Some large‐firm interviewees reported that before ARRA they provided some amount of free or reduced cost COBRA coverage for laid‐off workers, based upon the prior duration of employment. ...Several of these companies reported that they reduced or dropped this prior benefit in reaction to ARRA.
Saturday, June 8, 2013
Wednesday, June 5, 2013
The Rev. Andrew M. Greeley, who died on Thursday, was a creative and dedicated social scientist who taught economists and others that scholars help resolve controversies by making careful measurements.
Father Greeley was a Roman Catholic priest, well known outside of academic circles for his outspoken views on Church matters (the late Cardinal John Patrick Cody of Chicago refused to assign Father Greeley to a parish) and his best-selling mysteries and romance novels. But he also earned a doctorate in sociology at the University of Chicago in 1962 and was a senior study director at the National Opinion Research Center at Chicago.
Father Greeley actively participated in academic discourse at both of those institutions for the rest of his life. His participation included sharing wisdom and ideas with young social scientists arriving at the University of Chicago, as he did with me when I arrived in the early 1990s.
In his dissertation work, Father Greeley tried to help answer controversial questions by gathering better data. One anecdote from his graduate student days – a time when Americans were actively debating whether it would be appropriate to have a Catholic, John F. Kennedy, as president of the United States – succinctly illustrates Father Greeley’s approach.
He was interested in assertions that Catholics were not segregated from Protestants, especially in Midwestern cities like Chicago. As evidence against segregation, Father Greeley told me, many people pointed to Chicago institutions that included significant numbers of both Catholics and Protestants. The Beverly Country Club on the southwest side of the city was one of those institutions, and in fact had roughly equal numbers of Catholic and Protestant members.
Father Greeley wondered whether the club was nonetheless highly segregated on the inside, but, working long before the days of surveillance cameras and eye-recognition software, was faced with the challenge of measuring internal segregation. He approached the caddy master at the club, who kept records on which club members played golf and at what “tee time.” Up to four members could play golf together, and in doing so they would have a common tee time. Father Greeley was permitted to examine the tee sheets and found that Catholics and Protestants rarely shared a tee time: Catholics and Protestants might have been at the same club, but they were not golfing together.
(If you are wondering how tee sheets would indicate religion, Catholics in the Beverly neighborhood were primarily Irish and had distinctly Irish surnames. Moreover, Father Greeley was the assistant pastor at a Catholic parish in that neighborhood and knew many of the families).
Father Greeley’s passion to inform controversies with new and better data suited him well for his positions at the National Opinion Research Center, where in the early 1970s he helped initiate the General Social Survey, which continues today and is widely used in economics and other social-science research. For example, the survey results he examined helped overturn the belief that Catholics were less educated than the average American. He also helped fund expansions in the General Social Survey, and its international counterpart the International Social Survey Programme, to include additional topics and additional nations.
He and I talked about the welfare state, especially its differences between the United States and Western Europe. One point of view, still held today, is that Western Europeans are more compassionate toward their less fortunate neighbors. After all, the United States had traditionally devoted less of its national income to social programs than did France, Sweden and other nations. But Father Greeley noted that results from international surveys of volunteering and giving showed that Americans spent more money and time in volunteer work than Western Europeans did, so perhaps American compassion takes a different form.
Survey results are criticized when they go against the conventional wisdom. Father Greeley acknowledged that surveys have flaws but explained that conventional wisdom often has those flaws in spades.
“Everybody takes surveys,” he wrote. “Whoever makes a statement about human behavior has engaged in a survey of some sort,” adding:
The difference between the survey takers and the rest of generalizing humankind is that the former (usually) observe large numbers of people in a representative sample that reflects the total population and are precise about their methods of data collection and analysis. Precisely because the professional survey taker is honest about his methods, he becomes an easy target for loudmouth critics who appeal to ‘what everyone knows’ and ‘common sense.’
Wednesday, May 29, 2013
More people die in economic expansions, and fewer die in recessions. Whether and how policy makers should heed this pattern depends on the hitherto unknown links between mortality and economic activity.
Recessions can be stressful and depressing, especially for the people who lose their jobs. Suicide rates spike during recessions, and for that reason alone recessions have been called deadly. Two researchers, David Stuckler and Sanjay Basu, noted that suicides and binge drinking are positively correlated with unemployment and concluded that “Austerity kills” by adding to unemployment.
Even if we could be sure that austerity and related fiscal policies create recessions, it would be premature to conclude that they literally kill people. Industrial and construction accidents are more common in economic expansions, and less common in recessions because those industries’ activities follow the business cycle. Overtime hours may be more dangerous than average, and overtime is more common at the peak of the business cycle. Moreover, the share of people working in construction – one of the most hazardous industries – increases during expansions and falls during recessions.
Highway accidents also follow the business cycle because more vehicles are on the road during economic expansions, and fewer on the road during recessions. (Mr. Stuckley and Mr. Basu noted that the United States’ Great Depression of the 1930s also had abnormally low rates of fatalities due to traffic accidents.)
With more accidents at work and on the road during expansions, expansions have more deaths by such accidents, and recessions have fewer.
It turns out that the business cycle for suicides is more than offset by the business cycle for other deaths. Mortality and the unemployment rate are negatively correlated. Christopher J. Ruhm, a professor of public policy and economics at the University of Virginia, has looked at all causes of death and found that most of them – suicide was the exception – occur less frequently at the depths of the business cycle.
Perhaps most surprising is that the business cycle for overall deaths is dominated by the business cycle for deaths among elderly people, perhaps especially elderly women. Because so many elderly people are retired, they are especially unlikely to have recently been laid off from their job (which can lead to suicide), to drive their car to work hurriedly, or to take part in a dangerous construction project.
We don’t really know how the business cycle for economic activity is connected to the cycle for elderly deaths. One hypothesis is that economic expansions create air pollution, and air pollution kills elderly people. Another hypothesis is that nursing homes have more trouble retaining their staffs during expansions because they have to compete with other businesses. Perhaps family members who are busy at work during expansions spend less time helping their elderly relatives.
Life is valuable, so it may be at least as important to understand what determines mortality and its cycles as it is to understand what causes recessions.
Wednesday, May 22, 2013
Massachusetts and a few neighboring states are likely to experience the Affordable Care Act a lot differently than the rest of America.
Massachusetts is often held up as a window into America’s health insurance future, because it embarked on what came to be called the Romneycare reform six years ago. Like the Affordable Care Act provisions going into effect nationwide next year, Romneycare aimed to increase the fraction of the population with health insurance by imposing mandates on employers and employees and by subsidizing health insurance plans for middle-class families without employer plans.
Because the subsidized plans are available for only low- and middle-income families whose employers do not offer affordable health benefits, some analysts fear employers around the nation will drop their health benefits as the Affordable Care Act goes into full effect, resulting in millions of people losing the opportunity to get health insurance through an employer.
But some people say they believe this fear is likely to be unfounded, because the propensity of Massachusetts employees to receive employer-sponsored health insurance was hardly different after Romneycare went into effect than it was in the years before.
The details and dollar amounts in the Massachusetts health care law differ from the national Affordable Care Act, and for that reason alone I hesitate to infer too much from the Massachusetts experience. Even if the two laws were essentially the same, the effects in Massachusetts could be different than the national effects because Massachusetts has a different population and business environment than the rest of the nation.
Last week I explained how specific types of employers could be expected to drop their health benefits during the next couple of years: those employers that currently offer benefits but nonetheless pay much of their payroll to people living in households below 300 percent of the federal poverty line, who are eligible for the most generous federal subsidies as soon as their employer ceases to offer benefits.
Massachusetts has an extraordinary fraction (almost two-thirds) of its population above 300 percent of the federal poverty line, and as a result practically all Massachusetts employers will prefer to retain their health benefits over the next few years, even though a significant fraction of employers elsewhere will not.
One way to quantify the difference between Massachusetts employers and employers elsewhere is in the percentage of payroll going to employees from families below 300 percent of the poverty line. At a national level, the percentage varies from 4 percent in Internet publishing to about 50 percent in restaurants and private household employers. The national average is 20 percent, compared with 13 percent in Massachusetts.
Employers have a variety of factors to consider in their benefit offering decisions, but I have made some estimates that focus on the payroll-composition statistics noted above. By my estimates, employers with percentages of 26 to 35 percent of employees above 300 percent of the poverty level have a sufficiently high percentage that they are likely to have been offering health insurance benefits before the Affordable Care Act. Yet they have a low enough percentage that their employees gain on average if the employer health benefit is dropped and employees take the subsidies available through the Affordable Care Act’s health insurance exchanges.
About 10 percent of employees with health insurance live in a state and work in an industry with compensation percentages in the range where profits are to be gained by dropping employer health insurance. But none of them live in Massachusetts, and some states that border Massachusetts, including New Hampshire and Connecticut, are in a similar situation.
A number of states and industries – especially the industries I emphasized last week – have more than 35 percent of their payroll paid to people in families under 300 percent of the poverty line and are unlikely to be offering employee health benefits.
But those employers in Massachusetts who have 35 percent of their payroll paid to people in families under 300 percent of the poverty line are more likely to offer some kind of health benefit, in part because of Romneycare’s incentives to create “cafeteria plans” in which employees authorize pretax salary to be withheld from their paychecks for the payment of health insurance premiums.
Under the federal law, the Massachusetts cafeteria plans will lose some of their advantages to employers in terms of avoiding penalties for failure to offer health benefits.
Based on the combination of these two factors — that no Massachusetts industries have 26 percent to 35 percent of their employees under 300 percent of the poverty line, and that Massachusetts employers will lose the advantages of their cafeteria plans — I calculate that employers offering health insurance in Massachusetts are one-third as likely to drop their employee health plans over the next couple of years as are employers in the rest of the nation.
That’s because the percentage of the United States work force at risk of losing its employer insurance (because of the tendencies of their industry and states to have low- and middle income employees) is three times the percentage of the Massachusetts work force in the same situation.
Wednesday, May 15, 2013
A number of industries can expect big changes in employee health insurance in the next year or two, while others will continue with business as usual.
Beginning next year, states and the federal government intend to create opportunities for families to purchase health insurance, separate from their employers, through insurance “exchanges” in the states. Insurers and the federal government will heavily advertise the new plans. Most important, middle- and low-income families may qualify for valuable federal subsidies that will serve to reduce premiums and out-of-pocket health costs.
To qualify for subsidized exchange plans, workers cannot be offered affordable insurance by their employers. Paradoxically, employers will create subsidy opportunities for their middle- and low-income employees whenever they fail to offer health insurance.
On the other hand, an employer dropping its health insurance next year will put its high-income employees in a tough spot, because they will have to buy insurance on their own without the tax advantages they had in the past by obtaining health insurance through their employer. As a result, employers with relatively many high-income employees will be under pressure to keep their insurance, whereas an employer of middle- and low-income employees may find them asking for health insurance to be dropped from the employee benefit menu.
Administrative costs, rising premiums and other costs have already made a number of employers lukewarm about health insurance, but they offered it in order to attract employees who do not care to be uninsured or to end up on Medicaid. The new insurance opportunities that become available next year may give their employees enough of an alternative that the lukewarm employers can drop their plans.
Both of these situations are closely correlated across industries, which leaves me to suspect that we can readily predict the industries that will retain employer insurance and predict those that will drop whatever health benefits they currently have. The scatter diagram below displays Bureau of Labor Statistics data on several industries according to the percentage of their employees in families above three times the poverty line (horizontal axis) and the percentage of employers offering health benefits as of March 2012 (vertical axis).
I measured employees relative to three times the poverty line because that is the family income threshold beyond which the new exchange subsidies are less valuable than the income tax preference for employer-sponsored health insurance.
Industries like colleges, utilities and banking almost always offer health insurance, and about 80 percent of their employees will be getting a better deal on employer health insurance than they would from the exchange plans because their families are above three times the poverty line. For these reasons, I am confident that these industries will continue to offer health insurance to their employees in much the same way that they have in the past.
A couple of industries like “accommodation and food services” (i.e., restaurants), leisure and hospitality, administrative and waste services, and construction already have a mix of employers in terms of their health insurance offerings, so it would not be unusual from an industry perspective for those that currently have health plans to drop them during the next couple of years.
Moreover, the diagram shows how 45 to 60 percent of their employees do not come from families above three times poverty and therefore will have a significant federal health insurance subsidy waiting for them as soon as their employers drop coverage.
Employers that do not offer health insurance may be subject to penalties, but the penalties are not levied based on part-time employees, or levied on small employers, and even the penalties levied will be less than the subsidy opportunities created by an employer of middle- and low-income people that fails to offer health insurance.
For these reasons, I suspect that the stories we will hear about employers dropping insurance will disproportionately come from the industries shown in the lower left part of the scatter diagram, which collectively employ about 25 million people. Some employers in these industries have already discussed such plans.
Sunday, May 12, 2013
Do you believe the incentive effects related to the ACA will be more limited since: (i) they are more difficult to value/understand as compared to an unemployment check and (ii) the impact is less direct and comprehensive.
Thursday, May 9, 2013
- Obamacare is designed to subsidize high quality insurance plans for middle class people -- plans good enough for your U.S. Senator. Romneycare only subsidized Medicaid Managed Plans with benefits of far less value than the typical employer health plan.
- Under Obamacare, middle-class families can get subsidized health insurance for their entire family, including their children. As noted above, those plans are good enough for their Senator. Under Romneycare, the new subsidized plans were for adults only; families wanting subsidized insurance for their children had to apply for Medicaid.
- For the first time under Obamacare (with a brief exception under the American Recovery and Reinvestment Act), most workers outside of Massachusetts will obtain health insurance subsidies only by leaving their job or getting fired -- the economic equivalent of unemployment assistance. Romneycare did not introduce health insurance subsidies for the unemployed in Massachusetts, because the state has had such subsidies in place since the 1980s.
- Under Obamacare, middle-class persons leaving a job with health insurance are immediately eligible for subsidized health insurance. Under Romneycare, there is a six month waiting period, and even then only if the persons do not qualify for Medicaid.
- Both Obamacare and Romneycare have per-employee penalties for employers not offering insurance but, accounting for the business tax treatment of those penalties, the Obamacare penalties are more than ten times larger.
- Romneycare was designed to leverage the special federal tax treatment of employer-provided fringe benefits. Obamacare is designed to reduce the usage of that special federal tax treatment.
- Romneycare subsidies exclude families between 300% and 400% of the federal poverty line. Obamacare subsidies do not. Even if the two reforms had the same income cutoff, a larger fraction of Massachusetts would be above it because Massachusetts is a high income state.
- Employer-provided insurance was a lot more prevalent in Massachusetts before Romneycare than it is in the U.S. generally. ie., even if we ignore the penalty amounts and subsidy values, the fraction of the U.S. labor market directly experiencing the Obamacare penalties and subsidies will far exceed the fraction of the Massachusetts population experiencing Romneycare penalties and subsidies.
To learn more about Romneycare, take a look at the book The Great Experiment.
Wednesday, May 8, 2013
- A reduction in labor supply could reduce the quality of labor, with workers putting in less effort, or doing less to maintain their skills, or become less attached to the labor market. This tends to reduce cash earnings per hour because each hour is less productive. These have been major factors in the analysis of women's wages, where most economist believe that women's hourly earnings increased as a consequence of supplying more (see Becker 1985, Goldin and Katz 2002, Mulligan and Rubinstein 2008, and many others). See also some of the literature on unemployment insurance such as Ljungqvist and Sargent's paper on European unemployment.
- A reduction in labor supply or demand could increase the average quality of labor through a composition bias. See p. 17ff of my book and the references cited therein.
- Because of fringe benefits, cash hourly earnings are not the same as employer cost. As employer health insurance expenditure has been growing over time, the growth of cash hourly earnings has substantially under-estimated the growth of employer cost.
When employer costs are taken into account, it is unclear whether jobs are something that can be efficiently shared.
The idea behind work-sharing is that employers have a certain amount of work that needs to be done, and that the work can be divided by many employees working a few hours each or a few employees working many hours each. If hours per employee could be limited, by this logic employers would have to hire more employees to get the same amount of work done.
American labor law has traditionally placed some limits on employee hours, such as overtime regulations. While the recent Affordable Care Act does not strictly limit hours per employee, beginning next year it gives employers a strong push toward part-time employment by levying a significant fee per full-time employee and exempting part-time employees from the fee.
A number of employers have said they would change some work schedules to part time from full time to avoid some Affordable Care Act fees. Because part-time workers generally have fewer benefits than full-time employees, this could save employers a considerable sum. From the work-sharing perspective, the part-time employee exemption by itself would be expected to increase employment, because employers would have to hire more people (probably on a part-time basis) to complete work their employees used to accomplish when full time.
But it is possible that work-sharing would reduce employment rather than increase it, because it prevents employers from accomplishing their tasks at minimum cost, adding administrative and coordination expenses. Higher costs for employers may put them out of business, or at least reduce the scale of their business. When companies reduce the scale of their activities, that means fewer employees.
It is also possible that work-sharing would reduce employment by making jobs less attractive to people who desire full-time work. One reason that people sometimes justify commuting long distances to work or enrolling in demanding training programs – trucking and nursing are two such occupations — is that they expect to recoup those cost by taking advantages of opportunities to earn extra by working long hours.
Work-sharing proponents have credited Germany’s comparatively low unemployment rate to its adoption of a work-sharing program, because the program encourages German employers to reduce employee hours rather than lay workers off. Work-sharing proponents may be right, although Germany carried out a number of labor-market reforms at the same time, such as allowing businesses to use temporary workers more easily.
As the Affordable Care Act suddenly pushes business toward part-time employment, we economists will have an unusual opportunity to learn whether cutting employee hours creates jobs, or destroys them.