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

Amid the ongoing and growing debate about ways to reduce inequality, a new working paper shows that a wealth tax, rather than capital income taxes, would better boost efficiency, productivity, and investments in the economy. Summarizing the working paper, Somin Park explains the authors’ findings that switching to a wealth tax rewards productive investments and broadens the tax base, improving the allocation of capital and increasing output, compared to a system of capital income taxation. In effect, a wealth tax would increase economic growth while reducing consumption inequality.

As inequality concentrates more and more economic power at the very top of the income and wealth ladders, the political preferences of the economic elite are ever more relevant. A new working paper studying the partisan leanings of top CEOs shows that a majority of these executives vote for and support Republicans, Somin Park writes in a post covering the new research. The authors of the paper studied Federal Election Commission records for more than 3,800 individuals who served as chief executive officers of companies in the S&P Composite 1500 index between 2000 and 2017, and found that 57 percent were Republican, while only 19 percent were Democrats and the remainder were neutral. As Park notes, these findings are significant because the preferences of CEOs are a window into corporate political spending, which, since the Supreme Court ruling in Citizens United v. Federal Election Commission, is unlimited and is not necessarily disclosed to investors. CEOs also express their views and provide advice on policy to lawmakers, occupying an influential position in the policymaking process.

The U.S. Bureau of Labor Statistics this week released the August data from the Job Openings and Labor Turnover Survey, or JOLTS. Raksha Kopparam and Austin Clemens produced four graphs using the data, which demonstrate that job openings declined slightly in August, as did the quits rate and the rate of hires per opening.

And finally, check out Brad DeLong’s latest worthy reads for his takes on must-see content from Equitable Growth and around the web.

Links from around the web

In 2018, for the first time in the history of the United States, the richest of the rich Americans paid a lower effective tax rate than the working class, writes Christopher Ingraham in a Washington Post article covering a new study by Emmanuel Saez and Gabriel Zucman of the University of California, Berkeley. More specifically, the study finds that the richest 400 families in the United States paid an average effective tax rate of 23 percent, while the bottom 50 percent of American households paid an average rate of 24.2 percent. Saez and Zucman attribute the shocking results of their study to decades of top income-tax rate cuts, slashed capital gains and estate tax rates, and an inadequate IRS enforcement budget, as well as the Tax Cuts and Jobs Act of 2017, which lowered the top income tax bracket and slashed the corporate tax rate.

In light of this, maybe we should take Annie Lowrey of The Atlantic’s suggestion—to “cancel billionaires”—more seriously. It isn’t just that the increase in inequality has left too many with too little, she writes, while noting that this is certainly a troubling trend. But inequality is also changing the very nature of our society, our economy, and our country. Lowrey describes exactly how inequality constricts mobility, damages human capital, stifles innovation, drags down growth, and endangers our political system. She concludes that a wealth tax could be a way to both pay for programs for the poor and “[reduce] the incentive for the rich to soak up all that money in the first place … pushing the steps of the income ladder closer together to make them easier to climb.”

As the rich become richer and the middle class stagnates, families face many more hurdles than they used to in their quest to achieve the American Dream. With rising costs of housing, healthcare and childcare, and education, and increasingly demanding jobs that pay less for the same or more work, “middle-class families are working longer, managing new kinds of stress, and shouldering greater financial risks than previous generations did,” write Tara Siegel Bernard and Karl Russell in The New York Times. They go on to examine in detail four families from different corners of the United States, as well as their monthly budgets, to illustrate the challenges these households—and millions more like them across the country—face as they work to enter or stay in the middle class.

And considering the increased cost of childcare in recent years, should we start paying stay-at-home parents for their hard work? The idea has bipartisan support, writes Claire Cain Miller in The New York Times Upshot blog, with social conservatives endorsing its support of traditional families and progressives rallying behind the recognition of the economic value of unpaid domestic labor. While both sides certainly also take issue with the idea for different reasons, and there are various takes on how to go about doing it, people can agree on one thing: Children need care, and families usually take some kind of financial hit to provide it, whether it’s leaving a job to provide it yourself or paying someone else to do so.

Friday Figure

Figure is from Equitable Growth’s “The political influence and preferences of the U.S. economic elite,” by Somin Park.

Worthy reads from Equitable Growth:

1. This is very, very, very much worth watching: “Research on Tap: Unbound,” in which “Equitable Growth celebrated the release of Heather Boushey’s book, Unbound: How Inequality Constricts Our Economy and What We Can Do About It. She was joined by Sandra Black, Atif Mian, and Angela Hanks for a conversation moderated by Binyamin Appelbaum.”
2. And this upcoming event will be well worth attending, “Vision 2020: Evidence for a Stronger Economy”: “Vision 2020 will bring together leading voices from the policymaking, academic, and advocacy communities to highlight the most pressing economic issues facing Americans today. This daylong conference will explore recent transformative shifts in economic thinking that demonstrate how inequality obstructs, subverts, and distorts broadly shared economic growth and what we can do to fix it.”
3. I would have thought wealth taxation would be the default conventional neoliberal public finance position. You want to broaden the base and lower the rates. And what base is broader than wealth? Administrative, behavioral-response, and information-revelation considerations can move you away from a wealth tax to narrower bases. But it has always seemed to me that a wealth tax is where you start. That does not seem to be how the public finance intellectual community is reacting. We, however, are providing pushback. Read Fatih Guvenen, Gueorgui Kambourov, Burhan Kuruscu, Sergio Ocampo, and Daphne Chen, “Use It or Lose It: Efficiency Gains from Wealth Taxation,” in which they write: “How does wealth taxation differ from capital income taxation? When the return on investment is equal across individuals, a well-known result is that the two tax systems are equivalent. Motivated by recent empirical evidence documenting persistent heterogeneity in rates of return across individuals, we revisit this question. With such heterogeneity, the two tax systems have opposite implications for both efficiency and inequality. Under capital income taxation, entrepreneurs who are more productive, and therefore generate more income, pay higher taxes. Under wealth taxation, entrepreneurs who have similar wealth levels pay similar taxes regardless of their productivity, which expands the tax base, shifts the tax burden toward unproductive entrepreneurs, and raises the savings rate of productive ones. This reallocation increases aggregate productivity and output.”
4. “My Job as the Economist Here Is to Do the Numbers,” in which I write: “People believe that they have rights to a good life. People believe they have rights to stable communities that support them and that don’t disrupt and overturn their lives … Look at my neighbors … horrified at the idea that they might want to tear down a single-family house and build an apartment building for students. People think that they have the right to the income that corresponds to the profession or the occupation that they have worked hard to become part of … People believe that … their job shouldn’t suddenly vanish because some financier 3,000 miles away decided it doesn’t make a cost-benefit test. Yet the only rights the market respects are property rights, and the only property rights that are worth anything are those that help you make things for which rich people have a serious and unsatiated jones. The fact that the U.S. economy over the past 40 years has not been delivering substantially rising living standards for everybody means that the market’s failure to deliver these other forms of nonproperty rights becomes the source of—call it economic anxiety—a big potential problem.”

Worthy reads not from Equitable Growth:

1. Why invite people onto TV just so that they can tell lies? Read Zachary Basu, “Trump trade adviser Peter Navarro: Tariffs aren’t hurting anyone in the U.S.,” in which Basu writes: “White House trade adviser Peter Navarro said on CNN’s ‘State of the Union’ Sunday that tariffs on Chinese goods are not hurting consumers in the United States, despite reports to the contrary from researchers at Harvard, the University of Chicago, the International Monetary Fund, the Federal Reserve of Boston and more.”
2. This is absolutely fascinating. The rich in the American South were much poorer a generation after the Civil War than they had been before: Sharecropping and Jim Crow were less effective at extracting wealth from African Americans. But Phil Ager and company find no signs that those fractions of the elite who were direct slaveholders lost more than those members of the elite who were indirect slaveholders. I am going to have to think very hard about this. Read Philipp Ager, Leah Platt Boustan, and Katherine Eriksson, “The Intergenerational Effects of a Large Wealth Shock: White Southerners After the Civil War,” in which they write: “The nullification of slave-based wealth after the U.S. Civil War (1861–65) was one of the largest episodes of wealth compression in history. We document that white southern households with more slave assets lost substantially more wealth by 1870 relative to households with otherwise similar pre-War wealth levels. Yet, the sons of these slaveholders recovered in income and wealth proxies by 1880, in part by shifting into white collar positions and marrying into higher status families. Their pattern of recovery is most consistent with the importance of social networks in facilitating employment opportunities and access to credit.”
3. The best thing I have yet seen on how industrial organization, concentration, and monopsony drive the conclusion that increases in the minimum wage do not reduce employment in the United States today—or, rather, for which groups of workers minimum wage increases lower and for which raise employment. Read José Azar, Emiliano Huet-Vaughn, Ioana Marinescu, Bledi Taska, and Till von Wachter, “Minimum Wage Employment Effects and Labor Market Concentration,” in which they write: “Why is the employment effect of the minimum wage frequently found to be close to zero? Theory tells us that when wages are below marginal productivity, as with monopsony, employers are able to increase wages without laying off workers, but systematic evidence directly supporting this explanation is lacking. In this paper, we provide empirical support for the monopsony explanation by studying a key low-wage retail sector and using data on labor market concentration that covers the entirety of the United States with fine spatial variation at the occupation-level. We find that more concentrated labor markets—where wages are more likely to be below marginal productivity—experience significantly more positive employment effects from the minimum wage. While increases in the minimum wage are found to significantly decrease employment of workers in low concentration markets, minimum wage-induced employment changes become less negative as labor concentration increases, and are even estimated to be positive in the most highly concentrated markets. Our findings provide direct empirical evidence supporting the monopsony model as an explanation for the near-zero minimum wage employment effect documented in prior work. They suggest the aggregate minimum wage employment effects estimated thus far in the literature may mask heterogeneity across different levels of labor market concentration.”
4. It is now very, very clear that whatever Facebook says about how it strives to keep your data private, it is lying. Organizations are what they do: Facebook is an organization that makes money out of offering people data they can then use to try to hack your brain. Read Kate Conger, Gabriel J.X. Dance, and Mike Isaac, “Facebook’s Suspension of ‘Tens of Thousands’ of Apps Reveals Wider Privacy Issues,” in which they write: “Facebook said on Friday that it had suspended tens of thousands of apps for improperly sucking up users’ personal information and other transgressions, a tacit admission that the scale of its data privacy issues was far larger than it had previously acknowledged. The social network said in a blog post that an investigation it began in March 2018—following revelations that Cambridge Analytica, a British consultancy, had retrieved and used people’s Facebook information without their permission—had resulted in the suspension of ‘tens of thousands’ of apps that were associated with about 400 developers. That was far bigger than the last number that Facebook had disclosed of 400 app suspensions in August 2018 … Facebook … suspended 69,000 apps. Of those, the majority were terminated because the developers did not cooperate with Facebook’s investigation; 10,000 were flagged for potentially misappropriating personal data from Facebook users. The disclosures about app suspensions renew questions about whether people’s personal information on Facebook is secure, even after the company has been under fire for more than a year for its privacy practices.”
5. My colleague Christy Romer is giving the Keynes lecture at the University of Cambridge on October 17, on “The Narrative Approach to Establishing Causation in Macroeconomics.”

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 landscape of competition and consumer protection has changed and the Federal Trade Commission is trying to keep up with the times, writes Jonathan Sallet. In hearings conducted between September 2018 and June 2019, the FTC heard from experts and analysts on how things have changed and what the FTC can do to adapt the full spectrum of its competition work. Sallet compiles the suggestions from the hearings under five broad categories: growing market concentration, evolving business models, protecting competition as well as consumers, utilizing modern economic tools and analysis, and taking advantage of the full range of enforcement tools at the FTC’s disposal. Integrating the knowledge from these hearings into its day-to-day work will be essential for the FTC to continue its antitrust law enforcement in the modern economy.

The U.S. Bureau of Labor Statistics issued its monthly report on the U.S. labor market for September, showing that despite employment for prime-age worker rising to near pre-Great Recession levels, these gains are mainly in healthcare and education, while manufacturing and construction employment rates have plateaued and retail employment decreased. Likewise, the data show that there is no evidence that the current tight labor market is exerting upward pressure on wages as nominal wage growth remains below healthy levels. Raksha Kopparam and Kate Bahn put together five graphs highlighting these important trends in the monthly announcement.

Head over to Brad DeLong’s latest worthy reads for his takes on must-see content from Equitable Growth and around the web.

Links from around the web

The U.S. Census Bureau recently announced that inequality has grown to its highest point in more than 50 years, meaning that the gap between the richest and poorest Americans is at its widest point in decades. The numbers indicate that “America has not become a poor country but an unfair country,” writes Sarah Jones for New York Magazine. “The poor aren’t necessarily making less money, but as the wealthy get wealthier, people on the bottom end of the income scale are running in place,” she continues, arguing that we may have finally reached the tipping point on inequality in the United States.

As California lawmakers toy with the idea of implementing a public banking system, it wouldn’t hurt to take a look at North Dakota, where the nation’s only state-owned bank has been up and running for more than a century. Obvious differences (in size, economy, and population, to name a few) between the two states aside, “many of the characteristics of the modern economic landscape are eerily similar to that of a century ago when [the Bank of North Dakota] first passed: increasing income inequality and predatory practices on the part of financial institutions,” writes Will Peischel for Vox.

It would seem that wealth taxes are all the rage, as Democratic presidential candidates Sens. Elizabeth Warren (D-MA) and Bernie Sanders (I-VT) each recently announced their proposals for increasing taxation on the rich. Former Vice President Joe Biden is reportedly also weighing his options in this area. But, argues Ashlea Ebeling in Forbes, the wealthy may want to prepare for a change in the estate tax rather than a new wealth tax. The estate tax can be applied to a larger group of people and is already in place, albeit in a highly scaled-back position thanks to the Tax Cuts and Jobs Act of 2017, which more than doubled the estate tax exemption to those estates valued at $11.4 million and higher. Of course, the two are not mutually exclusive and could be implemented together, or alongside any of the multitude of other options available for taxing wealth.

Home health aides are increasingly sought-after to provide care for elderly and retiring Americans—and they have one of the most difficult jobs in the labor market—but these workers rarely receive the pay or protections they deserve. A new bill introduced by House and Senate Democrats aims to change that, however, by creating sustainable career paths for caregivers, including apprenticeships, on-the-job training, professional development, or mentoring, reports Alexia Fernández Campbell for Vox. These supports will be essential given that the U.S. Bureau of Labor Statistics estimates a 41 percent increase in the number of available home caregiver positions—1.2 million more than the current 2.9 million—by 2026.

Friday Figure

Figure is from Equitable Growth’s “Equitable Growth’s Jobs Day Graphs: September 2019 Report Edition,” by Raksha Kopparam and Kate Bahn.

Worthy reads from Equitable Growth:

1. Listen to Kate Bahn’s podcast, “Real talk with feminist visionaries, Season 3, No. 23, Kate Bahn.” This isn’t your Econ 101 take on the economy!
2. Read Equitable Growth grantee Ellora Derenoncourt’s new paper with co-author Claire Montialoux, “Minimum Wages and Racial Inequality,” in which they present a key finding: “20 percent of the decline in the racial earnings gap during Civil Rights era stemmed from one single reform of the minimum wage.”
3. Read Jonathan Sallet, “Competitive Edge: Five Building Blocks for Antitrust Success: The Forthcoming FTC Competition Report,” in which he writes: “Here are five building blocks for successful antitrust enforcement that the Federal Trade Commission should embrace in order to, as its Chairman Joseph Simons said (quoting his predecessor Bob Pitofsky), ‘restore the tradition of linking law enforcement with a continuing review of economic conditions to ensure that the laws make sense in light of contemporary competitive conditions’ … Pay attention to growing market concentration … Business models are evolving [and] today, multisided business models intersect with other economic trends that include network effects, the aggregation of data, and vertical integration … Antitrust enforcement protects competition, not just consumers … Modern economic analysis is up to the challenge … Congress gave the FTC broader enforcement tools than just the Sherman and Clayton Acts.”
4. Re-read Carmen Ye, “Why we need better re-employment policies for formerly incarcerated African American men,” because she makes these important points: “African American men … 33 percent of the 1.56 million Americans held in state or federal prisons … When these men are released from prison, what will their employment prospects look like? … Black applicants with no criminal record receive a callback or job offer at the same rate as white applicants with a felony conviction. Yet black applicants without a criminal record were three times as likely to get a callback as those with a record.”

Worthy reads not from Equitable Growth:

1. Once again, we have a piece by an impressively credentialed academic Republican economist that seems to me to have no contact with reality. There is no economist I know of, save for Robert Barro, who has ever said or implied that the “neutral” real interest rate today is the same 2.4 percent that the average real interest rate was from 1986–2008. To the contrary, there has been a very long and active discussion—led over the past two decades by current New York Fed President John Williams—about how far the “neutral” rate has fallen and how persistent that fall will be. And one conclusion of that debate has been that the current real federal funds rate of “only 0.7 percent” does indeed look “high” by some important metrics. So, why would anyone write as though this literature does not exist? Read Robert J. Barro, “Is Politics Getting to the Fed?,” in which he writes: “From the early 1980s until the start of the financial crisis in September 2008, the U.S. Federal Reserve seemed to have a coherent process for adjusting its main short-term interest rate, the federal funds rate. Its policy had three key components: the nominal interest rate would rise by more than the rate of inflation; it would increase in response to a strengthening of the real economy; and it would tend toward a long-term normal value. Accordingly, one could infer the normal rate from the average federal funds rate over time. Between January 1986 and August 2008, it was 4.9 percent, and the average inflation rate was 2.5 percent … The Fed’s prolonged low-interest-rate policy, which was supplemented by quantitative easing [or QE], seems misguided, considering that the economy had long since recovered, at least in terms of the unemployment rate. The nominal federal funds rate was not placed on an upward trajectory until the end of 2016 … It is hard to view today’s nominal federal funds rate of 2.4 percent as high. With an inflation rate of 1.7 percent, the real federal funds rate is only 0.7 percent. And yet the Fed’s “high”-interest-rate policy was fiercely attacked by Wall Street … That view is not crazy if you are focused solely on boosting the stock market. On average, interest-rate cuts do tend to stimulate the stock market by making real returns on bonds less competitive. But that does not mean it is good economic policy always to be cutting rates.”
2. A very nice look back at a big story from a decade ago that simply did not happen. Read Ben Casselman, “The White-Collar Job Apocalypse That Didn’t Happen,” in which he writes: “‘Where in retrospect I missed the boat is in thinking that the gigantic gap in labor costs between here and India would push it to India rather than to South Dakota,’ Mr. Blinder said in a recent interview … Adam Ozimek revisited Mr. Blinder’s analysis to see what had happened over the past decade. Some job categories that Mr. Blinder identified as vulnerable, like data-entry workers, have seen a decline in United States employment. But the ranks of others, like actuaries, have continued to grow … Overall, of the 26 occupations that Mr. Blinder identified as ‘highly offshorable’ and for which Mr. Ozimek had data, 15 have added jobs over the past decade and 11 have cut them. Altogether, those occupations have eliminated fewer than 200,000 jobs over 10 years, hardly the millions that many feared … In the jobs that Mr. Blinder identified as easily offshored, a growing share of workers were now working from home. Mr. Ozimek said he suspected that many more were working in satellite offices or for outside contractors, rather than at a company’s main location. In other words, technology like cloud computing and videoconferencing has enabled these jobs to be done remotely, just not quite as remotely as Mr. Blinder and many others assumed … Call centers [and] telemarketing jobs have declined sharply in the United States since 2007, as much of the work was sent overseas. But the number of customer service representatives has continued to grow … Telemarketers are essentially selling products and often working from a script. Customer service and other call-center work like tech support often require a more nuanced understanding of the customer experience.”
3. There are remarkably good odds that the next global recession will be triggered by the miscalculations of politicians who have no business holding any office whatsoever. I have but one quibble with Nouriel Roubini’s argument here. The situation in Argentina is dire for Argentina and the southern cone, but it is not the kind of thing that can provoke a global recession. President Donald Trump and UK Prime Minister Boris Johnson, by contrast, might. Read Nouriel Roubini, “Four Collision Courses for the Global Economy,” in which he writes: “Between U.S. President Donald Trump’s zero-sum disputes with China and Iran, U.K. Prime Minister Boris Johnson’s brinkmanship with Parliament and the European Union, and Argentina’s likely return to Peronist populism, the fate of the global economy is balancing on a knife edge. Any of these scenarios could lead to a crisis with rapid spillover effects … In each case, failure to compromise would lead to a collision, most likely followed by a global recession and financial crisis … The problem is that while compromise requires both parties to de-escalate, the tactical logic of chicken rewards crazy behavior. If I can make it look like I have removed my steering wheel, the other side will have no choice but to swerve. But if both sides throw out their steering wheels, a collision becomes unavoidable.”
4. No matter what our domestic economic problems, it is still essential to remind ourselves that for humanity as a whole, the years since 1980 have seen the greatest improvement in economic well-being, globally, of any 40-year period in human history. We have been truly blessed. Read Noah Smith, “Globalization Has Cut Inequality Between Rich and Poor Countries,” in which he writes: “Up through the 1980s, the blessings of the Industrial Revolution seemed largely confined to a handful of countries in Western Europe, East Asia, the [United States], Australia, and Canada. But in the past three decades, there has been a sea change, and developing countries have made great strides in catching up. Although inequality has risen within some nations, at the global level it’s going down: Much of this catch-up is happening in countries that are still largely poor, such as India or Indonesia. To an economist—or someone who cares about alleviating the suffering of the world’s poorest people—this still represents a miracle. But a skeptic of globalization might wonder whether it can really be called a success if broad middle-class living standards still remain the exclusive privilege of a handful of nations, many of them former colonial powers.”