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Hutchins Roundup: Social Security benefits, hiring discrimination, and more 

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Studies in this week’s Hutchins Roundup find older workers retired at higher rates during the pandemic but did not increase claims for Social Security benefits, some large U.S. firms systemically discriminate against Black applicants, and more.   

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Pandemic increased the unemployment and retirement rates of older workers 

Using survey and administrative data on U.S. workers, Gopi Shah Goda of Stanford and co-authors find that the employment of 50- to 70-year-olds declined substantially due to the COVID-19 pandemic. The fall in employment was driven primarily by increases in unemployment and labor force exits due to retirement (for individuals age 62-70) or labor force exits due to reasons other than retirement or disability (for individuals age 50-61). However, more labor market exits due to retirement were not associated with more older workers transitioning to Social Security over the pandemic, the authors find. Monthly claims for Social Security retirement benefits remained unchanged and claims for Social Security disability insurance declined 15% relative to their pre-pandemic predicted levels. Older workers may have had temporary alternatives to Social Security (e.g., higher unemployment insurance benefits) or encountered difficulties in applying (e.g., due to office closures) which reduced the spillovers into the program during the crisis, the authors suggest. 

Discrimination against Black workers in large US firms is driven by a handful of employers 

In an experiment that sent 83,000 job applications to 108 Fortune 500 companies, Patrick Kline of UC Berkeley and co-authors find that much of the racial discrimination in the U.S. hiring process is perpetuated by a small number of highly discriminatory firms. In the study, fictitious “applicants” were given either a distinctively Black or white name (chosen if more than 90% of people with that name identify as Black or white, respectively) and otherwise equal qualifications for entry-level vacancies. Applicants with Black names were 2.1% less likely to hear back from employers than white applicants for the same job. The top 20% of the most racially discriminatory firms accounted for about half of all discrimination perpetuated against Black applicants. The unlawful practice was concentrated in firms in particular industries such as auto services, sales, and certain forms of retail. Identifying the individual discriminatory firms is important, the authors argue, as the information can help workers avoid biased employers and can inform the decisions of the Equal Employment Opportunity Commission, the federal agency charged with preventing and remedying unlawful employment discrimination. 

Green bonds do achieve their environmental objectives  

The green debt market, which grew to $730 billion in 2020, is comprised of green bonds, green loans, and sustainability-linked loans, all of which are seen as a way to reduce greenhouse gas emissions and/or increase climate change resilienceUsing data from the firms in the S&P Global 1200 index, Jochen M. Schmittmann and Chua Han Teng of the IMF find that firms that issue green bonds have lower emission levels than firms that do not issue them. But green bank loan borrowers – who take out loans earmarked for environmental projects – do not differ as much from other borrowers after adjusting for industry composition. However, green bond, green loan, and sustainability-linked loan borrowers lower their emission intensity over time at a faster rate than other firms. Given that there is little evidence that issuing green bonds reduces borrowing costs, the authors suggest that green debt issuers seek to signal their green credentials rather than trying to save money.  

Chart of the week: GDP is returning to pre-pandemic levels in large economies, but some countries are recovering slower than others 

Line graph showing the gross domestic product (index: fourth quarter 2019=100) of China, India, U.S., Germany and U.K. from October 2019 to January 2021

Source: The Wall Street Journal 

Quote of the week: 

“One of the major fault lines remains the pandemic. If we see newer virus variants, which are far more transmissible – like the Delta variant that we’re seeing right now – in a world where vaccine access remains highly iniquitous, that will have a big hit to the economic recovery. Another major risk and fault line is with respect to financial conditions. If inflation in, for instance, the U.S. were to be more persistent than we expected, that could lead to a faster tightening in monetary policy, and that could then again disrupt financial market conditions. So, these are some of the major risks we are concerned about,” says Gita Gopinath, Chief Economist of the International Monetary Fund. 

 “First and foremost, the world needs to be more fully vaccinated. This requires multilateral action to make sure that sufficient vaccine doses are made available to developing countries. Individual governments will need to tailor their policy support to the stage of the crisis. They will have to do this by nesting their fiscal policies in credible, medium-term fiscal frameworks. In the case of monetary policy, central banks should look through what are transitory inflation movements. However, it’s very important that they remain prepared and strongly communicate what they will do if it turns out that inflation goes even higher and is much more persistent than expected.”  

Nasiha Salwati

Research Assistant - The Hutchins Center on Fiscal and Monetary Policy

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