Class Notes: Surprising impacts of unionization, affirmative action, and more

This week in Class Notes:

• Unionization reduces both employment and average earnings, because of a change in the composition of the workforce towards those with lower skills or less experience.
• The EITC strongly boosts employment among mothers with toddlers, cutting poverty rates.
• Ending affirmative action in California reduced both equity and efficiency in higher education.
• This week’s top chart shows that the pandemic caused significant drops in math and English test scores for Ohio students.
• In this week’s choice opinion, Sheryll Cashin argues for investment of resources and care into Black neighborhoods.
• Check out our latest piece on how the new permanent increase in SNAP benefits will help low-income children.
• For your calendar: virtual events exploring efforts to address health inequities, racial disparities in today’s economy, and the economics of mobility.

Unionization reduces both employment and average earnings, because of a change in the composition of the workforce towards those with lower skills or less experience

Historically and theoretically, unions win higher wages for members, but at the expense of employment for union “outsiders.” Brigham Frandsen uses an employer-employee matched panel dataset to examine the impact of a vote among workers to form a union, drawing in particular on data from firms in which the vote was close. Unionization leads to a drop in employment. More surprising, average worker earnings also fall, by up to 4 percentage points. These effects are not driven by wage cuts for existing workers, but by changes in composition of workers following unionization. Specifically, younger, lower-paid workers are more likely to be hired following a union victory, while higher-paid workers are more likely to exit. This is caused by a shift in the relative return to experience and skills, which make union jobs more attractive to those with less experience, but less so for those further along their careers.

The EITC has the strongest impact on maternal labor supply for those with children under 3 years old

The Earned Income Tax Credit (EITC) has boosted the labor supply of lower-income workers, particularly mothers. However, given that maternal employment is strongly influenced by the age of children, the impact of the EITC may vary. Katherine Michelmore and Natasha Pilkauskas explore this age gradient with a sample of unmarried mothers from the Current Population Survey and the Survey of Income and Program Participation. They find that the EITC increases employment the most for unmarried mothers with toddlers, with decreasing, though still positive, impacts as children age. For those with children under 3, a $1,000 increase in average EITC generosity increases weekly work hours by an average of 3.4 hours and pre-tax earnings by $2,400. It also reduces poverty in this group by around 5 percentage points. This employment increase is paired with greater use of childcare services for toddlers, particularly informal rather than center-based care.

Ending affirmative action in California reduced both the equity and efficiency in higher education

In 1998, the California state legislature passed Proposition 209, banning race-based affirmative action at public state (UC) universities. With a newly constructed administrative longitudinal dataset from 1994 to 2002, Zachary Bleemer estimates the impact of this policy on underrepresented minorities’ (URM) academic and labor market outcomes. Prop 209 led URM students to enroll in lower-quality colleges and universities and less likely to obtain a bachelor’s degree, an undergraduate STEM degree, or a graduate degree. This finding is contrary to the “mismatch hypothesis” that URM outcomes will improve when they enroll in less-selective schools where they can better “match” their peers. The worse educational outcomes translate into a 5% average annual decline in Hispanic—but not Black—applicants’ wages in their early thirties. For those non-URM applicants who benefited from Prop 209, the long-run educational or wage benefits were small by comparison to the declines for URM students.

Top chart: Pandemic caused significant drops in math and English test scores for Ohio students

This week’s top chart shows how student scores in math and English in Ohio declined significantly due to remote learning and school disruptions during the COVID-19 pandemic. The authors estimate that the decline in math scores for 5th graders is equivalent to half a year’s learning, and a full year’s learning for those in middle and high school.

Chart source: The Ohio State University

Choice opinion: Invest resources and care into Black neighborhoods

“Anti-Black habits of disinvestment and plunder continue to this day. Government at all levels overinvests in affluent white space and disinvests in Black neighborhoods, with the exception of excessive spending on policing and incarceration” writes Sheryll Cashin, who described the residents of those neighborhoods as “descendants” of generational inequality.

“Applying a humane lens to descendants frees policymakers to innovate and focus on evidence-based strategies that might be cheaper and certainly more effective than punitive strategies borne of racial dogma…Perhaps follow the lead of Lawrence, Massachusetts, which made bus lines from its poorest neighborhoods free, as have other cities. Invest in well-resourced, culturally competent education, with reduced class sizes, in high-poverty neighborhood schools. And allow descendants to be first in line in any lottery for accessing great, integrated schools and neighborhoods. Invest in parks and neighborhood centers that offer recreation and human services in poor Black neighborhoods — free services for the freedom and liberation of descendants who have been intentionally trapped in hyper-segregated poverty,” she writes.

Self-promotion: Increase in SNAP benefits will help low-income children

Under new rules, monthly benefits for SNAP have increased by around $36 per person from a pre-pandemic amount of $121 to reflect changing family needs over the past 50 years. Our Center Director Kristin Butcher describes how this long overdue update will benefit low-income children. Increasing benefits to help families eat a healthier diet that is also less time-costly is a longer-term investment for children, she argues. In her own research, Kristin finds that “children on SNAP grow up to be healthier, live longer, are more likely to complete high school, have better economic outcomes, and are less likely to be incarcerated compared to similar people not covered by these benefits.”

For your calendar: Virtual events exploring efforts to address health inequities, racial disparities in today’s economy, and the economics of mobility

Leveraging community expertise to advance health equity

Monday, September 27, 2021 3:00 PM – 4:00 PM EDT

Urban Institute

Racial disparities in today’s economy, 64th annual conference

October 4-6, 2021

Boston Fed

Economics of mobility meeting, Fall 2021

Friday, October 22, 2021 11:30 AM – 5:30 PM EDT

NBER