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Employment Insurance reform that promotes agency

Benefits for employee initiated time away from work should be delivered through individual accounts, and a new program for maternity and parental benefits should be started outside of Employment Insurance.

More than one out of every three dollars distributed through the Employment Insurance program are for so-called Special Benefits, those parts of the program associated with maternity and parental leave, with caregiving, and with sickness.

The fact that the COVID19 pandemic is a health crisis with important job market consequences has sharply exposed and widened gaps not just in EI’s coverage and delivery of job loss benefits, but also with these Special Benefits.

Constructive reform will require rationalization of coverage for demographic and family risks and should proceed in a way that recognizes both their collective and individual nature, with a delivery design that gives citizens agency in an incentive compatible way.

This can be best accomplished by delivering Special Benefits through individual accounts, while at the same time devising a new program for maternity and parental benefits outside Employment Insurance.

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Social Policy, Now: Next steps for income support and income insurance in Canada

Three next steps for social policy involve: 1. Maximizing auto-enrollment and just-in-time program delivery; 2. Offering full income support with engagement; and 3. Offering broad income and earnings insurance with agency. In this post I introduce the detailed discussion of these proposals that you can also download.

 

On March 24th, 2020 the Government of Canada Tabled Bill C-13, “An Act respecting certain measures in response to COVID-19,” in the House of Commons, and the next day the Bill received Royal Assent, unleashing the most extensive and quickest change to Canadian social policy in living memory, if not in the history of the country.

The Canada Emergency Response Benefit is the most notable part of the Bill, offering $2,000 of income support every four weeks to all working age Canadians who made at least $5,000 in the previous 12 months and lost their source of income due to the COVID-19 crisis.

Almost immediately the public policy discussion turned to “what’s next?” Certainly this was so in the short-term as the government and the public service became fully engaged in meeting the evolving needs of citizens and businesses in response to the most serious health and economic crises the country has experienced since World War II.

But increasingly, as the weeks and months passed, it was also so in the longer term: What’s next for the design of social policy in light of the needs and the gaps that the COVID-19 crisis has revealed?

This is the question I address in a detailed presentation that you can download.

In this post I introduce the issues and options for discussing the next steps for social policy, the word “Now” in the title having three meanings that guide this approach.

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Inequality from the Child’s Perspective: Social mobility in pandemic times

Watch my presentation about the three ways the disruptions and stresses of the COVID19 pandemic threaten the future prospects of children, the implications they have for the conduct of public policy, and the possibilities for future research.

This presentation was offered to the “Inequality by the Numbers” virtual workshop organized by The Stone Center on Socio-Economic Inequality at The Graduate Center, City University of New York. The workshop includes a host of other presentations by my colleagues at The Stone Center and the affiliated fellows. Check them all out at this link: https://stonecenter.gc.cuny.edu/news-and-commentary/inequality-by-the-numbers-2020/

The COVID19 pandemic is a threat to social mobility, as children in disadvantaged families will face more challenges in adulthood

The COVID19 pandemic will threaten social mobility. I examine four ways in which this is likely to happen in my presentation to the ZEW Seminar on COVID19 and inequality held on June 19th, 2020. This post summarizes the major messages.

Drawing on past research I see four aspects of inequality in the lower part of the income distribution that will be exacerbated and threaten the upward mobility of children raised in challenging circumstances.

But I begin by stressing that the United States has lower social mobility than many other rich countries in part because of a more vicious intergenerational cycle of low income, and this in turn has something important to do with race and a legacy of disadvantage among African-Americans.

The obvious challenge for public policy directed to enhancing equality of opportunity is to address the barriers that divide many from the mainstream, and to promote social inclusion of all.

1. Family is central to social mobility

But more specifically, COVID19 is likely to have exacerbated the challenges of parenting, family stress has likely gone up among some families, and in the extreme abusive relationships are more threatening and harder to leave. Separation and divorce may rise. From the perspective of the adult prospects of children, this will lead to delayed partnership formation, and more unstable relationships, even if it does not impact directly on their earning prospects.

2. Progressive public investment matters and should be supported

Social mobility is promoted by progressive public investment, particularly in health care and schooling. Many have already pointed out that the pandemic has exacerbated differences in schooling outcomes in the short term, as children in lower socio-economic families have gained much less from online learning than their counterparts. This is equivalent to the well documented loss in learning that occurs during summer months as well-to-do families enrich the child’s experiences in ways not available to others.

But in the longer run it will be very important to not cut back, indeed to increase, investment in high quality public schooling. An era of austerity in the aftermath of the 2008 Great Recession led to cuts in public investments that should be avoided this time around.

3. Job loss and income falls echo into the next generation

Finally, if temporary layoffs morph into permanent job loss, and if public income support is inadequate this will imply a long-lasting decline in family income that will have long run consequences for children. The adult earnings of children raised in families where the main breadwinner permanently lost a high seniority job in mid career suffered. The parental income loss echoed into the child’s adulthood, the children experiencing lower income and greater reliance on public income support as adults.

 

For more detail, download my presentation and use the links to useful resources to learn more: “Inequality from the Child’s Perspective: Social mobility in Pandemic Times”

 

The Canada Emergency Response Benefit, what now? Government policy as the economy re-opens should be rules-based

We have learned from past experience that public policy proceeds through two phases during major crises: first, as one influential economist has said, “whatever it takes”; then, “Oh my God, what have we done!”

The Canada Emergency Response Benefit represents the best of whatever-it-takes policy. The speed, the depth, and the sheer uncertainty of the duration and aftermath of the COVID19 crisis called for maximum flexibility in the making of public policy, and full discretion for leaders to respond quickly. This is equally the “In it altogether” phase. It motivates significant, widely available, and easy to get income support intended to avert a liquidity crisis and ensure the survival of many asset-poor households.

The CERB is a generous payment, minimally targeted, with an on-off eligibility rule that would normally create a significant work disincentive, a program totally appropriate for times when the standard rules of economic policy are flipped upside down. The work disincentives of this program are a feature, not a bug. For many there is no work to be had, while for others work should be avoided to maximize the physical distancing necessary to reduce the reproduction rate of the virus, and flatten the curve. Survival, not stimulus, is the watchword for policy.

But re-opening the economy in stages, according to risks of re-infection and flare-ups, makes clear that we are in-it-together only until we are not. And yet uncertainty continues to prevail: will the recovery be V, U, W, or L-shaped? At what point do temporary layoffs morph into permanent layoffs that lengthen spells of unemployment, and further depress consumer confidence?

In the “OMG, what have we done” phase, giving maximum flexibility and discretion to government may even add to uncertainty.

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Business cycles and the unemployment rate

The COVID19 crisis has unleashed an economic crisis that is unprecedented in its speed and in its depth, making these very interesting times to study macro-economics.

Lecture 9 of Economics for Everyone describes the anatomy of the business cycle, and relates these swings in macroeconomic activity to a statistic that, as much as any other, speaks directly to the lives of citizens, the unemployment rate.

So in this lecture we describe the anatomy of the business cycle, how macro-economists link changes in GDP from its potential to changes in the unemployment rate, and finally just exactly what is this statistic called the “unemployment rate” and how is it measured by statistical agencies.

Download the presentation as a pdf.

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