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Mulligan: The Redistribution Recession — How Redistributive Policies Have Destroyed Jobs (Especially for Less-Skilled Workers)

MulliganNew York Times:  Labor-Market Scars Left by Redistributive Public Policy, by Casey B. Mulligan (University of Chicago, Department of Economics):

The social safety net became more generous under Presidents George W.
Bush and Barack Obama, and as a result massively altered employment
patterns in the labor market.

I have explained in previous posts how public moneys have recently been used to help the unemployed, the poor and the financially distressed endure the recession,
but at the same time have dramatically eroded incentives for people to
maintain their own living standards by seeking, accepting and retaining
jobs, as well as incentives for employers to create jobs that are attractive to workers.

My forthcoming book The Redistribution Recession [Oxford University Press, Oct. 2012] (see the introductory chapter online)
quantifies those incentives and their changes over time in terms of
marginal tax rates, which refer to the extra taxes paid, and subsidies
forgone, as a result of working, expressed as a ratio to the income from
working. …

The group-specific incentive changes are measured (most recently in my paper “Recent Marginal Labor Income Tax Rate Changes by Skill and Marital Status“)
on the horizontal axis in the chart below as percentage changes in the
share of what people keep from what they earn, net of taxes paid and
subsidies forgone. …

NY Times Chart
The fact that marginal tax rates rose so differently for various groups
means not only that redistributive public policy depressed the labor
market but has also sharply, and arbitrarily, altered the composition of
the work force in the direction of people who are married and more
skilled.


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