Wednesday, September 26, 2012
Mulligan: The Redistribution Recession -- How Redistributive Policies Have Destroyed Jobs (Especially for Less-Skilled Workers)
New York Times: Labor-Market Scars Left by Redistributive Public Policy, by Casey B. Mulligan (University of Chicago, Department of Economics):
The social safety net became more generous under Presidents George W. Bush and Barack Obama, and as a result massively altered employment patterns in the labor market.
I have explained in previous posts how public moneys have recently been used to help the unemployed, the poor and the financially distressed endure the recession, but at the same time have dramatically eroded incentives for people to maintain their own living standards by seeking, accepting and retaining jobs, as well as incentives for employers to create jobs that are attractive to workers.
My forthcoming book The Redistribution Recession [Oxford University Press, Oct. 2012] (see the introductory chapter online) quantifies those incentives and their changes over time in terms of marginal tax rates, which refer to the extra taxes paid, and subsidies forgone, as a result of working, expressed as a ratio to the income from working. ...
The group-specific incentive changes are measured (most recently in my paper “Recent Marginal Labor Income Tax Rate Changes by Skill and Marital Status“) on the horizontal axis in the chart below as percentage changes in the share of what people keep from what they earn, net of taxes paid and subsidies forgone. ...
The fact that marginal tax rates rose so differently for various groups means not only that redistributive public policy depressed the labor market but has also sharply, and arbitrarily, altered the composition of the work force in the direction of people who are married and more skilled.