[Economic Report of the President (2012)]
[Administration of Barack H. Obama]
[Online through the Government Printing Office, www.gpo.gov]


 
CHAPTER 6

Jobs and Income: Today and Tomorrow


Recessions caused by financial crises typically cause large declines
in aggregate demand, as households that have borrowed excessively
during the boom years bring down their debt during and after the
recession. This deleveraging cycle takes time and disrupts the labor
market, because reductions in consumer spending mean that employers
require fewer workers to satisfy customer demand. Long-term problems
that have been building over several decades pose a further set of
challenges for the labor market. Inequality was sharply rising and
earnings were stagnant for middle-income families for many years
before the latest recession. And job growth from the end of the 2001
recession through 2007 was the weakest for any recovery in more than
five decades. The Great Recession exacerbated these problems.
Despite the severe damage caused by the recession that began in
December 2007, the labor market is gradually improving. Sustained
private-sector job growth resumed more quickly after the official end
of the 2007-09 recession than it did after the two previous
recessions (Figure 6-1). Private employers have now added jobs, on
net, every month since February 2010. In 2011, 2.1 million private-
sector jobs were added to the economy, the most in any year since
2005. But, given the depth of the 2007-09 recession, the recovery
has not yet resulted in enough new jobs to replace all of those that
were lost.
Continuing the recovery is essential to putting more Americans
back to work. And even as the economy and job market recover,
long-term trends that predate the recession continue to pose a
challenge for American families and businesses. Responding to
these challenges, the President has proposed measures that
independent economists predict would create millions of jobs. To make
sure that Americans are equipped to compete in the economy of the
future, the President has also taken steps to improve K-12 education
and to make college more accessible and affordable for middle-class
families, actions that should help to mitigate the long-term trend
of growing income inequality.





JOBS AND EMPLOYMENT

The traditional pattern has been that as both the U.S. economy
and population have grown, so too has the number of jobs filled by
American workers. Between January 1980 and July 1990, from business-
cycle peak to business-cycle peak, total U.S. employment grew by an
average of 151,000 net new payroll jobs a month; it grew even more
quickly, at a rate of 178,000 payroll jobs a month, between July 1990
and March 2001, again from business-cycle peak to business-cycle
peak. But this long-term pattern of job growth changed around the turn
of the millennium. Between March 2001 and December 2007, the economy
added a monthly average of only 68,000 total jobs and only 50,000
private-sector jobs. U.S. job creation slowed even as productivity
growth remained relatively strong, and even as other developed
countries, such as the United Kingdom and Canada, maintained robust
job growth.
Against this backdrop of weak employment growth beginning in
about 2000, the economy fell into recession in December 2007 and
began to shed jobs at the end of 2008 at a rate unprecedented in the
postwar era. During 2008 and 2009, the economy lost an average of
361,000 jobs a month, reaching a high of 818,000 jobs in January
2009. As the recession continued, the unemployment rate doubled,
from 5.0 percent in April 2008 to a peak of 10.0 percent in October
2009, a rate not seen since 1983 (Figure 6-2).
Soon after the President signed the American Recovery and
Reinvestment Act (Recovery Act) on February 17, 2009, the pace of
job loss slowed. The private sector has added jobs in each of the
past 23 months, registering a cumulative gain of 3.7 million jobs
since February 2010, including 2.1 million jobs in 2011. Private-
sector job growth has averaged 159,000 jobs per month since February
2010, and 218,000 jobs per month in the last three months (ending
in January 2012).
The recession has had a large and continuing negative fiscal
impact on State and local governments, however, and they continue to
shed workers, thus offsetting some of the private-sector job growth.
Nonetheless, with the support provided by the Recovery Act and by
the payroll tax cut and unemployment insurance extensions contained
in the Tax Relief, Unemployment Insurance Reauthorization, and Job
Creation Act of 2010, the U.S. economy has added jobs in every month
since February 2010, excluding temporary Census hires. The
continuing recovery has brought the unemployment rate down from a
peak of 10.0 percent in October 2009 to 8.3 percent in January 2012.
The 0.9 percentage point decline in the unemployment rate that
occurred in 2011 is the largest in any calendar year since 1994.




The pace of the recovery has varied across sectors of the
economy, with those sectors most harmed by the financial crisis the
slowest to recover. Since February 2010, when the private sector
began consistently adding jobs, job growth has been strong in
industries such as education and health services (+717,000 jobs as of
January 2012); trade, transportation, and utilities (+683,000 jobs);
and manufacturing (+400,000), but is still weak in some sectors,
notably construction (+43,000 jobs) and State and local government
(-456,000 jobs). The continued weakness in these two sectors reflects
the severity of the financial crisis and the recession's impact on
the housing market and on government revenues.
The pace of recovery has also differed across demographic
groups. The Hispanic unemployment rate reached a peak of 13.1 percent
twice, first in August 2009 and then again in November 2010. The
unemployment rate for African Americans reached 16.7 percent in March
2010 and then again as recently as August 2011. The unemployment
rates for Hispanics and African Americans as of January 2012 are
well below their respective peaks--down 2.6 percentage points for
Hispanics and 3.1 percentage points for African Americans--but still
remain elevated.
Trends in the labor force participation rate and in the
employment-to-population ratio that pre-date the recession, and
were exacerbated by the recession, are a continuing concern. After
trending upward for most of the post-World-War-II period, largely
because of increases in the fraction of women in the labor force,
the participation rate has been in a secular decline since the late
1990s, driven by declining participation of Americans between the
ages of 16 and 54, as well as by the aging of the workforce. These
same developments have also lowered the employment-to-population
ratio. The labor force participation rate fell further in the
recession. As discussed in Chapter 2, many of those who have left
the labor force since the beginning of the recession have enrolled
in school.
Extended unemployment insurance benefits have encouraged
workers who lost their jobs through no fault of their own to keep
searching for work, thereby maintaining a connection to the labor
force. Helping more Americans get back to work more quickly remains
the top priority of the Administration's economic policy. That is
why, in September 2011, President Obama proposed the American Jobs
Act to support and speed up the ongoing recovery for American
workers and their families. More recently, the President's 2012 State
of the Union Address and Fiscal Year 2013 Budget laid out a blueprint
for an economy built to last on American manufacturing, American
energy, skills for American workers, and American values.

THE DYNAMICS OF LABOR MARKET TRENDS

Underlying the changes in employment is a dynamic process
through which firms are born and die, jobs are gained and lost, and
workers transition in and out of employment and between jobs. These
labor market dynamics have strong cyclical properties that have been
very much at work during and since the recession, but secular trends
are also changing the functioning of the U.S. labor market over the
long run.

Job Dynamics

The job market is dynamic, with new firms entering and others
exiting, and some growing and others contracting. The dynamic job
market is supported by a safety net that helps to protect workers
when job transitions do not occur smoothly and that gives
entrepreneurs a backstop when they take risks with potentially high
payoffs in future productivity. The importance of the many facets of
the safety net is discussed in detail in Chapter 7.
These job dynamics are characterized by gross flows of job gains
and job losses across firms. Gross job gains are measured as jobs
created in new and expanding firms, while gross job losses are
measured as jobs that disappear in firms that are contracting or
closing.\1\ Net job growth in a given period is the difference
between gross job gains and gross job losses:



and NETt is the net number of jobs created by firms in the economy
in period t; Gt is the amount of gross job gains in the period; Lt
is the amount of gross job losses; i is a firm; C is the set of firms
that are either new or have grown in period t; D is the set of firms
that have either exited or contracted in period t; and N is the
number of jobs.
To calculate the rates of net job growth, gross job gains, and
gross job losses, each of these values is divided by overall
employment in the economy
_________________
\1\ Alternative measures of gross job gains and gross job losses use
units of observation other than the firm, such as the establishment,
generally a physical location of business activity where goods and
services are produced. Using units smaller than firms leads to higher
rates of gross gains and losses because jobs that flow across the
units within a firm are counted in the gross measures.

averaged between one period and the next period. So, for example, the
rate of gross job gains in period t is:\2\



Recent work by economists using the Business Dynamic Statistics
(BDS) data at the U.S. Census Bureau demonstrates the tremendous
dynamism of private-sector employment in the United States
(Haltiwanger, Jarmin, and Miranda 2010; Haltiwanger 2011). Between
1980 and 2009 (the most recent year of BDS data), approximately 17
percent of all jobs in the private sector in an average year were
added in that year at new or expanding firms; approximately 15
percent of jobs in an average year were gone by the next year
because firms closed or contracted. While both large and small
firms contribute to gross job gains and losses, small firms tend to
gain and lose jobs disproportionately and to account
disproportionately for net job growth.
Recent research suggests that an important part of the
explanation for the disproportionate amount of both gross job gains
and gross job losses accounted for by small firms is that they tend
to be young. Put differently, startups and other young firms drive
the large rates of job gains and losses in small firms. Between 1980
and 2009, for example, 18.2 percent of overall gross job gains each
year were in new firms--mostly small new firms--even though new
firms accounted for only 3.1 percent of employment (Data Watch 6-1).
These numbers make clear the importance and contribution of
America's entrepreneurs to the dynamism of the economy.
The annual average rates of job gains and losses between 1980
and 2009 mask two important features of heterogeneity across time--
secular, or long-term, trends, and cyclical patterns. The rates of
both gross gains and gross losses have been declining over time.
Whereas, on average, 18.2 percent of private-sector jobs in the
1980s were newly created positions in startups or expanding firms,
gross job gains fell to 16.8 percent of total private-sector
employment in the 1990s and to 15.8 percent between 2000 and 2009
(Figure 6-3). Similarly, gross job losses were slightly more than
16.2 percent of overall private-sector employment in the 1980s but
fell to 14.9 percent in the 1990s and then remained largely the
same between 2000 and 2009. These secular declines also are apparent
when one focuses more narrowly on startups. Gross job gains from
startups accounted, on average, for 3.6 percent of the overall
number of private-sector jobs in the 1980s but for only 2.7 percent
between 2000 and 2009.


______________
\2\ The data on U.S. firms capture gross flows over a 12-month
period beginning and ending in March. So, for example, the rate of
job gains in year t=2009 refers to information on jobs gained in
firms between March 2008 and March 2009.

----------------------------------------------------------------------
Data Watch 6-1: Measurement of Startups

Research based on a new Census Bureau data set called the
Longitudinal Business Database (LBD) has led to new discoveries about
the important role that startups play in creating jobs. The LBD
contains annual information on virtually the entire universe of U.S.
nonfarm private businesses that paid Federal payroll and income taxes
between 1976 and 2009, and it will continue to be updated as new data
become available.
LBD data are available both at the level of the firm--a
measurement unit combining all of the economic activity of a business
that occurs under common operational control--and at the level of
individual establishments--physical locations of economic activity
where goods and services are produced. The initial data are derived
from quarterly Internal Revenue Service filings that are compiled by
the Census Bureau and augmented with data collected through the Census
Bureau Economic Censuses and business surveys. The final LBD data set
contains annual information on payroll, employment size, industry, and
other key economic variables for both firms and establishments.
One of the key advances of the LBD is its ability to track the
births and deaths of firms. When a new economic entity is reported in
the administrative sources used to create the LBD, the Census Bureau
determines whether that new economic entity is a new firm, a new
establishment that is part of an existing firm, or an establishment
that has undergone a change in legal form because of a merger, change
in ownership, or some other similar change. Through this process, the
Census Bureau is able to identify essentially all new private payroll
startups.
The creation of the LBD has allowed researchers to study
comprehensively the process of private-sector job gains and losses.
One of the most important findings has been how important startups
are to the dynamism of the U.S. economy. For example, Haltiwanger,
Jarmin, and Miranda (2010) find that about 2.5 million net new
private-sector jobs were gained in 2005. Firm startups created
nearly 3.5 million net new jobs in that year, while all other firms
together lost about 1 million jobs on net.
More information on the LBD is available from the Census Bureau
at http://www.ces.census.gov/index.php/bds/bds_home. The Bureau of
Labor Statistics has produced a separate database, the Business
Employment Dynamics (BED), which tracks gross quarterly job gains
and losses; more information about the BED is available at
http://www.bls.gov/bdm.
----------------------------------------------------------------------





The rates of gross job gains and losses exhibit not only secular
declines but cyclical patterns as well. Gross job gains are
procyclical, increasing in expansions and declining in recessions,
whereas gross job losses are countercyclical, increasing during
recessions and declining in expansions. In the depths of the recent
recession, gross job losses rose sharply, but the decline in gross
job gains was even more notable.
An alternative data set produced by the Bureau of Labor
Statistics (BLS) offers more frequent and more recent data than the
BDS. The Business Employment Dynamics (BED) reports quarterly data on
payroll employment at the level of the Employer Identification Number
(EIN). An EIN is a tax-reporting construct rather than an economic
construct, but the unit of observation in the BED consists in most
cases of all of the operations of a particular firm located within a
given U.S. state. Movements in gross job gains and losses in the BED
on an annualized basis since its 1990 inception are broadly similar
to those in the BDS; most important, the BED also shows a trend
decline in gross gain and loss rates since 2000.
The quarter-to-quarter movements shown in Figure 6-4, which are
based on BED data through the second quarter of 2011 (the most recent
quarter of data available), show a large increase in the rate of
gross job losses toward the beginning of the recession; the rate
reached a peak in the




first quarter of 2009, and then returned to approximately the
pre-recession trend by the beginning of 2010. The BED data also show
a precipitous fall in the rate of gross job gains during the
recession, and although that decline reversed and gross job gains
exceeded gross job losses by the second quarter of 2010, the gains so
far have resulted in too few new jobs to accommodate the large number
of individuals who lost jobs in the 2007-09 recession.
Now that researchers have documented the long-term secular
slowdown in job gains and losses, the underlying reasons for the
slowdown and its implications for the future of the U.S. economy are
fast becoming the subject of an active debate. One possible reason
for the slowdown in job reallocation is the aging of the population.
Older workers may be less likely to become entrepreneurs, and
research has documented a positive correlation between worker age and
job tenure (Davis et al. 2007; Krueger 2010). But while the U.S.
population is indeed aging, it is and will remain much younger than
the population in the countries of Western Europe. So, to the extent
that aging can explain part of the slowdown in job flows in the
United States, other countries can be expected to experience
slowdowns as well. Further research is needed to better understand
the secular trends in job flows in the United States, and
international comparisons could be helpful in this regard.
Because of the importance of entrepreneurship to the vitality
of the economy, the President last year launched Startup America, a
national campaign to improve the environment for high-growth
entrepreneurs by expanding their access to capital and connecting
them with mentors, helping the Nation's veterans start businesses,
reducing barriers to entrepreneur-ship, and fostering
entrepreneurship in communities.

Worker Flows

The reallocation of jobs across firms is accompanied by the
flows of individual workers between firms and in and out of
employment. Overall, the net change in employment at a firm must by
definition equal the difference between the firm's hires and
separations. But the rates of worker flows are larger than the rates
of job reallocation: a firm may maintain stable employment (no gross
job gains or losses) from one year to the next while having many
individual workers come and go from within its employee ranks.
On a monthly basis, flows of workers into firms (hires) and out
of firms (separations) are large. As captured since December 2000 in
the BLS Job Openings and Labor Turnover Survey, hires and separations
have both averaged more than 4.7 million a month and have tended to
track each other closely over time. As Figure 6-5 illustrates, firm
hires and separations before the start of the recession in 2007 were
notably below the levels observed before the start of the 2001
recession.




As the U.S. economy fell into recession in December 2007, worker
flows slowed notably, with large monthly declines in the number of
separations, and even more precipitous monthly declines in the
number of hires. A decline in separations during a recession may
seem counterintuitive, but it is attributable to a large decline in
the frequency of workers quitting their jobs; quits are usually a
sign of workers leaving jobs voluntarily for better opportunities.
So while layoffs were increasing over this period, the decline in
quits swamped the increase in layoffs. Overall, the economy on net
was shedding jobs at a very fast pace during the recession because
the decline in hiring in absolute numbers was larger than the decline
in separations. Hires and separations both began to rise in the
second quarter of 2010, but both remained below pre-recession levels
at the end of 2011.
One can also study flows of workers into and out of employment,
unemployment, and the labor force. Perhaps most important over time
are the flows into and out of unemployment, which can be calculated
using the Current Population Survey (CPS). Because of the structure
of the CPS, in any given month three-quarters of the sample members
have also been interviewed in the previous month, making it possible
to use these repeat respondents to follow transitions into and out
of unemployment. The BLS has been constructing these flows each month
since 1990 in a manner that also matches up with the level of
reported unemployment. Figure 6-6




displays the extent of inflows and outflows as a percent of the
total labor force for each month from the start of 1990 through
January 2012.
Although the BLS labor force flow series goes back only to 1990
and is dominated by strong cyclical movements, the data in Figure
6-6 through the end of 2007 suggest a secular decline in both the
inflow and outflow rate. A similar decline has also been documented
elsewhere (see, for example, Davis, Faberman, and Haltiwanger 2006)
for years before 1990, using alternative methods of calculating
unemployment inflows and outflows. As with job flows, the aging of
the population may account for some of these secular declines,
because older workers tend to leave jobs less often than younger
workers and, when they do, are more likely to leave the labor
force permanently. But the declining flows into and out of
unemployment also may reflect other forces that have lowered the
rates of gross job gains and losses over the past three decades.
As the recession began, monthly inflows and outflows from
unemployment both stood at approximately 2.4 percent of the labor
force. Both began to rise steeply, but the inflow rate rose more
quickly than the outflow rate, increasing the unemployment rate to
levels not seen in approximately 30 years. Put differently, both
the increase in the monthly average probability of a worker
entering unemployment and the decrease in the monthly average
probability of an unemployed worker exiting unemployment have, as
in a typical recession, contributed to the observed rise in
unemployment (Elsby, Michaels, and Solon 2009). Since March 2009,
unemployment inflow and outflow rates, measured as a share of the
labor force, each have been over 3 percent. Because the outflow
rate was notably higher than the inflow rate near the end of 2011,
the unemployment rate has fallen.
The labor market is still recovering from the cyclical impacts
of the recession. And it is still subject to the long-term slower
trend in gross job gains and losses, as well as to the long-term
decline in the share of the population that is employed. In the
face of these trends, the Administration has pursued and continues
to pursue robust policies to foster faster job creation in the short
run, as well as an economic environment in which existing firms have
reasons to increase employment, new firms are able to grow and
innovate, and workers can find satisfying employment.

Earnings and Income Mobility over the Career and between
Generations

Although the Nation's labor market is highly dynamic in terms
of worker flows, the United States has had low rates of income
mobility for decades, both across the career and across generations.
Low rates of income mobility across the career are especially
notable for men, whose higher rates of labor force attachment make
them much less likely than women to have years with zero earnings.
Kopczuk, Saez, and Song (2010) show that the annual earnings of a
man averaged across 11 years early in his working career are highly
predictive of his annual earnings averaged across 11 years later in
his working career. For example, a man in one of the bottom two
quintiles of the income distribution early in his lifetime has less
than a 10 percent chance of rising to the top quintile 20 years later.
Family (or individual) incomes in one generation are also highly
correlated with family (or individual) incomes in the next
generation. In other words, the children of parents who are poor are
more likely than the children of well-off parents to be poor when
they grow up. A common measure of mobility across generations is
the intergenerational elasticity (IGE) of earnings or income, which
is defined as the percentage difference in a child's income
associated with a 1 percent difference in the parent's income.\3\
These IGE estimates are sensitive to several measurement issues,
particularly fluctuations in incomes from year to year. Studies
based on U.S. data that deal appropriately with these measurement
issues suggest that plausible estimates of the average IGE between
fathers and sons are between 0.4 and 0.6. An IGE of 0.4 means that
if one father earned 20 percent more than another over their
lifetime, the first father's son on average would earn 8 percent more
than the second father's son; an IGE of 0.6 means that the first
father's son would earn 12 percent more on average than the second
father's son. That is, the higher the IGE is, the lower economic
mobility is between the generations.
Data limitations make it difficult to infer whether the IGE or
the correlation between parents' and children's income has changed
significantly over time (Data Watch 6-2). Lee and Solon (2009)
conclude that the IGE in the United States was fairly stable for
cohorts born between 1952 and 1975, while Aaronson and Mazumder
(2008) present evidence suggesting that it has increased in the
past 30 years, implying that intergenerational mobility has fallen.
None of the available research has suggested a decline in the IGE
over time. Moreover, the widening of income inequality has meant
that it is harder for someone born into the bottom to move to the
middle or the top of the income distribution.
The high degree of persistence in incomes between generations
in the United States is especially noteworthy in the context of
cross-country comparisons. Corak (2011) makes such a comparison
and finds that the average

\3\ IGEs most commonly have been estimated as the regression
coefficient resulting from a linear regression of the logarithm of
the income (or earnings) of a child on a measure of the logarithm
of income (or earnings) of a parent or family.

----------------------------------------------------------------------
Data Watch 6-2: Intergenerational Mobility

One measure of opportunity is the extent to which children grow
up to live in better economic and social circumstances than their
parents. While there has been useful research on this topic, data
limitations have hampered attempts of economists and other social
scientists to measure the extent of intergenerational mobility.
Researchers interested in intergenerational mobility in the United
States most commonly have used one of two nationally representative
surveys to assess the relationships between the income and
occupations of children and those of their parents--the Panel Study
of Income Dynamics or the National Longitudinal Survey. Neither of
these surveys was designed specifically to address questions
concerning intergenerational mobility, however, and the lack of
precision resulting from the relatively small numbers of people
surveyed makes it difficult to discern trends in economic mobility.
Grusky and Cumberworth (2010) have suggested that, if organized
into an administrative database with strict confidentiality
protections, information gleaned from U.S. tax records could allow
researchers to gain a much fuller picture of the evolution of
earnings and career outcomes between generations. Mazumder (2005)
has taken a step in this direction, using data from the Survey of
Income and Program Participation linked to Social Security earnings
records to study the relationship between parents' earnings and the
later earnings of their adult sons. He finds that the
intergenerational elasticity of earnings is around 0.6, which is
larger than had been found in previous studies, probably because he
had access to more accurate earnings histories.
----------------------------------------------------------------------

estimated IGE of 0.47 for men in the United States, while lower than
the IGE for countries such as the United Kingdom (0.50) and South
Africa (0.69), is much higher than the IGE for men in countries such
as Sweden (0.27), Norway (0.17), Finland (0.18), and Denmark (0.15).
Jantti et al. (2006) also compare IGEs for men's incomes in some of
the same countries and report similar estimates.\4\
While many factors contribute to cross-country differences in
inter-generational mobility, one clear pattern is that countries
with more intergen-erational mobility also tend to have lower
point-in-time income inequality. Figure 6-7 plots the relationship
across 13 industrialized countries between the IGE of the earnings
of fathers and sons as reported in Corak (2011)
_______________
\4\ One exception is that Jantti et al. report a somewhat lower IGE
(0.31) for the United Kingdom, below that of the United States but
still well above those in Nordic countries. Following the literature,
this discussion focuses on IGEs for men, because in many countries
the inconsistent labor force participation of women complicates the
estimation of their IGEs.


and the Gini coefficient of after-tax 1985 income as reported in the
OECD statistical database. The Gini coefficient, shown along the
horizontal axis of the figure, is a common measure of income
inequality; higher values mean higher levels of income inequality.
Higher IGEs along the vertical axis mean less intergenerational
mobility. The United States appears in the upper right part of
Figure 6-7, indicating both high inequality and low
intergenerational mobility.
As other research has shown, the finding of a positive
relationship between IGE and inequality--a relationship that Krueger
(2012) has referred to as "the Great Gatsby Curve"--is robust to
alternative choices of countries, intergenerational mobility
measures, and year in which income inequality is measured (see, for
example, Corak 2011; Andrews and Leigh 2009; OECD 2010). This
robust relationship suggests that at least some of the same
mechanisms that drive income inequality also drive intergenerational
mobility. For example, a rise in the rate of return to schooling can
be expected to lead to both a rise in point-in-time income inequality
and a decline in intergen-erational mobility because educational
attainment is positively correlated across generations.
The educational system also may contribute to the pattern in
Figure 6-7. Research has found a strong negative correlation between
spending on public education and IGEs across countries (Ichino,
Karabarounis, and




Moretti 2011). This pattern suggests that public investments in
supporting children may help to reduce persistent inequality across
generations. Similarly, the OECD has concluded that educational
policies ranging from support for early childhood education to
measures that support postsec-ondary education for students from
low-income backgrounds can increase intergenerational income
mobility (OECD 2010). As discussed later in this chapter, the
Administration has taken multiple steps to improve the quality of
education and to provide opportunities for all students to earn a
postsecondary credential or degree.

Overall Trends in Income and Rising Inequality

Irrespective of the persistence in income across generations,
the rungs on the ladder of the income distribution in the United
States have moved farther apart, and income growth has been stagnant
for the middle class for a decade.
One indicator of the evolution of income over time is annual
real median household income, which rose in the United States from
the late 1960s through the late 1990s, was stagnant in the first
part of the 2000s, and then, as is typical during recessions and
their aftermath, fell between 2007 and 2010 (the last year for which
data are available).



Rising income inequality is another major development in the
United States economy (see, for example, Autor, Katz, and Kearney
2008; Card and DiNardo 2002; CEA 1997). Growing dispersion of
household incomes, a manifestation of growing dispersion of
earnings, means that fewer and fewer households have incomes in
the middle band of the income distribution. This can be seen clearly
in Figure 6-8. In 1970, just over 50 percent of households had
incomes within 50 percent of the median; that share fell to just
over 44 percent in 2000 and to just over 42 percent in 2010.
Another way to look at changes in the distribution of income is
to examine the rates of income growth for households at different
income levels. A report released by the Congressional Budget Office
(CBO) in October 2011 examines real growth in after-tax (and
transfer) household income from 1979 through 2007 across quintiles
and the top 1 percent of the income distribution. Figure 6-9,
reproducing information from the CBO report, provides stark evidence
of the rise in inequality, showing that real after-tax incomes grew
by just 18 percent over nearly 30 years for those in the bottom
income quintile and rose only somewhat more rapidly for those in the
middle 60 percent of the distribution, but grew by a stunning 278
percent for those in the top 1 percent of the distribution.
As a result of these divergent growth rates, increasingly more
income has been concentrated at the top and less at the bottom of
the income distribution. The CBO reports that the share of total
after-tax household income for the bottom four income quintiles was
lower in 2007 than it was in 1979, and the share for those in the
81st to 99th percentiles was essentially flat. For the top 1 percent,
however, the share more than doubled, from almost 8 percent in 1979
to 17 percent in 2007.
Piketty and Saez (2003, 2010), using data and definitions of
income slightly different from the CBO report, focus on income
inequality between those at various places in the very top of the
distribution and the rest of the population. They find that the
share of income prior to taxes and transfers excluding capital gains
going to the earners in the 90-95th percentile of the distribution
barely changed between 1979 and 2010 and that the share of income
going to those in the 95-99th percentiles rose from almost 13 percent
to about 16 percent. But the share of income going to the top
1 percent of earners rose from 8 percent in 1979 to 18 percent in
2007, the highest it had been since the Roaring Twenties, and it
still stood at over 17 percent in 2010 (Figure 6-10).
Rising inequality has important implications in the context of
low rates of intergenerational mobility. As incomes become more
unequal, larger increases in household income are necessary for
families to move from a lower part of the income distribution to a
higher part--for example, from a level of household income that
classifies a family as living in poverty to one that puts it in the
middle of the distribution. Low rates of economic




mobility across generations imply that children born in poverty are
more likely to remain in poverty as adults, while children born to
higher-income parents are more likely to have higher incomes as
adults. As long as income inequality is increasing, those adult
children will find themselves even farther away from the middle
class than their parents were. Perhaps even more worrisome, the
Great Gatsby curve in Figure 6-7 suggests that a rise in inequality
for the current generation of families could lead to a slowdown in
economic mobility for the next generation.
The confluence of rising inequality and low economic mobility
over the past three decades poses a real threat to the future of the
United States as a land of opportunity. Social and economic mobility
across generations are at risk of declining unless concerted efforts
are devoted to providing more opportunities for those born into
lower-income households.

Long-Term Unemployment

The upheaval in the labor market brought on by the recession
that started in late 2007 is primarily a cyclical phenomenon. A major
challenge, especially given the long-term changes in the labor
market that were underway even before the recession, is how to
prevent these cyclical dislocations from having permanent effects on
workers' prospects. This means that pathways for the long-term
unemployed to return to the workforce are a particular priority The
protracted high level of unemployment has led to large numbers of
long-term unemployed workers--those who have been out of work for
more than 26 weeks. Currently, 5.5 million workers--more than
two-fifths of all unemployed individuals--have been jobless for more
than 26 weeks, and over 1.8 million have been without a job for more
than two years.
Historically, as depicted in Figure 6-11, the share of the
unemployed that has been unemployed for more than 26 weeks has been
quite cyclical, starting at a relatively low point right before a
recession, growing thereafter, and usually peaking many months into
the recovery before gradually declining. Another useful measure of
unemployment duration is the median dura-tion--the amount of time
that the person in the middle of the distribution has spent
unemployed to date. Typically, this measure has been similarly
cyclical, and as a result of the 2007-09 recession it remains
elevated at 21.1 weeks.
A long period of joblessness is obviously first and foremost a
serious hardship for the individuals involved. The loss of income due
to unemployment can wreak havoc on households' finances, often
necessitating liquidation of savings. Households with unemployed
members are more likely to fall behind on their bills and to suffer
foreclosure or bankruptcy; foreclosures




also can have adverse effects on the prices of neighboring homes. To
help the long-term unemployed keep their homes, the Administration
created a version of the Home Affordable Modification Program (HAMP)
for the unemployed, called HAMP UP, in which unemployed homeowners
were given a three month forbearance period on their mortgage
payments. In July 2011, this forbearance period was extended to
12 months.
Income losses associated with job loss can persist even after
reemployment. Recent research examined male workers age 50 or younger
with at least three years of tenure who lost their jobs in mass
layoffs (defined as employment decreases of at least 30 percent over
two years at their place of employment) between 1980 and 2005. The
researchers concluded that job displacement led to a loss of 1.7
years of earnings, on average, accumulated over 20 years. Moreover,
job displacement led to an average accumulated earnings loss of 2.8
years if the job was lost when the unemployment rate was above 8
percent, but the earnings loss was only half as large--1.4 years--if
the job was lost when the unemployment rate was below 6 percent
(Davis and von Wachter 2011).
In addition to the mortgage forbearance program mentioned
above, the Administration has supported the long-term unemployed by
calling for extended unemployment compensation, which provides much-
needed income to these workers and their families while the recipient
searches for work. As explained in Chapter 7, continued extensions of
the Emergency Unemployment Compensation and Extended Benefits
programs through 2012 are vital to those who remain unemployed.
Additionally, the American Jobs Act proposal for extending
unemployment benefits also included significant reforms to the
unemployment insurance system designed to speed the return of
benefit recipients to work.

As part of his Fiscal Year 2013 Budget, the President is
proposing a $12.5 billion Pathways Back to Work Fund to provide
employment opportunities for vulnerable youth, low-income adults,
and the long-term unemployed, and an expanded community college
initiative to support state and community college partnerships with
business to give workers the skills employers need. The President
also is proposing to streamline training and employment services
for dislocated workers, improving access to critical supports for
getting the unemployed back into employment.

PREPARING FOR TOMORROW'S LABOR MARKET

Even as the Administration remains focused on strengthening and
sustaining the recovery from the recession, the President continues
to address the longer-term challenges in the structure of the
American economy and labor market. To ensure that American workers
are prepared to meet the evolving needs of employers, the Nation's
education and training system must provide the workers of tomorrow
with the skills they will need for the jobs of tomorrow. At the same
time, jobs and workplaces also must evolve to enable workers to
fulfill family and other nonwork responsibilities (Box 6-1). This
section describes what the jobs of tomorrow are likely to look like,
why educating workers is a cornerstone of economic opportunity and
growth, and how the Administration's policies are working to prepare
Americans for the jobs of tomorrow.

Education and the Workers of Tomorrow

The rise in wage and income inequality over recent decades is
largely attributable to long-lasting structural changes in the U.S.
economy. Among the changes are technological advances that have
increased employer demand for a relatively more highly educated
workforce, a slowdown in the expansion of educational attainment,
and increased competition from overseas for many lower-paid jobs.
Another is a decline in the share of the workforce covered by
collective bargaining agreements and the decline in the real value
of the minimum wage, both of which historically helped protect the
wages of lower-paid workers.

----------------------------------------------------------------------
Box 6-1: Work-Life Balance in the Jobs of Tomorrow

American household life has changed dramatically over the past
half century in ways that have caused many workers to face conflicts
between their work and personal lives. Women are now the majority
recipients of bachelor's and advanced degrees and compose nearly
50 percent of the workforce. Families rely increasingly on women's
earnings to make ends meet. In addition to managing care of
children, both men and women juggle elder caregiving
responsibilities with work. In 2008, approximately 43.5 million
Americans served as unpaid caregivers to a family member over the
age of 50. Workplace flexibility is also important for older
Americans themselves. In 2011, the first of the baby boomers turned
age 65. Workplace flexibility policies, such as part-time work or
job sharing, facilitate a phased retirement that helps older workers
transition slowly out of the workforce, allowing them to take care
of their health needs and maintain their economic security while
moving toward retirement.
Workplace flexibility can be expanded by increasing workers'
control over when, where, and how much they work. These goals can be
achieved through a variety of different arrangements that allow
workers to continue making productive contributions to the workforce
while also attending to family and other responsibilities.
Arrangements range from job sharing, to phased retirement of older
workers, to telecommuting. Workplace flexibility policies not only
help employees balance work and family responsibilities but also
can improve employers' bottom lines.
As in all business decisions, the critical considerations for
employers in adoption of flexible workplace policies are the benefits
and costs. Almost one-third of firms cite costs or limited funds as
obstacles to implementing workplace flexibility arrangements. On
the benefit side, however, as documented in CEA (2010), these
practices can reduce turnover and improve recruitment, increasing
the productivity of an employer's workforce. Moreover, flexible
workplace practices are associated with improved employee health
and decreased absenteeism, a major cost for employers. The CEA study
estimated that wholesale adoption of flexible workplace policies
could save as much as $15 billion a year through greater
productivity, lower turnover, and reduced absenteeism. Should more
firms adopt such practices, the benefits to society, in the form of
reduced traffic, improved employment outcomes, and more efficient
allocation of workers to employers, could be even greater than the
gains to individual firms and workers (Galinsky et al. 2011).
Although the academic literature has identified numerous
benefits from flexible workplace practices, along a variety of
dimensions, the adoption rates for these practices differ across
industries and employers of different sizes. Goldin and Katz (2011)
explored the prevalence of flexible workplace arrangements across
industries and found that, although these practices are gaining in
popularity, some industries lag behind, in particular the business
and financial sectors. Overall, the CEA study reported that more
than half of employers report allowing some workers to periodically
change their starting and quitting times. However, only 28 percent
of full-time workers and 39 percent of part-time workers report
actually having flexible work hours. Even if some employers offer
more flexible workplace arrangements, there remains the concern that
their employees may not be taking advantage of those arrangements
because either, in the case of unpaid leave, they cannot afford to
bring home a smaller paycheck, or, in the case of paid leave, they
are afraid to take leave for fear of missing out on advancements or
not being viewed as a "team player."
A lack of data has hindered deeper understanding of the
benefits and costs of flexibility, as well as knowledge about who is
taking advantage of that flexibility. The largest, most detailed
source of data, a survey of employers, provides information on
practices that is now three years old and does not contain
information for the smallest firms. The only nationally
representative data from workers are seven years old and provide
little information on the prevalence of flexible practices. While
the existing evidence has demonstrated a strong connection between
flexibility and productivity, additional research exploring the
mechanism through which flexibility influences worker's job
satisfaction and firms' profits would better inform policymakers
and managers alike. In the summer of 2012, the results of a module
added to the American Time Use Survey will provide expanded
information about workplace flexibility from the workers'
perspective. The module asks survey respondents about their access
to leave and flexible scheduling, how they use such policies to
balance their work and personal responsibilities, and whether they
fail to take advantage of existing policies because of a fear of
negative consequences. These data will add to the existing knowledge
base on workplace flexibility. Although the literature is small, the
best available evidence suggests that adoption of more flexible
practices can boost productivity, improve morale, and benefit the
U.S. economy--all while strengthening families.
----------------------------------------------------------------------

Because these structural changes have shifted demand toward a
workforce with relatively more education, a substantial fraction of
the overall increase in wage and income inequality is related to a
growing divergence in earnings between those with more years of
education and those with fewer years of education, as depicted in
Figure 6-12.
For example, in 2010, workers with a bachelor's degree or higher
earned nearly twice as much as those with a high school degree, a
premium that has risen since 1980, when college graduates earned 45
percent more than high school graduates. In fact, even long before
the most recent recession, the average real annual earnings of those
with a high school degree or less fell below the levels of the 1970s.
One important way to help stem the tide of rising inequality,
and potentially to ameliorate the effects of low intergenerational
economic mobility, is to increase the number of workers who obtain
postsecondary education and earn higher wages as a result. For this
reason, President Obama has set the ambitious goal of returning the
United States, by 2020, to the world's top spot in the share of 25-
to 34-year-olds with a college degree.
Increasing the number of workers who obtain postsecondary
education is also vital for meeting the changing skill needs of
firms. The BLS Employment Projections Program produces forecasts of
employment by industry, occupation, and education on an
approximately biennial basis. The industry employment forecasts are
based on incorporating projections of the size of the labor force
into a model of output growth across U.S. industries. These detailed
industry employment forecasts are then mapped into projections of
employment growth by occupation, and then into forecasts of growth
in employment by education group. Beginning with the newly released
projections for 2010-20, the BLS is projecting employment growth by
education group by assigning to each occupation the typical level
of formal education needed to enter the occupation, and then
aggregating by education group the projected employment growth in
the occupations requiring that level of education. As shown in
Figure 6-13, the BLS projects that in the coming years, jobs
requiring education beyond a high school degree will grow by more
than the average, while occupations requiring at most a high school
diploma will grow by less than the average. For example, between
2010 and 2020, employment in jobs that require an associate's
degree is projected to grow by 18.0 percent, 3.7 percentage points
more than the average projected employment growth of 14.3 percent.
Much of the divergence in employment growth across education groups
is driven by the projected growth of sectors such as health care
and education that intensively utilize workers in occupations that
typically require education beyond a high school diploma.



Information that tracks the changing skill needs of firms can
help Americans make informed career decisions. In addition to the
statistics published by the BLS on existing and projected jobs by
industry, occupation, and education, the potential exists to harness
new data sources to gain a deeper understanding of what skills are
in high demand. For example, the more than 50 million U.S.-based
members of LinkedIn, an online professional networking company,
typically provide to LinkedIn their job titles and the companies
they work for, and upon joining, many members also provide
information on their past work history. LinkedIn classifies members'
jobs by industry and occupation, often at a more detailed level than
is available in government statistics. The resulting information can
be used to track changes over time in the industries and occupations
in which LinkedIn's members work and to identify emerging sectors and
job titles. LinkedIn's members are not a nationally representative
sample of the U.S. workforce, but because they tend to work in sectors
of the economy that require higher levels of education, the
information embodied in the changing distribution of the industries
and occupations in which members are employed has the potential to
inform the decisions of individuals considering specific educational
and career paths.




LinkedIn has produced initial tabulations from among its U.S.
members of the growth rate of employment in industries and
occupations since 2007. These tabulations are for a longitudinal
sample of individuals, based on aggregated historical data from
their resumes and other information that they provide, LinkedIn
reports that two of the fastest-growing industries among their
members between 2007 and 2011 were the Internet and oil and energy;
two of the fastest-shrinking industries were newspapers and
construction. Among the fastest-growing occupations were social
media (including jobs titles such as social media manager, social
media marketing manager, and social media specialist) and digital
technology (including digital producer, digital product manager,
digital strategist, and digital sales manager); LinkedIn reports
that teachers and middle-management positions were among the
shrinking occupations.
One of the main drivers of the increasing relative demand for
workers with more education and training is the continuing shift
toward using machines or computers to perform the routine tasks once
done by workers. Although the BLS, assuming a continuation of these
trends, projects that the number of manufacturing jobs will decline
between 2010 and 2020, the U.S. manufacturing sector has added more
than 400,000 net new jobs since the beginning of 2010, the first
sustained job growth in manufacturing since the late 1990s.

Some of the recent growth in manufacturing jobs is the direct
result of firms that are choosing to produce goods in the United
States rather than using overseas labor. The Administration is
supporting this "insourcing" with new tax proposals that eliminate
tax advantages for moving jobs overseas and reward companies that
choose to invest in or bring jobs back to the United States. In
addition, the President has proposed measures to revitalize the
manufacturing sector. These measures include initiatives to help
develop and produce advanced technologies, ensuring clean energy
technologies that will fuel the 21st century economy are built in
the United States; funding to help catalyze partnerships between
universities and industries to develop new technologies for
manufacturing products and processes; the creation of a new
Interagency Trade Enforcement Center to challenge unfair trading
practices; and tax incentives to promote job growth in communities
hard-hit by factory closings.

Increasing Educational Attainment

To prepare for the jobs of tomorrow, it is essential to invest
in the American workforce and to increase the number of young people
who attain a college degree. Meeting the President's college
completion goal for 25- to 34-year-olds requires investments in
early, primary, and secondary education to increase the number of
students who are college-ready when they graduate from high school.
Meeting the goal also requires policies and programs that make
college more affordable and accessible.
Teachers in the Nation's public schools are crucial to preparing
children for the jobs of tomorrow. During the depths of the recession,
however, many State and local governments were forced to make cuts,
resulting in the loss of more than 200,000 education jobs over the
past three years. Had it not been for the combined $40 billion in
targeted assistance through the Recovery Act's State Fiscal
Stabilization Fund and the Education Jobs Fund, the cuts would have
been worse: these programs provided the resources to support 420,000
teacher job-years. Given the continued need to prevent teacher layoffs
and to rehire many of the teachers who lost their jobs during the
recession, the President's FY 2013 Budget proposes a $25 billion
teacher stabilization fund.
The Administration also has made improving the quality of
education a priority and has taken an innovative approach, using grant
competitions and evaluations to fund promising practices and learn
more about what works, from early childhood education through high
school. A key part of this effort has been Race to the Top grants,
established as part of the Recovery Act. Competitive grants have been
awarded to states to undertake innovative reform in four areas of
K-12 education: implementing rigorous standards and assessments;
using data to improve instruction and deci-sionmaking; recruiting
and retaining effective teachers and principals; and turning around
the lowest-performing schools. Race to the Top grants have catalyzed
widespread reform even in states that did not win an award.
In 2011, Race to the Top funds were also used for Early Learning
Challenge grants to promote evidence-based evaluation of programs,
develop strategies for families and parents to assess the quality of
early learning programs, and create age-appropriate curricula and
assessment systems. The Early Learning Challenge fund announced nine
state grant winners in December 2011. As with the K-12 Race to the
Top competition, although not all proposals were funded, the
framework of providing competitive grants to states to formulate
their own solutions focused local conversations on education reform.
The Early Learning Challenge grants complement the Administration's
major investments in improving a cornerstone of early childhood
education, the Head Start and Early Head Start programs, by increasing
funding by $2.1 billion in two years through the Recovery Act, by
nearly doubling the number of children and families served by Early
Head Start, and by taking key steps to increase Head Start Center
program quality and accountability. Notably, the Department of Health
and Human Services has begun implementing new regulations that, for
the first time, require current grantees that do not meet quality
benchmarks to compete for continued funding.
In addition to Race to the Top, the Administration has funded
other important innovations in education. The Investing in Innovation
Fund supports projects in K-12 education that test, validate, and
scale up promising strategies and interventions that raise overall
student achievement, close the achievement gap, and improve outcomes
for high-need students. The Promise Neighborhoods initiative supports
cradle-to-career wraparound services to improve educational outcomes
for students in distressed high-poverty neighborhoods. The
President's 2012 State of the Union Address challenged all states to
do what 21 states have already done: require all students to graduate
from high school or stay in school until age 18. Raising the
compulsory schooling age increases average educational attainment
and, for those induced to stay in school longer, leads to higher
earnings when those students become adults. In view of the positive
externalities from schooling, economists Milton and Rose Friedman
wrote, "What kind of governmental action is justified...? The most
obvious is to require that each child receive a minimum amount of
schooling of a specified kind" (Friedman and Friedman 1962).
The President has committed to continued investments in
America's education system. Beyond making investments to help all
students prepare for college, the Administration is working to make
college affordable for American families. In recent years, published
college tuitions have risen sharply, posing a threat to the Nation's
growing need for workers with college-level skills. The
Administration has made college accessibility and affordability a
top priority. Through the Recovery Act and the Health Care and
Education Reconciliation Act passed in 2010, the Administration
raised the maximum Pell Grant award from $4,731 in 2008 to $5,550 in
2010, and the FY 2013 Budget calls for the maximum to increase to
$5,635 for the 2013-14 school year. Some 8.1 million college students
received an average of $3,700 in Pell Grants in 2009-10. These
figures are up sharply from the year before President Obama took
office, when 5.5 million college students received an average of
$2,650 apiece in Pell aid, and the President remains committed to
protecting these historic increases in Pell Grant awards.
In addition, the American Opportunity Tax Credit (AOTC),
established through the Recovery Act, provides up to $2,500 a year
for college tuition and related expenses for American families.
Compared with the Hope Scholarship that it largely replaces, the
AOTC offers a higher maximum benefit; can be claimed for up to four,
rather than only two, years of undergraduate education; has a higher
income eligibility cutoff, making the credit available to more
middle-class families; and is partially refundable, thereby also
reaching lower-income families. This credit is estimated to have
benefited 9.4 million students and their families in 2011. In
December 2010, the President signed an extension of the AOTC through
the end of 2012, and his FY 2013 Budget request proposes to make the
AOTC permanent.
Data from the College Board (2011) demonstrate the effectiveness
of these Administration initiatives to keep college affordable (see
also CEA 2011). The estimated average net price for full-time
students attending public four-year institutions increased by only
about $60 between 2007-08 and 2011-12, and the estimated average net
price for full-time students attending public two-year and private
nonprofit four-year institutions actually fell.
To build on the successes of Pell expansions and the AOTC as
well as lessons from K-12 education reform, the President has
proposed a Race to the Top for College Completion and Affordability
to make public colleges more affordable and a better value and to
drive reforms that will help more students complete their degrees on
time. The FY 2013 Budget also proposes reforms to the distribution of
campus based-aid to reward colleges that are serving low-income
students, setting tuitions responsibly, and offering a quality
education that prepares students to obtain employment and repay
their loans. Finally, the Budget proposes a new First in the World
Fund that introduces an evidence-based framework, modeled after the
Investing in Innovation initiative, to develop, validate, and scale
up effective approaches in higher education. (For a discussion of
financing the cost of college, see Economics Applications Box 6-1.)

Federally Supported Job Training

The education of workers does not end when they complete formal
schooling and enter the labor market. As the economy evolves, workers
often need to develop new skills to meet the changing demands of
firms. In many cases, firms partner with their workers to help them
acquire new skills, but for workers who have lost their jobs or are
seeking to change fields or careers, this option may not be available.
Providing such workers with opportunities for training is especially
important in today's economy given the continued high rates of
unemployment that are the direct result of the recession, and it will
remain important in ensuring a skilled workforce well into the future.
The Federal Government funds two main training programs for
adults--the Trade Adjustment Assistance (TAA) program and the
Workforce Investment Act (WIA) formula grant program. The WIA Adult
and Dislocated Programs have by far the largest reach, serving 8.6
million participants in 2010 (the most recent year for which data
are available) at a total annual cost of $3.8 billion.\6\  Created in
1998, the WIA system provides reemployment and training services to
adults who are economically disadvantaged and to workers who have
been displaced from their jobs. Importantly, WIA moved the design
and management of job training programs to the local level by
creating "one-stop" employment centers where job seekers can access
all employment services of the Department of Labor. WIA provides
both short-term services, including job search assistance and basic
skills assessments, and longer-term services that involve more
substantial career counseling as well as training services. Program
participants work with a case worker to choose the menu of services
that best meets their needs, although limited funds mean not all
participants have access to all services deemed appropriate. Research
suggests that the average WIA participant benefits from the program,
although the quality of the services provided is somewhat uneven.
One recent study found that, on average, WIA training programs for
adults boosted employment and earnings, although there was
substantial variation across states and across participants depending
on which WIA program they were in and what kind of services they
received (Heinrich, Mueser, and Troske 2008). Growing evidence from
studies of state programs, particularly studies that track
participants for a longer
_______________
\6\ Other smaller programs serving many fewer participants include
the Employment Services Program and the Adult Basic Education
Program. In addition, WIA also has a small program that serves
economically disadvantaged youth.

----------------------------------------------------------------------
Economics Application Box 6-1: Calculating the Cost of College

The decision to attend college is one of life's most important
decisions. Individuals with a college degree earn substantially more
throughout their working lives than otherwise similar non-degree
holders, on average, but the dollar costs of college can be high and
many students accumulate substantial debt. In addition, there is an
"opportunity cost" of college--students are unable to work for pay
while performing school-related tasks.
One key piece of information that a prospective student should
have is the actual dollar price of college that the student is likely
to pay. The published costs of a year of college do not tell the full
story. Many students receive Federal assistance, and individual
colleges and universities often have their own need-based aid
programs, as well as merit scholarships.
The Department of Education has two particularly useful tools for
prospective college students who would like to understand better what
they are likely to pay in tuition, room and board, expenses, and fees.
While the exact financial aid available to any particular student
depends on a number of factors including household size, household
income, and asset net worth, the Department of Education's
FAFSA4caster (http:// fafsa4caster.ed.gov/) can help students learn
how much aid might be available. Using the College Navigator tool
(https://nces.ed.gov/colleg-enavigator/), a prospective college
student can learn how Federal, state and local, and institutional
aid affect net prices at specific colleges.
A menu-driven format allows a prospective student to select a
college or set of colleges (say, by geography or type of degree) and
discover the average net price paid by students of various income
levels at each college on the prospective student's list. The average
net prices across schools can vary widely and can deviate
substantially from the published costs. For example, information from
the College Calculator shows that, for households with income between
$48,000 and $75,000, the average annual cost of attending one of the
top ten national universities (as ranked by U.S. News and World
Report) in 2009-10 was $52,796. The average net price for those who
received aid at one of those institutions, however, was a
substantially lower $9,340. Meanwhile, large state schools with much
lower published costs than the private universities can have higher
net costs. For households in the $48,000-$75,000 income range that
received aid, the average annual net cost (including the costs of
living on campus) in 2009-10 at the top ten largest public
universities was $13,486.
----------------------------------------------------------------------

period of time, shows that training for adults can have large positive
effects on earnings. Combining classroom learning with more hands-on
training usually has led to the largest and most lasting impacts
(Hotz, Imbens, and
Klerman 2006; Dyke et al. 2006).
The Trade Adjustment Assistance program was established in 1963
and has undergone numerous changes since its inception, but its basic
purpose remains to provide training to workers displaced as the result
of foreign competition. Eligible workers receive the same kinds of
reemployment and training services offered to WIA participants, but
more generous funding allows them to receive training for a longer
period of time. Moreover, TAA provides income supplements to regular
unemployment insurance benefits as well as an allowance for
relocation. If the displaced worker is over 50 years old and finds a
new job paying less than $50,000 a year, TAA also provides the worker
the option to receive wage insurance in the amount of half the
difference between his or her old and new wage (up to a cap of
$10,000) for up to two years.
Recognizing the importance of job training to American workers
and their families, the President has proposed a major initiative to
provide workers with the tools and skills they need to find new
jobs--by forging new partnerships between community colleges and
businesses to train 2 million skilled workers and by streamlining
access to training and employment services for dislocated workers.
The current system does not treat all workers who were
dislocated because of economic shifts equally. As noted above,
workers in trade-impacted industries are eligible for extensive
income support, training, and reemployment services under the TAA,
while those who lose their jobs for other reasons receive less
generous assistance. In this increasingly global economy, it is
difficult to distinguish between trade, technology, outsourcing,
consumer trends, and other economic shifts that cause displacement.
The President believes that dislocated workers should be able to
access a single program, visit a single location or go to a single
web site to find information about and assistance with job and
training opportunities in their community. Ensuring that displaced
workers have the information and training they need to successfully
return to work is important not only for those who have lost their
jobs as a result of the 2007-09 recession, but also for those who
will be in need of these services in the future.

CONCLUSION

The 2007-09 recession severely disrupted a labor market that
was already under stress from decades of rising inequality, stagnant
middle-class incomes, and weak job growth in the 2001-07 recovery
period. The job market has been recovering gradually since the end
of the recession, and the Administration continues to make
strengthening and sustaining the recovery in the job market a top
priority. The policies proposed by the Administration will promote
continued economic growth and job creation by supporting aggregate
demand through an extension of the 2 percentage point payroll tax
cut, the continuation of extended unemployment insurance benefits,
investments in infrastructure, and assistance to states and
localities to retain school teachers and first responders.
Investments in expanded reemployment services and training for
low-skilled and displaced workers will help get Americans back to
work. And the President's proposals to invest in elementary and
secondary education and to make college more affordable will lay
the foundation for a stronger economy in the future.