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Pension Spending Supports 6.2 Million Jobs, $943 Billion in Economic Input

July 31, 2014 Comments off

Pension Spending Supports 6.2 Million Jobs, $943 Billion in Economic Input
Source: National Institute on Retirement Security

A new economic impact study finds that pension benefit expenditures provide important economic support to the economy, including more than $943 billion in total economic output and 6.2 million jobs in the United States.

Pensionomics 2014: Measuring the Economic Impact of Defined Benefit Pension Expenditures reports the national economic impacts of public and private pension plans, as well as the impact of state and local plans on a state-by-state basis. The study measures the economic ripple effect of retiree spending of pension benefit income, which typically is a stable source of income that lasts through retirement.

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By 2030 U.S. Standard of Living Could Decline to 2000 Level, According to Accenture

July 31, 2014 Comments off

By 2030 U.S. Standard of Living Could Decline to 2000 Level, According to Accenture
Source: Accenture

According to Accenture (NYSE:ACN), the U.S. standard of living is in danger of declining by 9 percent by 20301 – back to the level it was in 2000 – due to three major economic threats: an aging population, lower workforce participation and a flat or declining labor productivity growth rate.

The Accenture analysis is outlined in a new report, U.S. States: For Richer, For Poorer? Winning the battle for talent and securing our standard of living, which advocates that state governments develop and execute strategies to ensure a sufficient supply of talent to meet the country’s workforce demands. According to the U.S. Bureau of Labor Statistics, current workforce participation rates are at their lowest since 1977.

How America Saves 2014

July 31, 2014 Comments off

How America Saves 2014
Source: Vanguard

How America Saves 2014 is here! This comprehensive report analyzes the saving, investing, and account activity trends in defined contribution (DC) plans at Vanguard. The report offers useful insights into current issues affecting DC plans, including employer contribution trends, automatic plan features, use of target-date funds, and use of advice services.

The Labor Force Participation Rate Since 2007: Causes and Policy Implications

July 31, 2014 Comments off

The Labor Force Participation Rate Since 2007: Causes and Policy Implications (PDF)
Source: Council of Economic Advisers (White House)

In 2008, the U.S. economy collided with two historic forces. The first force was the Great Recession, the most severe economic crisis in a generation. While the economy has recovered considerably over the last five years, there is little doubt that more work remains to address some of the challenges left in the wake of the Great Recession. The turmoil of 2008 inflicted tremendous pain on millions of families, overshadowing the fact that 2008 also marked a unique milestone in U.S. economic history. That year, the first baby boomers (those born in 1946) turned 62 and became eligible for Social Security early retirement benefits. This second force — the demographic inflection point stemming from the retirement of the baby boomers — was felt far less acutely than the Great Recession, but will continue to have a profound influence on the economy for years to come, well after the business cycle recovery from the Great Recession is considered complete.

In addition to these inflection points in 2008, a number of longer – term trends had been playing out in the U.S. labor force prior to 2008 — and have continued since then. These include the nearly continuous decline in labor force participation rates for prime – age males (i.e., age 25 – 54) since the mid – 1950s and the dramatic rise in labor force participation rates for prime – age females in the 1970s and 1980s followed by a st alling and slight trend decline after the late 1990s.

Many dimensions of the economy’s performance over the last several years can only be properly evaluated when the effects of the Great Recession, the retirement boom, and the longer – term labor force trends are taken into account . One of the clearest illustrations of this point is the labor force participation rate, which represents the fraction of the adult population either working or looking for work. Changes in labor force participation reflect not just current economic conditions like job availability and workers’ assessments of job – finding prospects, but also more structural factors like the age distribution of the population and other aspects of society that impact people’s decisions to participate in the labor force .

This report analyzes the evolution of the labor force participation rate since late 2007 and attempts to quantify the effects of these various forces. We examine the period since 2007 to focus on how each of the two largest forces, the Great Recession and the retirement of the baby boomers, has impacted labor force participation in recent years . We find that the combination of demographic changes and the drop in labor force participation that would have been expected based on historical business cycle patterns explain most but not all of the recent drop in labor force participation. This implies that other factors, likely including both a continuation of pre – existing trends in labor force participation by certain groups and the unique ef fects of the Great Recession have also been important. This report also discusses the labor force participation rates for different groups, discusses potential future scenarios for the participation rate, and lays out policies that would help to boost part icipation in the years to come.

Federal Reserve issues FOMC statement (7/30/14)

July 31, 2014 Comments off

Federal Reserve issues FOMC statement
Source: Federal Reserve Board

Information received since the Federal Open Market Committee met in June indicates that growth in economic activity rebounded in the second quarter. Labor market conditions improved, with the unemployment rate declining further. However, a range of labor market indicators suggests that there remains significant underutilization of labor resources. Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has moved somewhat closer to the Committee’s longer-run objective. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators and inflation moving toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat.

A Case against Child Labor Prohibitions

July 30, 2014 Comments off

A Case against Child Labor Prohibitions
Source: Cato Institute

In my recent book, Out of Poverty: Sweatshops in the Global Economy, I argue that much of what the anti-sweatshop movement agitates for would harm workers and that the process of economic development, in which sweatshops play an important role, is the best way to raise wages and improve working conditions. Child labor, although the most emotionally charged aspect of sweatshops, is not an exception to this analysis.

We should desire to see an end to child labor, but it has to come through a process that generates better opportunities for the children—not from legislative mandates that prevent children and their families from taking the best option available to them. Children work because their families are desperately poor, and the meager addition to the family income they can contribute is often necessary for survival. Banning child labor through trade regulations or governmental prohibitions often simply forces the children into less-desirable alternatives. When U.S. activists started pressuring Bangladesh into eliminating child labor, the results were disastrous.

Health, Work and Working Conditions: A Review of the European Economic Literature

July 30, 2014 Comments off

Health, Work and Working Conditions: A Review of the European Economic Literature
Source: OECD

Economists have traditionally been very cautious when studying the interaction between employment and health because of the two-way causal relationship between these two variables: health status influences the probability of being employed and, at the same time, working affects the health status. Because these two variables are determined simultaneously, researchers control endogeneity bias (e.g., reverse causality, omitted variables) when conducting empirical analysis. With these caveats in mind, the literature finds that a favourable work environment and high job security lead to better health conditions. Being employed with appropriate working conditions plays a protective role on physical health and psychiatric disorders. By contrast, non-employment and retirement are generally worse for mental health than employment, and overemployment has a negative effect on health. These findings stress the importance of employment and of adequate working conditions for the health of workers. In this context, it is a concern that a significant proportion of European workers (29%) would like to work fewer hours because unwanted long hours are likely to signal a poor level of job satisfaction and inadequate working conditions, with detrimental effects on health. Thus, in Europe, labour-market policy has increasingly paid attention to job sustainability and job satisfaction. The literature clearly invites employers to take better account of the worker preferences when setting the number of hours worked. Overall, a specific “flexicurity” (combination of high employment protection, job satisfaction and active labour-market policies) is likely to have a positive effect on health. This Working Paper relates to the 2014 OECD Economic Survey of the United States (www.oecd.org/eco/surveys/United States ).

China’s digital transformation

July 29, 2014 Comments off

China’s digital transformation
Source: McKinsey & Company

As individual companies adopt web technologies, they gain the ability to streamline everything from product development and supply-chain management to sales, marketing, and customer interactions. For China’s small enterprises, greater digitization provides an opportunity to boost their labor productivity, collaborate in new ways, and expand their reach via e-commerce. In fact, new applications of the Internet could account for up to 22 percent of China’s labor-productivity growth by 2025.

Yet the Internet is not merely a tool for automation and efficiency; it also expands markets rapidly. Greater adoption of web technologies in China could lead to the introduction of entirely new products and services if government and industry take the right steps to maximize the potential (exhibit). A new report from the McKinsey Global Institute (MGI), China’s digital transformation: The Internet’s impact on productivity and growth, projects that new Internet applications could fuel some 7 to 22 percent of China’s incremental GDP growth through 2025, depending on the rate of adoption. That translates into 4 trillion to 14 trillion renminbi in annual GDP in 2025.

Retirement — How Much Should People Save?

July 29, 2014 Comments off

How Much Should People Save?
Source: Center for Retirement Research at Boston College

The brief’s key findings are:

  • The National Retirement Risk Index framework is used to address how much working-age households need to save for retirement.
  • A typical household should get a third of its retirement income from a savings plan, with the low income needing one quarter and the high income one half.
  • A typical household needs to save about 15 percent of earnings, with the low income requiring less and the high income more.
  • For those with a savings shortfall, the necessary savings hike is much more feasible for younger households than for older households.
  • Starting to save early and retiring late dramatically reduce a household’s required saving rate.

New From the GAO

July 28, 2014 Comments off

New GAO Reports
Source: Government Accountability Office

1. Railroad Retirement Board: Total and Permanent Disability Program at Risk of Improper Payments. GAO-14-418,June 26.
http://www.gao.gov/products/GAO-14-418
Highlights – http://www.gao.gov/assets/670/664467.pdf

2. Consumer Financial Protection Bureau: Opportunity Exists to Improve Transparency of Civil Penalty Fund Activities. GAO-14-551, June 26.
http://www.gao.gov/products/GAO-14-551
Highlights – http://www.gao.gov/assets/670/664452.pdf

3. Drinking Water: EPA Program to Protect Underground Sources from Injection of Fluids Associated With Oil and Gas Production Needs Improvement. GAO-14-555, June 27.
http://www.gao.gov/products/GAO-14-555
Highlights – http://www.gao.gov/assets/670/664500.pdf

4. Media Ownership: FCC Should Review the Effects of Broadcaster Agreements on Its Media Policy Goals. GAO-14-558, June 27.
http://www.gao.gov/products/GAO-14-558
Highlights – http://www.gao.gov/assets/670/664485.pdf

5. Security Clearances: Tax Debts Owed by DOD Employees and Contractors. GAO-14-686R, July 28.
http://www.gao.gov/products/GAO-14-686R

Mid- and Late-Career Teachers Struggle With Paltry Incomes

July 28, 2014 Comments off

Mid- and Late-Career Teachers Struggle With Paltry Incomes
Source: Center for American Progress

Low teacher pay is not news. Over the years, all sorts of observers have argued that skimpy teacher salaries keep highly qualified individuals out of the profession. One recent study found that a major difference between the education system in the United States and those in other nations with high-performing students is that the United States offers much lower pay to educators.

But for the most part, the conversation around teacher pay has examined entry-level teachers. The goal of this issue brief was to learn more about the salaries of mid- and late-career teachers and see if wages were high enough to attract and keep the nation’s most talented individuals. This research relied on a variety of databases, the results of which are deeply troubling. Our findings include:

  • Mid- and late-career teacher base salaries are painfully low in many states. In Colorado, teachers with a graduate degree and 10 years of experience make less than a trucker in the state. In Oklahoma, teachers with 15 years of experience and a master’s degree make less than sheet metal workers. And teachers in Georgia with 10 years of experience and a graduate degree make less than a flight attendant in the state. (See Appendix for state-by-state data on teacher salaries. We relied on “base teacher” salaries for our data, which typically does not include summer jobs or other forms of additional income.)
  • Teachers with 10 years of experience who are family breadwinners often qualify for a number of federally funded benefit programs designed for families needing financial support. We found that mid-career teachers who head families of four or more in multiple states such as Arizona and North Dakota qualify for several benefit programs, including the Children’s Health Insurance Program and the School Breakfast and Lunch Program. What’s more, teachers have fewer opportunities to grow their salaries compared to other professions.
  • To supplement their minimal salaries, large percentages of teachers work second jobs. We found that in 11 states, more than 20 percent of teachers rely on the financial support of a second job, and in some states such Maine, that number is as high as 25 percent. In these 11 states, the average base salary for a teacher with 10 years of experience and a bachelor’s degree is merely $39,673—less than a carpenter’s national average salary. (Note that teachers typically have summers off, and the data on teachers who work second jobs do not include any income that a teacher may have earned over the summer.)

Giving Cities and Regions a Voice in Immigration Policy: Can National Policies Meet Local Demand?

July 26, 2014 Comments off

Giving Cities and Regions a Voice in Immigration Policy: Can National Policies Meet Local Demand?
Source: Migration Policy Institute

Immigration policies are typically designed and implemented at the national level, even though economic and demographic circumstances may vary widely across cities and regions. Large and fast-growing metropolitan areas are natural magnets for both immigrants and their native-born peers, while rural areas and small towns tend to attract fewer immigrants, even when employers have vacancies to fill.

Some immigration routes, however, channel new arrivals toward particular destinations where their labor is thought to be in high demand. These routes fall into two major categories: (1) employer-sponsored immigration and (2) immigrants selected through regional nomination programs. Employer-sponsored visa policies implicitly direct foreign workers to areas where their skills are in demand. To ensure that this happens, some such programs are further customized to the needs of particular regions. In the cases of Australia and Canada, which have made regional nomination programs the flagship policies in their immigration systems, the national governments have delegated a certain level of authority to subnational jurisdictions to select their own workers. These subnational visa programs allow regions and localities that are not traditional immigration destinations to attract workers who would otherwise have gone elsewhere.

These types of region-specific immigration policies are not without risk. They add complexity to already complicated immigration systems and disregard immigrants’ market-based decisions, which could potentially undermine economic prospects and contributions.

State and Local Government Workforce: 2014 Trends

July 25, 2014 Comments off

State and Local Government Workforce: 2014 Trends
Source: Center for State & Local Government Excellence

Local and state governments continue their hiring trend although their workforces are still smaller since the 2008 economic downturn; recruitment and retention continue to be challenges; and pressure on benefits continues, particularly health care.

DOL — Workforce Innovation and Opportunity Act Frequently Asked Questions

July 24, 2014 Comments off

Workforce Innovation and Opportunity Act Frequently Asked Questions (PDF)
Source: U.S. Department of Labor

WOIA authorizes key employment and training programs and the American Job Center (referred to as One-Stop Center in the law) service delivery system to help workers acquire the tools and skills they need to be successful and to connect employers to the skilled workers they need. WIOA aligns the “core” programs to provide coordinated, comprehensive services. The core programs are: (1) Adult, Dislocated Worker and Youth formula programs administered by DOL; (2) the Adult Education and Literacy programs administered by the Department of Education (ED); (3) Wagner-Peyser Employment Service program administered by DOL; and (4) and the programs under title I of the Rehabilitation Act that provide services to individuals with disabilities administered by the ED. Other programs administered by DOL that are authorized under title I of WIOA include: Job Corps, YouthBuild, Indian and Native American programs, Migrant and Seasonal Farmworker programs, and evaluation and multistate projects.

Part of the Solution: Pre-Baccalaureate Healthcare Workers in a Time of Health System Change

July 24, 2014 Comments off

Part of the Solution: Pre-Baccalaureate Healthcare Workers in a Time of Health System Change
Source: Brookings Institution

Healthcare occupations account for a large and growing share of the workforce and span the education and earnings continuum. Although many discussions of the healthcare workforce focus on doctors and other occupations requiring advanced degrees, the healthcare system would not function without pre-baccalaureate workers—those with less than a bachelor’s degree. These workers perform a variety of clinical, assistive, and administrative tasks, and like all healthcare staff, should be working at their full level of competence in order to achieve the “triple aim” of improving the experience of care, improving health outcomes, and reducing per capita costs.

While individuals with less than a bachelor’s degree work in multiple healthcare occupations, they are overwhelmingly concentrated in a subset of occupations. This report identifies the 10 largest “pre-baccalaureate” healthcare occupations, those in which substantial shares of workers—ranging from 39 percent to 94 percent—have less than a bachelor’s degree, and focuses on those workers in the 10 occupations, unless otherwise noted.

Differences in Time Use and Activity Patterns When Adding a Second Job: Implications for Health and Safety in the United States

July 24, 2014 Comments off

Differences in Time Use and Activity Patterns When Adding a Second Job: Implications for Health and Safety in the United States
Source: American Journal of Public Health

Objectives.
We compared work and lifestyle activities for workers who work in 1 job with those who work in multiple jobs during a 1-week period.

Methods.
We used information from the 2003–2011 American Time Use Survey to classify workers into 6 work groups based on whether they were a single (SJH) or multiple (MJH) job holder and whether they worked their primary, other, multiple, or no job on the diary day.

Results.
The MJHs often worked 2 part-time jobs (20%), long weekly hours (27% worked 60+ hours), and on weekends. The MJHs working multiple jobs on the diary day averaged more than 2 additional work hours (2.25 weekday, 2.75 weekend day; P < .05), odd hours (more often between 5 pm and 7 am), with more work travel time (10 minutes weekday, 9 minutes weekend day; P < .05) and less sleep (–45 minutes weekday, −62 minutes weekend day; P < .05) and time for other household (P < .05) and leisure (P < .05) activities than SJHs.

Conclusions.
Because of long work hours, long daily commutes, multiple shifts, and less sleep and leisure time, MJHs may be at heightened risk of fatigue and injury.

Migration’s Local Dividends: How Cities and Regions Can Make the Most of Immigration (Transatlantic Council Statement)

July 23, 2014 Comments off

Migration’s Local Dividends: How Cities and Regions Can Make the Most of Immigration (Transatlantic Council Statement)
Source: Migration Policy Institute

Well-managed immigration can be a windfall for local economies by creating jobs and fueling growth, fostering innovation, and bringing in new revenue. But these benefits are neither automatic nor do they accrue evenly. Highly skilled and entrepreneurial migrants tend to flock to certain geographic “magnets”—such as vibrant metropolises, financial hubs, or tech clusters—while other regions may struggle to attract and retain native and foreign workers alike.

Meanwhile, increasing mobility has brought new challenges, which are also asymmetrically distributed. And many cities, even those experiencing new dynamism and growth, have to contend with community tensions arising over the allocation of often scarce public resources such as housing, social welfare, and health services, as well as difficult-to-address problems of poverty, residential segregation, and social exclusion.

While cities and regions experience both the positive and negative effects of immigration firsthand, they are typically at arm’s length, at best, from the policy reins that enable and shape these movements. Immigration policies are rarely calibrated to regional, let alone local, needs.

This Council Statement from the 11th plenary meeting of the MPI-convened Transatlantic Council on Migration examines how policymakers at all levels can work together to get more out of immigration. The Statement launches a series of reports from the Council’s meeting on the topic “Cities and Regions: Reaping Migration’s Local Dividends.” The series examines place-based immigration and entrepreneurship policies, city attractiveness, social cohesion, and means to build inclusive cities.

VA OIG — Administrative Investigation, Prohibited Personnel Practice and Preferential Treatment, National Cemetery Administration, VA Central Office

July 22, 2014 Comments off

Administrative Investigation, Prohibited Personnel Practice and Preferential Treatment, National Cemetery Administration, VA Central Office (PDF)
Source: U.S. Department of Veterans Affairs, Office of Inspector General

The former Under Secretary for Memorial Affairs engaged in a prohibited personnel practice when he created a position and preselected an employee for that position. He also engaged in preferential treatment of an NCA contractor when he developed a less-than-arm’s-length relationship with the contractor. Further, NCA improperly gave the contractor sole-source contracts to provide one-to-one services to select NCA employees.

Moving Up or Standing Still? Access to Middle-Skilled Work for Newly Arrived Migrants in the European Union

July 22, 2014 Comments off

Moving Up or Standing Still? Access to Middle-Skilled Work for Newly Arrived Migrants in the European Union
Source: Migration Policy Institute

Over the past 15 years, migration in Europe has changed considerably. The economic boom in the early and mid-2000s and expanded mobility owing to European Union enlargement helped create new populations of migrants from both within and beyond the European Union. These recent migrants are more educated than earlier arrivals and many are highly skilled. Against the backdrop of the global economic crisis, which profoundly affected many migrant-receiving countries in Europe, governments are grappling with questions of how to ensure that immigrants are able to find employment and progress into better jobs over time.

This overview report caps a series of six country case studies evaluating the employment outcomes for foreign-born workers in the Czech Republic, France, Germany, Spain, Sweden, and the United Kingdom. The study examines how easy it is for newcomers in the European Union to establish themselves in destination-country labor markets in the first ten years after arrival, and how well they are able to move out of unskilled work and into middle-skilled jobs.

Flattening Tax Incentives for Retirement Saving

July 19, 2014 Comments off

Flattening Tax Incentives for Retirement Saving
Source: Brookings Institution

The United States’ pension system has failed millions of workers who enter into retirement with very limited assets relative to what they need to live securely the rest of their lives. According to Survey of Consumer Finance data, about 40 percent of households headed by someone near retirement (ages 55–64) do not hold any assets in retirement savings accounts. The median retirement savings account balance for all households in this age group is only $12,000 (Rhee 2013).

At the same time, the pension landscape has been gradually shifting away from defined benefit (DB) pension plans toward defined contribution (DC) plans. The shift is especially pronounced in the private sector. Between 1989 and 2012, the proportion of private industry full-time workers participating in DB pension plans declined from 42 to 19 percent, while the share participating in DC plans increased from 40 to 51 percent (Bureau of Labor Statistics 2013; Wiatrowski 2011). While DB plans often provide significant benefits for the lucky minority who have been in a single job for many years before retirement, DC plans can be more beneficial for a mobile workforce. At the same time, the transition from DB to DC plans has also presented new challenges.

Because DB pensions are tied to employers, long-term workers sometimes achieve adequate protection even without much planning on their own part. They are automatically enrolled and often do not even have to contribute. Benefits are automatically paid when workers retire. With DB pensions, employers bear the responsibility for ensuring that employees receive pension benefits. In contrast, DC retirement accounts are owned by employees. With most DC plans, the most familiar of which are 401(k)-type plans, workers bear the responsibility for their own financial security. Unless such plans include automatic features, workers have to actively decide to participate, how much to contribute, which investments to put their money in, and how to manage their benefits through retirement.

This paper focuses on the effects of the tax preferences for employer-sponsored defined contribution plans. Using two notable microsimulation models, we simulate the effect of changes in contribution limits to retirement plans, the saver’s credit, and the exclusion of contributions from taxable income on current and future taxes and retirement savings. We find that reducing 401(k) contribution limits would primarily increase taxes for the richest taxpayers; expanding the saver’s credit would raise saving incentives and lower taxes for low- and middle-income taxpayers; and removing the exclusion for retirement saving incentives and replacing it with a 25 percent refundable credit will benefit some taxpayers—mainly low- and middle-income taxpayers—while raising taxes and reducing retirement assets for others—primarily those at the top of the income distribution.

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