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Princeton economics professor Alan B. Krueger, President Obama’s nominee to head the White House Council of Economic Advisers, is a prolific, data-driven researcher. His work mainly focuses on labor markets and how policies affect people. As the President prepares for his big September job speech, Krueger’s 100-plus papers offer a glimpse of the advice he might give Obama about the nation’s most pressing problem.
The Job Market
Along with a Harvard economist, Krueger studied why joblessness decreased sharply in the 1990s. Their 1999 paper found that the rise of temporary job agencies accounted for as much as 40 percent of the decrease.
The lesson for Obama: Using intermediaries can reduce hiring costs and make better employment matches.
For a 2011 paper, Krueger and a Swedish colleague surveyed more than 6,000 unemployed people in New Jersey each week during late 2009 and early 2010, documenting the psychological costs of joblessness. As time passes, they found, workers become discouraged and devote less energy to finding work, potentially dragging down employment even after the economy improves.
The lesson for Obama: Preventing the unemployed from permanently giving up on work should be a priority.
In 1992, Krueger and a Princeton colleague looked at the long-term earning potential of identical twins, finding that each extra year of schooling increased wages by 16 percent. He has also found that small class sizes can cut the black-white achievement gap in half and is beneficial in the long run for students and the greater economy.
The lesson for Obama: Education reform is fraught—so start by focusing on what we know works.
Krueger and two fellow researchers wrote in 2001 that during good economic times, everyone generally benefits from growth. During economic downturns, however, the disadvantaged tend to bear the brunt of government spending cuts without receiving commensuratetax relief.
The lesson for Obama: When the economy sours, don’t count on trickle-down from the rich to provide for the poor.
When New Jersey raised the minimum wage by 80¢ in 1992, Krueger and a fellow Princeton economist compared jobs at fast-food restaurants in the state to those in neighboring eastern Pennsylvania. In one of his most influential papers, Krueger found that increasing the minimum wage did not put a damper on hiring.
The lesson for Obama: Raising wages and expanding hiring are not mutually exclusive.
In 2009, Krueger and a Princeton colleague analyzed survey data to find that about a quarter of jobs in the U.S. could be transferred overseas. Not all jobs were equally at risk, however. Site-specific industries such as education, health care, tourism, and construction were less vulnerable than jobs in finance and technology. Union members and people in jobs that require licensing were also less likely to see jobs move overseas.
The lesson for Obama: Pushing tech is tempting, but education and health care may have more staying power.
People often form opinions about the economy based on their feelings, not knowledge or experience, Krueger and a colleague wrote in a 1994 paper. Often, those opinions are against their self-interest.
The lesson for Obama: Good luck.
By Hans Nichols
Timothy Geithner knows how to get what he wants. As the Treasury Secretary was playing Hamlet this summer, publicly mulling whether to leave the Administration, he was privately working to reshape the President’s economic team to his liking. Geithner left no doubt about whom he wanted to work with at the Council of Economic Advisers should he decide to stay. He pressed Obama and his top aides to select Krueger, his old lieutenant at Treasury, according to two people familiar with the matter. He would be a pleasure to work with, Geithner conveyed to the President. Krueger got the post, and Geithner decided to stay put.