“We live in a time of extraordinary change – change that’s reshaping the way we live, the way we work, our planet and our place in the world. It’s change that promises amazing medical breakthroughs, but also economic disruptions that strain working families...It’s change that can broaden opportunity, or widen inequality.”
In his 2016 State of the Union address, President Barack Obama stated: “What is true – and the reason that a lot of Americans feel anxious – is that the economy has been changing in profound ways, changes that started long before the Great Recession hit and haven’t let up.”
This year’s State of the Union address focused on the extraordinary time of change in which we live and how this change can directly impact our quality of life—by either broadening opportunity or widening inequality. While the President highlighted a host of policy issues in this year’s State of the Union—spanning from the economy, the future of work, immigration, education, and climate change, among others—he also posed a series of questions for the nation to answer moving forward, including:
Since its launch in 2006, The Hamilton Project has released a range of targeted policy proposals that provide innovative, evidence-based approaches for addressing many of the policy priorities set forth in last night’s address. In this document, we highlight those that are most relevant to the goals and ideas promoted in the speech and reflective of the current policy context.
“Today, technology doesn’t just replace jobs on the assembly line, but any job where work can be automated… For the past seven years, our goal has been a growing economy that works better for everybody. We’ve made progress. But we need to make more.”
As the labor market continues to evolve, our nation will face pressing questions about how to address both cyclical and longer-term labor market challenges and, ultimately, about how best to help workers secure steady jobs. The appropriate response to these challenges will involve a range of policies, targeting both short-term and long-term issues. In existing work, The Hamilton Project has focused on the future of work, and policies that both regulate and provide benefits and protections to workers.
The Future of Work in the Age of the Machine by Melissa S. Kearney and Brad Hershbein
Recent developments in technology, including the proliferation of smart machines, networked communication, and digitization, have the potential to transform the economy in groundbreaking ways. In this framing paper, The Hamilton Project explores the debate about how computerization and machines might change the future of work and the economy, and what challenges and opportunities this presents for public policy.
Workers and the Online Gig Economy by Jane Dokko, Megan Mumford, and Diane Whitmore Schanzenbach
The Hamilton Project describes the broader economic context of contingent employer-employee relationships and where the emerging on-demand economy fits in this context. It also highlights the regulatory and measurement gaps that need to be resolved.
A Proposal for Modernizing Labor Laws for Twenty-First Century Work: The “Independent Worker” by Seth D. Harris and Alan B. Krueger
The rise of technological intermediaries enabling workers to engage in the gig economy has resulted in protracted legal battles over whether to classify these workers as “employees” or “independent contractors.” The authors propose assigning benefits and protections to independent workers according to whether or not the new benefits meet three certain considerations, and seek to address several growing issues in the labor market.
Reforming Occupational Licensing Policies by Morris M. Kleiner
The author proposes a four-tiered approach to reforming occupational licensing practices would include conducting state-level cost-benefit analyses on proposed new requirements, establishing federal-level best-practice models and more-uniform licensing standards across states, allowing for streamlined transfer of licenses as workers move across state lines and, when appropriate, eliminating occupational licensing for certain occupations. Taken together, these proposals would allow employment in affected sectors to grow, improve consumer access to goods and services, and lower prices.
Designing Thoughtful Minimum Wage Policy at the State and Local Levels by Arindrajit Dube
The author proposes that state and local governments consider median wages and local costs when setting minimum wages, index the minimum wage for inflation, and engage in regional wage setting. This proposal aims to raise the earnings of low-wage workers with minimal negative impacts on employment.
“America is about giving everybody willing to work a hand up, and I’d welcome a serious discussion about strategies we can all support, like expanding tax cuts for low-income workers without kids.”
Economic security and economic growth are mutually reinforcing. The more security that people achieve in their personal finances—through personal savings and social insurance—the more confidence they place in the future. In addition to those living below the poverty line, millions more Americans struggle each month to pay for basic necessities or quickly run out of savings when they face unexpected challenges, such as the loss of a job or a health emergency. In existing work, The Hamilton Project has put forth proposals to reduce the impacts of poverty and increase economic security for individuals and families.
A Dozen Facts about America’s Struggling Lower-Middle Class by Melissa S. Kearney, Benjamin H. Harris, Elisa Jacome, and Lucie Parker
This set of economic facts provides a dozen facts on struggling lower-middle-class families and focuses on two key challenges: food insecurity, and the low return to work for these families who lose tax and transfer benefits as their earnings increase. This set of facts highlights the critical role of federal tax and transfer programs in providing income support to families struggling to remain out of poverty.
Supporting Low-Income Workers through Refundable Child-Care Credits by James P. Ziliak
The author proposes converting the federal Child and Dependent Care Credit from a nonrefundable tax credit to a refundable one; and capping eligibility at an income of $70,000, with the value of the credit depending on income, the age of the child, and utilization of licensed care facilities.
Building on the Success of the Earned Income Tax Credit by Hilary Hoynes
The author proposes expanding the Earned Income Tax Credit (EITC) by raising the benefits for families with one child to be on par with the benefits for families with two children. This proposal aims to strengthen work incentives for low-income one-child families; raise 410,000 people—including 131,000 children—out of poverty; and increase after-tax income by about $1,000 for one-child EITC beneficiaries, leading to improvements in health and children’s cognitive skills.
Employment-Based Tax Credits for Low-Skilled Workers by John Karl Scholz
The author proposes an expansion of the Earned Income Tax Credit for single, childless taxpayers and for married, childless taxpayers which—when coupled with a wage subsidy for workers in poor urban areas earning less than $11.30 per hour—would improve the circumstances of millions of individuals living in poverty. These proposals would deepen the incentives for low-skilled workers to find gainful employment, and will ultimately decrease crime and promote marriage, because employment gains correlate positively with the marriage rate.
New Hope: Fulfilling America’s Promise to “Make Work Pay” by Johannes M. Bos, Greg J. Duncan, Lisa A. Gennetia, and Heather D. Hill
In this proposal, the authors draw on the previously piloted and successful New Hope model—which guarantees incomes above the poverty line for those who document a thirty-hour work week, identifies community-service jobs for those without private sector employment, subsidizes health care, and assigns caseworkers to families. The pilot program increased participants’ employment rate and earnings growth by 5 percentage points each, and lowered participants’ poverty rate by 8 percent. To serve as a more comprehensive demonstration of this approach, states could compete to be selected among the five states that would compete for $10 million in annual funding for New Hope-modeled programs.
“That's what the Affordable Care Act is all about. It's about filling the gaps in employer-based care so that when we lose a job, or go back to school, or start that new business, we'll still have coverage. Nearly eighteen million have gained coverage so far. Health care inflation has slowed.”
The American health-care system produces cutting edge technologies that improve and extend life in ways previously unimaginable. At the same time, health-care costs remain among the greatest financial threats to both American families and the long-run sustainability of government budgets. In existing work, The Hamilton Project has put forth proposals focused on delivering higher-quality health care more efficiently or with less financial risk for families.
Six Economic Facts about Health Care and Health Insurance Markets after the Affordable Care Act by David Boddy, Jane Dokko, Greg Nantz, and Diane Whitmore Schanzenbach
Many enduring economic challenges persist in the health care and health insurance markets, which include accessing care, delivering high-quality care without waste, and managing new technology. The Hamilton Project offers six economic facts that highlight continuing challenges and complexities in health care and health insurance markets on which the policy debate should focus.
Correcting Signals for Innovation in Health Care by Nicholas Bagley, Amitabh Chandra, and Austin Frakt
To encourage medical technology developers to pursue high-value innovations, the authors propose that Congress replace the tax exclusion for employer-sponsored health insurance with a tax credit that phases out with increasing income; and give Medicare the authority to decline to cover technologies that produce small health benefits at huge costs. In addition, they recommend that the Center for Medicare & Medicaid Innovation undertake small-scale demonstration pilots in Medicare and Medicare Advantage, for select treatments and regions, to explore reference pricing with a cost-effectiveness threshold.
A Floor-and-Trade Proposal to Improve the Delivery of Charity-Care Services by U.S. Nonprofit Hospitals by David Dranove, Craig Garthwaite, and Christopher Ody
The authors propose the design of a floor-and-trade system wherein each state designates a minimum amount of charity care for each hospital to provide and an income threshold for patients receiving charity care. Hospitals would then trade credits of charity care to adjust for differences in local need and preference.
Getting the Most from Marketplaces: Smart Policies on Health Insurance Choice by Ben Handel and Jonathan Kolstad
The authors propose that the Centers for Medicare & Medicaid Services (CMS) and the operators of state insurance exchanges should adopt and promote a narrow and personally targeted consumer search tool, which incorporates an individualized cost calculator, an assessment of risk, hospital and physician network information, and individualized preferences. Additionally, they recommend CMS and operators of state insurance exchanges should implement a smart default model, in which regulators switch consumers from a poorly matched to a well-matched plan during the open enrollment period.
Strengthening Risk Protection through Private Long-Term Care Insurance by Wesley Yin
The author proposes a number of reforms that would improve the functioning of the long-term care (LTC) insurance market, including: (1) a new voluntary subsidy program, LTC Advantage, to help individuals purchase private LTC insurance, (2) a shared-risk-corridor program to help insurers manage systematic and undiversifiable financial risks and (3) a menu of policy options to boost access and demand for the LTC Advantage Program.
“Americans understand that at some point in their careers, they may have to retool and retrain…Say a hardworking American loses his job – we shouldn’t just make sure he can get unemployment insurance; we should make sure that program encourages him to retrain for a business that’s ready to hire him. If that new job doesn’t pay as much, there should be a system of wage insurance in place so that he can still pay his bills.”
Although rapid technological change and increasing global competition have delivered great economic benefits to the U.S. economy overall, the development of new and more productive industries has caused some Americans to experience significant declines in their earnings and job prospects; the Great Recession exacerbated these longer-term trends. In existing work, The Hamilton Project has put forth proposals focused on improving outcomes for workers with less education and those who have been displaced from long-tenured jobs, and creating effective job training programs to help these workers.
Strengthening Reemployment in the Unemployment Insurance System by Adriana Kugler
The author recommends three pilot programs to reform the unemployment system by encouraging different ways to return to work. The first program would allow the unemployed to continue claiming benefits while receiving entrepreneurial training and other assistance for setting up a business. The second program would support the unemployed through temporary positions and internships that might lead to full-time jobs. The third program would provide partial benefits to claimants who accept part-time jobs. By helping the unemployed transition back to work, these programs have the potential to break the cycle of long-term unemployment before it starts.
Fundamental Restructuring of Unemployment Insurance: Wage-Loss Insurance and Temporary Earnings Replacement Accounts by Jeffrey R. Kling
The author proposes a series of new instruments that would help to provide stability to workers who find themselves unemployed. One proposal is wage-loss insurance—which for a limited time would supplement the wages of unemployed workers whose new jobs pay less than their prior job. Another proposal is temporary earnings replacement accounts—into which workers would voluntarily contribute for the purposes of compensation during periods of unemployment and, if unused, would revert to the worker at retirement. The financing plan does not increase the corporate burden.
Providing Disadvantaged Workers with Skills to Succeed in the Labor Market by Sheena McConnell, Irma Perez-Johnson, and Jillian Berk
The authors offer proposals to help disadvantaged adult workers with the skills necessary to succeed in the labor market. The authors call for an increase in funding in the Workforce Investment Act Adult program. They also propose a series of four steps that state and local workforce boards can take to better assist disadvantaged adult workers in obtaining skills.
Using Data to Improve the Performance of Workforce Training by Louis S. Jacobson and Robert J. LaLonde
The authors propose a federal grant competition to be implemented for states to build systems to gather state-based data on employment trends, workforce skill gaps, and the effectiveness of training programs; the information should then be presented in accessible ways. These new training program report cards, plus offering the services of career counselors, will arm workers seeking training to make better-informed career-development decisions.
Raising Job Quality and Skills for American Workers: Creating More-Effective Education and Workforce Development Systems in the States by Harry J. Holzer
The author proposes a competitive grant program, administered jointly by the U.S. Department of Labor and the U.S. Department of Education, that could fund education programs to specifically build the skills needed by high-growth sectors or by particular employers. States could apply on behalf of high schools, nonprofits, postsecondary schools, or other entities that design programs emphasizing both industry-specific skills and more-generalized portable skills.
“And we have to make college affordable for every American. Because no hardworking student should be stuck in the red. We've already reduced student loan payments to ten percent of a borrower's income. Now, we've actually got to cut the cost of college.”
In recent decades, the earnings of college graduates have risen steadily, while the wages of those with less education have stagnated or fallen. Furthermore, lifetime earnings of workers with a college degree are nearly twice as high as those without one. In existing work, The Hamilton Project has focused on identifying policies addressing both academic and financial barriers to higher education.
Major Decisions: What Graduates Earn Over Their Lifetimes by Brad Hershbein and Melissa S. Kearney
The importance of a college education for the advancement of one’s life and career has been widely reported. However, there is much speculation about the likely trajectory of one’s lifetime earnings once they’ve chosen a major program to study. To accompany a new interactive feature, The Hamilton Project explores the evidence behind career earnings by college major in this economic analysis.
Addressing the Academic Barriers to Higher Education by Bridget Terry Long
The author proposes that school districts, community colleges, university systems, and state and federal governments reform the college remediation system by improving placement in remediation classes, providing better remediation services, and adopting measures to prevent the need for remediation. This proposal, targeted at disadvantaged, academically underprepared students in high school and college, aims to reduce the need for college-level remediation and to better match underprepared students with effective resources to equip them with the skills they need to succeed in college and in the workforce.
Loans for Educational Opportunity: Making Borrowing Work for Today’s Students by Susan M. Dynarski and Daniel Kreisman
To increase student loan repayment rates, the authors propose a transformed and singular repayment model that could replace the current array of options that lead many borrowers to make poor financial choices. Under this model, payments would rise and fall with borrowers’ earnings, and would include the ability to increase payments and repay loans more quickly to minimize financing over the lifetime of the loan. Additional recommended consumer protections include allowing private student loans to be included as part of bankruptcy and requiring individuals to exhaust potential federal loans before seeking private loans.
Improving Employment Outcomes for Disadvantaged Students by Harry J. Holzer
The author proposes the creation of financial incentives for public colleges and university systems to offer classes in high-return fields and for employers to offer more training to their employees. This proposal, targeted at disadvantaged youth who have some academic preparation for higher education, aims to generate better labor market outcomes and wage gains. This proposal is chapter eight of The Hamilton Project’s Policies to Address Poverty in America, and a segment in Building Skills.
“For everyone else, especially folks in their forties and fifties, saving for retirement or bouncing back from job loss has gotten a lot tougher…But they shouldn't lose what they've already worked so hard to build. That’s why Social Security and Medicare are more important than ever; we shouldn’t weaken them, we should strengthen them.”
Rising life expectancy and potentially exorbitant long-term care costs have increased the financial resources required to support oneself and one’s spouse in retirement and old age. For many segments of the population, negligible real wage growth has made the challenge all the more difficult. Even with substantial planning, unanticipated events can put pressure on even the most well-planned retirement portfolios. In existing work, The Hamilton Project has focused on policies that will promote financial well-being in retirement.
Ten Economic Facts about Financial Well-Being in Retirement by David Boddy, Jane Dokko, Brad Hershbein, and Melissa S. Kearney
Achieving financial well-being in retirement is an important component of economic security. The Hamilton Project offers this set of economic facts to bring attention to trends in Americans’ financial well-being and preparedness for retirement.
Building on What Works: A Proposal to Modernize Retirement Savings by John N. Friedman
The author offers a proposal to increase retirement saving by middle-class Americans through encouraging the creation of a Universal Retirement Savings Account that combines various types of savings accounts, allowing workers to more easily manage their retirement savings across the duration of their careers. Additionally, the author calls for replacing part of the individual tax subsidy for retirement savings with large tax credits directed to employers who help workers save for retirement.
Better Ways to Promote Saving through the Tax System by Karen Dynan
The author examines the design of government incentives for personal savings, outlining how reforms to these programs would improve saving and economic security for low-income households and reduce expensive and ineffective federal subsidies for high-income households.
Increasing Annuitization of 401(k) Plans with Automatic Trial Income by William G. Gale, J. Mark Iwry, David C. John, and Lina Walker
The authors propose several measures that would help retirees better manage their assets over time and take advantage of already available, yet underused, financial management tools such as retirement annuities. One approach is that a portion of assets in 401(k) plans or similar accounts could be automatically distributed in the form of consecutive monthly payments for a trial period of two years, unless workers opt out; thereafter, workers could chose to continue receiving annuity-like payments or to receive a lump-sum payment.
“That’s why I’m going to push to change the way we manage our oil and coal resources, so that they better reflect the costs they impose on taxpayers and our planet. That way, we put money back into those communities and put tens of thousands of Americans to work building a 21st century transportation system."
Access to affordable energy is a key driver of economic growth and quality of life for American businesses and families. However, our current energy sources impose concealed costs on society including adverse health impacts, constrained foreign policy objectives, and environmental damages that reduce our quality of life. In existing work, the Hamilton Project has focused on policies to more appropriately price the use of energy to compete on a transparent and level playing field, advance research, develop new energy technologies, and improve long-run well-being.
Energy Policy Opportunities and Continuing Challenges in the Presence of Increased Supplies of Natural Gas and Petroleum by Michael Greenstone and Adam Looney
This Hamilton Project framing paper provides a summary of recent changes in the energy sector, tally the benefits and costs, and speculate about the changes yet to come. The framing paper also introduces three discussion papers written for The Hamilton Project that aim to harness the opportunities that the technological advances in the recovery of natural gas offer, while managing the risks.
The Many Benefits of a Carbon Tax by Adele Morris
The author proposes a carbon tax as a new source of revenue that could also help address climate change. She suggests that a carbon tax would reduce the buildup of greenhouse gasses, replace command-and-control regulations and expensive subsidies with transparent and powerful market-based incentives, and promote economic activity through reduced regulatory burden and lower marginal tax rates.
Promoting Clean Energy in the American Power Sector by Joseph E. Aldy
The author offers a proposal for a national policy framework that would complement state requirements and establish a national clean energy standard—jointly administered by the U.S. Environmental Protection Agency and the U.S. Department of Energy—based on performance-based metrics. The system would feature clean-energy credits to offset emissions, with revenues from the credit marketplace used to fund research and development, and demonstration projects used to promote cleaner energy generation.