John Schmitt

John Schmitt is a Senior Economist with the Center for Economic and Policy Research in Washington, DC and co-author of The State of Working America.

Recent Articles

The Upside of Unemployment Insurance

To many economists, the unemployment insurance system is, at best, a necessary evil: The system helps laid-off workers survive hard times, but at the cost of economic efficiency. Unemployment benefits, the argument goes, reduce the incentive that unemployed workers have to seek and accept new jobs. But a new study concludes that the nation's unemployment insurance system may actually improve economic efficiency. Economists Daron Acemoglu, of the Massachusetts Institute of Technology, and Robert Shimer, of Princeton University, argue that financially pressed workers are too quick to take low-skill, low-wage jobs. For the economy to operate at peak efficiency, workers should be investing additional time and effort into finding better-paying jobs that take advantage of their particular skills. The research suggests that the current unemployment insurance system is too stingy. A modest increase in the system's generosity would raise workers' wages...

Cooked to Order

When two economists showed that a higher minimum wage would have little adverse effect on jobs, did the fast food industry try to spike the data and poison their reputations?

T his is the story of how the fast food industry and its conservative allies sought to discredit two distinguished economists, and how the attack backfired. The economists in question committed the sin of conducting research that challenged the conventional view of the minimum wage. Their attackers may have committed rather cruder sins. Almost every introductory economics textbook warns that raising the minimum wage will cost jobs. Assuming a standard model of the labor market, the reasoning is a straightforward variant of the law of supply and demand: If you raise workers' wages, you increase the price of labor—and firms will naturally hire fewer workers. But in fact recent data provide little support for the theory. Over the last decade or so, as the after-inflation value of the minimum wage has fallen close to a 40-year low, most economic research has found no connection between minimum-wage increases and levels of employment. In 1994, two well-respected Princeton economists, David...

Health Care and the Entrepreneurial Spririt

Free markets are supposed to have made the United States the world's most fertile ground for entrepreneurial activity. So how come only about 8 percent of Americans are self-employed, compared with much higher self-employment rates in countries alleged to suffer from "Eurosclerosis?" The United States, for example, trails Belgium (15 percent), France (11 percent), Germany (10 percent), Italy (24 percent), the Netherlands (11 percent), Spain (21 percent), Sweden (11 percent), and the United Kingdom (12 percent). Are Europeans just naturally more entrepreneurial than we are? Possibly, but recent research by economist Alison Wellington, of the College of Wooster, suggests that the higher self-employment rates in Europe may be due to the continent's predilection for universal health care coverage. Wellington has observed that, in the United States, spouses of workers with employer provided health insurance coverage were 7-14 percent more likely to be self-employed than were spouses of...

Minimum Wage Careers

Business opponents of the minimum wage often argue that it is little more than an "entry-level" wage--water-wings for those workers taking their first dip in the labor pool--and therefore needn't be high enough to sustain a worker over many years. A recent study by two government economists, William Carrington at the Bureau of Labor Statistics and Bruce Fallick of the Federal Reserve Board, however, has found that a significant number of new workers stay at or near the minimum wage long after their initial foray into the labor market. "Minimum Wage Careers?" followed young people for up to 10 years after they finished school and found that while the minimum wage had little or no effect on the careers of most workers, a "non-trivial fraction of workers ... spend substantial portions of their post-school career on minimum or near-minimum wage jobs." Ten years into the work world, 13.2 percent of all workers had spent half or more of their careers within $1.50 of the minimum wage. Not...

The Rise and Fall of Job Training

With unemployment at a 30-year low, opponents of current proposals to raise the minimum wage by a dollar to $6.15 an hour will be hard-pressed to argue such a move will cost low-wage workers their jobs. But what about that other stock argument that a higher minimum will reduce training for low-wage workers? New research by MIT economists Daron Acemoglu and Jörn-Steffen Pischke casts doubt on that claim. The researchers noticed that training for low-wage workers fell substantially during the 1980s--a period when the inflation-adjusted value of the minimum wage plummeted. Why didn't the wage decline allow employers to invest more in training? Since other factors could have been at play, Acemoglu and Pischke designed a test. They followed a sample of low-wage workers over the period 1987-1992, a time when the federal government and some states increased minimum wages. The economists then compared training outcomes across states with...