Research Topics

On November 5, 2024, American voters sent Donald Trump back to the White House. In 2020, he lost his bid for reelection to Joe Biden, after winning in 2016 against Hillary Clinton (but only thanks to the electoral college). This time, however, Trump won the popular vote. All the new energy that surrounded the Harris-Walz campaign was outmatched by the turnout from Trump supporters.
 
All polls—whatever one’s feelings about their reliability—kept pointing to the same defining issue in this (as in every other) election: the economy. Critical issues of democracy, abortion, and immigration filled the airwaves and political speeches, but the economy remained once again more powerful than any one of them.
 
Economists uniformly failed to grasp what these “concerns with the economy” were all about. They kept celebrating the decline in inflation and kept pointing to the fastest recovery in postwar history. The labor market—almost everyone declared—was now at full employment (a few of us strongly disagreed). Real wages, especially at the bottom, had finally risen for the first time in many decades. Fiscal policy had returned, juicing up economic growth with mega-contracts to firms and generous credits for renewable energy: all developments we hadn’t seen in decades.
 
This was an economy that most economists hadn’t seen in their professional lives. For 50 years, wages had been stagnating, jobless recoveries were the norm, labor force participation rates were falling. This time was different: the fastest recovery from any postwar recession, growth rates America hadn’t experienced in decades, prime-age employment at its historical peak, record peacetime government spending, and wage increases at the bottom of the income distribution. This time the recovery felt different. But despite the post-COVID splurge to salvage and repaint the old American economic engine, for many families it was the same old clunker under the hood.
 
And this is exactly what the various ballot measures on election night seemed to tell us. When presented with questions about the economy and their standard of living, voters expressed their displeasure with how things were going and they voted in support of pro-worker measures—especially in red states.
 
Here are some of the ways in which state ballot measures played out.
 
Paid Sick Leave
Three states had introduced measures requiring employers to provide paid sick leave to workers (Alaska, Missouri, Nebraska). In all three states, these measures passed. All three states voted for Trump.
 
The United States is the only advanced country without a federally mandated paid leave policy.
 
Minimum Wages 
When it came to wages, Alaska and Missouri passed measures to increase their minimum wage to $15/hour (in 2027 and 2026, respectively) and adjust them with the cost-of-living thereafter (a similar measure had already passed in Nebraska in 2022). A fourth state (Arizona) rejected a proposed measure to reduce wages of tipped workers.1 Arizona, too, voted for Trump.
 
In California, a minimum wage ballot measure (Prop 32), which would have raised the minimum wage to $18/hour, was rejected. It is unclear why, but CA voters had already passed a law in 2023 to raise the minimum wage to $16/hour in 2024.2 Massachusetts had proposed an unusual and generous increase in the wages of tipped workers (to reach 100 percent of the MA minimum wage by 2029—while continuing to earn tips), but that ballot measure was also rejected. While none of the existing or proposed minimum wages are living wages, it seems some red states are catching up to increases that have been happening in blue states.
 
Infrastructure, Climate, Health
In California,3 two infrastructure investment measures passed. Prop 2 authorizes a bond issue to go forward for public school and community college facilities, while Prop 4 is another bond issue for the support of water infrastructure, wildfire protection, and addressing climate risks.
CA also passed a measure regulating how federal money from drug reduction programs would be spent (Prop 34). Voters wanted 98 percent of such funds to go directly to patient care.
 
Housing and Prison Labor
What CA voters also wanted is to retain oversight over such bond issues, and therefore they defeated Prop 5, which reduced the votes needed to approve bond issues for housing and other public infrastructure from the current two-thirds majority to 55 percent. CA also rejected a measure to expand rent control (Prop 33) and a measure (Prop 6) that would have banned forced servitude (i.e., using prison labor as punishment). Prop 6 would have made prison labor voluntary and would have prioritized rehabilitation.
 
School Choice
Three states introduced a measure to amend the state constitutions and allow state money to go to private schools. In all three states, the measure failed (KY, CO, NE). Considering that school choice is a signature Republican policy, it is notable that two out of the three states that defeated this measure voted for Trump.
 
Reproductive Rights
Repealing Roe v. Wade was bad politics. Voters overwhelmingly supported measures to protect reproductive rights and the right to an abortion. Such measures passed in six states (AZ, CO, MD, MO, MT, NV). In some states, the right to an abortion is now a state constitutional right (CO, NV). Other state laws protected that right up to the point of fetal viability (AZ). New York passed a measure (Prop 1), which adds an anti-discrimination provision to the state’s constitution. NY reproductive rights activists argue that the right to an abortion is now subsumed under a wide range of other protections against unequal treatment.
 
Nebraska had two ballot measures. In the first one, NE voters rejected establishing the right to an abortion until fetal viability, while in the second ballot measure, they voted to enshrine in the constitution the current law prohibiting abortions after the first trimester, unless it is required due to medical emergencies, sexual assault, or incest. In South Dakota and Florida, the proposed constitutional right to an abortion also failed.
 
Right to Vote 
Anti-immigrant rhetoric dominated this election cycle, leading to uniform support for “citizenship requirement to vote” measures wherever they were introduced (IA, ID, KY, MO, NC, OK, SC, WI). In Nevada, voters approved a proposal to amend the state constitution to require voter identification for in-person and by-mail voting. To become law, this measure will need to be approved a second time during the 2026 election.
 
Economic Signals
While the sample of ballot measures that dealt with economic issues in this election cycle is small, it still makes clear where the electorate’s anxieties lie. Red states voted to protect workers, supporting minimum wage increases and mandated paid sick leave. Voters in CA and MA didn’t go for another round of measures, perhaps because they had supported similar increases in recent history. Still, CA voters supported measures to strengthen healthcare, schools, and public infrastructure.
 
For those who remember the politics of school vouchers from the Betsy DeVos area, it is notable that red states rejected using public funds for private school vouchers.
 
While Democrats rightfully singled out abortion and democracy as core issues in this election, and zeroed in on housing affordability and childcare support, they said very little about uniformly popular policies like raising the minimum wage and mandating paid family leave.
 
We should note that none of the minimum wage increases (in blue or red states) will deliver the living incomes that Americans are calling for. The MIT living wage calculator4 is a quick check for how much one must earn to make ends meet. There is no corner of the country where minimum wages come close. Still, these ballot measures are saying that working families can’t keep up.
 
When people say that inflation is their top concern, they are also saying that their jobs and paychecks aren’t allowing them to stay afloat. They are telling us that they need a break; they want paid leave, they want government funding to directly support their immediate needs: patient care, public schools, clean water. They don’t want the public’s money to go to already-thriving private schools.
 
Left Behind
The US saw the fastest recovery in postwar history and an unprecedented level of government spending, but for working families the economy has pretty much returned to its pre-COVID status quo. And that wasn’t pretty. But for a brief moment during the COVID crisis, Americans realized what was possible: they got universal healthcare, no questions asked. They could get student loan relief and a break from other debt and rent payment. Parents received a universal child allowance. All of it was possible and all of it disappeared. Still, Americans wanted and needed more.
 
Today we know that the job market is softening even as the unemployment level remains around its pre-COVID lows. Part-time-employment for economic reasons has been on the rise. Job-related anxieties have been clear in sentiment surveys for a while,5 but the problems are deeper and structural. American families’ standard of living has been slipping for a long time: housing, education, and healthcare have been consistently out of reach. The high grocery bill that American families get to see every day has only added insult to injury, even as official measures of inflation have fallen.
 
Failure
In 2008, the Queen of the United Kingdom asked how professional economists could fail to foresee the 2008 crisis. Well, not everyone failed—for one, we at the Levy Institute saw it—but the mainstream establishment didn’t. Today, we can say that most economists uniformly failed again. They failed in the US, in Europe, and everywhere authoritarianism is on the rise; failed to understand that patching up the economy after each crisis is not enough.
 
Economists fed this complacency with talk about a booming economy and “full employment” (which it was not), celebrating the increase in real wages at the bottom of the distribution, without sounding the alarm that it is not enough to keep up. They urged us to celebrate this once-in-a lifetime postwar growth, glossing over the clear sense among the electorate that the economy is profoundly broken and folks are fed up with the status quo.
 
Growth is not enough. This much should have been obvious long ago. Structural economic issues and insecurity still shape voters’ lives and continue to shape every dimension of politics. For those of us reading the economic tea leaves pointing to economic insecurity, the ballot measures corroborated the anxieties voters feel about their standard of living.
 
As one friend put it to me:
 We are two parents with three Master’s degrees between us and three kids. I make $15-23/hour teaching and have a second job. My husband has a full-time job with benefits but he just survived a first round of layoffs and we don’t know what’s next. Groceries are not affordable, childcare is not affordable, our property taxes continue to rise but we can’t even afford basic house maintenance. Our car repairs put us over the edge, while our kids are growing and their financial needs are expanding. Sending them to college is extremely expensive and our own student loans are impossible to pay. Health insurance has been a help but each year we pay more and more out-of-pocket expenses uncovered by Obamacare. Most jobs require advanced degrees but pay miserable wages. The list goes on and on. We live paycheck to paycheck and cannot afford entertainment or “wants” like we used to. 
That’s it. That’s the story of downward mobility for a middle-class American working family, with a clear punch list for policy makers. The same punch list we’ve known about for decades.
 
 
Notes

1. The Arizona measure (Prop 138) was particularly convoluted but it would have made it more difficult for tipped worker wages to keep up with increases in the state minimum wage. Currently, employers can only pay $3 below the state minimum wage: a gap that will be shrinking as a percentage of the minimum wage as the latter increases. The new proposal would have fixed that gap at 25 percent less than the state minimum wage.
2. https://www.dir.ca.gov/DIRNews/2023/2023-66.html
3. https://voterguide.sos.ca.gov/propositions/index.htm
4. https://livingwage.mit.edu/
5. https://www.cnbc.com/2024/05/29/us-workers-are-less-satisfied-with-nearly-every-aspect-of-their-jobs-survey-finds.html

The job guarantee (JG) is finally getting the public debate it deserves, according to Pavlina R. Tcherneva, and criticism is expected. Following the Levy Institute’s latest report analyzing the economic impact of a JG proposal and providing a blueprint for its implementation, Tcherneva responds to alarmist claims that the JG is (1) an expensive big-government takeover, (2) unproductive and impossible to manage, (3) dangerously disruptive to the private sector, and (4) inflationary.

The Vested Interests, Limits to Reform, and the Meaning of Liberal Democracy

I subject some aspects of Roosevelt’s “New Deal” to critical analysis, with particular attention to what is termed “liberal democracy.” This analysis demonstrates the limits to reform, given the power of “vested interests” as articulated by Thorstein Veblen.
 
While progressive economists and others are generally favorably disposed toward the New Deal, a critical perspective casts doubt on the progressive nature of the various programs instituted during the Roosevelt administrations. The main constraint that limited the framing and operation of these programs was that of maintaining liberal democracy. The New Deal was shaped by the institutional forces then dominant in the United States, including the segregationist system of the South. In the end, vested interests dictated what transpired, but what did transpire required a modification of the understanding of liberal democracy.

Design, Jobs, and Implementation

The job guarantee (JG) is a public option for jobs. It is a permanent, federally funded, and locally administered program that supplies voluntary employment opportunities on demand for all who are ready and willing to work at a living wage. While it is first and foremost a jobs program, it has the potential to be transformative by advancing the public purpose and improving working conditions, people’s everyday lives, and the economy as a whole.
 
This working paper provides a blueprint for operationalizing the proposal. It addresses frequently asked questions and common concerns. It begins by outlining some of the core propositions in the existing literature that have motivated the JG proposal. These propositions suggest specific design and implementation features. (Some questions are answered in greater detail in appendix III). The paper presents the core objectives and expected benefits of the program, and suggests an institutional structure, funding mechanism, and project design and administration.

Why Time Deficits Matter

We describe the production of estimates of the Levy Institute Measure of Time and Income Poverty (LIMTIP) for Buenos Aires, Argentina, and use it to analyze the incidence of time and income poverty. We find high numbers of hidden poor—those who are not poor according to the official measure but are found to be poor when using our time-adjusted poverty line. Large time deficits for those living just above the official poverty line are the reason for this hidden poverty. Time deficits are unevenly distributed by employment status, family type, and especially gender. Simulations of the impact of full-time employment on those households with nonworking (for pay) adults indicate that reductions in income poverty can be achieved, but at the cost of increased time poverty. Policy interventions that address the lack of both income and time are discussed.

Demographic Trends in US Labor Force Participation

US labor force participation has continued to fall in the wake of the Great Recession. Improvements in the US unemployment rate reflect the fact that more people are falling out of the labor force, not a stronger labor market. Controlling for changes in the demographic makeup of the workforce (i.e., gender, age, education, and race), Research Scholar Fernando Rios-Avila investigates trends in labor force participation across and within groups between 1989 and 2013. He finds that not all groups have lost ground equally, while participation rates for some groups have actually increased. Understanding these patterns in labor force participation is a necessary first step toward crafting effective policy responses.

Expanding Child Care and Preschool Services

This one-pager presents the key findings and policy recommendations of the research project report The Impact of Public Investment in Social Care Services on Employment, Gender Equality, and Poverty: The Turkish Case, which examines the demand-side rationale for a public investment in the social care sector in Turkey—specifically, early childhood care and preschool education (ECCPE)—by comparing its potential for job creation, pro-women allocation of jobs, and poverty reduction with an equivalent investment in the construction sector.

The Turkish Case

Produced in partnership with the International Labour Organization, United Nations Development Programme, and UN Women, this report examines the demand-side rationale for a public investment in the social care sector—specifically, early childhood care and preschool education (ECCPE)—by comparing its potential for job creation, pro-women allocation of jobs, and poverty reduction with an equivalent investment in the construction sector.

The authors find that a public investment of 20.7 billion TRY yields an estimated 290,000 new jobs in the construction sector and related sectors. However, an equal investment in ECCPE creates 719,000 new jobs in ECCPE and related sectors, or 2.5 times as many jobs. Furthermore, nearly three-quarters of the ECCPE jobs go to women, whereas a mere 6 percent of new jobs go to women following an expansion of the construction sector.

ECCPE expansion is also shown to be superior in terms of the number of decent jobs (i.e., jobs with social security benefits) created: some 85 percent of new ECCPE jobs come with social security benefits, compared to the slightly more than 30 percent of construction jobs that come with equivalent benefits. Both expansions are found to benefit the poor, with an ECCPE expansion targeting prime-working-age poor mothers of small children showing the potential to reduce the relative poverty rate by 1.14 percentage points. In terms of fiscal sustainability, an ECCPE expansion is estimated to recoup 77 percent of public expenditures through increased government revenues, while construction recovers roughly 52 percent.

The report concludes that in addition to supply-side effects, there is a robust demand-side rationale for expanded funding of ECCPE, with clear benefits in terms of decent employment creation, gender equality, poverty alleviation, and fiscal sustainability. These findings have important implications for expanded public investment in the broader social care sector as a strategy that embraces gender budgeting while promoting inclusive and sustainable growth.

This addendum to our June 2014 report, “Responding to the Unemployment Challenge: A Job Guarantee Proposal for Greece,” updates labor market data through 2014Q3 and identifies emerging employment and unemployment trends. The overarching aim of the report, the outcome of a study undertaken in 2013 by the Levy Institute in collaboration with the Observatory of Economic and Social Developments of the Labour Institute of the Greek General Confederation of Labour, is to provide policymakers and the general public research-based evidence of the macroeconomic and employment effects of a large-scale direct job creation program in Greece, and to invite critical rethinking of the austerity-driven macro policy instituted in 2010 as a condition of the loans made to Greece by its eurozone partners. 

To mobilize Greece’s severely underemployed labor potential and confront the social and economic dangers of persistent unemployment, we propose the immediate implementation of a direct public benefit job creation program—a Greek “New Deal.” The Job Guarantee (JG) program would offer the unemployed jobs, at a minimum wage, on work projects providing public goods and services. This policy would have substantial positive economic impacts in terms of output and employment, and when newly accrued tax revenue is taken into account, which substantially reduces the net cost of the program, it makes for a comparatively modest fiscal stimulus. At a net cost of roughly 1 percent to 1.2 percent of GDP (depending on the wage level offered), a midrange JG program featuring the direct creation of 300,000 jobs has the potential to reduce the unemployed population by a third or more, once indirect employment effects are taken into account. And our research indicates that the policy would do all this while reducing Greece’s debt-to-GDP ratio—which leaves little room for excuses.

This report presents the findings from a study undertaken by the Levy Institute in 2013 in collaboration with the Observatory of Economic and Social Developments of the Labour Institute of the Greek General Confederation of Labour. It uses as background the 2011 Levy Institute study “Direct Job Creation for Turbulent Times in Greece,” which focused on the need for direct job creation to address rising unemployment. The focus in this report, however, is different. Here, the aim is to make available to policymakers and the broader public research-based evidence of the macroeconomic and employment effects of a large-scale program of direct job creation program—a cost-effective and proven policy response. The ultimate goal of this undertaking is to draw urgently needed attention to the worsening levels of unemployment in Greece, and to invite critical rethinking of the austerity-driven macro policy instituted in 2010.

Gauging the severity of poverty in a given country requires a reasonably comprehensive measurement of whether individuals and households are surpassing some basic threshold of material well-being. This would seem to be an obvious point, and yet, in most cases, our official poverty metrics fail that test, often due to a crucial omission. In this policy brief, Senior Scholar Ajit Zacharias, Research Scholar Thomas Masterson, and Research Associate Emel Memiş  present an alternative measure of poverty for Turkey and lay out the policy lessons that follow. Their research reveals that the number of people living in poverty and the severity of their deprivation have been significantly underestimated. This report is part of an ongoing Levy Institute project on time poverty (the Levy Institute Measure of Time and Income Poverty), which has produced research on Latin America, Korea, and now Turkey, with the aim of extending this approach to other countries.

The Levy Institute Measure of Time and Consumption Poverty for Turkey

Official poverty lines in Turkey and other countries often ignore the fact that unpaid household production activities that contribute to the fulfillment of material needs and wants are essential for the household to reproduce itself as a unit. This omission has consequences. Taking household production for granted when measuring poverty yields an unacceptably incomplete picture, and therefore estimates based on such an omission provide inadequate guidance to policymakers.

Standard measurements of poverty assume that all households and individuals have enough time to adequately attend to the needs of household members—including, for example, children. These tasks are absolutely necessary for attaining a minimum standard of living. But this assumption is false. For numerous reasons, some households may not have sufficient time, and they thus experience what are referred to as “time deficits.” If a household officially classified as nonpoor has a time deficit and cannot afford to cover it by buying market substitutes (e.g., hire a care provider), that household will encounter hardships not reflected in the official poverty measure. To get a more accurate calculus of poverty, we have developed the Levy Institute Measure of Time and Consumption Poverty (LIMTCP), a two-dimensional measure that takes into account both the necessary consumption expenditures and household production time needed to achieve a minimum living standard.

The Levy Institute Measure of Time and Consumption Poverty (LIMTCP) is a two-dimensional measure that takes into account both the necessary consumption expenditures and the household production time needed to achieve a minimum standard of living—factors often ignored in official poverty measures. In the case of Turkey, application of the LIMTCP reveals an additional 7.6 million people living in poverty, resulting in a poverty rate that is a full 10 percentage points higher than the official rate of 30 percent. 

Official poverty lines in Korea and other countries ignore the fact that unpaid household production contributes to the fulfillment of material needs and wants that are essential to attaining a minimum standard of living. By taking household work for granted, these official estimates provide an inaccurate accounting of the breadth and depth of poverty—and can lead policymakers astray.

Why Time Deficits Matter for Poverty

We cannot adequately assess how much or how little progress we have made in addressing the condition of the most vulnerable in our societies, or provide accurate guidance to policymakers intent on improving each individual’s and household’s ability to reach a basic standard of living, if we do not have a reliable means of measuring who is being left behind. With the support of the United Nations Development Programme and the International Labour Organization, Senior Scholars Rania Antonopoulos and Ajit Zacharias and Research Scholar Thomas Masterson have constructed an alternative measure of poverty that, when applied to the cases of Argentina, Chile, and Mexico, reveals significant blind spots in the official numbers.

The Importance of Time Deficits

Standard poverty measurements assume that all households and individuals have enough time to engage in the unpaid cooking, cleaning, and caregiving that are essential to attaining a bare-bones standard of living. But this assumption is false. With the support of the United Nations Development Programme and the International Labour Organization, Senior Scholars Rania Antonopoulos and Ajit Zacharias and Research Scholar Thomas Masterson have constructed an alternative measure of poverty that, when applied to the cases of Argentina, Chile, and Mexico, reveals significant blind spots in the official numbers.

The paper evaluates the fiscal policy initiatives during the Great Recession in the United States. It argues that, although the nonconventional fiscal policies targeted at the financial sector dwarfed the conventional countercyclical stabilization efforts directed toward the real sector, the relatively disappointing impact on employment was a result of misdirected funding priorities combined with an exclusive and ill-advised focus on the output gap rather than on the employment gap. The paper argues further that conventional pump-priming policies are incapable of closing this employment gap. In order to tackle the formidable labor market challenges observed in the United States over the last few decades, policy could benefit from a fundamental reorientation away from trickle-down Keynesianism and toward what is termed here a “bottom-up approach” to fiscal policy. This approach also reconsiders the nature of countercyclical government stabilizers.

Countries in crisis round the world face the daunting task of dealing with abrupt increases in unemployment and associated deepening poverty. Greece, in the face of her sovereign debt crisis, has been hit the hardest. Remediating employment policies, including workweek reductions and employment subsidies, abound but have failed to answer the call satisfactorily. Direct public-service job creation, instead, enables communities to mitigate risks and vulnerabilities that rise especially in turbulent times by actively transforming their own economic and social environment.

With underwriting from the Labour Institute of the Greek General Confederation of Workers, the Levy Economics Institute was instrumental in the design and implementation of a social works program of direct job creation throughout Greece. Two-year projects, funded from European Structural Funds, have begun.

This report traces the economic trends preceding and surrounding the economic crisis in Greece, with particular emphasis on recent labor market trends and emerging gaps in social safety net coverage. While its primary focus is identifying the needs in Greece, broader lessons for direct job creation are highlighted, and could be applied to countries entertaining targeted employment creation as a means to alleviate social strains during crisis periods.

President Dimitri B. Papadimitriou and Research Scholar Greg Hannsgen make the case that the recession has turned into a prolonged and very unusual slump in growth, preventing a labor-market recovery—and the government lags far behind in creating the new jobs needed to deal with this disaster.

There is little mystery to explaining our current high levels of unemployment. The Bureau of Economic Analysis recently revised its figures on GDP growth, and revealed that not only was the recession worse than we realized, but recent growth rates have been overstated as well. The hole, in other words, was deeper than we thought, and we have been climbing out of it at a slower pace. Simply put, the economy has failed to recover to the point where it can be expected to generate sufficient job growth. In the event that Congress should turn its attention away from the (so far) purely notional dangers of rising debt levels and back toward the immediate and tangible jobs crisis, it might consider a solution that has been overlooked so far: job creation through social care investment.

The slow recovery of the job market after the recessions of 2001 and 2007–09 has fostered concerns that the link between output growth and job creation has been severed. Between 2000 and 2010, the employment rate for males plunged from 71.9 to 63.7 percent—a decline that can be accounted for almost entirely by a fall in the employment rate for the disabled members of this group.

Research Scholar Greg Hannsgen examines whether the Great Recession disproportionately affected the job prospects of disabled workers, and whether the long-run fall in employment among the disabled can be blamed largely on the design of Social Security disability insurance. His findings? At least since 2008, the ongoing fall in the probability of being employed has strongly affected the job prospects of both the disabled and the nondisabled, and the accelerated declines since 2007 hint at an important, and negative, role for the recent recession. Hence, a government jobs initiative such as an employer-of-last-resort program, and not just long-term improvements in entitlement programs, is still very much apropos.