Editor’s Note: This article first appeared in the Q3 2022 issue of Morningstar Magazine. Laura Lallos interviewed Jones in June. The transcript has been edited for length and clarity. Laura Lallos is managing editor of Morningstar Magazine. Photography by Matthew Gilson.
Damon Jones is an associate professor at the University of Chicago Harris School of Public Policy. His current research topics include income tax policy, Social Security, retirement and retirement savings, and the interaction between employer-provided benefits and labor market outcomes. Jones was a postdoctoral fellow at the Stanford Institute for Economic Policy Research from 2009 to 2010 and is a faculty research fellow at the National Bureau of Economic Research. He received his Ph.D. in economics from the University of California, Berkeley, and holds a B.A. in public policy with a minor in African and African-American studies from Stanford University.
1. You describe your research as an intersection of public finance, household finance, and labor/personnel economics. Is there a common thread?
A unifying theme is inequality. I study tax policies that redistribute income, especially the ones that impact low-income families. These can help to provide a safety net, but when they don’t, household financial decisions are important in allowing people to weather volatility. Finally, there are benefits and policies in the workplace that are affected by public policies and have implications for financial well-being.
2. What are your thoughts on “nudging” techniques, such as requiring employees to opt out of 401(k) plans?
Some nudges, in particular default effects, can have dramatic impacts on short-run outcomes, like contributions to retirement accounts. A question remains as to whether these impacts are persistent. Nudges aren’t enough to overcome some sources of financial inequality, such as structural racism, segregation, and the like.
3. What’s your assessment of COVID-19 relief policies?
The monthly child tax credit had a tremendously positive impact in cutting child poverty in half, unemployment insurance expansions were necessary to support workers while the economy was on lockdown, and payment protection loans could have been more equitably distributed during its initial rounds.
4. Are you a proponent of a universal basic income?
I am in favor of a guaranteed income for everyone. Some argue that this could reduce labor supply, but our research found that this may be offset if spending, and therefore the demand for workers, increases. Also, this kind of safety net may give workers more leverage in the workplace.
5. One of your studies challenges the conventional view that temporary income shocks don’t meaningfully affect consumption. What were your key findings?
Fluctuations in income from month to month do translate into fluctuations in spending on nondurable goods such as food, groceries, and services. This volatility in spending is higher for households with low assets, which in our sample, are disproportionately Hispanic and Black. In particular, the racial wealth gap in liquid assets leaves households of color more vulnerable to income fluctuations or job loss.
6. Are there policy solutions?
Make sure that social safety net programs, such as unemployment insurance, are well funded and accessible across racial groups. Another solution is to address factors leading to income volatility, such as unpredictable working hours.
7. A number of states have instituted financial education requirements for schools. What would you like to see taught?
Tools that help to assess the risks, costs, and benefits of student loans across different schools might help students avoid some of the more-questionable financing options.
8. You recently finished a term at the White House Council of Economic Advisers. What is the difference between working in government and academia?
In academia, studies take years to get finalized and published. In government, answers to questions are needed immediately.
9. What are your favorite things to do in Washington, D.C., and Chicago?
In D.C., going on walks and taking in the architecture and people. In Chicago, watching movies in the park during the summer.
10. What do you read for fun?
The Saga comic book series.
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