Policy Seminar on the Redistribution Recession: How Labor Market Distortions Contracted the Economy.

Friday, April 26, 2013
George Shultz Conference Room, Herbert Hoover Memorial Building
PARTICIPANTS 
 
Casey Mulligan, Michael Boskin, John Cogan, John Gunn, Eric Hanushek, Kyle Herkenhoff, Dan Kessler, Ed Lazear, Lee Ohanian, Leena Rudanko, George Shultz, John Taylor, Ian Wright 
 
ISSUES DISCUSSED 
 
Casey Mulligan, professor of economics at the University of Chicago, discussed his recent book “The Redistribution Recession: How Labor Market Distortions Contracted the Economy.” 
 
Mulligan began by discussing why labor hours declined so much during the great recession, and argued redistribution of “safety net” programs is the single largest factor depressing work hours. Next, he discussed his methodology for quantifying the changes in net eligibility and benefit rules in key safety net programs since 2007, and detailed how unemployment insurance, food stamps (SNAP) and Medicaid benefits and eligibility have evolved. 
 
Mulligan argued that increases in both the amounts and the length of benefits have depressed real output, and that as a result of the increased safety nets, the return to working decreased on average by 8 percentage points of compensation. 
 
Mulligan concluded by saying that expanding social safety nets explains a large fraction of the reduction in labor (due to both changes in outflows and inflows) , a large fraction of the increase in labor productivity, a large fraction of the reduction in business investment, and why labor per capita has recovered sluggishly. 

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