The Schwartz Center for Economic Policy Analysis hosted a panel discussion of “Capital in the Twenty-First Century” with economist Thomas Piketty on October 3, 2014. After Piketty’s remarks, the New School’s Anwar Shaikh and Equitable Growth’s Executive Director Heather Boushey gave remarks on the book. The text of Dr. Boushey’s speech is below and a video can be found here

Speech As Prepared for Delivery

I want to use my 10 minutes to focus on a couple of points: What are the implications if Thomas Piketty is right? Where should we start looking for policy answers?

Thomas points his readers to the novels of Jane Austen, Henry James and Henri Balzac. I want to quote him – he says, “for Jane Austen’s heroes, the question of work did not arise; all that mattered was the size of one’s fortune, whether acquired through inheritance or marriage.” Reading Henry James and Jane Austen certainly made me glad to have been born in 1970, not 1800.These novels are a testament to the limited choices that women had.

Today, to some extent, anyone can create a decent standard of living – or become a millionaire – through accomplishment in this life, rather than what we inherited from our parents. Of course, Thomas presents evidence that the “upper classes instinctively abandoned idleness and invented meritocracy lest universal suffrage deprive them of everything they owned,” but let’s set that aside for a moment.

There’s been a gender revolution, although it remains fairly recent and still incomplete. When I went off to college, my mother admitted to me she was jealous of the opportunities that I had. She told me how when she was thinking about her college option, they were much more limited than mine. She felt that her options were only to study to become a nurse, teacher, or secretary. That wasn’t the array of opportunities that I faced or today’s young women face.

These changes have been good for our economy. According to Stanford economist Peter Klenow and his colleagues, the opening up of professions to women and minorities accounted for a fifth of growth in U.S. GDP between 1960 and 2008. A fifth! That’s non-trivial. In my own research with John Schmitt and Eileen Appelbaum, we found that the increase in women’s labor supply in the United States has added 11 percent to GDP since 1979.

We – all of us, no matter our age – have lived through an era where the presumption is that our society marches always towards great equality or less discrimination, even if slowly. But, if Thomas is right, then this era could be at an end. To get a feel for this, one could point to the PBS it Downton Abbey where Lord Grantham’s family will face eviction from their family manor when the Earl dies. There was no other way for Grantham’s three daughters to maintain their standard of living other than marrying well. So, the show’s first season focuses on whether the eldest daughters would concede to marry her cousin Matthew.

If Thomas is right, then once again, the rules over inheritances will make all the difference for the potential for women’s equality. Do inheritances go to the eldest child or to the eldest male child? What happens upon the death of a spouse – does the wife or the child inherit? I fear that the answers to these questions are not likely to be good for women because while the gender revolution has come a long way, it has stalled in recent decades. Thomas’s data makes me wonder if we’ll wish we’d solidified that more quickly.

In 2014, only one-in-ten U.S. billionaires were women (11.4 percent) and the female share of self-made billionaires is only 3.1 percent. While women have made progress in the workplace, the gender pay gap remains 78 cents on the dollar and this gap begins as soon as women enter the labor force and grows over time.

The gap in pay and labor force participation between men and women, especially here in the United States, is in no small part because we have no found sufficient ways to help workers with care responsibilities. For example, in the vast majority of workplaces neither women nor men have access to paid family leave. That is, except in California, New Jersey, and Rhode Island, where paid family and medical leave has been implemented.

The lack of a federal paid leave policy leaves female caregivers disadvantaged in the labor market. We see this when we compare the labor force participation rates of women in the United states to other OECD countries where the United States has fallen to 17th out of 22 countries. Policy plays a clear role here.

Cross-national studies on the role of policies that reconcile work and family demands have found that the work hours of women in dual-earner families are similar to those of men when child care is publicly provided. Paid maternity and parental leave also increases the employment rate of mothers and more generous paid leave benefits increase the economic contributions of wives to family earnings.

If we’re on the cusp of an era where wealth becomes more important, the failure to implement these policies and achieve greater equality in the preceding era are all the more urgent to address. But, Thomas also questions whether we can raise “g.” And we know, expanding opportunities to excluded groups raises productivity. So there might be some potential there.

That leads me to two aims for policymakers that I draw from the book. First, recognizing that women are an underutilized source of growth and addressing this is extremely urgent for our economy and may be imperative if we don’t want to regress on the gender progress we have made.

In Japan, in order to boost growth in the face of declining population growth, they are pursuing “womenomics’ and implementing policies to boost female labor force participation and close the gender wage gap. When I talk to policy leaders from the United Kingdom or Canada, they will make the argument to me that addressing conflicts between work and family are critical for economic productivity. Too often, I find that I have to make that argument to U.S. policymakers.

While I fear that Thomas’s analysis predicts that women may have fewer economic opportunities moving forward, I also wonder what it means to ponder an economy where dead capital could again supersede human capital. Certainly, it would imply less innovation if economic opportunities were confined to those who started with the most capital. But, is this an overreaction?

In Capital in the Twenty-First Century, Thomas focuses on the rise of the “supermanager,” which he referenced earlier. Which brings me to a second area for policy. We must consider that some of what we’re calling labor income is actually capital income or unproductive rents. This has important policy implications. We hosted a conference last week where Alan Blinder and Emmanuel Saez debated this point, noting that we don’t have data that allows us to discern whether high incomes are rents or productive. At the end of the day, this is a key piece of information we need to inform policymakers in terms of whether and how to intervene.

I have thought a lot about your wealth tax idea, Thomas, and am very taken by remarks Michael Ettlinger made at that same conference we hosted last week where he pointed out that wealth is harder to track and harder to value than income. That’s not to say we shouldn’t not seek to pursue this or try to pull together the data, but I also want us to consider a variety of other strategies that could also be effective.

I want to end by saying that I’m really pleased we are having this conversation at the New School of Social Research. To echo what Anwar said, I think it’s encouraging and exciting to see economic research that beings by seeking to understand the real world and then uses that data to inform a theoretical framework. I think that Thomas is part of a new generation of economic asking different questions than their teachers.

Many of us who came into adulthood as the 1980s turned into the 1990s begin not from President Kennedy’s dictum that a rising tide lifts all boats, but rather from the premise articulated by presidential economics advisor Gene Sperling that “the rising tide will lift some boats, but other will run aground.”

We had to begin here.

The only economic reality we’ve ever experienced is one where productivity gains go to the top while leaving the vast majority to cope with stagnant wages, greater hours of work, and, most especially in the past decades, rising debt burdens. We’ve experienced first-hand the damage this has done to our generation and the ones that follow. The idea that the real world matters was a key idea I took from my education here at the New School and I’m glad we’ve been able to be here together to discuss this important book here today.