Brad DeLong: Worthy reads on equitable growth, January 12–19, 2021

Worthy reads from Equitable Growth:

1. Read the very excellent new book of essays assembled by Equitable Growth and Berkeley‘s Labor Center on how to boost wages here in America, Boosting Wages for U.S. Workers in the New Economy: “The U.S. labor market is shackled by decades of wage stagnation for the majority of workers, persistent wage disparities by race, ethnicity, and gender, and sluggish economic growth. The steady increase of income inequality since the 1970s leaves generations of U.S. workers and their families unable to cope with the daily costs of living, let alone save for emergencies or invest in their futures—conditions that have left many families ill-prepared for the “stress test” of the coronavirus recession. These labor market ills particularly affect women and workers of color … There is increasing evidence that broad structural inequality leads to a misallocation of talent and the undervaluation of different types of work, which contributes to anemic economic growth and slower productivity gains. Boosting Wages for U.S. Workers in the New Economy, a joint effort of Equitable Growth and the Institute for Research on Labor and Employment at the University of California, Berkeley, presents a series of essays from leading economic thinkers, who explore alternative policies for boosting wages and living standards, rooted in different structures that contribute to stagnant and unequal wages.”
2. Here is, I think, the most interesting idea about how to boost wages in America I have seen recently. It comes from my colleague Benjamin Schoefer. He proposes a framework of bargained sector-wide minimum wages for different worker skill levels. This has the possibility of getting us more quickly to wage levels that the market would eventually reach after he sustained period of high-pressure growth, and thus make growth more equitable. Read Benjamin Schoefer, “Collective bargaining as a path to more equitable wage growth in the United States,” in which he writes: “Rising wage inequality in the United States means that the median wage has not kept pace with the mean wage in recent decades. Moreover, the United States has performed worse in this regard than many of its international peers … I will first examine the decoupling of median wage growth from mean wage growth and, in turn, the decoupling from productivity growth … I will then consider the role of collective bargaining institutions in these patterns … Finally, I will review policies the United States could pursue that have the potential to foster more equitable wage growth … industrywide and cross-industry wage boards to set minimum wages for workers in the middle rungs of the wage distribution, not just those on the lower rungs … The coronavirus recession … has led to a uniquely slack labor market among many segments of the economy and has hurt the bargaining position of many low-wage workers in particular. Without strong and sustained wage growth that is broadly distributed across the U.S. labor force, the eventual economic recovery will almost certainly take longer to reach the vast majority of U.S. workers.”

Worthy reads not from Equitable Growth:

1. This, from Bloomberg Businessweek, is well worth reading If you want to orient yourself as to the likely changes in the macro configuration of the world economy that we are likely to see over the next generation. Read Tom Orlik and  Bjorn Van Roye,”An Economist’s Guide to the World in 2050,” in which they write: “China’s rise is just one part of a larger shift that’s already under way and looks set to accelerate in the decades ahead … A remarkable period of stability, stretching from the end of World War II through to the early 21st century, is coming to an end. The center of economic gravity is shifting from West to East, from advanced economies to emerging markets, from free markets to state controls and from established democracies to authoritarian and populist rulers. The transition is already upending global politics, economics and markets. This is just the beginning … For the past 40 years, since the Reagan and Thatcher revolutions, the free-market ideal has been the organizing principle for the global economy … The rise of alternative models, in government as in economics, poses questions that the West has so far proved unable to answer … For businesses, investors and policy makers, history isn’t over. It’s just getting started.”
2. The very intelligent Michael Schuman believes that the reign of Xi Jinping may well be a disaster for China’s future economic growth. So far, China has managed to hit the sweet spot between market, forward-looking industrial-policy guidance, and command-and-control to keep financial flows that would be totally unsustainable in a neoliberal market economy somehow in balance. This has been an extremely complex balancing act. Schuman thinks that Xi Jinping does not understand how it has been accomplished. He is focused on cementing his power and eliminating any possibilities of the growth of strong forces pushing for political liberalization. Achieving those goals may well be incompatible with maintaining the balance that has produced such rapid economic growth. Yet China has done many things over the past four decades that outside observers, especially those of us of even slightly neoliberal persuasion, thought would be impossible. Read his “The Undoing of China’s Economic Miracle,” in which he writes: “The country’s paramount leader is turning away from reforms that helped it grow and develop. That will have consequences beyond its borders: China’s economic “miracle” wasn’t that miraculous. The country’s high-octane ascent over the past 40 years is, in reality, a triumph of basic economic principles: As the state gave way to the market, private enterprise and trade flourished, growth quickened, and incomes soared. This simple lesson appears, however, to be lost on Xi Jinping … Classically trained economists frown upon Xi’s program. He’s ticking just about every box of what not to do to propel incomes and innovation. Yet we shouldn’t immediately dismiss his plans as doomed to fail. As a gargantuan market of 1.4 billion people, China can develop local companies of size and scope without bothering much with the outside world. (Ma’s Ant is a prime example.) If the program works, economists may have to rewrite their textbooks. Yet the undertaking is fraught with risks. By favoring the state sector, Xi is funneling valuable money and talent to notoriously bloated and inefficient government enterprises instead of far more nimble and creative private firms. The negative effect shows up in miserably poor productivity—a disaster for an aging society still catching up with the richest nations—and mounting debt, now nearly three times the size of national output … Xi is preparing for protracted conflict between the world’s two largest economies by attempting to fireproof China from measures President-elect Joe Biden might use against him. Yet in doing so, he is also repositioning the Chinese economy in the world.”