Is abating radon worth it?

Earlier today, the US Department of Housing and Urban Development announced that the Bridgeport, Connecticut and Dayton, Ohio public housing authorities would receive $1.1 million in grants to help reduce radon exposure in homes. Radon is a radioactive gas that can be found in the soil underneath homes, and can increase the risk of cancer for people exposed to it. 

These funds will allow the two housing authorities to test public housing units for radon exposure, and if detected enable them to mitigate the negative effects. The press release claims that they expect this to protect 1,700 low-income families from radon exposure. 

From an efficiency lens, we should probably expect this to have a net positive effect on society. $1.1 million is a small price to pay for something that could potentially prevent people from getting cancer. 

Doing some back of the envelope math, if we use a Value of Statistical Life of $11 million, then this would need to reduce the risk of death for individuals in the impacted families by only 0.00003% to break even. That assumes that there are roughly 2.5 people per affected family. 

Given how likely this is to return a positive value for society, it could be beneficial for more local governments to pursue similar programs. A more expansive strategy could amplify the benefits by ensuring that low-income families in other cities also have access to testing and mitigation services. 

From an equity perspective, this proposal should have a positive impact. It is a bit more difficult to know for certain though, because low-income families do not necessarily have higher exposure to radon than higher-income families. Instead, we might expect an increase in equity to result from the fact that low-income families have fewer resources to dedicate to treatment in the long run, should the exposure result in negative health outcomes. 

While this funding announcement is a positive development, some key details could help better assess the policy’s potential impact. Clarity on how the $1.1 million will be distributed between testing and mitigation is essential. If most of the funds are used for testing, there might be insufficient resources to effectively mitigate radon in all affected homes. A more detailed breakdown would provide confidence that the program will successfully reduce radon exposure and protect families.

The timeline for the rollout and completion of the program is another missing piece of information. Knowing when testing and mitigation efforts will begin and end would allow communities to better understand when they will see improvements. Establishing clear benchmarks and deadlines could also help in evaluating the program’s effectiveness.

Finally, details on how the success of this initiative will be measured are crucial. Plans for follow-up testing and long-term monitoring would ensure that initial mitigation efforts are sustained and effective. A well-defined evaluation strategy would not only strengthen the current program but also provide valuable data for expanding such efforts to other regions in the future. 

Public policy that finds cost effective ways to improve public health are always good. Though more research would be needed to fully understand what the impacts of this proposal might be, this is a positive step toward protecting public health for low-income families. 

What are the consequences of property tax relief?

Last month, Ohio state Rep. Thomas Patton introduced a bill to freeze property taxes for low- and middle-income households.

The bill specifies that property taxes shall be frozen if the home is occupied by someone making $75,000 or less (a little over 110% of the statewide median household income) and the person living in the home is enrolled in Medicaid or Medicare.

This practically means that the property tax benefit would apply to people who are homeowners who are low-income or middle-income and elderly.

This sort of tax benefit would be helpful for some low-income people and elderly people who own homes. Housing prices in Ohio have doubled over the past decade, which is likely leading to higher property tax costs for homeowners across the state to go with it.

There are a couple of considerations worth taking into account when looking at a policy like this, though.

First, where will we be losing revenues if this policy is put into place? According to the Ohio Department of Taxation, about two-thirds of property taxes in Ohio go to school funding. This means about two-thirds of the savings would be paid for with lower spending on K-12 schools.

This could have uneven geographic impacts as well. It may not have as significant of an impact in communities with more people on Medicare, which would mostly be retirees. But school districts that have more low-income homeowners would see a disproportionate impact to school revenues. This would further limit resources to schools with high rates of low-income homeowners living in their districts.

Another consideration for this policy is who would be left out? According to a Federal Reserve Bank of Minneapolis article from earlier this year, more low-income Americans own their homes now than ever before. Despite this upward trend, a majority of bottom-quintile Americans still do not own their homes.

This impacts retirement-age people as well. While a majority of retirement-age people in Ohio own their homes, about 27% of retirement-age people are still renters according to Census Bureau surveys. This means substantial numbers of low-income people and retirees are renters.

But this is fine because renters don’t pay property taxes, right? Wrong: renters pay property taxes because the people who own their homes pay property taxes. Just like how retailers can pass on part of their sales taxes to consumers and how importers can pass on part of the cost of tariffs to those who buy their products, landlords pass on the cost of property taxes to renters. So renters are burdened with property taxes but would not receive any relief under this sort of proposal.

Is there a better way to do property tax relief?

One way would be to target relief to low-income people and retirees without the stipulation of homeownership. Just provide a tax credit with the stipulation of Medicaid or Medicare enrollment. This would relieve tax burdens and make sure that relief gets to everyone who is burdened by property taxes.

It would not, however, provide a solution to the problem that lowering property taxes means lowering support for schools and likely hurting student achievement. This would need to be fixed through another revenue stream if policymakers did not want to accept this tradeoff for property tax relief.

This commentary first appeared in the Ohio Capital Journal.

Ohio economists: exempting tips from taxes will help higher-income tipped workers

In a survey released this morning by Scioto Analysis, 11 of 16 economists agreed that exempting tips from state income tax would significantly improve wellbeing for tipped workers. This comes after Representative Jay Edwards introduced a bill that would exempt tips from income tax in Ohio, and both President Trump and Vice President Harris announced that exempting tips from income tax would be part of their agendas if elected president. 

Bob Gitter from Ohio Wesleyan who agreed with the statement qualified his response by saying “low-income tipped workers are not paying much, if any, income tax. The benefits will be for higher income tipped workers, e.g. servers at higher priced restaurants.” This highlights a common concern with this policy, the fact that many workers who rely on tips do not end up paying much if any income tax. 

Similarly, Curtis Reynolds from Kent State commented about how this might create some negative incentives for employers “... I am not sure that this will really help at all.  Some tips may not be declared on taxes in the first place (so exempting them does not help) and this may just slow wage growth if employers view this as an increase in total compensation.”

Additionally, 11 of 16 economists disagreed that exempting tips from income tax would lift more people out of poverty than raising the tipped minimum wage to the non-tipped minimum wage. As Will Georgic from Ohio Wesleyan wrote “The number of tipped workers in Ohio who are both in poverty and pay income taxes is vanishingly small. Exempting tips from income taxes will do very little to pull people out of poverty. Roughly doubling the tipped minimum wage to coincide with the overall statewide minimum wage will be much more effective at reducing poverty in a partial equilibrium sense. However, the ultimate effect will depend on how much of this increase in labor costs for employers is passed on to consumers and on the own-price elasticity of services provided by tipped workers.”

The Ohio Economic Experts Panel is a panel of over 40 Ohio Economists from over 30 Ohio higher educational institutions conducted by Scioto Analysis. The goal of the Ohio Economic Experts Panel is to promote better policy outcomes by providing policymakers, policy influencers, and the public with the informed opinions of Ohio’s leading economists. Individual responses to all surveys can be found here. 

Is a strong safety net good for the economy?

When I was in grad school, I did a project with an advocacy group that helped people who were faced with evictions. They were interested in studying the effects of the COVID-19 eviction moratorium.

The moratorium was in effect temporary housing assistance for people who could not pay their rent. It still allowed for some evictions in situations where tenants either used the property for illegal activities or severely damaged the property, but overall the policy acted as temporary housing assistance for hundreds of thousands of people across the country.

The question we were looking to uncover was how much evictions rose after the moratorium was lifted. If they were higher than pre-pandemic levels, we thought that might be because the moratorium just delayed their eviction for a short time rather than actually reducing eviction rates. 

If eviction rates returned to pre-pandemic levels, we suspected that it would be because this temporary assistance helped get people back on their feet, and avoid future eviction. 

Unfortunately, we didn't come to a decisive conclusion. I was working on this project in the Fall of 2022, and there just wasn’t enough data yet to be sure either way. At first glance though, it seemed like there was not going to be a significant rise in evictions. 

The real question that at the heart of this project that I wasn’t able to answer is how far temporary assistance can go. If you give someone rent money for one month, does that enable them to find a way to pay themselves the next?

In January of this year, researchers helped answer this question. In a paper written by researchers at Notre Dame university and the Census Bureau, they explain how emergency financial assistance appears to help increase earnings for some individuals. 

These researchers exploit variation in the availability of emergency resources in order to compare similar families that receive assistance to those that do not. They found no evidence to suggest that families that receive assistance decrease their labor supply, in effect replacing income from working with emergency assistance dollars. Instead, they found that for the lowest earners, this emergency assistance can lead to increases in employment and earnings. 

This result has extremely important policy implications. Short-term financial emergencies can have severe consequences. Things like homelessness and unemployment have long-lasting effects that the public sector ends up paying the bill for. If we can use short-term assistance to help get people back on their feet, then we not only improve conditions for struggling people in the short-term, but we can also avoid much more costly problems down the road. 

This new research helps highlight the fact that when there is a strong social safety net, we can improve long-run outcomes for people facing short-term struggles. This paper demonstrates that people who use emergency assistance do not begin to rely on it and use it as a replacement for their own income. Instead, we find that people who receive emergency assistance use it as a springboard to propel themselves into a more stable financial situation.

How does poverty impact health?

A Columbus Dispatch article released last weekend presented data from the Centers for Disease Control and Prevention on life expectancy for people living across Ohio.

One of the findings of the journalist was that the lowest-life-expectancy neighborhood in all of Ohio was located on the west side of Columbus. This neighborhood, which is approximately in the “south Franklinton” area, has a life expectancy of only 60 years.

This was poignant for me particularly because this neighborhood is directly adjacent to the neighborhood I live in. Just across the river in Columbus’s Brewery District, the life expectancy is 80 years. That is higher than even than the state average life expectancy of 78 years.

So this means that being born on my side of the river versus the other side of the river is worth 20 more years of life on average–a 34% increase in life expectancy.

What is driving this steep difference in life expectancies between one side of the river and the other? Something inescapable about this story is poverty. In south Franklinton, the Census Bureau estimates the poverty rate is about 62%--an astounding number. That means over half of the population of the neighborhood is living in poverty.

In the Brewery District? The estimated poverty rate is only 8%--low for Franklin County, low for Ohio, low for the United States. This means someone living in south Franklinton is 8 times as likely to live in poverty as someone living in the Brewery District.

This situation touches on a larger theme covered in a recent working paper published by the National Bureau of Economic Research. In this paper, researchers from the University of California, Los Angeles, Northwestern University, and New York University discuss the state of the research on the connection between poverty and health. They talk about how poverty and health are associated not only between countries, but within countries as well.

One conclusion these researchers come to is that it is not income that drives poor health, but rather poverty. They find that life expectancy at age 40 and the share of middle-age adults reporting that they are in good health, have a health difficulty, or experience depression all improve as people gain more income but flatten at higher levels of income.

This fits a pattern we see throughout many economic phenomena: the pattern of diminishing marginal returns. An additional $10,000 of income will improve the health of members of a household that makes $30,000 of income much more than it will improve the health of members of a household making $250,000 of income.

Another conclusion they come to is that income is not the only factor driving health outcomes for people in poverty. They note that across different geographies, life expectancy is steady for the wealthy, but varies for the poor. This suggests geographic factors may be at play in impacting health outcomes for people with less resources.

We do have public policies that can lead to better health outcomes for people in poverty, though. The authors of the paper mention the research around cash transfers, early childhood education, and health care provision. Poverty is a risk factor for poor health, but tackling both poverty and poor health is something fully within the grasp of public policy. Well-designed public policy can stop a river from having a 20-year impact on people’s lives.

Why are teachers paid so little?

When you first take an introductory microeconomics class, you learn all about the basic theory of supply and demand. You learn that in a competitive market, prices are determined by both how easy something is to supply and how valuable it is to the people consuming it. 

You also learn that the same basic rules apply to the labor market. This is the justification that is given when the question is inevitably asked “why do people with more important jobs not make more money?” 

The answer to this question has always been that prices in the labor market (wages) are not just a factor of the job itself, but of how easy it is to find employees in those jobs. That is why even though grocery store cashiers got labeled as “essential workers” during the pandemic, they still often are among the lowest paid employees in the state. 

The same has also been said about teachers. Despite the fact that good teachers provide an extremely valuable service that everyone benefits from in the long run, the theory has been that it was easy to find teachers. Another reason that teachers are underpaid is that most of the benefits of teaching are externalities. The people who benefit from good teachers are children, while the people who pay for good teachers are taxpayers. 

Positive externalities will always exist with teaching, but now it is no longer true that teachers are easy to find. We are currently experiencing a  shortage of qualified teachers in most parts of the country. A policy brief from the Journal of Policy Analysis and Management by Jim Wyckoff from the University of Virginia looks at the teacher shortage in Virginia. He points to three major problems in the teaching workforce.

1. Teaching vacancies disproportionately affect a small number of schools. 20% of schools have 80% of the vacancies.

2. The schools that are most affected are the poorest schools, with the largest populations of BIPOC students. 

3. Shortages are more pronounced among specialist teachers. For example, in the 2022 Virginia data, 3% of all teaching positions were vacant, while 6% of special education teaching positions were vacant.

Clearly, it is no longer true that it is easy to find teachers. The labor market for teachers is currently experiencing a major shortage. The good thing is that shortages in markets are fairly straightforward to solve. You just need to increase wages. 

In his policy brief, Wyckoff also suggests that specialists who teach special education, math, and science should get an additional bonus of at least $5,000. Currently, most public school teachers get paid on a single schedule. That means that the only thing that determines wages is how long a teacher has been working. If we want to specifically address the shortage of specialist teachers, then we should be willing to pay them more. This bonus could also apply to teachers who choose to work in high poverty schools that are facing major shortages. 

Education is one of the most important public goods. Paying teachers more is an investment in the future, not just a cost today. It may be expensive in the short run, but once these students grow up they are going to be better prepared to participate in society. 

We know that education leads to so many positive outcomes for people who experience it. Paying teachers more is a rare policy that could potentially improve efficiency by correcting a market shortage, and equity by leveling the playing field when it comes to our education system. 

Can public policy cure loneliness?

In July, I ended my service as president of Gross National Happiness USA, an organization focused on changing the way we measure progress and success in the United States.

In the six years I have served on the board of the organization, I have learned a lot about the protective factors that contribute to high levels of subjective well-being among people. In layman’s terms, I have learned a lot about what research says makes people happy.

In our 2022 survey of happiness in the United States, far and away the most-mentioned contributor to happiness by people surveyed was “family.” A total of 45% of respondents mentioned family in their free response about contributors to happiness. The next most common was “health,” which 6% of respondents mentioned.

This is just another datapoint in a large body of research that underscores the key role of social connections in driving happiness among individuals.

This poses a problem for policymakers. As we consider the tools at the hand for policymakers, few are effective at building social connections between people. While governments like the UK are spurring new initiatives to tackle loneliness, initiatives in the U.S. to preserve marriages have not been successful so far.

My reading of the evidence is that there is hope on this dimension, though. While many of the initiatives that have failed before have focused on relationships between adults, there does seem to be evidence that relationships can be built early on for children.

I thought of this recently while reading about an evaluation of the long-term effects of a randomized controlled trial in Bogotá, Colombia. The program, Kangaroo Mother Care, is an intervention aimed at increasing skin-to-skin contact between preterm infants and their mothers. This specific evaluation showed that at age 22, infants who were randomly assigned to groups to receive this skin-to-skin contact had better socio-emotional skills than those who were not.

This follows some of the evidence we have on impacts of programs like home visiting, which give week-to-week counseling to expectant and new mothers. Giving parents tools to have positive interactions with their children can lead to long-term benefits for those children in the form of socioemotional development and eventually in test scores, criminal justice involvement, health, and earnings.

Other similar programs have been shown to have positive impacts on child development. A group of pediatricians and psychiatrists evaluated a program where therapists coached parents as they interacted with children, viewing their interaction through a one-way mirror and providing coaching through a radio earphone. The program was very effective at reducing cases of child abuse and neglect. Estimates by the Washington Institute for Public Policy found the program could have large impacts on future labor market earnings, criminal justice system savings, less spending on special education, and less PTSD.

Some public health researchers are saying now that we are in an epidemic of loneliness. We may yet find a “cure”--a killer public policy intervention to improve connections between adults today. But until then, we do have one tool to fight this problem: building relationships between parents and children.

Inflation as a policy choice

In March of 2020, right as the United States was beginning to shut everything down as the COVID-19 pandemic was ramping up, I went to a panel discussion led by some of the professors at Bates College talking about what the economic impacts of the pandemic might be. One of the panelists was a former professor of mine, Paul Shea, who taught a class on the Great Recession. 

One thing he said that stuck with me was that during the Great Recession, a fundamental flaw in the economy was exposed. Financial markets had gotten wildly out of control, and the only way forward was to address the root issues. After some new regulations and a very long and slow recovery, it seems like we have tools in place now to prevent such a major asset bubble from forming. 

In contrast, the COVID-19 pandemic wasn’t the result of something fundamentally wrong with our society. Because of this, Dr. Shea speculated that the recovery from the COVID-19 pandemic might be shorter. 

Of course, the pandemic was longer and more difficult than anyone could have imagined in March 2020. That meant that while it may have not been caused by some fundamental systemic flaw, it exposed a lot of flaws in our society that we have been able to largely ignore otherwise. 

I think this is the key difference between the Great Recession and the COVID-19 pandemic from an economic perspective. In 2008, we had to solve an underlying economic failure, while in 2020 we had to prop up other systems that could not bear the short term burden they were facing. 

The result of this difference can be seen in the recovery after the two downturns. One of the biggest challenges after 2008 was unemployment. Unemployment was a challenge during the pandemic, but emergency aid helped remedy the problem to some extent. After the Great Recession, it took nine years for unemployment to return to their 2007 levels. In 2020, it took only two years to recover. 

The biggest economic problem that came from the pandemic was the high inflation. During the great recession, there was actually a brief period of deflation as the economy grinded to a halt. 

The recent bout of inflation was a policy decision in response to the pandemic. In order to keep the economy from tailspinning into something worse, the government spent a lot of money to keep it going while people were cooped up in their homes. 

However, according to data released yesterday, inflation has finally fallen to below 3% for the first time since 2021. People are still reeling from the shock of prices rising so quickly over the past two years, but we are quickly returning to a more normal economic world. Interest rates are still high, but many people suspect that the Federal Reserve will begin to lower rates now that inflation appears to be under control.

It appears that at least to some extent, Dr. Shea was right. The economic recovery from the COVID-19 pandemic has been a lot faster than the recovery from the Great Recession. Hopefully, we can learn from the past four years and address some of the problems that were exposed. With a little effort, we can better prepare ourselves for the next major economic downturn.

Why antipoverty policy today is antipoverty policy tomorrow

One of the fundamental tradeoffs in public policy analysis is that between equality and efficiency. Theoretically, promoting equality (or “equity” for that matter) can come at the cost of economic efficiency. This is because safety net programs must be financed through taxing income or consumption and can create disincentives to efficient allocation of resources.

Recently, a growing body of research has been questioning the nature of this tradeoff in public policy. For instance, research on patent filings across the country show they are less likely to be registered in zip codes with less economic opportunity. This means that we tolerate poverty at the cost of new technological breakthroughs for everyone.

Similarly, research on cash transfers increasingly shows how putting cash in the pockets of low-income families can be key to future earnings, health, and crime outcomes for poor children. Last year’s winner of the journal article of the year in the Journal of Benefit-Cost Analysis was a study of the federal child tax credit suggesting this tax credit returns benefits in excess of $9 for every $1 of costs.

New research out this year provides more credence to this “domino effect” of antipoverty programs. A study published in the Journal of Human Resources in March used data from the Panel Study of Income Dynamics to estimate the impact of the earned income tax credit on future propensity to be in poverty.

The researchers found that people whose families received the earned income tax credit in childhood had a 5% lower chance of being in poverty or near poverty than those who did not receive the tax credit at that age.

Another finding from this study was that some of these people who received the earned income tax credit in childhood also drew less on public assistance in adulthood. This suggests that in the long-run, there could be dynamic effects from antipoverty spend that reduce the need for antipoverty assistance.

Intergenerational effects like this could have impacts on cost-benefit analysis of these types of programs. If antipoverty spending today means lower poverty rates in twenty years, that could mean less social costs down the road.

This could have positive long-term effects. Researchers at Washington University at St. Louis estimate child poverty costs the United States about 5.4% of its GDP–over a trillion dollars–every year in the form of loss of economic productivity, increased health and crime costs, and increased costs as a result of child homelessness and maltreatment.

These researchers also estimate that a dollar of spending on reducing child poverty could be worth $7 to $12 in reduced economic costs.

This growing literature on the intergenerational impact of antipoverty spending is key to understanding how we spend dollars today. While it is easy to dwell on the costs of antipoverty programs, understanding their benefits will give us a more complete picture of the policy decision to address poverty. In general, it seems the spending on poverty is a worthwhile investment. If we can fight poverty today and tomorrow at the same time, why would we choose not to?

Why can’t prices go back down after inflation?

Over the last two years, the biggest economic story has been very high levels of inflation in the United States and abroad. It may not have been as bad as inflation in the 1980’s, and it certainly was not as bad as some historical examples of hyperinflation, but people are feeling the effects of rising prices across the country after decades of stable prices.

A Pew Research poll from earlier this year found that 62% of respondents believed that inflation was a “very big problem” in the country today. This is despite inflation falling to 3.3% according to the Bureau of Labor Statistics, which (while still being slightly elevated) is not extremely concerning. 

Some of this can be attributed to the rise in political partisanship over recent years, but there are some valid underlying economic concerns leading to this economic discomfort as well.

Many people may think the best scenario would be for prices to return to pre-pandemic levels, undoing the harm of the past couple of years. However, ask any economist and they will warn you that deflation of any kind might be even more harmful than the last few years of inflation. 

This is because when prices are falling, there is a strong disincentive to spend money in the present. When prices are falling, the cash you currently have is becoming relatively more valuable every day. When deflation is expected, spending money is losing money. 

Compare that to inflation, where the incentive is to spend as much money as possible since cash becomes less valuable over time. During inflationary periods there is an incentive to participate in the economy, while during deflationary periods there is an incentive to stay home.

These relative changes in economic activity don’t really happen on the day-to-day level. Everyone still needs to go out and get groceries after all. But inflation and deflation can change the way big economic decisions are made. 

Another advantage inflation has over deflation is that we have macroeconomic tools to help balance the impacts of inflation. The Federal Reserve can increase interest rates to make money more expensive, reacting to the fact that during inflation money is more valuable than goods.

If we were experiencing deflation, then the Federal Reserve would have much fewer options. There is the option of negative interest rates, but those are extremely controversial. In other contexts, countries that have employed negative interest rates have been successful in keeping their economies moving while avoiding the worst case scenario. 

The risk of negative interest rates is that they make it costly for people to hold money in a bank. If everyone were to withdraw all their money, it could erode the stability of our financial system. 

Inflation has been an extremely difficult problem for many people, but prices are likely not going to fall to pre-pandemic levels. Trying to spark deflation would likely lead to even more problems than elevated prices. 

Instead, we should be looking for wages to rise to meet the higher prices. This may take some time since wages are notoriously sticky, but at the end of the day it is far better than dealing with any sort of deflation.