This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.
Equitable Growth round-up
The extreme inequality that defines the U.S. economy rendered the country more susceptible to the coronavirus recession. The incoming Biden-Harris administration will have a lot of work to do to get the economy and society on the path to recovery and ensure all Americans prosper when the economy grows. To do so, the new administration and the next Congress will need to address rampant racial and economic inequality. Corey Husak and David Mitchell compiled the best ideas from Equitable Growth’s Vision 2020 initiative and beyond to guide the new administration and incoming Congress in how to do just that. Husak and Mitchell direct readers to specific key policy categories, such as building worker power, providing universal paid family and medical leave, shoring up the Unemployment Insurance system, and addressing racial economic divides, among others. They explain how each of these proposals would work to address racial and economic inequality, implement the major structural changes needed, and ensure strong, stable, and broad-based economic growth for all Americans.
In mid-October, a group of scholars and advocates joined a webinar hosted by the Groundwork Collaborative (co-hosted by several organizations, including Equitable Growth) to discuss past policies that made the United States vulnerable to the worst impacts of the coronavirus, as well as ideas for how to promote a robust recovery from this and future downturns. The webinar, titled “EconCon presents: Building an economy that works for us all,” featured Sen. Elizabeth Warren (D-MA), Fair Fight Action Founder Stacey Abrams, and sociologist Tressie McMillan Cottom from the University of North Carolina at Chapel Hill, among others. Equitable Growth’s Shanteal Lake provides an overview of the event, which centered on the role of racial disparities and worker power in both the depth of the coronavirus public health and economic crises and the path forward for widespread economic growth.
Late last week, the U.S. Bureau of Labor Statistics released labor market data for the month of October, which showed unemployment rates declining, albeit at a slower pace than in previous months. Kate Bahn and Carmen Sanchez Cumming compiled five graphs to showcase the most important takeaways from the data and how the U.S. workforce is affected by the coronavirus. Namely, they note that the coronavirus recession is disproportionately harming less-educated workers and non-White workers—trends that must be addressed by the incoming administration as it works to ensure a broad economic recovery.
The U.S. Bureau of Labor Statistics also releases data every month on hiring, firing, and other U,S, labor market flows from the Job Openings and Labor Turnover Survey, or JOLTS. Earlier this week, the agency released the latest data for September 2020. Bahn and Sanchez Cumming put together four graphics highlighting key points in the data, including a slight uptick in the quits rate, which indicates that job prospects have stalled for many workers amid the coronavirus recession.
It is long past time to abandon the false dichotomy between saving the U.S. economy or protecting people’s health during the coronavirus pandemic. The Atlantic’s Annie Lowrey explains just how misguided this belief is by showing how the decision to prioritize the economy over workers’ health led to worse economic outcomes by sickening and debilitating our workforce. The millions of U.S. cases of the coronavirus and nearly 250,000 deaths from COVID-19, the disease caused by the virus, are hampering our economic recovery by hobbling the workers who drive the economy. The pandemic led to a huge increase in short-term disability applications and medical leave requests, and many of those who are able to recover from the worst of COVID-19’s symptoms now must deal with the long-term health impacts that prevent them from doing their jobs. All of this is made worse by the country’s lack of universal paid sick leave, which would stem the spread of the virus and reduce some of the racial, economic, and educational disparities in who gets sick. As the incoming Biden-Harris administration looks for solutions to both the economic and health crises, it would do well to enact a permanent federal paid leave program that covers all workers. As Lowrey concludes, “there is no saving the economy without saving the people who make it up.”
In an op-ed for The New York Times, economist Justin Wolfers offers the incoming administration some advice for how to deal with the economic challenges facing the country over the next 4 years—including, as a first step, getting the coronavirus under control in order to boost the economy. He, like Lowrey and many others, argues that controlling the spread of the virus is the best way to restart the economy. Wolfers suggests that President-elect Joe Biden also immediately consider a vast yet targeted stimulus package to help those struggling the most. He then turns to some medium-term solutions to protect the economy from future shocks, including automatic stabilizers that would remove the question of politics from providing aid to support those in need. Finally, Wolfers urges the Biden-Harris administration to address long-term issues such as the climate crisis, universal healthcare, and inequality—challenges that will remain long after the coronavirus recession recedes, Wolfers writes, and delaying action won’t delay their impacts.
Structural racism is behind the racial wealth divide. The legacy of slavery, segregation, and racial discrimination is what suppresses Black Americans’ wealth, writes Michelle Singletary in The Washington Post, despite where many place the blame for the disparities in wealth between Black and White families—on Black people’s spending habits. Relying on the stereotype that Black Americans would be richer if they didn’t spend “so much” on clothing, shoes, or smartphones is intellectually lazy, Singletary explains. Wealth in the United States is typically driven by owning a home—not day-to-day spending or saving behaviors—and Black Americans have long been shut out of homeownership, thanks to racist and discriminatory policies and practices dating back many decades. The American public and policymakers must acknowledge, Singletary concludes, that the difficulty many Black families face in catching up to their White peers’ wealth levels stems from these and other structural barriers to entry that hamper intergenerational transfers of wealth and mobility—not whether a family buys new sneakers for their child.
This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.
Equitable Growth round-up
The minimum wage is one of the primary tools to raise the earnings of low-income workers in the United States. From the time it was first enacted in some states in the early 20th century to the times it was expanded and applied to new industries and grew to include more workers, the clear, widespread positive benefits of the minimum wage are manifest. Ellora Derenoncourt, Claire Montialoux, and Kate Bahndetail the various reforms to the federal minimum wage and its effect on earnings—specifically, its role in narrowing the racial income divide in the 1960s and 1970s, as well as its role in perpetuating that divide in recent decades as the minimum wage has not kept pace with inflation and economic growth. The co-authors explain why increasing the federal minimum wage may be critical to ensure a booming economic recovery and broad-based prosperity for all Americans following the coronavirus recession, which is currently exacerbating racial disparities in the economic security of U.S. households.
Derenoncourt and Montialoux also wrote an op-ed in The New York Times this week, on the vital role the minimum wage plays in reducing racial inequality in the United States. Their research, cited in both the issue brief on our website and in the Times op-ed, shows that raising the minimum wage would have a significant impact on the persistent earnings divide between White workers and their Black, Hispanic, and Native American colleagues. Raising the minimum wage and expanding its application to new sectors currently not covered would be an extremely effective tool in the fight for racial justice, they write, without significantly reducing the number of low-wage jobs available to workers in the U.S. economy.
The extreme inequality that has marked the U.S. economy over the past 40 years made the country more vulnerable to the worst effects of the pandemic and its recession, writesHeather Boushey on Medium. Not only does the United States have one of the world’s highest rates of death from COVID-19, the disease caused by the coronavirus, and the most cases and deaths overall, but the U.S. economy also seems likely to recover much more slowly than that of our competitors. Boushey revisits five predictions she made earlier in the pandemic about the course of the health and economic crises, and then details how policymakers can get the country back on the path to an equitable and robust recovery.
A new study confirms that access to paid sick leave reduced U.S. coronavirus infections by as much as 400 cases per day in states where workers gained access to an emergency paid leave guarantee enacted by Congress in March. Equitable Growth put together a factsheet detailing the key takeaways from the study and the policy implications for the United States—one of only three high-income nations in the world that does not already have a universal paid sick leave program in place.
Public investments in education are a vital element of broad-based, equitable economic growth that will benefit middle-class and low-income families in the United States. Not only are these investments essential for our future workforce—and some even pay for themselves in terms of long-term economic growth, tax revenues, and reduced public spending—but they also can provide a macroeconomic stimulus in the short term that will help jump-start our economy as it struggles to get out of recession. Robert Lynchsummarizes several types of public investments in education, specifically investments in school facilities and in pre-Kindergarten and Kindergarten-through-12th grade services, and how they would contribute to economic growth in the coming years and decades. Lynch analyzes the current policy considerations of these investments and explains why the current low-interest rate environment provides an opportunity to finance these investments with debt, which he argues would be better than financing via tax increases or savings from reductions in other public spending.
Equitable Growth staff submitted to two letters this week to federal government agencies seeking public comments. One comment letter, to the U.S. Department of Labor, expressed our labor market experts’ concerns about a proposed change to the standards for classifying workers as independent contractors or employees under the Fair Labor Standards Act. The change would remove important protections given to employees under the law, including the minimum wage and overtime protections, along with stripping workers of the many benefits of full-time employment, such as healthcare and retirement benefits. The other comment letter, co-signed by Policy Director Amanda Fischer, was sent to the U.S. Department of Justice’s Antitrust Division regarding its Bank Merger Review Guidelines. Fischer and her co-signatories urge the Antitrust Division to reverse the trend of deregulation and consolidation in the banking industry, and in so doing promote much-needed financial stability for U.S. households amid the current economic downturn.
This week, Equitable Growth announced changes to our Steering Committee, with the addition of Lisa Cook of Michigan State University, Hilary Hoynes of the University of California, Berkeley, and Atif Mian of Princeton University. We are looking forward to their contributions to our academic grants program and their support for the next generation of scholars studying the effects of economic inequality on growth and stability. Find out more about their research backgrounds and our Steering Committee.
Links from around the web
Even as reports abound signaling a growing U.S. economy and less unemployment, many Americans, especially Black Americans, are still struggling to find work and pay their basic expenses. The unemployment rate for Black workers remains in the double-digits, high above the rate for White workers. And Black Americans still face disproportionate risk in catching the coronavirus and dying from COVID-19. Dartunorro Clark writes for NBC News that in addition to policies aimed at lowering the Black unemployment rate, more sweeping federal action will be needed in order to address the historic levels of structural inequality in the labor market. Clark details the deep-seated inequalities that persist and the various ways they affect Black workers, particularly now, in the midst of the coronavirus recession. He also discusses the impact (or lack thereof) of the diversity and inclusion pledges many large corporations made earlier this year, alongside large donations to racial justice organizations, on racial inequality—and on the lives of Black employees.
Changes in aggregate Gross Domestic Product do not provide an accurate account of what is really happening across the U.S. economy. Neil Irwin of The New York Times’ The Upshot blog uses the apt metaphor of taking a 3-month average of a person’s health indicators before and after that person is hit by a bus to show why this week’s GDP release is not telling the full story of what’s happening to the U.S. economy. Even though the reports show a record-breaking 7.4 percent rise in GDP over the past 3 months, the data also exposes an economy in a deep recession (albeit not a complete collapse). Irwin points out that the details of the data, when broken down, reveal the areas of the economy that are beginning to recover alongside those that are still reeling from the coronavirus pandemic and recession. He highlights the importance of looking past the headline GDP numbers and diving in more depth into the data to get a better idea of where the economy is and where it might be heading.
Centuries of discrimination and injustices in the United States have robbed Black people from access to opportunities to build wealth and have crippled generations of families, contributing to the vast racial wealth, income, and mobility divides seen today between Black and White Americans, among other disparities in areas such as health, housing, and education. The Washington Post’s Michelle Singletary makes the case for a reparations program in the United States to begin healing the wounds caused by these atrocities—wounds which have repeatedly been scratched open by various actions (or inaction) and policies by the U.S. government. Rebutting several arguments put forth by opponents of reparations, Singletary shows why actions must be taken to acknowledge, redress, and provide closure for descendants of enslaved Americans and how such actions would address the structural racism that pervades every area of our economy and society.
The U.S. economy will not fully recover from the coronavirus recession without universal paid sick leave and child care. Erika L. Moritsugu and Avenel Joseph detail the importance of these two programs for workers in The Hill, explaining the impossible choice many workers have faced during the pandemic between missing a paycheck—or worse, losing their job—or keeping themselves and their loved ones safe from the virus. A paid leave program would relieve them of this burden and surely reduce the spread of the virus, facilitating an equitable recovery for all Americans. Likewise, Moritsugu and Joseph continue, providing accessible and quality child care would enable working parents—and especially working mothers—to continue to provide for their families with the peace of mind that their children are safe. While emergency sick leave provided to some workers in March did help, that program is set to expire at the end of this year. But this pandemic is not temporary, and even if it were, future crises are likely to place these issues back in the spotlight again. We need permanent solutions that provide guaranteed paid sick leave for all workers and affordable child care for all families.
Change is coming to Washington, D.C. No matter who wins the presidential and congressional elections in 2020, a new set of economic policymakers will transition into government. They will come to power at a time of immense economic turmoil. A new Trump or Biden administration, and the new Congress, should quickly implement evidence-backed policies that reduce economic and racial inequality in order to spur strong, stable, and broad-based economic growth. This post, and our entire Vision 2020 initiative, is a guide for how to do just that, especially in light of the continuing negative effects of the coronavirus recession.
In addition to new lawmakers, change is also coming from a new, diverse generation of academics studying the economy. They have a new set of diagnoses for and solutions to our economic problems. Old economic orthodoxies have left tens of millions of Americans with stagnant wages and without key pandemic- and recession-fighting tools such as paid leave, healthcare, and adequate unemployment benefits. At the same time, “free market” policies bestowed the wealthiest Americans with exploding wealth and income, rising market power, and falling tax rates. But now, a new generation of scholars, drawing on new data sources, novel methodological techniques, and their diverse experiences, are offering new structural solutions to get the U.S. economy working for all.
Worker power has declined for decades as firms amassed more control over their suppliers, contractors, and workers, wages stagnated, and unionization rates declined. Congress, state policymakers, and federal agencies such as the Department of Labor can rebalance the current anti-worker policy environment in 2021. Research suggests doing this by supporting unionization, cracking down on employer abuses, and enacting new pro-labor policies such as sectoral bargaining.
Universal paid family and medical leave could not be more critical in the current crisis. The United States is the only high-income country in the world that does not have a national paid family or medical leave program for all workers, which is one reason the coronavirus pandemic has spread so quickly through workplaces and communities. Research into states and countries with paid leave programs suggests that the federal government should establish a system with inclusive eligibility requirements, progressive wage-replacement structures, robust job protections, and adequate leave lengths.
The United States taxes income from wealth at much lower rates than income earned from working. This two-tier tax system gives preferential treatment to wealthier Americans, exacerbating inequality by income and race. Equitable Growth’s key resources and experts describe the current system and the various ways Congress could eliminate the two-tier system to make taxes, and our economy overall, more equitable.
The market power of U.S. corporations, or “monopoly power,” means consumers pay more for what they need, workers earn less, innovation declines, and small businesses aren’t as likely to succeed. Monopoly power also increases inequality by boosting the wealth of executives and stockholders. Academics and former enforcers suggest strengthening U.S. antitrust laws to counter corporate power and boosting resources for the antitrust enforcement agencies—the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice.
Unemployment Insurance is a bedrock of the social safety net, but unfortunately, policymakers at the state level built numerous problems into the system. These include fragile technical and administrative systems, coverage gaps for independent contractors and those with little work history, low benefit levels, and overly restrictive and complicated program access rules. As the coronavirus recession demonstrates, these issues cause chaos and uncertainty exactly when people most need access to benefits. Equitable Growth has compiled the readings and experts for you to understand the current system and how to fix it, so workers get the help they need.
Racial economic mobility and inequality divides are older than the republic itself but have powerfully come to the fore of late, thanks to the Black Lives Matter movement. U.S. economic mobility is declining as inequality is rising. And Black Americans not only are more likely to experience downward mobility than White Americans, but also face systemic and institutional barriers to wealth building, access to credit, and income security. This post explains economic mobility dynamics, systemic barriers for Black Americans, and how to address them.
Automatic stabilizers are economists’ favorite tools to combat recessions. These policy designs ramp economic support programs up and down as economic conditions, such as the unemployment rate, rise and fall. Making more economic aid “automatic” means quicker, more sustained support for families in need and less politicization of the crisis. A body of experts outline a suite of six ways Congress could expand automatic stabilizers for this recession and those to come.
Small businesses are suffering during the coronavirus recession and need new policies to prevent a wave of bankruptcies. The Paycheck Protection Program enacted earlier this year failed to prevent layoffs and bankruptcies among the smallest employers and did not provide enough assistance to the hardest-hit areas or to businesses owned by people of color. Research suggests restructuring business aid so that small firms can be rescued with the same speed as big businesses and building up public financial systems to improve economic resilience.
The current economic status quo—a devastating recession and underlying fragilities due to sky-high economic and racial inequality—is untenable. Maintaining the status quo is a choice we can no longer afford to keep making. No matter who is in power in 2021, major structural changes are needed. Equitable Growth’s deep bench of policy ideas and experts, highlighted in the above policy guides, can guide the way.
The coronavirus recession took root in a U.S. economy already characterized by profound economic and racial inequality, deeply inadequate public investment, and significant holes in support systems for families. At an October 19 webinar sponsored by the Groundwork Collaborative and several other organizations, including the Washington Center for Equitable Growth, speakers and panelists described past policies that prepared that fertile ground for the spread of the coronavirus, and proposed a series of ideas for recovering from the pandemic and the recession while laying the foundation for a thriving, inclusive economy.
The event, titled “EconCon presents: Building an economy that works for us all,” brought together leading scholars and advocates in two panels to discuss the policies that enabled the spread of coronavirus and COVID-19, the disease caused by the virus, as well as the path forward. The event opened with remarks by Sen. Elizabeth Warren (D-MA) and Stacey Abrams, founder of Fair Fight Action, and closed with a keynote address by sociologist Tressie McMillan Cottom of the University of North Carolina at Chapel Hill.
Sen. Warren set the tone for the event in her introductory remarks. She described the current state of the country in graphic terms: “Our country is taking one gut punch after another,” she said. “More than 200,000 Americans have died from an infectious disease that is still out of control. Our economy is being squeezed to the breaking point. And families are being pushed off an economic cliff as they lose their jobs and struggle to pay their bills. Black and Brown Americans have been hit the hardest.”
“Right now,” she continued, “our nation has a serious choice to make about how to recover from this economic crisis. … We could decide to prioritize making this recovery a racially just recovery. And it starts by reframing what we think a strong economy looks like.” Pointing to racial economic disparities in employment, housing, and wealth, she added, “We have to stop allowing the economic well-being of people of color to be expendable as long as White folks are doing OK and the stock market is doing OK.”
Abrams told the virtual audience that economic recovery depends on the ability of all people to spend and support their families. “We need to rebuild our economy, but we need to learn from past failures and current calamity as we do it,” she said. “Fundamentally, the economy does well when we all do well. We have the power to reshape the economy because we are the economy.”
Past policies that paved the way for economic disaster
The first panel, titled “How decades of conservative policies and narratives paved the way for economic disaster,” featured economist Ioana Marinescu of the University of Pennsylvania, author and former President of Demos Heather McGhee, and Mehrsa Baradaran, professor at the University of California, Irvine School of Law and a member of the Equitable Growth board of directors. New York Times columnist Jamelle Bouie served as moderator.
The panel agreed that the coronavirus recession revealed the weaknesses of the U.S. economy and society. “This crisis could not have done more to reveal and expose some of the mythologies at the heart of our economy,” Baradaran said, adding that “people’s lives came up against the economy and a lot of policymakers chose economic growth versus people’s lives.”
Marinescu and McGhee pointed out that that the recession showed the weakness of U.S. social systems. “One of the things that characterizes U.S. social policy as compared to many other rich countries, including Europe … is the paucity of its social protection system,” Marinescu said. “We have rolled back a lot of the social protection programs that we had, we have limited the amount, and more and more made them conditional on work.” The recession, she added, “exposes the holes in our system in terms of being able to ensure an income for all in a time of crisis like today.”
McGhee focused on the role of the public health system. “We don’t have a really universal form of guaranteed health insurance, but even beyond that, we also don’t have a robust public health system,” she said. “We have a fragmented, for-profit health system.” She said that the public was shocked that nurses could not obtain adequate personal protective equipment at the beginning of the pandemic, and that half of hospitals in low-income areas had no ICU beds to spare. She blamed the weakness of the system on cutbacks in public health in the latter part of the 20th century.
The panel placed racial animus at the center of the narrative of why liberal economic policies prior to the 1980s failed to support progress for Black Americans, and why low- and middle-income White Americans have been willing to support political leaders over the past four decades whose conservative policies hurt them as well as Black Americans.
Baradaran argued that conservative economic policies were a direct response to the civil rights movement’s push for economic equity. She said this led to the rise in the political strength of libertarian, anti-government policies, after an era when the government’s role had been seen as critical. The argument that government did not have a role to play in addressing people’s economic problems succeeded as it had not before. “The damage has been across society,” she said, but has hurt Black communities the most.
McGhee said that in the New Deal and beyond, many of the policies enacted to help people were developed and implemented “with an asterisk, which is a Whites-only basis.” “The American Dream got so much harder to attain just as the formal barriers to the American Dream were stripped away for Black and Brown people,” she said. McGhee related a story that occurred in many communities around the country when civil rights enforcement began, where formerly segregated public swimming pools were drained and closed to avoid integration. She said this story illustrated how White people resisting integration and civil rights turned against government action. “It was racism, and the link between government action and government action to address civil rights” that made conservative ideas “common sense” for White voters, she said.
Marinescu noted that research shows that countries with more ethnic diversity have poor welfare systems because of racism. She said this had played out in the concept of welfare reform, which was fed by the myth of the “welfare queen,” and cut benefits and made them more contingent on work. She said that policies that provide cash to families, such as a universal basic income, support the economy.
Bouie noted that the $600 weekly supplemental payment that was added in March to Unemployment Insurance benefits by the Coronavirus Aid, Relief, and Economic Security, or CARES, Act has now expired, but also that the additional money did not discourage people from working. He asked if the success of this benefit, as well as the $1,200 payment to all families that was also provided early in the pandemic, might lead to similar policies in the future.
The panel expressed varying degrees of optimism in their responses.
Marinescu expressed hope that this has “opened the window.” She said images of the “undeserving poor” were giving way to “a much bigger sense of solidarity.” She pointed out that “everybody knows that there’s a reason why, through no fault of their own, people have come to suffer economic hardship.” She said this could increase understanding of the need to support families when they face economic difficulties.
McGhee noted that beyond cash benefits, a long-term, broad-based recovery would require support for state and local governments and other priorities. “If you get $600 [a week], that is fantastic, but you also need a school to send your kids to, you also need a hospital that is highly functioning, you also need clean water.” Given these and other crises facing communities across the country, she expressed concern about recent calls for austerity that could stand in the way of needed investments.
And Baradaran said, “I’m not as optimistic about people being convinced that if it’s a benefit to the economy, it’s going to change anyone’s mind.” She pointed to the power that the wealthy exert in politics and society. “The way that our democracy is tilted now,” she said, “it doesn’t matter that this benefits the majority of people … because the people getting the benefits [of this economy] have a larger voice.”
The panel discussed ideas for moving forward to produce a broad-based recovery. McGhee called for reinventing the New Deal era of shared prosperity “without the racial asterisk” and that it depends on “whether or not White people are willing to be part of a multiracial democracy.” She said that the public does not support conservative economic policies, and that White voters need to decide between racial issues and addressing economic policies that are to the right of their own views.
Baradaran pointed to the need for electoral and judicial reform. She noted that the U.S. Constitution gives greater power to White and more conservative voters because of the Electoral College and the make-up of the U.S. Senate. She expressed concern that, in fact, White voters may still vote on the basis of race instead of on the basis of economic policies that would benefit them.
Marinescu raised the question of how to pay for necessary programs and pointed to the possibility of a wealth tax. It’s “often maligned by conservatives as punishing the rich,” but it should be seen as providing “the symbolic value that we’re all pitching in and those who have more pitch in more because they can, and it’s not about punishing you.” She noted that racial wealth inequality is far greater than income inequality. “Being able to make progress on wealth equality is so important for having a more equal society.”
Building a multiracial, post-neoliberal economy
The second panel was titled “Where we need to go: Building a multiracial, post-neoliberal economy.” The panelists were Jess Morales Rocketto, executive director of Care in Action and civic engagement director for the National Domestic Workers Alliance, Abdul El-Sayed, a physician, epidemiologist, activist, and educator, and former Deputy Secretary of the U.S. Department of the Treasury Sarah Bloom Raskin. The panel was moderated by the President of Demos K. Sabeel Rahman.
Rahman began by acknowledging the current calamitous time, noting that “we are in a moment where these intersecting crises—of systemic racism, of the pandemic, of the economic collapse before us—have all combined to produce such a severe moment of crisis for our communities.”
El-Sayed ushered in the conversation about the fragility of the U.S. economy by examining the state of the nation prior to the pandemic. As he explained, “We know that if you look at the pathophysiology of the coronavirus, that among people with preexisting conditions, the risk of a serious course of illness and even death is substantially higher.” Consequently, “among societies with preexisting conditions, the course of this disease and the risk of serious outcomes is higher, and our economic circumstances are a preexisting condition.”
Raskin then pointed to income and wealth inequality as one of the greatest longstanding conditions plaguing the U.S. economy. She explained that the nation has “had a very fragile heterogeneity of income and wealth, where we have essentially gutted the middle class,” leaving the nation with “this barbell which actually does not poise the economy or … households well in terms of being hit by exogenous shocks.” She explained that we went into this set of crises with an unaddressed set of fragilities that have created greater dispersions in income and wealth, and “set us up for a very hard shock that came our way via the pandemic and will make it exceedingly challenging to get out of.”
Rocketto described the plight of domestic workers during a time of unprecedented challenges. She explained how workers in this industry, particularly women, are more susceptible to negative consequences of wealth and income inequality. She said that “we still have the vestiges of the past in that industry, and so it is an exploited and marginalized sector of the economy. And that is because it is directly related to slavery and racism and patriarchy around women’s work and working inside the household.”
All three panelists agreed this deep structural crisis developed over the course of the nation’s history. And they concurred that if the country does not respond, not only will we fail to meet the current crisis but conditions are likely to get even worse over the next few years—or even over the next decade. Rahman pointed out that one of the consistent themes of U.S. history has been “the systematic bypassing or even our continued extraction from people of color, women workers, and the essential workers of our economy” of the income and profits from economic growth. Rahman add that these workers have been the engine of our wealth and stability but have not been part of the social compact. When asked how to ensure that the United States builds an economy that centers these communities that have historically been cut out, the panelists placed addressing workers’ needs and advancing worker power at the forefront of policy priorities.
Raskin said policymakers must “put the worker’s experience at the heart of economic policy. It has to be central to every single policy decision that goes forward.” She explained that there is a disconnect between workers’ experiences and current policy. While there have been major policy changes as a result of the pandemic, she said, many of those changes are still falling short.
Rocketto said that “workers themselves have a lot of clarity about what’s really needed” and that understanding workers’ experiences and how they interact with the labor market is essential to policymaking. She also argued that workers need to have a seat at the policymaking table and that they should be considered experts in terms of setting standards in their industries. Rocketto explained that workers themselves are already experiencing those changes that policymakers are understanding only at a theoretical level, “so it just makes sense to listen to the people who have the experience right now and can influence and shape that, even as we are thinking about the larger, macro-level changes that we are trying to apply.”
Commit to fight for a more just, equitable, and prosperous economy
The conference concluded with a keynote by Tressie McMillan Cottom from the University of North Carolina at Chapel Hill. She tied the day’s key takeaways together by reminding the audience that no matter the outcome of November’s elections, it is important to be committed to fighting for a more just, equitable, and prosperous economy.
Cottom framed her remarks around “the powerful progressive ideas and narratives that have shaped economic policy … and delimited our imagination about what is possible.” She discussed the idea that she said has animated all of her work and considers “probably the most powerful idea outside of slavery in all of United States of America folklore … the idea that there is a clear path for upward social mobility and economic security, and we have solved the puzzle and that puzzle is deeply embedded in our belief in markets, in liberalism and free speech and civil liberties.”
Focusing on the prospects for women, particularly Black women, in a post-coronavirus economy, Cottom explained that the narrative that describes getting ahead in the United States as being a matter of working hard in school, delaying childbirth, and then going to college not only excludes women from the American Dream, but also is “an unrealistic road map for social mobility.”
Cottom described the considerations that Black women in particular must face when trying to chart a path for socioeconomic growth. She pointed to “sexist public policy wrapped around things such as child care and racist labor market discrimination [that] expose Black women to poorer job quality and lower occupational mobility … bad jobs, and no promotions, no opportunity.” She also explained that “if you are a Black woman sitting at that intersection [choosing between college and entrepreneurship], it makes absolute rational sense for you to do what everybody tells you, you need to do. Which is to go out on your own.”
For those who choose entrepreneurship, Cottom makes it clear that “racist economic policy exposes Black women to poor credit terms and lower wealth basis for investment,” and that “ideas about Black women’s inherent deviance makes them keen to expose themselves to the risks of entrepreneurship on predatory terms.” Citing Janelle Jones, the policy and research director at The Hub Project, and others, she said, “The female recession is … best understood as … one where putting Black women first may just save us all from economic disaster.”
Stating that some progressives have helped to write an unrealistic narrative, Cottom noted that progressive politics face “a special challenge that conservative politics simply does not have when it comes to the stories we tell about society, the stories we tell about the social contract, the stories we tell about humanity.” She said that progressive politics, in order to be progressive, have to be based in reality.
She stated that “politics based in nostalgia simply do not have the same responsibility to reality or material conditions” as politics based on current conditions. “The challenge for progressives is that we have to tell a story that is at least marginally related to reality.” Cottom cautioned progressives, “When it comes to the story then that we tell about opportunity and progress—go to school, get a degree, get a good job—we have a reality problem.”
For Cottom, the great risk is that the pandemic, having pushed women back out of the paid labor market, “is going to legitimize our historical desire to obscure women’s economic lives so that we can get back to the ‘real work’ of economic policy.” She cautioned listeners further that “going to college and hanging out your own shingle will not solve that crisis. That is a deeper more protracted crisis.” It does not benefit us, she added, “to focus so narrowly on the institutions of the mid-20th century—college and entrepreneurship—for solving decidedly 21st century economic problems.”
Cottom concluded, “We have got to be ready, I think, to write a better progressive metaphor at this moment in time, and a progressive metaphor is one that has to tell the truth about our economic realities while also allowing for a development of a set of tools ready to push for better.”
This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.
Equitable Growth round-up
The coronavirus recession is resulting in millions of Americans either laid off or furloughed as businesses around the country close either temporarily or permanently due to the public health crisis. This jobs crisis is accompanied by record-setting levels of Unemployment Insurance claims—and these don’t even include the many more workers who are eligible but do not apply for benefits or wrongly believe they are not eligible. This in turn reflects the severe stigmatization in our society of joblessness and being unemployed—a stigma that threatens both our future economic recovery and the psyche of millions of capable workers let go through no fault of their own. Peter Norlander examines the effect of this stigma against the unemployed—labeling them as lazy, less productive, and personally at fault for not having a job—amid the coronavirus recession. He finds that this vilification, along with the existing faults within the Unemployment Insurance system, inhibits the delivery of jobless benefits to workers, leads to discrimination in hiring, and can have lasting damage to workers and the U.S. economy. Norlander concludes with several policy recommendations to address this stigma toward the unemployed, explaining why these suggestions would help unemployed workers re-enter the job market quickly and efficiently, and thus support the broader economy.
Student loan debt is a longstanding problem for workers, especially younger and lower-income workers, in the U.S. labor force. But an in-depth look at the Federal Reserve’s 2019 Survey of Consumer Finances reveals that this crisis ballooned in recent years—and it is likely getting even worse amid the coronavirus recession. In fact, average student debt-to-income ratios are now 0.56 among those adults who have student debt, falling most heavily on those households in the bottom 50 percent of the income distribution and especially on Black Americans, writeRaksha Kopparam and Austin Clemens. Though some debt forbearance was provided in one of the coronavirus relief packages passed in March, and other programs such as income-based repayment plans attempt to alleviate debt burdens more generally, much more is needed to fully mitigate the effects of the student loan crisis on households across the country. Kopparam and Clemens analyze the data, summarize its main findings, and conclude with the policy implications of rising student debt-to-income ratios.
New research on a German law requiring varying levels of worker representation on some boards of directors shows that this representation does no harm to revenues or corporate profits while giving workers a much-needed voice in corporate decision-making. The law was overturned for new companies in 1994 but upheld for certain businesses already in existence, providing researchers with natural setting for testing the effect of including workers on boards. Kate Bahnsummarizes the new paper, which found that when worker and shareholder representatives hold equal or near-equal power on boards, they operate by consensus rather than contention. This consensus yielded no significant impact on overall wages or employment, according to the study, alongside a slight increase in capital assets. More significantly, Bahn writes, when workers were included on boards, the study found an increase in worker productivity, with added values accruing mainly to capital and not labor, as well as a noteworthy reduction in outsourcing, with no meaningful effect on profits and revenues. This suggests that worker representation does not lead to negative outcomes for companies, such as bankruptcy.
Earlier this week, the U.S. Census Bureau released new data on the effects of the coronavirus pandemic on workers and households. Austin Clemens, Kate Bahn, Raksha Kopparam, and Carmen Sanchez Cumming put together five graphs highlighting important trends in the data, including the racial disparities in food insecurity, in the ability to pay household expenses, and in loss of income since the start of the recession as well as the impact of the coronavirus on students’ postsecondary education plans.
Head over to Brad DeLong’s latest Worthy Reads, for his takes on must-read content from Equitable Growth and around the web.
Links from around the web
The majority of Americans believe the U.S. economy is rigged against them, writes Samantha Fields for Marketplace. In fact, according to a recent poll, more than 80 percent of Black Americans, 70 percent of women, and two-thirds of Americans overall feel that the economy works better for some people than it does for others—namely, the wealthy, the powerful, and White Americans while everyone else gets left behind. Fields examines the data and its implications, particularly amid the coronavirus recession as millions struggle to pay basic expenses, and compares this year’s results with those from similar polls taken in 2016. She interviews several people across the country and varying demographic groups for their takes on who is benefitting from U.S. economic growth and why some people have it better than others.
It’s no secret that the coronavirus pandemic caused a child care crisis in the United States. Many schools are operating virtually or offering only part-time in-person learning and child care centers are closing. It’s also no secret that women tend to shoulder the majority of home responsibilities, including child care. So, it shouldn’t come as a surprise that the pandemic is forcing women out of the labor force in much higher numbers than men—four times as many in September, according to the U.S. Department of Labor’s jobs report for last month. NPR’s Andrea Hsureports that this trend is hitting even the most successful women, many of whom are sidelining their hard-earned careers to take care of overwhelming household needs. This may well put many of their future promotions, earning power, and leadership positions at risk, Hsu continues, threatening a generation of gains for women in the workforce. The uncertainty surrounding the pandemic and how much longer it will continue to wreak havoc on U.S. society and the economy only adds to this rolling crisis.
New research shows that access to paid sick leave is an essential tool in reducing the transmission of the coronavirus. The study, summarized by HuffPost’s Emily Peck, looked at the impact of the emergency paid sick leave benefit in early coronavirus legislation, which provided 10 days of sick leave for workers with COVID-19 working for companies with fewer than 500 employees. It found that this emergency benefit prevented up to 400 cases of coronavirus per day per state, or roughly 15,000 cases prevented in the United States per day. Though experts say paid sick leave is not a “silver bullet,” it does slow the spread of the virus and can be extremely effective at doing so. Peck writes, however, that the emergency paid leave benefit is set to expire at the end of this year even though the coronavirus will certainly still be spreading throughout the country. What’s worse, the United States does not have a universal paid sick leave program to pick up where this emergency benefit leaves off. A universal paid leave program is long overdue: The United States is the only developed country in the world to not offer such a benefit for all workers, which some experts argue may be why case numbers in the United States have been so much higher than in other comparable nations.
This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.
Equitable Growth round-up
The Voting Rights Act of 1965 is probably best known for its role in eliminating barriers to political representation and voting for Americans of color at the height of the civil rights era. But a new working paper by Abhay P. Aneja and Carlos F. Avenancio-León shows that this signature legislation also worked to improve economic circumstances of Black Americans and other Americans of color. The co-authors’ research quantifies the connection between increasing political representation and reducing poverty, finding that between 1950 and 1980, the gap in median wages between Black and White workers in the South narrowed by around 30 percentage points, and that the Voting Rights Act was responsible for approximately one-fifth of that change. Aneja and Avenancio-León explain their study and its results in an issue brief, drawing a clear connection between Black voters’ greater political power and higher wages for Black workers in subsequent years, reducing poverty in the United States. They look at the various mechanisms that could have enabled the legislation to have this effect, and discuss the 2013 Supreme Court decision to weaken the law’s enforcement, which may be reversing the wage gains seen after the law was enacted.
Homeownership in the United States for a long time helped White middle-class families build up their wealth, providing many of these families with opportunities to accumulate, over their working years, the financial cushion they need to support themselves upon retirement. Yet the Federal Reserve’s 2019 Survey of Consumer Finances suggests that this wealth-building opportunity is under threat for all U.S. households today. Austin Clemens and John Sabelhaus review the data, which show that the Great Recession of 2007–2009 and the sluggish recovery that followed it have pushed homeownership rates lower than they were for older generations at similar ages and phases in the lifecycle. Clemens and Sabelhaus look specifically at data for families with middle-aged heads of households because this group of people will be urgently in need of the financial security homeownership can provide in short order. They also examine the inequities in housing among this group along race and income lines, showing that White and wealthy families have higher rates of homeownership than their Black, Latinx, and less well-off peers. Clemens and Sabelhaus then propose several actions policymakers can take to protect these vulnerable families on the brink of retirement to ensure they are able to begin building wealth before exiting the labor force.
Equitable Growth is committed to building a network of scholars studying how inequality affects economic growth and stability. As such, every month, we highlight a group of scholars in various fields doing cutting-edge work in the social sciences. This month, Christian Edlagan, Aixa Alemán-Díaz, and Maria Monroe write about five scholars whose research looks at the diverse lived experiences of Latinx populations in the United States and how these experiences are often compared to those of Black Americans, who face similar barriers to economic and social equity.
Check out Brad DeLong’s latest Worthy Reads, in which he summarizes and analyzes recent content from Equitable Growth and around the web.
Links from around the web
Since the end of July, when emergency coronavirus aid relief provided in the Coronavirus Aid, Relief, and Economic Security, or CARES Act expired, up to 8 million Americans have slipped into poverty. Two new studies show how the aid worked to prop up many vulnerable families and how those families have fared since the money ran out—namely, that the poverty rate is now higher than it was before the onset of the pandemic, The New York Times’ Jason DeParle reports. The researchers found that the CARES Act relief kept more than 18 million people out of poverty, but that number has dropped now that it has expired. Despite what appears to be an improving job market, the studies show that poverty has continued to rise, indicating that the recovery is too sluggish to offset the negative effects of not renewing aid. Coupled with a recent uptick in Unemployment Insurance claims and rising cases of the virus across the United States, the economy is poised to falter again—and, DeParle writes, Congress is no closer to passing another, desperately needed stimulus package to support those most in need.
The connection between climate change and economic inequality is becoming more obvious with every passing day and is one of the biggest, most daunting challenges we face, writesThe Atlantic’s Vann R. Newkirk II. Rising temperatures are more likely to affect poorer regions of the world, while wealthier areas—which contribute more to climate change via higher emissions—are mostly spared the worst effects of this warming or are easily able to avoid them. Sweltering heat levels also hit lower-income workers, such as farm and field hands, factory workers, and those in construction, harder than their more economically and geographically mobile peers, expanding wealth disparities even further, killing some people and not others, and fomenting conflict within many, and even between some, countries. Rising temperatures also exacerbate racial wealth and health divides, reinforcing structural racism and discrimination, and impacts Black and Latinx communities in the United States more than White areas. In short, Newkirk writes, in the long, hot century ahead, “the heat gap will be a defining manifestation of inequality.”
In the wake of lockdowns, quarantines, and stay-at-home orders earlier this year that most affected restaurants and the service industry in the United States, many small businesses have had to change their operations and business models to stay afloat. Even as some states and cities are now scaling back their restrictions on public gatherings, many people won’t return to their pre-coronavirus habits until they feel safe going out, meaning many of these businesses will continue struggling for months to come. One lifeline for many of them has been online crowdfunding websites, writes Vox’s Rebecca Jennings. But, Jennings continues, the fact that small businesses—the backbone of many U.S. cities, both small and large—have had to use these methods is clear evidence of the lack of public safety net protections for employers and employees alike. Though the Paycheck Protection Program, for instance, was intended to help those companies in this exact situation, many small businesses were excluded from the program for various reasons, and access was further limited for entrepreneurs of color, who faced significant barriers to entry. Crowdfunding and haphazard innovative solutions to coronavirus restrictions, such as makeshift outdoor dining patios and curbside pickup, will only work for so long, Jennings concludes, especially with winter around the corner. Policymakers must act to support the restaurant industry so that no more of these vital local businesses have to shutter permanently.
This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.
Equitable Growth round-up
The Federal Reserve last week released its 2019 Survey of Consumer Finances, a triennial dataset on U.S. households’ financial situation. Austin Clemens analyzes the data and finds that over the more than 10 years of economic growth since the previous economic downturn, U.S. households barely recovered their prerecession levels of nonhousing wealth, and many are less likely now to own a home that could be leveraged as a financial asset. Clemens disaggregates the data by race, income, and educational level to show that Whiter, wealthier, and more educated households were much more able to recover their wealth than Black, Hispanic, lower-income, and less educated households. In fact, he writes, White households, on average, had 15 percent more wealth in 2019 than they did in 2007, while Black households had 14 percent less wealth and Hispanic households had 28 percent less wealth in 2019 than in 2007. This means that as the U.S. economy entered the coronavirus recession earlier this year, most families were in a worse position than they were at the start of the Great Recession to weather the economic storm. Clemens urges policymakers to act, and quickly, to avoid repeating the mistakes that led the last recovery to be sluggish and deepen existing inequalities.
One way of building wealth in the United States—outside of homeownership—is through savings for retirement. David Mitchell and John Sabelhaus review the 2019 Survey of Consumer Finances to specifically determine trends in retirement savings since the Great Recession of 2007–2009. They find that many U.S. households don’t have retirement savings, and, looking at a survey from May 2020, see that many of those who do have drawn on it this year to help them remain afloat during the coronavirus recession. After breaking down the data further by race and income, Mitchell and Sabelhaus reveal that almost two-thirds of Hispanic households and half of Black households don’t own a retirement savings account, compared to one-fourth of White families and fewer than one-tenth of high-income households. In fact, those families in the top 10 percent of the income spectrum have more in retirement savings than the bottom 90 percent combined. Mitchell and Sabelhaus offer several policy solutions to close the racial and economic divides in retirement savings coverage, including several ideas that have already been proposed by some policymakers.
The coronavirus recession drives home anew the importance and benefits of a strong Unemployment Insurance system across the United States to protect and support workers during economic crises. Alexander Hertel-Fernandez and Alix Gould-Werth explore the links between labor organizations and Unemployment Insurance in propping up workers’ voices and reducing disparities in applying to and receiving unemployment benefits. They find that labor organizations make it easier for workers to use unemployment benefits, narrowing racial and educational divides in UI applications and receipt. Hertel-Fernandez and Gould-Werth also show that workers who had better access to the UI system during this recession felt more comfortable engaging in workplace collective action, such as strikes for better working conditions or pay. The co-authors close with three important implications for public policy of this so-called virtuous cycle, in which greater access to unemployment benefits “supports workplace collective action, including forming labor unions, which, in turn, support greater access to unemployment benefits.”
Hertel-Fernandez and Gould-Werth also participated in the latest installment of Equitable Growth’s In Conversation series, in which they further discuss a wide range of topics related to Unemployment Insurance. They touch upon themes such as the current weaknesses of the UI system in the United States and five specific policy reforms to strengthen it, fiscal constriction’s role in hampering UI programs and access to unemployment benefits, the role of academics (and academics’ understanding of the lived experience of unemployed workers) in designing a better way of delivering Unemployment Insurance to those in need, and more.
Earlier this week, the U.S. Census Bureau released new data on the effects of the coronavirus recession on workers and households for the period between September 16 and September 28. Austin Clemens, Kate Bahn, Raksha Kopparam, and Carmen Sanchez Cumming put together a series of five graphics that highlight key trends in the data.
Links from around the web
Before the coronavirus swept through the U.S. economy and society, low- and middle-income earners were finally starting to see their wages rise, writes The Washington Post’s Tory Newmyer, who looks at the Census Bureau’s 2019 Survey of Consumer Finances. Yet despite average wealth slowly increasing alongside rising wages, the divide between the haves and the have-nots continued to grow wider after the Great Recession of 2007–2009. In fact, Newmyer continues, the top 1 percent owns around one-third of all wealth in the United States—close to a three-decade high for that group—while the bottom 90 percent of income-earners saw their wealth decline over the past 30 years. Newmyer looks at the effect of generational transfers of wealth, namely via inheritances, on the racial wealth divide, as well as the booming stock market, finding disparities in both of these areas by race and income.
In small tourist towns, the coronavirus recession is threatening local economies in unprecedented ways. Vox’s Terry Nguyenvisits the city of Anaheim, California, which is home to Disneyland and whose economy revolves around the theme park’s success. But, as the park has been closed indefinitely to prevent the spread of the coronavirus and COVID-19, the disease it causes, small businesses in Anaheim have been hit hard and the city’s revenue has plummeted, leaving many to wonder whether any businesses will survive long enough to serve the millions of people who will return once the pandemic wanes and the park reopens. In the wake of Disney’s recent announcement that it will lay off 28,000 employees across its parks and in other corporate divisions, Nguyen writes, the fate of the city of Anaheim is tied to the fate of Disneyland. But, somewhat surprisingly, not all tourist towns are in the same dire position. Nguyen turns to Telluride, Colorado, and Sevierville, Tennessee—two small cities that are equally dependent on their local tourism attractions but have managed to stay afloat—in search of why some towns are struggling more than others.
If it wasn’t already clear that the coronavirus recession is hitting certain demographic groups harder than others, the latest employment data from the U.S. Bureau of Labor Statistics shines a harsh spotlight on the gender disparities of this recession. In fact, reports Stephanie Ebbert for The Boston Globe, four times more women than men left the labor force in September. Of the 1.1 million workers to drop out of the workforce, 865,000 were women, compared to 216,000 men. This discrepancy indicates that the burden caused by the child care crisis is being disproportionately carried by women, and reinforces many economists’ worries that women’s labor market gains over the past several decades are likely to be lost in this recession. The employment numbers also obscure the racial unemployment divides, Ebbert continues, with both Black women and Latina workers facing unemployment rates around 11 percent even as the overall joblessness rate for women is 7.7 percent.
Last week, California Gov. Gavin Newsom (D) signed a law establishing a taskforce to study the state’s role in the enslavement of Black Americans prior to the end of the Civil War and make recommendations about reparations. California at that time was a free state, Gillian Brockellwrites in The Washington Post, yet many White southerners brought these enslaved workers with them during the Gold Rush beginning in 1848 and could keep them enslaved in the state until it was abolished nationally in 1865. Brockell tells a handful of California’s hidden stories about enslaved Black Americans, which will get renewed attention now, thanks in part to this first-of-its-kind law, which had bipartisan support in the state legislature. Though some critics argue that no state alone can fully atone for the original sin of our nation and society—that has to come from the federal government, they argue—whatever action the California taskforce decides to take could be a start, alongside a federal reparations program.
This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.
Equitable Growth round-up
Though recent unemployment data released by the U.S. Bureau of Labor Statistics suggest that overall joblessness is going down, the coronavirus recession is exacerbating long-term trends of decreasing job quality and rising economic vulnerability. These trends are especially harmful to marginalized workers and their families. Unemployment rates for Black, Latinx, Asian American, women, and lower-educated workers are well above those of White men and highly educated peers, and the data indicate that the recovery is and will continue to be uneven among these groups. Kate Bahn and Carmen Sanchez Cumming analyze this month’s Jobs Report and show why the recent data signal an impending disaster for the public sector, particularly in local and state government jobs, which are disproportionately held by workers of color and women. Though job losses so far are not as severe in the public sector as in the private sector, Bahn and Sanchez Cumming explain that government employment was slower to recover in the previous recession and was marked by a shift from decent to low-quality jobs. Another sluggish recovery in the public sector would harm the economic security of these workers, deepen existing labor market disparities, and put a drag on the speedy and equitable recovery our economy desperately needs.
Early in 2018, after the Tax Cuts and Jobs Act was passed and signed into law by President Donald Trump, the administration began requiring cost-benefit analyses of tax regulations. More than 2 years later, Greg Leiserson writes, it is clear this experiment failed. In a new report and an accompanying blog post, Leiserson details the shortcomings of cost-benefit analyses for TCJA regulations and how the framework for cost-benefit analysis mandated by the White House Office of Information and Regulatory Affairs within the Office of Management and Budget shaped these weaknesses. Namely, the current cost-benefit analysis framework hides revenue-losing, inequality-increasing giveaways by ignoring the revenue and distributional effects of tax regulations. Leiserson explains why a different approach is needed and then provides one, in which the Department of the Treasury leads the process and provides qualitative and, when possible, quantitative evaluations that look at the impacts of tax regulations on revenues, on the level and distribution of the tax burden, and on compliance costs.
Earlier this week, Michael Kadestestified before the U.S. House Subcommittee on Antitrust, Commercial, and Administrative Law regarding competition in digital markets. His testimony explains the importance of the recent Judiciary Committee investigation into the state of competition in online markets and encourages the committee to continue acting to strengthen the antitrust laws, promote competition online, and protect consumers. Kades runs through various legislative reforms that are needed in addition to enforcement actions, explains why interoperability can work as a mechanism for addressing digital monopoly power, and details other laws and regulations Congress can enact to promote competition.
Catch up on Brad DeLong’s latest Worthy Reads, in which he provides summaries and his takes on recent must-read content from Equitable Growth and other sources. This week, he highlights Heather Boushey’s recent USA Today op-ed on the importance of equitable economic growth especially in the wake of the coronavirus recession, a recent working paper by Michael Kades and Fiona Scott Morton on competition in digital networks, and more.
Links from around the web
While recessions often hit poorer households harder than wealthier ones, the coronavirus recession is undoubtedly the most unequal recession in modern U.S. history. A recent Washington Postanalysis from Heather Long, Andrew Van Dam, Alyssa Fowers, and Leslie Shapiro shows how job losses since March have disproportionately fallen on low-wage workers, women, and workers of color. In a series of interactive graphics, the co-authors display the stark disparities in both unemployment and re-employment among various groups within the U.S. labor market. In particular, they write, Black women, Black men, and mothers of school-age children are having the hardest time getting hired back. While those at the top of the income ladder have either faced mild setbacks or none at all, many of those workers lower down on the ladder face what the authors call “a depression-like blow.” The inequality of the economic downturn is a reflection of the outsize impact of the coronavirus public health crisis on communities of color and low-income households.
A recent survey also confirms that Black and Latinx parents are having the most financial difficulty during this recession. Eighty-six percent of Latinx households and 66 percent of Black households reported struggling to afford healthcare, running out of household savings, and having trouble paying bills, compared to 50 percent of White households. Now that many of the government supports enacted earlier this year have expired, writes Giulia McDonnell Nieto del Rio in The New York Times, experts are concerned that the racial divides will continue to grow and exacerbate existing inequalities faced by these communities. This is particularly concerning for households with children, del Rio continues, and indicates that many will experience added long-term financial harm from the pandemic.
Though much of the conversation around the coronavirus pandemic is centered on ending lockdowns and getting people back to work, the reality is that until the public feels safe venturing out of their homes, reopening the economy won’t save small businesses from shuttering. Vox’s Emily Stewartexplains why the narrative around reopening only provides false hope for many small businesses around the country, many of which had to close permanently despite implementing additional safety measures. Many people not only are wary of going out in public during a deadly pandemic but also lost their jobs and are not eager to spend money on unnecessary expenses. Simply put, Stewart writes, “you can’t force business as usual when life is not.”
This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.
Equitable Growth round-up
The disproportionate impact of the novel coronavirus and COVID-19, the disease caused by the virus, on communities of color, particularly Black and Latinx communities, alongside the continuing police murders of unarmed Black people without consequences demonstrate more than ever that systemic racism is an ongoing problem in the United States. Equitable Growth has long argued for disaggregating economic data to see who prospers when the economy grows, but Austin Clemens and Michael Garveyexplain why doing so would have an additional important result—putting on full display the profound effects of racism across our economy and society, from healthcare to wealth accumulation to the criminal justice system and more. Clemens and Garvey detail how Congress and the executive branch can improve our understanding of economic and social outcomes for communities of color, including improving data collection, performing deeper analyses of racial economic divides, and providing policymakers with a better idea of the needs of marginalized communities in the United States. Specifically, they push for oversampling of communities of color with regard to existing federal surveys and data collection efforts to ensure the data collected is as robust as possible.
Earlier this week, the U.S. Census Bureau released new data on the effects of the coronavirus pandemic on workers and households. Austin Clemens, Raksha Kopparam, and Carmen Sanchez Cumming put together four graphs highlighting important trends in the data—namely, that low-income workers, those with less education, and workers of color are struggling the most amid the coronavirus recession.
Prioritizing stock market growth and using it as the barometer of economic expansion provides an inaccurate look at how the U.S. economy is actually working for workers and their families, writes John Sabelhaus. He explains the hidden costs of only looking at the stock market’s performance but not examining why it has gone up and the policies that increase stock prices at the expense of other things, such as adequate wages or Medicare and Social Security funding. He dives into what moves the stock market up and down, and the government’s role in these booms and busts, to show why stock-market-first economists are wrong to focus on policies that generate stock-price growth rather than a stronger economy for all. Sabelhaus then turns to recommendations for how policymakers should act to spur broadly shared economic growth, including investing in our workforce, infrastructure, innovation, and technology, and, importantly, ignoring the oft-told idea that making wealthy people wealthier will produce trickle-down effects for the rest of us (it doesn’t). Stock-market-first approaches have deepened wealth inequality in the United States, he writes, and those who benefit from a booming stock market are not the same people who are sacrificing so much, particularly during the coronavirus recession.
Policy decisions made over the past half-century weakened the U.S. economy and restricted growth, making the nation more vulnerable to crises such as those we are currently experiencing. We need new policies that support equitable economic growth across the income spectrum in order to truly recover from the coronavirus recession, writes Heather Boushey in an op-ed for USA Today. Lawmakers must enact policies, including paid sick leave, affordable child care and universal pre-Kindergarten, a livable minimum wage, expanded Unemployment Insurance, and small business support systems, Boushey continues—and policymakers must ensure these benefits are triggered on and off automatically. Without automatic stabilizers, economic aid to hard-hit populations in future recessions could be hamstrung by politics, much like the next round of coronavirus relief aid, which is currently stalled in Congress.
Competition among big technology firms is a hot topic, with rumors that Facebook Inc. and Alphabet Inc.’s Google unit may soon face monopolization cases against them. The previous major monopolization case was filed in 1998, against Microsoft, but much has changed since then. Michael Kades and Fiona Scott Morton propose that instead of questioning whether monopolization is occurring, we look at remedies for such violations of antitrust laws. In a recent working paper and accompanying Competitive Edge post, they design a remedy for addressing monopolization by a social media network based on five principles: the network effects of social networks, the entry barriers these network effects create, interoperability, the legal and technical challenges of implementing interoperability, and the role of the Federal Trade Commission’s rulemaking authority in drafting interoperability orders. They then explain each of these five areas and their relevance to designing a remedy to address monopoly violations by social media networks.
Links from around the web
A new study by Citigroup Inc. shows that the U.S. economy lost $16 trillion as a result of discrimination against African Americans since 2000. This is a significant amount, writes Adedayo Akala for NPR, especially when you consider that U.S. Gross Domestic Product totaled $19.5 trillion in 2019. The study breaks down the $16 trillion figure in four key divides between Black and White Americans: lost business revenue from discriminatory lending practices for African American entrepreneurs ($13 trillion); lost income from wage discrimination ($2.7 trillion); lost wealth accumulation thanks to housing discrimination ($218 billion); and lifetime income lost from discrimination in access to higher education opportunities ($90 billion). And that’s not all, Akala reports. The study’s authors also estimate a $5 trillion price tag over the next 5 years for not acting immediately to eliminate racial discrimination, before providing several recommendations for how policymakers can reverse these racial divides.
At the start of the coronavirus recession, the Federal Reserve jumped into action to stabilize the U.S. financial system, which was going haywire as a result of the uncertainty surrounding the pandemic. With stock markets back to pre-pandemic levels, it appears the Fed’s quick action worked, writesNeil Irwin for The New York Times’ The Upshot—perhaps too well. The success of these efforts may have removed the urgency for lawmakers to pass legislation that would extend relief aid to average Americans. This mentality of Wall Street over Main Street means a difficult economic reality today for many workers—especially low-income, less-educated, Black, and Latinx workers, who, as the data show, are being hardest hit by the recession—and small businesses, which are struggling even as large corporations experience record profits. Similar actions focused on rescuing financial systems rather than individuals were taken during the Great Recession of 2007–2009, Irwin writes, which led to a recovery so sluggish that many families were only just beginning to get back on their feet when the virus took hold earlier this year.
The Unemployment Insurance system in the United States is broken, writes Vox’s Emily Stewart. But it doesn’t have to be. Telling the story of one working mother in California, Stewart looks at how workers have been harmed by the UI system’s shortcomings and complexities during the coronavirus recession as well as before the onset of the pandemic. Stewart then examines the ways policymakers can improve how unemployment benefits are delivered and actions they can take to ensure that those who need help are able to access it with ease. Reimagining the UI system “would treat the jobless like customers, not criminals, while helping them stay afloat as they find their next gig,” she writes, making it easier to navigate and ensuring more consistent pay regardless of where workers live.
We lost a key figure in the fight for gender equality last week. Over the course of her career, Supreme Court Justice Ruth Bader Ginsberg made it possible for women to gain access to credit and wealth building opportunities, to access the same jobs as men and get paid the same when they did, and generally making society, the labor market, and the economy more equitable. The Atlantic’s Joe Pinsker runs through Ginsberg’s legacy and how it brought about changes to areas of daily life that we take for granted nowadays, including gender roles in the household and the labor force. Though the United States has hardly achieved gender equality, Pinsker continues, without a doubt, Ginsberg pushed us closer.
This is a post we publish each Friday with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is relevant and interesting articles we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.
Equitable Growth round-up
The U.S. labor market is difficult to navigate and that is especially the case since the onset of the coronavirus pandemic and recession, with record-high unemployment and an economic contraction ravaging the economy since March. When the statistics are broken down by race and gender, an even bleaker picture appears, showing that Black and Latinx workers and women workers in particular are bearing the brunt of this economic downturn. These groups of workers also tend to receive lower wages than their White and male peers, according to a recent working paper that was the basis of a policy report, published this week, by Kate Bahn, Mark Stelzner, and myself. These wage discrepancies can’t be explained by differing skills or education levels among these groups of workers. In fact, the working paper finds that workers of color, particularly Black and Latinx workers, women, and those at the intersection—Black women and Latina workers—face wage discrimination due to lower levels of wealth and more household responsibilities. These factors make them more vulnerable to exploitation and less likely to leave a job—even when they are being paid too little for their labor. Bahn, Stelzner, and I recommend several areas where policymakers can act to close the racial and gender wage gaps, including restoring worker power, reducing racial wealth inequality, and reinforcing family economic security.
As millions of American workers are laid off and small businesses are struggling amid the coronavirus recession, U.S. financial markets are booming and wealthy people keep getting wealthier. The reason behind this seeming paradox lies in the policy choices made over the past 40 years, exacerbating inequality across the economy and society. Amanda Fischer looks at both coronavirus-era policies and various policies that preceded them to show where this break between the fates of Wall Street and Main Street began. From antitrust law and the dominance of Big Tech companies to monetary policy and the Federal Reserve’s interventions in the bond market, Fischer walks through why some firms and people are doing great right now and why that isn’t trickling down to the many others who are being left behind. Fischer concludes with several policy ideas that could reverse this trend and help ensure a strong recovery for all Americans and businesses—not only from the coronavirus recession but from future recessions as well.
Heather Boushey wrote an op-ed in The Washington Post recently that examines why U.S. stock markets rallied quickly after plunging at the start of the coronavirus recession while the real U.S. economy and so many U.S. workers and their families continue to suffer. She explains how income and wealth inequality enabled the Dow Jones Industrial Average and the S&P 500 indexes to recover largely on the back of the five Big Tech companies in those indexes, but that smaller firms in the Russell 2000 index fell in value. She points to more economic data to caution that U.S. stock markets cannot sustain their gains indefinitely without a recovery in the real economy.
Head over to Brad DeLong’s latest Worthy Reads for his takes on must-read content from Equitable Growth and around the web.
Links from around the web
While unemployment numbers, in aggregate, seem to be decreasing from their peak in April, dropping from 14.7 percent to 8.4 percent in August, a closer inspection of the data shows that much of this improvement has been for White workers. HuffPost’s Emily Peckreports that the unemployment rate for White workers is at 7.3 percent, while Black workers’ jobless rate is still in double-digits, at 13 percent—indicating that White workers are getting hired back almost twice as fast as Black workers. Black workers have long had unemployment rates that are higher than that of their White peers due to structural racism and discrimination, but at the start of the coronavirus recession, Black and White workers were laid off at similar and high rates. It appears, however, that the racial unemployment divide may soon widen once again as businesses reopen and rehire White workers more quickly. And as the child care crisis continues to burden working parents, Peck writes, Black women workers will bear the brunt of this, since household responsibilities fall disproportionately on them. Black workers are getting left behind, and policymakers are not acting to address this issue with the urgency it requires—or at all.
Contrary to what many economists argue is the cause of racial and gender wage divides—a so-called skills gap between White men workers and their otherwise-similar peers—Annelies Goger and Luther Jackson write for The Brookings Institution that policymakers instead should focus on an opportunity gap in the U.S. labor market. The skills gap narrative doesn’t take into account social dynamics that stunt many workers’ career advancement and job options, and therefore does not provide an accurate picture of the obstacles faced by large swaths of the labor force in the United States. This leads to misinformed policy choices that will not solve the real issue at hand. Instead, Goger and Jackson argue that policymakers should look at the opportunity gap—the disparity in access to a good education, economic security, high-quality jobs, and career mobility—in order to cultivate and invest in talent, innovation, and general well-being. Goger and Jackson conclude with several policy solutions to address these issues specifically and explain why they are necessary for lawmakers interested in reducing inequality in the United States.
The rampant inequality prevalent in the U.S. economy over the past several decades made the nation more vulnerable to the economic and public health crises brought on by the coronavirus pandemic. In a TIME magazine article, Nick Hanauer and David M. Rolf show how the upward redistribution of income has cost American workers dearly—how the top 1 percent took $50 trillion from the bottom 90 percent over the past 40-plus years—and how that wealth did not trickle down to all Americans, as some economists predicted it would. Hanauer and Rolf explain in depth how this inequality holds back U.S. economic growth and limits who prospers from that growth, and how it made us less resilient and primed our system to be ravaged by the coronavirus pandemic and COVID-19, the disease caused by the virus. They also demonstrate, using data from a recent RAND Corporation working paper, what American workers would be making across the income distribution had this inequality not taken hold—and, unsurprisingly, the vast majority of workers are earning only a fraction of what they could be earning. In fact, they find, inequality is costing the average full-time worker $42,000 per year.
