Hutchins Roundup: Migrant domestic workers, Medicare and financial disparities, and more 

What’s the latest thinking in fiscal and monetary policy? The Hutchins Roundup keeps you informed of the latest research, charts, and speeches. Want to receive the Hutchins Roundup as an email? Sign up here to get it in your inbox every Thursday. 

Migrant domestic workers allow high-skilled American women to enter the labor force  

Half of household services workers in the United States are foreign-born. Using data on time-use and wages in the United States over the past 30 years, Patricia Cortés of Boston University finds that the presence of female migrant domestic workers has broad economic effects. First, the increase in the number of migrant domestic workers has lowered the price of babysitting, housekeeping, and other forms of household production by about 10%. Second, domestic workers are mainly hired by highly educated women, who then participate in the labor force at higher rates. Finally, increased labor force participation by high-skilled native women has narrowed the gender earnings gap in the top third of the wage distribution. The findings suggest that outsourcing household work may reduce gender gaps between native workers in the United States.  

Medicare eligibility reduces geographic disparities in debt collections   

Using data on consumer credit and comparing individuals just above and below the age at which they become eligible for Medicare, Paul Goldsmith-Pinkham and Jacob Wallace of Yale and Maxim Pinkovskiy of the Federal Reserve Bank of New York find that Medicare eligibility improves the financial health of Americans. Specifically, the authors find that eligibility for health insurance at age 65 lowers debt collections by 30% and reduces the differences in the amount of debt sent to collection agencies across states by two-thirds. The improvements in financial health are most pronounced in Southern states and in commuting zones with higher shares of Black residents, people with disabilities, and for-profit hospitals. These areas also experience larger increases in health insurance rates when residents become eligible, suggesting that the reduction in debt collections results from more people acquiring health insurance at age 65 rather than changing their type of coverage. The authors posit that federally administered universal policies like Medicare reduce geographical disparities by extending coverage to “areas where the financial health gains per newly insured are largest,” while policies such as the Affordable Care Act “that delegate states considerable latitude in policy implementation” are unable to target such areas.   

Federal student loan pause reduced delinquencies, spurred debt creation  

Using a large panel of credit and loan data, Michael Dinerstein, Constantine Yannelis, and Ching-Tse Chen of the University of Chicago find that the pause in federal student debt payments reduced the student-loan delinquency rate of affected borrowers by 0.8 percentage point, with delinquency rates on other loans largely unaffected. Previously-delinquent borrowers saw their credit scores rise 28 points on average as the pause increased perceived creditworthiness, the authors argue. Never-delinquent borrowers took out loans over the pause, with the average household in this group increasing non-student loan debt by $1,200, mostly from increased mortgage balances. The authors highlight the complementarity of liquidity and credit. “We speculate that using credit requires a certain level of liquidity for making down payments or making the first due monthly payments. This interaction between liquidity and credit is important for policy design and highlights that policymakers should consider them jointly.”  

Chart of the week: US Treasury balance continues to fall as government exhausts cash available for payments 

Quote of the week:  

“[M]y take is that demand is cooling but it’s not yet cold… We had this big spike on all of the demand metrics in January. But February, March, April, they’re coming in much more flattish, net of inflation. I think that’s just a sign that the combination of all these things — rate hikes, eroding consumer savings, waning fiscal stimulus — are all affecting demand in the way that you would think…[T]here’s a plausible story there that combines the things I was just talking about and add credit tightening to say they’re going to bring demand down and in time bring inflation down. I think that’s a plausible story. I’m still looking to be convinced. I still see core inflation or trim mean inflation in the month-to-month 0.4% range, which implies we’re sort of operating at an annual rate of around 5% and I’m still looking to be convinced that demand will come down and then of course that that will bring inflation down at a pace that won’t erode expectations,” says Tom Barkin, President of the Richmond Fed. 

“I like the optionality that was implied in the statement we did after the last meeting. Obviously even this month, we’re going to have a full month’s worth of data coming. You’ve got questions about the debt ceiling and what impact that might have. You’ve got questions about credit tightening and how significant that might be. I think it gives you time and optionality to say either there’s still more we need to do so let’s do more, or it’s still OK to wait and we’ll wait a bit.” 

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