Category: Equitablog

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

Weekend Reading is back, after a few weeks off! We hope you had a wonderful holiday season and wish you the best in 2020.

Given the nature of politics these days, it was a nice surprise that right before Christmas Congress passed and President Donald Trump signed into law historic, bipartisan legislation that will lower prescription drug prices. The measures were folded into the year-end omnibus spending bill, and will strengthen market competition in the industry by limiting the various tactics, including sample blockades and safety protocol filibusters, which drug companies use to prevent generics from entering the market. Michael Kades explains how the pharmaceutical industry uses these tactics to keep competition at a low, and discusses how the new CREATES Act targets these practices specifically in order to lower prices for consumers.

Equitable Growth’s academic grants program is now entering its seventh year. Since 2014, we have provided grants to more than 200 researchers, and distributed more than $5.6 million in grants. We recently wrote up a report covering what we’ve learned from researchers over the past six grantgiving cycles, as well as our new lines of inquiry for this coming year. (And don’t forget to check out our 2020 RFP and 2020 RFP specifically for paid family and medical leave research!)

Last week, Equitable Growth staff attended, spoke at, and co-organized a panel at the American Economics Association’s Allied Social Science Associations annual meeting in San Diego. The three-day event brings together more than 13,000 of the best minds in economics to network and celebrate new achievements in their lines of research. Read our coverage from day one, day two, and day three of the event.

The U.S. Bureau of Labor Statistics issued its monthly report on the U.S. labor market for December, showing high prime-age employment (above 80 percent) and high labor force participation, as well as continued short periods of time spent unemployed. The data also show wage growth flattening out after months of relatively steady increases. Raksha Kopparam and Austin Clemens put together five graphs highlighting these and other important trends in the monthly announcement.

Links from around the web

The United States is the only industrialized nation in the world that does not guarantee paid family leave to workers. But even though there is no federal paid family leave standard in place, eight states and the District of Columbia have passed laws to expand these kinds of benefits to workers, and President Trump recently signed into law a bill that guarantees such leave to around 2.1 million federal government workers—and private companies are taking notes, reports Jena McGregor for The Washington Post. McGregor writes about the various ways in which employees are using expanded access to paid leave, including to care for a new child, an ill family member, and an ailing pet. Here’s hoping a federal paid family leave guarantee for all workers is coming next.

Millionaires who aren’t against paying more in taxes? Yes, there is a group of ultra-wealthy individuals who think they should be doing more to fight income inequality. Led by Abigail Disney (yes, of those Disneys), the Patriotic Millionaires are a collection of rich Americans who are concerned about rising economic disparities— and, writes Sheelah Kolhatkar for The New Yorker, often speak out “in favor of policies traditionally considered to be antithetical to their economic interests.” Disney said she decided to start the group after realizing that the privileges she and her family experienced were cutting them off from the world and making it too easy for them to ignore the economic realities faced by most Americans. Kolhatkar tells the story of how Disney got to this point, and what she and her peers are doing about it.

As student loan debt rises and wages stagnate or drop, many younger Americans are now asking themselves if the costs of getting a university degree are still worth it. While some studies show that college graduates do earn more than their peers without a degree, a new study shows that these higher earnings don’t necessarily translate into higher prosperity and long-term economic security, reports Annie Lowrey for The Atlantic. “College still boosts graduates’ earnings, but it does little for their wealth,” she writes, going on to say that “if going to college is still important for young people’s earnings and employment, it is less of a clear economic boon that it was 30 years ago.”

California may take steps to be the first state that releases its own brand of generic prescription drugs in an effort to curb rising healthcare costs. The proposal is expected to be included in Gov. Gavin Newsom’s (D) new state budget, reports Melody Gutierrez for the Los Angeles Times, and allegedly would allow the state to contract with one or more generic drug companies to manufacture certain prescriptions under the state’s own label, which would be available to Californians at a lower cost. While we wait for more details on the plan, Gutierrez explains much of the motivation behind the proposal, as well as what critics and proponents are saying.

Friday figure

Figure is from Equitable Growth’s “Equitable Growth’s Jobs Day Graphs: December 2019 Report Edition” by Raksha Kopparam and Austin Clemens.

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

Median household income has not changed in a statistically significant way between 2017 and 2018, writes Alix Gould-Werth in an analysis of this week’s U.S. Census Bureau release of the 2018 poverty rate and 2018 median household income in the United States. While the official poverty rate went down 0.5 percent, finally returning to its pre-Great Recession level, median household income has not improved significantly relative to 2007. A more nuanced look at the data shows that overall economic hardship did not decrease in 2018—despite an increase in Gross Domestic Product over the same time period—thanks to growing income inequality. This means millions of families are vulnerable to falling into poverty again when the next recession inevitably hits.

As wealth inequality grows, ideas about how to raise taxes on that wealth abound. In an issue brief, Greg Leiserson and Will McGrew outline a system of mark-to-market taxation, which changes the way we currently tax investment income such that investors would pay tax on the increase in the value of their investments each year, rather than deferring tax until those investments are sold. The brief reviews the revenue potential of this taxation system and summarizes the distribution of the resulting burden, which would fall overwhelmingly on wealthy individuals.

The U.S. Bureau of Labor Statistics this week released the July data from the Job Openings and Labor Turnover Survey, or JOLTS. Kate Bahn and Raksha Kopparam produced four graphs using the data, which demonstrate an expansionary labor market even as job openings decreased slightly in July.

Read Will McGrew’s coverage of last month’s sixth annual Freedom and Justice Conference—hosted by the National Economic Association and the American Society of Hispanic Economists at University of New Mexico’s Department of Economics—which focused on better incorporating those who are economically marginalized into the field of economics, both as researchers and as subjects of research.

Equitable Growth announced more than $200,000 in funding for two grants studying the effects of state-level paid family and medical leave on labor market participation and on opioid abuse. The two off-cycle grants will study issues “that matter to families and that also have profound implications for the labor market and broader economy,” said Alix Gould-Werth in a press release.

Brad DeLong gives us his latest worthy reads, providing his takes on content from Equitable Growth and around the web.

Links from around the web

During President Donald Trump’s second year in office, safety net programs—including the Supplemental Nutrition Assistance Program, Social Security, and housing subsidies—and the benefits they provide to low-income families kept almost 48 million people out of poverty. That’s close to 3 million more people above the poverty threshold than in 2017, reports Alexia Fernández Campbell for Vox, analyzing the newly released U.S. Census Bureau data on poverty and median income. Yet, she continues, repeated efforts to slash welfare spending—including President Trump’s budget proposal for fiscal year 2020 and attempts to disable Obamacare—will only push more people into poverty, should they succeed.

Since 2009, the rate of uninsured people living in the United States has been declining, largely thanks to the Affordable Care Act and the creation of state healthcare exchanges in 2014. But in 2018, that progress halted, as almost 2 million more people became uninsured, bringing the total to 27.5 million Americans living without healthcare coverage—including more than 4 million children—reports Tami Luhby for CNN.

After the California state legislature passed landmark legislation on Wednesday changing the employment status of app-based company employees, companies such as Uber Technologies, Inc. and Lyft, Inc.—which are some of the main targets of the law—responded by declaring they were exempt from key provisions, leading to confusion about who, exactly, will be covered once it goes into effect. Under the law, workers are considered employees (with all the rights, benefits, and protections that implies), and not contractors, if a company controls how they perform their tasks or if their work is central to a company’s regular business. So, if this law doesn’t affect Uber and Lyft drivers, then who does it apply to? The ensuing debate “could have wide economic ramifications for businesses and workers alike in California, and potentially well beyond as lawmakers in other states seek to make similar changes,” write Kate Conger and Noam Scheiber for The New York Times.

For the first time in history, write Heather Long and Andrew Van Dam for The Washington Post, most new hires of prime working age (ages 25 to 54) in the United States are people of color. Specifically, black and Hispanic women—who have been entering the workforce at an increasing rate since 2015—have reshaped the workforce and pushed it across this historic threshold. But, the authors ask, will these minority groups be able to hold on to these gains when the labor market weakens as the economy slows down?

Attorneys general for 50 states and territories—only California and Alabama have not signed on—announced an antitrust investigation into Alphabet Inc.’s Google unit, stopping short of filing a lawsuit for the time being. The probe is focused on the tech giant’s online advertising, though could expand to other areas, including “the way the company processes and ranks search results to the extent to which it may not fully protect users’ personal information,” writes Tony Romm for The Washington Post. This investigation comes as regulators around the world are looking into the company’s practices, including investigators in the European Union, who recently fined Google $9 billion for competition-related issues over the past 3 years.

Friday Figure

Figure is from Equitable Growth’s “Newly released U.S. poverty statistics show that recent economic growth is not broadly shared,” by Alix Gould-Werth.

Worthy reads from Equitable Growth:

1. Diverse scholars at conferences ask different questions—questions as, if not more, important than the mainstream. Will McGrew reports on this year’s “National Economic Association and the American Society of Hispanic Economists Work to Diversify and Strengthen Economics Research,” writing: “Last month, the National Economic Association and the American Society of Hispanic Economists hosted the sixth annual NEA-ASHE Freedom and Justice Conference at University of New Mexico’s Department of Economics. As in previous years, this conference provided an invaluable contribution to the field by elevating new communities, topics, and methodologies within economics research. Indeed, the papers presented at the conference painted a fuller picture of the current state of the U.S. economy and provided empirically grounded recommendations for a stronger and fairer economic future.”
2. Very good advice for California now—and for future congressional majority leaders and speakers and presidents who might represent the large majorities of American voters who want these problems addressed sensibly and substantially. Read Heather Boushey’s “Equitable Growth CEO’s Written Testimony at California Future of Work Commission,” in which she writes: “The monopoly power problem … exacerbates inequality, contributes to wage stagnation, limits entrepreneurship, increases the cost of living, and stifles innovation … Industry concentration and declining economic dynamism reduces wages by limiting workers’ employment options and opportunities for advancement, and allows firms to use their increasing power to squeeze worker compensation in favor of greater profits. Workplace fissuring, through the rise of independent contractors, franchisors, and contingent hiring, prevents workers from accessing career ladders, matching into the jobs they are best suited for, and gaining sufficient bargaining power to unlock wage increases. Persistent historical disparities such as wage discrimination and social norms reinforce occupational segregation into jobs that don’t pay well enough and offer little room for advancement. Yet policymaking over the past several decades has been moving in the wrong direction. Specifically: Antitrust law now allows firms to accrue and abuse monopoly power, not just over consumers but also in many cases over workers. Successive rounds of tax cuts, including the Tax Cuts and Jobs Act of 2017 and several tax cuts under the George W. Bush administration, have lowered the progressivity of the tax code and greatly decreased taxes on wealth, capital, inheritances, and corporate profits. Outdated labor law provides insufficient protection of workers and has facilitated the long decline of unions, traditionally the most vocal and ardent advocates for the middle class. We have an opportunity right now to take a step back to look at the scale and scope of the problems and develop real solutions.”
3. These two are Equitable Growth’s not-so-secret but very powerful intellectual weapons on issue of public finance. Read Greg Leiserson and Will McGrew, “Taxing Wealth by Taxing Investment Income: An Introduction to Mark-To-Market Taxation,” who write: “The sharp increase in U.S. wealth inequality in recent decades has spurred interest in increasing taxes on wealth. This issue brief introduces mark-to-market taxation, one approach to raising taxes on wealth by reforming the taxation of investment income. In a system of mark-to-market taxation, investors pay tax on the increase in the value of their investments each year rather than deferring tax until those investments are sold, as they do under current law. This issue brief first defines investment income and explains how mark-to-market taxation works. It then reviews the revenue potential of this approach to taxing investment income, explaining why a mark-to-market system can raise substantial revenues. Finally, it summarizes the distribution of the burden that would result, which would fall overwhelmingly on wealthy individuals.”

Worthy reads not from Equitable Growth:

1. Listen to a conversation between Reed Hundt and me about the “limits of, and challenges to, free-market economics,” with Joshua Cohen, co-editor of Boston Review, “Neoliberalism and Its Discontents,” which is prefaced on the web pages of the host of the discussion, the Commonwealth Club: “At the end of the Carter administration and throughout the Reagan Revolution, belief in the power of markets became America’s preferred economic policy doctrine. President Bill Clinton all but announced the triumph of free markets when he declared that ‘the era of big government is over.’ President Barack Obama faced the worst economic crisis since the Great Depression and pushed a recovery plan that was more limited than many had hoped, seeming to protect the very sectors that had created it … In his new book, A Crisis Wasted, Reed Hundt … makes the argument that Obama missed an opportunity to push for a new progressive era of governance, a miscalculation that ultimately hobbled his administration.”
2. A more sophisticated model says that the 2 percentage point drop in the Wicksellian equilibrium real interest rate due to the coming of the low interest rates of “secular stagnation” should have triggered a 2 percentage point increase in the Federal Reserve’s inflation target. I think this is probably right. It mirrors the conclusion of a less-sophisticated model—one in which proper policy simply seeks to keep inflation as low as is consistent with not exceeding a fixed small probability of hitting the zero lower bound on interest rates. Read Philippe Andrade, Jordi Galí, Hervé Le Bihan, and Julien Matheron, “The Optimal Inflation Target and the Natural Rate of Interest,” in which they write: “Starting from pre-crisis values, a 1 percentage point decline in the natural rate should be accommodated by an increase in the optimal inflation target of about 0.9 to 1 percentage point.”
3. The interest rate is an optimal-control variable. Almost always, in an optimal control problem—like in steering a boat—you are doing one of two things: as much as you can (wheel hard left or hard right), or staying the course (wheel center, unsure whether your next move will be to nudge it left or right, but certainly your next move will be small). Only when something special is going on—like following a narrow channel or passing a reef—do you tend to deviate from that rule. The Fed knows that its next move is highly likely to be a rate cut. I see no reef. I see no island. Why has the rate cut not happened already? What is the reason? Read Tim Duy, “Gearing Up For A Rate Cut,” in which he writes: “One take on the numbers is fairly positive. The economy continues to generate jobs at a pace sufficient to either lower unemployment further or encourage more people to enter the labor force. The jump in wage growth might even suggest that the economy is finally bumping up against full capacity and that is the primary culprit behind slower job growth. And maybe the August jobs number is revised up. Another take is less positive. The job market has clearly slowed, and, after accounting for the [U.S.] Census [Bureau] hires, may have slowed very close to the point where unemployment at best holds steady. That significant downshift in momentum is very worrisome. The second derivative here is not our friend. Moreover, don’t take too much comfort in the stronger wage numbers, as that can easily be a lagging variable; wages might not take a hit until unemployment starts rising … [Gross Domestic Product] tracking measures from the New York and Atlanta Federal Reserve Banks are both at a below trend 1.5 percent for the third quarter. New York is looking at 1.1 percent growth for the fourth quarter. Most definitely nothing to write home about.”

This is a weekly post we publish on Fridays 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 the work 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

Equitable Growth Director of Competition Michael Kades published a piece on the antitrust issues raised by the “Big Four” technology companies (Amazon.com Inc., Apple Inc., Facebook.com Inc., and Alphabet Inc.’s Google unit) whose representatives testified on Capitol Hill this week. After pointing out the negative effects of market dominance by these firms on business investment, Kades argues that policymakers should focus on reducing barriers to entry in these internet markets.

In an addition to our working paper series, Stanford University economists Petra Persson and Maya Rossin-Slater investigate the effects of increased parental leave for fathers on health outcomes for mothers. They find that increased temporal flexibility for fathers reduces the risk of postpartum and mental health difficulties for mothers. The authors conclude that mothers thus often bear the burden for a lack of workplace flexibility.

Equitable Growth Research Assistant Raksha Kopparam wrote a piece this week to celebrate the U.S Women’s National Team’s victory in the World Cup and discuss their case for pay equity. Given that the women’s team has a better record and produces more revenue than the men’s team, Kopparam argues that their situation is similar to those of many other women whose work is devalued, and she offers some policy recommendations for closing these unjustified pay gaps.

Academic Programs Director Korin Davis announced the launch of our new working paper digest, a quarterly email summarizing key insight from papers in our working paper series. The four papers featured in the first edition cover topics ranging from the social safety net in rural areas to the effects of disability programs on financial distress.

In his weekly “Worthy Reads” column, University of California, Berkeley economist and Equitable Growth columnist Brad Delong highlighted recent research and writing in economics from Equitable Growth and other economists. This week, Brad redirects readers to economist Fiona Scott Morton’s literature review for Equitable Growth on cutting-edge research in the economics of antitrust and competition, and he provides his take on recent debates on President Trump’s nominations to the Federal Reserve Board.

Finally, in a working paper released yesterday, University of Chicago economists Thibaut Lamadon, Magne Mogstad, and Bradley Setzler empirically test the relationship between compensating differentials for workplace conditions and declining competition in U.S. labor markets. Using their data to propose a model of the labor market with two-sided heterogeneity, the authors offer some policy recommendations to achieve more efficient and equitable outcomes for workers.

Links from around the web

Nathaniel Meyersohn reports for CNN on recent local efforts to restrict the growth of Dollar General and Dollar Tree stores in communities across the country. In addition to boxing out locally owned small businesses, these stores are often clustered in low-income areas, thereby preventing the arrival of supermarkets that sell healthier and higher quality food products. [cnn]

Zach Shrivers interviews local retailers in West Virginia on Amazon.com Inc.’s Prime Day to see how they are dealing with competition from the massive online retailer. The small business owners emphasize that local communities suffer from Amazon’s market dominance because this multinational corporation doesn’t invest in communities to nearly the same extent as traditional small businesses. [wtap]

Claire Kelloway summarizes the findings of a recent report by the Institute for Local Self-Reliance on Walmart Inc.’s effects of the economics of food in the United States. In particular, Walmart leverages its dominant market position and its links with financial firms to force the closure of local retailers by selling stores in targeted communities at a loss. To make up for this, Walmart forces lower prices on farmers and other suppliers—often dependent on the retail giant for sales. [civil eats]

Todd Shields reports for Bloomberg on a recent win by small telephone service providers at the Federal Communications Commission. In May 2018, large telecom companies attempted to get the FCC to remove limits on what they can charge small carriers for accessing their networks. S0 far this year, however, the FCC has sided with the small carriers given the risk that large providers could hike prices to drive smaller competitors out of the market to the detriment of consumers. [bloomberg]

Friday figure

Figure is from Equitable Growth’s “Modern U.S. antitrust theory and evidence amid rising concerns of market power and its effects” by Dr. Fiona Scott Morton.

Worthy reads from Equitable Growth:

1. The most important worthy read this week is Fiona Scott Morton’s “Modern U.S. Antitrust Theory and Evidence Amid Rising Concerns Of Market Power and Its Effects: An Overview Of Recent Academic Literature,” in which she writes: “The experiment of enforcing the antitrust laws a little bit less each year has run for 40 years, and scholars are now in a position to assess the evidence. The accompanying interactive database of research papers for the first time assembles in one place the most recent economic literature bearing on antitrust enforcement … Horizontal mergers … Vertical mergers … Exclusionary conduct … Loyalty rebates … Most Favored Nation clause … Predation … Common ownership … Monopsony power … Macroeconomics and market power.”
2. Watch Darrick Hamilton, “Racial and Gender Wage Gaps,” from this event on Capitol Hill, “Racial and Gender Wage Gaps: Overcoming Structural Barriers to Shared Growth.”
3. Read Korin Davis, “Equitable Growth Launches Quarterly Working Paper Digest,” in which she notes: “The Equitable Growth Working Paper Digest provides descriptions of several highlighted working papers along with analysis by our staff of why they are significant and how they fit into the framework of Equitable Growth’s efforts.”
4. And then read Kyle Herkenhoff, “The Case for More Internships and Apprenticeships in the United States,” in which he writes: “We estimate that learning from co-workers accounts for 24 percent of the aggregate U.S. human capital stock. Roughly 40 percent of a typical worker’s human capital is accumulated on the job, and of that human capital accumulation, 60 percent comes from learning the skills of co-workers. These benefits of learning from co-workers could be increased markedly.”

Worthy reads not from Equitable Growth:

1. A healthy macroeconomy continues to be the best of all labor-side policies. Two centuries of bitter experience have taught us that the macroeconomy can only stay healthy if it is planned—and properly planned. Not least among the necessary planning institutions for the macroeconomy is the central bank. And two centuries of bitter experience have taught us that the central bank has a very delicate task, one that can only be successfully accomplished if it is staffed by highly competent and good-hearted people. Here, we have the American Enterprise Institute raising the alarm with respect to the chaos-monkey nature of President Donald Trump’s Federal Reserve nominations. Read Desmond Lachlan, “Trump’s bizarre Federal Reserve nomination,” in which he writes: “Among President Trump’s more bizarre nominations for office has to be his nomination of Judy Shelton … Shelton manages to hold two contradictory views of monetary policy at the same time … Normally a person would be in favor of either an easy monetary policy to stimulate the economy or a hard monetary policy to exert discipline on the government … One would not expect her to hold both views at the same time. Yet Ms. Shelton does exactly that.”
2. The past decade of bitter experience has taught us that monetary policy cannot do the entire job on its own: A healthy macroeconomy requires planning, and some of that planning must be on the fiscal policy side. And the evidence that expansionary fiscal policy is a very effective tool to cure a depressed economy, and cure it with minimal blowback costs of any kind, continues to mount. Read Jérémie Cohen-Setton, Egor Gornostay, and Colombe Ladreit de Lacharrière, “Aggregate Effects of Budget Stimulus: Evidence from the Large Fiscal Expansions Database,” in which they write: “This paper estimates the effects of fiscal stimulus on economic activity using a novel database on large fiscal expansions for 17 OECD countries for the period 1960–2006. The database is constructed by combining the statistical approach to identifying large shifts in fiscal policy with narrative evidence from contemporaneous policy documents. When correctly identified, large fiscal stimulus packages are found to have strong and persistent expansionary effects on economic activity, with a multiplier of 1 or above. The effects of stimulus are largest in slumps and smallest in booms.”
3. Very wise. There is no reason for the U.S. Senate to do anything but neglect the Federal Reserve, and the Fed will be stronger at the start of 2021 if it is neglected. Read Josh Barro, “There’s No Need for the Senate to Confirm Anyone to the Fed,” in which he writes: “Trump … says he will nominate Judy Shelton and Christopher Waller to … fill out the board … Moore and Cain were bizarre … Waller seems like a fine enough choice … Shelton … like Cain and Moore before her has traded in a long track record of hawkish gold-buggery for a new, dovish outlook that calls for the low interest rates President Trump wants … Shelton’s flip-flop is, if anything, more egregious than Moore’s and Cain’s, because monetary policy is supposed to be an actual area of expertise for her … Conservatives in the Senate have reasons to take a long view … So long as Trump is the person making nominations, there’s no reason to aim for seven.”
4. Market forces are voting, strongly, for green energy. Read Alwyn Scott, “General Electric to Scrap California Power Plant 20 Years Early,” in which he reports: “General Electric Co. said on Friday it plans to demolish a large power plant it owns in California this year after only one-third of its useful life because the plant is no longer economically viable in a state where wind and solar supply a growing share of inexpensive electricity. The 750-megawatt natural-gas-fired plant, known as the Inland Empire Energy Center, uses two of GE’s H-Class turbines, developed only in the last decade, before the company’s successor gas turbine, the flagship HA model, which uses different technology. The closure illustrates stiff competition in the deregulated energy market as cheap wind and solar supply more electricity, squeezing out fossil fuels.”

The Washington Center for Equitable Growth today launched a new quarterly newsletter, the Equitable Growth Working Paper Digest, dedicated to informing readers about several of the working papers we’ve released on our website over the previous three months.

Equitable Growth’s Working Paper Series has been going strong for more than three years. We’ve released nearly 100 of these works-in-progress. They comprise a diverse, comprehensive, and ever-growing collection of original research by our grantees and other scholars highlighting the connections between inequality and economic growth. By posting this work, Equitable Growth seeks to promote broader discussion of these issues and generate feedback for the researchers from the academic community as they prepare their research for final publication. We also hope to provide a resource for policymakers who seek to develop and implement evidence-based policies on issues related to economic inequality.

The Equitable Growth Working Paper Digest provides descriptions of several highlighted working papers along with analysis by our staff of why they are significant and how they fit into the framework of Equitable Growth’s efforts. The inaugural issue covers the following papers:

• “Simplified distributional national accounts,” by Thomas Piketty of the Paris School of Economics and Emmanuel Saez and Gabriel Zucman of the University of California, Berkeley
• “Economic change and the social safety net: Are rural Americans still behind?” by James Ziliak of the University of Kentucky
• “Declining job quality in the United States: Explanations and evidence,” by David R. Howell of The New School and Arne L. Kalleberg of the University of North Carolina, Chapel Hill
• “Disability and distress: The effect of disability programs on financial outcomes,” by Manasi Deshpande and Yalun Su of the University of Chicago and Tal Gross of Boston University

The Equitable Growth Working Paper Digest is the best way to stay informed about the working papers that Equitable Growth has published. If you wish to subscribe, please click here.

This is a weekly post we publish on Fridays 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 the work 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

Hourly wages among U.S. workers vary enormously by gender, race, and education level. In order to address and identify these variances, we updated our wage comparison tool, which was originally published by former Equitable Growth Research Director John Schmitt and former Analyst Kavya Vaghul, along with our Computational Social Scientist Austin Clemens. This interactive tool provides a way to see just how much wages vary within and across demographic groups. The data behind this interactive are derived from the Center for Economic and Policy Research extracts of the Current Population Survey Outgoing Rotation Group.

The Congressional Budget Office score forecasting significant job losses from a minimum wage increase relies too heavily on old research and not sufficiently on new studies. Recent research makes clear that badly needed increases in the minimum wage can produce substantial wage hikes for workers without significant job loss. This op-ed by Director of Labor Market Policy and economist Kate Bahn puts into context the anticipated CBO scoring of the minimum wage legislation currently being considered in the U.S. House of Representatives. Bahn and Research Assistant Will McGrew also compiled this factsheet, which contextualizes the CBO report in light of the cutting-edge econometric research on minimum wage increases from economists and other scholars in Equitable Growth’s network.

In light of the recent introduction of the “Raise the Wage Act,” Creative Director Dave Evans , along with former Equitable Growth economist Ben Zipperer and Research Assistant Will McGrew updated their analysis on the minimum-to-median wage ratios across states. They provide an interactive graphic that demonstrates that most states had much stronger minimum wages more than 30 years ago than they do today. They conclude that a federal $15 minimum wage would benefit a majority of the states.

Last Friday, the U.S. Bureau of Labor Statistics released new data on the U.S. labor market during the month of June. Kate Bahn and I compiled five graphs highlighting important trends in the data.

The U.S. Bureau of Labor Statistics earlier this week released the newest data from the Job Openings and Labor Turnover Survey covering the month of May. Kate Bahn and I put together four graphs utilizing JOLTS data.

In the latest installment of Equitable Growth’s In Conversation series, Equitable Growth President and CEO Heather Boushey speaks with economist Leemore Dafny, the Bruce V. Rauner Professor of Business Administration at the Harvard Business School and the Kennedy School of Government. They discussed health insurance exchanges established under the Affordable Care Act and how antitrust enforcement in the health insurance industry can regulate mergers, preventing rising costs and limiting potential harm to consumers.

Heather Boushey dives into the role economist Arthur Laffer, who was recently awarded the Presidential Medal of Freedom, played in promoting supply-side economics. Laffer introduced the country to the idea that tax cuts would lead to such large-scale investments and economic growth that in the end, they basically would pay for themselves. However, this theory is not supported by credible research or evidence, as Boushey points out.

Austin Clemens reports that new estimates of U.S. economic growth released by the University of California, Berkeley’s Gabriel Zucman and Emmanuel Saez tell us, for the first time, how growth was distributed in the United States between wealthy and low-income households in 2015 and 2016. Low-income households in the lowest quintile of income-earners suffered an especially poor year in 2016 and saw their incomes decline by more than 3 percent as a group. While the share of total economic income held by the top 10 percent dropped slightly between 2014 and 2016, from 39.2 percent to 38.4 percent, it still maintains a disproportionately large share of economic growth.

Brad DeLong compiles his most recent worthy reads on equitable growth over the past two weeks, both from Equitable Growth staffers and outside press and academics.

Links from around the web

This month marks a record-breaking stretch of economic expansion, as the U.S. economy has experienced 121 months of continuous growth. Hispanic women between the ages of 25 and 54 saw employment rates increase by 2.2 percentage points since 2007, while African American women saw a growth of 1.6 percentage points within the same time frame. While this growth is encouraging, the aggregate growth has been concentrated among the wealthiest Americans, who happen to be white men. [nyt]

This week, the Trump administration ended its fight to add a citizenship question to the 2020 Census. Critics argued that adding such a question would result in massive underreporting among permanent residents and visa-holders, who may be fearful of ICE targeting them for their immigration status. The administration still wants to collect citizenship data and, as such, President Donald Trump issued an executive order mandating the U.S. Department of Commerce to obtain citizenship data through other means. [cnn]

This week, the Congressional Budget Office estimated that raising the federal minimum wage to $15 would lift the incomes of 27.3 million workers but eventually lead to 1.3 million lost jobs. Andrew Van Dam reports that while the CBO report headline credits a $15 minimum wage to the tremendous potential job loss, the estimates actually say that an increased minimum wage can result in a range of no major job loss up to 1.3 million jobs lost. Economic Policy Institute economist and former Equitable Growth economist Ben Zipperer said that the low-job-loss scenario indicates that raising the minimum wage may not be as dangerous as academics once thought. [wapo]

The Trump administration recently dropped their plan to limit industry rebates that pharmaceutical manufacturers give to pharmacy benefit managers, or PBMs, in Medicare. This plan would have restricted the deals made between pharma and the PBMs for Medicare and Medicaid plans, thus preventing the PBMs from taking a large profit at the expense of America’s most vulnerable patients. [wsj]

Earlier this week, a federal judge blocked a Trump administration proposal that would require pharmaceutical companies to reveal the sticker prices of their prescription drugs on TV ads if the price is above $35. Transparency of drug pricing would heavily benefit older patients, who often struggle to obtain accurate information of their medical costs. However, many drugmakers sued the Trump administration for violating their free speech rights, and in the end, the judge ruled in their favor. [npr]

Friday Figure

Source: “JOLTS Day Graphs: May 2019 Report Edition”