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  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
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Upside of Inequality Oxford Unintended Consequences

Ernie Tedeschi The Hill
Date Posted:
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In 2015, the US spent 0.1% of GDP on Active Labour Market Policies (1/5 OECD avg). Despite this low investment, labor force participation has grown since 2014, driven by a tightening labor market, with women re-entering at 2x the rate of men. Yet, US prime-age participation still trails Europe and Japan, especially among women.

In 2015, the US allocated just 0.1% of GDP to Active Labour Market Policies, significantly lower than France's 1.01%. This spending disparity highlights America's investment in work-related welfare programs as only 1/5 of the OECD average. Despite predictions of declining labor force participation post-Great Recession, the US participation rate remained stable, with prime-age (25-54) participation rising by 1.5 percentage points since 2014. This increase was driven by a tightening labor market, encouraging previously discouraged workers to re-enter the workforce. Notably, women returned at twice the rate of men. However, US prime-age participation lags behind peers like Europe and Japan, particularly among women, despite past advantages in female employment.

He's referring to "Active Labour Market Policies" (in 2015 the US spent.1% of GDP versus 1.01% in say France)

The labor force brings some joy to the 'dismal science': Extended Excerpt Image 1


http://www.oecd.org/employment/activation.htm

Earnie claims America is spending only 1/5 the OECD average in some collection of work related welfare programs. I find that hard to believe. What is he referring to? I suspect that it's a subset of some larger amount of welfare spending where we have seen the US spend as much or more after tax as the highest spending euro countries.
"....Four years ago, the conventional wisdom among economists was that few of the working-age adults who left the labor force in the wake of the Great Recession would return. Coupled with retiring baby boomers, the implication was that the overall labor force participation rate — the share of adults with or actively looking for a job — was doomed to keep falling. But these forecasts were wrong. Instead of falling, the overall participation rate has stayed roughly flat, which is a surprisingly positive outcome against the backdrop of the aging population. And the prime-age (25-54) participation rate has risen 1.5 percentage points since 2014. It turns out that the tightening labor market of the last several years worked wonders.In particular, as jobs became more plentiful and wages gradually firmed, prime-age Americans who were out of the labor force due to disability or ill health or who wanted a job but had gotten discouraged and gave up looking started coming back after 2014. Those two categories of workers were enough to fully offset the downward effect on participation from an aging population. And while both men and women have seen labor-force gains since 2014, women have returned at about twice the magnitude of men. The lesson of the last four years, then, is that the declines in participation we saw in the wake of the Great Recession were less permanent than many economists thought. Without another recession, there’s even good reason to think prime-age participation has some further room to grow..... This reaction isn’t inevitable; in fact, among advanced countries, U.S. labor force participation seems uniquely sensitive to recessions. Europe and Japan were hit hard by the Great Recessions, too — and Europe even endured another recession in 2012. Yet, both have managed striking gains in prime-age participation. As a result, U.S. prime-age participation is falling further behind our peers, particularly among women, despite the fact that just 15 years ago the U.S. enjoyed an advantage in female employment...."

The labor force brings some joy to the 'dismal science': Extended Excerpt Image 2

Ernie Tedeschi, "The labor force brings some joy to the 'dismal science',"The Hill, April 2, 2019, https://thehill.com/opinion/finance/436940-the-labor-force-brings-some-joy-to-the-dismal-science

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