Month: June 2014

Afternoon Must-Read: Sean Trende: What Cantor’s Loss and Graham’s Win Mean

Posted on by Brad DeLong

Sean Trende: What Cantor’s Loss and Graham’s Win Mean: “Watch Dave Brat’s interview on Fox News here…

…He is not Tom Tancredo; immigration reform is not his main focus. He’s hitting a lot of the themes that… in many ways echo the Democratic Netroots’ discontent with “Wall Street Democrats” in the mid-2000s (a discontent that led, in part, to Obama’s victory in the 2008 primaries, to the discomfort of some in the Democratic Leadership Council)…. The GOP base is frustrated over the direction of the country… a large portion of that frustration is directed at the Democratic Party, and Barack Obama in particular.  But it is also directed at the party establishment…. When pundits say that the Tea Party seems like it is more interested in defeating Republicans than Democrats, they aren’t entirely off base. They just miss the reasoning behind that animus toward the GOP establishment…

The college wage premium affects inequality very little

Posted on by Marshall Steinbaum

David Leonhardt of The New York Times recently reported on the evolution of the college wage premium, or the difference between average earnings among those with a college (but no graduate) degree and those who do not attend college. The premium has increased substantially, while the premium for those who attend “some college” without actually earning a degree has not changed at all. From this data, Leonhardt concludes that people ought to graduate from college despite the enormous cost of college tuition.

On the face of it, this conclusion makes sense. Leonhardt writes:

 The decision not to attend college for fear that it’s a bad deal is among the most economically irrational  decisions anybody could make in 2014. The much-discussed cost of college doesn’t change this fact. According to a paper by [Professor David] Autor published Thursday in the journal Science, the true cost of a college degree is about negative $500,000. That’s right: Over the long run, college is cheaper than free. Not going to college will cost you about half a million dollars.

But the implicit conclusion that many people are unwisely choosing not to finish college flies in the face of a number of other factors that I discuss in my recent column. These factors are particularly relevant for policymakers, who would be mistaken to think that a four-year college degree is the most effective way to reduce income inequality. And that’s why Leonhardt’s conclusion—“as the economy becomes more technologically complex, the amount of education that people need will rise [and] at some point, 15 years or 17 years of education will make more sense as a universal goal”—doesn’t quite fit all the facts about inequality.

Things to Read on the Morning of June 11, 2014

Posted on by Brad DeLong

Should-Reads:

  1. Jonathan Chait: Eric Cantor’s Shocking, Richly Deserved DefeatNYMag: “Cantor went out the way he carried himself throughout his career: making comically disingenuous attacks. His television commercials assailed Brat as a tax-loving Democrat–he served on a non-partisan state revenue-estimating commission–and actually ran ads calling him a “liberal college professor”…. It is conceivable that, by preposterously describing a Rand-loving right-wing crank as a liberal, Cantor actually managed to underestimate the intellectual discernment of his voters. In any case, he had ceded all the premises of the argument to his opponent even in the course of smearing him. Cantor was, finally, Cantor’d. He will not be missed.”

  2. Danny Vinik: Brookings Survey: Republican Fear Changing Demographics, Immigration: “Hispanics don’t care that much about immigration reform. They care more about finding work and being treated with respect…. Republicans’ Hispanic problem… is a deep-seated fear of the changing demographics in America. While House Republicans do not need to pass immigration reform to woo Hispanic voters, they do need to show compassion for them. In 2012, Mitt Romney was unable to do that: He argued that ‘self-deportation’ was the best strategy for dealing with the 11 million undocumented immigrants in the United States. In the end, he won just 27 percent of the Hispanic vote…”

  3. John Aziz: Beware the self-fulfilling prophecies of economic pessimists: “Their prophecies of economic malaise haven’t become self-fulfilling, but there has been several instances in which their predictions have won the argument–to ruinous effect…. Sweden…. It’s highly troubling, then, that one of the arch-pessimists has a prominent spot at the Federal Reserve. Richard Fisher, president of the Dallas Fed, has been warning about economic bubbles throughout the bull market, saying that easy money is stoking up a mania on Wall Street. ‘I fear that we are feeding imbalances similar to those that played a role in the run-up to the financial crisis’, he told the Association of Mexican Banks last week. Fisher’s view is a gross oversimplification. Low interest rates and quantitative easing do encourage investment and spending. But that really says nothing about whether the subsequent growth will be productive growth or bubbly growth. Throughout human history… economic growth has overwhelmingly been productive. Why should we assume that bubbly growth is now the norm?…”

  4. Lawrence Ball: The Case for a Long-Run Inflation Target of Four Percent: “Many central banks target an inflation rate near two percent. This essay argues that policymakers would do better to target four percent inflation. A four percent target would ease the constraints on monetary policy arising from the zero bound on interest rates, with the result that economic downturns would be less severe. This benefit would come at minimal cost, because four percent inflation does not harm an economy significantly.”

Should Be Aware of:

And:

  1. Paul Glastris and Haley Sweetland Edwards: The Big Lobotomy: How Republicans Made Congress Stupid: “Last September, as they scrambled to decide on one final ultimatum before shutting down the federal government, Republican House leaders came up with what seemed like an odd demand: to strip their own staff of health care benefits. At the time, staffers reacted to the news with a mixture of despair and disbelief. ‘It was like getting sucker-punched by your boss’, one aide told me. ‘Everyone was thinking, “What’s the point? How is screwing us going to help you?”‘…”

  2. Andrew Prokop: What is the battle over Medicaid expansion?: “Obamacare’s authors wanted to make more people eligible for Medicaid, and to make the eligibility rules more uniform overall. So the law contained an expansion of Medicaid to everyone making beneath 138 percent of the federal poverty line — more generous coverage than any state had previously offered. But there’s a catch: due to [John Roberts’s] subsequent court ruling, states can now reject the expansion, and many states with Republican governors or legislatures have done just that. Only 26 states have signed on so far…”

  3. Robert Waldmann: Consumption, Real Interest Rates, and Habit Formation: “Many macroeconomists use models of aggregate consumption based on utility maximization by a rational representative agent… inter-temporal substitution subject to a lifetime budget constraint… utility function is time separable with a constant inter-temporal elasticity of substitution… stationary distributions around a balanced growth path. All this implies that the expected rate of growth of consumption is a constant (the inter-temporal elasticity of substitution of consumption) times the expected real interest rate…. Estimates of this constant are alarmingly tiny (generally around 0.1)… imply extremely slow growth of consumption given measured real interest rates and even complete patience…. That is estimates based on first differences are inconsistent with estimates based on long term trends. In order to reconcile the model with the data, it is necessary to modify the assumptions…. This was an important impetus for the development of models of rational addiction, that is, of habit formation…. The standard new Keynesian DSGE model due to Smets and Wouters… includes habit formation… to explain the low correlation of the rate of growth of consumption and the expected real interest rate… [and make it] consistent with the… long-term trend of increasing consumption…. Their claim must be that short run fluctuations in real interest rates don’t matter much, because of habit formation, but long run persistent variation matters a lot. This claim suggests… [that] as consumption growth and real interest rates are averaged over longer and longer periods of time, their correlation gets higher until the very strong long run association appears…. [But] there is essentially no sign of a high long-term correlation between real interest rates and consumption growth… no sign that the low quarterly correlation is due to habit formation…. There have been huge and highly-persistent fluctuations in US achieved safe short-term real interest rates, with enormous rates in the 80s and very high rates in the 90s. The fact that the growth rate of aggregate consumption was similar in the 80s to that of other decades should have made it obvious that standard macroeconomic models with habit formation did not fit the data at all…”

  4. Steve M.: The Powell Memo Had a Baby Named David Brat: “The BB&T Moral Foundations of Capitalism program is designed to push [Ayn Rand’s] work and her philosophy. In fact, the program — at Randolph-Macon and quite a few other institutions — is an open campaign of proselytization for her worldview as much as it is for capitalism. John Allison explained this in 2012: ‘About twelve years ago we [at BB&T] re-examined our charitable giving and realized that our contributions to universities were not typically being used in our shareholders’ best interest…. The Left had taken over the universities and educated future leaders, including teachers, in statist/collectivist ideas…. BB&T has used the fundamental ethics expressed in Ayn Rand’s philosophy of Objectivism in very successfully growing our business, and we wanted Rand’s ideas to be heard in the academic community…. Typically, Atlas Shrugged is included in the reading list….’ Does this talk remind you of anything? It reminds me of the Powell memo–Lewis Powell’s 1971 memo to the president of the U.S. Chamber of Commerce, which warned that capitalists were losing the war of ideas…. The people who read the Powell memo in 1971 ultimately won–we’ve been living in their world ever since the Reagan presidency. But they’re still fighting…. Dave Brat is one of their propagandists, and tonight he just toppled a giant from the last wave of Republican radicals, who’s now, clearly, not deemed radical–or Randian–enough.”

Already-Noted Must-Reads:

  1. Jim Newell (June 10, 2014): Drudge’s new fixation: Eric Cantor and the right’s frenzied paranoia: “As a hobby, scanning the Drudge Report for signals of what rabbit hole the conservative brain has gone down at any given point has lost some of its novelty over the years. Still, it was hard not to notice this morning that Drudge, in the prime upper-left real estate of his site, had listed a full 14 links regarding immigration and a supposed impending push for “amnesty” among the House Republican leadership. (Personal favorite: “Kids Complaining Burritos They’re Being Fed Making Them Sick…”) What gives on this sleepy Tuesday? We learned last week, after all, that the House won’t hold any immigration-related votes in June. That leaves the leadership a few weeks in July to pass the unicorn-like Secret Amnesty that’s not in its interest to pass. Why is it so vital to whip up the conservative base about immigration reform on today of all days? Hmmm … maybe something about Tuesday … primary season … it’s a Tuesday during primary season … Ohhhhhhhh, we get it: House Majority Leader Eric Cantor’s primary is today!”

  2. Matthew Zeitlin: Goldman Sachs CEO: “Income Inequality Is A Very Destabilizing Thing In The Country”: “Lloyd Blankfein, in an interview with CBS, said that income inequality is ‘destabilizing’ and ‘responsible for the divisions in the country’. Calling it a ‘very big issue… that has to be dealt with’, Blankfein said that whether or not the economy grows faster, ‘too much of the GDP over the last generation has gone to too few of the people’…”

Morning Must-Read: Jim Newell: Eric Cantor and the Drudge Report

Posted on by Brad DeLong
NewImage

Jim Newell (June 10, 2014): Drudge’s new fixation: Eric Cantor and the right’s frenzied paranoia: “As a hobby, scanning the Drudge Report for signals of what rabbit hole…

…the conservative brain has gone down at any given point has lost some of its novelty over the years. Still, it was hard not to notice this morning that Drudge, in the prime upper-left real estate of his site, had listed a full 14 links regarding immigration and a supposed impending push for “amnesty” among the House Republican leadership. (Personal favorite: “Kids Complaining Burritos They’re Being Fed Making Them Sick…”) What gives on this sleepy Tuesday? We learned last week, after all, that the House won’t hold any immigration-related votes in June. That leaves the leadership a few weeks in July to pass the unicorn-like Secret Amnesty that’s not in its interest to pass. Why is it so vital to whip up the conservative base about immigration reform on today of all days? Hmmm … maybe something about Tuesday … primary season … it’s a Tuesday during primary season … Ohhhhhhhh, we get it: House Majority Leader Eric Cantor’s primary is today!

Taking a page from Germany’s paid family leave program

Posted on by Alexandra Mitukiewicz

Last month’s congressional hearing on “Economic Security for Working Women” before the Senate Committee on Health, Education, Labor, and Pensions sparked Ellen Bravo, executive director of Family Values at Work to lament the glacial pace of family friendly workplace reforms in the United States. “It should be not just discouraging but infuriating that it’s stalled,” Bravo told KJ Dell’Antonia of The New York Times, referring to legislation to enact paid leave in our country. “Polls show overwhelmingly broad bipartisan support for policies that support families.”

Perhaps a telling international example of how paid family leave helps one of the world’s most competitive countries, Germany, might help persuade the U.S. Congress of the merits of this key work/life reform. A new study by economist Jochen Kluve of Humboldt-Universitat zu Berlin and researcher Sebastian Schmitz examined the policy effects of a new parental leave benefit program in Germany on mothers’ employment up to five years after childbirth. They find that that the program significantly increased the likelihood that mothers would return to work and would return to their pre-childbirth employers. Kluve and Schmitz also find that employers reward mothers’ return to their pre-childbirth jobs by significantly and substantially raising job quality.

This research underscores the importance of Germany’s parental benefit reform of 2007, known as Elterngeld—which literally translates to “parents’ money”—in helping to grow the female employment rate and increase fertility rates. The reform is intended to smooth consumption for working families and generate incentives for working women to have children, taking into account the opportunity costs of child bearing versus continuing to work. The new program provides more generous benefits, replacing 67 percent of pre-childbirth earnings for up to 14 months. Benefits are capped at 1,800 euros per month, or about $2,450 per month. Parents with no pre-childbirth earnings are eligible to receive 300 euros per month. The program is available to all German families.

Economists on both sides of the Atlantic know how critical family and medical leave insurance is for growing the labor force and the economy. Leave programs—which provide short-term paid leave to recover from a serious illness, to care for a newborn or family member—allow workers to remain employed and better financially provide for their families. Research by economist Christopher J. Ruhm at the University of Virginia and researcher Jackqueline L. Teague find that paid parental leave policies are associated with higher employment-to-population ratios and decreased unemployment for all workers, especially for working women.

This new study by Kluve and Schmitz finds that leave programs with relatively short but generous benefits can increase mothers’ employment by about 3 percent over three to five years after childbirth. Certain subgroups such as first-time mothers, highly-educated mothers, and higher-income mothers experienced even greater increases in employment, around 10 percent. The new program was effective in incentivizing mothers to take on work: the increase in employment was primarily driven by mothers with loose labor market attachment taking on part time employment, working 23 to 32 hours per week.

Leave programs also can reduce employee turnover and limit employment disruptions for workers. The researchers find that under Germany’s new leave program, full-time employed mothers were more likely to return to their pre-childbirth employers. Furthermore, the researchers find an increase in job quality among both part-time and full-time employed mothers.

Encouraging both trends could not be more important for economic growth and stability in the United States. With most family income coming from labor earnings, mothers maintaining labor force attachment is important for families’ financial security and their own retirement savings. Leave programs can increase mothers’ lifetime savings, thereby reducing the risk of old-age poverty which is higher for woman than men. Furthermore, mothers’ employment is also important for maintaining the functionality of Social Security and pension systems. More mothers working can generate additional revenue for the U.S. Social Security program and improve the fiscal solvency of the program’s trust fund.

Mothers’ work is critical for our economy: women’s employment patterns over the past three decades have increased U.S. gross domestic product by 11 percent. Findings from Kluve and Schmitz indicate that working women in our country need policies like the Family and Medical Insurance Leave Act, sponsored by Rep. Rosa DeLauro (D;CT) and Sen. Kirsten Gillibrand (D-NY), which would establish a national paid leave program that expand workforce opportunities. When we boost women’s economic progress, we boost the strength of our economy.

How important is the college wage premium to reducing inequality?

Posted on by Marshall Steinbaum

The college wage premium—the difference between average earnings among those with a college (but no graduate) degree and those who do not attend college—has increased substantially in recent years while the premium for those who attend “some college” without actually earning a degree has not changed at all. This fact leads many observers to conclude that a college degree is the best way for young adults to attain the skills they need to earn more and thus reverse growing inequality. (See Figure 1.)

Figure 1

college-wage-col

This view, however, has serious problems. The idea that not enough people are graduating from college implies that the much-reported rise in income inequality is thanks to a “shortage” of highly skilled college grads able to meet the labor market’s need. That idea has been conclusively debunked. The fact that the wage premium only kicks in when a college student receives a diploma, rather than gradually appearing in the cross section of people who go to college for one, two, or three years but don’t earn a degree, casts serious doubt on the idea that it’s the skills content of college that matters. Furthermore, the fact that buying an expensive degree correlates with high income certainly doesn’t imply that causation runs from buying the expensive degree to the high income.

So where in the academic literature did this notion of the four-year college degree as the solution to labor market inequality arise? The idea that the college wage premium reflects a rise in the labor market’s demand for skills stems in large part from a 1992 paper by Harvard University economist Lawrence Katz and University of Chicago economist Kevin Murphy, who argued that since there’s been both a rise in the college wage premium and a rise in the proportion of the population with college degrees, demand in the market for skilled labor has increased against a somewhat elastic but essentially unchanged supply curve.

Along similar lines, Katz and another Harvard professor Claudia Goldin, published a paper in 2007 that tracks the college premium over the long run and posits that its dynamics are explained by the race between education and technology. They argue that “skill-biased technological change” creates a demand for college degrees that takes time to be reflected in the skill composition of the workforce.

The story about the race between education and technology leaves questions unanswered. First, it cannot explain the significant differences between the income distributions across countries, especially at the very high end. Technological change and the distribution of individuals’ skills seem to be uniform across countries, at least in the developed economies, and yet their income distributions are very different. For instance, the distributions of harmonized standardized test results for high school math students in the United States and France are basically the same, yet the top ten percent of income earners accrue 25 percent of total labor market income in France and 35 percent in the United States- and the shares are even more skewed higher up the distribution.

Second, the argument that increasing inequality is caused by a shift in the demand for scarce skilled labor is only theoretical: it’s not at all clear where that technological change comes from. Every attempt to operationalize the theory of skill-biased technological change has run up against problematic data. Since the late 1990s, most of the increase in the college wage premium (which has not grown much during the last fifteen years) is due declining absolute wages for those with less education. That is the exact time period in which the “IT revolution” is supposed to have had a wide impact on experience of the middle class in the labor market. And it has had an impact—on the industrial mix of workers, but not on their wages. If there is a race between education and technology, currently the runners are tied: both supply and demand for skills have shifted such that wages are unaffected.

The potential harm in misattributing rising income inequality to a race between education and technology — a race that technology is winning — is that it could lead to perverse policy prescriptions. Trying to get more enrolled college students to undertake the cost of finishing their degrees might lead to yet further tuition hikes, especially if that route receives government subsidies, without significantly improving their outcomes in the labor market or reducing inequality overall.

 

Afternoon Must-Read: Lloyd Blankfein: “Income Inequality… Destabilizing… Reponsible for the Divisions in the Country… a Very Big Issue That Has to Be Dealt with…”

Posted on by Brad DeLong

Matthew Zeitlin: Goldman Sachs CEO: “Income Inequality Is A Very Destabilizing Thing In The Country”: “Lloyd Blankfein, in an interview with CBS…

said that income inequality is “destabilizing” and “responsible for the divisions in the country.” Calling it a “very big issue..that has to be dealt with,” Blankfein said that whether or not the economy grows faster, “too much of the GDP over the last generation has gone to too few of the people”…

Atrophied Social Network vs. Skill Mismatch Theories of the Unfortunate Shift in the Beveridge Curve: Tuesday Focus: June 10, 2014

Posted on by Brad DeLong

The highly-intelligent and thoughtful Erik Brynjolfsson tweets:

Erik Brynjolfsson: Twitter / @erikbryn: “The Beveridge curve has shifted. Part (but not all) of our economic problem is a mismatch between skills vs. needs http://pic.twitter.com/TODGowPjTL“

Twitter erikbryn The Beveridge curve has shifted

I think that’s what Erik says is: “true, but…”. The “true” part is that as technology advances the needs of the economy shift, and very bad things happen if the skills of the labor force do not keep up.

The not so true part is Erik’s assumption that “skill-need mismatch” will show itself in a shift in the Beveridge Curve rather than in sharp shifts in relative wages, As businesses respond by boosting what they will pay to those with skills in short supply and by reconfiguring jobs to make more use of low-wage “unskilled” labor. The way I look at it, an upward shift in the beverage curve is much, much more likely to reflect either the atrophy of the past social networks that had gotten the currently not employed their previous jobs or the nonexistence of the needed social networks on the part of young workers entering the labor market and looking for their first jobs.

There is no reason to think that our educational system was performing much poorer in the 1970s and 1980s that it had in the 1950s and 1960s or that the pace of technological progress and speed it up. Yet the Beveridge Curve shifted out sharply in those years. There is no reason to think that June 2009 was a magic moment after which “skill–needs mismatch” took a sudden upward leap.

Thus I think Erik is most likely misdiagnosing our problem here: Yes, there is an enormous amount of “skill-needs mismatch” but it has shown itself in the widening wage and salary distribution over the past generation, not in an end of 2009 shift in the Beveridge Curve. Yes, we should aggressively reform our educational system to reverse this mismatch. But we do not need to do that in order to fix our unemployment–vacancy problem, and we should not think that even successful educational reform would fix our unemployment–vacancy problem. That requires different policies to make the job matching process easier for both workers and firms to find potential matches.

Patterns of economic mobility in the United States

Posted on by Carter Price

“That dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement regardless of the fortuitous circumstances of birth or position.”

—James Truslow Adams, “The Epic of America” (1931)[1]

The idea of the American Dream as defined by historian James Truslow Adams reflects a powerful cultural narrative with deep historical roots.[2] It also reflects the understanding that broad-based opportunity propels the economy forward. Adams wrote at a time when Horatio Alger’s nineteenth-century rags-to-riches tales were confronting the harsh realities of the Great Depression. This American Dream of upward economic mobility, though deferred for many women and people of color, became reality for many among the generation of Americans who came of age during the Depression and World War II and entered the workforce in the 1950s and 1960s, and for many of their Baby Boomer children, too. This drove productivity gains and strong economic growth, as people with talent and initiative were able to match their skills to jobs and economic opportunities.

Read a pdf of the full document

mobility-report-fig

Yet over the past decades, living the dream has seemed less likely for Americans following in their footsteps—those born into Generation X (1965-1980), the Millennials (1981-2000), and the so called Boomlet generation of the 21st century. Research suggests economic mobility in the United States as a whole has been essentially flat since the 1970s.[3] Although economic mobility may not have declined, income inequality has risen over that period, making the consequences of the ‘birth lottery’—the household a child happens to be born in—more stark.[4] Larger differences in income between people at the top and bottom of the income distribution are visible across the country, as are differences in perceived economic mobility. Understanding trends in levels of economic mobility is important to understanding what influences economic mobility, which in turn is important to understanding economic growth and stability.

The narrative that America was the best place for people to achieve a better life than their forebears, though once uncontroversial, was built at a time when reliable statistics were difficult to come by. Recent advances in data collection and more precise methodology allow us to examine how the United States measures up as a land of opportunity today.[5] Now we can ask ourselves whether the entire United States is a land of opportunity or a country where different lands of opportunity exist, depending on one’s geographic location or one’s place on the income spectrum.

In the pages that follow, we present the most recent research and data available on economic mobility, which we define as movement up and down the income ladder from one generation to the next. This report aims to explain recent scholarship on intergenerational economic mobility across the nation. Briefly, this research and data show that:

  • There are regional differences in economic mobility across the country.
  • Economic mobility nationwide has been roughly flat in recent decades, but it has not remained flat everywhere.
  • Economic mobility in the United States is lower than in many other developed economies.

We identify three sets of factors that are correlated with—though not necessarily causal determinants of—economic mobility: economic factors, social factors, and family factors. Economic factors are measures of economic well-being in an area. Social factors are a variety of measures of social cohesion and community activity. Family factors are various measures of family cohesion and structure. While there is more research to be done, this gives us ideas about what to pursue and where to look for answers. Researchers will need to explore these relationships further in order to identify the causal mechanisms driving levels and trends of economic mobility.

In this report, we first present terms related to economic mobility, before looking at how economic mobility varies across communities in the United States. We then examine how mobility has changed over time. Next, we look at factors that may influence mobility. Finally, we highlight a few questions for future research in this area.

Read a pdf of the full document

[1] James Truslow Adams, The Epic of America (Simon Publications, 2001).

[2] Ibid.

[3] Raj Chetty et al., Is the United States Still a Land of Opportunity? Recent Trends in Intergenerational Mobility, Working Paper (Cambridge, MA: National Bureau of Economic Research, January 2014), http://www.nber.org/papers/w19844.

[4] Ibid.

[5] Orsetta Causa and Asa Johansson, Intergenerational Social Mobility in OECD Countries (OECD, 2010), http://www.oecd.org/eco/growth/49849281.pdf.

Things to Read at Lunchtime on June 10, 2014

Posted on by Brad DeLong

Should-Reads:

  1. Larry Mishel: Raising America’s Pay: A summary of the initiative: “Raising America’s Pay will: Highlight our nation’s failure to provide broad-based wage growth…. Research and explain the role of labor market policies and practices in suppressing pay…. Identify policies that will generate substantial broad-based wage growth…. Connect with key networks of civic engagement and community organizing groups…”

  2. Nick Bunker: Immigration reform is pro-growth and pro-equity: “Gianmarco Ottaviano of the Universita’ di Bologna and Giovanni Peri… found that the wages of U.S. citizens, even those with less than a high school education, actually increased because of immigrant labor… immigrants were complementary workers…. The benefits of productivity gains due to immigration aren’t limited to boosting U.S. wages. Immigrants can also increase the overall productivity of the economy and spur long-run economic growth…. Passing commonsense immigration reform in 2014 is certainly a long-shot. But members of the House of Representatives and the general public should be aware of this shrinking window of opportunity…”

  3. Heather Boushey And Nick Bunker: The labor market is doing better, but not fully recovered: “Six-and-a-half years after the start of the Great Recession, in some ways, the U.S. labor market has recovered nicely…. The three-month average for job growth is 234,000 a month…. And the unemployment rate has dropped from its high of 10 percent in October 2009 to 6.3 percent in May. But… these improvements are not… enough to alleviate the pain the Great Recession inflicted on our economy…. The labor force participation rate… was 62.8 percent in May…. The year-on-year growth in nominal wages was 2.1 percent…”

  4. Nick Bunker: Inequality and the future rate of savings: “[If] there is a positive relationship between growth and the saving rate… [that leads] to a declining savings rate as growth declines…. There’s also the issue of net savings versus gross savings… the rate of savings has to be higher than… depreciation…. As more and more income flows to those at top, the consumption and savings decisions of top earners would have a larger effect on the overall savings rate… [and] high-income individuals have a higher savings rate than the rest of the population…”

  5. Lily Kuo: Beijing is having a hard time convincing officials they shouldn’t abandon China: “Chinese state media recently reported what was meant to be another coup for president Xi Jinping’s anti-corruption campaign: a crackdown on thousands of ‘naked’ officials—those who send their family, and often their wealth, abroad, and remain behind…. China’s battle against elite families moving abroad remains an uphill one, which reflects a much broader public relations crisis for the country’s ruling party. For the Chinese public, the fact that so many government officials—whose official salaries are low—can afford to send their families to live, and their children to study, in America, Canada, or Europe is yet more proof of corruption in the government. Some also use their emigrated relatives as a way to funnel wealth abroad, often through real estate…. ‘These officials have lost confidence in the party and the country’, Chinese economist Zhao Hai Jun wrote on his blog (link in Chinese) in response to the news…”

Should Be Aware of:

And:

  1. Jason Furman: Global Lessons for Inclusive Growth: “The first set is policies that directly expand both growth and opportunity… preschool, which has among the highest returns of any area of investment… expanded access to college and improved demand-driven training…. The second set of policies are ones that increase growth… labor, capital, and what we can broadly call technology…. The third set of policies is aimed at ensuring that everyone shares in the benefits of growth. Currently, countries including Switzerland and the United States are focused on raising their minimum wages…. The EITC has been very successful in reducing poverty, rewarding work, and encouraging increased labor force participation. Part of ensuring that everyone shares in the benefits of growth is making sure that the process of enhancing medium- and long-term fiscal sustainability does not move in the opposite direction. One element of this is that deficit reduction be done in a balanced manner that in addition to entitlement reform include additional high-income revenue…. Ensuring everyone shares in the benefits of growth would be, from my perspective, a sufficient motivation for these policies. But as I discussed in the previous section, there is also the possibility that these policies could raise growth rates and increase the sustainability of economic expansions…. We have a lot of low-hanging fruit in terms of policies that can both reduce inequality and increase economic growth. And these policies would promote the type of inclusive growth that would manifest itself in higher median incomes, lower poverty rates, and broader, more inclusive growth. I can tell you that the Administration in the United States is very focused on all of these areas and I am hoping that we can work together to draw lessons from each other’s experiences and to cooperate on economic policies that would help advance these goals.”
    

  2. Simon Wren-Lewis: mainly macro: What we do know: “There is much that we do not know in macro…. Noah [Smith] puts all this down to lack of data, rather than politics. When it comes to unconventional monetary policy this is also right. However there are some things where the data is pretty clear, and where any macroeconomist with an open mind should be able to come to a clear conclusion…. There is a huge elephant in the room: fiscal policy…. The theoretical framework used by monetary institutions almost everywhere says that fiscal contraction at the zero lower bound will do serious damage to output and unemployment (and therefore reduce core inflation). The evidence overwhelmingly confirms this proposition. While the reasons for the Great Recession may still be controversial, the major factor behind the second Eurozone recession is not: contractionary fiscal policy, in the core as well as the periphery…. Yet too many macroeconomists seem reluctant to acknowledge this. There are the anti-Keynesians who want to deny the monetary policy consensus; there are others, who want to deny the importance of the zero lower bound; and still more, who for some other reason want to deny the importance of fiscal policy. This allows policymakers to continue to press for fiscal consolidation in the Eurozone, largely ignoring those economists who do challenge this policy because they just represent ‘one view’ within the discipline…”

  3. Liza Daly: 23 and Me: The Complete James Bond: “There’s a scene in which Goldfinger stages an elaborate Powerpoint presentation to a roomful of henchmen, and then immediately gasses them all to death. As someone who has to give a lot of public talks, I found this progression of events curiously appealing.”

Already-Noted Must-Reads:

  1. Austerity and the Employment Rate CEPR Blog Ben Wolcott: Austerity and the Employment Rate: “In 2010, after an initial round of coordinated stimulus from both wealthy and developing countries, deficit hawks around the world regrouped. Pointing to growing deficits and debt, they demanded that countries reverse course and begin moving toward balanced budgets. The deficit hawks argued that deficit reduction could be accomplished without impairing growth because of the effect it would have in boosting confidence among businesses and consumers. Many economists argued against this drive towards austerity at the time. They noted and rigorously explained the fallacious logic in the idea that deficit reduction could be expansionary. They also pointed out how fiscal policy had already saved the economy from a second depression and that more stimulus would likely be necessary. However, now we have more than three years of data, so we no longer have to speculate. A simple picture can be worth a thousand words (or in this case, billions)…”

  2. Steve Randy Waldmann: Welfare Economics: an Introduction: “Whenever a claim about ‘welfare’ is asserted assumptions regarding ethical value are necessarily invoked as well. If you believe otherwise, you have been swindled. If claims about welfare can’t be asserted in a value-neutral way, then neither can claims of ‘efficiency’. Greg Mankiw teaches that ‘[under] free markets…[transactors] are together led by an invisible hand to an equilibrium that maximizes total benefit to buyers and sellers’. That assertion becomes completely insupportable. Even the narrow and technical notion of Pareto efficiency… is rendered problematic, as nonmarket allocations can also be Pareto efficient…. Market efficiency, deadweight loss, tax incidence, price discrimination, international trade–all of these topics are diagrammed and understood in terms of what happens to the area between supply and demand curves. If we cannot redeem those diagrams, all of that becomes little more than propaganda…. If the best ‘scientific’ economics can do is say nothing about interpersonal welfare comparison, that is neither evidence for nor evidence against policies which, like all nontrivial policies, benefit some and harm others, including policies of outright redistribution…”

  3. John Aloysius Farrell: Yes, Nixon Scuttled the Vietnam Peace Talks: “Did Richard Nixon’s campaign conspire to scuttle the Vietnam War peace talks on the eve of the 1968 election to capture him the presidency? Absolutely, says Tom Charles Huston, the author of a comprehensive, still-secret report he prepared as a White House aide to Nixon. In one of 10 oral histories conducted by the National Archives and opened last week, Huston says ‘there is no question’ that Nixon campaign aides sent a message to the South Vietnamese government, promising better terms if it obstructed the talks, and helped Nixon get elected. Nixon’s campaign manager, John Mitchell, ‘was directly involved’, Huston tells interviewer Timothy Naftali. And while ‘there is no evidence that I found’ that Nixon participated, it is ‘inconceivable to me’, says Huston, that Mitchell ‘acted on his own initiative’…”