Think tanks wrap-up II

May 9, 2003 at 7:57 AM
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WASHINGTON, May 9 (UPI) -- The UPI think tank wrap-up is a daily digest covering opinion pieces, reactions to recent news events and position statements released by various think tanks. This is the second of several wrap-ups for May 9. Contents: unemployment and the tax stimulus plan; child care for working mothers; don't regulate private schools.

The Employment Policy Foundation

(EPF is a nonprofit, nonpartisan public policy research and educational foundation focused on workplace trends and policies. EPF seeks to shape U.S. employment policies by producing timely, high quality, unbiased and reliable economic analysis and commentary. EPF believes that sound employment policy requires objective research, strategic analysis and prudent forecasting.)

The employment deficit

WASHINGTON -- The recession, that began officially in March 2001, combined with the destabilizing effects of terrorist attacks later that year, resulted in direct job loss of 2 million jobs as total employment fell from 137.8 million in March 2001 to a low point of 135.8 million in January 2002. However, the direct decline in employment is only part of the loss caused by the recession.

If the robust employment growth prior to March 2001 (1.6 percent annual growth between 1991 and 2001) had continued, employment would have reached 140 million in 2002 and would be at 142.8 million today -- 5.1 million more than the 137.7 million employed reported for April 2003 by the Labor Department.

An employment deficit of 5.1 million people working translates into an economic gross domestic product deficit of nearly $400 billion per year in lost production, lower family incomes and reduced business profits. The employment deficit also results in bigger government budget deficits -- $120 billion in lost tax revenue to support federal, state and local government services in 2003.

The 15 months since the low point of January 2002 have seen weak and erratic employment growth-averaging less than one percent per year. Continuation of the current growth track through the end of 2006 would see total employment rise to 142.2 million, but the unemployment rate would likely rise from the current 6.0 percent level to 7.4 percent if the economy receives no extra stimulus and job growth lags behind labor force growth. The average number of unemployed individuals would increase by nearly 3 million to a total of more than 11.4 million jobless Americans by December 2006.

Compared to the long-term growth benchmark, the employment deficit would mount to 8.9 million jobs. The cumulative GDP loss by the end of 2006 could exceed $2.3 trillion and government revenue losses over the 2003-2006 period could total $697.6 billion-$458.3 billion in lost federal government revenue and $239.3 billion in lost state and local revenues.

The strong economic growth experience of the 1980s that followed the tax cuts and defense spending increases of the Reagan era resulted in one of the most robust periods of employment growth in recent history. Between January 1983 and January 1990, U.S. employment grew at an average rate of 2.6 percent per year-more than half again as fast as the 1.6 percent rate of the 1991-2001 that was used as the benchmark for calculating the employment deficit for the EPF study.

Achievement of economic stimulus of that magnitude would close the employment deficit by the end of 2006, returning employment to the level that would have been reached if economic expansion had not been interrupted in 2001. This strong growth scenario would see unemployment fall below 4.0 percent in 2006.

After 2006 the economic concern would then focus again on labor shortage issues -- how to find the labor needed to maintain rising employment and production needs. The effect of applying the monthly employment growth rates experienced following enactment of the Reagan tax cuts at the end of 1981 to the current (April 2003) employment situation offer a good example, which also illustrates that the impact of a fiscal stimulus is not instantaneous.

In 1982, employment continued its previous decline for most of the year before employment gains began to occur. Then, in 1983, employment surged by 4.1 percent. Employment growth continued at more than 3.1 percent in 1984, and settled to a 1.9-percent growth rate in 1985. A stimulus plan enacted today would not likely begin to have a noticeable impact on the employment growth trend until early 2004. Dramatic results would be seen from 2003 through the end of 2006 if this strong employment growth experience were repeated.

EPF analyzed the employment impacts that would result from the president's original $650 billion stimulus and other smaller stimulus packages through 2006. EPF found that none of the proposals will have as strong an impact as the Reagan era growth experience, but they will stabilize employment growth at a level comparable to the robust 1.6-percent annual growth that was characteristic of the 10 years prior to 2001.

The employment impacts reflect a delay in fiscal policy impact similar to that experienced in 1982. If a stimulus package were enacted today, significant employment gains would not be seen until early 2004.

EPF formulated a consensus estimate based on current proposals that showed that the proposals would cause unemployment to fall to 5 percent, stop expansion of the employment deficit and result in total employment of 146.0 million by the end of 2006. The proposed stimulus plans will result in approximately 3.7 million fewer people unemployed in 2006 compared to the current trend, $585 billion additional output over the next four years, and at least $180 billion in additional tax revenues for federal, state, and local governments.

The impact of the president's $650 billion stimulus package would be larger than these estimates, while the compromise plan offered by Sen. Charles Grassley, R-Iowa, which would size the stimulus package at $350 billion, would be lower.

The Center for Economic and Policy Research

(CEPR's goal is to ensure that citizens have the information and analysis that allow them to act effectively in the public democratic debate on important economic and social issues that their lives, by informing them about the problems and choices they face in an accurate and understandable manner, so they are better prepared to choose among various policy options.)

Who cares? The child care choices of working mothers

By Heather Boushey

WASHINGTON -- Most mothers not only provide care for their families, they hold down a paid job as well. Two-thirds of mothers with children under age 6 are employed and of these, the majority work more than 30 hours per week. For the "typical" American family, an important part of a mother's job at home is to find care that meets her family's needs in terms of quality, the location of the child care, affordability, and other characteristics, such as flexible time arrangements.

Familial care by a parent or relative remains the most common kind of child care used by working mothers, followed by formal daycare. These arrangements are almost as reliable as formal daycare and are less expensive to use. Even though most working mothers spend 40 hours per week or more working at a paid job, one-third of working mothers (33.2 percent) have their children in parental care, provided by themselves or the child's other parent, for the majority of their child care hours.

Married working mothers are the most frequent users of parental care, while working mothers with low incomes or who live with other family members are most likely to use relative care.

In addition, one-third of working mothers (30.9 percent) rely on relatives. However, there are indications that relative care is used out of necessity rather than choice because it is most often used by low-income mothers and by single mothers who live with other family members. Moderate and lower income families generally cannot afford formal daycare without assistance and mothers who cannot rely on family support or afford formal care must rely on informal child care arrangements (family daycare or nanny/sitters).

While formal care is generally of higher quality and is one of the most reliable forms of care, it is also the most expensive. Formal daycare, regarded as the highest quality alternative to parental care, costs an average of $4,068 per year for each child in care, putting this kind of care out of the reach for many working mothers.

Higher-income and more-educated mothers are most likely to use formal daycare settings. Family daycare is chosen by 19.1 percent of working mothers and nanny/sitter care by 3.6 percent. Many of the working mothers who choose either of these kinds of informal care arrangements lack access to relative care options and cannot afford formal daycare.

Formal care is also becoming increasingly difficult for low-income mothers to access. The U.S. General Accounting Office reports that since January 2001, two-thirds of states have made changes to their child care assistance policies and of these, 23 limited eligibility for low-income mothers, including former welfare recipients.

While welfare reform pushed women into the labor market, it has become increasingly difficult for many mothers to access state assistance in paying for child care, forcing them to rely on relative care, if they have an able and willing family member, or informal care.

The Cato Institute

The school choice movement must fight restrictions on private schools

By David Salisbury

WASHINGTON -- The Colorado legislature recently passed the "Colorado Opportunity Contract Pilot Program." This makes Colorado the first state to pass a school voucher program since the Supreme Court's ruling this summer that school vouchers are constitutional.

Texas is also set to pass a school voucher bill. Florida and Arizona are likely to extend their tuition tax credit programs and Washington may get vouchers. Gov. Mike Foster in Louisiana has proposed a voucher bill for that state.

As those measures make their way through the state legislatures, the school choice community needs to stress the importance of avoiding new regulations on private schools. If they don't, those new rules could destroy the very basis for school choice.

The Colorado bill, for example, requires that participating private schools allow the school district to administer state tests to the voucher children enrolled at those schools. Foster's bill in Louisiana would require that participating private schools test all their students using the state's standardized testing program. The Texas bill would require participating private schools to administer "comparable assessment instruments approved by the commissioner."

Requiring private schools to give state-selected achievement tests would have harmful effects on the participating private schools. Some private schools would have to give up the curriculum they have designed for their own students and teach the state-sanctioned curriculum instead.

That would kill the diversity and vitality of the private schools. Many state tests emphasize fuzzy math over traditional math and stress the use of "culturally diverse texts" over traditional classical literature, a staple of many effective private schools.

Private schools have legitimate reasons for selecting one type of test over another. Some prefer the Iowa Test of Basic Skills because they think it tests for a more traditional coverage of the curriculum -- others prefer the Stanford-9 or the CAT. Some private schools shun standardized tests altogether, choosing to rely instead on more holistic measures of student progress.

The fact that most private schools don't want to administer state tests doesn't mean that they are not serious academic institutions with rigorous standards of excellence. It simply means that their curriculum and standards are different than those of government schools.

Most state standards have no empirical basis. Rather, state standards and tests are typically an awkward compromise between disparate factions of the professional education community, many of which are influenced by fads and politically correct thinking.

As currently written, the Texas bill would require participating private schools to accept any student who wishes to pay with a voucher "unless the student has been expelled from public school or has a criminal record." Thus, schools would be prohibited from considering religious background or academic achievement as criteria for admission.

Rules requiring private schools to accept all applicants would severely jeopardize the ability of private schools to specialize by focusing on specific types of students. Religious schools would not be allowed to require a 'statement of faith' or other demonstration of support for the mission of the school as a basis for admission. Presumably, private schools that specialize in serving children with disabilities would be required to accept non-disabled children as well.

Specialization is a requirement for quality. Consumers have diverse preferences and producers have different skills, talents, and interests. The purpose of school choice is to give parents choices among schools of differing specializations, ideologies, and practices. It defeats that purpose to make private schools into one-size-fits-all carbon copies of public schools.

The Texas bill would also mandate tuition caps that prevent families from using vouchers at private schools that charge more than the voucher amount. Such price controls would drive out innovation and prevent families that want to purchase additional education services for their child from doing so.

As in all economic sectors, wealthy people provide the initial capital to finance experimentation and innovation. Those innovations that are found to be most useful soon get expanded. The price of the new innovation comes down, and the product is made available to everyone at less cost.

The same thing would happen in education. A school choice program that prohibits families from adding onto their tuition produces a market that is less attractive to new capital and new entry than a program where entrepreneurs can attract consumers from all income levels. Without the interest and investment of wealthy and middle-income families, a real educational revolution likely won't happen.

Several proposed bills call for local school boards in participating districts to evaluate the program each year. This is like asking KMart to evaluate Walmart. The parents themselves will provide plenty of accountability for private schools and not all parents have to be astute consumers of educational services. Private schools, like other businesses, respond to even small changes in market share. So it only takes a few critical customers to effect the practices of a school that doesn't want to lose clients.

The school-choice community needs to do a better job of selling the idea that private schools are already more accountable than public schools, precisely because they are accountable directly to the consumers. As we encourage policy-makers to enact school choice policies, we should simultaneously oppose any attempts by state legislatures to impose unnecessary and harmful regulations on private schools.

There are a number of signs that private schools will not participate in school choice programs if those programs require that they give up their curriculum, religious environment, or their ability to admit students based on the school's unique specialization or mission. Imposing state standards or admission policies on private schools would create an institutional rigidity and uniformity that would limit the diversity of standards, school practices and educational philosophies that exist in the private-school market.

We do not want school choice legislation to impose public school type regulations on private schools. Rather, we should work to end discrimination against parents who choose private schools, while ensuring that those schools remain truly private and independent.

The school choice movement is at a crossroads. Those school choice bills making their way through state legislatures today will become the models for school choice programs tomorrow. The success of school choice will depend largely on how effective we are in opposing increased regulation of private schools.

(David Salisbury is director of the Center for Educational Freedom at the Cato Institute.)

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