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2020 Opportunity & Inclusive Growth Institute working papers: A retrospective

January 27, 2021

Author

Lisa Camner McKay Writer/Analyst
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Jake MacDonald/Minneapolis Fed

Article Highlights

  • 2020 defined by health and economic crises caused by COVID-19
  • Institute scholars analyzed the crises’ impact on different people, places, and industries
  • Working papers advanced scholarship on urban growth, taxes, immigration, and wages

2020 Opportunity & Inclusive Growth Institute working papers: A retrospective

The year 2020 was defined by the health and economic crises caused by the novel coronavirus. Scholars at the Opportunity & Inclusive Growth Institute responded immediately with analyses that deepened our understanding of the impact of the crises and the policies governments implemented in response. Beyond COVID-19, Institute working papers continued to advance scholarship on a diversity of topics related to opportunity, inclusion, and growth across the U.S. economy. In all, the Institute added 17 working papers in 2020, its highest yearly output to date. We feature some of them below.

The inequitable impact of COVID-19

Public health guidance on steps people can take to protect themselves from the coronavirus evolve as we learn more about how it spreads and whom it hurts most. Two recommendations, however, have been with us from the early days of the pandemic: Work from home, if you can, and keep six feet of distance from others.

Low-wage workers in consumer service industries in big cities saw steeper declines in employment than their counterparts elsewhere.

Not everyone has the same ability to follow those recommendations, however. Institute visiting scholar Milena Almagro and her co-authors find that working at essential jobs and living in crowded housing are strongly associated with higher rates of COVID-19 infection. Black, Hispanic, and low-income people are more likely than others to do both, which helps explain why they have experienced higher COVID-19 infection rates.

The economic impact of the pandemic also varies, not only by job but by place. Visiting scholar Fabian Eckert and his co-authors find that low-wage workers in consumer service industries in big cities saw steeper declines in employment than their counterparts elsewhere. This is because big cities have a disproportionate share of high-wage skilled workers who could work from home when the pandemic hit, which withdrew their spending from the local economy.

A tale of two Americas

This analysis of geographic differences in the labor market during the pandemic built on an earlier paper by Eckert and his co-authors in which they studied why wage growth in the largest U.S. cities has been so much higher than wage growth everywhere else in the United States. The reason, they find, is due entirely to wage growth in one sector that is concentrated in dense urban areas: service industries that rely on high-skill labor and information and communication technologies. This finding sheds light on the sources of economic growth in knowledge economies.

For many, it costs too much to call in sick (even with COVID-19)

In the early phase of the pandemic, individuals with a COVID-19 diagnosis in their household did not reduce their working hours. This alarming discovery came from the COVID Impact Survey, a tool developed by Institute Director Abigail Wozniak to understand the pandemic’s impact on the economic, physical, and mental well-being of people from all walks of life. Her finding suggests that one way to reduce infections is to provide financial support to people who need to quarantine.

Distance learning drives women from the workforce …

Visiting scholar Misty Heggeness studied the impact of school closures on working parents, a pressing dilemma for families. She found that when day care sites and schools shut down, mothers with school-aged children—but not fathers—took leave from work to care for their kids, putting mothers’ careers in a precarious position. This article received widespread attention in national media, including the New York Times, Wall Street Journal, and Yahoo Money.

… While the tax system discourages them from joining

Among the many complexities of the U.S. tax system is the fact that most married couples file taxes jointly. As a result, Institute consultant Mariacristina De Nardi and her co-authors explain, many married women experience higher marginal tax rates than they would if they were single, which discourages them from working. Eliminating joint taxation could provide a significant boost to women’s participation in the workforce.

Property tax assessments burden minority homeowners

Government assessments of minority homeowners’ property values are higher relative to the home’s actual market value than assessed values of White homeowners’ properties.

Visiting scholar Troup Howard examined a different part of the tax code: property taxes. Howard and his co-author report that government assessments of Black and Hispanic homeowners’ property values are higher relative to the home’s actual market value than assessed values of White homeowners’ properties, creating a significant financial burden. A partial solution is to link assessments to ZIP-code-level home price indexes so that assessed values reflect each neighborhood’s amenities. This research received national media attention from the Washington Post, MPR News, and TheHill.com, among others.

Low-skill immigrants indirectly increase public finances

Finally, visiting scholar Mark Colas and his co-author deepened our understanding of the economic impact of low-skill immigration. A common concern is that low-skill immigrants use costly public services, such as education, and lower the wages of low-skill native workers by competing with them. But low-skill immigrants also boost productivity and raise wages of the higher-skill native workers with whom they work. The researchers find that this indirect fiscal effect leads higher-skill workers to pay between $700 and $2,100 more each year in income taxes, an amount that is similar in size to a low-skill immigrant’s direct fiscal cost.

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