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Medicare and Financial Health across the United States

Published by Anonymous (not verified) on Wed, 08/07/2020 - 10:00pm in

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inequality

Paul Goldsmith-Pinkham, Maxim Pinkovskiy, and Jacob Wallace

Medicare and Financial Health across the United States

Consumer financial strain varies enormously across the United States. One pernicious source of financial strain is debt in collections—debt that is more than 120 days past due and that has been sold to a collections agency. In Massachusetts, the average person has less than $100 in collections debt, while in Texas, the average person has more than $300. In this post, we discuss our recent staff report that exploits the fact that virtually all Americans are universally covered by Medicare at 65 to show that health insurance not only improves financial health on average, but also is a major explanation for the heterogeneity in financial strain across the country. We find that Medicare affects different parts of the United States differently and plays a particularly important role in improving financial health in the least advantaged areas.

People make many lifestyle changes in their 60s—they typically retire, downsize, decrease consumption and earnings, move in with children, or lose family members—and these transformations happen relatively continuously as they age. In contrast, most people qualify for Medicare precisely at 65, not a year earlier or later. In the chart below, we plot the average insurance rate and amount of debt in collections for every age from 55 to 75, using data on collections amounts from the New York Fed Consumer Credit Panel.

Although people tend to be more likely to have insurance and, on average, have lower debt balances in collections as they age, these trends evolve continuously as people grow older. The exception happens at 65—that is when the insurance rate jumps by 8 percentage points from around 92 percent to nearly 100 percent, while the average amount in collections falls by nearly 30 percent of the average balance in collections at age 64. This is accounted for by both fewer people having debt in collections, and people having smaller balances in collections than they otherwise would have had.

Because nothing else changes so abruptly at age 65 as does eligibility for Medicare—even Social Security receipt rises smoothly, though rapidly, through the early and mid-60s—it is reasonable to conclude that having access to Medicare materially improves people’s financial health along this critical margin. These findings are also consistent with research by Barcellos and Jacobson, which shows that contact by collection agencies and difficulties with medical bills also decline discretely at 65.

Medicare and Financial Health across the United States

The recognition that Medicare improves financial health on average is well-known in the literature. Here we investigate the heterogeneity of the Medicare effect across the country by performing the discontinuity exercise above for each of the 741 U.S. commuting zones (groups of counties within which people tend to commute for work, such as the NYC metro area). We reach three intriguing conclusions.

First, Medicare reduces the gap in debt collections between areas of the United States, like the Massachusetts and Texas example above, by two-thirds at age 65. Just like we did nationwide, we can estimate average dollar amounts in collections at every age for every commuting zone and plot them as we did in the above chart. By extrapolating the continuous trend below age 65 for every geographic location, we can estimate what the total amount in collections would have been at 65 if Medicare did not exist. We can then compare these amounts with the actual amounts in collections that we see under Medicare.

The figure below presents two maps of the actual and counterfactual amounts in collections for 65-year-olds across U.S. commuting zones. We see that not only are collections amounts lower in the map showing actual conditions (with Medicare) than in the counterfactual map, but they are much more similarly distributed across the country. The right panel illustrates that the South is much less of an outlier in terms of high amounts in collections relative to the rest of the country, while the Midwest is barely distinguishable from the Northeast and Plains regions. Quantifying the variation across commuting zones in both maps, we find that Medicare reduces geographic variation in amounts in collection by approximately two-thirds.

Medicare and Financial Health across the United States

Second, we show that the financial health benefits of Medicare are distributed in a way that reaches poor and vulnerable areas. Since we can compute the decline in collections amounts for every one of the 741 U.S. commuting zones, we can ask which characteristics of commuting zones statistically explain the size of the benefit of Medicare per newly-insured individual (the ratio of the decline in collections amounts to the increase in uninsurance relative to their counterfactual at 65). The variables that are most robustly associated with the decline in collections per newly insured are: the fraction of residents in the commuting zone who are Black, the fraction of residents with disabilities and the market share of for-profit hospitals (which tend to provide less charity care than do nonprofits). All of these characteristics are particularly high in commuting zones in the South, which also tend to be less affluent than the national average.

Third, we construct forecasts of the causal effect of expanding coverage to the near-elderly in each commuting zone in the United States, which we use to evaluate existing policies and can serve as a guide for future expansions. This is straightforward to do with our methodology as we can extrapolate collections amounts for individuals 65 and older to compute counterfactual estimates of what amounts in collections would be for individuals aged 64 if they had access to Medicare. (For this exercise we assume that there is no selective migration at 65 from one commuting zone to another; accounting for this migration would likely increase the magnitude and dispersion of the benefits of Medicare for financial strain).

Two questions stand out based on these forecasts. First, would the additional beneficiaries of coverage expansion to the near-elderly also reside in disadvantaged areas? Second, would there be benefits following the introduction of much higher insurance coverage following the passage of the Patient Protection and Affordable Care Act (ACA) in 2014?

The figure below shows two maps of the geographic distribution of the reduction in amounts in collections that would take place if Medicare were expanded to the near-elderly: one assuming insurance rates as prevailed before the implementation of the ACA and one assuming post-ACA insurance rates. We find that not only does Medicare already give large benefits to minority and vulnerable areas, but an expansion of coverage to the near-elderly, along the lines of Medicare, would have the same effects.

The declines in collections amounts in both maps are largest in the same counties in the South that are already among the largest beneficiaries of Medicare. We see that the ACA attenuates the overall benefits of expanding coverage to the near-elderly, as after the ACA most near-elderly have obtained insurance either through the Medicaid expansion or the new health insurance exchanges. However, even after the ACA, the geographic pattern of the financial benefits of coverage expansion to the elderly remains such that it would further reduce the geographic dispersion in financial health. In fact, our staff report finds that although a Medicare-style coverage expansion to the near-elderly improves financial health in areas with generally high financial strain to begin with, the ACA’s improvements in financial health—while substantial—were larger in places where it was high in the first place.

Medicare and Financial Health across the United States

Our research highlights the heterogeneity in financial strain across the United States and the leading role of health insurance in explaining it. We likewise show that even national and universal programs like Medicare have very different impacts on different parts of the country. Understanding the geographical variation in the impacts of different interventions is essential to crafting policies that reach the people that policymakers most intend to help.

Paul Goldsmith-Pinkham is an assistant professor of finance at the Yale School of Management.

Maxim Pinkovskiy

Maxim Pinkovskiy is a senior economist in the Federal Reserve Bank of New York’s Research and Statistics Group.

Jacob Wallace is an assistant professor at the Yale School of Public Health.

How to cite this post:

Paul Goldsmith-Pinkham, Maxim Pinkovskiy, and Jacob Wallace, “Medicare and Financial Health across the United States,” Federal Reserve Bank of New York Liberty Street Economics, July 8, 2020, https://libertystreeteconomics.newyorkfed.org/2020/07/medicare-and-finan....




Disclaimer

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Do College Tuition Subsidies Boost Spending and Reduce Debt? Impacts by Income and Race

Published by Anonymous (not verified) on Wed, 08/07/2020 - 9:45pm in

Rajashri Chakrabarti, William Nober, and Wilbert van der Klaauw

Do College Tuition Subsidies Boost Spending and Reduce Debt? Impacts by Income and Race

In an October post, we showed the effect of college tuition subsidies in the form of merit-based financial aid on educational and student debt outcomes, documenting a large decline in student debt for those eligible for merit aid. Additionally, we reported striking differences in these outcomes by demographics, as proxied by neighborhood race and income. In this follow-up post, we examine whether and how this effect passes through to other debt and consumption outcomes, namely those related to autos, homes, and credit cards. We find that access to merit aid leads to an immediate but temporary increase in eligible individuals’ consumption in these categories. The increase is followed by a decline in consumption and a reduction in total debt of these types in the longer term. Importantly, there are marked differences in these consumption and debt patterns across income and race groups.

Our analysis uses a nationwide data panel that links students’ educational records with their debt outcomes to understand the effect of merit scholarship programs on students’ short- and long-term financial outcomes. Our data set leverages a unique merger of the New York Fed Consumer Credit Panel (CCP) and the National Student Clearinghouse (NSC). The CCP is constructed from anonymized Equifax consumer credit reports, while the NSC contains individual-level post-secondary education records. The NSC currently covers 97 percent of all college enrollments, but its coverage rate was less complete for those attending college before the mid-1990s. We therefore limit our analysis to the 1978-88 birth cohorts for whom we can measure outcomes up to age 30.

We assume a person is eligible for merit aid if she turned 18 in a state that has a merit aid program in effect at that time. We compare the outcomes of students who were merit-eligible because of their home state and their year of birth with those of students who were not merit-eligible either because they went to college before a state’s merit aid program was implemented or because their home state never implemented such a program. We control for time-invariant characteristics of cohorts at each age as well as time-invariant characteristics of states by each age (by capturing, for example, permanent differences in state-government policies, in the educational landscape, and in labor market characteristics).

Neither the CCP nor the NSC allows direct observation of demographic characteristics, but we are able to proxy for an individual’s race and family income by observing the characteristics of the area where they first appear in our data. We use a person’s first observed zip code in the CCP as a proxy for the place they grew up. We match this zip code with the 2001 IRS zip code income and racial breakdowns from the American Community Survey (ACS) 2012-16 five-year aggregate. Using these data, we identify low-income zip codes as those that fall into the bottom quartile of mean income (where the mean income in 2001 was $24,339). We also identify predominantly Black neighborhoods as those in the top quartile of Black population share (where the average Black share during 2012-16 was 37 percent).

In previous work on Liberty Street Economics referenced above, we showed that eligibility for merit-based financial aid has no impact on whether students decide to go to college but leads to a lowering of their student debt burdens both during and after their expected college years. Here, we extend the analysis to investigate the impact of tuition subsidies on other debt and consumption outcomes. First, for merit-aid-eligible cohorts, we find an immediate impact on short-term spending as captured by credit card debt shown in the chart below. Our estimate indicates that this effect amounts to $100, or around 12 percent of the mean credit card balance at that age. Increased early-20s credit card spending is consistent with a direct substitution for educational expenses: some of the money not immediately spent on college tuition appears to go to other near-term consumer purchases, which could include educational materials. This compares to a reduction in student debt balance by approximately $600 at age 21. These spending effects quickly disappear as people reach their mid-20s and in fact turn slightly negative by age 30. Equally striking are the effects on credit card delinquency. By age 25, an individual belonging to a merit-eligible cohort is 1.8 percentage points more likely to have been at least 90 days delinquent on credit card debt, a 9 percent increase from the mean.

Do College Tuition Subsidies Boost Spending and Reduce Debt? Impacts by Income and Race

Individuals in low-income and predominantly Black zip codes see an even larger increase in credit card balances during typical college-going ages. They are possibly more credit-constrained than the average person, but access to merit aid appears to lead them to substitute more into card spending. Additionally, merit-eligible cohort members from predominantly low-income and Black areas show a significant reduction in credit card balances by 30. This is possibly owing to larger delinquencies we observe (in results not reported here) for merit-eligible cohorts when they are in their early twenties relative to ineligible cohorts originating in a similar neighborhood. Alternatively, to the extent that credit card balances represent carried-over debt, the reduction may reflect a greater ability to repay debt, or it may simply capture a lower need to borrow.

Next, we turn our attention to auto buying (as proxied by auto debt). About 85 percent of all car purchases are financed through a car loan, with the remainder representing cash purchases. Previous work indicates that the presence of merit aid induces some parents to buy cars for their college-going children. We find that individuals belonging to merit-aid eligible cohorts show an increased propensity to buy cars at the typical college-going ages, as reflected in auto loans on their credit reports, although this effect is not statistically different from zero. At age 21, individuals in merit-eligible cohorts are 1 percentage point more likely to have purchased a car (with debt financing), which translates to a 4 percent increase in the propensity to buy a car by this age. The patterns for individuals from low-income and predominantly Black neighborhoods are more striking, with merit-eligible cohort members much more likely to buy cars in their early-to-mid 20s than their peers in noneligible cohorts; notably, this effect is reversed in the late 20s. Thus, the trend shows more car-buying while in college, but possibly less buying and faster paying down of debt post-college. This pattern of substitution into car debt when the students have more cash in hand and a reversal later in life is especially prominent for individuals originating from low-income zip codes.

Do College Tuition Subsidies Boost Spending and Reduce Debt? Impacts by Income and Race

Finally, we examine individuals’ total debt balances. We define total debt as the sum of all types of debt including student, auto, mortgage and home equity line of credit, credit card, retail card, and consumer finance debt. While consistent with the previously shown debt patterns for credit card and auto loan debt, the results at later ages in the chart below are actually dominated by patterns in mortgage balances, which constitute 88 percent of individuals’ debt at age 30. Overall, we see an initial increase in total debt of merit-eligible cohort members in their early 20s, despite a reduction in their student debt balances, and a decline in their total debt burden during their late 20s. Once again, these patterns are considerably stronger for individuals originating from the low-income and predominantly Black zip codes. The alleviation of what are likely to be particularly binding credit constraints for these groups along with reduced cost of college (due to merit aid eligibility) drives consumption up even more in the early 20s, while leading to a further reduced overall debt burden in the late 20s. The decline in total debt owes not only to a decline in student debt but also reductions in mortgage, auto, and credit card debt. We are doing further research to understand these patterns.

Do College Tuition Subsidies Boost Spending and Reduce Debt? Impacts by Income and Race

In this post, we have investigated whether access to merit aid and the consequent reduction in student debt led individuals to substitute into other kinds of debt such as credit card, mortgage and auto. We find evidence in favor of such substitutions at college-going ages, but this increased consumption is not sustained. By age 30, overall average debt burdens are significantly lower among those belonging to merit-eligible cohorts. These patterns are much more prominent for individuals originating from low-income and predominantly Black neighborhoods. This post shows that average effects of eligibility for college subsidies hide a more complex story, with large heterogeneous impacts across different student populations.

Rajashri Chakrabarti

Rajashri Chakrabarti
is a senior economist in the Federal Reserve Bank of New York’s Research and Statistics Group.

William Nober
William Nober is a senior research analyst in the Bank’s Research and Statistics Group.

Wilbert van der Klaauw
Wilbert van der Klaauw is a senior vice president in the Bank’s Research and Statistics Group.

How to cite this post:

Rajashri Chakrabarti, William Nober, and Wilbert van der Klaauw, “Do College Tuition Subsidies Boost Spending and Reduce Debt? Impacts by Income and Race,” Federal Reserve Bank of New York Liberty Street Economics, July 8, 2020, https://libertystreeteconomics.newyorkfed.org/2020/07/do-college-tuition....




Disclaimer

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Measuring Racial Disparities in Higher Education and Student Debt Outcomes

Published by Anonymous (not verified) on Wed, 08/07/2020 - 9:30pm in

Rajashri Chakrabarti, William Nober, and Wilbert van der Klaauw

Measuring Racial Disparities in Higher Education and Student Debt Outcomes

Across the United States, the cost of all types of higher education has been rising faster than overall inflation for more than two decades. Despite rising costs, aggregate undergraduate enrollment rose steadily between 2000 and 2010 before leveling off and dipping slightly to its current level. Rising college costs have steadily increased dependence on student debt for college financing, with many students and parents turning to federal and private loans to pay for higher education. An earlier post in this series reported that borrowers in majority Black areas have higher student loan balances and rates of default than those in both majority white and majority Hispanic areas. In this post, we study how differences in college attendance rates and in the types of colleges attended generate heterogeneity in loan experiences. Specifically, using nationwide data, we analyze heterogeneities in college-going and heterogeneities in student debt and default experiences by college type across individuals living in majority Black, majority Hispanic, and majority white zip codes.

Our analysis uses a nationwide data panel that links students’ educational records with their debt outcomes. We leverage a unique merger between two large datasets: the New York Fed Consumer Credit Panel (CCP) and the National Student Clearinghouse (NSC). The CCP consists of anonymized consumer credit records sourced from the Equifax credit bureau, while the NSC comprises individual-level postsecondary education records. Though the NSC currently covers 97 percent of all college enrollments, the coverage rate was less complete for cohorts that attended college before the mid-1990s. We therefore focus our analysis on individuals in our CCP-NSC data set that were born between 1980 and 1984, both to maximize coverage and ensure that we can observe debt outcomes for each individual up to age 30.

We classify individuals’ locations according to their zip code reported on credit records at age 30. Then, using American Community Survey (ACS) data for 2012-16, we classify each zip code as majority Black, majority Hispanic, or majority white. We define majority Black zip codes as those where non-Hispanic Black individuals make up at least 50 percent of the adult population. Likewise, a majority Hispanic zip code is defined as one in which more than half of adult residents are Hispanic and a majority white zip code is defined as one in which more than half of adult residents are non-Hispanic white. We categorize college type by the highest level of institution (two-year or four-year) attended by each individual.

We first focus our analysis on college attendance behavior, noting stark differences between majority Black, majority Hispanic, and majority white zip codes. In the chart below, we find that individuals from majority white zip codes have the highest college attendance rate, followed by individuals from majority Black zip codes. Individuals in majority Hispanic zip codes have the lowest attendance rates among these three zip code categories. In majority white zip codes, 64 percent of 30-year-olds with a credit report had attended some kind of post-secondary education; of that total, 15 percent had attended a two-year institution and 49 percent had attended a four-year institution. Individuals in majority Hispanic zip codes attended two-year colleges at a marginally higher rate, and those in both majority Black and majority Hispanic areas lagged behind those in majority white zip codes in four-year college attendance. While the majority Hispanic areas have a higher two-year college attendance rate, their lower overall rate of college-going is explained by a considerably lower attendance rate for four-year colleges. Individuals in majority Black areas are 15 percentage points more likely to go to a four-year college than individuals in majority Hispanic areas.

In results not shown, we apply the same analysis to people living in the nation’s largest metropolitan areas. New York-area residents attend two-year colleges less frequently, and four-year colleges more frequently, than the national averages for each zip code category. New York City has a massive public university system with several four-year campuses, which may help explain area residents’ propensity for pursuing four-year degrees over two-year ones. Los Angeles lags only marginally behind New York in four-year attendance rates in majority white areas, but lags significantly behind New York in this rate for majority Hispanic and majority Black areas. However, Los Angeles has a much higher two-year college attendance rate than New York in each zip code category.

Measuring Racial Disparities in Higher Education and Student Debt Outcomes

There is significant variation in student loan behavior by race and ethnicity. Individuals who attended college and live in majority Black neighborhoods are more likely to borrow than those in majority white areas and majority Hispanic areas. Four-year attendees in majority Black neighborhoods were 9 percent more likely to have a student loan by age 30 than their counterparts in majority white and majority Hispanic areas. We find that the propensity to hold student debt is similar between majority white and majority Hispanic areas, for both two-year and four-year college attendees, with two-year attendees in majority Hispanic areas borrowing at slightly lower rates.

Measuring Racial Disparities in Higher Education and Student Debt Outcomes

We also examine student debt balances among those who hold student loans. Borrowers in majority Hispanic zip codes carry similar debt balances at age 30 to those in majority white zip codes, among four-year college students. Among two-year students, students from majority Hispanic zip codes hold lower balances than those from majority white neighborhoods. However, four-year borrowers typically have a much higher debt balance at age 30 than two-year attendees, reflecting the relative costs of these colleges. Moreover, consistent with the findings of an earlier post in this series, we find that borrowers in majority Black areas carry higher debt balances than borrowers in majority Hispanic zip codes. Differentiating between two-year and four-year college borrowers, we find this gap between majority Black and majority Hispanic areas to be present for both college types. But interestingly, this gap is much more prominent for two-year borrowers. Borrowers from two-year colleges in majority Black neighborhoods hold 45 percent higher balances at age 30 than borrowers from two-year colleges in majority Hispanic areas. This number is 23 percent for four-year college borrowers.

Lastly, we examine student debt default and find significant differences across school type, geography, and demographics. Borrowers who attend two-year colleges have uniformly higher default rates by age 30. As shown earlier, two-year attendees are less likely to borrow, but here we see that the debt they take on is riskier. The default patterns for two-year and four-year attendees are starkly different: nationwide, borrowers who went to two-year schools default almost 50 percent more often than their four-year counterparts in majority Black, majority Hispanic, and majority white areas alike.

Overall, borrowers living in majority Black and majority Hispanic zip codes are much more likely to default on student debt by age 30. Two-year college borrowers in majority Black areas default at 1.9 times the rate of those in majority white areas, and those in majority Hispanic areas default 1.7 times as often as residents in majority white areas. The ratios of default rates among four-year borrowers are very similar. Nationwide default rates are highest for those living in majority Black zip codes and just 1-2 percentage points lower for individuals living in majority Hispanic areas, both for two-year and four-year borrowers.

Measuring Racial Disparities in Higher Education and Student Debt Outcomes

This post reveals that headline statistics paint a far from complete picture of college attendance, student debt, and default rate trends, which vary considerably across demographic groups. While individuals in majority Black and majority Hispanic areas have lower college attendance rates than those in majority white areas (a reflection of significantly lower four-year college attendance rates), students from majority Black areas have a markedly higher propensity to take out student loans and students from majority Black and majority Hispanic areas have a considerably higher propensity to default on those debts. We also find that two-year college students are less likely to borrow but more likely to default, conditional on borrowing. These disparities in debt and default patterns are stark and it is important to better understand the underlying reasons for these differences—a challenge we will take on in future work.

Rajashri Chakrabarti
Rajashri Chakrabarti
is a senior economist in the Federal Reserve Bank of New York’s Research and Statistics Group.

William NoberWilliam Nober is a senior research analyst in the Bank’s Research and Statistics Group.

Wilbert van der KlaauwWilbert van der Klaauw is a senior vice president in the Bank’s Research and Statistics Group.

How to cite this post:

Rajashri Chakrabarti, William Nober, and Wilbert van der Klaauw, “Measuring Racial Disparities in Higher Education and Student Debt Outcomes,” Federal Reserve Bank of New York Liberty Street Economics, July 8, 2020, https://libertystreeteconomics.newyorkfed.org/2020/07/measuring-racial-d....




Disclaimer

The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Toward an Understanding of Effective Practices in Employment Programs for People with Disabilities in California

Published by Anonymous (not verified) on Wed, 08/07/2020 - 2:41am in

Tags 

inequality, wages

In the past two decades, equal opportunities for people with disabilities (PWDs) have been outlined and guaranteed through two federal acts: the 1990 Americans with Disabilities Act and the 2014 Workforce Innovation and Opportunity Act. Intended to increase access to high-quality workforce services and preparation for competitive integrated employment, these federal acts set precedent for statewide employment programs for PWDs. Despite continued efforts to provide greater employment opportunities to people with disabilities, their employment rate in California remains only 33.8 percent.

In “Toward an Understanding of Effective Practices in Employment Programs for People with Disabilities in California,” Roosevelt Network Summer Fellows Manushri Desai and Shivam Saran analyze various initiatives to increase employment for and accommodate PWDs in the California workforce and argue that, on the basis of California’s legislative precedents, only providing equal treatment for PWDs once they have entered the workplace has not been effective at increasing employment rates for PWDs.

The post Toward an Understanding of Effective Practices in Employment Programs for People with Disabilities in California appeared first on Roosevelt Institute.

Black Americans Can’t Breathe: How Environmental Racism Has Intersected with COVID-19

Published by Anonymous (not verified) on Wed, 08/07/2020 - 2:36am in

By mid-May, COVID-19 had killed more Americans than the Vietnam War, Gulf War, Afghanistan War, and Iraq War combined. The magnitude of this pandemic—and its disproportionately deadly assault on Black communities—is astounding. In Mississippi, Black Americans account for 38 percent of the population and 66 percent of COVID-19 related deaths. In Michigan, those figures are 12 percent and 47 percent, and in Louisiana, 32 percent and 65 percent. 

How could that be? Top medical officials have offered little guidance, blaming preexisting conditions faced by Black people without further inquiry or consideration. What’s being overlooked, or even ignored, is the fact that health outcomes are often influenced by levers of systemic racism. 

These disparate effects don’t just happen; they are tied to policy. Poor air quality, which has been linked to more severe COVID-19 symptoms and is also disproportionately imposed on Black people in the US, offers a compelling example of racist policy leading to racist health outcomes. 

A new study from Harvard public health experts reveals two important findings: First, exposure to toxic air pollution (PM 2.5) increases vulnerability to death and the most severe symptoms of the novel virus. Researchers considered data from 3,000 counties, accounting for 98 percent of the population, and found that long-term exposure to air pollution increases vulnerability to the most severe COVID-19 outcomes; an increase of 1 microgram per cubic meter of long-term PM2.5 exposure is associated with an 8 to 15 percent increase in the COVID-19 mortality rate.

This is supported by similar analysis of hard-hit European countries that have already turned the corner. In Spain, Italy, France, and Germany, 78 percent of deaths occurred in only five regions, which are also the most polluted, according to German researchers who studied the effects of nitrogen dioxide. 

The second key finding is a 45 percent increase in COVID-19 mortality rate associated with a 1 standard deviation increase in percent Black residents. This trend is supported by research from Johns Hopkins University and the American Community Survey that shows that the infection rate in predominantly Black counties is more than three times that of white counties. The death rate in Black counties is six times that of white counties. 

Harvard researchers do not draw explicit links between these two key findings, but another recent study finds that Black Americans endure 56 percent more toxic air pollution than they create in the US, while white people are exposed to 17 percent less pollution than they create. The compounded lifetime effect of this exposure is elevated levels of asthma, high blood pressure, and cancer—the same conditions that now predict how severely individuals are affected by COVID-19. 

Taken together, this research suggests that Black people’s disproportionate death rates from COVID-19—a virus that attacks the lungs—could be associated with the lifetime exposure to toxic air pollution they disproportionately endure. The potential link deserves further inquiry, especially as we head into a second wave of COVID-19 cases that will endanger even more Black Americans. 

Top health officials should be scrambling for answers. But they’re not. They have largely brushed off the fact that Black people are dying at alarming rates and use sanitizing language like “underlying conditions” and “comorbidities” to explain the drastic disparity Black people are facing. Dr. Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, has said this disparity in death rates is due to preexisting conditions that Black people are more likely to have. His solution: “It’s very sad. There’s nothing we can do about it right now, except to try and give them the best possible care to avoid those complications.” 

As Secretary of Health and Human Services Alex Azar, a former pharmaceutical lobbyist, said, “Unfortunately the American population is very diverse . . . It is a population with significant unhealthy comorbidities that do make many individuals in our communities, in particular African American, minority communities, particularly at risk here because of significant underlying disease health disparities and disease comorbidities.” 

These careless and callous statements do not address the root of the problem, and they effectively absolve policymakers of the choices they’ve made—and in many cases, their inaction—that led to the racialized effects of COVID-19. In this case, naming and investigating the environmental determinants of COVID-19 death, such as air pollution, underscores the already dire need to implement Black-centered climate policies as we combat the climate crisis. 

Ultimately, enacting environmental justice policies that aim to reduce pollution endured by Black communities would be essential not only to mitigating climate change and improving health overall but also to preventing unequal effects of major public health crises like COVID-19.

The post Black Americans Can’t Breathe: How Environmental Racism Has Intersected with COVID-19 appeared first on Roosevelt Institute.

Introduction to Heterogeneity Series III: Credit Market Outcomes

Published by Anonymous (not verified) on Tue, 07/07/2020 - 10:00pm in

Rajashri Chakrabarti

 Credit Market Outcomes

Average economic outcomes serve as important indicators of the overall state of the economy. However, they mask a lot of underlying variability in how people experience the economy across geography, or by race, income, age, or other attributes. Following our series on heterogeneity broadly in October 2019 and in labor market outcomes in March 2020, we now turn our focus to further documenting heterogeneity in the credit market. While we have written about credit market heterogeneity before, this series integrates insights on disparities in outcomes in various parts of the credit market. The analysis includes a look at differing homeownership rates across populations, varying exposure to foreclosures and evictions, and uneven student loan burdens and repayment behaviors. It also covers heterogeneous effects of policies by comparing financial health outcomes for those with access to public tuition subsidies and Medicare versus those not eligible. The findings underscore that a measure of the average, particularly relating to policy impact, is far from complete. Rather, a sharper picture of the diverse effects is essential to understanding the efficacy of policy.

Here is a brief look at each post in the series:

Inequality in U.S. Homeownership Rates by Race and Ethnicity1. Inequality in U.S. Homeownership Rates by Race and Ethnicity

Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw investigate racial gaps in homeownership rates and, importantly, explore the reasons behind these differences. They find:

  • The Black-white and Black-Hispanic homeownership gaps widened after the Great Recession, markedly more so after 2015.
  • The foreclosure crisis disproportionately affected areas with majority Black or Hispanic populations.
  • Explanations for the homeownership gap may include differential effects of tightening underwriting standards across areas with a majority Black or Hispanic population versus those with a majority white population, differences in labor market outcomes across these areas during and following the Great Recession, and larger incidence of student debt in these areas.

Who Has Been Evicted and Why?2. Who Has Been Evicted and Why?

Andrew Haughwout, Haoyang Liu, and Xiaohan Zhang explore the reasons behind evictions, who is more likely to be evicted, and the possibility of owning a home and gaining access to credit following evictions. Their findings reveal:

  • Large shares of low-income households have been evicted.
  • Income or job loss and change in building ownership are important reasons behind evictions.
  • Renters with a past eviction history are less likely to have access to credit cards and auto loans.

Measuring Racial Disparities in Higher Education and Student Debt Outcomes3. Measuring Racial Disparities in Higher Education and Student Debt Outcomes

Rajashri Chakrabarti, William Nober, and Wilbert van der Klaauw investigate whether (and how) differences in college attendance rates and types of college attended may lead to student debt borrowing and default. The key takeaways include:

  • There are noticeable disparities in college attendance and graduation rates between majority white, majority Black, and majority Hispanic neighborhoods, with graduation rates the lowest in majority Black neighborhoods.
  • Students from majority Black neighborhoods are more likely to hold student debt and in larger amounts.
  • Borrowers from majority Black neighborhoods are more likely to default, and this pattern is more prominent for borrowers from two-year colleges than those from four-year colleges.

Do College Tuition Subsidies Boost Spending and Reduce Debt? Impacts by Income and Race4. Do College Tuition Subsidies Boost Spending and Reduce Debt? Impacts by Income and Race

Rajashri Chakrabarti, William Nober, and Wilbert van der Klaauw investigate the effect of tuition subsidies, specifically merit-based aid, on other debt and consumption outcomes. The main findings include:

  • Cohorts eligible for these tuition subsidies have higher credit card balances and higher delinquencies in their early-to-mid-twenties. These patterns are more evident for borrowers from low-income and predominantly Black neighborhoods.
  • Eligible cohorts are more likely to own cars (as captured by auto debt originations) in their early-to-mid-twenties. This pattern is more prominent for borrowers from low-income and predominantly Black neighborhoods.
  • The patterns indicate substitution away from student debt (as net tuition declines) to other forms of consumer debt for eligible cohorts in college-going ages, a pattern more prominent for borrowers from low-income and Black neighborhoods.

Medicare and Financial Health across the United States5. Medicare and Financial Health across the United States

Paul Goldsmith-Pinkham, Maxim Pinkovskiy, and Jacob Wallace investigate the effect of access to health insurance programs, as captured by Medicare eligibility, on financial health of individuals. They find:

  • Medicare eligibility markedly improves financial health, as captured by declines in debt in collections.
  • Access to Medicare drastically reduces geographic disparities in financial health.
  • The improvements in financial health are most evident in areas with a high share of Black, low-income, and disabled residents and in areas with for-profit hospitals.

As these posts will demonstrate in greater detail tomorrow, the average outcome doesn’t provide a full picture of credit market outcomes. There is considerable heterogeneity in different segments of the credit market both in terms of outcomes, as well as the in the effects of specific policies. Outcomes vary by a range of factors, such as differences in race, income, age, and geography. We will continue to study and write about the importance of heterogeneity in the credit market and other segments of the economy.

Chakrabarti_rajashriRajashri Chakrabarti is a senior economist in the Federal Reserve Bank of New York’s Research and Statistics Group.

How to cite this post:

Rajashri Chakrabarti, “Introduction to Heterogeneity Series III: Credit Market Outcomes,” Federal Reserve Bank of New York Liberty Street Economics, July 7, 2020, https://libertystreeteconomics.newyorkfed.org/2020/06/introduction-to-he....

Related Reading:

Series One

Introduction to Heterogeneity: Understanding Causes and Implications of Various Inequalities

Series Two
Introduction to Heterogeneity: Labor Market Outcomes




Disclaimer

The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.

Cartoon: The gentrification cycle

Published by Anonymous (not verified) on Tue, 07/07/2020 - 9:50pm in

This one is a still-relevant “classic” as I’m taking a much-needed break this week.

If you are able, please consider joining the Sorensen Subscription Service!

Follow me on Twitter at @JenSorensen

Book note: Johny Pitts, Afropean

Published by Anonymous (not verified) on Tue, 07/07/2020 - 7:31pm in

Just finished Johny Pitts’s Afropean: Notes from a Black Europe (Penguin). It is a remarkable and highly readable book which I strongly recommend. Pitts, a journalist and photographer from Sheffield in England, embarks on a journey across Europe to discover the continent’s African communities, from Sheffield itself, through Paris, the Netherlands, Berlin, Sweden, Russia, Rome, Marseille and Lisbon. Pitts, the son of an African-American soul singer and a working-class Englishwoman, is a curious insider-outsider narrator of the book which ambles from meditations on black history and (often American) literary forbears to chance encounters with black and brown Europeans in hostels, trains, stations, cafés and universities.

Is there a unity in all this? Hard to say, since as Pitts observes, these different populations, linked by an experience of marginalisation, come to be where they are via very diverse personal and collective histories. Some have come in their best clothes from former colonies to nations they were taught about as the motherland, only to find they had to make their lives in a place that was disappointing or hostile and where the white population — British, French, or Dutch — remain ill-disposed to see their new compatriots as being part of themselves. Others have fled war, persecution and trauma in Sudan or South Africa, only to find themselves exiled on the periphery of Scandiavian social democracy. And then there are the residual African students in a Russia transformed in thirty years from somewhere professing — occastionally sincerely — the unity and equality of all humankind, into a place where it is dangerous for black people to venture out at night for fear of violent attack or worse.

This is a very personal story and not a work of objective social science. But it is characterised by often acute observation, particularly of the gap between the image that European societies have of themselves as being basically tolerant and inclusive and a reality of systematic disadvantage in which populations of African origin (and others) almost invisibly do the jobs that keep our societies running. We’ve seen this when it has been people of colour who have worked and died through the COVID pandemic. He discusses the difficulty the Dutch have had in acknowledging their colonial past and the sometimes violent reaction that black people in the Netherlands have received when they’ve challenged the role that Zwarte Piet (Black Pete) has in winter festivities. His image of Sweden as a utopia for black professionals take a knock when he encouters both white Swedish racism and the reality of Rinkeby on Stockholm’s outskirts. The Parisian banlieu of Clichy-sous-Bois is a story of police violence and concrete desert. And St Petersburg is, well, just terrifying. In passing, he notices the discomfort of African American tourists with the bustle of Afropean life in Paris and tells us of the weirdness of his encounter with German antifa in Berlin,

The place he comes to love most is Marseille. This won’t surprise anyone who has been there. In some ways it is a hard and edgy city. When I was there a couple of summers ago I met with a student who’d witnessed a gang murder in her first week of living there. But the life in the streets of Marseille is astonishing: the mix of peoples, cultures, races, cuisines, life is unlike any city I’ve visited. It far exceeds New York, for example, in this respect. The charm of the city and Pitts’s romantic engagement with it may explain one of the few false notes in the book, his encounter with a black Egyptian nomad who has travelled the world and values experience over work or wealth. Maybe, but in a world of securitized borders where some passports are worth more than others there must be some further fact about this traveller that explain his ease of passage through the EU and United States: either he’s got money or he’s got a more valuable legal nationality than the Egyptian one he identifies with.

One measure of a book is the further explorations it excites and provokes, and Afropean succeeds wildly on that front. I’ve been listening to new music, making notes about authors I ought to get to know and films I need to watch. But it would be wrong to see this fine book mainly as a treasure trove of recommendations. Its value for all Europeans is in making visible what is often invisible in our cultures and societies and I hope in chipping away at the barriers that disadvantage our Afropean members, keeping so many of them unseen in grinding jobs at low pay. In the Financial Times only yesterday, the ever-complacent Martin Wolf wrote that

We are not going back to a world of mass industrialisation, where most educated women did not work, where there were clear ethnic and racial hierarchies and where western countries dominated.

Pitts testifes powerfully that those ethnic and racial hierarchies are with us still and that in many ways not much progress has been made.

From this blog to The Times: let’s tackle wealth inequality by starting with additional taxes on investment income

Published by Anonymous (not verified) on Mon, 06/07/2020 - 3:59pm in

I realised over the weekend that my blog from Friday on wealth taxes had been picked up by Patrick Hosking in his business commentary in The Times after we had a conversation on Friday morning.

As he noted:

Most proposals suggest that wealth taxes should be levied on assets less borrowings, and exclude pensions and primary residences. The problem for governments is that this approach immediately wipes out most of the tax base.

Of that £13 trillion, £4.5 trillion is in property (mostly first homes) and £5.4 trillion in pensions. Strip out Isas, which most would argue should also be sacrosanct, and cars and suchlike and you are left with a taxable base of just £900 billion, points out Richard Murphy of Tax Research UK.

It’s harder than it looks, this wealth tax idea. A good start, however, would be to tax income from investments at the same rate as income from employment.

I write blogs to influence debate. It's always worth noting when they do.

GOD is right: we need to tackle wealth inequality through the tax system. We just have to make it more than a token gesture

Published by Anonymous (not verified) on Fri, 03/07/2020 - 3:55pm in

As The Guardian noted last night:

The UK government’s response to the coronavirus and the dramatic rise in public borrowing during the crisis should include a wealth tax on the richest in society, a former head of the civil service has said.

Sir Gus O’Donnell, who served as cabinet secretary under David Cameron, Gordon Brown and Tony Blair, said the Conservative government could prove it was serious about fighting inequality and levelling-up Britain by increasing taxes on wealth.

GOD (as he was inevitably known in the civil service) makes an important point about symbolism and a direction of travel. A wealth tax is an important element in the long term fight against inequality, which is increasing, and more because of the impact of quantitative easing than anything else.

The Guardian also notes:

John McDonnell, a former shadow chancellor, and Richard Murphy, a UK tax expert, have previously made the case for increasing taxes on wealth as part of the response to Covid-19.

According to polling by YouGov, 61% of the public support a wealth tax for individuals with assets worth more than £750,000, excluding pensions and the value of their main home.

I have made that point. But I have also made the point that UK wealth is, according to the ONS distributed like this:

Once private property wealth and pensions are taken out of account something like 75% of wealth falls out of the tax base on this basis. Of the remaining wealth, physical wealth (from cars onwards) will be hard to tax. That leaves financial wealth outside pension funds, and of that £1.6 trillion some £700 billion is ISAs, and they are going to be hard to tax. So we’re down to a tax base of £900 billion at best.

I am not saying a 1% tax on that would be inappropriate: I am saying it will not rock the boat or really tackle the issue of wealth inequality, but some boat rocking is required.

In that case my alternative argument that we must instead focus on taxing the income from wealth a great deal more equitably is more important if we are to achieve real change through taxation to address wealth inequality.

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