Rising wage inequality and stagnant real wages have contributed to inequality in family incomes during the past three decades. While the expansion of the Earned Income Tax Credit (EITC) and the Supplemental Nutrition Assistance Program (SNAP) have helped mitigate the impact on low-income families (Bitler and Hoynes 2010), federal minimum wage policy has not contributed to the solution. The federal minimum wage has failed to keep pace with both the cost of living and the median wage in the labor market. As a consequence, working full-time at the minimum wage does not allow many families to escape poverty, or to attain economic self-sufficiency.

State and local governments can set minimum wages in excess of the statutory federal minimum wage. Indeed, state and local governments have played an important role in establishing minimum wages across the country; as a result, thirty-seven states had state minimum wages exceeding the federal level in 2007 prior to the most recent federal increase. Cities, too, have begun setting higher minimum wages, as evidenced by city-level wage minimums in Albuquerque, San Francisco, San Jose, Santa Fe, Seattle, and Washington, DC; other cities are actively exploring possibilities of raising minimum wages. 

In this policy memo, I propose a framework for effective state and local minimum wage policy. First, I propose using half the local-area median wage as an important gauge for setting an appropriate level of the minimum wage. Second, I propose that state and local governments take into account the local cost of living as a relevant consideration in setting a minimum wage, and I provide estimates of how state minimum wages would vary if they reflected cost-of-living differences. I also recommend the use of regional consumer price indexes (CPIs) to index the local minimum wage. Finally, I propose that cities and counties coordinate regional wage setting to mitigate possible negative effects of local mandates. 

The implementation of the state and local framework does not override the need for reform at the federal level. Thoughtful reforms to the federal minimum wage can help reduce poverty and mitigate inequality. The federal minimum wage has been the focus of substantial debate by academics and policymakers; this proposal focuses on state and local reforms that have received substantially less attention. These state and local reforms can be an important part of the policy portfolio for reducing the incidence of poverty and for helping low-income families support themselves as they strive toward the middle class. In particular, although the federal minimum wage serves as a floor in the labor market, there is some room for additional increases in higher-wage areas.

Downloads

• Designing Thoughtful Minimum Wage Policy at the State and Local Levels - Full Text

In this paper, we outline the manner in which design can help promote the Indian economy. We look at the status of design in India, review the country’s development challenges, discuss the opportunities of a design economy, and make recommendations to enhance design in India.

Highlights of Main Findings

• India’s design capacity in the number of patents granted is approximately 3 percent of China and less than 2 percent of the U.S.A.
• India’s industrial design capacity is approximately 1 percent of China and 6 percent of the U.S.A.
• Historically, non-resident entities have been granted the most number of patents within India.
• Since 2012, more patents have been granted to Indian entities abroad than the number of patents granted by the Indian government to either resident or non-residents entities within India.
• While in India and the U.S.A. the most number of patents are annually granted to non-resident entities, in China the most number of patents have been granted to resident Chinese entities since 2008.
• Among the broad economic factors that affect design economy in India, the role of higher education, FDI, digital connectivity, infrastructure and trade have been identified as the most important.

Some specific policy recommendations to boost design economy in India are:

• Curricular reform for research and development in higher education
• Workforce development for R&D sector
• Establishing design labs and special economic zones to focus on R&D
• Developing and enforcing domestic legislation for intellectual property protection<.li>
• Promoting greater collaboration between business, government, and academia

Downloads

• Download the paper

In “Designing Pan-Atlantic and International Anti-Crime Cooperation,” a chapter for the new book, Dark Networks in the Atlantic Basin: Emerging Trends and Implications for Human Security (Center for Transatlantic Relations, January 2015), Vanda Felbab-Brown discusses the context and challenges of designing policies to counter organized crime and illicit economies in West Africa. She argues that although large-scale illicit economies and organized crime have received intense attention from governments and international organizations since the end of the Cold War, the strategies designed to combat these developments have been ineffective and, at times, counterproductive. Many populations experiencing inadequate state presence, great poverty, and social and political marginalization are dependent on illicit economies; and policies prioritizing suppression of these economies can, paradoxically, increase the economic and political capital of criminal or militant groups.

The recent drug trade epidemic and the connections between various illicit economies and terrorism have cast a spotlight on West Africa, Felbab-Brown explains. But in analyzing how the drug trade affects West Africa, it is important to note that preexisting institutional and governance deficiencies crucially amplify the destabilizing effects of the drug trade. Neither the  drug trade nor the entrenchment of political corruption and misgovernance in West Africa are new phenomena emerging in the wake of cocaine flows through the region. Rather, political contestation in West Africa has long centered on the capture of rents from legal, semi-illegal, or outright illegal economies such as diamonds, gold, timber, cacao, human trafficking, and illegal fishing, resulting in a pervasive culture of illegality, in which society expects that laws will be broken, enforcement evaded, and that the state will be the source of rents rather than an equitable provider of public goods. A long history of rentier economies, illicit activity, smuggling, endemic corruption, weak institutions, and governance as mafia rule—that provides exceptions from law enforcement to the ruler's clique—has left West Africa with what Felbab-Brown terms the technology of illegality and the state as mafia bazaar.

This context makes West Africa a particularly vexing area for policymakers and international donors who want to combat militancy or organized crime in West Africa. The United States and international community should consider any intervention in the region strategically, calibrating assistance packages to the absorptive capacity of the partner country, focusing on broad state-building, and fostering good governance. The priority of the United States must be to combat the most disruptive and dangerous networks of organized crime and belligerency, recognizing that anti-crime interventions cannot eradicate the majority of organized crime, illicit economies, and drug trafficking in the region. Moreover, efforts by external donors, such as Colombia or Brazil, to transfer policy practices to West African countries need to carefully consider which external lessons and policies are suited for local contexts.

The full book, Dark Networks in the Atlantic Basin: Emerging Trends and Implications for Human Security, is available for purchase from The Brookings Institution Press.

Downloads

• Designing pan-Atlantic and international anti-crime cooperation

Breakthrough therapy designation (BTD) is the newest of four expedited programs developed by the U.S Food and Drug Administration (FDA) to accelerate the development and review of novel therapies that target serious conditions. The public response to the program has been largely positive, and dozens of drugs have successfully received the designation. However, the FDA denies many more requests than it grants. In fact, as of March 2015, less than one in three of the BTD requests submitted have been granted. By contrast, roughly 75 percent of the requests for fast track designation (another of the Agency’s expedited programs) were granted between 1998 and 2007. This discrepancy suggests ongoing uncertainty over what exactly constitutes a “breakthrough” according to the FDA’s criteria.

On April 24, the Center for Health Policy at Brookings will host an event, Breakthrough Therapy Designation: Exploring the Qualifying Criteria, that will discuss qualifying criteria for the BTD program using real and hypothetical case studies to explore how FDA weighs the evidence submitted. Below is a primer that describes the definition, value, and impact of BTD.

What is BTD?

BTD was established in 2012 under the Food and Drug Administration Safety and Innovation Act, and is intended to expedite the development and review of drugs that show signs of extraordinary benefit at early stages of the clinical development process. However, BTD is not an automatic approval. The drug still has to undergo clinical testing and review by the FDA. Rather, BTD is designed to facilitate and shorten the clinical development process, which can otherwise take many years to complete.

What criteria does FDA use to evaluate potential breakthroughs?

In order to qualify for the designation, a therapy must be intended to treat a serious or life-threatening illness, and there must be preliminary clinical evidence that it represents a substantial improvement over existing therapies on at least one clinically significant outcome (such as death or permanent impairment).

In considering a request for BTD, FDA relies on three primary considerations:

1) the quantity and quality of the clinical evidence being submitted;

2) the available therapies that the drug is being compared to; and

3) the magnitude of treatment effect shown on the outcome being studied.

In practice, however, it can be difficult to define a single threshold that a therapy must meet. The decision depends on the specific context for that drug.  In some cases, for example, the targeted disease has few or no treatments available, while in others there may be several effective alternative treatments to which the new therapy can be compared. The request may also be made at different stages of the clinical development process, which means that the amount and type of data available to FDA can vary. In some cases, early evidence of benefit may disappear when the drug is tested in larger populations, which is why FDA reserves the right to rescinded the designation if subsequent data shows that the therapy no longer meets the criteria.

How many therapies have received the designation?

As of March 2015, FDA had received a total of 293 requests for BTD. Of these, 82 received the designation, and 23 have since been approved for marketing. Ten of these approvals were new indications for already approved drugs, rather than novel therapies that had never before received FDA approval.

What are the benefits of BTD?

For drug manufacturers, it is about the intensity and frequency of their interactions with FDA. Once the designation is granted, the FDA takes an “all hands-on-deck” approach to providing the manufacturer with ongoing guidance and feedback throughout the clinical development process. Products that receive BTD are also able to submit portions of their marketing application on a rolling basis (rather than all at once at the end of clinical trials) and BTD can also be used in combination with other expedited programs in order to further reduce the product’s time to market.

For patients, the potential benefits are straightforward: earlier access to therapies that may significantly improve or extend their lives.

How does BTD relate to the other three expedited programs?

The other three expedited review and development programs—fast track designation, priority review, and accelerated approval—are also geared at facilitating the development and approval of drugs for serious conditions. These other programs have been in place for over 15 years, and have played a significant role in accelerating patient access to new therapeutics (Table 1). In 2014 alone, 66 percent of the 41 drugs approved by FDA's Center for Drug Evaluation and Research used at least one of these four pathways, and 46 percent received at least two of the designations in combination.

Table 1: Overview of FDA’s Expedited Review Programs

 Adapted from FDA's Guidance for Industry: Expedited Programs for Serious Conditions - Drugs and Biologics

Event Information

Established by the Food and Drug Administration Safety and Innovation Act of 2012, breakthrough therapy designation (BTD) is one of several programs developed by the U.S. Food and Drug Administration (FDA) to speed up the development and review of drugs and biologics that address unmet medical needs. In order to qualify for this designation, the treatment must address a serious or life-threatening illness. In addition, the manufacturer (i.e., sponsor) must provide early clinical evidence that the treatment is a substantial improvement over currently available therapies. The FDA is working to further clarify how it applies the qualifying criteria to breakthrough designation applications.

On April 24, under a cooperative agreement with FDA, the Center for Health Policy convened a public meeting to discuss the qualifying criteria for this special designation. Using examples from oncology, neurology, psychiatry, and hematology, the workshop highlighted considerations for the BTD application process, the evaluation process, and factors for acceptance or rejection. The discussion also focused on key strategies for ensuring that the qualifying criteria are understood across a broad range of stakeholder groups.

Video

• Breakthrough therapy designation: Two and a half years in
• Applying the breakthrough therapy criteria: Oncology
• Applying the breakthrough therapy criteria: Neurology
• Applying the breakthrough therapy criteria: Anti-infective/psychiatry/hematology
• Summary and discussion of lessons learned

Event Materials

• Breakthrough Therapy Designation_final
• Breakthrough therapy slide deck

The breakthrough therapy designation (BTD) program was initiated by the U.S. Food and Drug Administration (FDA) in 2012 to expedite the development of treatments for serious or life-threatening illness that demonstrate “substantial improvement” over existing therapies. The program has since become a widely supported mechanism for accelerating patient access to new drugs. As of March 2015, FDA has received a total of 293 requests for BTD. However, it has granted just  82 (28%), which indicates an ongoing lack of clarity over what exactly meets the criteria for the designation.

On April 24, the Center for Health Policy at Brookings convened a public meeting to explore the designation’s qualifying criteria and how FDA applies those criteria across therapeutic areas. Panelists used real-world and hypothetical case studies to frame the discussion, and highlighted major considerations for the application process, the FDA’s evaluation of the evidence, and the key factors for acceptance or rejection. The discussion also identified strategies to ensure that qualifying criteria are well understood. Here are the five big takeaways:

1.  The BTD program is viewed positively by drug companies, researchers, advocates, and others 

Across the board, participants expressed enthusiasm for the BTD program. Industry representatives noted that their experience had been extremely positive, and that the increased cooperation with and guidance from FDA were very helpful in streamlining their development programs. Receiving the designation can also raise a drug company’s profile, which can facilitate additional investment as well as clinical trial patient recruitment; this is particularly important for smaller companies with limited resources.

Patient and disease advocates were likewise supportive, and expressed hope that the early lessons learned from successful breakthrough therapy approvals (which have been mostly concentrated in the oncology and antiviral fields) could be translated to other disease areas with less success. However, while BTD is an important tool in expediting the development of new drugs, it is just one piece of broader scientific and regulatory policy landscape. Accelerating the pace of discovery and development of truly innovative new drugs will depend on a range of other factors, such as developing and validating new biomarkers that can be used to measure treatment effects at an earlier stage, as well as establishing networks that can streamline the clinical trial process. It will also be important to develop effective new approaches to collecting, analyzing, and communicating information about these treatments once they are on the market, as this information can potentially be used by FDA, providers, and patients to  further improve prescription drug policy and medical decision-making.

2.  BTD requests far outnumber those that actually meet the qualifying criteria

Since the program began, less than 30 percent of requests have received BTD designation. A substantial majority were denied at least in part due to either a lack of data or problems with the quality of the data, or some combination of the two. For example, some sponsors requested the designation before they had any clinical data, or submitted the request using clinical data that was incomplete or based on flawed study designs. Many requests also failed to meet the Agency’s bar for “substantial improvement” over existing therapies.

One reason for the high denial rate may be a lack of a clear regulatory or statutory bar that could be used as a definitive guide for sponsors to know what is needed to qualify for the designation. BTD denials are also confidential, which means that sponsors effectively have nothing to lose by submitting a request. Going forward, manufacturers may need to exercise more discretion in deciding to request the designation, as the process can be resource- and time-intensive for both sides.

3.  There is no single threshold for determining what defines a breakthrough therapy

About 53 percent of the 109 total BTD denials were due at least in part to the fact that the drug did not represent a substantial improvement over existing therapies. During the day’s discussion, FDA and sponsors both noted that this is likely because the criteria for BTD are inherently subjective. In practice, this means there is no clear threshold for determining when a new therapy represents a “substantial improvement” over existing therapies. Designation decisions are complex and highly dependent on the context, including the disease or condition being targeted, the availability of other treatments, the patient population, the outcomes being studied, and the overall reliability of the data submitted. Given the multiple factors at play, it can be difficult in some cases to determine when a new product is potentially “transformational” as opposed to “better,” especially for conditions that are poorly understood or have few or no existing treatments. In making its determinations, FDA considers the totality of the evidence submitted, rather than focusing on specific evidentiary requirements.

4.  Early communication with FDA is strongly recommended for BTD applicants

Roughly 72 percent of the BTD denials related at least in part to trial design or analysis problems, which led several people to suggest that sponsors engage with FDA prior to submitting their request. Though there are several formal mechanisms for interacting with the agency, informal consultations with the relevant review division could help sponsors to get a better  and much earlier sense of what kind of data FDA might need. This early communication could both strengthen viable BTD requests and reduce the number of frivolous requests.

5.  FDA may need more resources for implementing the BTD program

The death of Afghan Taliban leader Mullah Mansour in an American drone strike is a significant but not fatal blow to both the Taliban and their Pakistani Army patrons.

The critical question Afghans and Pakistanis are asking is whether this is a one-off or the beginning of a more aggressive American approach to fighting the war in Afghanistan.

Mullah Mansour became the Taliban's leader last year after it was revealed his predecessor, Mullah Omar, the founder of the Taliban, had been dead for two years from unknown causes.

Mullah Omar's death in a Pakistani hospital in Karachi had been covered up for two years by the Pakistani Army's intelligence service, the Inter Services Intelligence Directorate or ISI, and the cover-up allowed the ISI to manipulate the Taliban very effectively behind the scene. Mullah Mansour was the ISI's handpicked successor.

There was resistance to his selection by some Taliban commanders, but the ISI forced them to acquiesce.

Since the fall of Kabul to American and allied forces after 9/11, the Taliban leadership has made its headquarters in Quetta, the capital of Baluchistan province in Pakistan.

For 15 years the Quetta Shura, as the assembly of leaders is known, has been protected by the ISI in its Pakistani safe haven where it is free to plan operations, conduct training, raise money and prepare terrorist attacks to strike American, NATO and Afghan targets in Kabul and elsewhere. While drones pummeled Al Qaeda targets elsewhere in Pakistan, the Taliban leaders were immune.

So this operation is unprecedented, the first ever effort to decapitate the Afghan Taliban. Mullah Mansour apparently was killed in Baluchistan very close to the Afghan border. He pressed his luck too far it appears. It's too soon to know the details of how he was found, but he was likely visiting front-line commanders.

The ISI will find a successor. They will work with the powerful Haqqani network, inside the Taliban, which has its own sanctuary in Peshawar Pakistan. The challenge will be to hold together the fractious movement, especially as the so-called Islamic State (ISIS) is trying to rally dissidents to its cause and create an Islamic State Vilayet, or province, in Afghanistan. The ISI and the Haqqanis are prepared to be ruthless to keep control of the Taliban.

The elected Pakistani government led by Prime Minister Nawaz Sharif has been trying to persuade Mullah Mansour and the Quetta Shura to join in peace talks with the Afghan government, which is led by President Ashraf Ghani. The US and China have encouraged the political process. But Sharif has no power over the Pakistani military and its ISI minions.

Indeed, now that Prime Minister Sharif is engulfed in a scandal caused by the Panama papers, his goal is simply to survive in office, and some Pakistani political commentators expect the army to oust Nawaz Sharif in a soft coup this summer. The Afghan peace talks are not likely to get going as long as the army calls the shots in Pakistan.

The killing of Mansour in an unprecedented operation has produced elation in the Afghan security forces, who hope it does it actually does mark the start of more aggressive attacks against the safe havens in Pakistan. But that's probably a misplaced hope. A discreet operation in the border region is not the equivalent of hitting targets deeper inside Pakistani territory.

Inevitably, the attack will be another blow to U.S.-Pakistan relations, even if both Washington and Islamabad try to paper it over. The U.S. Congress, after years of passively accepting Pakistani duplicity, has become much less willing to fund arms deals and aid to the Pakistani army. A recent administration proposal to sell F16 jets to the Pakistani military at sweetheart prices has been killed, wisely, on The Hill.

The next U.S. president will confront a complex and worrisome challenge in Afghanistan and Pakistan. It is not quite as bad as the disaster President Barack Obama inherited eight years ago, but it is one of the toughest foreign policy issues the next team will face. What do the candidates think they can do about it? It's not too early to start pressing them for answers.

This piece was originally published by The Daily Beast.

Renewable energy is an important source to tackle against climate change, as the latest IPCC report has pointed out. However, due to the existence of multiple market failures such as negative externalities of fossil fuels and knowledge spillovers of new technology, government subsidies are still needed to develop renewable energy, such as solar photovoltaic (PV) cells. In the United States, there have been various forms of subsidies for PV, varying from the federal level to the state level, and from the city level to the utility level. California, as the pioneer of solar PV development, has put forward the biggest state-level subsidy program for PV, the California Solar Initiative (CSI). The CSI has planned to spend around $2.2 Billion in 2007–2016 to install roughly 2 GW PV capacity, with the average subsidy level as high as $1.1/W. How to evaluate the cost-effectiveness and incentive pass-through of this program are the two major research questions we are pursing.

Our cost-effectiveness analysis is based on a constrained optimization model that we developed, where the objective is to install as much PV capacity as possible under a fixed budget constraint. Both the analytical and computational results suggest that due to a strong peer effect and the learning-by-doing effect, one can shift subsides from later periods to early periods so that the final PV installed capacity can be increased by 8.1% (or 32 MW). However, if the decision-maker has other policy objectives or constraints in mind, such as maintaining the policy certainty, then, the optimally calculated subsidy policy would look like the CSI.

As to the incentive pass-through question, we took a structural approach and in addition used the method of regression discontinuity (RD). While in general, the incentive pass-through rate depends on the curvature of the demand and supply curve and the level of market competition, our two estimations indicate that the incentive pass-through for the CSI program is almost complete. In other words, almost all of the incentive has been enjoyed by the customer, and the PV installers did not retain much. Based on the RD design, we observe that PV installers tend to consider the CSI incentive as exogenous to their pricing decision.

The relative good performance of the CSI in terms of both the cost-effectiveness and the incentive pass-through aspect are tightly related to its policy design and program management. International speaking, the biggest challenge for the design of any PV subsidy program is the quick running out of the budget, and in the end, it looks like customers are rushing for the subsidy. Such rushing behavior is a clear indication of higher-than-needed incentive levels. Due to the policy rigidity and rapid PV technological change, the PV subsidy policy may lag behind the PV cost decline; and as a result, rational customers could rush for any unnecessarily high subsidy.

Due to the high uncertainty and unpredictability of future PV costs, the CSI put forward a new design that links the incentive level change and the installed capacity goal fulfillment. Specifically, the CSI has designed nine steps to achieve its policy goal; at each step, there is a PV capacity goal that corresponds to an incentive level. Once the capacity goal is finished, the incentive level will decrease to the next lower level. Furthermore, to maintain the policy certainty, the CSI regulated that every step-wise change in the incentive level should not be higher than $0.45/W, nor smaller than $0.05/W, together with other three constraints.

A good subsidy policy not only requires flexible policy design to respond to fast-changing environment, but also demands an efficient program management system, digitalized if possible. For the CSI, the authority has contracted out a third-party to maintain a good database system for the program. Specifically, the database has documented in detail every PV system that customers requested. Key data fields include 22 important dates during the PV installation process, customers’ zip code, city, utility and county information, and various characteristics of the PV system such as price, system size, incentive, PV module and installer. All information is publicly available, which to some extent fills in the information gap held by customers and fosters the market competition among PV installers. For customers to receive the incentive, their PV systems have to pass the inspection of the local government, and also to be interconnected to the grid. On the supply side, the CSI has also certified and created a list of PV installers that every customer can choose from.

Although the CSI has ended in 2014 due to fast PV cost reduction starting from 2009, its experience has been transferred to other areas in the United States and in Europe. It is highly possible that other similar new technologies and products (e.g. the electric car and the battery) can adopt the CSI policy design, too. In summary, a good and successful policy may need to be simply, clear, credible, foreseeable, flexible, end-able, and incentive-compatible. The PV subsidy policy in China still has a long way to go when compared to the CSI.

Introduction

Many American workers do not have access to employer-sponsored payroll deduction plans for retirement saving. Groups with low rates of access include younger workers, members of minority groups, and those with low-to-moderate incomes. 1 Small business employees are especially at risk. Only about 14 percent of businesses with 100 or fewer employees offer their employees a retirement plan, leaving between 51 and 71 percent of the roughly 42 million people who work for a small business without access to an employer-administered plan (Government Accountability Office 2013).

Lack of access makes it difficult to build retirement wealth. A study by the Employee Benefit Research Institute (2014) shows that 62 percent of employees with access to an employer-sponsored plan held more than $25,000 in saving balances and 22 percent had $100,000 or more. In contrast, among those without access to a plan, 94 percent held less than $25,000 and only three percent hold $100,000 or more. Although workers without an employer-based plan can contribute to Individual Retirement Accounts (IRAs), very few do.2 But employees at all income levels tend to participate at high rates in plans that are structured to provide guidance about the decisions they should make (Wu and Rutledge 2014).

With these considerations in mind, many experts and policy makers have advocated for increased retirement plan coverage. While a national approach would be desirable, there has been little legislative progress to date. States, however, are acting. Three states have already created state-sponsored retirement saving plans for small business employees, and 25 are in some stage of considering such a move (Pension Rights Center 2015). John and Koenig (2014) estimate that 55 million U.S. wage and salary workers between the ages of 18 and 64 lack the ability to save for retirement through an employer-sponsored payroll deduction plan. Among such workers with wages between $30,000 and $50,000 only about one out of 20 contributes regularly to an IRA (Employee Benefit Research Institute 2006).

This paper highlights a variety of issues that policymakers will need to address in creating and implementing an effective state-sponsored retirement saving plan. Section II discusses policy design choices. Section III discusses management issues faced by states administering such a plan, employers and employees. Section IV is a short conclusion.

Note: this paper was presented at a October 7, 2015 Brookings Institution event focused on state retirement policies.

Downloads

• Download the paper

Many American workers do not have access to employer-sponsored payroll deduction plans for retirement saving. Groups with low rates of access include younger workers, members of minority groups, and those with low-to-moderate incomes. Small business employees are especially at risk. Only about 14 percent of businesses with 100 or fewer employees offer their employees a retirement plan, leaving between 51 and 71 percent of the roughly 42 million people who work for a small business without access to an employer-administered plan (Government Accountability Office 2013).

Lack of access makes it difficult to build retirement wealth. A study by the Employee Benefit Research Institute (2014) shows that 62 percent of employees with access to an employer-sponsored plan held more than $25,000 in saving balances and 22 percent had $100,000 or more. In contrast, among those without access to a plan, 94 percent held less than $25,000 and only 3 percent hold $100,000 or more. Although workers without an employer-based plan can contribute to Individual Retirement Accounts (IRAs), very few do. But employees at all income levels tend to participate at high rates in plans that are structured to provide guidance about the decisions they should make (Wu and Rutledge 2014).

With these considerations in mind, many experts and policy makers have advocated for increased retirement plan coverage. While a national approach would be desirable, there has been little legislative progress to date. States, however, are acting. Three states have already created state-sponsored retirement saving plans for small business employees, and 25 are in some stage of considering such a move (Pension Rights Center 2015).

This policy brief, based on John and Gale (2015), highlights a variety of issues that policymakers will need to address in creating and implementing an effective state-sponsored retirement saving plan.

Download "Policy Design and Management Issues for State Retirement Saving Plans" »

Downloads

• Download "Policy Design and Management Issues for State Retirement Saving Plans"
• Download the policy brief

The pace of employment gains slowed in January from the torrid pace of the previous three months. The latest BLS jobs report shows that employers added 151,000 to their payrolls in January, well below monthly gains in October through December. In that quarter payrolls climbed almost 280,000 a month. For two reasons, the deceleration in employment gains was not a complete surprise. First, the rapid growth payrolls in the last quarter did not seem consistent with other indicators of growth in the quarter. Preliminary GDP estimates suggest that output growth slowed sharply in the fourth quarter compared with the previous two. Second, I see few indicators suggesting the pace of economic growth has picked up so far this year.

It’s worth noting that employment gains in January were far faster than needed to keep the unemployment rate from increasing. In fact, if payrolls continue to grow at January’s pace throughout the year, we should expect the unemployment rate to continue falling. As usual in the current expansion, private employers accounted for all of January’s employment gains. Government payrolls shrank slightly. The number of public employees is about the same as it was last July. Over the same period, private employers added about 213,000 workers a month to their payrolls. In January employment gains slowed in construction and in business and professional industries. Payrolls shrank in mining. Since mining payrolls reached a peak in September 2014, they have fallen 16 percent. Manufacturing payrolls rose slightly in January, but payroll gains have been very slow over the past year. Employment in the temporary help industry contracted in January. The industry has seen no net change in payrolls since October.

Average hourly pay in private companies edged up in January. The average nominal wage was 2.5 percent higher than its level 12 months earlier. This is a faster rate of improvement compared with what we saw earlier in the recovery, when annual pay gains averaged about 2.0 percent a year. The modest acceleration in nominal pay gains has occurred against the backdrop of slowing consumer price inflation. The combination has given workers real wage gains approaching 2.0 percent over the past year.

The BLS household survey showed a small drop in unemployment. The jobless rate fell to 4.9 percent, just 0.3 points above its average level in 2007, the last year before the Great Recession. The drop in unemployment was the result of a rise in the number of survey respondents who were employed. The labor force participation rate increased in January, and it has increased 0.3 points since October.

This rebound in labor force participation is modest compared with the drop that occurred between 2008 and 2015. From 2007 to January 2016 the adult participation rate fell 3.4 percentage points. Roughly half the drop is traceable to population aging, but the other half is due to factors related to the deep slump or to long-term factors that have affected Americans’ willingness to enter or remain in the workforce. If we assume all of the drop was due to factors that have temporarily discouraged jobless adults from seeking work, then we can recalculate the unemployment rate to reflect the rate we would see if all of these discouraged workers were reclassified as unemployed. That calculation suggests the current unemployment rate would be about 7.4 percent rather than 4.9 percent.

It is of course unlikely all the adults who’ve dropped out the labor force would stream back in if job finding got easier and real wages continued to rise. It is encouraging to see, however, that participation is now climbing after a long period of decline. Over the past four months, the labor force participation rate of 25-54 year-olds increased 0.5 percentage points.

Wouldn’t it be great if complex social problems could be solved by technology? Alvin Weinberg suggested in 1967 that technical engineering could work better than social engineering; the argument advocated quick fixes to the most urgent problems of humanity at least to alleviate pain while more complete solutions were worked out. However controversial was this idea, our reliance on technology has only increased since then. Still, over the same period, we have also come to appreciate better the unanticipated consequences of technological advancement. In light of our experience leaping forward as well as our tripping and tumbling along the way, we should make two considerations in designing a technological fix.

Consideration 1: Serious attention to unwanted consequences

A consideration of first-order is the study of unwanted effects and tradeoffs introduced by the technology. Take for instance nanoparticles—particles in the range of one to a hundred nanometers—that enable new properties in materials in which they are mixed; for instance, maintaining permeability in fine-particle filtration to make available inexpensive water purification devices for vulnerable populations. Once these nano-enabled filters reach the end of their usable life and are discarded, those minuscule particles could be released in the environment and exponentially increase the toxicity of the resulting waste.

No less important than health and environmental effects are social, economic, and cultural consequences. Natural and social sciences are thus partners in the design of this kind of technological solution and transdisciplinary research is needed to improve our understanding of the various dimensions relevant to these projects. What is more, the incremental choices that set a particularly technology along a developmental pathway demand a different kind of knowledge because those choices are not merely technical, they involve values and preferences.

Consideration 2: Stakeholder engagement

But whose values and preferences matter? Surely everyone with a stake in the problem the fix is trying to solve will want to answer that question. If tech fixes are meant to address a specific social problem, those who will live with the consequences must have a say in the development of that solution. This prescription does not imply doing away with the current division of labor in technological development completely. Scientists and engineers need a degree of autonomy to work productively. Yet, input from and participation by stakeholders must occur far in advance of the completion of the development process because along the way a host of questions arise as to what trade-offs are acceptable. Non-experts are perfectly capable of answering questions about their values and preferences.

The market system provides to some extent this kind of check for technologies advancing incrementally. In an ideal market scenario, one of high competition, the stakeholders on the demand side vote with their wallets, and companies refine their products to gain market share. But the development of a technological fix is neither incremental nor distributed in that manner. It is generally concentrated in a few hands and it is, by design, disruptive and revolutionary. That’s why stakeholders must have a say in key developmental decisions so as to calibrate carefully those technologies to the values and preferences of the very people they intend to help.

Translating these considerations into policy

The federal government first funded in 1989 a program for the analysis of Ethical, Legal, Social implications (ELSI) within the Human Genome Project. The influence this program had in the direction and key decisions of the HGP was at best modest; rather, it practically institutionalized a separation between the hard science and the understanding of human and social dimensions of the science.[i]  By the time the National Nanotechnology Initiative was launched in 1999, some ELSI-type programs sought to breach the separation. With grants from the National Science Foundation, two centers for the study of nanotechnology in society were established at the University of California Santa Barbara and Arizona State University. CNS-UCSB and CNS-ASU have become hubs for research on the governance of technological development that integrate the technical, social, and human dimensions. One such effort is a pilot program of real-time technology assessment (RTTA) that achieved a more robust engagement with the various stakeholders of emerging nanotechnologies (see citizens tech-forum) and tested interventions at several points in the research and development of nanotechnologies to integrate concerns from the social sciences and humanities (see socio-technical integration). Building upon those experiences, the future of federal funding of technological fixes must include ELSI analyses more like the aforementioned RTTA program, that contrary to being an addendum to technical programs are fully integrated in the decision structure of research and development efforts.

Whenever emerging technologies such as additive manufacturing, synthetic biology, big data, or climate engineering are considered as the kernel of a technological fix, developers must understand that engineering the artifact itself does not suffice. An effective solution requires also the careful analysis of unwanted effects and a serious effort for stakeholder engagement, lest the solution be worse than the problem.