Category: Economic Stability

Piketty’s data deserve better analysis

Posted on by Carter Price

There was buzz across the economics blogosphere and twitterverse over the Memorial Day weekend and into the work week today about Chris Giles’ Friday afternoon Financial Times piece claiming that data errors in the best-selling “Capital in the 21st Century” invalidate author Thomas Piketty’s results on the relationship between economic growth and the concentration of wealth.

Giles’ claims attracted substantial attention in no small part because his attack strikes at the Paris School of Economics professor’s data, which have been nearly universally praised for thoroughness—even by critics who disagree with the conclusions that he draws from them. While it is clear that Giles spent some time looking over Piketty’s spreadsheets, he jumps to conclusions that are not supported by the points he raises.

Indeed, my examination of Giles’ analysis and the spreadsheets that Piketty provided to the public indicate that perhaps the key claim by Giles is erroneous. Giles bases his argument that there was not an increase in wealth concentration in the United Kingdom but rather a decrease on a single data point from a 2010 wealth survey in the UK. Because that survey did not exist in 2000, it cannot be directly compared to other time series data without harmonization. The entirety of the drop Giles claims is occurring can be explained by switching from one survey to another.

In contrast, Piketty went through the different surveys and sources to stitch together a coherent data set that is presumably free of these discontinuities. In order to do his comprehensive analysis of the change in wealth inequality over time, Piketty had to look at disparate data sources, harmonized them (so that he could compare apples to apples), and draw conclusions. Wealth is notoriously difficult to measure, which makes working with wealth data especially tricky. Piketty has been exceptionally transparent with the data sets used in his book (the data can be found here).

Giles uses the raw, non-harmonized wealth data to claim that wealth inequality in the United States has been flat and that it has been decreasing in the United Kingdom. Yet by combining these non-harmonized data sets, Giles is comparing apples to oranges. To say that this deviates from best data practices would be an understatement. In addition, as Piketty notes in his response to the article, recent work by Emmanuel Saez and Gabriel Zucman using better data and more sophisticated methods show an increase in wealth concentration in the United States. I am not aware of comparable analysis for the United Kingdom to confirm or refute those claims made by Giles.

Many of Giles’ other critiques highlight the difficult choices that economists must make when working with complicated data. Some of his points about data mistakes suggest that Piketty may need to update a few figures and data points in a second edition of his book. Just like many textbooks (and other publications such as the Financial Times) contain errata, so will this 700-page empirical work. Some of Giles’ points do require a more thorough response from Piketty than the one he has already given, especially Giles’ claim that Piketty sometimes cherry-picks his data. None, however, seem likely to ultimately undermine Piketty’s basic empirical insight—that across time, societies tend toward an ever-increasing consolidation of wealth in the hands of the few.

In this light, Giles’ critique of Piketty’s research jumps the shark when he compares it to the Reinhart and Rogoff spreadsheet scandal, where their widely-cited debt study was used to push fiscal austerity policies for debt-burdened economies was debunked when a graduate student got his hands on their spreadsheets and discovered that they had made a summation error that materially altered their conclusions.

Piketty may have made a few errors, and we certainly look forward to future work that corrects any errata and more deeply works through any questionable data decisions. He also did not always provide enough detail about his harmonization methods—his explanation for the wealth data can be found here on pages 56-62—so providing more details in the future would be wise. But the sum total of his work and that of others suggests that the basic insights that have made Piketty’s “Capital in the 21st Century” a phenomenon in economics are solid.

No piece of research is above reproach and, particularly given the volume of work in the book, this research will require extensive study for confirmation. That said, the critique by Giles has much less than meets the eye.

I’m not alone in drawing this conclusion after a careful look at Giles’ points and Piketty’s data. Some of the best analysis on this that I read over the long weekend includes:

  • Neil Irwin and Justin Wolfers at The Upshot both do great work putting the debate in context.
  • Mike Konczal also does a good job responding to the points individually.
  • For more, I also recommend looking at the Twitter dialogue between Gabriel Zucman (@gabriel_zucman) and Scott Winship (@swinshi) on Saturday.
  • Roosevelt Institute: In “The FT Gets Piketty’s Capital Argument Wrong,” the think tank notes that Giles writes, “The central theme of Prof Piketty’s work is that wealth inequalities are heading back up to levels last seen before the first world war.” The institute says “this is incorrect, or at least badly stated. Piketty’s central theme is not that inequality of the ownership of wealth is going to skyrocket.”
  • Washington Post: A piece in Wonkblog titled “Is Piketty’s ‘Capital’ full of mistakes?” starts with this—“The nine most terrifying words in the English language for a researcher are: You made spreadsheet errors like Reinhart and Rogoff did.”  Wonkblog then concludes that “this doesn’t seem to be a Reinhart and Rogoff situation. Their Excel errors really did change their conclusions. Piketty’s don’t.
  • Bloomberg: The wire service published a piece titled “Piketty Rejects ‘Ridiculous Allegations of Data Flaws,’” in which the wire service notes that Scott Winship, a fellow at the New York-based Manhattan Institute for Policy Research, said the newspaper’s allegations aren’t ‘significant for the fundamental question of whether Piketty’s thesis is right or not.’ Bloomberg also noted that James Hamilton, an economics professor at the University of California, San Diego, said there’s ‘abundant evidence’ of widening inequality ‘from a good many sources besides Piketty.’

 

The aftermath of wage collusion in Silicon Valley

Posted on by Carter Price

The settlement is in—some of Silicon Valley’s biggest and most influential technology companies late last week agreed to pay $324.5 million to settle a class-action law suit brought by their employees alleging collusion to suppress their wages.  After an anti-trust investigation, the U.S. Department of Justice filed a complaint in September of 2010.  The companies eventually settled with the department and stopped the practice. The targeted workers and the companies involved agreed to settle last month, with the amount announced last week.

But will there be any repercussions from this long legal tangle between employers and employees in one of the leading industries in the country? A great series of stories on Pando Daily lay bare the alleged efforts of big tech companies (including Apple Inc., Intel Corp., and Google Inc.) for a secret “do not hire” cartel deterring these companies from hiring each other’s workers, which artificially suppressed their workers’ wages. In the mid-2000s there was a high demand for programmers and engineers, which pushed up their wages. To combat higher pay, Apple’s Steve Jobs and Google’s Eric Schmidt allegedly agreed to stop trying to hire each other’s workers, using their size to pressure other firms to join them.

Yet some conservative economists, among them George Mason University economics professor Tyler Cowen on his popular Marginal Revolution blog, argue this kind of cartel is not terribly important because some firms will cheat, causing the system to fall apart, while new workers will figure out that there is a cartel and go work somewhere else for more money. But this particular case of wage collusion lasted from 2005 to 2009 and took the Justice Department to solve this problem, not the market.

In fact, this series of cases fit in with the narrative of French economist Thomas Piketty and his book “Capital in the 21st Century.” Piketty describes some of the fundamental economic problems facing the developed world, emphasizing those related to earnings from work versus investment. Piketty’s conservative critics make much of the fact that the author targets the “supermanagers” of companies as culprits in the rise in income inequality in the developed economies, in particular the United States. On the editorial pages of The Wall Street Journal, for example, columnist Holman Jenkins argues that Piketty wants to pitchfork the idle rich but “somewhat disconsolately for his story, the U.S. has exhibited the wrong kind of income inequality, caused not by rising inheritances but soaring “labor earnings” of the managerial class, which he attributes to self-dealing by executives and boards. “

Piketty does discuss at length such self-dealing, mostly in order to note that labor earnings in the C-suite do not seem at all connected to any corresponding productively gains compared to these supermanagers’ steely-eyed focus on wages and productivity among their companies’ workforces. And now comes along a legal settlement in Silicon Valley that proves Piketty’s point in spades.

There are at least three concrete steps that can be taken to help combat future abuses. The first is to improve access to salary information. The Bureau of Labor Statistics provides some information about salary norms by occupation and location. More important are websites such as Glass Door that encourage people to share salary information. As participation increases, there will be less room for wage discrimination not just from executive to employees but also by sex, race, and ethnicity. Earlier this year, President Obama signed an executive order preventing federal contractors from discouraging workers from talking about pay. Legislation could expand this to protect all workers.

The second is to bring new analytic tools to investigating business collusion charges. Law enforcement and intelligence agencies have brought a wide array of new analytic tools to bear on problems of terrorism. White-collar crimes need the same rigor. The financial crisis was extraordinarily costly for not just the United States but the whole world, yet we spend only a miniscule fraction of the resources fighting business crimes as we do on national defense.

And third, policymakers could change the penalties to target the actual offenders, in this case, the colluding executives. Lawmakers could ensure that these rogue executives get stiff fines and even jail time. Firms can also act by using clawback provisions to recoup losses from fines. These actions would help deter future collusion.

In the aftermath of wage collusion in Silicon Valley, these suits and settlements highlight the need to modernize our systems to detect and deter such labor abuses, which are a problem for white collar workers, too.

Carter Price is a Senior Mathematician focusing on quantitative analysis of U.S. economic policy at the Washington Center for Equitable Growth.

Economic inequality and the parenting time divide

Posted on by Ariel Kalil

Members of Congress across the political spectrum agree with the Obama administration on the importance of a quality education for all of our nation’s children. Indeed, there may well be a bipartisan consensus in Washington that all children, including low- and moderate-income ones, should have access to pre-kindergarten. Certainly academic research demonstrates that high quality education programs for young children are associated with improved outcomes later in life—even decades later—which is why growing up in a low-income family often consigns those kids to being low-wage earners when they grow up.

But learning in fact begins at home at a very early age and remains fundamental to success through high school. To break the cycle of economic disadvantage, we must consider the evidence on inequality and parenting. When we talk about economic inequality, we should remember how current conditions are likely to exacerbate inequality for future generations given the key role family plays in the intergenerational transmission of economic status. Few people believe that there should be complete independence between parents’ and children’s economic success, but in the race to the top, new research shows highly-educated families are at an ever-greater advantage.

Economists, psychologists, and others who study children’s achievement and well-being often talk about investments that parents make in their children—both money and time—the myriad things parents do to help their children develop successfully and reach their full potential. But researchers have not until recently thought about parents’ time investments in children as a mechanism for the intergenerational transmission of economic status. Yet we know that the amount of parents’ time spent talking, playing, reading, helping with homework, facilitating positive interactions with peers and other adults, and exploring the outside world are all important ingredients of parenting that help to ensure children’s development and long-term prospects.

We are learning more about how parents across the income spectrum spend their time with their children. The economist Jonathan Guryan and his colleagues used data from national time diaries to show that mothers with a college education or greater spend roughly 4.5 hours more per week directly interacting with their children than mothers with a high school degree or less. This relationship is noteworthy because higher-educated parents also spend more time working outside the home.

Interestingly, based on mothers’ patterns of time use across a variety of activities, these researchers posited that highly educated parents, more so than less-educated parents, view time with children as an investment behavior with which to increase children’s human capital. My own national time use research, with Professor Rebecca Ryan and one of our students, Michael Corey, finds evidence for this. Highly educated parents not only spend more time with their children than do less-educated parents, they spend that time differently. College-educated mothers are more efficient in their parental time investments by tailoring specific activities to children’s developmental stage.

In other words, highly educated mothers shift the composition of their time as the child grows in ways that adapt to children’s development at different developmental stages. When children are in preschool, for example, college-educated mothers focus their time with children on reading and problem solving. This is precisely when time spent in learning activities best prepare children for school entry. During the middle school years, college-educated parents shift their attention to the management of children’s life outside the home – at precisely the ages when parental management is a key, developmentally appropriate input.

Research indicates that non-college educated parents do not match their time investments to children’s developmental stage in this fashion. To the extent that highly educated parents increasingly adopt these patterns of investing in their children, the destinies of the children of college-educated parents may diverge even farther from those of their less-advantaged peers.

We still don’t know precisely why these patterns have emerged. It is possible that mothers learn about child development during college—such that highly educated mothers are consciously acting on knowledge attained in formal schooling. But college-educated mothers are also more likely to have higher incomes, to be married, and to have spouses who are more involved in child rearing; they may also have more flexible work schedules due their different types of employment. Unlike less-educated mothers, they can marshal all of these resources to help their children explore their full potential.

Regardless of the reason, we do know there are many direct and indirect policy measures to help support families and promote more equal access to opportunities for children. This why Congress and the Obama administration need to keep their eye on what matters for children and how we can support parents from all kinds of families be the best parents they can be. From providing access to high-quality education and health care for all children, to helping ensure parents who work can rise above poverty, as a society, we must consider our role in supporting every child’s ability to reach his or her full potential.

Ariel Kalil is a Professor in the Harris School of Public Policy at the University of Chicago, where she directs the Center for Human Potential and Public Policy.

 

Can letting kids watch TV make them better students?

Posted on by Pedro Spivakowsky-Gonzales

With the end of the 2013-14 school year, families across the nation are turning to decisions about what to do with their kids over summer vacation. Some will be looking at summer camps away from home, others at summer sports or academic camps in their communities, and still others at how to keep track of their kids in the neighborhood while at work.

For those families at the low and middle rungs of the economic ladder, those without the resources to send children to camp or to other organized activities, the decision sadly is often whether to park the kids in front of the TV all summer or leave them to roam the neighborhood. But how will letting kids watch TV affect their academic performance?

This year’s winner of the John Bates Clark Medal—known as the ‘Baby Nobel’ prize in Economics because it is awarded annually to the best economist under forty—may have an answer. Matt Gentzkow, a Professor of Economics at the Chicago Booth School of Business won his award in part because of his application of empirical methods in microeconomics to interesting questions.

This announcement may also be celebrated by TV-loving children across America, who would likely approve of the findings in his 2008 paper Preschool Television Viewing and Adolescent Test Scores: Historical Evidence from the Coleman Study (with fellow Chicago Professor Jesse Shapiro). In this paper, Gentzkow and Shapiro find that watching TV in early childhood did not negatively affect standardized test scores in adolescence for the first generation raised watching TV, born between 1948 and 1954.

Those children are now the grandparents and great-grandparents of today’s children, who can happily point to these research findings as they attempt to convince their elders not to take away the remote (with the argument that learning from television is even remotely possible). Of course, what is shown on TV these days is not the same as what was shown on TV then, but kids might argue that whether TV today is more or less educational is a question that can only be resolved with further observation.

Seriously though, the paper finds that the (marginally statistically significant) positive impact of TV-viewing at a young age was largest for children from underprivileged households, including those where English was not the primary language and where mothers had less than a high school education. In contrast, according to Gentzkow and Shapiro, “children whose home environments were more conducive to learning were more negatively impacted by television.”

The reason they provide is that for children in privileged households, time spent not watching TV was more likely to be spent on activities conducive to higher test scores: “this evidence would lead one to expect that television is more beneficial to children from more disadvantaged backgrounds, because for such children the activities crowded out by television are likely to be less cognitively stimulating.”

Even if the authors find that watching TV may not be as harmful as the vast majority of pediatricians believe, their assessment of the differential impact of television on children from privileged and underprivileged households suggests that there are things other than excessively watching television that children could be doing that might help their cognitive development more than sitting in front of a television screen.

For example, children could attend pre-school or other forms of organized educational programming. They could read or engage in physical exercise. In addition, they could use digital technology, which has created a whole host of other activities that might foster cognitive development more effectively than television, such as certain interactive games and applications. Of course, whether these activities are mostly beneficial for the children depends crucially on what they are trying to teach.

If Gentzkow’s research on how watching television in early childhood affects later educational outcomes can lead some to consider alternatives to television for their educational value, then someday children may appreciate this Clark Medalist not for the excuse to watch television, but for the excuse not to.

 

Pedro Spivakovsky-Gonzalez is a junior economist at the Washington Center for Equitable Growth

Extended unemployment insurance remains critical

Posted on by Jesse Rothstein

Unemployment Insurance is designed to help workers who are displaced, through no fault of their own, until they can find new jobs. It is natural to extend these benefits when the labor market is weak and job searches take longer to result in a new job. But benefits should not be so generous that the recipients delay taking new jobs.

Balancing these two policy prescriptions is difficult politically. Yet new analyses of recent data covering unemployed workers during the Great Recession and its aftermath indicate that the impact of unprecedented extensions of Unemployment Insurance on job uptake were smaller than previously thought while the benefits were extremely important to maintaining family incomes. The program helped sustain families and communities during an unusually long period of weak labor demand, helping to promote long-term labor market resiliency and higher future prosperity by helping the long-term unemployed remain out of poverty and attached to the labor market.

Extended Unemployment Insurance benefits expired at the end of 2013, and Congress is now considering whether and how to reinstate them. The new data and analysis detailed in this issue brief—based on the roll-out of extended benefits in 2008-2010 and the roll-back that began in late 2011—indicate that old views of the design of Unemployment Insurance need some updating. Specifically, the downsides of UI extensions are smaller than in past economic downturns, and there are some previously unanticipated upsides. Congress should take these findings seriously as it considers a possible reauthorization of the Emergency Unemployment Compensation program this year.

Read a PDF of the full document

 

Current labor market conditions

Unemployment insurance extensions are only authorized in weak labor markets, and understanding their effects requires understanding the context in which they operate. Although the Great Recession officially ended in 2009, a full five years later the labor market is still quite weak. The unemployment rate has fallen, from a peak of 10.0 percent in October 2009 to 6.7 percent in March 2014. But the share of the adult population that is employed is only 58.9 percent, down a full 4.0 percentage points from before the Great Recession and lower than at any point between 1984—when female labor force participation was much lower than today—and 2009.  And the long-term unemployment rate, the share of the labor force that has been out of work for six months or longer, remains extremely high.

This crisis has been devastating for working people. More than 30 million “person-years” of employment were lost.[1]  This represents potential earnings that vanished without a trace, cutting deeply into family budgets. And the overhang from the extended period of extreme labor market weakness will extend the pain much further, in at least three distinct ways.  First, the weak labor market held down wages even for those workers who kept their jobs—the median full-time worker has not had a real wage increase in a decade. Second, workers who lost their jobs will probably see long-run declines in their earnings, as high as 20 percent per year for as long as 20 years.[2] Third, the cohorts of young people who have entered the labor market since the crisis began have had trouble getting their feet on the bottom rungs of the career ladder. This, too, will have long-lasting effects, depressing wages for much of their lives.[3]

The most important component of the policy response to a shock of this magnitude must be to ensure that the economy recovers quickly so that the damage does not continue. On this score, policymakers in Washington have done exceptionally poorly.

A second important component is to cushion people from the ill effects of the crisis while it lasts. Unemployment Insurance is a very important part of this cushion. Ideally, it should help fill in the hole in household budgets that is created when a worker is laid off, allowing the family to maintain its consumption during the job search.

The design of unemployment insurance policy trades off two objectives: We want to insure workers against job losses, but we don’t want to create incentives for workers who have lost their jobs to delay finding new work. The former pushes us toward more generous benefits—higher replacement rates and longer durations—while the latter consideration pushes in the opposite direction.

There has always been good reason to think that the insurance function of Unemployment Insurance is more important in weak labor markets. When there are few jobs to be had, it takes displaced workers a long time to find new jobs and job seekers thus need more support. At the same time, incentive problems are less severe in weak labor markets—jobless workers will be loathe to turn down an available job in the hope of something better, and even if these incentives do dissuade a worker from taking a job, there will be a long line of other workers ready to fill the open position, with little net impact.

This argument provides a rationale for a policy of making Unemployment Insurance more generous in downturns. And indeed this is what we saw early in the Great Recession:  Where traditional UI benefits have averaged about $300 per week for no more than 26 weeks during the early years of the crisis, Congress both raised benefit levels, by $25 per week as part of the 2009 Recovery Act, and dramatically extended their duration, to as many as 99 weeks through much of 2010 and 2011.

Although this expansion was entirely consistent with the best understanding of optimal policy, it was quite controversial. Opponents argued that it would dissuade displaced workers from taking new jobs, and some have even attributed nearly the entire rise in unemployment during 2007-2009 to the disincentive effects created by extended Unemployment Insurance. [4] But these arguments are not well founded in the evidence. New data indicate that the recent extensions reduced job-finding rates [or job search efforts] only minimally.

Examining the most recent data

The roll-out of extended Unemployment Insurance benefits in 2008-2010 and the roll-back that began in late 2011—UI durations are now only about a quarter of their 2009-10 maximum—created a natural experiment allowing researchers to study the effects of extended UI benefits in weak labor markets. These studies indicate that old views of the design of Unemployment Insurance need some updating. Specifically, the downsides of UI extensions are smaller than in the past, and there are some previously unanticipated upsides.

The evidence indicates that extended Unemployment Insurance does reduce the likelihood that an unemployed worker will find a job in any given month, but by much less than we previously thought.  Moreover, extended UI benefits have an important countervailing effect:  Many unemployed workers who would have given up their job searches and exited the labor force are persuaded to remain in the job market because benefits are available only to those actively searching for work.  This effect is at least as large as the effect on job finding.[5]

The effect of Unemployment Insurance extensions on labor force participation may turn out to be very important in the long run.  An important concern as the weak labor market drags on is that workers who have been out of work for years or more may become detached from the labor market and unable to return to work. Any such effect would cast a long shadow over our future prosperity.[6] Although evidence is limited, the data appear to indicate that UI extensions help to reduce worker disconnection from the labor market, [7] and thus play an important role in returning our economy to eventual health.

Despite the accumulation of evidence that UI benefits are doing little to dissuade displaced workers from finding jobs, and may even be having a positive net effect on the labor market, the UI extensions put in place in 2008-2010 have been allowed to expire. Benefit durations have fallen to only 26 weeks in most states, just over a quarter of their peak level, and in some states they are much lower. North Carolina, for example, has cut durations to as short as 12 weeks, and has reduced benefit levels as well. As a consequence of these cuts, hundreds of thousands of workers have been thrown off Unemployment Insurance who might otherwise have received it.

Not surprisingly, this has done nothing to improve the labor market, which is limping along just as slowly now as it was in 2012 and 2013, before the UI extensions expired. There remains no sign that employers are having trouble filling most jobs, as would be expected if UI benefits were discouraging recipients from taking work. The evidence still points overwhelmingly to labor demand shortfalls as the primary problem.

The cutback in UI benefits has, however, imposed great hardships on families and their communities. In recent work with Rob Valletta of the Federal Reserve Bank of San Francisco, I examined the trajectory of family incomes from initial employment, through job losses to spells of UI receipt, and then through UI exhaustion at the end of the spell.[8]  We found what one would expect: Earnings fall dramatically when a worker loses his or her job, and UI benefits make up only about half of that loss on average.

052614-UI-webgraphic

When these benefits expire, family income takes another dramatic fall.  Some families turn to the Supplemental Nutrition Assistance Program (formerly called food stamps) or other government assistance programs, while others turn to early retirement and Social Security payments for support. But most families are able to do neither, and thus must live with sharply reduced incomes. The average recent UI exhaustee’s family has only 70 percent of its pre-displacement income. Many families, particularly those that previously had a single earner, have much less than this. These families are likely to have exhausted their savings long before, and thus face real hardship. Well over one-third of exhaustee families fall below the poverty line.

This is devastating to families. It also hurts their communities: Families without income to spend cannot support local merchants or service providers or make rent or mortgage payments, so the expiration of UI sends ripples throughout the local economy. Needless to say, few local economies can afford this right now, and the drag created by the expiration and exhaustion of Unemployment Insurance threatens to bring an already slow recovery to a dead stop.

Extended UI benefits cannot be the whole of our policy response to the ongoing weakness of the labor market. Many workers displaced in the downturn have outlasted even the maximum benefit extensions, and will need other forms of support to allow them to survive. And UI extensions alone will not provide enough of a fiscal boost to support a robust recovery. But the fact that this one tool will not finish the job cannot justify not starting. And the evidence that has accumulated during the Great Recession and the subsequent tepid recovery demonstrates that Unemployment Insurance is a useful and important tool, and that the recovery would have been even weaker and slower without it.

Jesse Rothstein is associate professor of public policy and economics at the University of California, Berkeley. He joined the Berkeley faculty in 2009. He spent the 2009-10 academic year in public service, first as Senior Economist at the U.S. Council of Economic Advisers and then as Chief Economist at the U.S. Department of Labor. Earlier, he was assistant professor of economics and public affairs at Princeton University. He received his Ph.D. in economics from UC Berkeley in 2003. 

Endnotes

[1] A person-year represents one person employed for one year. I calculate this as the increase in the number of person-years of unemployment from what would have obtained had the unemployment rate remained at its November 2007 level of 4.7%. This assumes that the weakness of the labor market was not responsible for the sharp decline in the labor force participation rate, so is a substantial underestimate.

[2] See Jacobson, Louis S., Robert J. LaLonde, and Daniel G. Sullivan. “Earnings losses of displaced workers.” The American Economic Review (1993): 685-709; von Wachter, Till M., Jae Song, and Joyce Manchester. “Long-Term Earnings Losses due to Job Separation During the 1982 Recession: An Analysis Using Longitudinal Administrative Data from 1974 to 2004.” Working paper (2009).

[3] See Oreopoulos, Philip, Till von Wachter, and Andrew Heisz. “The short-and long-term career effects of graduating in a recession.” American Economic Journal: Applied Economics 4.1 (2012): 1-29; Oyer, Paul. “The making of an investment banker: Stock market shocks, career choice, and lifetime income.” The Journal of Finance 63.6 (2008): 2601-2628; Kahn, Lisa B. “The long-term labor market consequences of graduating from college in a bad economy.” Labour Economics 17.2 (2010): 303-316.

[4] Barro, Robert.  “The Folly of Subsidizing Unemployment,” Wall Street Journal, August 30, 2010. http://online.wsj.com/news/articles/SB10001424052748703959704575454431457720188. See also, Hagedorn, Marcus, Fatih Karahan, Iourii Manovskii, and Kurt Mitman, “Unemployment Benefits and Unemployment in the Great Recession: The Role of Macro Effects.” National Bureau of Economic Research working paper 19499, 2013.

[5] Rothstein, Jesse. “Unemployment insurance and job search in the Great Recession.” Brookings Papers on Economic Activity Fall (2011): 143-213; and Farber, Henry S., and Robert G. Valletta. Do extended unemployment benefits lengthen unemployment spells? Evidence from recent cycles in the US labor market. Working paper no. W19048, National Bureau of Economic Research (2013).

[6] See DeLong, J. Bradford, and Lawrence H. Summers. “Fiscal Policy in a Depressed Economy.” Brookings Papers on Economic Activity (2012): 233-297.

[7] Rothstein (2011); Farber and Valletta (2013).

[8] Rothstein, Jesse, and Robert G. Valletta. Scraping by: Income and program participation after the loss of extended unemployment benefits. Federal Reserve Bank of San Francisco working paper no. 2014-6 (2014).

 

Thomas Piketty’s big book: What do you really need to know?

Posted on by Heather Boushey

(Heather Boushey, executive director and senior economist for the Washington Center for Equitable Growth, appeared on the PBS News Hour on May 13 alongside Kevin Hassett of the American Enterprise Institute and moderator Gwen Ifill of PBS to debate the importance of Thomas Piketty’s new best-selling book “Capital in the 21st Century.” Her column below encapsulates her views on the book as discussed on the show. You can find her review of the book here.)

People continue to ask me what they need to know about economist Thomas Piketty’s 700-page tome, “Capital in the 21st Century.” I read the book, which is genuinely engaging, and I recommend you do the same. But I get that it’s a big, academic book with quite a few economic equations, so let me give you a simple answer for what you need to know.

What I learned from reading Piketty is that he has an impressive treasure trove of data (much of it compiled with his co-authors) and the data show that today’s income inequality is calcifying into tomorrow’s wealth inequality, which has serious implications for economic growth, the possibility of the everyday Americans moving up the income ladder, and our democracy.

The importance of Piketty’s perspective comes from his attention to two often-overlooked ways of understanding modern economies. The first is his focus on understanding how income flows become capital stocks. The second is his focus on the trends at the tippity-top of the economic distribution—the top 1 percent—where the biggest accumulations of capital have occurred. Both developments point to the growing economic inequality of the past 40 years devouring our future. This dynamic is troubling indeed for the promise of the American Dream. So let’s look at each of these insights in turn.

Income and capital

When Forbes puts out its new list of the top-earning chief executives, Piketty’s data push us to look not only at their current income, but also how that income will accumulate over time. As an economist, I get that inequality can create an incentive to work harder. Increasing pay for workers with greater skills, talent or effort is good, for a more skilled workforce results in a more productive economy.

But we don’t talk much about how today’s high earners become tomorrow’s propertied elite. Piketty brings back the idea of the “rentier,” the person (or, more likely, the family) whose income comes from their stock of accumulated wealth, through property rents or income from investments. Today’s flow of income becomes tomorrow’s stock of capital in a variety of ways. First, many senior corporate executives and other professionals are paid millions of dollars in salary—much of which they invest—alongside millions more worth of stock options that convert into capital. Second, larger investments tend to earn a higher return because they can accommodate greater risk. If you have more capital, it’s easier to make even more. And finally, large amounts of accumulated capital cannot easily be spent by these investors within in their lifetime, leaving it to their heirs.

Leaving an inheritance isn’t necessarily a bad thing for the children of the very wealthy, but it does mean that a nation’s wealth grows increasingly concentrated among those born into very affluent families. A vibrant economy requires a living workforce with incentives to be the best and create the next big thing—be it the iPhone, the electric car, or the know-how to cure cancer through new genomic discoveries. The opportunity to be the best may well be limited by the concentration of wealth at the very top of society because future inventors will not have the wherewithal to learn and study, invent and start a company. Many Americans boast ancestors who left the Old World because they wanted their chance to make it big; they didn’t want to live in a society dominated by families with “old money.”

Piketty illustrates what happens in a society where capital overwhelmingly trumps labor by pointing to several European novels of the 18th century, where the characters focus on marrying well rather than improving their productive endeavors. Piketty’s data show this is where we’re headed in the United States today. That’s not a recipe for a vibrant economy.

The growing wealth of the wealthiest

Piketty then explores where this wealth is really concentrated. He wants us to recognize that today’s rising inequality isn’t about too many falling behind; it’s about only a few pulling very far ahead—a dynamic that runs counter to how Americans think about inequality. Americans often discuss inequality in terms of “fairness,” which in turn leads policymakers to frame their efforts to foster a more equal society in terms of creating “equality of opportunity.” The American Dream is premised on the idea that anyone can make it to the top of the economic ladder, and much of our political and policy rhetoric is organized around the idea that being born into a low-income family should not prohibit individuals from reaching their highest potential.

What’s more, the idea that there may be something wrong with a few individuals taking in so much of our nation’s income isn’t even on the table because of the belief that “they earned it.” Americans tend to embrace a form of capitalism that is all about risk-taking and the subsequent big pay-off—the reward that incentivizes taking those risks in the first place. Yet Piketty spells out several important reasons to look at the very top and question whether this is the kind of capitalism our economy is fostering today and into the future. He concludes that the vast majority of us are getting a raw deal because the rewards going to the top one percent are not justified by their risk-taking. Paying top dollar is supposed to bring top talent and top productivity, yet Piketty shows that we cannot look to productivity to explain the exceedingly high wages accruing to the top one percent. In fact, he calls doing so “illusory.”

The rise in U.S. inequality stems from increased pay specifically to the top one percent of income earners. As a test, Piketty compares the skills of the top one percent with the next nine percent, who are doing very well relative to the remaining 90 percent of income earners but not so much compared to the top one percent, to see if they differ. They don’t. So skills cannot explain the rise in incomes in the top one percent relative to the next nine percent. There is something else is going on that is not benefiting our economy.

Furthermore, Piketty warns that growing wealth at the very top has nothing to do with skills. It is important to ensure that the children of all Americans have a fair shot at opportunity But given the growing importance of inherited wealth—and the increasingly well-documented importance of both financial capital and human capital that wealthier parents are able to pass on in the form of much better early childhood education, attendance at better primary and secondary schools, important connections when applying to college and those first jobs—what is equality of opportunity?

The Piketty moment

In the two months since Piketty’s book was published in English, economists have been arguing over his central economic premise—the idea that so long as the rate of return to capital, r, is greater than the rate of economic growth, g, then economic inequality will continue to rise. In a recent speech, Jason Furman, the Chair of the White House Council of Economic Advisers, succinctly summarized the nut of the issue: “Intuitively, wealth grows with r while wages grow with g.” Thus, as long as the rate of return on capital exceeds the rate of economic growth, income from wealth is greater than that from wages.

That’s the past devouring the future—and it happens because income flows become capital stocks. The central take-away here is that in order to create a vibrant economy and a strong middle class we need to pay attention not only to wages, but also capital. This is being done by Piketty and his colleagues through the sheer breadth and quality of Piketty’s (and his colleagues’) impressive data. Indeed, already Piketty had a ready-made audience for his new book, because it was Piketty’s 2003 paper in the Quarterly Journal of Economics (with Emmanuel Saez) that first made it possible for us to see what was happening in the “top 1 percent.”

Now, “Capital in the 21st Century” expands our knowledge about global inequality. The data alone are a seminal contribution to economics that is a good thing no matter what you think of how he interprets the data.

 

 

“Expanding Economic Opportunity for Women and Families”

Posted on by Ed Paisley

Heather Boushey, Executive Director and Chief Economist, Washington Center for Equitable Growth, testifying before the  U.S. Senate Budget Committee  on “Expanding Economic Opportunity for Women and Families”

Enabling Women to Succeed Builds Strong Families and a Growing Economy

I would like to thank Chairman Murray, Ranking Member Sessions, and the rest of the Committee for inviting me here today to testify.

My name is Heather Boushey and I am Executive Director and Chief Economist of the Washington Center for Equitable Growth. The Center is a new project devoted to understanding what grows our economy, with a particular emphasis on understanding whether and how rising levels of economic inequality affect economic growth and stability.

It is an honor to be invited here today to discuss how working women are critical for economic growth, and how federal policy can further advance women’s economic progress. My testimony today highlights the many aspects of our economy where gender inequality and economic inequality go hand in hand—to the detriment of many families and our nation’s economy—and also where economic inequality among women threatens family well-being and economic growth. Government policies can address these gaps in order to help women succeed, so our economy can succeed.

There are three takeaways from my testimony:

  • Women, their families, and the economy have greatly benefited from women’s entry into the labor force.
  • Yet there are barriers to women’s work that manifest themselves differently across the income distribution, which means that not all women realize their full economic potential.
  • There are a variety of ways that federal policy can encourage women’s labor force participation, among them tax credits and early childhood education programs, which provide critical support for low-income workers and working families. Federal policies such as pay equity and flexible work-family policies can grow our economy by encouraging greater labor force participation among women and increasing women’s contributions to family income.

Women’s employment is critical for families and the economy

Women’s entry into the labor force is one of the most important transformations to our labor force in recent decades. Between 1970 and 2000, the share of women in the labor force steadily increased, from 43.3 percent to 59.9 percent.[i] Today, most women work full time. Before the Great Recession in 2007, the share of women who worked 35 hours or more per week was 75.3 percent.[ii]

Women’s movement into the labor force also transformed how they spend their days, which is increasingly important for families’ economic wellbeing.  About two-thirds of mothers are family breadwinners—those bringing home all of the family’s earnings or at least as much as their partners—or co-breadwinners—those bringing home at least one-quarter of their families’ earnings.[iii] Between 1967 and 2007, the most recent economic peak, the share of mothers who were breadwinners or co-breadwinners rose from 27.7 percent to 62.8 percent, and has increased slightly since then as the economic recession wore on.[iv] (See Figure 1.)

Figure 1. Share of mothers who are breadwinners or co-breadwinners, 1967 to 2010

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Figure source: Sarah Jane Glynn, The New Breadwinners: 2010 Update (Washington, DC: Center for American Progress, 2012).

Women’s increased work is important for family incomes and for economic growth. In a paper we released last month, my colleagues Eileen Appelbaum, John Schmitt and I find that between 1979 and 2012, our nation’s gross domestic product increased by almost 11 percent due to women’s changed employment patterns.[v] This translates to about $1.7 trillion in output in today’s dollars. We find that women’s economic contribution is roughly equivalent to U.S. spending on Social Security, Medicare, and Medicaid in 2012.[vi]

Continuing women’s economic progress

Over the past four decades, women have made great economic gains, but more can be done to help women realize their full economic potential. Gender inequality in the workforce still persists between men and women. Additionally, while some women have made great gains in the workforce, too many women are being left behind.

Between 1960 and 2000, women’s labor force participation steadily grew and the gender pay gap steadily shrank. But progress has stalled for more than a decade. The share of women in the labor force has not significantly increased since 2000, hovering a bit below 60 percent.[vii] Similarly, in 2012 the female-to-male earnings ratio remained at about 77 percent, the same as in 2002.[viii]

To be sure, some women have pulled ahead and experienced increases in incomes despite the recent slow-down in women’s entry in the workforce. But not all women have experienced these gains. Between 2000 and 2007, for example, higher-wage women saw their real wages increase by four times the amount of women with poorly paid jobs.[ix]

One reason is that while some women have made progress entering into professional or male-dominated occupations, many women continue to work in female-dominated occupations that still pay low wages. In 2012, 43.6 percent of women worked in just 20 types of jobs, among them secretary, nurse, teacher, and salesperson. (See Table 1.)

Table 1. Top 20 occupations for women and men, 2012

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Women across the wage distribution need more access to work-family policies in order to better balance the dual demands of work and home. Polices such as paid sick days, paid family leave, and schedule flexibility would fill an important inequality gap for workers, especially women. This basket of work-family policies would allow both women and men to remain in the labor force while dealing with life’s emergencies.

The United States is an outlier among other developed nations in not offering work-family policies to workers.[x] Nor have employers in our country stepped in to provide these benefits. In 2013, only 61 percent of workers had employer-provided paid sick days.[xi] An even smaller share of workers—only 12 percent—had access to employer-provided paid leave, which can be used to recover from an illness or care for a family member.[xii]

Despite playing a larger role as family breadwinners, women today continue to be more likely than men to provide care to their families. The lack of family friendly policies make it harder for women to stay employed and provide financially for their families. Women who have to quit their jobs in order to provide care harm their future earnings potential. The U.S. Census Bureau found that new mothers who have access to paid maternity leave are more likely to return to their previous employer. About 98 percent of those who return to the same employer do so at their previous pay level or higher. Conversely, less than 70 percent of women who change employers after giving birth earn the same level of pay or higher.[xiii]

Work-family policies are critical for the strength and size of our labor force. In a 2013 study by Cornell University economists Francine D. Blau and Lawrence M. Kahn, the authors argue that likely one reason why the United States fell from the sixth-highest female labor-force participation rate among 22 Organisation for Economic Co-operation and Development countries in 1990 to the 17th-highest rate in 2010 was because it failed to keep up with other nations and adopt family-friendly policies.[xiv]

Although most workers do not have access to these important policies, low-wage workers disproportionately lack access to policies to balance work and care. Employers often view policies such as paid leave or paid sick days as perks for higher-paid workers. Too often workers who need these benefits the most—such as low- and middle-wage, young, and less-educated workers—do not have access to them. Workers whose wages are in the lowest 25 percent of average wages are approximately four times less likely to have access to paid family and medical leave than those in the highest 25 percent.[xv]

The lack of benefits for women earning the least in our economy is unhealthy for their families, the labor force, and the economy. Poorly paid jobs that do not provide these work-family benefits often offer nonstandard work or varying schedules, which often result in high employee turnover.[xvi] There is more we can do to boost women’s economic progress, and thereby boost the strength of the entire economy.

Federal policy can help working women succeed

Federal policies can encourage women’s work and increase family income. Specifically, these six policies are tailored to achieve the results we need for our families and our economy:

  • The Earned Income Tax Credit, Child Tax Credit, and Child and Dependent Care Tax Credit
  • The 21st Century Work Tax Act
  • Broader and less expensive access to child care and early childhood education programs
  • Work-family policies, such as family and medical leave insurance, as proposed in the Family and Medical Insurance Leave Act
  • Pay equity
  • Raising the minimum wage

Let’s examine each of these policies briefly in more detail.

Tax credits

With most working women playing the dual roles of breadwinner and caregiver, tax credits can help increase the financial security of American families. The Earned Income Tax Credit is a fully refundable tax credit for low-income working families. The credit is larger for those with dependent children.[xvii] The Earned Income Tax Credit is an effective anti-poverty policy that encourages work, especially among low-income single mothers.[xviii] In 2012, this tax credit lifted 6.5 million people out of poverty, according to the Center on Budget and Policy Priorities.[xix]

Additionally, there are two other tax credits that help most working families—rather than just low-income families—offset the cost of raising children. The Child Tax Credit refunds families up to $1,000 per year, per eligible child.[xx] The Child and Dependent Care Tax Credit refunds families a percentage of total child-care costs, usually 20 percent to 35 percent.[xxi] The percentage of expenses refunded to families decreases as income rises. However, unlike the Earned Income Tax Credit or Child Tax Credit, this tax credit is not refundable, which means that only families who owe income taxes can benefit from the credit.[xxii]

Tax credits can benefit both our current and our future workforce. Tax credits provide families with additional income that can be spent on children’s skill development. For example, economist Gordon B. Dahl at the University of California-San Diego and economist Lance Lochner at the University of Western Ontario find evidence that increases in family income due to the Earned Income Tax Credit increase children’s math and reading test scores.[xxiii]

The 21st Century Worker Tax Act

The 21st Century Worker Tax Cut Act, introduced by Chairman Murray, would help promote women’s economic progress in two ways. First, the act proposes a new tax cut that would let low- and middle-income two-earner families keep more of what they earn. The tax cut would provide a 20 percent deduction on a secondary earner’s income.[xxiv] Furthermore, it would provide an additional benefit to low-income two-earner families. The 20 percent deduction would reduce their earned income for calculating the Earned Income Tax Credit and thus provide a higher refundable benefit.[xxv]

This deduction will benefit working mothers and their families in two ways. By deducting a portion of the secondary earner’s income, the cut would encourage mothers’ workforce participation, thereby helping them to better financially support their families. And it would help low-income working mothers offset the costs of child care through an enhanced refundable Earned Income Tax Credit. This would again further encourage mothers’ workforce participation and boost family income. It is estimated that the tax cut would benefit 7.3 million working families.[xxvi]

Second, the 21st Century Worker Act also would help support childless working women. The Act would increase the Earned Income Tax Credit for childless workers to about $1,400 in 2015.[xxvii] Furthermore, it would increase income eligibility and expand the eligibility age for childless workers so more would be eligible for this tax credit.[xxviii] It is estimated that the Act would benefit 13 million childless workers.[xxix] With women making up nearly two-thirds of minimum wage workers,[xxx] this expansion would increase the financial security of low-income women, and provide them with a better shot at the middle class.

Child care

In order to work and remain in the labor force, mothers need affordable high-quality child care. As mentioned earlier, tax credits help families manage their child care expenses, but child care remains very expensive for most families. In 2011, the average cost for a 4-year old in center-based care ranged from less than $4,000 a year to more than $15,000 a year.[xxxi] With most working women earning less than $30,000 a year, many cannot afford care or spend a large portion of their earnings on care.[xxxii]

In addition to making child care less expensive, policy should address so called “child care cliffs” for families receiving child-care assistance. In certain states, a slight increase in parent’s earnings can push them over the income threshold for child-care assistance, which can result in a sharp increase in child care expenses.[xxxiii] Unable to pay for high-quality care, working mothers could turn down a raise or ask for a pay cut to avoid going over the “cliff.”[xxxiv]

Early childhood education is one of the most important investments in our future workforce. But not all child care meets the standards to be considered an early childhood education program. It is important that policies expand access to high-quality early childhood education programs, especially to low-income children. Research finds that children who participate in early childhood education programs are more likely to do better in school, graduate and attend college, and are less likely to get involved with crime and become teenage parents.[xxxv] There are also large benefits to society. An academic study found that for every $1 invested in high-quality preschool, the U.S. economy saves $7 in future public costs due to increases in workers’ productivity, reduced remedial education costs, and reduced crime.[xxxvi]

Head Start

The Bipartisan Budget Act of 2013, also known as the Murray-Ryan Budget Agreement, made important steps toward expanding early childhood education programs to working families. The Act provided about $8.6 billion in Head Start funding and for the President’s Early Head Start-Child Care Partnerships. This amount reversed the entire sequester cut to Head Start, about a half billion more than 2013 funding.[xxxvii] In fiscal year 2014, more low-income families can utilize this comprehensive early childhood program. About 57,000 children were dropped from the program in 2013.[xxxviii]

Family and Medical Leave Insurance

Women need polices to help them balance work and family care so they can remain in the workforce and help grow our economy. Family and medical leave insurance—also known as paid leave—would provide a critical support for workers—men and women alike—allowing them to take temporary leave from work to recover form an illness or care for a loved one.

The Family and Medical Insurance Leave Act of 2013, also known as the FAMILY Act, would relieve the financial burden of taking unpaid time off, providing paid leave for nearly every U.S. worker.[xxxix] Introduced by Representative Rosa DeLauro and Senator Kirsten Gillibrand, the FAMILY Act draws on what we have learned from states that have family leave insurance and from other federal benefit programs.

Today, only three states provide paid leave to their workers: California, New Jersey, and Rhode Island.[xl] These three states provide years of useful experience to other states interested in providing paid leave to their workers. To encourage states to offer paid leave programs, the President’s Fiscal Year 2015 budget requests a $5 million State Paid Leave Fund.[xli]

Paid leave makes it easier for women to work and have higher lifetime earnings. 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.[xlii] Ruhm and Teague also find that moderate leaves—10 weeks to 25 weeks—are associated with higher labor-force participation rates for women.[xliii]

By remaining in the labor force, women are able to earn more during their careers, increasing families’ financial security.[xliv] Furthermore, there is evidence that these work-family policies could also help close the wage gap between workers who provide care and those who do not.[xlv]

Pay equity

The pay gap today persists for all women. On average, working women only make 77 cents for every dollar earned by men.[xlvi] This gap means that women make $11,084 less than men per year in median earnings.[xlvii] If women were paid the same amount as their male counterparts, their additional earnings could help improve their families’ financial security as well as provide additional tax revenue to the government.

Making sure that women receive equal pay for equal work not only affects their lifetime earnings but also strengthens the economy. The Institute for Women’s Policy Research finds that if women had received pay equal to their male counterparts in 2012, the U.S. economy would have produced $447.6 billion in additional income.[xlviii] This is equal to 2.9 percent of 2012 gross domestic product, or about equal to the entire economy of the state of Virginia.[xlix]

The President’s Fiscal Year 2015 budget requests $1.1 million to help eliminate pay discrimination among federal contractors. The funds would be used by the Office of Federal Contract Compliance Programs to strengthen enforcement efforts.[l]

Minimum wage

Raising the minimum wage is critical for closing the wage gap. Low-wage workers are disproportionately women. Nearly two-thirds of minimum wage workers are women.[li]

Raising the minimum wage would provide many women—who represent 49.2 percent of total U.S. employment[lii]—with the economic security they need to succeed. According to calculations from the Economic Policy Institute, approximately 28 million workers would see a raise if the minimum wage were raised to $10.10 by July 2016.[liii] Fifty-five percent of the affected workers would be women. This share varies by state, and is as high as 63.3 percent in Mississippi.[liv]

Conclusion

Women’s employment is critical to their families and to our nation’s economy. Federal policy can do more to help women realize their full economic potential no matter where they are on the income ladder.

The Murray-Ryan Budget agreement has helped promote women’s economic progress in the workforce, but there will be more work to do after the deal expires.

We need to preserve tax credits such as the Earned Income Tax Credit and funding for early childhood education programs such as Head Start. Women are more likely to be low-wage workers, which means they and their families are more vulnerable to spending cuts. Passing the 21st Century Worker Tax Cut Act would provide two critical tax credits to low-wage working women, helping increase their earnings and give them a better shot at entering the middle class.

In addition, ensuring pay equity and providing work-family supports such as the FAMILY Act to all working women will further their economic progress. Closing the wage gap and raising the minimum wage boosts women’s earnings and could generate additional tax revenue. Work-family policies help breadwinner mothers remain in the labor force and better financially provide for their families.

As a critical driver of economic growth, women need polices that expand workforce opportunities. Yet to help all women succeed, polices must acknowledge that barriers to women’s work manifest themselves differently across the income distribution.  To echo House Minority Leader Nancy Pelosi, “when [all] women succeed, America succeeds.”[lv]

Endnotes

[i]           U.S. Bureau of Labor Statistics, Women in the Labor Force: A Databook (Washington, DC: U.S. Department of Labor, 2013), Table 2.

[ii]          U.S. Bureau of Labor Statistics, Women in the Labor Force: A Databook, Table 20.

[iii]         Heather Boushey, “The New Breadwinners,” in The Shriver Report: A Woman’s Nation Changes Everything, ed. Heather Boushey and Ann O’Leary (Washington, DC: Center for American Progress, 2009); Sarah Jane Glynn, The New Breadwinners: 2010 Update (Washington, DC: Center for American Progress, 2012).

[iv]         Sarah Jane Glynn, “The New Breadwinners: 2010 Update.”

[v]          Eileen Appelbaum, Heather Boushey, and John Schmitt, Economic Importance of Women’s Rising Hours of Work: Time to Update Employment Standards (Washington, DC: Center for American Progress and the Center for Economic and Policy Research, 2014).

[vi]         Ibid.

[vii]        U.S. Bureau of Labor Statistics, Women in the Labor Force: A Databook, Table 2.

[viii]       Carmen DeNavas-Walt, Bernadette D. Proctor, and Jessica C. Smith, Income, Poverty, and Health Insurance Coverage in the United States: 2012 (Washington, DC: U.S. Census Bureau, 2013), Table A-4.

[ix]         The statistic refers to the 90th to 10th wage percentile ratio. Lawrence Mishel and others, State of Working America, 12th ed. (Washington, DC: Economic Policy Institute, 2013), Table 4-6, http://stateofworkingamerica.org/chart/swa-wages-table-4-6-hourly-wages-women-wage/.

[x]          Jody Heymann, Alison Earle, and Jeffrey Hayes, The Work, Family, Equity Index: How Does the U.S. Measure Up? (Montreal, Canada: Institute for Health and Social Policy, McGill University, 2009), http://www.hreonline.com/pdfs/08012009Extra_McGillSurvey.pdf.

[xi]         U.S. Bureau of Labor Statistics, “Table 32. Leave Benefits: Access, Private Industry Workers, National Compensation Survey, March 2013” (U.S. Department of Labor, 2013), http://www.bls.gov/ncs/ebs/benefits/2013/ownership/private/table21a.pdf.

[xii]        U.S. Bureau of Labor Statistics, “Table 32. Leave Benefits: Access, Private Industry Workers, National Compensation Survey, March 2013.”

[xiii]       Lynda Laughlin, Maternity Leave and Employment Patterns of First-Time Mothers: 1961–2008 (Washington, DC: U.S. Bureau of the Census, 2011), Table 11, http://www.census.gov/prod/2011pubs/p70-128.pdf.

[xiv]        Francine D. Blau and Lawrence M. Kahn, Female Labor Supply: Why Is the US Falling Behind? (Bonn, Germany: Institute for the Study of Labor, 2013).

[xv]         U.S. Bureau of Labor Statistics, “Table 32. Leave Benefits: Access, Private Industry Workers, National Compensation Survey, March 2013.”

[xvi]        Susan J. Lambert and Julia R. Henly, “Nonstandard Work and Child-care Needs of Low-income Parents.” In Suzanne M. Bianchi, Lynne M. Casper, and Rosalind B. King, eds., Work, Family, Health, and Well-being (Lawrence Erlbaum Associates, Inc., 2005), pp. 473–92.

[xvii]       Elaine Maag and Adam Carasso, “Taxation and the Family: What Is the Earned Income Tax Credit?” (Washington, DC: Tax Policy Center, 2014), http://www.taxpolicycenter.org/briefing-book/key-elements/family/eitc.cfm.

[xviii]      Nada Eissa and Jeffrey B. Liebman, “Labor Supply Response to the Earned Income Tax Credit,” The Quarterly Journal of Economics 111, no. 2 (1996): 605–37; Chuck Marr, Chye-Ching Huang, and Arloc Sherman, Earned Income Tax Credit Promotes Work, Encourages Children’s Success at School, Research Finds (Washington, DC: Center on Budget and Policy Priorities, 2014), http://www.cbpp.org/files/6-26-12tax.pdf.

[xix]        Center on Budget and Policy Priorities, The Earned Income Tax Credit (Washington, DC: Center on Budget and Policy Priorities, 2014), http://www.cbpp.org/files/policybasics-eitc.pdf.

[xx]         Center on Budget and Policy Priorities, Policy Basics: The Child Tax Credit (Washington, DC: Center on Budget and Policy Priorities, 2014), http://www.cbpp.org/files/policybasics-ctc.pdf.

[xxi]        Elaine Maag, “The Tax Policy Briefing Book: Taxation and the Family: How Does the Tax System Subsidize Child Care Expenses?” (Washington, DC: Tax Policy Center, 2013), http://www.taxpolicycenter.org/briefing-book/key-elements/family/child-care-subsidies.cfm.

[xxii]       Maag, “The Tax Policy Briefing Book: Taxation and the Family: How Does the Tax System Subsidize Child Care Expenses?”

[xxiii]      Gordon B. Dahl and Lance J. Lochner, “The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit,” American Economic Review 102, no. 5 (August 2012): 1927–56.

[xxiv]      21st Century Worker Tax Cut Act, S. 2162, 113 Cong. 2 sess. (2014).

[xxv]       U.S. Senator Patty Murray, “Senator Patty Murray Introduces The 21st Century Worker Tax Cut Act,” Press release, March 26, 2014, http://www.murray.senate.gov/public/index.cfm/2014/3/senator-patty-murray-introduces-the-21st-century-worker-tax-cut-act.

[xxvii]     U.S. Senator Patty Murray, “Senator Patty Murray Introduces The 21st Century Worker Tax Cut Act.”

[xxviii]    Ibid.

[xxix]      U.S. Senate Budget Committee, “The 21st Century Worker Tax Act.”

[xxx]       David Madland and Keith Miller, “Raising the Minimum Wage Would Boost the Incomes of Millions of Women and Their Families” (Center for American Progress Action Fund, 2013), http://www.americanprogressaction.org/issues/labor/news/2013/12/09/80484/raising-the-minimum-wage-would-boost-the-incomes-of-millions-of-women-and-their-families/.

[xxxi]      Melissa Boteach and Shawn Fremstad, “Putting Women at the Center of Policymaking,” in The Shriver Report: A Woman’s Nation Pushes Back from the Brink (Washington, DC: Center for American Progress, 2014), 244–79.

[xxxii]     Ibid.

[xxxiii]    Ibid.

[xxxiv]      Ibid; NBC News, “Working Americans turn down pay raise to avoid ‘cliff effect’,” May 24, 2013, http://www.nbcnews.com/video/rock-center/51996100.

[xxxv]     James J. Heckman and Dimitriy V. Masterov, “The Productivity Argument for Investing in Young Children,” Review of Agricultural Economics 29 (2007): 446–93.

[xxxvi]    Arthur J. Reynolds et al., “Age 21 Cost-Benefit Analysis of the Title I Chicago Child-Parent Centers,” Educational Evaluation and Policy Analysis 24, no. 4 (Winter 2002): 267–303.

[xxxvii]   Committee on Appropriations – Democrats, “Summary of Omnibus Appropriations Act,” United States House of Representatives, http://democrats.appropriations.house.gov/top-news/summary-of-omnibus-appropriations-act/ (last accessed May 2014); Harry Stein, “The Omnibus Spending Bill Reveals the Economic Consequences of the Murray-Ryan Budget Deal” (Center for American Progress, 2014), http://www.americanprogress.org/issues/budget/news/2014/01/17/82484/the-omnibus-spending-bill-reveals-the-economic-consequences-of-the-murray-ryan-budget-deal/.

[xxxviii]  Stein, “The Omnibus Spending Bill Reveals the Economic Consequences of the Murray-Ryan Budget Deal.”

[xxxix]    National Partnership for Women and Families, “Fact Sheet: The Family and Medical Insurance Leave Act (FAMILY Act)” (Washington, DC: National Partnership for Women & Families, 2014), http://www.nationalpartnership.org/research-library/work-family/paid-leave/family-act-fact-sheet.pdf.

[xl]         National Partnership for Women and Families, “Paid Family & Medical Leave: An Overview,” (2012), http://go.nationalpartnership.org/site/DocServer/PFML_Overview_FINAL.pdf?docID=7847; Rhode Island Department of Labor and Training, “Temporary Disability Insurance,” http://www.dlt.ri.gov/tdi/ (last accessed May 2014).

[xli]        Department of Labor, FY 2015 Department of Labor Budget in Brief (Washington, DC: Department of Labor, 2014), http://www.dol.gov/dol/budget/2015/PDF/FY2015BIB.pdf.

[xlii]       Christopher Ruhm and Jackqueline L. Teague, “Parental Leave Policies in Europe and North America,” Gender and the Family Issues in the Workplace, 1997, 133–56.

[xliii]      Ibid.

[xliv]       MetLife Mature Market Institute, The MetLife Study of Caregiving Costs to Working Caregivers: Double Jeopardy for Baby Boomers Caring for Their Parents (Westport, CT: MetLife Mature Market Institute, 2011).

[xlv]        Jane Waldfogel, “The Family Gap for Young Women in the United States and Britain: Can Maternity Leave Make a Difference?,” Journal of Labor Economics 16, no. 3 (1998): 505–45.

[xlvi]       DeNavas-Walt, Proctor, and Smith, Income, Poverty, and Health Insurance Coverage in the United States: 2012, Table A-4.

[xlvii]      National Women’s Law Center, “How the Wage Gap Hurts Women and Families,” (Washington, DC: National Women’s Law Center, 2013), http://www.nwlc.org/sites/default/files/pdfs/factorotherthan_sexfactsheet_5.30.12_final.pdf.

[xlviii]     Heidi Hartmann and Jeffrey Hayes, How Equal Pay for Working Women Would Reduce Poverty and Grow the American Economy (Washington, DC: Institute for Women’s Policy Research, 2014).

[xlix]       Ibid; U.S. Bureau of Economic Analysis, Widespread Economic Growth in 2012, News release, June 6, 2013), Table 4, http://bea.gov/newsreleases/regional/gdp_state/2013/pdf/gsp0613.pdf.

[l]           Department of Labor, FY 2015 Department of Labor Budget in Brief.

[li]          Madland and Miller, “Raising the Minimum Wage Would Boost the Incomes of Millions of Women and Their Families.”

[lii]         David Cooper, Raising the Federal Minimum Wage to $10.10 Would Lift Wages for Million and Provide a Modest Economic Boost, (Washington, DC: Economic Policy Institute, 2013), http://www.epi.org/publication/raising-federal-minimum-wage-to-1010/.

[liii]        Ibid.

[liv]        Ibid.

[lv]         Democratic Leader Nancy Pelosi, “When Women Succeed, America Succeeds: An Economic Agenda for Women and Families,” http://www.democraticleader.gov/Women_Succeed (last accessed May 2014).

Morning Must-Read: Robert Reich: How to Shrink Inequality

Posted on by Brad DeLong

Bob Reich: Robert Reich (How to Shrink Inequality): “Some inequality of income and wealth is inevitable…

…if not necessary. If an economy is to function well, people need incentives to work hard and innovate. The pertinent question is… at what point do these inequalities… pose a serious threat to our economy… equal opportunity and our democracy. We are near or have already reached that tipping point…. But a return to the Gilded Age is not inevitable. It is incumbent on us to dedicate ourselves to reversing this diabolical trend…. 1) Make work pay…. 2) Unionize low-wage workers…. 3) Invest in education…. 4) Invest in infrastructure…. 5) Pay for these investments with higher taxes on the wealthy…. 6) Make the payroll tax progressive…. 7) Raise the estate tax and eliminate the “stepped-up basis” for determining capital gains at death…. 8) Constrain Wall Street…. 9) Give all Americans a share in future economic gains…. 10) Get big money out of politics…. We need a movement for shared prosperity—a movement on a scale similar to the Progressive movement at the turn of the last century…. Time and again, when the situation demands it, America has saved capitalism from its own excesses. We put ideology aside and do what’s necessary. No other nation is as fundamentally pragmatic…. But we must organize and mobilize…

Afternoon Must-Read: Corey Robin: Clarence Thomas’s Counterrevolution

Posted on by Brad DeLong

Corey Robin: Clarence Thomas’s Counterrevolution: “What I think Thomas took away… are two ideas.

First, not only is racism a perdurable element of the American experience… but it is also a protean and often-hidden element of that experience… so profoundly inscribed in the white soul that you’ll never be able to remove it. You see this belief in quiet, throwaway lines in his opinions that you can easily miss if you’re reading too fast. In 1992, in one of his early cases, Georgia v. McCollum, Thomas stated:

Conscious and unconscious prejudice persists in our society. Common sense and common experience confirms this understanding.

The point was so obvious and self-evident to Thomas it didn’t need elaboration or explanation.

Continue reading “Afternoon Must-Read: Corey Robin: Clarence Thomas’s Counterrevolution” →

Lunchtime Must-Read: Paul Krugman: Now That’s Rich

Posted on by Brad DeLong

Paul Krugman: Now That’s Rich: “These 25 men (yes, they’re all men) made a combined $21 billion in 2013…

…their good fortune refutes several popular myths…. First, modern inequality isn’t about graduates. It’s about oligarchs. Apologists for soaring inequality… try to disguise the gigantic incomes of the truly rich by hiding them in a crowd of the merely affluent…. The goal of this misdirection is to soften the picture, to make it seem as if we’re talking about ordinary white-collar professionals who get ahead through education and hard work. But many Americans are well-educated and work hard… schoolteachers… don’t get the big bucks… those 25 hedge fund managers made more than twice as much as all the kindergarten teachers in America combined. And, no, it wasn’t always thus….

Conservatives want you to believe that the big rewards in modern America go to innovators and entrepreneurs…. But that’s not what those hedge fund managers do for a living…. They’re actually in the business of convincing other people that they can anticipate average opinion about average opinion. Once upon a time, you might have been able to argue with a straight face that all this wheeling and dealing was productive…. But… the evidence suggests… they don’t deliver high enough returns… and they’re a major source of economic instability….

Finally, a close look at the rich list supports the thesis made famous by Thomas Piketty… that we’re on our way toward a society dominated by wealth, much of it inherited, rather than work…. At first sight, this may not be obvious. The members of the rich list are, after all, self-made men. But, by and large, they did their self-making a long time ago…