Betsey Stevenson Answers Your Questions

DESCRIPTIONPhoto: Shawn Moore, US Department of Labor

We recently solicited your questions for Betsey Stevenson, a sometimes Freakonomics contributor and newly minted Chief Economist of the Department of Labor. Your questions were excellent and varied, and Betsey’s responses cover everything from persistent unemployment to parental leave. Thanks to Betsey and everyone who participated.

Q.

What do you make of the argument that the long-run structural level of unemployment has increased because of the economic crisis? – David (and several others who asked a variant)

A.

It’s an interesting story, but there’s just not much evidence for it. The concern is that there’s a mismatch between the skills possessed by workers displaced from contracting sectors and the skills demanded in expanding sectors. The evidence for this argument is coming from recent increases in job vacancies that have occurred without a corresponding decrease in unemployment. This relationship is known as the Beveridge Curve and insights about how this relationship can go haywire during a downturn were part of today’s Nobel Prize in economics.

I think it’s way too soon to conclude that there has been a permanent shift in the relationship between vacancies and unemployment. If we were really seeing an increase in mismatch, then we would see declines in some industries but expansion in others. But we don’t. And we would see qualified workers being inundated with job offers, while others remain unemployed. Again, we don’t.

So the problem is not that we need to transform construction workers into manufacturing workers, it’s much simpler: We need to generate jobs. Insufficient aggregate demand has kept the lid on hiring in all sectors.

However, there are two structural issues that concern me. First, lots of people are underwater on their mortgages, and intriguing research has found that those underwater are much less likely to move for a new job. I don’t think that this is causing a lot of problems in the labor market now, but as the economy picks up steam, this could become more of a problem.

Second, I worry that the skills of people who’ve been unemployed for a long time are atrophying. It’s important that we help the long-term unemployed keep their skills up-to-date through training and career development opportunities. Searching for a job for a year or more can be discouraging, so keeping people connected to the labor force is crucial.

Q.

It’s been reported that part of the reason for our stubborn unemployment problem is a disconnect between the skills employers need and the skills that people have. How will you close that gap? -DaveyNC

A.

While I disagree with the premise, as I said above, there are always workers who could benefit from training. The Department of Labor focuses on getting people into jobs and on a path to higher earnings and greater labor force attachment so that they can support themselves and their families throughout their lives. Our training programs reflect a commitment to ensuring a tight link between training and jobs. The DOL and the Administration at large are undertaking two major efforts to expand and improve our training programs. The Skills for America’s Future initiative – a public-private partnership led by the Aspen Institute with support from the DOL and other government entities – will strengthen the links between private employers and community colleges, to ensure that the skills that America’s students are learning are those that firms are looking for in their workers. Additionally, DOL’s soon-to-be-announced Community College Career Training grants will provide $2 billion over four years to expand training programs that serve workers who have been negatively affected by trade.

Q.

How can the DOL create a job? Could the DOL mandate a shorter work week, such as 35 hours, to help job creation? – Greg

A.

The Labor Department isn’t in the business of creating jobs. Our goal is to help prepare workers for the types of jobs that are available and connect workers to jobs.

Personally, I don’t think that it’s a good idea to mandate a shorter work week, but providing some flexibility can avert layoffs (saving jobs) and encourage shorter work weeks instead.

Here’s the problem that we are trying to solve: an employer who needs to reduce payroll can either cut one-in-five workers, or shift folks to a four-day-a-week schedule.?I think most of us would prefer the latter, but in most states unemployment insurance can only help those workers who are fired, pushing employers towards firing people instead.?However, in 17 states, there is the option to get similar unemployment insurance when you choose to share the burden among your workers, and I’d like to see us make this option available in every state. Workers benefit because they suffer a smaller reduction in income than they would had they been laid off (or had their hours been cut without access to unemployment insurance). And employers get to keep production lines intact and retain the skills of specialized team members. Work-sharing also makes it easy for firms to ramp up when business improves. Even better, it’s cheap. Because work sharing is instituted in place of layoffs, the benefits being paid out to workers whose hours are cut is offset by the fact we avoided a full layoff.

Q.

What are your thoughts on how to improve parental leave prospects in the United States without causing further gender discrimination in labor markets? I’m assuming here that whatever one might do to encourage parental leave will still not change the fact that it is likely that women will take it up more than men.? -Joshua Gans

A.

OK, as a recent mother, this one strikes close to home.

Remember that sometimes our assumptions about how these things work aren’t right. In the early ’90s, everyone assumed that the Family and Medical Leave Act would be primarily used for maternity leave, but as Yale’s Christine Jolls has shown, the policy has had major benefits for those with medical conditions that cause them to occasionally miss work.

And why the assumption? What would happen if we passed policies that gave strong incentives for men to take parental leave? Don’t laugh, the Swedes have tried it. And now you see hunky blond Swedish men pushing strollers down the streets while Mom is at work. It’s an intriguing idea and it could decrease gender discrimination.

Q.

The Bush tax cuts, we were told, would provide incentives for companies and the rich to create jobs, and stimulate economic growth. According to the Bureau of Labor Statistics, the Bush tax cuts had a net job production of 1.9 million in 8 years, when 19.2 million were needed to sustain a vibrant economy, and the top 1 percent now has 23.3 percent of the nations’ wealth. Given the fact that the tax cuts were not used to create job growth and stimulate the economy, should tax cuts be extended to the top 2 percent? -Michael W Baker

A.

We need to put money in the hands of people who need it and people who will spend it (yep, I’m back on that we-need-to-increase-aggregate-demand soapbox). The top 2 percent don’t need it and won’t spend it.

I was at the latest meeting of the President’s Economic Recovery Board when this was discussed, and the person advocating this position was Marty Feldstein, who happens to be one of my former mentors. Marty’s often right, but not this time.

Let’s take the money and extend unemployment benefits for a bit longer. Unemployment insurance kept 3.3 million people out of poverty (including 1 million children) in 2009. Let’s keep those people out of poverty until we have the aggregate demand necessary for all of them to get a job.

Q.

Ms. Stevenson, how may we increase incentives for offering employment opportunities to those who have been chronically discriminated against – namely the deaf, hard-of-hearing, blind and older workers? -rob k

A.

My boss, Secretary Solis has a very clear goal for the Labor Department: “Good jobs for everyone.” And when she says that this includes marginalized and disadvantaged workers, she means it. It’s true that people with disabilities are much less likely to be employed. Only around 1 in 5 are even in the labor force and they still have an unemployment rate that is about 50 percent higher than those without disabilities. DOL’s Office of Disability Employment Policy (ODEP) offers a variety of resources including training programs and employment services designed specifically to address the needs of those with disabilities.

Q.

What data do you wish you had to help your work as a labor economist? -KB

A.

I wish that we did a better job linking together the data that the government collects. There is a lot of administrative data that can’t be compared across agencies. While it’s important that we protect the confidentiality of data containing American citizens’ and businesses’ private information, we need to balance that desire to protect confidentiality with the efficiency that comes from combining information. As a taxpayer, I want the government to learn as much as they can for every dollar they spend collecting data. One active area of discussion is about sharing information across the three largest statistical agencies:?BEA, Census, and BLS. Statistical use of some business tax information is authorized for Census and the Bureau of Economic Analysis, but not for the Bureau of Labor Statistics. This means that Census and BEA can’t share what they learn through their use of tax information with BLS. Changing the tax code to allow this would extend some of the sharing that was enabled by 2002 legislation-the Confidential Information Protection and Statistical Efficiency Act (CIPSEA). That legislation created stronger protections including increasing penalties for disclosure of confidential information, and these steps to improve protections were combined with changes that broke down some of the barriers that had prevented the Bureau of Labor Statistics, Census, and the US Bureau of Economic Analysis from sharing data.

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  1. Robbie Laney says:

    The Department of Labor is a great example of a useless government agency that should be eliminated. Where is the justification for the Department of Labor in the Constitution?

    The government does not “create jobs”. It only takes from one group and gives to another.

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  2. Greg says:

    First off I did not ask the second part of my question above about shorter work weeks.

    Anyway if the DOL isn’t in the business of creating jobs then I doubt other parts of governments are in that business either. So please tell the politicians to stop talking about job creation. Gov’t policies can have an effect on jobs, but without large changes in policies I doubt they have much effect on jobs.

    I believe that many other factors cause jobs to be created or lost.

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  3. Doc says:

    1. The Mismatch of Skills and Jobs myth was elegantly debunked by Jim Costello in the last cycle in a paper titled “Where have all the Farriers Gone?”. Just look at a McDonald’s register and you can see that business will find a way to work with the available skill set.
    2. She’s in the ballpark in the area of labor mobility. But it’s not foreclosures, it’s home ownership in general. The predominantly renter age cohorts are those in the early stages of a career who need mobility to build their work history. The recent policy of making everone a homeowner was insamity. The good side is that an increase in inventory and a decrease in value are positive for labor mobility as is the current reversion to long run decline in homeownership in any specific age cohort. America’s ownership percentage is going up due to the age of the population not due to tenure choice by a specific group.
    3. Dead wrong on extending the current tax rates. Let’s be honest. We aren’t talking about “extending tax cuts” we’re talking abouut raising tax rates. As a member of the maligned group at the top I can guarantee that we will spend less money if the rates are raised. The cadre of incomes above $250,000 includes many more two income middle managers than truly rich folks.

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  4. Smitty says:

    Can I ask that the Libertarians and radicals who think the Dept of Labor should not exist keep their comments to a minimum? I think it is always a good policy to question the need for govt policy, but I would have thought this kind of ideological rationale for not managing the economy (“after all, capitalist economies manage themselves” Huh?) would have become extinct. I, for one, have become tired of hearing the same tired arguments. A Department of Labor is something we clearly need, because it is here to help shape the policy that protects workers rights.
    The only criticism I might have for this department is that it should be doing more. For example, why not new policy that allows for the fact that many families have dual earners, and would benefit from one of the earners being able to switch to part time work at the job they currently hold? Few companies acknowledge that having a family changes everything, and do not offer much flexibility. Can’t we all agree that having a family benefits society, and should be actively encouraged by labor laws?
    We should have more labor laws that provide positive incentives, instead of only punitive ones. Our laws do not say “do this, and”, they say “don’t do this, or”. Imagine if I raised my children by only telling them what NOT to do?

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  5. Greg says:

    Smitty, you want a law saying that if you have a child then your employer must allow you to start working part-time? That may be a positive incentive for an employee, but it would be a puintive one for an employer.

    What if we said, that if you had a baby then you had to continue to work at least part-time. You could not quit. Let’s do that.

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  6. Andrew says:

    You lost me at the part about not extending the Bush tax cuts. I’ll gloss over the fact-of-ethics that it is not the government’s place to decide who does and doesn’t need the money they’ve earned and point out that the people who are making that top 2% are precisely the people who provide the investment that results in the jobs this country needs in order to raise aggregate demand.

    Meanwhile, unemployment benefits are crowding out the labor market. Stop extending the free-ride and get this country back to work.

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  7. Government Auditor says:

    @ #2 Greg

    There are several government agencies that are in the busienss of creating jobs. They accomplish this task primarily through grants. Grantees and contractors are required to report the number of jobs that were created or retained due to the government funds they receive on a quarterly basis (along with 98 other data points). This information is tracked through the Recovery.gov website. If you feel like truly understanding what’s going on with your tax dollars, I would recommend looking at it. You may be especially interested to read the reports filed by the Recover,y Accountability, and Transparency Board and several Inspectors General, which provide detailed analysis on the effectiveness of the funds. This is also found on that website.

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  8. pablo says:

    Wow. There really are a lot of rich folks who won’t admit they are rich. The definition of ‘rich’ is not “has more money than me,” though you wouldn’t know it. It was nice to get some of these answers, and a shame that the discussion around here is so often unserious bloviating in response.

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