Recorded on March 12, this panel focused on the book Moving the Needle: What Tight Labor Markets Do for the Poor, by Katherine S. Newman, UC System Provost and Executive Vice President for Academic Affairs and UC Berkeley Chancellor’s Distinguished Professor of Sociology and Public Policy, and Elisabeth S. Jacobs, Deputy Director, WorkRise and Associate Vice President, Executive Office of Research, Urban Institute. Paul Pierson, John Gross Endowed Chair, Professor of Political Science, and Director of BESI, moderated.

About the Book

Most research on poverty focuses on the damage caused by persistent unemployment. But what happens when jobs are plentiful and workers are hard to come by? Drawing on over 70 years of quantitative data, as well as interviews with employers, jobseekers, and longtime residents of poor neighborhoods, Katherine S. Newman and Elisabeth S. Jacobs have investigated the most durable positive consequences of tight labor markets. Their recent book, Moving the Needle, provides an illuminating look at how very low unemployment boosts wages at the bottom, improves benefits, lengthens job ladders, and pulls the unemployed into a booming job market. It also reveals the downside of overheated economies that can ignite surging rents and spur outmigration, marking an urgent and original call to implement policies that will maintain the current momentum while still preparing for slowdowns.

Transcript

[PAUL PIERSON] I’m Paul Pierson. I’m the Director of the Berkeley Economy and Society Initiative. And before we move on to today’s program, I just wanted to quickly mention some upcoming events that we have that you can see here. Nick Romeo is going to be here next week talking about the alternative, how to build a just economy.

On April 2, we have a great panel discussion coming up on US antitrust. And then new directions in Latin American structuralism, the three-gap model of sustainable development, which will be a talk on the climate cluster on April 23. And the following week, also from the climate cluster, the national investment authority, an institutional blueprint and implication for climate policy. So be sure to register for any of those events you’d be interested in.

And now, it’s really my pleasure to invite Elisabeth and Kathy to give this talk for us today. I could spend most of the time that we have just running through everything that these two amazing scholars have done. So I’ll just actually refer to what’s up here as an initial summary.

Katherine Newman is the UC System Provost and Executive Vice President for Academic Affairs, and UC Berkeley Chancellor’s Distinguished Professor of Sociology and Public Policy. She’s written, I think, 15 books, including a number of books on how to think about and combat inequality.

I first got to know Kathy when she was directing the incredible inequality and social policy program headquartered at the Kennedy School at Harvard, which is also I think where I met Elisabeth, who is the Deputy Director of WorkRise, Associate Vice President in the Executive Office of Research at the Urban institute, and also a longtime scholar working on really important issues having to do with family policy and poverty and assorted subjects near that. So we’re just really happy to have both of you guys with us, and the floor is yours.

[KATHERINE NEWMAN] Thank you so much. Thank you, Paul. The last time I gave a talk on this campus I realized on my way up here was 43 years ago.

[LAUGHTER]

Shocking that anything–

[AUDIENCE MEMBER] You were five years old.

[KATHERINE NEWMAN] I was five years old. I was a new faculty member in what was then the brand new Jurisprudence and Social Policy Program, which is now at least 43 years old. And so for me, this has been a wonderful round trip back to the place that I hold near and dear as my origins.

And it’s wonderful to be able to talk alongside Elisabeth, who has been a co-author of mine before. We wrote a book about a decade ago called Who Cares? which was about the history of public opinion on the intrusions of the federal government into poverty problems. And we were looking at how– historically, at how public opinion shifted in the 1930s, in the 1960s, in the 1980s. But that was the first time we worked together.

This project came about because I realized when I recognized that the United States was beginning what is now a two-year run of below 4% unemployment that I needed a good quantitative partner, which Elisabeth has always been, and an intellectual partner to understand what impact tight labor markets have on poor people.

I’m going to start by just explaining what we hope to cover today. We want to start by talking about the role of unemployment in theories of poverty. It sounds very obvious, but actually, the fluctuations in unemployment rates has not been particularly important in the way scholars have thought about poverty. But we’re going to argue that it should be actually quite crucial.

And then we’re going to explore some thorny questions about measurement and definition. How do we understand what is a tight labor market? How do we define it? When has it happened in our history?

We’re in the middle of a really long period of tight labor markets, but it’s not the first time that that’s been the case. There have been a number of periods of American history where tight labor markets have cropped up. Of course, during the world wars, that tends to happen. But there have been periods other than that.

And I realized again walking up here that this is not the first book I’ve written about tight labor markets. I was very interested in the experience of low-wage workers in Harlem over a long period of time when I worked on a book called No Shame In My Game, which was a study of the working poor in the inner city.

But the next book in that series was called Chutes and Ladders. And it looked at what happened to those people who were working in these fast food restaurants over an eight-year period. And during that time, the reason I was interested in what happened to them is that welfare reform happened in between. And there was a great deal of concern about what would happen if the low-wage labor market was flooded with people who were looking for work because of welfare reform.

But at the same time, labor markets tightened drastically during the Clinton years. So I didn’t think about tight labor markets, per se. But what I found was that those workers, about a third of them weren’t poor at all after eight years. But that’s because the labor market changed around them. So anyway, the point is it’s time to think about how unemployment rates impact poverty.

We then want to look at who benefits from tight labor markets. And how long do those benefits actually last? Because if it’s just a flash in the pan, well, that might be nice for a short time. But if it has more durable impact, then there’s more to talk about and think about.

Then we want to look at the mechanisms behind those economic benefits. What changes in the way that employers behave, in the way the search process unfolds when low-wage workers are looking for work? What happens to– or do we see some features of the secondary labor market start to fade away and we start to see the emergence of job ladders where they didn’t exist before? Job hopping, which leads to wage improvement, and so on and so forth. So we’ll talk about some of the mechanisms that lead to these economic benefits.

And then we want to return to what the literature on poverty tends to focus on. There’s a great deal written in the literature on neighborhoods and poor– what are poor neighborhoods like and why do poor neighborhoods, in and of themselves, exert a force on the people living in them.

So you take an equally poor person and plunk them in a really poor, depressed neighborhood, and their life outcomes look very different than that same poor person might look somewhere else. We want to look at what happens to neighborhoods when many more people in them are employed, especially men.

And then we want to return again to a question that bedevils people writing about poverty, which is the family. The family is another crucible that is impactful for poor households. And the theory is that poor households tend to beget more poor households. But what happens when those households aren’t as poor anymore, and in particular, when men can contribute more to the household than they have been able to when they’re persistently unemployed?

Tight labor markets we are going to argue are really brilliant. They have enormously positive benefits, but they don’t last forever. Although at the moment, you could be fooled if you thought maybe they were going to last a really long time because they have now for several years.

But how could we utilize changes in social policy to mimic some of the benefits of tight labor markets? Because they don’t last forever. So are there ways in which we could create similar forces to the benefits that we see naturally occurring? And then we’ll come back to the question of unemployment and sociology and the sociology of poverty.

So let’s talk first about the role of unemployment in theories of poverty. This will be familiar to any of you who’ve read this literature. But there are a whole series of areas that are really quite critical, where unemployment plays a critical role in the dynamics of poverty.

And the first is family formation. So this has been written about by everybody, from Lebow, to William Julius Wilson, to everyone in between. But the concept here is that when– especially when men find it very difficult to find work, they become unmarried, unmarriageable, undesirable as partners.

You then tend to see a spike in teenage childbearing, and non-marital childbearing, and tension between the genders. There’s a whole series of variable or outcomes with respect to family formation that are tied back either to unemployment or bad employment, one or the other.

Another whole realm of literature is on neighborhood stability. And so the theory here is that poor neighborhoods tend to be, on average, socially isolated, separated from the mainstream economy– sometimes physically so, sometimes just socially.

But social isolation leads to a lack of contact to the labor market, an inability to hear about job opportunities because of networks that become very restricted. Social isolation leads to– often leads to idleness, to crime, to declining social efficacy, to class divisions within racial enclaves.

But the underlying– I would argue the underlying thrust of these descriptions of neighborhood instability all stems from poor employment opportunities that characterize people who live in poor neighborhoods.

Human capital– huge discussion about human capital in the poverty literature, that when you have extensive poverty, you tend to have low educational attainment, interrupted or nonexistent track records in the labor market. And that just tends to perpetuate poverty because it’s impossible to break into higher wage jobs or to recover from structural recessions.

And then finally, the poverty literature focuses a lot on intergenerational trajectories, that children born in poor households tend to repeat that cycle, especially if they’re raised in dangerous neighborhoods where their social contacts tend to implode or retract and become limited to other poor children in a defensive fashion, trying to ward off some of the dangers that exist a little bit further away from home.

Family formation, neighborhood stability, human capital, intergenerational trajectories– these are all aspects of the poverty problem that are tied back one way or the other to either bad or no employment. Elisabeth.

[ELISABETH JACOBS] So we needed to define a tight labor market, right? We had the sense that we were in one when we started working on this book. And then we weren’t quite sure that we’d left one because COVID happened. And now we’re back in one. But we needed to really define that empirically, both for obvious reasons– to be able to study something, you’ve got to be able to define it– and also to be able to really look in the data and understand what was happening and to whom.

So as everyone in this room probably knows, but just to level set, a tight labor market is, in general, when an employer demand for workers outstrips the supply of workers willing and able to work for what employers are willing to pay. And the reverse is a slack labor market.

So when we’re measuring tight labor markets, we’re looking to capture labor market slack. And we use two metrics. We played around with a lot more than these two and kind of landed where everyone ultimately lands, which is both, like, why did I spend months playing with the data to land with the unemployment rate as a measure of tight labor markets? But on the other hand, I’m the person at every talk who’s like, wait, but what about– so I needed to be that person for myself and for Katherine and our work here.

So like all economic concepts, the measures are imperfect. But this is where we landed. And what you see here is unemployment. And I’m going to say a little bit more about that 4.5% threshold. Interestingly, it actually shows up in Paul Krugman’s column today.

I don’t know if you guys are Krugman readers, but he’s looking at the inflation debate and kind of sets 4.5%. He says it’s an arbitrary measure of a tight labor market. And I looked at it and said it’s actually not arbitrary.

[LAUGHTER]

So a side note, but 4.5% for the unemployment rate. And then the other numbers that we looked pretty closely at and they track fairly closely with the unemployment rate, particularly in tight markets, is the ratio of job openings to job seekers.

And so there’s a whole community of people in my policy world who are big jolts nerds. I don’t know if that’s, like, spilled over into academia or not as an economic data source that people get very excited about. But it matches up the job openings in the labor market to the number of job seekers.

And it gives you a somewhat more arguably precise or different measure of labor market slack. So any time you see the blue line crossing that yellow line, you have a labor market where there’s more than one job opening for each unemployed worker out there looking.

A really important point that came out for us, and that I’ll talk a little bit more about in a bit, is that 4.5% threshold and the fact that it needs to stay there for about 18 plus months. So we haven’t had a ton of truly tight labor markets in the way that we actually see results over the course of US history, but I’ll walk you through a couple periods where we have and where we see the results that we’d predict, i.e., the kinds of things that Katherine is talking about, where workers actually both get work and hold on to work for longer, particularly folks at the bottom.

So just in terms of where we are now, before COVID in February of 2020, so when we were knee deep and working on this book, the unemployment rate was 3.5%. COVID hit. We had field workers out there in neighborhoods in Boston who had to come back and totally reconvene how they did the work, and Kathy can tell you more about that in a little bit.

By April, unemployment– April, 2020, unemployment peaked at 14.7%, which is pretty astounding. But it fell really steadily after that. And it fell by below 5% by September of 2021 and continued to fall pretty steadily. We’re still– most recently, we’re at 3.9%, which is still well below that 4.5% threshold.

So these are all national figures that I’ve been talking you through. And what we do in the analysis is take into account the fact that people don’t live in America. They live in places in America. You have a question? Go ahead.

[INAUDIBLE] start before that? Or was that–

[KATHERINE NEWMAN] It started tightening before 2019. But by 2019, it was below 4%.

Yeah.

And it stayed there until COVID. And then you had this really rapid business cycle. And it fell back down. And we are now I think 25 months into below 4%.

[ELISABETH JACOBS] And noting too that I mean because of when the book went to press, we had this whole arc that happened in the middle. And you could rerun essentially all of our analysis on data that’s come out since the book came out or extend all of it, which I would love to do, and I’d love even more if someone in this room wanted to do it. I’m happy to hand over all kinds of PSID code for you.

So what you see here is just looking at states’ labor markets. I had a great research associate on this project who said, wait, but what about– like, people are– they’re not starting in the same places– recoveries from the recession, we’re all over the place. And so we took a fair bit of time to really contextualize people and places.

And this is just giving you a snapshot of the diversity of what the US looked like in the period when the US was recovering, from 2010 until 2018 when things really tightened up to the point of being genuinely tight. And this is– it’s a little bit of a confusing chart, but it’s worth talking about because this is a group of political economy folks. So I imagine political economic geography is of interest.

So what you see here, there’s sort of two types of what we call overperformers, places where unemployment was lower than the national average in 2010, so folks who started– states that started in a good place. And these are the solid– the solid– solid gray folks.

Consistent overperformers are the solid light gray. That’s just Missouri and Idaho. These are, like, theoretically the best places, right? Their unemployment rates were lower than average, lower than the national average in 2010. And their unemployment rates were falling even faster than the rest of the country. I think that probably has to do something with the natural gas boom in Idaho. And I’m not quite sure about Missouri.

And then the solid dark gray are declining overperformers, so places that were doing pretty well, lower than national average in 2010 for unemployment. But the unemployment rate was falling slower. So it was falling because it was falling basically everywhere, but more slowly than the national average. And that’s New England, the Midwest, some of the South, and the Southwest.

And then on the flip side, and these are the stripey places, you have places where unemployment was higher than the national average. Consistent underperformers are places that are doing really genuinely not great. So

They’ve got higher than average unemployment and their unemployment rate is declining less quickly. So that’s Arizona, Mississippi, and Washington State. I suspect if you took Seattle out, it would look even worse.

And then you have improving underperformers, which includes you all here in California, places where high unemployment but faster than average decline. So the labor markets were improving quite quickly.

So all of this is to give you some background and context in terms of thinking about ways of understanding tight labor markets. And this all is kind of a look underneath the hood of what goes into the quantitative results that we did there looking at people. So I’m going to get you there in a minute. But that’s the reason for all of this motivation, is just to get a sense of what was behind all of this.

And then lastly, so I mentioned that 4.5% rate. And what you see here is 4.5% for about 18 months emerges as the threshold. And this is just a descriptive picture of looking at– instead of shading recessions, which is what you usually see on a chart like this, this is, like, the opposite. This is shading– the dark gray places are places– periods when unemployment was 4.5% or lower. And then there’s some light lighter gray shading getting a little more generous and saying 5% or lower.

And the real takeaway here is just that you see the steepest declines in unemployment for workers in households that are below the poverty line or 200% below the poverty line, so 100% or 200% of the federal poverty line, and by race. So we’ve broken it out that way.

And you can see the other key point here is racial disparities are persistent. They are not going away when there’s a tight labor market. But the declines are steepest for Black workers in low-income households. And so it’s one of the other things.

And we find this in the additional analysis that I’ll get to, that tight labor markets are especially powerful for Black workers who are living in poverty, which is a pretty key takeaway in terms of thinking about who macro conditions can help when the circumstances are right.

So I’ve mentioned a bunch about the other analysis, right, and that this is all kind of the under the hood piece. So in answering the question of who benefits from tight labor markets and how, we need to get more precise in identifying that relationship between the labor market conditions and worker outcomes.

So two basic premises. We need to follow individual workers over time. So we needed longitudinal data. We use the Panel Study of Income Dynamics, which many of you probably know. It began in 1968. It has a nationally representative sample of nearly 2,000 individuals and tracks those individuals, their families, their descendants for more than five decades.

I wrote my dissertation on it. And therefore, it is my go-to. And I continue to defend it even though that was decades ago. Even in a world where there is administrative data and the PSID has become kind less popular as a result of that, it is publicly accessible. And it has a ton of information that you can’t actually get in administrative data or you can’t get quickly with administrative data. So that’s my little pitch for the PSID.

The second piece, and this is why I gave you that economic geography context, is that we needed to situate individuals in places. Because we don’t live in America, right? You live in– this case, we took a state. We get– a national overview gives a useful snapshot of macro conditions. It’s fine for headline news.

But not all places have the same labor market dynamics. So what we do is match individuals in the PSID with local labor market statistics over time. We ended up using state unemployment rates. I would love to be able to rerun this. Again, I have a long list of things that we could do later or someone else could do later.

But to rerun it with a more precise local definition of a labor market would be amazing and not totally impossible because the PSID, theoretically, has it. But for a variety of reasons, including pandemic, institutional limitations, that the PSID and I experienced, that’s not what we did. We ended up using the state data.

So the result is we have a data set that’s got thousands of observations of individuals over time in their specific labor market conditions. And then we use two distinct methodological approaches. I’m not going to get into them in depth here. I have slides that spell out with all of the equations that you might want. But to me, that’s much less interesting than what they’re actually doing.

One is building on Danny Egan’s paper. And Danny’s not here. But in theory, he could be. He’s one of your colleagues in the econ department. And he has a paper that looks at the long-term effects of local recessions and testing for period-specific differences.

So are different times different for different people? And we essentially reverse that and say, what happens if we use that same method to look at the longer term effects of strong labor markets? Essentially, the opposite of a local recession.

And then the second piece is building on an approach used by two economists at the Atlanta Fed that looks at tight labor markets and looks at the relative importance of the duration of the conditions versus the intensity of the conditions, right? Because you could have a sort of medium tight labor market that lasts for a really long time, or you could have an exceptionally tight labor market that doesn’t last for all that long.

Either one of those could potentially be transformative. They could work differently for different populations. And so we’re able to explore some of that with the data as well.

So there really are five key questions. And I’m going to try and be both thorough and brief in running you through the results on each of these. But I want to clarify the questions right upfront.

So first is, what happens to individuals’ employment and earnings outcomes in very tight labor markets? The second is, do those effects endure? So if you get a foot on the ladder in a tight labor market, does it provide a buffering effect against future outcomes?

We don’t expect people to just continue to climb indefinitely just because you get a job. That’s totally unrealistic. But you could imagine if you get a foot in the door when things are good– times are good, you might be more likely to actually stay on the ladder as opposed to being shoved back down or all the way out.

The third question is whether the effects are period-specific. So the tight labor markets, that 4.5% threshold that I talked about, we see those in the ’80s. We see them in the ’90s. And we see them in the 2000s, the most recent period.

And so the question is, do we see the same effects across those different points in time? And I can think of all kinds of reasons why we wouldn’t. And spoiler, we don’t. So then we wanted to know whether there was a difference over time.

Fourth, how much does the duration matter relative to intensity? So I mentioned that before. And then lastly, are the effects across all of this consistent for different demographic groups? So by race, by gender, by age. We’ve already seen hints that these matter a fair bit, especially for poor Black workers living in poverty. So we wanted to explore that more thoroughly.

The top line takeaway, which will not surprise you given that Kathy and I are here and actually got the book published, is that tight labor markets do matter a fair bit. They drive durable employment. They boost the probability that a low-income worker is in fact working. That is not especially surprising.

But what we find that’s potentially more surprising and that’s new is they boost the durability of employment, so that idea of do you actually get on and stay on the ladder for longer. In other words, when the local unemployment rate falls below 4.5% and stays there for a prolonged period of time, 18 plus months, low-income workers are more likely to remain employed even after labor markets begin to contract. And this holds even after we control for basically everything you could imagine parceling out, so age, industry, prior earnings history, all the things.

We find that the effects do vary across time. In the 1980s, a one percentage point decline in the local unemployment rate predicts about a 9% higher odds of employment on the eve of the next recession. So across the business cycle, when things start to fall apart. You’re about 9% more likely to stay employed in the ’80s.

In the 90s, that figure is 13%. And the 2000s, we had directionally consistent results. But they weren’t statistically significant, so I’m not going to give you a number because it’s essentially meaningless.

The biggest takeaway here for us was really the durable lift that we saw from the 1990s. It endured through the ups and downs of the 2000s, all the way through the eve of the Great Recession in 2007. And, again, one of the motivators for this book was so much had been written about how awful the Great Recession was, in particular for low-income workers, in particular for low-income Black and Latino workers, in particular for women.

But there was this question of, well, what about the opposite and what were people heading in with? And we found that the 1990s actually were– it surprised me to be completely candid in terms of how powerful they were for low-wage workers.

Specifically, a one percentage point decrease in the ’90s in an individual’s local unemployment rate translated into a 17% higher odds that a low-wage worker remained employed in 2007. And we see the same thing in the ’80s in terms of the direction for the ’80s and 2000s, but we don’t see the statistical significance. So again probably, but, like, unclear.

So I’ve mentioned this a few times but can give you some actual numbers based on the analysis the significant boost that tight labor markets provide to the least advantaged workers. So for every percentage point decrease in local unemployment rates in the ’90s, black workers’ odds of enduring employment increase by 40%. Female workers’ odds of enduring employment increase by 22%.

And younger workers, so 18 to 24-year-olds– and I think this is sort of an underappreciated big deal because what happens in the beginning of a worker’s career is so important. And we know how bad bad labor markets are for young workers.

The opposite is true, right? So good labor markets are quite good for younger workers in terms of their longer term odds of staying employed. They have a 40% boost in their odds of employment over the course of the labor market as it starts to unravel.

So this is getting back to that question of duration and intensity and actually looking at the data to try and figure out what matters and for whom. So how long and how strong? Which of those matter? And we wanted to really understand which of these conditions was driving the results and whether there was a difference in the effects across groups.

So the first is– this is where this 18 plus months figure comes from, from this analysis. About a year and a half more of exposure to a tight labor market reduces unemployment spells when things go south and does a better job protecting wages against erosions in recessions.

And in general, the length of exposure is more important than intensity. So if anyone ever gives you a choice, you want to choose, like, OK, I’ll take the, like, medium grade labor market for a really long time. I can think of all kinds of theoretical reasons why that might be true.

And it shows up in the data. We can talk more about it if people want to get into the why. So we see it across a bunch of different results. So employment, labor force participation, duration of unemployment after falling after a job loss. So if you lose a job, you’re more likely to get back to work more quickly. Your work hours, your wages– all more strongly related to the duration of a tight labor market than the intensity.

And this is particularly true for all of those groups of disadvantaged workers that I mentioned. So those with a history of low wages, black workers with low wages, workers without a high school diploma, younger workers ages 18 to 24.

I think there are takeaways here in terms of how we think about calibrating for the labor market, that we don’t have to just bring it as low as possible and then bounce right back up. There’s sort of a different equilibrium that we could be living in and potentially doing a fair bit to transform the lives of the folks who are most stuck. I will now turn it back to Kathy to tell you all the whys.

[KATHERINE NEWMAN] So whatever the opposite of a scarring effect is, that’s what this is. We didn’t come up with a word.

I know. We need a name for it.

We need a word for that. But why does this happen? What happens on the ground to produce these effects? That was– really, the bulk of the book is about that. So the first thing that happens is that the matching process changes enormously.

Employers cannot find the workers they used to be able to find. They don’t get applications anymore. The people who are showing up at the door, if they show up at all, don’t look like the people they’re used to.

And this presents a challenge in the matching process because what they’re looking for are the traditional markers of education, experience even in the low-wage labor market, and they don’t see any of that. And pretty much, they don’t see anybody come knocking at the door.

So what do they do, especially when the economy is roaring? Because at this point, it is roaring. And there’s a lot for employers to gain from having workers on site who can produce things, sell things, manage stores, and so on and so forth. Then they just don’t have enough workers.

So the first thing they do is turn to the networks of their existing workers and try to mine those networks and create all kinds of incentives for the people they’ve got to go out and bring in more people just like themselves, if at all possible. But that only goes so far if the labor market is really tight and everybody’s already got a job.

So the next thing they tend to do is rely on intermediaries. There’s not a tremendous amount of literature on intermediaries. There’s some, but these range all the way from nonprofit organizations that have usually been in the job training business, sometimes homeless shelters that have training programs.

We focused a lot on homeless shelters because you had the most disadvantaged workers. But they couldn’t even hold on to those people. They were being snapped up almost immediately into the labor market.

But they begin to rely on intermediaries. And it’s not just because they’re having trouble finding people. The people they find don’t look like the people they’re used to. And they don’t have a good way of judging the likelihood of an applicant working out. So

They rely on intermediaries to not only bolster, like, stand behind the workers that they choose, make sure that they show up, but to help them fish in unfamiliar waters, to create almost a different kind of screening mechanism because the traditional screening mechanisms aren’t there.

The problem with intermediaries is that they tend to be needed– dramatically needed when you have labor markets like this. And that’s when funding tends to flow from city– from municipal agencies, from the federal government.

And the minute you’ve got a high level of unemployment, all that money dries up. So the intermediary– the flow of funding into intermediaries is highly unstable. And so when we come back to that when we get to the policy part, we think there’s more to be done there.

But the point is intermediaries become incredibly important in the matching process. And it leads to a greater degree of inclusion of completely marginal workers. There’s a section in the book that’s about people coming out of the prison system.

And this is the second time that I had found employers lining up outside of jails waiting for people’s sentences to come up and to try to create training programs inside prisons because they need the labor so badly, they will even take people that they wouldn’t have looked at all before.

And when that happens, you occasionally get people with very damaged biographies seizing the chance, recognizing that this is a tremendous opportunity, applying themselves and beginning to move up even into the managerial labor market, which is quite unusual for people who’ve been formerly incarcerated.

Another important finding is that employers begin to invest a lot in training. The great human capital machine isn’t just something that happens in job training programs or in schools, but it begins To happen more and more on the shop floor.

And that’s because, once again, employers are seeing people that don’t have the qualifications, don’t have the experience. And now, in order to make them genuinely useful in a firm, they have to provide that training themselves.

And so they start to invest heavily in providing licenses for nothing, where they would have been able to find those people with those qualifications walking in the door in a looser labor market. They invest a lot more in training.

They provide more job ladders because they’re trying to hold on to people who would otherwise take those new credentials and fly. And they usually do fly at some point to someone willing to spend even more money on their salaries.

But the investment in training is a really important aspect of what happens in tight labor markets. And we think it’s been completely underappreciated. In fact, I haven’t read anything else that ever even looks at this.

The other thing is that, again, in order to hold on to people, they drastically improve the quality of these jobs. So years ago, when I was studying workers in the fast food industry, we were talking about people who were below the minimum wage, who got virtually no benefit from staying on the job, virtually no salary increases whatsoever.

Today, if you go back to those fast food restaurants, you’ll find people who have sick pay, vacation pay, tuition benefits, health insurance. None of that existed when unemployment was at 13%, which is what I was looking at when I was studying those restaurants long ago in Harlem. Did you have a question?

[AUDIENCE MEMBER] I just need a bit of clarification. Is wage increase also part of it?

[KATHERINE NEWMAN] Yes.

OK.

Absolutely. Definitely. In fact, it’s probably the first thing. And in some ways, it’s the easiest thing. Giving people more money is the easier thing. Training is a significant investment in organizational change, but all of the above happens.

I mention this merely because you would easily imagine wages would be part of the picture. But the idea that you would get vacation, health insurance, tuition benefits in these jobs, absolutely unheard of in a very poor labor market.

The last thing to change are shifts and schedules. And this is an issue– this is an issue that colleagues of ours from our Harvard days have been studying, very interested in these shift changes. We don’t see much in the way of shift changes. They happen but they happen last, suggesting that a real change in the production process is the hardest thing for employers to manage.

So these are just some of the things, some of the mechanisms by which these durable effects happen. Because– if you go to the next slide– what this adds up to for the workers themselves is a pretty significant increase in their human capital.

They now have track records in the labor market that they can trade on. They have certifications they didn’t have before. They have references they couldn’t have pulled on before.

And that gives them greater mobility in the labor market. And that mobility is partly between jobs, but it also can be within firms. Because as I said before, employers start to invest in job ladders in order to hold on to people. But you also start to see an increase in job hopping, or workers moving between firms, in order to capitalize on that increase in their human capital.

However, a lot of other things are changing at the same time in a very hot economy. And at the point that we were studying this, it wasn’t just the labor market that was hot. The rental market was hot. Everything was hot. And in fact, overheating was a problem that many economists were beginning to think about.

So what are some of the limitations of tight labor markets? They don’t solve every problem if they are accompanied by other kinds of changes. Hot labor markets are often also accompanied by hot housing markets and overheating rents. And that was certainly true in the Boston area, where the fieldwork for this for the qualitative part of this book was done.

And so you started to see those wage increases get eaten up by rent increases. And then the question of whether people are actually managing to stay ahead of the curve becomes a problem. And they are, and they aren’t. They are staying ahead, but not enough. And you’ll see in a moment. Especially not enough to do without some of the subsidies that we provide through public benefit programs.

Child care, especially during the pandemic, this was a huge problem. But it’s a problem almost any time that you’ve got a very hot labor market because child care pays poorly. And women can find other jobs. And then child care becomes very expensive and very limited in availability. And that will then constrain women, in particular, from taking advantage of what tight labor markets have to offer.

But the most important issue we wanted to bring to your attention is benefit cliffs. The margin between wages and costs grow for households, but cliff effects in social programs reduce that buffer. So if you have a housing voucher and your wages increase just a fraction, you will lose that housing voucher.

And it’s not just if your wages increase, but if the wages coming into the household. Because your children are working, everybody in the household is working. Now, you’ve kicked into a point in which you’re going to lose your food stamp benefits or you’re going to lose your housing benefits.

And the wage increases, especially in a labor market this hot with high housing prices, tends not to be sufficient enough to do without those subsidies. If you lose those subsidies, that’s a huge, almost catastrophic loss.

So benefit cliffs pace this– places families on what we call the hamster wheel. Rather than a steady upward climb, they move up, they move up, and then they lose something, and they’re at risk. This tends to fracture households.

You start to see adult children moving away from their parents. So where they were previously able to pool income and the whole household is benefiting, they now have to keep that income underneath a certain threshold in order to preserve those benefits.

This is a social policy question we will return to because that’s a political choice. We could choose to think about those social benefits as forms of asset increases, but we don’t. Tend to worry a lot about free riders and we insist on those cliff effects.

So I said before that we were very interested in what happens to individual people. But we’re also interested, as the poverty literature would direct us, to neighborhoods. So we did a lot of field work in two neighborhoods that were studied by one of your colleagues, David Harding, who’s now the chair of the Sociology Department, but way back when was one of my graduate students at Harvard.

And David’s book, Living The Drama, focuses on three Boston neighborhoods. We went back to two of them to see what had happened to those neighborhoods over this long expanse of time. When David studied those neighborhoods in the early 2000s, they were classic poverty neighborhoods– very low income, mostly minority neighborhoods, very high levels of unemployment, very high crime neighborhoods.

These were among– considered to be among the most dangerous neighborhoods in the Boston area and were often characterized– some of them were characterized by social isolation. Some were characterized by not so much social isolation because there were other institutions in the area, but by segregated social networks.

So Roxbury Crossing and Franklin Field were the two neighborhoods we went back to study. And we focused mostly on old-timers. We actually were looking for the people that David himself had interviewed. They were very hard to find. We found some of them.

But 20 years later, they were really hard to find. But what we could find were people who’d been in those neighborhoods for a long time, especially social service providers, teachers, people who worked for nonprofit organizations, and many just ordinary residents of Roxbury crossing and Franklin Field.

And what we wanted to know was how did they– how did those neighborhoods change? We didn’t ask them about employment. We just asked them about their perceptions of neighborhood change over time.

But one of the things we could see in the quantitative data in the census data was that unemployment was way, way down in these neighborhoods, way down. Household income was rising dramatically, crime almost completely disappearing. In the worst, most dangerous neighborhoods in Boston, they really had become very calm neighborhoods.

And there are lots of reasons. We can’t just attribute this to tight labor markets. You also had gentrification as people– higher-income people were moving out of downtown Boston and into those peripheral neighborhoods.

But these are also neighborhoods in which the census data told us that the degree to which people had been in place for more than five years was growing. So although there were newcomers, right, now neighborhoods that had been almost completely Black and Hispanic now had about 10% whites in them, which is not nothing.

But there was a lot of stability in those neighborhoods as well. So how did those neighborhoods change? How did the sociological experience of being in a poor neighborhood change when there was higher levels of employment?

The first and most dramatic change people reported was the freedom to move in public without fear. The decline in crime meant that it was possible to take children outdoors. People talked a lot about what it was like to run a child care center in the bad old days that David was studying for his book and talked about how now they could actually take kids out to the park. They hadn’t been able to take them out to the park in those days because it was just too scary a place.

Rising social capital. We now know our neighbors. We are not afraid of our neighbors anymore. There’s a long literature, again, on social isolation and social efficacy that suggests that neighborhoods characterized by high levels of unemployment are also characterized by distrust, by fear, by unwillingness or inability to intervene when there’s social trouble in the landscape.

Here, we were told, we don’t see so much of that social trouble anymore. We know our neighbors. And that knowledge, those personal contacts, make us feel much more comfortable, more able to depend on a calm social environment.

They are much more willing to intervene because they weren’t worried about being shot if they did. And so that you saw everything that you would expect if you believed the literature on social isolation, that the reverse conditions of high employment created a greater degree of social trust.

And finally, these neighborhoods were places people didn’t want to talk about being from in the years when David Harding was studying them. Now these became points of pride, places where people felt like, yes, they could talk about this being a wonderful place to be, albeit a place in which their political control was waning because there were more whites coming in, more high– more highly educated people. And the sense of whether or not it was our neighborhood took a hit from that kind of increasing heterogeneity.

One of the biggest questions in the pottery literature, as I mentioned before, is what happens to family formation? I’m going to turn that to Elisabeth.

[ELISABETH JACOBS] So economic conditions shape family stability. We know this from the literature. We know that marriage is essentially out of the picture for the workers that we spoke to. And this was really interesting to hear it sort of confirm beyond what I and I think the rest of you have read in the sociological literature, that it really– like, it wasn’t on the radar screen, but healthy relationships 100% were.

So there’s been a wholesale shift for this population, at least in terms of thinking about marriage as a kind of whatever, right? It’s not even something that they even necessarily want. But being able to have a healthy, stable relationship 100%.

Regardless of whether partners are married or not, the economic conditions that folks are living in really shapes their ability to show up for one another, and in particular for fathers to do the right thing, in the words of one of the fathers that we spoke to.

And one of the clearest examples of this is we just took a look at– and again, you can tell that I’m the quantitative person between the two of us. We took a look at what happens to child support in tight labor markets versus not as just a really clear indicator of, like, can you show up with the resources that you’re meant to, to kind of see if what we were hearing from folks in terms of being able to show up and have much more stable home lives regardless of the formal relationship, how did that show up in terms of resources?

And you’d imagine that if folks are more likely to be working, they’re also more likely to meet their child support obligations. And it shows up really clearly in the national data. So the average annual child support owed in 2018, which is the most recent data that we had at the time, was $5,500.

On average, nationally, children and their custodial parents receive about 86% of what they’re owed. But in states with very tight labor markets, the percentage that people are receiving is 94% or higher, which is pretty good, I think, in the grand scheme of when you think about the conditions that these families are under, including many non-custodial fathers. 94% is people really showing up in ways that they just aren’t able to when labor markets look quite different.

But the precarity of tight labor markets– so the fact that they don’t last forever. They haven’t happened very often. People don’t trust that they’re going to last forever because very few of these folks have experienced them before– combined with housing costs, combined with the cost of care, all of the things that Kathy mentioned earlier, mean that complex family structures– so multigenerational family, chosen family– are really important, even in good labor markets.

And I’m sure everyone in this room knows this. People pool resources. Our policies, as mentioned, don’t recognize that at all. And so there’s this constant, both in terms of the economic stability and people really getting a foothold in terms of an economic ladder, that’s mirrored in the way that families essentially– the kind of fallout from the way that our structures treat families.

That even in good times, it’s so invisible the way that families actually are able to pool resources and manage their lives and support healthy relationships, that even those end up under a fair bit of stress for perverse reasons. Because people are doing too well, it puts new stresses on relationships that otherwise would be thriving.

There’s lots more to say about that. But I know we’ve been talking for a while. And I want to be sure that we get to policy conclusions and broader implications, and most importantly, hear from all of you. So I’m going to talk hopefully not too quickly, because I think there are a lot of important policy implications here, but briefly as possible, and then turn it over to Kathy to land the plane.

So I think the underlying story here is really one of power. We didn’t talk about this when we first started working on the book. But as I was thinking about wrapping up the book, writing the policy implications chapter and then thinking about all the press that we’ve done afterwards, it’s kind of a no-brainer, right? When labor markets are tight, workers’ power relative to their employers’ is higher. And that creates meaningful opportunity.

And the tight labor markets, in some ways, are “natural.” And those are big scare quotes because this is a group full of political economists. You know that nothing is really natural, right? But tight labor markets rebalanced power dynamics between workers and employers.

And policy can put wind in the sails of this dynamic. It can also take it out. As a society, I think we have some control over the dynamics. And I think one of the best examples of this, and this is a pretty obvious one, is that when COVID devastated the economy and labor markets in 2020, we had the most robust public response that we’d ever had, over 50 years at least, with specific attention given to really supporting family economic stability.

We saw financial household, financial well-being indicators stabilize for the first time in decades. We reduced the child poverty rate. We pushed the share of Americans without health insurance coverage to the lowest rate in history. And we also saw labor markets bounce back really quickly, which is, in some ways, maybe the most important piece of this.

Because I think sometimes there’s this argument that if we support families, we’ll just all become, you know, sort of suckers to the state and no one will ever go to work again. The opposite is actually what happened, and well before we really rolled those policies back in the ways that we have.

So a question we wanted to ask ourselves in thinking about what we learned from the book and all that we’ve shown you is, what, in principle, could we do to support more of what we see when labor markets are tight? The starting place is just actually working harder to prioritize tight labor markets. And the book came out right when the Fed was deep in arguments and actions around this.

And so this is really sort of top of mind. I never expected that I would be someone engaging in arguments around macro policy. But it is the number one top thing to think about, is really thinking about the Fed’s dual mandate focusing on full employment. And I can say a little bit more about the inflation, labor markets tradeoff in a little bit.

The second is focusing on regulatory policies that boost labor standards. So again, a little bit of a no-brainer, but what we see here is when you do right by workers, workers then succeed for longer, and theoretically, with some other reforms, could actually achieve meaningful permanent lift. So that’s everything, from wage floors, fair scheduling, which we didn’t see happen as much, skills-based hiring requirements, which we’ve seen.

I think a lot of what’s happening in my professional world– so I work in the policy space. And a lot of it is pulling in research to inform policy. But I work with employers and employer-focused groups.

And I think one of the reasons why they came to the Urban Institute and built this project with me back before COVID was because the labor market was so tight. So they were like, oh, no, right? Like, how do we get workers? What do we do? Like, they care more about these things when labor markets are tight.

Theoretically, there’s good reason for them to care more about these things indefinitely. We could have a long conversation about whether or not they do. But theoretically at least, there’s some evidence that we provide that they should.

The third is around training policies. So Kathy mentioned that we saw employers really doing a lot more internal training. I will say that the little bit we know about employer-based training for workers, that the US does really poorly at that and has done increasingly poorly.

No one, I don’t think, has looked at the cyclical effects and shows that they actually are real. We see suggestions of that in the quantitative work, but we could do much better.

We could incentivize training policy, incentivize employer-based training for incumbent workers. For new hires, invest more heavily in those workforce intermediaries to facilitate that effective matching. And invest more smoothly in those, right?

Because as Kathy mentioned, there’s sort of a misalignment in terms of the flow of funds, which I think– this is a little bit of a side note, but it’s an important one. And just to make explicit something that I think has been implicit throughout, is there’s both human capital and social capital that is developed in the context of work, both in terms of the intermediaries, includes in terms of the employers and in terms of the workers’ or potential workers’ relationships in all of those spaces.

When you have this kind of boom and bust cycle in terms of investing in intermediaries, particularly those community-based intermediaries, you disrupt the accumulation of social capital and trust that’s so important for so much of what we see, and I think really kind of the implicit driver of a lot of what we see in the qualitative data.

The fourth piece is reallocating risk through social insurance reforms that promote income smoothing and labor force attachment. Things like paid family medical leave, unemployment insurance returns– some of the things that I hoped would actually come out of the pandemic as obvious things that we could and should do. It’s dispiriting to me that they haven’t in the way that they might. But again, that’s another conversation for another day.

And then lastly, as we’ve talked about throughout, this idea of reconceiving the safety net as a ladder to opportunity and not a safety net, per se, that by easing cliff effects to enable workers to amass more assets, and really giving them a fighting chance to break free of the bottom of the labor market without sliding backwards into unstable housing, insufficient income.

Reconsider non-conditional cash transfers like the CTC, like emergency cash relief. Because, really, what we see here is that if you support workers, they’re able to, theoretically, eventually get to a place where they could support themselves. We just don’t actually give them a shot at doing that because we essentially pull the bottom out too soon, even in good times, right?

So a lot of this is about how can we actually just make the floor higher and make the ladder are a little bit more stable so that we can capitalize when things are good and allow people to actually really achieve what I think far more people are able to accomplish than we allow them for.

Shall I take this one?

Yeah, I’ll let you take the last two.

[KATHERINE NEWMAN] So there are a lot of questions that we did not explore in this book. We thought we did enough, but there’s a lot we didn’t. As Elisabeth mentioned, at the point that this book came out, the big policy question in the country was what the Fed was going to do to quell inflation. And our big worry was if they did what they were threatening to do, which was raise interest rates dramatically, that we would see these tight labor markets fall apart.

Ironically, the Fed has tightened and tightened and tightened. And it hasn’t caused tight labor markets to fall apart, which tells you something about the structural forces at play here. If the US doesn’t open up to immigration, that’s one of its traditional safety valves.

So for the moment, that’s a political choice, which could, if you want it to, it could undermine tight labor markets. But it hasn’t so far. And, in fact, we have fairly high immigration levels. But that is a possibility that hasn’t really been explored.

One thing is for sure, birth rates have not grown. And so we’re not seeing a lot of people coming into the country– we know who’s been born. We know how many 18-year-olds there are, and there aren’t very many of them. And there aren’t going to be very many of them.

In higher education, we’re already feeling that. Not so much at the University of California, but everybody else around us is already feeling the pinch of lower– low– persistent low fertility. And because that is persistent, we’re going to see this low level of supply of workers remain the case in the United States.

So the inflation problem, we just have to remember that inflation doesn’t always coincide with tight labor markets. We’re still in the middle of a tight labor market, and inflation is coming way down.

There are lots of features of the pandemic economy that led to inflation– supply chain problems and so on. They do often coincide with tight labor markets, but not always and not right now. At most, 20% of wages are connected to inflation. 80% of inflation are other factors, including corporate profiteering and supply chain disruptions and so on and so forth.

Automation. We did not talk much about automation. That is now a subject of a lot of concern– a lot of interest in what AI is going to do, for example. But of course, there are earlier forms of automation than that.

I mentioned in the beginning that I studied fast food restaurants for a long time. And one of the reasons I did was that I thought, that surely is something that can’t be exported, right? You can’t automate that.

Well, today, if you go into the restaurants that I studied, there are machines everywhere and very few people. So it’s entirely possible, it turns out, to automate many aspects of human service. But we did not focus particularly on automation. And the impact of automation is a mini contested thing.

So these three things– inflation, automation, and immigration– we didn’t really focus on. And they’re worthy of more study in understanding how tight labor markets ebb and flow.

But for what we did study, we come back to what the sociological implications are of tight labor markets. Most especially, and this is taking a page from my former student, Mario Small, poverty is a conditional condition, so to speak.

It’s not invariant. People move in and out of poverty. And when labor markets are tight, many more of them are able to escape the clutches of poverty. We should be paying attention to what the conditions of unemployment– how the conditions of unemployment shape the nature of poverty.

And policy matters a lot in sustaining that ascent. If we were dedicated to enabling people to escape poverty once and for all, there’s a lot we could do to sustain the conditions that we saw develop, in a sense, naturally or even artificially under COVID. We do know how to move that needle. We do know how to cut child poverty. We do know how to invest in training.

Whether we do so or not is a matter of political will. But it’s not like we don’t really know how to do this. So policy matters in sustaining that ascent.

But most of all, as sociologists, we think that portraits of poverty really need to take unemployment rates very seriously. And when you look at those classic books, you will rarely see any mention of fluctuating unemployment rates. So we think that’s really an important lesson that we learned out of this study. And with that, it’s over to you.

[APPLAUSE]

[PAUL PIERSON] Thank you. My questions.

That was fantastic. So floor is open for questions. I’ll walk around with the mic just so we can make sure everybody hears everybody.

[AUDIENCE MEMBER] Thank you. Thank you very much for sharing this. I’m a public policy graduate. And this semester, I’m working on a capstone project with a local Alameda County social service agency.

And my topic is to design some policy suggestions, or maybe reshape the current training programs for low-income communities. Because as you know, the federal government has the [INAUDIBLE] program. And in California, the subsidy program for local low-income community is called Welfare to Work.

But they found that even after this training program, actually, these recipients, they cannot get hired with significantly higher salary. Actually, they still need to rely on the subsidy. So local government can say, OK, maybe that company will be a good option.

And I recognize that you suggest that there should be more training policies. And I’m curious, are these training policies means the policy is only for the company or the policies that will encourage the cooperation between government and the industry, whatever industry? And can you name some– I mean, best practice or examples that between the government and the companies that– the cooperation there significantly help low-income communities to get hired with higher salaries. Thank you.

[KATHERINE NEWMAN] So most of what we saw in Boston in the way of government programs were government grants to training agencies. And the best of the training agencies were ones that were literally training for particular employers. Employers were almost putting in their orders for workers.

And there was a lot of customized training in medical fields– Boston is a very big hub for medical fields. So we saw a lot of injection of government resources into organizations that were providing job training, for example.

But there were also place-based organizations, where the money was flowing into a nonprofit organization interested in a particular neighborhood and not doing much training at all, but just linking up employer is looking for workers with workers looking for jobs. But what those intermediaries did was they checked those people out.

And they stood behind them. And they called to be sure they were showing up. And they basically vouched for them and continued vouching for them. The very best of those programs were durable.

They didn’t just place someone and walk away from them. They were by their side. Because these are– especially in very, very tight labor markets, the marginal worker may be someone with very limited labor market– recent labor market experience. And so they often don’t look like they’re all that reliable, but they can be supported, in a sense, to become reliable.

I think the most important feature of these training programs that really matters is training people for specific skills, for specific skills in industries that have high demand. But then after that, it’s what employers are doing themselves. It’s not the job placement. It’s the promotion, the internal promotion.

So one of the industries we looked at were garbagemen, basically, or scavengers. These are classic low wage jobs. They don’t require very much skill. But they do sometimes require a driver’s license for a truck.

Now you’ve got people coming in the front door who don’t have that license anymore. And so you’ve got employers who are starting to provide the training for those licenses, paying for those licenses, translating those programs into languages other than English for non-English speaking workers.

And although that sounds sort of trivial, it’s actually not. It’s actually quite a considerable investment in providing tailored training. And then there’s a question of fomenting upward mobility inside the firm, which means giving people cross-training and an opportunity to learn higher order skills than the ones they came in with.

So if you read the book you’ll see many, many examples of different kinds of training programs. Some of the most impressive to me because they seemed the least likely were in homeless shelters. There’s a very famous 50-year-old homeless shelter in Boston.

My Boston colleagues here would recognize it immediately if I used the actual name. They have a hospitality program. And so they train restaurant workers and– I’ve forgotten. There’s one other thing they train people for.

These are places where, typically, you have to be– you can’t be there all day long. You have to leave during the day. There are rigid rules around shelters, homeless shelters. But when they had these training programs, they were able to place these workers right away even though they were the most disadvantaged and the least conventional-looking,

[AUDIENCE MEMBER] I wanted to get your thoughts a little bit on how tight labor markets affect politics, that could mean lots of things, but I guess I have at least two things in mind. One is, how do– how does this rebalancing of power in labor markets, does that have any effect on the balance of power within politics?

And second, do tight labor markets change the policy preferences of employers? Elisabeth, you touched on this a little bit when you were talking about how suddenly people were interested in your work, you know, because of tape. But I’m wondering if you could flesh that out and tell us, is there a broader shift in what business is seeking from government in the context of tighter labor markets?

Get one more.

You want to take that?

Yeah, I can take that one. I think he’s collecting questions.

[OTHER AUDIENCE MEMBER] Thank you also for a fabulous talk. I’ve found it very interesting. I was interested in what Katherine was talking about with the implications for literature and sociological literature. But I was also thinking of implications for criminological literature, which I think also overlooks this connection.

And it’s sort of been the crime issue. I’m just amazed at how we talk about politics. It continues to get reincarnated, the make– what Katherine Beckett called making crime pay. But this is an interesting case in how when you have these tight labor markets, and you’re talking about the safety effects on neighborhoods, that it’s a lesson that I think has implications for criminologists as well as sociologists.

And then just a small secondary question is just, were the effects when you were talking about race, did they also go across gender in terms– so I was just wondering if there’s a gendered component to what you found going on in neighborhoods? Thank you.

Take the political one.

[ELISABETH JACOBS] Sure. So I’m going to start with the policy preferences question because that one I feel like I can– I can give some thoughts on. And then I want to think more while I’m talking maybe about the balance of power and politics question, because that one I’m less sure about.

Politics are just so crazy now, that, like, I just– like, I don’t actually know what to say about politics other than like, politics are crazy. Is there a science? I don’t know. Like, in this– [CHUCKLES] And policy, the same. And obviously, policy preferences are part of the politics.

But I mean, in terms of the policy preferences of employers, I think the answer is both yes and no, which is really unsatisfying but also, I think, true. On the one hand, employers have a problem, right? Like, they can’t find the workers to work at the wages that they want to offer under the conditions that they want to offer them.

And so their willingness to do things a little bit differently I think have changed. And they’re sort of head scratching around like, what do we do? How do we solve for this problem? Like, they’re working on that on the one hand. And they can give some examples. But I want to give on the other hand first.

On the other hand, they don’t want to cede control over their profits, the way they operate, right? They have all of the same standard. Like, we couldn’t possibly do that because how could a business run, right? All of those things still are at the heart of it. I mean, they’re still– it’s still capitalism, right?

But in terms of their preferences and where I think there’s been interesting movement is, you know, maybe the best example is the moving to skills as opposed to credentials and how much that’s taken off over the last couple of years. And that’s this idea that you want to hire people based on the skills that they have, and not have a degree as a requirement in terms of hiring.

And so there’s multiple states, and a movement to do it at the federal government level as well, to get rid of this idea that there’s a degree requirement in any kind of way, and to instead substitute skills and some sort of skills-based credentialing system.

You see that not only in terms of hiring, but also employers really interested in figuring out, how do we quantify skills in a way that we can track and measure and hire for so that we can do a better job identifying workers who could actually do this work?

Now, I think they’re especially interested in that because they’re less interested in just paying workers more, right? But it’s a change, and it’s arguably a good change. Because there are all kinds of reasons why having a degree based sort of barrier to entry is a problem, which has all kinds of implications for racial equity.

So that’s just one concrete example of kind of a like, yes, yes, and no. Whether it’ll stick is what I’m super interested to see. Like, to me, that’s, like, the real experiment that I’m basically living in, right? I run this project that brings employers, worker advocates, policymakers, researchers to the table to really think about, like, how can we jumpstart mobility for exactly the workers we’re talking about?

And employers are super interested in sitting at our table, including corporate funders. I will be so curious to see, and we’ve already seen it now in terms of renewals, I’ll be very curious to see how our employer partners continue to show up.

And the folks who are most interested and most engaged are the small businesses, the folks who are operating on the margin. They’re not the, like, National Federation of Independent Business small businesses. They’re like real small businesses, right?

But– so whether– yo know, Walmart is one of our funders. It shocks me that I run a project on low wage work that Walmart is at the table for. And they’ve shown up in a really genuine way. And yet, I can see all kinds of reasons why they will slowly tiptoe away, especially as labor market conditions change. So I’ll come back to you with my data, my n of 1 data.

[KATHERINE NEWMAN] And I’ll just add, because we do have political scientists in the room, I would love for Paul Pierson, given what he works on, to tell us what has happened to the business voice in the Republican Party. Because I would have expected there to be a lot of pressure to open up immigration.

Instead, there’s this reactionary absolutely no way, no how. It’s an absolute third rail. But if the business voice was really powerful in the Republican Party, we would have seen– we would have seen these tight labor markets at least marginally eroded by opening up immigration, and we haven’t. So I will– at some point, we’ll let Paul explain that because politics is definitely not– that’s more of an amateur hobby for the two of us.

But it is confusing to me in a way. Because if you’re just talking about interest politics, you would expect to see immigration, which it has in the past, right? Bracero programs. I mean, there’s a thousand different examples in which the business community argued for opening up immigration.

Instead, the most I’ve seen, and actually I’ve written a little bit about this, is amplifying the optional practical training visa system, right? So that’s for people who are legally here as international students to stay here and begin filling positions, but not opening up the immigration gates. Did you have a– you look like you were about to say something.

[AUDIENCE MEMBER] Two questions real quickly. The first would be, do you have any plans to do that mapping of immigration, race to your data? Because that is such a hot button issue right now. Number one. Number two is, what plans do you have to break down the data further and do a lot of work on encouraging nonprofits to go into these things? I would love to have that data by congressional district.

[KATHERINE NEWMAN] We did do it by local labor markets. But we couldn’t get it to go back far enough. The reason why we ended up with state-level unemployment rates was just the duration of the data that we needed, as I recall.

[ELISABETH JACOBS] Yeah, that’s exactly right.

[KATHERINE NEWMAN] Because at one point, we had it down to really small districts, and then we had to give that up.

[ELISABETH JACOBS] Yeah. Um, I’d have to look and see whether we could do congressional districts. And if we could, it would need to be– it would–

[INAUDIBLE]

Yeah, something like that. I think we could. And to Kathy’s point, it was to be able to look at those three periods, and to go back and look at that were why we ended up using states.

[KATHERINE NEWMAN] But I want to get to Lynn’s question about criminology because it’s actually a subset of a broader set of questions, which is, if tight labor markets produce all these benefits, you know, is there a way in which this plays into an almost conservative agenda of loosening up the dependency people have on public benefits?

So we wrote some op-ed pieces that weren’t really in the book, but they came out of the book, looking at what happens when labor markets tighten to the use of public benefits. Well, it’s no great shock, they go way down, way down because people are able to pay for themselves– not everything, of course. We’ve talked about some of the cliff effects problems. But when we’re talking about food stamps and Medicaid and so on, those rates go way down.

And so if you were a conservative who really cared about reducing public investment in those safety net programs, you would want these tight labor markets to last forever, you know? And there’s a lot to suggest that– and I will say this bluntly– poor people want to be independent.

They actually want to control their own destinies. They would like to be able to own their own homes and have assets to trade on because they don’t really trust the rest of us to keep helping them. And they’re right not to trust us because there’s a cycle. There’s a cycle in which we– as Fran Piven and Richard Clower taught us many, many years ago.

And that is the biggest problem we find with this cliff effect. If you were able to reform our social benefit programs so that asset accumulation was favored, you might well see people get beyond this and catapult with a completely different philosophy that isn’t just safety– the safety net plus asset accumulation.

And the same thing is true for crime. If we really want neighborhoods to be safe and for us to have to spend less or suffer less, this is one very good way to do that. I mean, it’s amazing. These neighborhoods that David Harding studied were absolutely crime-ridden, enormously dangerous, incredibly high murder rates.

And it just all plummeted down to nothing and made for much better living conditions. And I am sure if you could go back and study how children developed over the years– we were just there for a slice of time– you would see that sort of stability and safety paid off in all kinds of ways– in educational attainment, in mental health benefits, and on and on and on.

So you know when we see experiments like Move to Opportunity, that picks people up and tries to move them with a subsidy to a safer place. What if the place they were in just got safer? Isn’t that a better way to fly? And in a way, that’s what tight labor markets did for these neighborhoods– it made them safer, better places to live.

[PAUL PIERSON] OK, I think we barely have time for two more questions. And since I’m holding the mic, I’m going to ask one. And then [INAUDIBLE] pick you up.

There’s one back there.

So I found myself thinking as I was listening to this incredible presentation– and thank you for the work and for sharing it with us– thinking about recent discussions about what sometimes is called supply side progressivism. And so you’re talking about how you get these hot labor markets. You also get hot housing markets. You get more expensive childcare.

And so I wondered if you’ve reflected on– so there are people who’ve been arguing, well, actually, if you just put a lot of money into housing allowances, or giving people more money for child care, if you’ve got these kind of tight markets, you’re just going to increase the cost. And so what you actually need to try to do with housing, I think the case is clear, is, like, what you need to do is try to expand supply of housing.

And to try to deal with it now becomes– but for you guys, it becomes more complicated when you’re talking about increasing the supply of child care workers, right? Because that actually loosens, would loosen the market. So I just wondered if you guys had thought about how what you’ve been working on and what you found connects up to that, what I think is a really interesting conversation about how you–

[KATHERINE NEWMAN] We mostly talked about cliff effects, honestly, not depriving people of the margins they had to allow them to accumulate more. But I don’t know if you have any thoughts about this.

[ELISABETH JACOBS] I love that question. And in some ways, because I haven’t thought about the connection, I’ve followed the supply side progressivism, sort of, conversations. But I hadn’t actually connected the dots. They’ve lived in silos. And that’s my favorite kind of question. It’s like, what happens if you put those two things together?

But I don’t know that I have any observation beyond just like, I want to– I need to think about it. I mean, I think in the childcare space, which is sort of– it’s a space I know better, there is so much systems-wise that we could be doing in this country that we just don’t do, on both the supply side and the demand side.

I mean, it is just like it is a completely non-system system, right? So that’s– I actually– I know you were like, it’s clearest in housing. I actually think, in some ways, I don’t know if it’s clearest so much in childcare, but it feels the most important.

Because it’s also– the implications– and we didn’t spin this out in the way that we could have. But it’s implied in terms of multigenerational families, in terms of the kind of family relationships and what happens when you have resources, and what happens when if you’ve got to move out of a home because you’re going to push an older grandmother out of subsidized housing if your earnings come in, but that grandmother is the one who’s actually providing care for your kids.

And I mean, there’s just– like, it’s just a series of fails that so obviously, to me, are just dying for a complete overhaul of the system in ways that I think we could take some of the insights from both supply side progressivism and this book and really push on solutions. We also totally failed to do anything there politically. But it means the opportunity is still there to do something. So there’s that.

[KATHERINE NEWMAN] Well, let me just say that if I were going to study the best example I can think of, it would be to look at the Pre-K programs in New York City, right? I mean, everybody seems to hate Bill de Blasio. But I think he’s going to go down in history as a much more effective mayor than most people credit because the four-year-old kindergarten, which has now become three-year-old kindergarten, basically extending the public school system down the age spectrum.

Now, that doesn’t help you with very little babies, OK? But if we’re talking about the next rung up– I have not myself seen any research on the impact on workers, in particular, of extending the public school system down through to three-year-olds. But in theory, it should– it is basically socializing a cost that is otherwise being borne by families.

Now, could you do that with infants? Well, in Sweden you could. I don’t– you know, maybe we would never go that far. But I would really love to see what happened when you had three to five-year-olds now taken up by free public education.

There’s data on what happened in DC, um, which it did the same thing a while ago. And my kids had public Pre-K. It was amazing. And I was not the intended audience, but it happened. And there’s data on, in particular, women’s labor force participation. And women’s labor force participation for low-income women went up and stayed up. So it’d be really interesting to see.

I mean, it’s been pulled back a bunch because of the new mayor in terms of how he’s treated it. So it’ll be trickier to study in New York, which is unfortunate. But it’s out there waiting for someone maybe in this room.

I think you had a–

Do you have a question?

Ir is it a couple of questions?

[INAUDIBLE]

OK. [INAUDIBLE]

[AUDIENCE MEMBER] I’ll keep it simple. What about unions and labor organization and their role in securing durable gains for labor during a tight labor market?

[KATHERINE NEWMAN] Right. The wave of strikes is not an accident. It is– I’m absolutely certain it’s a consequence of these tight labor markets. And actually, at 6:00 o’clock, I’m going to go downstairs to the sociology department, where I’m going to meet with a group of graduate students who I’m hoping to entice into working with me on a project on unionization in the Southern auto plants in Alabama in particular.

Because there’s a long history of failed attempts to unionize the South. And the South becomes the place where the reserved army of the unemployed is basically located. But in some of those plants now, more than 50% have signed union cards. And so I’m hoping to take a research team down back to Alabama where I’ve done field work in the past because I do think the prospects for unions have never been stronger.

I mean, in the last couple of years, there have been I think something like 1,700 union elections. 1,200– more than 1,200 of them have succeeded, and 500 of them have failed. You wouldn’t see that in a period of very loose labor markets.

[ELISABETH JACOBS] One more thing on unions that I’ll say that I would love for someone to do building on what we started is I think you could look at whether the effects of tight labor markets are even greater in places or industries or figure out how to quantify it where you actually still have real union power and density.

I mean, one of the arguments here and one of the reasons why we don’t focus a ton on unions is because union power has been so deeply undermined and eroded, that it was, like, especially for this population, it’s probably not going to be, like, a major force. But I do think that with this first chapter of the work done– it’s like a book-length chapter– but that there’s a next chapter. And I think Kathy’s– Kathy’s next project is potentially part of that.

That could look at that interaction and actually look at the role that unions and other forms of bargaining, right? The absence of unions means there’s all kinds of trying to actually get around and do collective bargaining ways that I think we’re both seeing a growth for the same reason that we’re seeing a growth in actual union activity, but that also potentially you could capture in the data and show how much they add lift again to a natural [INAUDIBLE].

The combination of union growth and tight labor markets is leading to the first measurable reduction in inequality that we have seen since we started studying inequality whenever we started that, 25 years ago or so. And in particular, it’s because the bottom is lifting. The bottom is lifting. And there’s– that has not been the case for such a long time, it predates my career, and way predates yours.

[PAUL PIERSON] So the bad news is we’re out of time. The good news is there’s a small reception out here. So if people want to stay and ask the questions they didn’t get a chance to ask or just talk, glass of wine, glass of non wine. And the very good news is what an incredible project. And thank you so much for sharing.

[KATHERINE NEWMAN] Thank you for having us.

Oh, thank you.

Thank you for coming.

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