[Joint House and Senate Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 116-194
CONNECTING MORE PEOPLE TO WORK
=======================================================================
HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
NOVEMBER 20, 2019
__________
Printed for the use of the Joint Economic Committee
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
39-553 WASHINGTON : 2020
JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
SENATE HOUSE OF REPRESENTATIVES
Mike Lee, Utah, Chairman Carolyn B. Maloney, New York, Vice
Tom Cotton, Arkansas Chair
Ben Sasse, Nebraska Donald S. Beyer, Jr., Virginia
Rob Portman, Ohio Denny Heck, Washington
Bill Cassidy, M.D., Louisiana David Trone, Maryland
Ted Cruz, Texas Joyce Beatty, Ohio
Martin Heinrich, New Mexico Lois Frankel, Florida
Amy Klobuchar, Minnesota David Schweikert, Arizona
Gary C. Peters, Michigan Darin LaHood, Illinois
Margaret Wood Hassan, New Hampshire Kenny Marchant, Texas
Jaime Herrera Beutler, Washington
Scott Winship, Ph.D., Executive Director
Harry Gural, Democratic Staff Director
C O N T E N T S
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Opening Statements of Members
Hon. Mike Lee, Chairman, a U.S. Senator from Utah................ 1
Hon. Margaret Wood Hassan, a U.S. Senator from New Hampshire..... 3
Witnesses
Dr. Veronique De Rugy, Senior Research Fellow, Mercatus Center,
Arlington, VA.................................................. 5
Mr. Oren Cass, Senior Fellow, Manhattan Institute, New York, NY.. 7
Dr. Jay Shambaugh, Director, The Hamilton Project, and Senior
Fellow in Economic Studies, The Brookings Institution,
Washington, DC................................................. 9
Mr. Jose Ortiz, Jr., Executive Director, New York City Employment
and Training Coalition, New York, NY........................... 11
Submissions for the Record
Prepared statement of Hon. Mike Lee, Chairman, a U.S. Senator
from Utah...................................................... 32
Prepared statement of Hon. Margaret Wood Hassan, a U.S. Senator
from New Hampshire............................................. 32
Prepared statement of Dr. Veronique De Rugy, Senior Research
Fellow, Mercatus Center, Arlington, VA......................... 34
Prepared statement of Mr. Oren Cass, Senior Fellow, Manhattan
Institute, New York, NY........................................ 41
Prepared statement of Dr. Jay Shambaugh, Director, The Hamilton
Project, and Senior Fellow in Economic Studies, The Brookings
Institution, Washington, DC.................................... 52
Prepared statement of Mr. Jose Ortiz, Jr., Executive Director,
New York City Employment and Training Coalition, New York, NY.. 56
Report titled ``Labor Force Nonparticipation: Trends, Causes, and
Policy Solutions'' submitted by Senator Hassan................. 61
Response from Jay Shambaugh to Question for the Record Submitted
by Senator Klobuchar........................................... 63
Question for the Record to Jose Ortiz, Jr., Submitted by Senator
Klobuchar...................................................... 64
Question for the Record to Jose Ortiz, Jr., Submitted by Senator
Hassan......................................................... 64
CONNECTING MORE PEOPLE TO WORK
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WEDNESDAY, NOVEMBER 20, 2019
United States Congress,
Joint Economic Committee,
Washington, DC.
The Committee met, pursuant to notice, at 2:15 p.m., before
the Joint Economic Committee, Mike Lee, Chairman, presiding.
Representatives present: Schweikert, Beatty, and Frankel.
Senators present: Lee, Hassan, Cruz, and Peters.
Staff present: Melanie Ackerman, Robert Bellafiore, Sol
Espinoza, Harry Gural, Amalia Halikias, Sema Hasan, Colleen
Healy, Ziyuan Huang, Christina King, Wells King, Kyle Moore,
Hope Sheils, Kyle Treasure, Scott Winship, and Randy Woods.
OPENING STATEMENT OF HON. MIKE LEE, CHAIR, A U.S. SENATOR FROM
UTAH
Chairman Lee. Good afternoon, and thank you for joining us
for this hearing of the Joint Economic Committee.
The American labor market, which we will be discussing
today, is strong. The current economic expansion is the longest
that we have encountered in all of U.S. history. Our
unemployment rate has remained low, at or below 4 percent, for
the last 20 months and, staggeringly, encouragingly, it
continues to fall.
Average wage growth has of course slowed down a bit, but it
remains strongest for many workers who in the past have been
paid less well than others. The gains have been broadly shared.
African-American and Hispanic unemployment rates are today at
all-time historic lows. Female labor force participation is
approaching an all-time high, and analysts speculate that we
still at this moment have yet to reach full employment.
Yet, behind these indicators of very significant, robust
economic strength, there lies a worrisome long-term trend--what
Nicholas Eberstadt at the American Enterprise Institute has
called ``an invisible crisis.'' Many American men are leaving
the workforce altogether. Though on the rise, the employment-
to-population ratio for prime age men, those between the ages
of 25 and 54, is near levels that we have not seen in this
country for decades, since the Great Depression in fact.
Even in today's really strong, unusually good labor market,
we see that once top connections to the workplace have not only
started to slacken, but they have also started to fray. The
economic implications of such disconnection should be clear to
all, and anecdotally many of us have observed this in one
fashion or another. But the Joint Economic Committee's Social
Capital Project, as part of its mission to understand and
explain what we refer to as ``associational life in America,''
has studied the plight of these disconnected men and identified
potentially greater, more severe consequences for the health of
our families and our communities.
In its report, which bears the title ``Inactive,
Disconnected, and Ailing: A Portrait of Prime Age Men Out of
The Labor Force,'' the Joint Economic Committee's Social
Capital Project found that disconnected men are more socially
isolated, and they are less happy. And, that this is a problem.
They are more isolated and more disconnected than their
employed peers.
At the community level, the disappearance of work can lead
to the population brain drain and the decline of institutions
of civil society.
If we are to expand opportunity by strengthening families,
by strengthening communities and other institutions of civil
society, then we have to devote our attention to work, a means
of supporting ourselves and our families, a source of meaning
and of purpose, and a site for affirming and satisfying and
connecting relationships.
I hope our discussions this afternoon will give us
something of a clearer sense of how to connect more Americans
to this wellspring of opportunity and connectedness that we
need so much in our society for it to thrive.
At this afternoon's hearing, we will seek to better
understand the forces shaping the labor market and Americans'
connections to that labor market.
A variety of reasons have been offered to explain why fewer
Americans in their prime years are entering the workforce.
Several interdependent themes emerge from most analyses. We
have got declining economic dynamism, falling worker mobility,
stagnating wages, trade exposure, employment polarization,
skill-biased technological change, and an expanding safety net
that sometimes has implications beyond those that were intended
at the time of the creation of the program at issue.
Our next step will be to consider policy reforms consonant
with the most plausible explanations for declining prime age
labor force participation.
What barriers to opportunity can we identify first and then
try to remove? How might incentives to join the workforce be
strengthened? What might the government be doing to impair the
removal of those barriers? How might we more smartly invest
human and social capital to create new opportunities?
Possible solutions may involve reforming the safety net,
modernizing labor regulations, and increasing wage growth. The
Social Capital Project will cover a number of these topics in a
forthcoming report, all of them in fact. And that report will
in turn be informed by the insights of today's panelists.
I look forward to their testimonies, and am grateful to
each of our panelists for joining us today for this productive
conversation aimed at drawing disconnected Americans off the
sidelines and into the workplace.
I now recognize Senator Hassan for her opening remarks.
[The prepared statement of Chairman Lee appears in the
Submissions for the Record on page 32.]
OPENING STATEMENT OF MARGARET WOOD HASSAN, A U.S. SENATOR FROM
NEW HAMPSHIRE
Senator Hassan. Well thank you, Chairman Lee. Thank you to
our panelists for being here today.
Mr. Chairman, I appreciate today's focus, getting this
Committee to focus on the important issue of getting more
Americans to participate in our workforce. Members of both
parties agree that we must increase labor force participation.
While low unemployment rates in my home State of New Hampshire
and across the country are welcome news, we know that a low
unemployment rate can also present real challenges, from
businesses not being able to find workers, to additional
pressure being put on the productivity of our current
workforce.
For a variety of reasons, too many Americans are falling
out of the workforce, and a smaller percentage of Americans
participating in the workforce can drag on economic growth.
It is critical that we address the root cause that results
in people not seeking employment. And today's hearing presents
an opportunity to address those factors and look toward
bipartisan solutions.
To start, as our economy changes rapidly individuals may
not have the skills and supports that they need to enter and
remain in the workforce. And I have heard from businesses
throughout New Hampshire that one of their top challenges is
finding more qualified workers, even at entry level jobs.
Addressing this challenge requires us to both strengthen job
training efforts and remove the barriers that prevent too many
people from participating or remaining in the workforce.
I have introduced bipartisan legislation, The Gateway To
Careers Act, that would do just that. This bill would provide
grants to support partnerships between community or technical
colleges and workforce development partners such as State
workforce development boards, industry associations, and
community-based organizations.
These partnerships would help remove many of the barriers
that prevent too many people from completing a two-year degree
or credential by connecting them to support services, including
housing, mental health, and substance use disorder treatment,
assistance in obtaining health insurance coverage, offering
career counseling, transportation, and other services.
By strengthening job training and support services, we can
connect more people with the tools that they need to enter and
succeed in our changing economy.
Another systemic barrier that many Americans face is a lack
of access to paid leave and to child care. Frequently those who
want to work are held back by pressing family responsibilities
that make it impossible.
A recent report by the Hamilton Project showed that 9.6
million women who are not participating in our workforce list
family and home responsibilities as their primary reason.
And, Mr. Chair, I request that the Hamilton Project report,
which is called ``Labor Force Nonparticipation: Trends, Causes,
and Policy Solutions,'' be entered into the record.
Chairman Lee. Without objection.
[An excerpt from the report titled ``Labor Force
Nonparticipation: Trends, Causes, and Policy Solutions''
appears in the Submissions for the Record on page 61.]
Senator Hassan. Thank you. By enacting more family friendly
policies that enable people to balance their work and family
responsibilities, we can help more people join or rejoin the
labor market.
We also must break down employment barriers facing
traditionally disadvantaged communities. In 2018, Brookings
found that only 4 out of 10 working-age adults who experienced
disabilities are employed. So we also need to address the
challenges that those who experience disabilities encounter
entering the workforce.
As governor, I signed legislation banning employers from
paying workers with disabilities at a lower rate than the
minimum wage, making New Hampshire the first State in the
Nation to ban sub-minimum wages for people who experience
disabilities.
We must make this a Federal priority, which is why I have
co-sponsored the Transformation To Competitive Employment Act,
which would phase out the practice of paying a sub-minimum wage
to workers who experience disabilities nationwide.
We should also make sure that workers who experience
disabilities receive the support they need to succeed in the
workplace and are less likely to fall out of the labor market.
Finally, no conversation about increasing participation in
our workforce can exclude addressing the cost of higher
education. Right now, students face far too many obstacles in
getting the education that they need, particularly when it
comes to affordability.
No one who is pursuing higher education so that they can
build a better future for themselves and in turn for our
economy should have to put that goal on hold because they
cannot afford it. And they should not have to take out
substantial debt to do so, either.
I will continue working on strategies to increase college
affordability and to lower the burden of student debt so that
more workers can get the education that they need to thrive. We
can all agree that tackling our workforce challenges requires a
multifaceted and comprehensive approach. There is not a single
solution, and we have multiple opportunities to connect more
people to work.
I look forward to hearing more from our witnesses today,
and now I will turn it back to you, Chairman Lee.
[The prepared statement of Senator Hassan appears in the
Submissions for the Record on page 32.]
Chairman Lee. Thank you, Senator Hassan.
I would now like to introduce our panel of distinguished
witnesses. First we have Dr. Veronique De Rugy who is a Senior
Research Fellow at the Mercatus Center at George Mason
University. Her primary research interests include the U.S.
economy, the Federal budget, homeland security, taxation, tax
competition, elimination of the Export-Import Bank, and
financial privacy. Just a few small issues that do not affect
anything else [laughing].
Every one of them are issues of great importance.
Previously Dr. De Rugy had been a Resident Fellow at the
American Enterprise Institute. Also, a Policy Analyst at the
Cato Institute. And a Research Fellow at the Atlas Economic
Research Foundation.
So, Dr. De Rugy, welcome.
Oren Cass is a Senior Fellow at the Manhattan Institute,
where his work focuses on strengthening the labor market,
reforming the social safety net, and organized labor, and the
costs of regulation. Mr. Cass wrote a widely discussed book in
2018 titled ``The Wants and Wonder''--I am sorry, ``The Once
and Future Worker: A Vision for the Renewal of Work in
America.''
Before joining the Manhattan Institute, he was Domestic
Policy Director for Mitt Romney's 2012 presidential campaign.
Welcome, Mr. Cass.
We next have Jay Shambaugh, who is the Director of the
Hamilton Project and a Senior Fellow in Economic Studies at the
Brookings Institution. He is also a Professor of Economics in
International Affairs at the Elliot School of International
Affairs at the George Washington University. He served under
the Obama administration as a member of the White House Council
of Economic Advisers, where he was previously Chief Economist.
So thank you for joining us today, Mr. Shambaugh.
And we have Jose Ortiz, who is Executive Director of the
New York City Employment and Training Coalition. Mr. Ortiz has
spent his career building and overseeing programs at
organizations focused on education, leadership, innovation, and
workforce development. He previously served as the Managing
Director of External Affairs, Partnerships, and Business
Development at Pursuit, a Long Island City-based nonprofit that
prepares workers without college degrees for software
development jobs at some of the world's most innovative
companies. Welcome, Mr. Ortiz.
So thank you for joining us today. Dr. De Rugy, we will
start with you.
STATEMENT OF DR. VERONIQUE DE RUGY, SENIOR RESEARCH FELLOW,
MERCATUS CENTER, ARLINGTON, VA
Dr. De Rugy. Mr. Chairman, members of this Committee, thank
you for having me today. I am a Senior Research Fellow at the
Mercatus Center at George Mason University. So ensuring that
American workers can stay attached to the workforce is a worthy
goal, and in pursuit of this goal understanding what the
problems with the labor markets are or are not, and
understanding the reasons for the lack of attachment to the
labor force by some workers is key to designing the right
policy. And for that, to that effect, I will be making three
points.
So first, the labor market and the state of the American
workers are better than commonly suggested.
However, a small but sizeable segment of working-age
Americans have not shared in that progress.
Third, some government policies at the Federal, State, and
local levels today make it harder for some workers to tap into
a particular market in which workers are paid higher wages.
So first, as, Mr. Chairman, you have said, the unemployment
is at its lowest in 50 years, no matter how you measure it. So
is poverty. And while some argue that the real wages have been
stagnant over the past several decades, measured with the right
deflator and after adjusting for taxes and transfer, real wages
have unquestionably increased. The same is true of real median
household income, especially after adjusting for household
sizes.
Also, while millions of manufacturing and other middle-
skill jobs have disappeared, that decline has been more than
offset by the increase in high-skill jobs.
Second, despite this healthy employment number, some
Americans, disproportionately working age men, have dropped out
of the labor force entirely. This phenomenon has rightly
received serious attention from scholars and policymakers.
One conclusion of this research is that American workers
confronted with economic disruptions today face relatively new
and more serious problems than they were facing before. In the
past, economic shocks were followed by an increase in the
unemployment rate. But as people moved away to find jobs, or
change jobs in industry altogether, the unemployment rate would
go down. Well, not in this case.
Instead, Americans, especially those who were not college
educated, do not necessarily move away and remain in hard-hit
areas even if it means staying unemployed.
So my third point is that some policies reduce interstate
mobility, or they change incentives for workers on the margins
who work less or not at all. And they are in desperate need of
reform. So I will only cite three type of programs.
So the first one, which will not be a surprise to this
Committee, is land and zoning regulations. They have played an
oversized role in exacerbating work adjustment issues. These
regulations increase the cost of housing in higher-wage areas
and make it harder to move there.
Standard estimates are that even modest housing
deregulation would lead to a large increase in the supply of
housing in the most prosperous areas in the country, which
would give lower income workers greater access to higher-wage
labor markets.
Land and zoning regulations also create an incentive for a
low-skilled worker to stay where housing is cheap, even though
the job opportunities there are more limited.
Second, occupational licensing laws raise barriers between
workers and better job markets. These requirements operate as
barriers to interstate mobility as they vary between states and
cannot be transferred.
Occupational licensing also increases the price of goods
and services for consumers. In the case of services such as
child care, this effect is an impediment to working parents
wishing to stay attached to the workforce.
Third, in addition to the limits on access to better job
markets, some government policies may reduce a worker's
incentive to seek employment. Unfortunately, Social Security
disability incentive is one of these programs. The program was
created to support those struck with health conditions or
injuries that make it difficult or impossible to work, and it
continues, thankfully, to play that role.
But scholars have found that the program has also created
an incentive not to work for a rising number of adults with
limited earning potential who are physically able to work.
In conclusion, before policymakers rush to implement new
Federal Government programs to address worker adjustment
issues, we should acknowledge that some of the challenge in
connecting workers to the workforce can be created by existing
programs.
Removing these barriers would lead to more opportunities
and better lives for those who have been frozen out of the
gains enjoyed by most workers.
Finally, and I think this is important, while these reforms
may not be the whole answer at all to this challenge, a failure
to make these changes will make other reform efforts by the
Federal Government ineffective.
Thank you, and I am looking forward to your questions.
[The prepared statement of Dr. Veronique De Rugy appears in
the Submissions for the Record on page 34.]
Chairman Lee. Thank you, Dr. De Rugy. We will turn next to
Mr. Cass. I may have to go vote in a moment, but I will be
right back if I do. Thank you.
STATEMENT OF MR. OREN CASS, SENIOR FELLOW, MANHATTAN INSTITUTE,
NEW YORK, NY
Mr. Cass. Thank you, Chairman, Madam Vice Chair, and
members of the Committee. My written testimony focuses on three
topics.
First, explaining why in my view connecting people to work
is so important and not something the government benefits and
transfers can replace.
Second, reviewing the data on the declining health of the
labor market for men in particular, and the accompanying
decline in labor force participation.
And third, outlining the kinds of policies we might pursue
in response in areas ranging from regulatory reform, education
reform, trade and immigration policy, organized labor, a safety
net, and our programs of taxes and subsidies.
Here I would like to focus on two points in particular,
because certainly a wide variety of factors influence the long-
term slide in labor force participation for American men.
For instance, changes in cultural norms and home
environments may both be discouraging men from working and
reducing their capacity. The labor market, meanwhile, has
failed to generate attractive opportunities that prospective
workers are capable of seizing.
Attempts to allocate responsibility among these factors
have set off two robust, but in my view ultimately irrelevant,
debates. The first of these is, have wages technically risen or
fallen?
Men's median weekly earnings have fallen by seven percent
since 1979, if adjusted for inflation using the standard CPI
from the Bureau of Labor Statistics; but an alternative measure
from the Bureau of Economic Analysis suggests that earnings
have increased over the period by 12 percent.
Even using the more optimistic estimate, it is important to
recognize the gains hold only for men with college degrees--
excuse me, only for women with college degrees. All other
groups saw declines.
It is also worth noting that the problem is particularly
pronounced with younger men, exactly those who in many cases we
are most concerned with connecting to the workforce in the
first place.
The U.S. Census Bureau reports that between 1975 and 2016
the share of men aged 25 to 34 earning less than $30,000 per
year increased from 25 percent to 41 percent. And that of
course is among those who are working, ignoring the higher
share that are earning nothing.
I think it is also important to recognize when we discuss
these data that, while my colleague, Dr. De Rugy, is correct
that these data look different with respect to taxes and
transfers and household income, neither of those metrics is
relevant to how an individual worker would perceive the
decision to enter the labor market. If anything, at the margin
but increases in taxes and transfers are likely to have made
entering the workforce less attractive.
But ultimately, whether wages are slightly lower or higher
in real terms is beside the point. No one believes that a 5
percent wage decline over 40 years would produce a labor market
exodus while a 5 percent wage increase would flood the market
with new workers. The important fact, regardless, would be that
men's median earnings have fallen woefully behind the
trajectory of growth in the wider economy, and the rising costs
associated with achieving a middle class lifestyle.
Our concern ultimately is not only about the absolute value
of the wage, but also its relative value. The easiest way to
see this is to recognize that the fact that men may have
treaded water since 1970 is an arbitrary point of comparison.
We might just as well ask whether or not men are doing better
than they were in 1910. And if we truly believed in absolutely
that wage was all that mattered, we might posit that as long as
men were earning as much as they had been in 1910 there would
be no problem.
Obviously I do not think anyone believes that, and so we
should not necessarily believe that stagnation since 1970 is
any more acceptable.
The second robust but relevant debate centers on attempts
to allocate responsibility across the myriad factors that may
be influencing men's behavior.
Stagnated wages may be one problem, but many people view
the cultural problem to be even larger. And some worry that, if
it is truly a cultural problem, then policymakers would be
helpless.
In my view, that is not the right way of looking at it.
Regardless of how wage is assigned the various factors, the
question for policymakers today is not how we got into the
situation but how to get out of it. Huge, immovable cultural
and economic burdens may push toward harmful decisions, but so
too a number of factors push more constructively: behaving
responsibly, planning for the future, holding a job,
sacrificing for a family.
People are aware that these things really do have benefits.
And in the past in a world not unrecognizably different from
the present, with many critical conditions resting in similar
repose, men were more likely to work.
Whatever marginal shift changed outcomes for the worse,
other marginal shifts, even different ones, can cause just as
much change for the better. So whether major factors are
cultural, or whether major factors are ones that policymakers
cannot affect, the question for us for today is what factors,
economic or cultural, can policymakers affect?
This is obviously most strongly the case when it comes to
the labor market, the health of the economy, and the kinds of
jobs that are created. If more and better jobs are more
accessible to more people, I think most of us would agree, more
people would be more likely to work. And in achieving that
goal, I believe better public policy can help.
Thank you.
[The prepared statement of Mr. Oren Cass appears in the
Submissions for the Record on page 41.]
Representative Schweikert [presiding]. Thank you, Doctor.
And just a quick caveat for everyone else who has been staffing
those things, do understand. I may be up here alone, which has
always been one of my dreams----
[Laughter.]
Representative Schweikert. But you are on hundreds of
televisions right now around the Capitol with staff and others
watching you. So we cannot have as much fun as I would like to.
Doctor.
STATEMENT OF DR. JAY SHAMBAUGH, DIRECTOR, THE HAMILTON PROJECT,
SENIOR FELLOW IN ECONOMIC STUDIES, THE BROOKINGS INSTITUTION,
WASHINGTON, DC
Dr. Shambaugh. Thanks very much. Mr. Chairman, Madam Vice
Chair, members of the Joint Economic Committee, thank you for
inviting me to discuss this important topic. Getting more
people into the labor market and into jobs is a central part of
raising living standards.
The United States used to be a leader in labor force
participation rates, or LFPR, for both men and women, but now
substantially lags behind many other advanced economies.
Although overall U.S. LFPR has been stable since about
2015, it had been on a downward trend beginning around the year
2000. Much, but not all, of that decline is attributable to the
aging of the population as more adults are retirement age. If
we look across age groups, younger adults are participating
less than they used to, largely because more of them are in
school.
Adults over 55 are participating at higher rates than they
used to. And for those aged 25 to 54, what economists often
call prime-age workers, LFPR has been rebounding since about
2015 but is still below its 1999 peak. There is room in the
labor market for participation to rise.
Prime-age men have seen a persistent downward trend in LFPR
over the last half century, largely due to declining rates
among men with less education. And research has shown that this
group has seen a decline in demand for their labor. And prime-
age men with less than a high school education make about three
dollars less an hour than they did in 1980, adjusted for
inflation.
In my work with the Hamilton Project, we have argued that a
great deal can be learned about how to lift participation by
looking at the gaps across groups and the specific barriers
they face, and that is what I would like to focus on today.
For example, LFPR is 94 percent for prime-age men with a
college degree or more, but 86 percent for those with a high
school degree, and just 80 percent for those with less than a
high school degree. Taking steps to increase training and
education, along with steps to lift wages, could improve labor
market outcomes and directly lift participation for that group.
Low-wage U.S. markets are very unstable. And we can over-
estimate how many people are truly out of the labor force as
opposed to struggling to stay in it. Of those out of the labor
force in a given month who are not disabled, students, retired,
or care givers, at least three-quarters are actually back in
the labor force at some point in the next 16 months.
If we improve pay, schedules, bargaining power, and worker
rights in these jobs, we can make them more stable and that
could help participation. It is important to remember, though,
that women represent the largest pool of untapped labor in
today's labor market. Of the 22 million prime-age individuals
out of the labor force, almost 11 million list, quote, ``taking
care of family member'' as the reason. And 90 percent of those
individuals are women.
While some are home by choice, 35 percent of women who say
they want a job but are not working list family
responsibilities as the barrier. And evidence shows that better
availability of child care in particular for lower income
households would allow more who want to work to be in the labor
force, and that well-designed parental leave policies could
keep more women attached to the labor force after having
children.
There are also massive gaps in LFPR across places. In top-
ranked counties, prime-age LFPR is 88 percent, compared to 70
percent in bottom-ranked counties. And this gap dwarfs the
recent drop in nationwide LFPR. Place-based policies that try
to spur labor demand in struggling regions could lift national
participation.
There are also huge barriers to working for the formerly
incarcerated. African-American men have lower rates of
participation, likely due in part to disproportionate
incarceration rates, as well as what studies show to be
considerable discrimination in labor markets. Reducing the
punitiveness of the criminal justice system in combating these
barriers is important.
Finally, the second largest group out of the labor force
after care givers are those listing health or disability as a
barrier. We need better health care and treatment to keep
people in the labor market. It is important to note that it is
poor health, not the safety net, that is a major barrier to
work. Not all of those listing health as a reason for being out
of the labor force receive disability payments, and reported
health measures for this group show sharply worse health
relative to the overall population. Furthermore, there is no
evidence that increasing work requirements in SNAP or
introducing them into Medicaid lifts LFPR meaningfully.
Beyond removing barriers, creating jobs is also crucial. A
strong economy can raise wages, force employers to cast a wider
net to find workers, and draw people into the labor market.
Conversely, economic downturns lower LFPR and should be
minimized by making more use of automatic fiscal stabilizers.
Americans are trying to work, but they often face major
barriers. And it is reducing those barriers and maintaining
strong labor markets that should be a policy focus.
I look forward to any questions.
[The prepared statement of Dr. Jay Shambaugh appears in the
Submissions for the Record on page 52.]
STATEMENT OF MR. JOSE ORTIZ, JR., EXECUTIVE DIRECTOR, NEW YORK
CITY EMPLOYMENT AND TRAINING COALITION, NEW YORK, NY
Mr. Ortiz. Good afternoon, and thank you, Chairman Lee,
Senator Hassan, and Members of the Joint Economic Committee.
My name is Jose Ortiz, Jr., and I am the Executive Director
of the New York City Employment and Training Coalition. Every
day the workforce development system, including our 160-member
organizations that serve more than 500,000 under-served New
Yorkers, demonstrates that given the appropriate tools to
address specific individual and systemic challenges, people are
resilient and capable of learning at any stage of their lives.
The country is experiencing unprecedented economic growth.
And while we know that talent exists everywhere, in towns,
cities large and small, a significant percentage of people
across the Nation lack relevant work experience and
professional skill that would make them viable candidates for
employment across industries.
Research shows us that, while 53 percent of all jobs in
today's labor market are middle-skill, only 43 percent of U.S.
workers are trained at this level, which means that industries
cannot grow to their full potential, and American workers face
highly limited pathways into careers with good wages.
In addition to the moral imperative, there is an economic
imperative to increasing investments in workforce development.
Sixty-two percent of small- and mid-sized business leaders
reported that it is difficult to find skilled workers. Seventy-
nine percent of these business leaders also express their
support for new public investments in workforce policies.
There are roughly 75 million people who are unemployed,
under-employed, or not working but not counted in unemployment
figures. This includes (1) adults with post-secondary
credentials; (2) adults living in poverty; (3) individuals with
some college but no credential; and (4) young people ages 16 to
24 not in school or working.
Effective workforce programs contain critical components
that, when combined and structured to be reactive to each
individual's needs, provide people with deep interventions and
intensive services required to ensure successful entry and
growth in a career.
Recent data suggest that taxpayers reap as much as four
dollars for every one dollar spent on workforce programs.
Per Scholas, which provides tuition-free technology
training to adults across the country, is a clear example of
the impact of workforce programs. Per Scholas's track record
includes a 400 percent increase in graduates' post-training
income and an 80 percent placement rate into quality and stable
careers in the growing tech field.
Deris of Cincinnati is a 41-year-old Black man that
exemplifies the tenacity and potential that exists in all of
our communities. Having to drop out of college due to family
obligations, Deris spent years in ``tech adjacent'' jobs with
limited career growth.
As valedictorian of his 14-week IT Support course, he found
a job as a contractor with TEKSystems working on an internet
security team. His new confidence, in-demand skills, and
network of tech employers has enabled him to provide much more
stability for his family, and even prompted him to start his
own business.
In New York, there is a direct correlation with higher
unemployment rates among individuals who identify as Black,
Latinx, and/or female, making programs like Per Scholas--whose
students are 87 percent people of color and 30 percent women--
critical to closing that talent gap.
However, we know that this problem is also affecting non-
educated Whites across the Nation, and especially individuals
with additional challenges to employment such as criminal
justice histories or substance abuse issues.
To tackle these challenges, national organizations like
Seedco have targeted programs that combine in-demand skill
development and behavioral and interpersonal growth. Jared, a
24-year-old White man born and raised in rural Arkansas with an
early criminal history, sought out Seedco in Memphis,
Tennessee, seeking to transform his life through work.
Participating in Seedco enabled him to think critically
about his own choices, explore viable career pathways, and led
him to the Kingdom Low Voltage Apprenticeship Program. Jared is
currently earning $11.50 per hour with Torey Low Voltage
Communications, while training to become a certified
telecommunications technician. This is significantly higher
than the Tennessee minimum wage of $7.25.
Employment training programs like SEEKO are not only
critical to connecting more people to work, but are also
pivotal to our Nation's ability to remain competitive in the
face of automation.
Over the next 10 years, more than 10 percent of all
occupations can be fully automated. The same study found that
40 percent of all work activities have the potential to be
automated using current demonstrated technologies.
The largest occupational categories in the U.S. are also
the ones with the greatest potential for automation-related
displacement. Office support, construction, mining,
agriculture, forestry, fishing, hunting, retail trade,
accommodation, and food services, and manufacturing. The good
news is that job growth will net positive over the next 10
years.
As the stories of Deris and Jared and the organizations
that trained and supported them along the way show, we can
equip people with 21st century skills needed to create
sustainable futures for themselves and their families. This
task is enormous.
However, the Federal Government must ensure that workforce
development programs like the ones highlighted and the hundreds
that are not currently funded receive the support that they
need. Once successful, they will raise the standard of living
for all who reside in our towns and cities across America.
Thank you.
[The prepared statement of Mr. Jose Ortiz, Jr., appears in
the Submissions for the Record on page 56.]
Representative Schweikert. That is amazing. You hit the
time perfectly. In the spirit of love and bipartisanship,
Congresswoman Beatty.
Representative Beatty. Thank you so much.
Let me say thank you to all the witnesses. Please excuse me
for my lateness, but we have House Financial Services' Housing
Committee at the same time. But I have had the opportunity to
listen and to read your testimony and hear 50 percent, I guess,
of the testimony.
So, Mr. Cass, let me start with you. In reading your
testimony and words out of your book, ``The Once and Future
Worker,'' I find an interesting statement there. And let me
quote it, in your hypotheses that ``A labor market in which
workers can support strong families and communities is the
central detriment of long-term prosperity and should be the
central focus of public policy.''
And I think about, as we were walking over here we were
talking about child care and the expense of things. So I am
trying to figure out, is that statement saying that the
detriments are things that we have to do to support our
families that many people cannot afford?
For example, I just read something for child care. If you
have one child here in Washington, D.C., it can be anywhere
from $2,000 to $2,500 for that child. If you have two children,
that is more than some of the folks who work on my staff make.
And so what is the answer to that statement in your book?
What is it we should be doing in public policy? And then I am
going to come to an opioid question for you, Mr. Ortiz, since
you talked about drug addiction. And then, Mr. Shambaugh, I am
going to come back with a question for you.
Mr. Cass. Well thank you, Congresswoman. My view would be
that our goals should be an economy and a society in which
self-sufficient households can support themselves and their
families. And so----
Representative Beatty. But we know most people are not
self-reliant or self-sufficient when we look at the number of
people. I just left a hearing, talking about public housing,
and talking about poverty. One in five children go to bed
hungry at night. There are many disparities. When you think
about women of color, they make 74 cents on the dollar compared
to their White male counterparts.
So how do we get there?
Mr. Cass. Well, as I said, I think that should be the goal,
which means that we need to create a labor market that has
better paying jobs, and prepare people to work productively in
those jobs.
I think the question of----
Representative Beatty. Child support? Would you say a
public policy issue raising the minimum wage? We know for
someone in my district to even afford a two-bedroom apartment,
they need to make $18 an hour minimum wage. What do you think
about that as a policy change?
Mr. Cass. Raising the minimum wage to $18 an hour?
Representative Beatty. Or, $15. Pick a number.
Mr. Cass. Well I think this exercise of picking a number
underscores exactly why I do not think that is a sensible
response. I think what we wish people earned is a different
question from whether there are likely to be jobs available.
Representative Beatty. So let me ask it this way. Do you
think the minimum wage that we have across the country in many
of the communities like mine is sufficient to do what you are
saying?
Mr. Cass. I think that minimum wages should be set at the
local level based on local labor market conditions.
Representative Beatty. And I agree with you. So in our
market we know it is far too low. It would need to be a minimum
of somewhere between $15.
Mr. Cass. I am sorry if I as unclear. When I say ``local
labor market conditions,'' I do not mean with reference to what
things cost for people. I mean with reference to what the labor
market can support.
And so, while again we might wish that everybody were
earning a wage that allowed them----
Representative Beatty. Oh, I think the labor market could
support it.
Mr. Cass. Well do you know what the median wage in your
market is?
Representative Beatty. Yes. When we look at that, we know
that there are far too many people who are not making it. But
yet on the other hand, we know because of discrimination and
some of the disparities that you also have people who are not
being hired in that. So, you know, if we lived in an equal and
fair world, I would probably agree with you. But I am going to
run----
Mr. Cass. Well if I could say one thing just briefly, just
to clarify, when I asked what the median wage is, historically
economists have looked to the median wage. So what the person,
midway through the distribution, earns as a reference point for
what the labor market can support as a minimum wage.
And so nationwide, for instance, the median wage is still
only about $18 an hour. There are certainly local urban markets
where it is much higher and a much higher minimum wage could be
supported. But if you have a local market where the median wage
is $18 an hour, raising the minimum to $15 or $18----
Representative Beatty. No, no, I understand that. And we
are not into that, of course. I think I have 10 seconds, so I
was going to ask you a question, and I will get it out and I
will not be able to get the answer from you.
Representative Schweikert. I am hopeful you and I are going
to have two or three rounds.
Representative Beatty. Oh? Okay. Then I will yield back.
Representative Schweikert. Thank you, Congresswoman. I am
going to go off script a little bit because I actually, this is
one of the areas I am actually fascinated with, and I have
binder after binder. I have copies of some of your writings in
those binders. I was not going to be particularly jerky and
come in with some of my highlighted copies, saying many of the
things we knew a year ago, data-wise, and I understand the last
12 months is a small snapshot, appear to be wrong.
Can I give you the first--and I would like your thoughts,
and it is not a thought experiment because it has actually
happened--a year ago, we would all sit around this room and
look at the labor force participation numbers of millenials.
And then, come December, all of a sudden the BLS data had this
breakout, and it had continued, of millenial females. Walk me
through it, because I see that as an example of many of the
things we often talk about policywise, and this lever, and that
lever. Something happened, and we saw suddenly a gender
differential of movement into the labor force with millenial
females a year ago December, and it continued.
Help me understand why. Help me understand why the
differential. And is it an example of the debate we have had in
these rooms for decades of the levers we have as policymakers
turns out that maybe the ultimate lever is availability of
work?
Doctor, what did I see in those numbers? Why the sudden
separation a year ago in millenial males and females?
Dr. De Rugy. I actually really, although I am not a labor
economist, but I think where you are right is to actually raise
the possibility of some skepticism of what the Federal
Government can do. I mean, I think very often we think that the
Federal Government has the power to achieve a lot of goals. And
if we do not know exactly why things are happening, and we also
have a lot of evidence that projections often are not correct,
it may actually put in jeopardy this belief that the Federal
Government can do as much as it thinks.
Representative Schweikert. And my question was less wrapped
around the normal skepticism many of us carry, but more if
something was working how do we figure out what it was and do
more of it.
Mr. Cass.
Mr. Cass. I am sorry, I do not know anything about the
specific divergence in trends.
Representative Schweikert. Okay. Doctor, did you see it?
Dr. Shambaugh. Yes. I think there are a few things you can
point at. So the first is, I think--my guess is you are
referring to the 25- to 34-year-old group. So one thing that I
do think when we look at that group relative to say not just a
year ago, but relative to a few years ago, is--and this is not
the positive side of it, which is the birth rate is down. And
we do not have adequate child care for everyone who wants to
work. And more women in the 25- to 34-year-olds do not have
kids. It does not do it on a dime like you are talking about.
Representative Schweikert. I know that that is actually up
in the models, but that does not fit what we saw in that,
because it is a statistically significant number. And I am
just--it bothered me, because I have not seen anyone dive into
that.
Dr. Shambaugh. I think the other thing is, and I would say
it is two sides to what you are saying, when the labor market
is stronger it certainly brings more people into the labor
market. And when you ask why is it divergent between men and
women, I think a lot of it has to do with which parts of the
U.S. labor market we are doing better at that time.
And so the manufacturing and energy sides of the U.S. labor
market have been slowing, and those are not. And so those tend
to be more male, and that has the whole side lifting----
Representative Schweikert. The model would not--look, I
know you are freaky smart. I have you in my binders in lots of
places. But that would not equate to suddenly slowing down, and
then females suddenly exploding. It was not--the differential
was growth in actual participation.
Dr. Shambaugh. I would say one last piece, and this I mean
with all seriousness, which is: we always worry when we see,
the women's one was actually coming down a little bit when we
did not expect it to in the months before that, and then it
surged a little. And so I think there is also some noise in the
data.
Representative Schweikert. That is very possible. But the
trend has continued now for almost, what, three-plus quarters.
And it is statistically significant.
Mr. Ortiz--and I will do this with a quick anecdote, which
I despise when there are bells in this Committee because I
believe we have an obligation to do big-picture policy. Labor
market, Phoenix, Arizona. We are stunningly blessed right now.
But when we visit, when I visit like our homeless campus, they
have a stack of jobs there with St. Joseph's the Worker, and
the problem was not available labor, it was transportation. We
just put together an experimental project with, I think it is
the company Lyft, to actually cover that transportation gap.
If you were to think of outliers that are the barriers for
the participation of so many of those you have worked with, how
often is it actually transportation, and those types of
attributes, and not some of the things we would often
immediately move to?
Mr. Ortiz. So I appreciate the question. There are a number
of barriers and transportation is included in that. Child care
is one of the ones that came up. In New York City, and I cannot
speak to obviously the specific experience that you are talking
about in Arizona, but in New York City there are transit
deserts, locations that require multiple subways and/or buses
in order to get someone to work. So there is a statistical
connection and correlation for someone who is further away from
employment opportunities and higher poverty rates.
Representative Schweikert. Okay. And, forgive me, I know I
am over, but, Congresswoman, you can take all the time you--
well, within reason. But it is interesting that maybe in our
pockets was actually one of the solutions. There is a little
button for ride sharing that actually may actually be the way
we cover parts of at least that gap.
Congresswoman, please.
Representative Beatty. Thank you. Mr. Ortiz, let me go to
you. One of the things that I picked up in your testimony is
the importance of partnerships. As you described, it is
governments at all levels, business, educational institutions,
organized labor and nonprofits have a role to play. Through
those partnerships, we can identify the skills that will be in
demand in the future, and then help people build up on those
skills.
Can you discuss the importance of--how the importance of
collaborative partner-centric approach is to boosting the labor
market outcomes? Which models have been especially effective to
you?
Mr. Ortiz. Well I would just emphasize in terms of just in
general, in terms of partnerships to start, that no one
organization has all of the assets and skills to be able to do
everything that is required to make a labor market go.
And I think what we are experiencing in the workforce
system is that we need to have strong partnerships not just
with the businesses at the association level, but we need to
understand real-time data coming from employers to better
understand the implications on the type of training that is
required.
When it comes to the workforce development partners
themselves, those that are actually executing and providing the
training, even them, some of them are more specifically focused
on the skills development, while others are providing the
supportive services, the wraparound services that are important
for someone to be successful in a program.
And of course we need to work more closely with the
government to better understand where they can--how we can
better inform policy, where we can direct some of those
investments to help boost the economy and the labor market.
But ultimately I think what we are trying--when we say
``partnerships,'' what we are essentially saying is the most
effective programs that are the ones that are working with
multiple layers of organization. As the employers, they are--
you know, the programs are being driven by employer-informed
data in real time. They are working closely with government to
scale their programs. They are funded in multiple ways, et
cetera.
Representative Beatty. Thank you. And, Mr. Shambaugh, let
me go to you. I read something in your testimony that says:
Improving workers' pay, schedules, bargaining powers, workers
rights, that in these jobs it makes it more--if they are more
stable with those skills, it could help. Were you talking about
unions? It sounds like some of the language. Because if so--and
if not, you can answer it--do you think that has any effect on,
we have seen somewhat of a decrease in participation with some
of the unions?
Dr. Shambaugh. Thank you for the question. I think unions
are certainly one way to get workers better bargaining power. I
think there are--private-sector unions play a much smaller role
than they used to. Their membership has declined as a share of
private-sector workers, and that certainly reduces the
bargaining power of regular workers.
I think there are other things, whether it is getting rid
of non-compete contracts, getting rid of no-poach agreements
within franchises, whether it is wage transparency, many things
that are public policy rules we could take steps we could take
that would really strengthen the bargaining power of workers
and give them an opportunity to have somewhat more stable,
better-paying jobs. And here is where I agree very much with
Mr. Cass, that having better jobs here is one of the ways to
keep more people in the labor market. Because right now what we
see is them cycling in and out a lot, because the jobs are not
very stable. They cannot hold on to them very long, and that is
not a good environment to support a family or just to stay in
the labor market.
Representative Beatty. To piggyback on my colleague's
question about the women, maybe if we look at what the Bureau
of Labor Statistics has reported with the surge of women who
are Baby Boomers, it increased then. So it opened the door for
what may have been very difficult for me coming along. I would
not have thought of STEM. That did not exist. We would not have
thought about leading a construction demolition, or even an
engineer.
So when you look at what the Bureau of Labor Statistics is
saying up to the year 2024, that there is going to be another
surge. And many of them will be the millenial women because
they do not know that they could not have those opportunities.
Because I think we have done such a great job there. I think
that is another reason I asked the question, because they come
in wanting the same things that we have to wait to a certain
age to get.
You know, they drive the same cars. They live in condos.
They do not do rooming houses, and used cars that are 20 years
old that was handed-me-down. So I think you are going to see a
surge, because we have opened the door, thank goodness, for
women to be able to be anything they want to be.
And I think that is in part why in 2024 it looks like there
is going to be a surge, according to the Bureau of Labor
Statistics, of 77 percent, giving us an overall of like almost
48 percent of millenials and young women in the labor market.
So, thank you.
Chairman Lee. We will turn next to Senator Hassan.
Senator Hassan. Well thank you, Mr. Chair, for the
courtesy. And again thank you to the panelists for being here,
and apologies for the interruptions of Senate votes.
So, Mr. Shambaugh, I wanted to start with a question to
you. Families are often left making what is an impossible
choice between earning a paycheck and spending time with a
loved one in need, or taking care of their own personal health
care crisis.
And we know that women are often the ones who meet these
care-giving needs. As I mentioned earlier, the recent study
that you did with the Hamilton Project reported that far more
women say that they remain out of the labor force because of
their family and home obligations than men do.
Eight states and Washington, D.C., have enacted paid family
and medical leave policies to provide partial wages--partial
wage replacement to workers who need to care for a newborn or a
newly adopted child, provide care for a family member in need,
or address their own health care crisis.
So, Mr. Shambaugh, based on your research, do policies like
paid family and medical leave help improve labor participation
rates? And could they help close the gender gap in labor
participation?
Dr. Shambaugh. I think what we know about--thank you for
the question. I think it is incredibly important. And as we
mentioned, you know, a huge chunk of the people out of the
labor force who are prime age are people taking care of family
members.
And so trying to think about how to deal with that is
important. As we said, and I think you know, some of them are
choosing to do so by choice. It is a choice, right? And there
are people who want to be home taking care of someone. But it
is the case that roughly 35, or depending how you measure more
percent of women who are not in the labor force but want a job.
They say this is the problem.
And so I think on the one hand, yes, there is very good
evidence that well-designed parental leave policies can help
keep women engaged to the labor force. I think they also,
frankly, have huge benefits to families and children, as well,
and to infants. And so they are positive in their own right,
but they also can have, if designed right, positive labor force
impacts.
And then I think the child care side is the other very huge
one, which is we do spend a lot of money as a government on
child care. We just don't necessarily direct it towards the
families who need the help the most for whom it really becomes
the barrier to work. And I think that is a place we could do a
lot more.
Senator Hassan. Well that makes a lot of sense. I just came
from a subcommittee hearing looking at the challenges of the
growing incidence of Alzheimers, and the care-giving population
is often wives, daughters, and they are not in the labor pool
because they cannot be, and we do not recognize it. And that is
a whole other category, I think.
I wanted to follow up with another issue, which is housing.
So, Mr. Shambaugh, I travel all around my State and I
constantly hear from businesses about the challenges they have
in recruiting workers. According to the National Low Income
Housing Coalition, in New Hampshire a family would need to make
$23.23 an hour to afford a two-bedroom rental. That is the
equivalent of 3.2 minimum wage jobs. And the vacancy rate for
rentals is far below the national average, making it harder for
individuals to find and maintain housing in the communities
where they work.
Unstable housing can be a significant barrier to finding
stable employment and staying in the labor market. So in your
view what are the most important things we should be doing to
make it easier for workers to find and keep safe, stable, and
affordable housing?
Dr. Shambaugh. Thank you for the question. I think it is
hugely important that we now have a lot of trouble having
enough housing near where there are jobs. And that is a serious
constraint on people's ability to move, and it is a serious
constraint on their ability to find work.
And so I think local land use restrictions, unfortunately
they are not the purview of this Committee because they fall at
the local level often, although I think there are Federal steps
that could be taken, but they often prevent enough housing from
being built in the places where there are jobs. And that is a
real serious constraint.
I think there is also the fact that housing vouchers and
aid for housing are drastically in excess demand relative to
the supply, and people have to wait a long time to get help for
housing. And so that can be a constraint, as well.
But I think the issue of making sure people can live near
where there are jobs is a big part of why some people are not
working.
Senator Hassan. Well I thank you for that. We have our
overall housing vacancy rate in New Hampshire is less than one
percent, and it is making it, at all levels, extraordinarily
difficult to get people to move in and take jobs.
So thank you for your work. I am just about out of time,
and I know, Mr. Ortiz, you had been addressing the importance
of wraparound services as we help people pursue credentials or
degrees. I will follow up with a question to the record just to
make sure I get your full answer on that.
To all of the panel, I really appreciate your work and your
willingness to be with us today. Thank you.
Thank you, Mr. Chairman.
Chairman Lee. Thanks, Senator Hassan.
I want to talk for a minute about restrictions on entry
into the workforce. Dr. De Rugy, we will start with you.
Occupational licensing, as you have acknowledged, continues
to be a significant impediment for a lot of people getting into
the workforce. And it also tends, I think, to be something of a
barrier to interstate mobility, which in turn keeps a lot of
people out of the workforce, or at least in career paths that
are perhaps less fulfilling or less remunerative than they
would be otherwise.
Now a lot of states--and this is an interesting topic for
us to discuss here, because we have almost no authority over
occupational licensing here, just as we have almost no
authority over residential zoning and things like that. We do
have some authority at the margins. I have tried to highlight
the problem and underscore the need for reform in this area by
exercising what authority we have.
We have got plenary lawmaking authority under the so-called
Enclave Clause, Clause 17 of Article I, Section 8, over the
District of Columbia and other Federal enclaves. It is why in
the last Congress I introduced something called ``The Allow
Act,'' which would use Congress' Federal jurisdiction over D.C.
and Federal enclaves to bring out needed occupational reforms.
What other Federal changes, if any, would you suggest in
helping us to try to address the burden of excessive
occupational licensing? Any other ideas on that, as far as what
Congress could do? Or are they all at the State level?
Dr. De Rugy. Thank you for this question. I am actually
really reluctant of using the Federal Government to micro
manage State and local affairs. As costly as it a problem, I
think this may be a case, again apart from information, putting
out reports, which is not without value, I do not know that the
Federal Government, unfortunately, has a lot of things to do.
That said, there have been very successful challenges for
occupational licensing barriers before the Supreme Court.
Hopefully there will be more of them.
There is some good news because it does look like some
states are actually really seriously looking into the issue.
Arizona, I mean passed the first step into actually opening the
door to the transferability of licenses. It is not perfect,
because my understanding is that, you know, you can come and
work in Arizona, but then at some point you have to get the
Arizona license. I am not sure about this, but I think there is
some of this.
So, you know, it could be that the Federal Government could
put out information about best practices in that regard. But
again, unfortunately I come here and tell you these are like
really big, big problems, but I do not know that you can really
do very much about it.
Chairman Lee. I assume you would not disagree with me on
our Enclave Clause authority, though. We have got authority
over----
Dr. De Rugy. Yes, if you have authority----
Chairman Lee [continuing]. Federal property on military
bases.
Dr. De Rugy. But I mean in D.C. with child care, for
instance, we have been like talking about the cost of child
care. The cost of child care is absolutely increased quite
dramatically in D.C. because of the lack of supply of health
care brought on by vocational licensing requirements that are
quite stringent. And, that keep out low-income, low-education
people.
Chairman Lee. Is Arizona, the State you have identified, at
the cutting edge of this?
Dr. De Rugy. To my knowledge, this is the State that has
actually taken the broader steps. And again, it is only a first
step. There is way more to do. For instance, they need to
reform their own licensing system within the State, which is
still too burdensome. Because the problem is like the
progression of vocational licensing since the 1950s has been
quite dramatic, and as a result it has included a lot of low-
income workers and low-paid jobs. And that is problematic for
income mobility. It is problematic at many levels. And there is
a new study that just came out that actually looked at the
welfare effect of vocational licensing, and it showed that,
while they increase the wages and the hours of the people
within the industry who already have their license, it actually
keeps employment down for those who do not.
Chairman Lee. So it is classic protectionist.
Dr. De Rugy. It is absolutely.
Chairman Lee. It is a government-sponsored welfare system,
using the overwhelming force of the State in order to protect
the wealthy and the well-connected at the expense of the poor
and middle class.
Dr. De Rugy. And it may be a case, right, for a high-risk,
higher-risk professions like the medical practice, though there
is that question about whether actually occupational licensing
requirements do increase the quality of the work.
But it is just hard to imagine that the State or the local
government have, you know, to protect us against nonmatching
pillows or something like this.
Chairman Lee. Right, right. I mean, that could be bad. If
somebody recommends matching an unlicensed, unscrupulous
interior decorator that gives you clashing pillows----
Dr. De Rugy. Yeah, well, I do not think it would actually
come up like a very strong number on the national data, but,
yeah.
Chairman Lee. That is a fair point. I had a constituent a
few years ago make the following observation and I want to see
if you agree with this. The observation was, in those
professions where you can identify in the abstract the greatest
need for occupational licensing, where there is the greatest
potential health and public safety threat as a result of
someone practicing outside of something they know how to do, in
those same areas the occupational license seems to be the least
significant factor.
The examples that were given to me by this constituent
included the fact that, apparently if you get a pilot's
license, once you are a pilot, in theory you could fly a 747.
Whether or not you can fly a particular 747 is going to be up
to the owner of that 747.
So, too, with a medical degree. In theory, you are licensed
to practice medicine, which might include delivering a baby,
doing heart surgery, or brain surgery, or removing a wart. But
whether or not you know how to do any of those things may not
be determined as much by your State-issued occupational license
as by your particular credentialing and training that you have
received from private organizations rather than a State.
Would you agree with that?
Dr. De Rugy. Agree.
Chairman Lee. Mr. Cass, let's talk about marriage for a
minute, the marriage and family formation. It seems to me there
might be kind of a chicken and egg problem, and I want you to
help me unravel this.
Like you, I am concerned that if more men cannot find
stable, steady work, the result is likely to be fewer
marriages, in the first instance; more divorces in the second
instance. But it is not also likely that to the extent that
marriage is collapsing, that marriage rates are falling, men in
general will tend to feel less pressure, less of a need to be
bread winners, or to be involved in the lives of their
children, and that in turn could translate into more
unemployment, less stable family lives, and other societal and
economic problems. Would you agree with that?
Mr. Cass. Yeah, I think that is certainly true.
Chairman Lee. One of the things I am always looking to do
in this Committee, because, you know, it is my belief that
institutions of civil society and free markets cannot be
created by government. Certainly families are no exception to
the principle that a government cannot create an institution of
civil society.
Governments can, however, weaken those institutions. And
once it weakens them, where it has weakened them, government is
not necessarily very good at turning the switch back on.
Are there areas you would point to that you think represent
the sort of lowest-hanging fruit of where we could identify
that the Federal Government is impeding marriage or family
formation?
Mr. Cass. Yeah, thank you for that question. I think the
way you have put the problem is exactly right; that in a sense
we have a vicious cycle where declining economic opportunities
and outcomes harm family formation and, in turn, the culture
that is devaluing and de-emphasizing family formation that
potentially in turn harms economic engagement.
I think for policymakers the question, when you encounter a
cycle like--well, the challenge when you encounter a cycle like
that is to not just throw up your hands and say, well, that
looks like a big mess.
And instead, the question is to say: Well, where in that
cycle is there potentially an opportunity to intervene? It
seems to me there is very little potential to intervene
directly on the cultural side through simply reasserting
through public policy the importance of family formation--
though with respect to the bully pulpit it certainly helps to
talk about it.
But conversely, the labor market side offers I think a very
salient opportunity to intervene. I think to the extent that
things have gotten worse, to the extent that we could imagine a
world in which things got better, that is a world in which you
would not immediately turn the cycle on its head and solve all
the problems, but you would expect to slow the cycle, and you
would expect to have better outcomes than we do today.
And so I think that is why, rather than getting hung up on
exactly how much of the problem we can attribute to what, and
how much of the causation runs in each direction, we should be
asking where can policy help? Where do we think it would be
likely to support stronger families? And I think a stronger
labor market is that place.
Chairman Lee. Mr. Schweikert.
Representative Schweikert. Thank you, Mr. Chairman. Let's
engage in a little bit of the speed round.
Mr. Ortiz, and then let's go across. If I came to you right
now and said give me your three wish lists that you think would
have the most impact on having our brothers and sisters who are
not in the labor force enter stable work, what would those
three be? And I am going to ask everyone the same thing.
Mr. Ortiz. I would certainly start by saying that we need
to invest more in areas that are called bridge programs.
Representative Schweikert. Okay, bridge programs.
Mr. Ortiz. Bridge programs are certainly an area of high
focus for our organization and the populations that we often
serve.
Supportive services, of course, are of vital importance. So
you referenced earlier transportation, child care, et cetera.
Representative Schweikert. Okay, so----
Mr. Ortiz. So supportive services are certainly going to
take up a number of those issues that we say that that is two,
three, and many more.
Representative Schweikert. Okay. Alright, Doctor?
Dr. Shambaugh. I would start with child care, just because
it is the largest number of people. Spurring labor demand in
struggling regions where there is just not enough demand for
labor and labor force participation.
Representative Schweikert. Okay, so regional
differentiation.
Dr. Shambaugh. And I would say, with programs that try to
raise returns to work for people at the low end of the
educational spectrum. So training and education that try to
boost people and get them into better jobs.
Representative Schweikert. Okay, Mr. Cass.
Mr. Cass. I would say first realigning our education
policies to emphasize non-college pathways over college
pathways.
Second, reforming our approach to organized labor to create
a system that people actually want to participate in, and that
helps bring people into the work force.
And third, rethinking our approach to globalization in a
way that actually constrains access to workers outside of this
country and focuses firms on using the workers who are here.
Representative Schweikert. Interesting.
Doctor.
Dr. De Rugy. Dramatically increase the supply of housing.
I would say criminal justice reform is a big impediment to
people entering the workforce.
And just lifting like work, labor requirements, or
licensing requirements would be I guess my three. But there are
many more.
Representative Schweikert. Just to be clear, you do not
mean the reform is the impediment, just the----
Dr. De Rugy. No, no, the--I mean I could----
Representative Schweikert. I just did not want to get
blamed for that one.
Dr. De Rugy [continuing]. Medical and legalize some of the
drugs, just to stir the pot.
Representative Schweikert. You do stir. Okay, now actually
something a little more specific. If we have an under-
performance, predicting my fixation on millenial males in labor
force participation, for that one population segment, what
would be the number one thing you would do to encourage that
population to participate?
Dr. De Rugy. So I do not know very much about that
population, so----
Representative Schweikert. Okay.
Mr. Cass.
Mr. Cass. Non-college pathways.
Representative Schweikert. Non-college pathways.
Doctor.
Dr. Shambaugh. Increase wages for that demographic, for the
people with less education.
Representative Schweikert. Okay. We need to talk, because I
think there is noise in particularly in the last 12 months'
data that wages have been going up. That is actually partially
true of females, and I do not know why I have not seen the same
thing in the male side, but that is more of a geeky
conversation.
Mr. Ortiz.
Mr. Ortiz. I would agree with non-college pathways being of
high importance.
Representative Schweikert. For anyone that is listening, we
have actually sort of in our office fixated on this subject,
and we have built a list of many things. But you do understand,
when we talk about non-college pathways, it is everything from,
you know, types of votech type training at the high school
level, all the way to are we ready to have a real uncomfortable
conversation on accreditation at the university level that the
university is able to provide a degree at 20 months, but it is
solely training you to be able to have productivity in society,
and you may not, you know, have great understanding of great
literature. And we have actually made proposals on that, and it
is fascinating the incumbent class, which--I mean incumbent
systems, and regulators, and those who come crashing down in
here, defending the accreditation systems, or accrediting.
I will agree with all of you, there are ways to get there.
It is shocking, though, how much of the bureaucracy around us
is actually at war with you on all of your ideas.
And with that, I yield back, Mr. Chairman.
Chairman Lee. Senator Cruz.
Senator Cruz. Thank you, Mr. Chairman. Thank you to each of
the witnesses for being here.
Dr. De Rugy, tomorrow the Export-Import Bank's
authorization is set to expire. Unfortunately, when it comes to
the Export-Import Bank, virtually all of my Democratic
colleagues and an awful lot of my Republican colleagues have
been eager to continue the Ex-Im Bank in operation.
Many of us had been quite critical of the Ex-Im Bank, that
it serves as a vehicle for chronyism and for giving corporate
welfare to giant companies on the backs of, and with the
financial risk and exposure of the American taxpayers.
Can you give this Committee a breakdown of which types of
benefits--businesses benefited from the Ex-Im when its Board of
Directors had a quorum versus which types of businesses
benefited when Ex-Im's board lacked a quorum?
Dr. De Rugy. So thank you for this question. So the last
time we had a full year with a quorum for the Export-Import
Bank was in 2014 with the whole year data, and by then roughly,
on the domestic side, 65 percent of the benefit went to 10
large manufacturer, 40 percent went to Boeing, alone.
On the foreign side, it was as big companies, many foreign
airlines. But what was more striking is that 30 percent of the
bank's activity went to 10 state-owned enterprises. So foreign-
owned companies. If you look at the period from 2007 to 2014,
the main beneficiary overall was Pemex, the oil and gas state-
owned enterprises. And in 2014 alone it was Air China.
So basically Air China was the top beneficiary of the
Export-Import Bank on the foreign side.
During the time where the quorum did not allow the bank to
extend loans above $10 million, what ended up happening is
basically a lot of the big guys were excluded from the
benefits, though not entirely. Their benefits fell by 93
percent. And the share of small business benefiting from the
Small Business Administration--from Ex-Im went from 20 percent
to roughly 40 percent, even though as a whole the amount they
received went down.
And so Air China was, you know, not a beneficiary anymore.
The share of state-owned, of the Ex-Im that went to the 10 top
state-owned enterprise fell down, went from $6 billion to just
a few millions. And Boeing was, you know, hardly a beneficiary.
And it is interesting to say that during that time there
was a lot of innovation in the capital market that exports
continued going up, and apparently there was, as predicted,
no--the sky did not fall.
Senator Cruz. So there was a lot of substance in your
answer. Let's see if we can break out a couple of pieces of it.
One of the things, if I understood your testimony correctly,
was that in 2014, right before Ex-Im lost its quorum, that
support to Boeing, one company, comprised 40 percent of the
total outlays? I guess that is one of the reasons it has been
referred to before as ``Boeing's Bank.''
Dr. De Rugy. Yeah.
Senator Cruz. Although that raises questions why a giant
corporation needs the U.S. taxpayers subsidizing its
businesses.
If I understand you correctly, without a quorum a much
higher percentage of Ex-Im's funds went to small businesses who
were always put forward as the desired beneficiaries, except
for the fact that when it is fully authorized and has a quorum
that is not where the money goes.
Dr. De Rugy. No, the money goes roughly--it is roughly 20
percent goes to small businesses before 2014, and even the
majority, something like 89 percent of transactions went to
small businesses, when you actually follow the money it is
really only 20 percent. And, yes, and it is worth saying that
Boeing did really well during those four years where they did
not have a quorum. They sold more planes. Their backlog
increased.
Senator Cruz. So the American taxpayers are on the hook
giving Boeing a subsidy that it does not need.
Let me take the second piece of your question, which I
think is really important for people to hear. You said a major
beneficiary of Ex-Im's funds and benefits when it has a quorum
are state-owned enterprises, including state-owned enterprises
for countries like China.
So the American taxpayers are subsidizing companies owned
by the Chinese Government? Is that right?
Dr. De Rugy. Yes.
Senator Cruz. Does that make any sense?
Dr. De Rugy. I do not think it does, but I--I do not think
it does, especially in the context of a lot of people now
making the claim that the renewed support for the Export-Import
Bank comes from the fact that it can be used as a tool to fight
China. Considering that what really the Export-Import Bank does
is basically to compete with the other export credit agencies
in high-income nations where China is. So I do not think it
makes any sense.
Senator Cruz. Well in the Senate, every single Democrat
supports continuing the Ex-Im Bank, and about half of the
Republicans do. And I certainly hope some of the Members in
this body will listen to your testimony and the evidence you
have given. Thank you.
Dr. De Rugy. Thank you.
Chairman Lee. I want to follow up on the point made by
Senator Cruz about the Export-Import Bank, and particularly
with regard to Pemex, the state-owned energy company owned by
Mexico.
It is an interesting dynamic there. There is a term used
exclusively in Mexico. The term is Huachicolero. I do not know
whether you have ever heard of this term. It is a term used
specifically to describe one who steals fuel from a pipeline.
And in Mexico, it is always a Pemex pipeline, because Pemex is
the fuel company in Mexico.
They steal fuel from a pipeline owned by Pemex, and then
they sell it back onto the black market, often at a discounted
price relative to what they would pay retail.
The origin of the term, including the ``c-o-l'' portion of
Huachicolero, refers to alcohol. Originally this came from
people adding distilled alcohol, ethanol, to fuel in order to
dilute it. I find it rich with ironies or coincidences, or
whatever you want to call it, that our own Government is now
involved in the process of being a gigantic Huachicolero on one
side of the border through its awful, absurd policies with
regard to ethanol.
And on the other side of the border, it is fueling, it is
subsidizing Huachicoleros through the Export-Import Bank,
through Pemex which you have identified as the number one
beneficiary of the Export-Import Bank.
So you are an economist and a good one, one of the very
best in the country. I am just a politician and a poor country
lawyer from Utah. Can you tell me if I would be incorrect to
state that I think there is a logical connection between our
fueling of Pemex and Pemex's fueling of Huachicoleros and the
elicit drug cartel activity that surrounds that?
Could we be perpetuating that, and perhaps helping Pemex to
avoid dealing with these corruption problems and the theft from
its pipelines?
Dr. De Rugy. Well certainly, I mean just the fact that it
is a state-owned company and it is apparently a monopoly, means
that it is not subjected to market forces as much as it should.
And it is also true that lowering their borrowing costs,
whether--I mean, I assume that it is because they are buying GE
products, or they are not buying Boeing planes, they are buying
GE products, or Caterpillar, or what have you, that money is
fungible. So those lower costs mean basically we are helping
this company that has had massive amount of problems with
corruption stay in place.
I mean I know the original intent of using Ex-Im to fund
Pemex was that they were hoping it would help them move toward
privatization, but that obviously is----
Chairman Lee. Yeah, how has that worked out for us?
Dr. De Rugy. It has not worked out.
Chairman Lee. In fact----
Dr. De Rugy. Which I do not also think it is the role of
the Federal Government to actually pursue such roles.
Chairman Lee. Sure, sure. In fact, when President Lopez
Obrador was sworn into office almost exactly a year ago, a
substantial portion of his seemingly six-hour speech was
devoted to his desire to preserve Pemex and maintain it as a
state-owned enterprise.
I found that surprising. I did not know that this was that
big of a political issue there. Apparently, it is. But one has
to wonder why. And one has to wonder what we are doing to
perpetuate this ring of illicit activity. What we might be
doing to make it more possible.
If a private company here, let's say if Chevron, or Exxon-
Mobil, or some other company that sells gasoline and diesel
fuel, had that big of a problem as they have with Huachicoleros
in Mexico, they would adopt different security protocols. They
would figure out a way to stop the theft. That is not to say
that fuel theft does not occur in the United States, it does,
but not so much so that we have coined a noun and a verb and an
adjective after it.
And it appears to me that we are fueling a very significant
problem on the south of our border, and one with impacts here.
Mr. Cass, Yuval Levin wrote in his outstanding book
``Fractured Republic'' that, quote, ``Worker protections in the
coming decades will need to take the form of portable,
individualized benefits and rights that are not attached to
work places in ways that assume long-term employment
relationships. They will need to help make a diffuse labor
market more secure, rather than trying to reverse its
diffusion.'' Close quote.
Would you agree with that statement?
Mr. Cass. I would. And I would emphasize that the U.S.
system of organized labor is really quite odd by international
standards.
Chairman Lee. What would you do to address that issue?
Mr. Cass. So if you step back and look at how, for
instance, labor unions typically work in Europe, I think the
general impression is that in Europe it is a much more sort of
left-leaning environment. All of Europe is right-to-work. The
idea that you would vote in your single factory whether or not
to have a union, and then if you do everybody is in the union,
does not exist.
Instead, they have what I would say is a much more
effective system that is both much more local and much more
national. At the broader more national end, what they have are
effectively national unions that are more like membership
organizations that people join voluntarily because they receive
benefits from them, training, in some cases social support. And
then down at the local level, they have what are, for instance,
in Germany called Works Councils, which is a much more
collaborative, less adversarial relationship between the firm
management and workers within the firm.
And so you essentially at the local level collaborate to
try to make the company work better for everyone's benefit, and
at the national level you have what is typically called
``sectoral bargaining'' where you have negotiation over terms
and conditions for let's say janitors in the entire region. And
so the sides get together and agree on that. And it is not a
contentious firm-by-firm fight.
And so there are a lot of models. There are a lot of
variations to think about. I think the important thing to
recognize is that I think most would say it works a lot better
than what we have. And unfortunately there is an intractable
obstacle here in the United States, which is a single provision
in the National Labor Relations Act called ``Section 882''
which prohibits any sort of organized labor activity outside of
the confines of these standard American unions.
And so you could just get rid of that. Anyone who wanted
the kind of union we have now could still have one. But if you
got rid of that, you would also begin to open up the choice to
do other things. And I think that that would be an important
first step in moving toward a better system.
Chairman Lee. Why do we have 882? And what would be the
disadvantage of getting rid of it?
Mr. Cass. So 882 was put in as part of the--the NLRA was
passed in 1935 at the height of the Great Depression, at a time
of incredible labor conflict, and there was great concern about
what was called at the time ``company unions,'' which was the
idea that essentially firms would subvert genuine efforts to
organize by instead kind of locking employees into something
controlled by the management, and thereby foreclose the other
kinds of organizing activity that wanted to be facilitated.
I think that is much less of a concern today. As I said,
especially if you do it in the context of other reforms, you
can bring in other substitutes that are better. And I think
just as a concrete example, it is fascinating to look at what
happened in Tennessee where Volkswagen's plant is not
unionized. Volkswagen is so desperately wanting to bring in
this European style works council structure that they actually
tried to persuade and support--they supported the union and
tried to persuade the workers to vote in the union so they
could do the works council. And the workers voted it down twice
anyway.
That is how toxic our existing system has become, and how
relatively more attractive our alternatives are that could be
out there.
Chairman Lee. We are unfortunately going to have to wrap up
here in a moment.
Congressman Schweikert and I were talking a minute ago, and
I promised him that I would ask each of you to opine on whether
you think we could bump up the labor force participation rate,
and if so how high? Is, for example, 65 percent plausible? Why
don't you just weigh in each briefly on that.
Mr. Ortiz.
Mr. Ortiz. We can--I would not, you know, I am not a
trained economist so I cannot speak to a specific percentage in
that sense, but I would certainly say that we can certainly
bump it up with pointed investments in specific populations.
Chairman Lee. What would we consider a success? At what
level? We are at 63.3 percent right now. Is that right?
Mr. Ortiz. Like I said, I do not think I can speak to a
specific percentage there with any accuracy.
Chairman Lee. Dr. Shambaugh.
Dr. Shambaugh. I would say I think there is room for the
labor force participation rate to rise. I think demographics
are pushing it down. We know that as the population ages we do
not expect the 85-year-olds to work, and there are more of
them. So the number comes down.
But I think demographics are putting maybe a quarter point
a year downward pressure. And so when we are treading water, we
are kind of winning--we are at least fighting demographics to a
draw. And when it is rising a little, we are doing even better.
So I think it could rise. I think it would be hard to get
to 65 really fast. But I think if you look at, you know,
frankly, if you look at certain cohorts of, as we talked about,
younger women are working a lot more than women of previous
generations. There is no reason over time that you could not
see the labor force participation rate rise overall, especially
if we did some of the things we talked about here today that
would help some of the people who have become disconnected from
work back into the labor force, and help people who are cycling
in and out stay in more permanently so they are not kind of
occasionally counted as out.
So I do not think there is any reason you could not get it
that high.
Chairman Lee. Mr. Cass.
Mr. Cass. I do not think of it in terms of the overall
labor force participation rate because obviously you have the
demographic pressure. Even within prime age workers, I think it
is very important to separate men from women. Because as we
have talked about, there are some women who would really like
to enter the labor force. But polls consistently show that an
overwhelming majority of Americans, of women and of women with
children, prefer an arrangement where, particularly when women
have young children, they are not working full-time.
And so setting some arbitrary 100 percent is the idea for
women in the workforce is not necessarily right. In fact, you
could say the ideal is lower than it is now.
For men's prime-age labor force participation, I think that
is exactly where policymakers should be focused. And I think
Dr. Shambaugh offered a really good way of thinking about it
earlier when he pointed out that for men with a college degree,
that number is up 94, 95 percent.
There is no logical reason in a healthy labor market why
that number should not be as high as higher for people with
lower levels of education. And so I would say trying to bring
that up toward 95 percent, you know, in the 1950s and 1960s it
was 98 percent, I believe----
Chairman Lee. Meaning men with a college degree?
Mr. Cass. For all men.
Chairman Lee. For all men.
Mr. Cass. So bringing prime age men back up above 95
percent and doing it regardless of education level I think is
the right place to focus.
Dr. De Rugy. So I do think that there is space to improve.
I also think that it is--I am less worried--I think women are
going to--I mean I know it has slowed down but I think there is
a chance it is going to pick up. And so it is interesting to
look at the men, the working age men, but it is also important,
and your Committee actually put out a really interesting report
on this issue, when trying to actually understand what kind of
policies can be put in place to understand the motives of
people who actually have dropped out of the labor force, and
whether there are reasons to worry or not.
So obviously the fact that some people have retired, I
think it is roughly 7 percent of people who have dropped out of
the labor force, that people who are at school I think is 18
percent. There is close to, I think it is 44 or 45 percent who
are disabled.
I mean these are like it seems a good reason to not be
there. There are 23 percent ``other'' reasons for being
inactive. But one of the numbers from that report that I
thought was really striking in actually trying to think about
what kind of policy to put in place is actually when asked who
wanted a job, right, when you looked at the able-bodied, only
12 percent of those said they wanted a job.
And when you looked at the entire population, only 23
percent said. So when you have 75 percent of that population
that has dropped out of the labor force and says they do not
want a job, you have to actually think about why that is.
So if they are retired, if they are in school, there is
nothing to worry about. If for instance like some studies have
shown, the disability and kind of the not differentiating
between being disabled and being completely incapacitated
create a detachment from the workforce, that could be a reason
to worry about. But then again, how do you go about doing this?
You do not want to actually kick out disability rolls. People
actually really cannot work.
So there are things to do. But I think if we are going to
be doing something, we need to really--not all policy would
work, depending on why people have actually dropped out. And I
do not think that all of the drop is actually real for concern.
I mean, so----
Chairman Lee. Excellent. And you would not recommend an
expansion of the Export-Import Bank as a means of increasing
that?
Dr. De Rugy. No.
Chairman Lee. Thank you very much. I really appreciate each
of you coming. This has been an interesting and informative
hearing and we are grateful to you being here.
The record will remain open for two weeks. We stand
adjourned.
[Whereupon, at 3:57 p.m., Wednesday, November 20, 2019, the
hearing in the above-entitled matter was adjourned.]
SUBMISSIONS FOR THE RECORD
Opening Statement of Mike Lee, Chairman, Joint Economic Committee
Good afternoon, and thank you for joining us for this hearing of
the Joint Economic Committee.
The American labor market is strong. The current economic expansion
is the longest in U.S. history. Our unemployment rate has remained at
or below 4 percent for the last 20 months and continues to fall.
Average wage growth has slowed down a bit, but remains strongest for
lower-paid workers. The gains have been broadly shared: African-
American and Hispanic unemployment rates are at all-time lows. Female
labor force participation is approaching an all-time high. And analysts
speculate that we still have yet to reach ``full employment.''
Yet, behind these indicators of recent strength, there lies a
worrisome, long-term trend--what Nicholas Eberstadt of the American
Enterprise Institute has called an ``invisible crisis.'' Many American
men are leaving the workforce altogether. Though on the rise, the
employment-to-population ratio for prime-age men--those between the
ages of 25 and 54--is near levels not seen since the Great Depression.
Even in today's strong labor market, we see that once taut connections
to the workplace have not only slackened, but frayed.
The economic implications of such disconnection should be clear to
all. But the Joint Economic Committee's Social Capital Project, as part
of its mission to understand ``associational life'' in America today,
has studied the plight of these disconnected men and identified
potentially greater consequences for the health of our families and
communities. In its report, ``Inactive, Disconnected, and Ailing: A
Portrait of Prime-Age Men Out of the Labor Force,'' the Project found
that disconnected men are more socially isolated and less happy than
their employed peers. At the community level, the disappearance of work
can lead to depopulation, brain drain, and the decline of other
institutions of civil society.
If we are to expand opportunity by strengthening families,
communities, and civil society, we must devote our attention to work--a
means of supporting ourselves and our families, a source of meaning and
purpose, and a site for affirming and satisfying relationships. I hope
that our discussions this afternoon give us a clearer sense of how to
connect more Americans to this wellspring of opportunity and social
capital.
At this afternoon's hearing, we will seek to better understand the
forces shaping the labor market and Americans' connections to it. A
variety of reasons have been offered to explain why fewer Americans in
their prime earning years are joining the workforce. Several
interdependent themes emerge from most analyses: declining economic
dynamism, falling worker mobility, stagnating wages, trade exposure,
employment polarization, skill-biased technological change, and an
expanding safety net.
Our next step will be to consider policy reforms consonant with the
most plausible explanations for declining prime-age labor force
participation. What barriers to opportunity can we identify and try to
remove? How might incentives to join the workforce be strengthened? How
might we more smartly invest in human and social capital to create new
opportunities? Possible solutions may involve reforming the safety net,
modernizing labor regulations, and increasing wage growth.
The Social Capital Project will cover all of these topics in a
forthcoming report, to be informed by the insights of today's
panelists. I look forward to their testimonies and to a productive
conversation aimed at drawing disconnected Americans off the sidelines
and into the workplace.
I now recognize Senator Hassan for opening remarks.
______
Prepared Statement of Senator Maggie Hassan
Thank you Chairman Lee for focusing this committee's attention on
the important issue of getting more Americans to participate in our
workforce.
And thank you to our witnesses for being here today.
Members of both parties agree that we must increase labor force
participation.
While low unemployment rates in my home State of New Hampshire and
across the country are welcome news, we know that a low unemployment
rate can also present real challenges--from businesses not being able
to find workers, to additional pressure being put on the productivity
of our current workforce.
For a variety of reasons, too many Americans are falling out of the
workforce. And a smaller percentage of Americans participating in the
workforce can drag on economic growth.
It is critical that we address the root causes that result in
people not seeking employment. And today's hearing presents an
opportunity to address those factors and look toward bipartisan
solutions.
To start, as our economy changes rapidly, individuals may not have
the skills and supports that they need to enter--and remain--in the
workforce. And I have heard from businesses throughout New Hampshire
that one of their top challenges is finding more qualified workers,
even at entry level jobs.
Addressing this challenge requires us to both strengthen job
training efforts and remove the barriers that prevent too many people
from participating or remaining in the workforce.
I have introduced bipartisan legislation--the Gateway to Careers
Act--that would do just that.
This bill would provide grants to support partnerships between
community or technical colleges and workforce development partners such
as State workforce development boards, industry associations, and
community-based organizations.
These partnerships would help remove many of the barriers that
prevent too many people from completing a 2-year degree or credential
by connecting them to support services, including housing, mental
health and substance use disorder treatment, assistance in obtaining
health insurance coverage, offering career counseling, transportation,
and other services.
By strengthening job training and support services we can connect
more people with the tools that they need to enter and succeed in our
changing economy.
Another systemic barrier that many Americans face is a lack of
access to paid leave and child care.
Frequently, those who want to work are held back by pressing family
responsibilities that make it impossible. A recent report by the
Hamilton Project showed that 9.6 million women who are not
participating in our workforce list family and home responsibilities as
their primary reason.
Mr. Chair, I request that the Hamilton Project Report: ``Labor
Force Nonparticipation: Trends, Causes, and Policy Solutions'' be
entered in the record.
By enacting more family-friendly policies that enable people to
balance their work and family responsibilities we can help more people
join or rejoin the labor market.
We also must break down employment barriers facing traditionally
disadvantaged communities.
In 2018, Brookings found that only four out of 10 working-age
adults who experience disabilities are employed. So we also need to
address the challenges that those who experience disabilities encounter
in entering our workforce.
As Governor, I signed legislation banning employers from paying
workers with disabilities at a lower rate than the minimum wage, making
New Hampshire the first State in the Nation to ban sub-minimum wages.
We must make this a Federal priority--which is why I have cosponsored
the Transformation to Competitive Employment Act, which would phase out
the practice of paying a sub-minimum wage to workers with disabilities
nationwide.
We should also make sure that workers who experience disabilities
receive the support they need to succeed in the workplace and are less
likely to fall out of the labor market.
Finally, no conversation about increasing participation in our
workforce can exclude addressing the costs of higher education.
Right now, students face far too many obstacles in getting the
education that they need--particularly when it comes to affordability.
No one who is pursuing higher education so that they can build a
better future for themselves--and in turn our economy--should have to
put that goal on hold because they can't afford it. And they should not
have to take on substantial debt to do so either.
I'll continue working on strategies to increase college
affordability and to lower the burden of student debt, so that more
workers can get the education that they need to thrive.
We can all agree that tackling our workforce challenges requires a
multi-faceted and comprehensive approach.
There's not a single solution. And we have multiple opportunities
to connect more people to work.
I look forward to hearing more from our witnesses today.
And now, I'll turn it back over to Chairman Lee.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
The complete report is available at https://www.brookings.edu/wp-
content/uploads/2019/10/ES--THP--labor-force-nonparticipation--
final.pdf
Response from Jay Shambaugh to Question for the Record Submitted by
Senator Klobuchar
Men and women of color suffer disproportionately during economic
downturns. The unemployment rate for African Americans now stands at
5.4 percent--nearly two percentage points higher than the overall rate
of 3.6 percent.
What can Congress do now to help minimize the expected
rise in the unemployment rate for people of color during the next
recession--whenever it may hit?
Thank you for this question. You are exactly correct that men and
women of color suffer disproportionately during recessions. In general
any group that is marginalized in the labor market tends to do worse in
recessions. In the Great Recession, unemployment rates doubled for
nearly every group. Since the African-American unemployment rate was
higher to begin with, a doubling meant a much larger increase.
In addition, it is important to consider another labor market
challenge disproportionately impacting African-American workers: the
dramatic racial disparities in the rates of underemployment (including
those who are part-time but would rather work full-time and those who
are marginally attached to the labor force). At all points of the
business cycle, white workers have lower underemployment rates than
African-American (or Hispanic) workers.
For example, in 2018 the underemployment rate for white workers was
approximately 6 percent in 2018, compared to a rate of approximately 12
percent for African Americans.
When we look at underemployment rate disparities during the Great
Recession an even more grim picture can be painted. In April 2011,
underemployment among African-American workers reached 24.9 percent,
over one year after the African-American unemployment rate peaked at
16.8 (in March 2010). This stands in sharp contrast with the peak white
underemployment rate in the wake of the Great Recession, which was only
slightly higher than the pre-recession low for African-American
underemployment.
There are two main ways one could minimize the damage done to men
and women of color during recessions. The first is to minimize the
damages of recessions overall. Better use of automatic fiscal
stabilizers could try to limit the impact of a downturn on the labor
market. For example, one could strengthen the safety net and make it
more responsive to downturns (including: waive work requirements faster
in a downturn in the Supplemental Nutrition Assistance Program SNAP,
formerly the Food Stamp Program], increase unemployment insurance and
SNAP payments during a recession, reintroduce some countercyclicality
to Temporary Assistance for Needy Families [TANF]). One could also use
triggers based on the increase in the unemployment rate to increase
infrastructure spending automatically, increase Federal support to
states for Medicaid and the Children's Health Insurance Program (CHIP),
and mail direct checks to individuals. The Hamilton Project recently
put out a book (along with the Washington Center for Equitable Growth)
called ``Recession Ready'' that discusses many of these ideas. These
policies would not directly target the labor market experience of men
and women of color, but given that men and women of color are more
exposed to recessions, by limiting a recession's impact, these policies
would help.
Another set of options is to try to make these groups less
marginalized in the labor market overall. For example, robust
enforcement of anti-discrimination policies would help. In addition,
though, because of a range of barriers men and women of color face in
labor markets and in general, they often face other disadvantages in
the labor market. Men of color are more likely to have been
incarcerated, and criminal records are a hindrance in the labor market.
Both reducing unnecessary incarceration and unequal application of law
enforcement along with policies to create pathways for the formerly
incarcerated to rejoin the labor market would both help. Similarly,
individuals with less education tend to have worse labor market
outcomes. Policies to improve educational outcomes for young men and
women of color along with policies that create better pathways to
employment for those without a college degree could both help the labor
market outcomes of men and women of color.
Finally, one could try to take specific actions that safeguard men
and women of color in the labor market in a downturn. For example,
making sure that cities do not substantially cut back employment
opportunities due to budget problems and making sure that poor rural
areas--which often have large populations of men and women of color--
also feel the impact of fiscal stimulus is important. Policies like the
emergency TANF support that was included in the American Recovery and
Reinvestment Act helped stimulate employment in poorer communities.
Making that an ongoing program that could scale up during recessions
and making sure that it is applied in a way that benefits communities
of color would be an important step.
The negative labor market experience of vulnerable populations
during recessions is one of the main motivations for robust
countercyclical macroeconomic policy. Along with policies that try to
reduce discrimination and help communities of color more broadly,
strong countercyclical policy could help minimize these damages.
______
Question for the Record for Jose Ortiz, Jr., Submitted by Senator
Klobuchar
To help both our workers and our businesses that struggle to find
workers with the necessary technical skills, we need a strong training
and education agenda. I have introduced legislation to improve
apprenticeship and workforce training programs and to expand the
``529'' tax advantaged education savings program to include training
and credential programs that help workers develop the skills needed for
21st century jobs.
In your view, what measures should we take to ensure
workers are prepared to transition to jobs for which employers are
hiring?
______
Question for the Record for Jose Ortiz, Jr., Submitted by Senator
Hassan
Mr. Ortiz, as Governor of New Hampshire, and in the U.S. Senate, I
have tried to identify workforce training strategies that would help
pull individuals into the labor marker who were chronically unemployed
or underemployed.
Too often, these individuals are not able to get the training they
need for existing job openings because they face barriers like access
to transportation and child care.
To help address this, I introduced the bipartisan Gateway to
Careers Act to strengthen career pathway opportunities and help
individuals navigate barriers that keep too many people from
participating or staying in the workforce like transportation and child
care.
What more do you think we should be doing to help families access
the services they may already be eligible for and strengthen career
training programs to be responsive to issues individuals face outside
of the workplace?
Can you describe programs and strategies that have worked for
participants in your programs?
[all]