognitive development, cognitive development, health, and crime. We begin our investigation by replicating previous results showing that exposure to the Quebec program increased use of child care among children age 0- 4 and led to lower noncognitive outcomes at those ages. We then proceed to our examination of persistence. We provide new evidence for children aged 5-9, showing the program’s negative effect on noncognitive skills do not appear to have faded by those ages—and in some cases are even stronger. In this way, our results are a mirror-image of the Perry Preschool and Head Start evidence. We also extend previous evidence of the heterogeneous contemporaneous impact of the program. At older ages the primary, negative impact of the program is on children who are already struggling. We next explore the impacts of this child care intervention on outcomes in the preteen and teenage years. The oldest children who were eligible for the Quebec program are currently in their early 20s, and those who received full treatment are now in their teens. We therefore focus, as the data allow, on their cognitive achievement and health at these ages. We ask whether any early negative impacts of the program on these children’s cognitive development fade out, as has been found in evaluations of other early years programs? The program also led to earlier exposure to infections and diseases and increases in early childhood anxiety and aggression, and we investigate whether these provide any immunity against maladies or have any consequences for life satisfaction and mental health, respectively, at older ages. Finally, we also look for any longer term impacts of the early childhood deficits in noncognitive development on criminal activity. This line of inquiry is guided by the evidence from programs such as Perry Preschool, which have shown how positive, early childhood impacts on noncognitive development result in more positive interactions with various social institutions including the criminal justice system. Our results find no consistent evidence of a lasting impact of the Quebec program on cognitive test scores; the available data give opposing answers for math scores and show little effect on English or science scores. We do, however, find a significant decline in self-reported health and in life satisfaction among teens. Most strikingly, we find a sharp and contemporaneous increase in criminal behavior among the cohorts exposed to the Quebec program, relative to their peers in other provinces. We illustrate graphically a monotonic increase in crime rates among cohorts with their exposure to the child care program, andwe show in regression analysis that exposure led to a significant rise in overall crime rates. We also report that these effects are primarily for boys, who also see the largest deterioration in noncognitive skills….”

"...In the first row are estimates of the program effect on the probability of the child being enrolled in child care at ages zero to four. At just under 15 percentage points, the estimate using waves 1, 2, 3, and 4 almost exactly matches the estimate in our previous paper (0.146). Extending the sample by the additional cycles of the NLSCY and the SYC leads to a larger estimate, which might be expected as the supply of subsidized child care spaces expanded as the program matured. This latter estimate represents an increase in child care use of just over 40 percent of the baseline rate. In the next four rows are the estimates of the program impact on standardized noncognitive outcomes at ages 2-3. In each case, we have created the variable so that a higher score indicates a poorer outcome. The components of each score are listed in the online Appendix. The estimates using cycles 1, 2, 4, and 5 show statistically significant estimates for anxiety and aggression, but not for hyperactivity and separation anxiety. They are marginally smaller in magnitude than the estimates in our previous paper, although not enough to qualitatively change our inference. Adding the additional waves of data leads to a statistically significant estimate for hyperactivity and maintains the inference for anxiety and aggression. Also, the estimates are generally stable in magnitude across the two samples, except for aggression, which is just under 50 percent larger. In the last row is the estimated impact of the program on a measure of cognitive development—PPVT—at ages 4 and 5. We report a statistically significant decline of 11 to 14 percent of a standard deviation depending on the sample. This result, while consistent with Haeck, Lefebvre, and Merrigan (2015), is different than the estimate in Baker, Gruber, and Milligan (2008), which used a different age range.20The results in Table 1 demonstrate that the main conclusions of Baker, Gruber, and Milligan (2008) for young children of two-parent families extend to the full sample of young children from all family types, and persist as the program has matured. The Quebec program led to a substantial increase in the use of child care and increases in children’s levels of anxiety and aggression. We do not pursue analysis of heterogeneity for these contemporaneous outcomes, but Kottelenberg and Lehrer (2017) provides evidence of a positive boost to child development for children from disadvantaged, single- parent families, with more negative outcomes from two-parent families. In addition, Kottelenberg and Lehrer (2018) finds significant differences between boys and girls...."

“….We group the cohorts by the number of years of eligibility, ranging from 0 before 1993 birth year to 5 for those born in 2000 or later. The differences are negative, indicating lower accusation rates in Quebec than in the rest of Canada. The pattern across cohorts is striking— the gap between Quebec and the rest of Canada shrinks for the cohorts most exposed to eligibility for the Quebec program. In the online Appendix, we repeat the analysis for convictions and separately for four specific crime types with similar monotonic shifts across birth cohorts consistent with the degree of exposure. In Table 5, we formalize this inference with regression estimates. Column 1 presents the simple difference-in-differences results, controlling for fixed effects for province, year, age, and gender. In addition, we include a set of dummies for crime type in the pooled regression for all crime types. In column 2, a richer specification includes the full set of second-order interactions between province, age, and gender (and crime type in the aggregate rate regressions). Finally, in column 3, we add controls for province × year trends (and crime type × province × year in the aggregate rate regressions) to allow for province-specific trends. The estimates are generally consistent with the graphical evidence: exposure to the Quebec program leads to higher rates of crime. Looking first at all crime counts, the estimates from the simple difference-in-differences specification indicate increases in both the rates of accused and convictions that is statistically significant. The coefficient of 514 for accused is a 27 percent increase on the overall mean of 1,872 accusations per 100,000. The coefficient of 208 for convictions is of a similar magnitude relative to the mean conviction rate. This estimate for rates of accused does not change much when we add the second order province/age/gender interactions in the second column, but there is an increase in the estimates for convictions. In column 3, the estimate for accused falls but remains sizable and highly significant, while the estimate for convictions returns to the level seen in column 1. The estimates from the richest specifications indicate sizeable effects on crime rates. For accused across all categories, we estimate a rise of 353 per 100,000 children, compared to a mean of 1,872 accusations. This is a rise of 19 percent. The result is slightly higher in percentage terms for convictions at 22 percent. The remaining rows of the table show the results for each type of crime. The impact of exposure to the Quebec program is largest for property crime; the estimates from the richest specification show an increase in accusations of these crimes of 602 per 100,000 children, or 19 percent of the mean, and for convictions for these crimes of 342 per 100,000, or about 25 percent of the mean. The estimated impacts on other criminal code violations are almost as large. Slightly smaller are the estimated impacts on crimes against persons, at 16 percent of the mean for both accusations and convictions. Finally, the impact for drug crimes is 14 percent of the mean for accusations but over 23 percent of the mean for convictions... The estimates indicate larger absolute impacts on the crime rates for boys, particularly for other criminal code violations and drugs.28 In fact, in our richest specification, some of the estimates for girls are substantively smaller and lose some statistical significance. Therefore, the gender differences in the impacts of the Quebec program on crime rates line up with the gender differences in the impact of the program on noncognitive development...”

Noncognitive Outcomes, "...In Table 2, we present the results for noncognitive outcomes at ages 5-9. The details on each measure’s construction are provided in the online Appendix. We again normalize the noncognitive scores to have zero mean and unit standard deviation. The first four measures show that the Quebec program’s negative effects on noncognitive skills appear to strongly persist into school years, and in some cases are larger than at younger ages. For anxiety, the impact is now just over one quarter of a standard deviation, which is more than twice as large as for 2-3-year-olds, while for aggression, the estimate is very similar to the result for the younger age group. Hyperactivity shows an increase of 13 percent of a standard deviation. For the two new indices we see a statistically significant impact on indirect aggression of 19 percent of a standard deviation, while the result for pro-social behavior is very close to zero. For the older children, we also have an alternative measure of behavior: a parent- reported indication of how the child gets along with his/her teacher at school. The variable is coded 0/1, where one indicates the child gets along very well with his/her teacher (there are no problems). The estimate for this variable is in the last row of Table 2. It is consistent with the results for the noncognitive indices, indicating exposure to the Quebec program leads to a statistically significant worse outcome..”

The Core Evidence:

"...In September, the U.S. had 5 million fewer jobs than it had before the pandemic, Labor Department data show.... The Federal Reserve Banks of Kansas City and Dallas are among the groups tracking the growth in retirees. The share of the population in retirement from February 2020 to April this year was higher by 1.5 million people than it would have been if the 2019 retirement trend had continued, according to the Dallas Fed. The proportion of Americans 16 and older who weren’t in the workforce because of retirement reached a seasonally adjusted 19.6% in the third quarter this year compared with 18.5% in the pre-pandemic fourth quarter of 2019, according to data from the Federal Reserve Bank of Philadelphia....Among Americans in the prime working ages of 25 to 54, the labor-force participation rate—the proportion of those working or seeking work—rebounded to a seasonally adjusted 81.6% in September from 79.8% in April 2020, at the start of the pandemic. For Americans 55 and older, the rate was 38.6% in September, virtually unchanged from April a year ago, the data show. Even before the pandemic, overall labor-force participation in the U.S. was falling as the nation’s population aged. The rate hovered at about 63% before the pandemic, down from its peak of roughly 67% in the 2000s. The pickup in retirements during the pandemic highlighted the phenomenon, said Jed Kolko, chief economist at Indeed, a jobs website. “The size of the working-age population is growing more slowly than it used to,” he said....Research suggests that some early exits from the workforce in the pandemic were more pronounced among seniors with less education and lower incomes. A higher share of workers without a college degree retired before the traditional retirement age of 65 compared with those who had a college education, according to the Retirement Equity Lab. The lab’s analysis of census data found that retirement rates for those ages 55 to 64 without a college degree rose by 0.8 percentage point from 2019 to 2021, compared with a decline of 0.6 percentage point for similarly aged workers with a degree. Boston College’s Center for Retirement Research used census data to determine that job losses earlier in the pandemic were steeper among lower-income older workers compared with higher-earning ones. About 38% of workers aged 62 and older and in the lowest third of weekly earnings no longer held jobs in the fourth quarter of 2020, up from 28% in the second quarter of 2019, according to the analysis from Geoffrey Sanzenbacher, a research fellow at the center. Among similarly aged workers in the highest third of weekly earnings, 22% weren’t working during the fourth quarter of 2020 compared with 18% in the second quarter of 2019. Workers with less education and lower incomes are less likely to have robust retirement savings and are at higher risk of financial troubles from unplanned retirement, said Mr. Radpour of The New School...."

Amara Omeokwe, "Covid-19 Pushed Many Americans to Retire. The Economy Needs Them Back.,"Wall Street Journal, October 31, 2021, https://www.wsj.com/articles/covid-19-pushed-many-americans-to-retire-the-economy-needs-them-back-11635691340

Covid-19 Pushed Many Americans to Retire. The Economy Needs Them Back.

The Covid-19 pandemic has boosted retirements among baby boomers, further straining the tight labor supply and leaving a hole for employers to fill.

Older workers who could least afford to retire early—those with lower incomes and less education—have been more likely to leave the workforce during the pandemic, researchers have found. The question is whether their retreat is temporary or permanent. Some retired because of Covid-19 fears, and others after failing to find suitable work.

The rising value of stocks, homes and other assets also has prompted a group of more affluent boomers to also retire earlier than expected, economists said. Other researchers believe the rise in the number of retirees is because fewer of them are re-entering the workforce.

The shifting labor force is complicating the work of economic policy makers trying to determine which jobs lost in the pandemic will return and how many American workers will be available to fill them. So far, it isn’t clear if recent retirees will be lured back to work by better jobs and pay—or because they miss their working lives—and how many are gone for good.

In September, the U.S. had 5 million fewer jobs than it had before the pandemic, Labor Department data show. Yet employers have reported high rates of unfilled openings in such industries as leisure and hospitality, manufacturing and transportation, contributing to slowdowns in production and the delivery of services.

Hiring difficulties have also increased competition for workers and put upward pressure on wages. Across the economy, there were 10.4 million unfilled jobs at the end of August, according to the Labor Department, exceeding the roughly 8.4 million unemployed Americans looking for work.

Fed governor Randal Quarles said he didn’t expect workforce participation rates to return to pre-pandemic levels. “One reason is that a disproportionate number of older workers responded to the initial shock of the Covid event by retiring,” he said. A slower rebound in workforce participation could keep pressure on wages, potentially leading Fed officials to raise interest rates sooner than they had anticipated.

The Federal Reserve Banks of Kansas City and Dallas are among the groups tracking the growth in retirees. The share of the population in retirement from February 2020 to April this year was higher by 1.5 million people than it would have been if the 2019 retirement trend had continued, according to the Dallas Fed.

With the baby boomer generation reaching old age, economists acknowledge that some who retired in the pandemic would have likely done so over the next few years anyway. Many employers wish they had waited.

Veronica Primus, 69 years old, retired in June from her job as a literacy coach with the Richland School District in Columbia, S.C. “My principal said, ‘You can’t stay another year?,’” recalled Ms. Primus, who before the pandemic had planned to work two more years. “And I said, ‘No, I’m tired.’”

Ms. Primus said one reason she retired was that she believed educators would be under pressure to close student achievement gaps caused by the pandemic, and she didn’t want the stress.

She plans to expand her education consulting business to stay busy and supplement her retirement savings and Social Security benefits. After five decades working in education, she said she would first take a few months to “take a pause, take a breath.”

Help wanted

While many younger workers who left the labor force early in the pandemic have since rejoined, older workers haven’t returned in the same numbers, according to Labor Department data. Among Americans in the prime working ages of 25 to 54, the labor-force participation rate—the proportion of those working or seeking work—rebounded to a seasonally adjusted 81.6% in September from 79.8% in April 2020, at the start of the pandemic.

For Americans 55 and older, the rate was 38.6% in September, virtually unchanged from April a year ago, the data show.

Even before the pandemic, overall labor-force participation in the U.S. was falling as the nation’s population aged. The rate hovered at about 63% before the pandemic, down from its peak of roughly 67% in the 2000s.

The pickup in retirements during the pandemic highlighted the phenomenon, said Jed Kolko, chief economist at Indeed, a jobs website. “The size of the working-age population is growing more slowly than it used to,” he said.

Kevin O’Connor, 58, said working from home in the pandemic helped him realize that he didn’t want to go back to the frequent travel schedule normally required for his job at LogicMark, a medical-systems manufacturer. He retired in June, a couple of years before he had planned.

Mr. O’Connor, who lives in the Minneapolis metropolitan area, said he looked forward to seeing his grandchildren more often and maybe spending winters in a warmer city. He credited the performance of his savings portfolio with helping solidify his decision to retire early. For him, he said, “the economy didn’t come to a screeching halt.”

Stephanie Aaronson, director of the economic studies program at the Brookings Institution, said while retirement decisions typically stick, some seniors could return to work if they see improved working conditions. She cited the rise in labor-participation rates among older Americans late in the last economic expansion, when a tight labor market coaxed some back to work.

Bruce White, 63, was among those who wanted to keep working during the pandemic but couldn’t get hired. He said he submitted more than 100 applications after losing his job managing records at a hospitality company in Orlando, Fla., the result of the company’s pandemic cost-cutting.

“I was going to work until I was 66 or 67 or as long as I could work,” said Mr. White, of Stuart, Fla. “I wasn’t ready to start collecting Social Security.”

Mr. White, supported by retirement savings and Social Security, said money hasn’t been his main concern. Not working is what has taken a toll. Some days, he said, “I was in a funk, didn’t want to get up, didn’t want to do anything.” He believes his age makes him unattractive to employers.

Siavash Radpour, associate research director at the Retirement Equity Lab at The New School, a private university in New York, said some older workers face discrimination in hiring. They may be passed over even in industries with plenty of openings, such as food services, because employers consider the jobs physically demanding, he said. That means some older workers “don’t really have the option to come back to the labor force,” he said.

‘Further behind’

Research suggests that some early exits from the workforce in the pandemic were more pronounced among seniors with less education and lower incomes.

A higher share of workers without a college degree retired before the traditional retirement age of 65 compared with those who had a college education, according to the Retirement Equity Lab. The lab’s analysis of census data found that retirement rates for those ages 55 to 64 without a college degree rose by 0.8 percentage point from 2019 to 2021, compared with a decline of 0.6 percentage point for similarly aged workers with a degree.

Boston College’s Center for Retirement Research used census data to determine that job losses earlier in the pandemic were steeper among lower-income older workers compared with higher-earning ones.

Among similarly aged workers in the highest third of weekly earnings, 22% weren’t working during the fourth quarter of 2020 compared with 18% in the second quarter of 2019.

Workers with less education and lower incomes are less likely to have robust retirement savings and are at higher risk of financial troubles from unplanned retirement, said Mr. Radpour of The New School.

Walter Minard hadn’t planned to retire until the pandemic hit. He was going to work at least three more years, he said. But Covid-19 made his job inside a Pella, Iowa, equipment manufacturing plant feel too risky. Mr. Minard, 65, was an inventory coordinator at Vermeer Corp. He took stock of deliveries from truck drivers and couriers, he said, and his desk was in the middle of the plant floor.

Mr. Minard has diabetes, high blood pressure and other health conditions that put him at greater risk for serious illness from the coronavirus. “I felt like if I caught anything or whatever, it would probably kill me,” he said. He left his job in April 2020.

He is vaccinated but fears returning to the workplace. His health has worsened since retiring, he said, and he now requires kidney dialysis.

Mr. Minard considers himself retired but burdened with worry. Leaving his roughly $45,000 a year job—and its company-sponsored health insurance—yielded a financial crisis for his family, he said. Mr. Minard’s wife, who worked at a fast-food restaurant, also quit her job at the start of the pandemic over the fear of passing Covid-19 to her husband.

The family fell behind on mortgage payments by about $16,000, he said. Mr. Minard started collecting Social Security payments, but he said it hasn’t been enough to cover daily expenses, the house payment and medical costs.

Like many Americans, Mr. Minard had little in retirement savings. A survey from the Fed found that about half of U.S. households in 2019 didn’t have retirement accounts.

Mr. Minard gave up his house, he said, because he knew he couldn’t afford to keep it. He and his wife moved to a camper trailer, he said, and have begun the process of filing for bankruptcy. “We just kept getting further and further behind,” he said.

"....U.S. real total capex hit an all time high in the first quarter of 2021 - the only major GDP component to do so - driven by both hard capex, including machines and factories, and intangible capex, such as software. Core capital goods orders have been climbing fairly consistently for months, with nondefense capital goods orders recording gains in 13 of the last 15 months. Nonresidential fixed investment, often used as a proxy for business spending, increased 13% in the second quarter, led by growth in software and technology spending… Business profits particularly have tended to lead capex fairly consistently over time, and corporate capex has accordingly remained on an accelerating path given the strong rebound in corporate profitability....

https://www.bessemertrust.com/sites/default/files/2021-10/10_01_21_BT_QIP_US_UA.pdf

Holly MacDonald, “Go Big and Go Home,” Bessemer Trust, October 2021,