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Finding Economic Solutions for America

Faculty associate Katharine Abraham brings home experience from two years serving on the White House Council of Economic Advisors

MPRC Faculty Associate Katharine Abraham recently returned to the University of Maryland after two years serving as a Member of the President’s Council of Economic Advisers. Dr. Abraham is a labor economist whose work has included research on a variety of labor market policy topics, as well as work related to the measurement of economic activity. While working at the Council of Economic Advisers, Dr. Abraham contributed to the development of policy initiatives related to higher education, job training, unemployment insurance and retirement security, including the college scorecard recently rolled out by the Obama Administration and the unemployment insurance reforms included in the Middle Class Tax Relief and Job Creation Act of 2012.

Dr. Abraham’s experience at the Council of Economic Advisers is shaping her goals for future work. One of her current research projects relates to unemployment insurance. The 2012 law just mentioned encourages states to permit workers who participate in approved work-sharing plans to collect pro-rated unemployment insurance benefits. Under these laws, an employer might agree to cut everyone’s hours by 20 percent instead of laying off 20 percent of the workforce. Affected workers would be entitled to collect 20 percent of their full unemployment benefit. Such plans can help to reduce the number of layoffs—and the hardships associated with the resulting unemployment—and allow employers to retain workers with valuable skills. These so-called short-time compensation programs, some very recent, now exist in 26 states and the District of Columbia. The next question is how employers can be encouraged to take advantage of them. Dr. Abraham is part of a research team that is exploring ways to make employers more aware of this little-known option for avoiding mass lay-offs and increase its take-up.

Another of Dr. Abraham’s projects involves trying to better ensure that individuals have an economically secure retirement. As fewer people have employer-sponsored defined-benefit pension plans, individuals must take up more of the burden of saving for their own retirement and planning how to make that money last through retirement. One way to provide income during retirement is to buy an annuity that pays out a certain amount each year. While annuities have some big advantages, many people are reluctant to annuitize their retirement savings, in part because they worry that they will find themselves unable to pay unexpected medical expenses if their money is tied up in an annuity or that they won’t be able to leave a bequest to their heirs. One way around this problem could be to purchase an annuity that begins paying out at age 85. Such a policy could be purchased at modest cost and would provide inexpensive insurance against outliving one’s assets. The puzzle is why the market for longevity annuities has not taken off.  Together with a former colleague from the Council, Abraham is studying the barriers to the development of this market and whether there are policy solutions that can encourage its development.

Other topics on which Abraham sees research in her future are alternative mechanisms for funding higher education and the effects of the Affordable Care Act on employment decisions.

Read Dr. Abraham's bio

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