The Unassuming Economist

From a new post by Timothy Taylor:

“The Aspen Institute Economic Study Group has published a collection of 12 papers on the theme Expanding Economic Opportunity for More Americans Bipartisan Policies to Increase Work, Wages, and Skills, edited by Melissa S. Kearney and Amy Ganz (February 2019). I’ll list the complete Table of Contents for the volume below. Here, I’ll just focus on four of the proposals that struck me as especially thought-provoking: caught

1) A Boost for Community Colleges

From “A Policy Agenda to Develop Human Capital for the Modern Economy,” by  Austan Goolsbee, Glenn Hubbard, and Amy Ganz:

The United States should make a bold and dedicated commitment to increasing the skills and productivity of its workforce by leveraging the potential of the community college sector. We propose a federal grant program to provide new funding to community colleges, contingent on institutional outcomes in degree completion rates and labor market outcomes. We believe a program of a similar scale to the 19th century Morrill Land Grant Program, which dramatically expanded access to higher education for working-class Americans, is needed to ensure our workforce meets the demands of the modern economy. …

In 1910, fewer than 10% of Americans had a high school degree. By 1935, nearly 40% of the population had earned their degrees. This inflection point came from substantial new investments in the nation’s education resources. We aim to achieve increases of a similar magnitude …by 2030:

1. Close the completion gap between two-year college students aged 18 to 24 and their peers at four-year institutions by increasing the average completion/transfer rate among 18- to 24-year-olds at community colleges from 37.5% to 60% by 2030.3 This would result in 3.6 million additional 18- to 24-year-olds with college degrees in 2030.
2. Increase the share of Americans aged 25 to 64 with a college degree or other high-quality credential from 46.9% to 65% by 2030, which reflects the expected share of jobs requiring advanced skills by that year. This goal would require 28 million additional workers to earn first-time degrees or high-quality credentials by 2030. …

We estimate an annual investment of $22 billion.

2) A Boost for Apprenticeships

From “Scaling Apprenticeship to Increase Human Capital,” by Robert I. Lerman

[T]he United States has lagged far behind other developed countries—countries like Germany and Switzerland, but also Australia, Canada, and England—in creating apprenticeships. In these countries, apprentices constitute about 2.5-3.0% of the labor force, or about 10 times the U.S. rate. Increasing the availability of apprenticeships would increase youth employment and wages, improve workers’ transitions from school to careers, upgrade those skills that employers most value, broaden access to rewarding careers, increase economic productivity, and contribute to positive returns for employers and workers. …

The experiences of Australia, Canada, and England demonstrate that scaling apprenticeship is quite possible, even outside countries with a strong tradition of apprenticeship. While none of these countries have the strong apprenticeship tradition seen in countries like Austria, Germany, or Switzerland, they have nonetheless grown significant programs. In fact, if apprenticeships as a share of the U.S. labor force reached the levels already achieved in Australia, Canada, and England (on average), the United States would attain over 4 million apprenticeships, about 9 times the current number of registered apprenticeships in the civilian sector. …

Overall, the federal government has devoted less than $30 million (per year) to the Office of Apprenticeship (OA) to supervise, market, regulate, and publicize the system. Many states have only one employee working under their OA. Were the United States to spend what Britain spends annually on apprenticeship, adjusting for differences in the size and composition of the labor force, it would provide at least $9 billion per year for apprenticeship. In fact, the British government spends as much on advertising its apprenticeship programs as the entire U.S. budget for apprenticeship. …

Today, funding for the “academic only” approach to skill development in the United States dwarfs the very limited amounts available to market and support apprenticeship. Yet apprenticeship programs yield far higher and more immediate gains in earnings than do community or career college programs and cost students and the government far less.

3) Sharing the Costs of Higher Minimum Wages with a Tax Credit

From “The Higher Wages Tax Credit,” by David Neumark

In recent years, there has been a torrent of state and local minimum wage increases. For example, as of the end of 2017, 30 states (including the District of Columbia) had minimum wages above the $7.25 federal minimum wage, with an average difference of 26%. At the state and local level, California, New York, Seattle, and the District of Columbia have or will soon have a $15 minimum wage; other localities may follow. Finally, a change in the national political alignment could result in a $15 national minimum. …

While the effects of minimum wage increases are contested, it is impossible to dismiss the sizeable body of evidence that suggests minimum wage hikes reduce employment among the least skilled (including recent research that addresses criticisms of earlier evidence). In addition, it is uncontested that higher minimum wages do not target low-income families very well, in part because of the large number of teenagers earning the minimum wage, and in part because poverty is more strongly related to whether or not one works and how many hours one works, rather than low wages ….

I propose a Higher Wages Tax Credit (HWTC) to partially offset the costs imposed by minimum wage increases on firms that employ low-skilled labor. Following a minimum wage increase, the HWTC would provide a tax credit of 50% of the difference between the prior minimum wage and the new minimum wage, for each hour of labor employed; the credit would phase out at wages higher than the minimum wage, and as wage inflation erodes the real cost of higher nominal minimum wages. The HWTC would reduce the incentive for employers to substitute away from low-skilled workers in the face of minimum wage increases, thus mitigating the potential adverse effects of minimum wage increases while simultaneously preserving and possibly enhancing some of the benefits of minimum wage hikes.

4) Minimum Zoning to Ease Movement to Higher-Cost, Higher-Wage Locations

From “How Minimum Zoning Mandates Can Improve Housing Markets and Expand Opportunity,” by Joshua D. Gottlieb

Dramatic differences in income, productivity, and housing costs within the United States make geographic mobility important for spreading prosperity. But Americans’ ability to move to places like San Francisco, Boston, and New York in search of economic opportunities is limited by severe restrictions on new housing supply in these productive places.State-level Minimum Zoning Mandates (MZMs) allowing landowners to build at a state-guaranteed minimum density, even in municipalities resistant to development, would be an effective means of encouraging denser housing development. These MZMs would improve housing affordability, spread economic opportunity more broadly, and limit the environmental impact of new development. …

I propose that state governments adopt Minimum Zoning Mandates (MZMs). These MZMs would be explicit zoning codes that provide a baseline minimum density that land owners, such as developers, can invoke when municipal zoning and permitting processes prevent useful development.

The MZMs should provide all land owners with a meaningful right to build housing up to a certain density significantly beyond single-family houses. Medium-density rowhouses and small apartment buildings should be allowed in every location where any sort of development is allowed. This is the type of density that is associated with some of America’s most-loved neighborhoods: Greenwich Village and other parts of Lower Manhattan, Boston’s North End and South End, the Mission in San Francisco, Lincoln Park in Chicago, and much of historic Philadelphia. It meshes well with existing single-family homes, as we see in places like Cambridge, Massachusetts. MZMs need not enable high-rise condo towers that would change the character of leafy, low-density neighborhoods. Even medium-density zoning rules could generate interesting new neighborhoods and resolve the housing shortages in productive cities.”