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The Global Supply Side of Inflationary Pressures

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U.S. inflation has surged as the economy recovers from the COVID-19 recession. This phenomenon has not been confined to the U.S. economy, as similar inflationary pressures have emerged in other advanced economies albeit not with the same intensity. In this post, we draw from the current international experiences to provide an assessment of the drivers of U.S. inflation. In particular, we exploit the link among different measures of inflation at the country level and a number of global supply side variables to uncover which common cross-country forces have been driving observed inflation. Our main finding is that global supply factors are very strongly associated with recent producer price index (PPI) inflation across countries, as well as with consumer price index (CPI) goods inflation, both historically and during the recent bout of inflation acceleration.

Background

The chart below shows the evolution of PPI inflation for the United States, the euro area, and the OECD countries since 2005. As one can see, changes in U.S. PPI inflation are highly correlated with movements of the corresponding series in the euro area and the OECD.

U.S. PPI Inflation Is Highly Correlated with Euro Area and OECD PPI Inflation

Chart. U.S. PPI Inflation is Highly Correlated with Euro Area and OECD PPI Inflation.
Sources: Haver Analytics; OECD; Bureau of Labor Statistics.

A similar pattern holds for goods CPI inflation, as shown in the chart below. In particular, all major advanced countries have experienced a large rise in goods inflation during the pandemic recovery period. At the services level, however, inflation across countries has been more muted to date. More specifically, services CPI inflation in the United States rose from 1.3 percent in January 2021 to 4.0 percent in December. In comparison, CPI services inflation increased to 2.4 percent from 1.4 percent in the euro area, and to 2.9 percent from 1.0 percent in the OECD (excluding the United States) over the same period.

U.S. Goods CPI Inflation Is Highly Correlated with Euro Area and OECD Goods CPI Inflation

Chart. U.S. Goods CPI Inflation is Highly Correlated with Euro Area and OECD Goods CPI Inflation.

Developments on the supply side of economies are often highly correlated across countries. We postulate that global proxies for these supply side developments capture key determinants of selected measures of inflation across countries. One global supply side factor is our newly constructed Global Supply Chain Pressure Index (GSCPI), a gauge of disruption in global supply chains as we discussed in detail in our companion post. Another key potential global supply side variable is the price of energy, for which we focus on oil, and back out factors that explain oil price fluctuations in terms of a global demand factor and an oil supply factor. A recent application of this methodology can be found in Groen and Noble (2021) and it is updated weekly for the Federal Reserve Bank of New York Oil Price Dynamics Report. More specifically, using a statistical model and a large number of financial variables, weekly oil price changes are decomposed into demand effects, supply effects, and an unexplained residual.

Some Historical Contemporaneous Relationships

We next formally quantify the contemporaneous correlations between different measures of inflation for the United States and major advanced economies and our global factors using monthly data from 1997 to 2021. We take the euro area as the representative “country” for inflation developments in major advanced economies outside the United States. Our methodology exploits linear regressions that relate the different measures of year-on-year inflation rates country-by-country with our new GSCPI measure, as well as our estimates of global oil supply and demand factors behind year-on-year oil price changes. This approach yields the average monthly correlations between the country-by-country inflation measures and our global variables for a sample of data going back to 1997.

While we do not report the estimated coefficients here, three key results are worth highlighting from our analyses. First, changes in the global supply chain pressure index (GSCPI) have had a meaningful impact on PPI and goods CPI inflation for the 1997-2021 period, both for the U.S. and the euro area. Second, the oil supply factor plays a larger role in driving the overall fit of the regressions compared to the other two explanatory variables across the advanced economies. Third, our set of global variables appear to be unrelated to movements in services CPI inflation for the countries considered in our analyses.

We next use the estimated regression relationships to explore how the three global variables have correlated with recent inflation developments. We do so by first re-running the regressions only using data until 2019. We then use the regression estimated along with the observed values of the GSCPI and global oil demand and supply factors since the beginning of 2020 to calculate the implied cross-country inflation rates.   

We begin by discussing the results for PPI inflation. Note that as it has been shown in our companion blog post, the pandemic related events of 2020-2021 resulted in a doubling of the volatility of changes in the GSCPI, as well as increased volatility of shocks to oil price changes by about 50 percent. The chart below shows the relationship between the recently more volatile global factors and PPI inflation in the U.S. More specifically, in the chart we include estimates based on three models: (1) with only the GSCPI (the red line), (2) with the GSCPI and the oil supply factor (the yellow line), and (3) with the GSCPI and both oil supply and demand factors (the dark blue line). The latter is in line with the regressions we previously ran on the whole 1997-2021 sample to assess the historical correlations between inflation and our global variables.

The chart clearly illustrates that our model based solely on global supply factors (the dark blue line) tracks observed U.S. PPI inflation (the light blue line) in the recent part of the sample quite well, implying that there does not appear to be a structural break between the association of PPI inflation and the explanatory variables. As such, if global supply chain bottlenecks and energy price increases do not remain persistently high, we may expect to see decreasing pressure on inflation going forward. It is also important to note that including the oil demand factor helped the model to capture the downturn in PPI inflation at the outset of the pandemic.

Global Supply Factors Are Related to the Recent Surge in PPI in the U.S.

Chart. Global Supply Factors Are Related To The Recent Surge in PPI in the U.S.
Sources: Statistical Office of the European Communities; Thomson Reuters; Bloomberg L.P.; Haver Analytics; authors’ calculations.

The chart below graphs the contributions of our three global factors to the fluctuations in recent PPI inflation in the euro area. As was the case for the U.S., the supply side factors (the dark blue line) are instrumental in explaining the observed PPI inflation for the euro area, especially during the recovery period. Differently from the United States, however, demand-based oil price increases did not have much impact on euro area PPI inflation, neither in the beginning of the COVID-19 pandemic nor more recently during the recovery period.

Global Supply Factors Are Related to the Recent Surge in PPI in the Euro Area

Chart. Global Supply Factors Are Related To The Recent Surge in PPI in the Euro Area.
Sources: Statistical Office of the European Communities; Thomson Reuters; Bloomberg L.P.; Haver Analytics; authors’ calculations.

We next turn our attention to goods CPI inflation. The two charts below show our results for goods CPI inflation in the United States and the euro area, respectively, where we include estimates based on the same three models as done before for PPI inflation. These charts clearly illustrate that global supply factors have played a substantial role in driving observed goods CPI inflation rates in the two regions (the light blue lines) in the recent part of the sample even though they do not fully capture all observed CPI goods inflation moves. This is not surprising given that a multitude of factors may drive a wedge between producer and retail pricing. Finally, as was the case with PPI inflation, there does not appear to be a structural break in the association of goods CPI inflation rates and the explanatory variables, as the dark blue lines track the light blue lines well.

The first chart below depicts the implied relationship for U.S. goods CPI inflation. Here it is important to note that including only the GSCPI gives a good picture of the path of inflation during the recovery period (the red line) while it is less successful in its association with goods CPI inflation at the onset of the pandemic. Indeed, including the oil demand factor is key in capturing the downturn in U.S. goods CPI inflation at the outset of the crisis.

Global Supply Factors Are Related to Recent U.S. CPI Goods Inflation

Sources: Bureau of Labor Statistics; Thomson Reuters; Bloomberg L.P.; Haver Analytics; authors’ calculations.

The final chart reports the results of a similar exercise for the euro area. Here, a similar mix of global supply factors developments can describe euro area goods CPI inflation since 2020. However, supply-driven oil price hikes appear to be a key driver for the euro area. In contrast to the United States, demand-based oil price increases have had virtually no impact on euro area goods CPI inflation during the 2020-2021 period.

Global Supply Factors Are Also Related to Recent Euro Area Goods CPI Inflation

Chart. Global Supply Factors Are Also Related to Recent Euro Area Goods CPI Inflation
Sources: Statistical Office of the European Communities; Thomson Reuters; Bloomberg L.P.; Haver Analytics; authors’ calculations.

Conclusion

Our analysis emphasizes that global supply factors related to supply chain disruptions and energy markets are associated with recent developments in key measures of inflation across advanced economies.

The persistence of recent inflationary pressures at the goods CPI and PPI levels are importantly related to the evolution of global supply factors such as production or shipping bottlenecks and input prices: their global nature and their source (that is, supply as opposed to demand) suggest that domestic monetary policy actions would have only a limited effect on these sources of inflationary pressures.

An important caveat of our analysis is that our results are based on contemporaneous correlations and abstract from dynamic considerations that might be important in capturing a lagged responses of services CPI inflation. Supply factors could indeed feed into services over time rather than simultaneously as for goods prices. Given the relatively short time period (that is, from the beginning of the pandemic) over which we can evaluate our empirical specification we defer this analysis for further work.

Chart data

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

Portrait of Gianluca Benigno, assistant vice president at the New York Fed in International Research.

Gianluca Benigno is an assistant vice president in the Bank’s Research and Statistics Group.

Ruth Cesar Heymann is a senior research analyst in the Bank’s Research and Statistics Group.

Julian di Giovanni is an assistant vice president in the Bank’s Research and Statistics Group.

Portrait of Jan Groen, economist at the New York Fed in International Research.

Jan J. J. Groen is an officer in the Bank’s Research and Statistics Group.

Adam I. Noble is a senior research analyst in the Bank’s Research and Statistics Group.

Lawrence Lin is a senior research analyst in the Bank’s Research and Statistics Group.


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, the Federal Reserve Board, or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.



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Economy

US baby formula crisis holds lessons for reshoring dangers

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Walking into the baby aisle of my local New York pharmacy these days feels like entering a Soviet supermarket in the 1970s. Shelves usually jammed with cans of powdered baby formula are empty save for a notice warning customers they can buy a maximum of three tins each.

This shortage has fuelled such a national crisis that the White House is scrambling for a response. Formula is out of stock in 43 per cent of US stores and rising. Medical professionals are having to warn desperate mothers not to risk their children’s health by diluting or making their own formula.

The troubles are rooted in a highly concentrated domestic market that was distorted by government intervention and disrupted by pandemic-related hoarding, supply chain issues and safety concerns. This tangled tale holds important lessons for policymakers everywhere as they look to bring production of essential goods closer to home.

The US formula market has long been dominated by just three players: Abbott, Gerber and Mead Johnson, who account for the lion’s share of sales in what had been a sluggish market. The trio owes its strength to the US government. An estimated two-thirds of all formula is purchased through the Women, Infants and Children nutrition programme, a federal funding scheme for low-income families which contracts solely with these three domestic makers. Tight safety restrictions and import duties have squashed competition from Europe and Canada. Fully 98 per cent of US formula is made domestically.

The combination encouraged steady production but left the industry with little reason to invest in additional capacity. Then came Covid and an unexpected dip in the birth rate. The number of daily births had been falling by an average of 0.39 per cent annually from 2000 to 2019, before dropping precipitously in the winter of 2020-21. In the early months of the pandemic, Americans hoarded baby formula along with toilet paper and pasta, but then store orders fell as the birth rate dropped and parents started using up their stockpiles.

Since then, formula makers, like almost everyone else, have struggled to find workers and trucks to make and transport their product. So they were ill-equipped to ramp up when the birth rate recovered and demand surged.

The pressure was felt everywhere, but especially at a Michigan plant belonging to Abbott, the largest supplier. A Food and Drug Administration inspection last year revealed poor practices that failed to control microbial growth, and a whistleblower alleged shoddy record keeping and lax cleaning. Abbott failed to make changes, and tragedy struck. Several babies fell ill, at least four were hospitalised and two died. The plant was shut down in February and Abbott recalled several brands of formula. Price gouging and shortages followed.

On Monday, the FDA and Abbott reached an agreement that could lead to the plant’s reopening. The federal government said in court documents that both the FDA and Abbott’s own sampling found potentially deadly cronobacter bacteria at the plant, although no links were established between the formula and the actual illnesses.

Once the FDA agrees the plant is clean, the company forecasts it will take at least two weeks to restart production and eight weeks for formula to reach supermarket shelves. Danone, which makes a rival formula, has predicted that supplies will remain tight until at least August.

There is a warning in this. US authorities were simply trying to ensure that American babies were fed safe, locally produced formula from reliable sources when they put up trade barriers and limited purchasing contracts. But their interventions left the country dangerously dependent on a small number of suppliers who in turn relied on very few manufacturing plants.

In a positive step, the FDA this week announced plans to loosen the rules on imported formula, and Abbott has been flying in supplies from Ireland. Permanent changes that drop barriers while still protecting babies are needed to give families more options and bring flexibility to the US supply.

The formula debacle could easily be repeated as authorities bring back local production of critical, highly regulated supplies, such as vaccines and personal protective equipment. Government contracts and protectionism can help jump-start production and provide a necessary base, but left unchecked they can lead to complacency and under-investment.

Stimulating a lively market with lots of credible competitors must be the long-term goal, for baby formula and everything else too.

brooke.masters@ft.com

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Global Supply Chain Pressure Index: May 2022 Update

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Supply chain disruptions continue to be a major challenge as the world economy recovers from the COVID-19 pandemic. Furthermore, recent developments related to geopolitics and the pandemic (particularly in China) could put further strains on global supply chains. In a January post, we first presented the Global Supply Chain Pressure Index (GSCPI), a parsimonious global measure designed to capture supply chain disruptions using a range of indicators. We revisited our index in March, and today we are launching the GSCPI as a standalone product, with new readings to be published each month. In this post, we review GSCPI readings through April 2022 and briefly discuss the drivers of recent moves in the index.

More Stress on Supply Chains

The chart below provides an update of the GSCPI through April; readers can find a link to the updated data series on our new product page. Between December 2021 and March 2022, the index registered an easing of global supply chain pressures, though they remained at very high levels historically. However, the April 2022 reading suggests a worsening of conditions as renewed strains emerge in global supply chains.

April Data Indicate Worsening of Supply Chain Pressures

Sources: Bureau of Labor Statistics; Harper Petersen Holding GmbH; Baltic Exchange; IHS Markit; Institute for Supply Management; Haver Analytics; Bloomberg L.P.; authors’ calculations.

Note: Index is scaled by its standard deviation.

Methodology

Before analyzing this recent pickup in supply chain pressures, we remind readers that the GSCPI is based on two sets of data. Global transportation costs are measured by using data on ocean shipping costs, for we which we employ data from the Baltic Dry Index (BDI) and the Harpex index, as well as BLS airfreight cost indices for freight flights between Asia, Europe, and the United States. We also use supply chain-related components  of Purchase Manager Index (PMI) surveys—“delivery times,” “backlogs,” and “purchased stocks”—for manufacturing firms across seven interconnected economies: China, the euro area, Japan, South Korea, Taiwan, the United Kingdom, and the United States. Before combining these data within the GSCPI by means of principal component analysis, we strip out demand effects from the underlying series by projecting the PMI supply chain components on the “new orders” components of the corresponding PMI surveys and, in a similar vein, projecting the global transportation cost measures onto GDP-weighted “new orders” and “inputs purchased” components across the seven PMI surveys.

Sources of Pressure

So, what are the drivers behind recent moves in the GSCPI? The charts below illustrate how each of the underlying variables contributed to the overall change in the GSCPI in the last two months. Each column represents the contribution, in standard deviations, of each component of our index to the overall change in the index during a given period. In the first chart, we examine February-March 2022. We note that the lessening of supply chain pressures over this period was widespread across the various components, which indicated a welcome reduction in global supply chain disruptions. Most of the series in our data set declined over this period; the U.K. “backlog” component worsened and the U.S. “purchased stocks” component increased marginally.

Widespread Improvements Seen across Components in March 2022

Sources: Bureau of Labor Statistics; Harper Petersen Holding GmbH; Baltic Exchange; IHS Markit; Institute for Supply Management; Haver Analytics; Bloomberg L.P.; authors’ calculations.

In the chart below, we focus on the contributions of the underlying components of the GSCPI from March to April 2022.

Global Supply Chain Pressures Worsen in April 2022

Sources: Bureau of Labor Statistics; Harper Petersen Holding GmbH; Baltic Exchange; IHS Markit; Institute for Supply Management; Haver Analytics; Bloomberg L.P.; authors’ calculations.

As the chart indicates, the worsening of global supply chain pressures in April was predominantly driven by the Chinese “delivery times” component, the increase in airfreight costs from the United States to Asia, and the euro area “delivery times” component, as other components have eased over the month. These developments could be associated with the stringent COVID-19-related lockdown measures adopted in China, as well as the consequences of the Ukraine-Russia conflict for supply chains in Europe.

Finally, as we noted in our previous post and discuss on our product page, recent GSCPI readings are subject to revision. The chart below compares the current GSCPI release with the previous three releases, showing that revisions can have an impact up to a year back in time. The chart indicates that, based on the current vintage of the GSCPI, the decrease in global supply chain pressures through April occurred at a slighter faster pace than previous GSCPI estimates had suggested.

Revised and Realized Data Can Alter Previous Supply Chain Pressure Readings

Sources: Bureau of Labor Statistics; Harper Petersen Holding GmbH; Baltic Exchange; IHS Markit; Institute for Supply Management; Haver Analytics; Bloomberg L.P.; authors’ calculations.

Note: Index is scaled by its standard deviation.

Conclusions

In this post, we provide an update of the GSCPI through April 2022. This estimate suggests that the moderation we have observed in recent months has been partially reversed, as lockdown measures in China and geopolitical developments are putting further strains on delivery times and transportation costs in China and the euro area. Forthcoming readings will be particularly interesting as we assess the potential for these developments to further heighten global supply chain pressures.

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Gianluca Benigno is the head of International Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.

Julian di Giovanni is head of Climate Risk Studies in the Bank’s Research and Statistics Group.

Jan J.J. Groen is an economic research advisor in the Bank’s Research and Statistics Group.

Adam Noble is a senior research analyst in the Bank’s Research and Statistics Group.

How to cite this post:
Gianluca Benigno, Julian Di Giovanni, Jan Groen, and Adam Noble, “Global Supply Chain Pressure Index: May 2022 Update,” Federal Reserve Bank of New York Liberty Street Economics, May 18, 2022, https://libertystreeteconomics.newyorkfed.org/2022/05/global-supply-chain-pressure-index-may-2022-update/.


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.



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Abortion rights are economic rights: Overturning Roe v. Wade would be an economic catastrophe for millions of women

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A leaked draft of a majority opinion authored by Supreme Court justice Samuel Alito strongly suggests that the court will rule to overturn Roe v. Wade and Planned Parenthood v. Casey, the two landmark cases which have upheld the right to an abortion nationwide for the last half-century. If the final ruling largely follows what is sketched out in the leaked draft, abortion services will be drastically curtailed, if not outright banned, in over half the country.

Abortion is often framed as a “culture war” issue, distinct from material “bread and butter” economic issues. In reality, abortion rights and economic progress are deeply interconnected, and the imminent loss of abortion rights means the loss of economic security, independence, and mobility for millions of women. The fall of Roe will be an additional economic blow, as women in the 26 states likely to ban abortion already face an economic landscape of lower wages, worker power, and access to healthcare.

Women’s economic lives, livelihoods, and mobility are at the heart of the reasoning to overrule Roe.

In the draft majority opinion, Justice Alito dismissed the argument in Casey that women had organized their lives, relationships, and careers with the availability of abortions services, writing “that form of reliance depends on an empirical question that is hard for anyone—and in particular, for a court—to assess, namely the effect of the abortion right on society and in particular on the lives of women.” In fact, this empirical question has been definitively assessed and answered. A rich and rigorous social science literature has examined both the detrimental effect of a denied abortion on women’s lives, as well as the individual and societal economic benefits of abortion legalization, as detailed in the thorough amicus brief filed in Dobbs on behalf of over 100 economists.

Some of the economic consequences of being denied an abortion include a higher chance of being in poverty even four years after; a lower likelihood of being employed full time; and an increase in unpaid debts and financial distress lasting years. Laws that restrict abortion providers, so-called “TRAP” laws (targeted regulation of abortion providers), have led to women in those states being less likely to move into higher-paying occupations.

On the flip side, environments where abortion is legal and accessible have lower rates of teen first births and marriages. Abortion legalization has also been associated with reduced maternal mortality for Black women. The ability to delay having a child has been found to translate to significantly increased wages and labor earnings, especially among Black women as well as an increased likelihood of educational attainment. Treasury Secretary Janet Yellen summed up the overall effect: “…eliminating the rights of women to make decisions about when and whether to have children would have very damaging effects on the economy and would set women back decades.”

The draft opinion of this overtly partisan Supreme Court ignores the rigorous data and empirical studies demonstrating the significant economic consequences of this decision. In doing so, it lays bare the cruel and misogynistic politics that motivate it. Justice Alito’s dismissal of claims that forcing women to bear an unwanted pregnancy imposes a heavy burden is shockingly glib, as he simply asserts: “that federal and state laws ban discrimination on the basis of pregnancy, that leave for pregnancy and childbirth are now guaranteed by law in many cases, that the costs of medical care associated with pregnancy are covered by insurance or government assistance….”

Every statement in this casual litany is wildly misleading. Women are still routinely fired for being pregnant, close to 9 in 10 workers lacked paid leave in 2020, the costs of maternity care with insurance have risen sharply and constitute a serious economic burden for even middle-income families, and many of the states certain or likely to ban abortion after the fall of Roe have not expanded Medicaid, leaving women without insurance facing much steeper costs—particularly in the immediate post-partum period. And, of course, our failed health care system often imposes the worst cost of all on pregnant women: The U.S. rate of maternal mortality, especially for Black women, ranks last among similarly wealthy countries. In short, the potential costs of bearing a child are high indeed, and it is women who should decide if and when they wish to shoulder them.

States likely to ban abortion are more likely to have higher incarceration rates and lag in wages, worker rights, and access to health care

StateMinimum wageIncarceration Rate (per 100k)Abortion status keyRight to Work keyMedicaid Expansion key Right to WorkMedicaid ExpansionAbortion status
Alabama$7.25419Pre-Roe ban or bans/extreme limitsRTWNo Expansion112
Alaska$10.34243No changeNot RTWAdopted Expansion000
Arizona$12.80556Pre-Roe ban or bans/extreme limitsRTWAdopted Expansion102
Arkansas$11.00585Trigger banRTWAdopted Expansion101
California$14.00310No changeNot RTWAdopted Expansion000
Colorado$12.56342No changeNot RTWAdopted Expansion000
Connecticut$13.00246No changeNot RTWAdopted Expansion000
Delaware$10.50380No changeNot RTWAdopted Expansion000
Washington D.C.$15.20N/ANo changeNot RTWAdopted Expansion000
Florida$10.00444Likely to banRTWNo Expansion113
Georgia$7.25507Pre-Roe ban or bans/extreme limitsRTWNo Expansion112
Hawaii$10.10215No changeNot RTWAdopted Expansion000
Idaho$7.25474Trigger banRTWAdopted Expansion101
Illinois$12.00303No changeNot RTWAdopted Expansion000
Indiana$7.25400Likely to banRTWAdopted Expansion103
Iowa$7.25293Pre-Roe ban or bans/extreme limitsRTWAdopted Expansion102
Kansas$7.25342No changeRTWNo Expansion110
Kentucky$7.25515Trigger banRTWAdopted Expansion101
Louisiana$7.25678Trigger banRTWAdopted Expansion101
Maine$12.75146No changeNot RTWAdopted Expansion000
Maryland$12.50305No changeNot RTWAdopted Expansion000
Massachusetts$14.25133No changeNot RTWAdopted Expansion000
Michigan$9.87381Pre-Roe ban or bans/extreme limitsRTWAdopted Expansion102
Minnesota$10.33177No changeNot RTWAdopted Expansion000
Mississippi$7.25636Trigger banRTWNo Expansion111
Missouri$11.15423Trigger banNot RTWAdopted Expansion001
Montana$9.20439Likely to banNot RTWAdopted Expansion003
Nebraska$9.00289Likely to banRTWAdopted Expansion103
Nevada$9.75412No changeRTWAdopted Expansion100
New Hampshire$7.25197No changeNot RTWAdopted Expansion000
New Jersey$13.00209No changeNot RTWAdopted Expansion000
New Mexico$11.50315No changeNot RTWAdopted Expansion000
New York$13.20224No changeNot RTWAdopted Expansion000
North Carolina$7.25313No changeRTWNo Expansion110
North Dakota$7.25231Trigger banRTWAdopted Expansion101
Ohio$9.30430Pre-Roe ban or bans/extreme limitsNot RTWAdopted Expansion002
Oklahoma$7.25621Trigger banRTWAdopted Expansion101
Oregon$12.75353No changeNot RTWAdopted Expansion000
Pennsylvania$7.25355No changeNot RTWAdopted Expansion000
Rhode Island$12.25156No changeNot RTWAdopted Expansion000
South Carolina$7.25352Pre-Roe ban or bans/extreme limitsRTWNo Expansion112
South Dakota$9.95426Trigger banRTWNo Expansion111
Tennessee$7.25384Trigger banRTWNo Expansion111
Texas$7.25529Trigger banRTWNo Expansion111
Utah$7.25207Trigger banRTWAdopted Expansion101
Vermont$12.55182No changeNot RTWAdopted Expansion000
Virginia$11.00421No changeRTWAdopted Expansion100
Washington$14.49250No changeNot RTWAdopted Expansion000
West Virginia$8.75380Pre-Roe ban or bans/extreme limitsRTWAdopted Expansion102
Wisconsin$7.25378Pre-Roe ban or bans/extreme limitsRTWNo Expansion112
Wyoming$7.25426Trigger banRTWNo Expansion111

Source: Elizabeth Nash and Lauren Cross, “26 States Are Certain or Likely to Ban Abortion without Roe: Here’s Which Ones and Why,” The Guttmacher Institute, October 2021; “State Minimum Wage Laws, Department of Labor, Updated January 2022; Kaiser Family Fund, “Status of State Medicaid Expansion Decisions,” April 26, 2022; E. Ann Carson, “Prisoners in 2020 — Statistical Tables,” U.S. Department of Justice Bureau of Justice Statistics, December 2020; “Right-to-Work States,” National Conference of State Legislatures, Updated 2017.

Recognizing that abortion is an economic issue is an important step in building support for protecting women’s right of access. But this recognition also allows us to see the potential fall of Roe v. Wade as a key piece in a broader politics and economics of control. Twenty-six states currently have laws or constitutional amendments on their books that ban abortion. If Roe is declared overruled, these bans will go into effect. Low- and middle-income women, especially Black and Brown women will bear the brunt of the impact. Many of the states with preexisting abortion bans held at bay by Roe are also states that have created an economic policy architecture of low wages, barely functional or funded public services, at-will employment, and no paid leave or parental support. In these states, the denial of abortion services is one more piece in a sustained project of economic subjugation and disempowerment.

Figure A shows the 26 states that have “trigger bans” that will set in immediately after the SCOTUS decision, pre-Roe bans or extreme limits, and likely bans. Figure A also shows the minimum wage in that state, whether that state is a so-called “right-to-work” state which makes it harder for workers to collectively bargain and unionize, whether the state has expanded Medicaid, and the rate of incarceration per 100,000 people in that state. While wages and access to health care (through Medicaid) are relatively obvious measures of well-being, so-called “right-to-work” laws are also useful to look at as worker power and unionization also have strong connections to economic, social, and physical health. Mass incarceration and the criminal justice system are also deeply intertwined with racial and economic inequality, from the impact of a criminal record on employment and earnings, to the intergenerational effects on families and communities.

It is no coincidence that the states which will ban abortion first are also largely the states with the lowest minimum wages, states less likely to have expanded Medicaid, states more likely to be anti-union “right-to-work” states, and states with higher-than-average incarceration rates. For example, among the states which will ban abortion, the average minimum wage is $8.39, compared to $11.48 in the states which have abortion access. Similarly, 10 of the 26 anti-abortion states have not expanded Medicaid and all but two of the states are anti-union “right-to-work” states. Where the average rate of incarceration is 419 per 100,000 people. The 26 anti-abortion states, on average, incarcerate 439 per 100,000 people, compared to 272 for the states without abortion restrictions. The consequences of low wages and lack of access to health care, including abortion services fall especially hard on Black women in many of these states. There is a long history of racism motivating political organization, like the rise of “right-to-work” legislation in the Jim Crow south, or the complicated combination of anti-abortion politics and backlash against desegregation efforts during the political realignment in the 1970s.

Policymakers and advocates must recognize that the fall of Roe is an economic issue and would be one more victory for the economics of control and disempowerment—low wages, little worker power, and rising disinvestment. Reproductive justice is key to economic justice and protects women’s humanity, dignity, and the right to exert freedom over their own choices in the economy.





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