Gearing up for policy challenges in 2022

Here’s a snapshot of what three senior fellows at the Stanford Institute for Economic Policy Research (SIEPR) say they expect to see this year on the key trends and policy challenges in economic arenas where they are tapped for their expertise — remote work, digital currency, and unemployment insurance.

No turning back: WFH  

Nicholas Bloom, William D. Eberle Professor of Economics, School of Humanities and Sciences:

I hear two big themes for 2022 from talking to hundreds of managers and employees.

First, coordination will be key as it has become painfully clear that people want to be in the office on the same days as their colleagues. Increasingly, I hear comments like “I’m coming into the office to spend the day on zoom calls.” Or, “Half the desks are empty, and the other half have people on videocalls shouting into laptops.” Firms need to coordinate if they want in-person meetings, energy and connectivity. Expect the new norm to be the 3-2 plan — work from home on Monday and Friday, and in the office Tuesday to Thursday. 

Second, an office revolution is afoot. But contrary to what to one might think, office space is not shrinking. While about 30 percent less office days will happen post-pandemic because of greater working from home, firms are only cutting space by 5 percent on average. That’s because employees still don’t want indoor density on the days they show up. Instead, office space is changing. Mad Men-style executive offices are out. Meeting rooms, sound-proofed videocall cubicles, and lounge style open-plan seating are in. And these offices are staying in city centers. If you want your employees in the same place, hanging out and being social, keep it in the center of town. 

Catching up on crypto

Darrell Duffie, The Adams Distinguished Professor of Management and Professor of Finance, Graduate School of Business:

The United States is late in developing policies, regulation, and infrastructure for shaping competition and innovation in the provision of digital currencies and other fintech payment systems. National priorities are not yet well articulated. Regulatory authority is fragmented and unclear. For example, there has been a revealing debate over whether risky cryptocurrencies like Bitcoin are commodities, securities, or money, and who should regulate them for their various functional properties. U.S. policymakers are getting closer to taking a stand on the regulation of stablecoins, but there is a likely need for legislation.

China, on the other hand, is a world leader in mobile payments and technology for central bank digital currencies (CBDCs). Although it is not yet clear whether deploying a CBDC is the most effective way to upgrade U.S. payment systems, the U.S. has not yet begun a significant program to develop CBDC technology —  a necessary first step that could easily take a decade to complete. China’s new digital currency, known as e-CNY, gives China a first-mover advantage in setting international standards for cross-border payments. This, in turn, could erode some traditional U.S. geostrategic advantages, including the ability to effectively apply sanctions. Naturally, alarm bells are ringing in some quarters of Washington.

Under the radar: Unemployment insurance

Mark Duggan, Trione Director of SIEPR and The Wayne and Jodi Cooperman Professor of Economics, School of Humanities and Sciences:

With a change in one very important number that influences unemployment insurance payroll taxes for millions of employers and their workers, the Biden administration and Congress could help improve labor market prospects for the most vulnerable workers in our economy while making economic policy more efficient.

How? In new forthcoming research, my co-authors and I look at how the financing behind state unemployment insurance (UI) programs through employer payroll taxes affects employment. Specifically, we find that low UI tax bases lead to significantly worse employment outcomes for part-time and low-wage workers. The federal government could help with this by raising its minimum annual taxable wage base for state UI programs — a figure that was set at $7,000 in 1983 and hasn’t changed in 39 years, even though average wages in the U.S. have almost quadrupled since, and the share of earnings covered by UI taxes nationally has plunged from 60 percent to 25 percent. 

Some states have made adjustments while others have left it at or near the federal minimum. It’s not a red or blue state phenomenon either: California, Texas, Florida, and New York have low taxable wage bases while Idaho, Minnesota, North Dakota, and Washington have high tax bases.

It’s rare that one gets a chance to improve both equity and efficiency with one policy change, but raising the federal minimum UI tax base would do it!