More Americans are opting to earn a paycheck rather than staying home to care for family members, and it's helped to arrest a long-run decline in the nation's labor force participation rate.
A deep dive into what's pushing up the share of U.S. adults who are working or looking for jobs kicks of this week's economic research wrap. We then run through the differences between U.S. and German taxes, the effect that higher-cost college is having on homeownership, and the U.S. partisan confidence divide. Check this column every Tuesday for new studies from around the world.
Participation stabilization, unpacked
The U.S. labor market participation rate has flat-lined over the past year, a trend that comes partly as people choose to work rather than stay home to care for family members, according to a new analysis on the Atlanta Federal Reserve Bank's Macroblog. Between the first quarter of 2016 and the first quarter of 2017, the share of people working or looking rose slightly even though demographic trends suggested it should have dropped by 0.14 percentage points. That change came as fewer adults — and fewer women, in particular — opted out of work to care for children or the elderly.
While the Atlanta Fed post doesn't dig into why that's happening, it could be that a strong labor market is enticing workers to get back in the game. Monetary policy makers have long hoped that their patience in raising rates would help the job market tighten to the point where workers would come back from the sidelines.
An Update on Labor Force Participation
Published July 12
Available on the Atlanta Fed's macroblog website
Whose taxes are most burdensome?
A new Chicago Fed analysis finds that after factoring in tax breaks, businesses in the U.S. are paying more than German companies (a reasonable point of comparison because the countries have a somewhat-similar industry mix). That said, effective average tax rates on corporate profits are well below statutory tax rates in both the U.S. and Germany, which means simple comparisons based on the headline rates can seriously mislead.
This is relevant because President Donald Trump's administration has pledged tax reform that would slash how much corporations are paying, even as Democrats criticize the U.S. system for allowing businesses to skip out on taxes through breaks and parking cash overseas. It's worth noting that individual taxes in Germany are much higher than in America, so the U.S. has a relatively light overall tax burden.
The Burden of Taxation in the United States and Germany
Published July 2017
Available on the Chicago Fed website
Getting the degree, skipping the house
A major jump in state school tuition and costs between 2001 and 2009 didn't cause American students to skip out on college — but it did prompt them to forgo home ownership, based on a New York Fed analysis. State average enrollment-weighted public college tuition and fees rose by 81 percent during that time, but students still enrolled and finished school, with the help of loans.
The higher cost explains between 11 percent and 35 percent of the 8 percentage-point decline in homeownership for 28-to-30-year-olds between 2007 and 2015, based on their analysis of nine groups of people across all 50 states. "States that increase the cost of education therefore may pay a price not in the form of declining workforce skill, but instead through muted housing-related spending and lower wealth accumulation among younger consumers in the years to come," the researchers write.
Echoes of Rising Tuition in Students’ Borrowing, Educational Attainment, and Homeownership in Post-Recession America
Published July 2017
Available on the New York Fed website
The epic partisan confidence divide
As political polarization has increased, so has the gap in economic confidence between members of winning presidential candidates' parties and members of the opposition. Trump's supporters posted a massive increase in economic optimism after his election, an effect six-times larger than the bump that followed George W. Bush's election in 2000. The thing is, it doesn't seem to matter all that much for consumer spending, according to an analysis by economists including Amir Sufi and Atif Mian. That's puzzling, but it doesn't mean that the optimism gap is unimportant. "This increased partisan bias may be correlated with other important outcomes, such as voting," they write.
Partisan bias, economic expectations, and household spending
Published July 2017
Available on the Chicago Booth website