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

It’s well-established that there are significant income-based enrollment disparities in center-based childcare and early education in the United States. High costs and limited availability have long been understood to be fundamental reasons for this phenomenon. Cesar Perez describes new research by University of Wisconsin researchers showing that there is a third important cause of this disparity: unstable work schedules for low-income workers. Nonstandard schedules, including early morning, evening, overnight, and weekend hours, constrain the ability of workers to make arrangements for center-based childcare and education, and low-income workers are considerably more likely to have to contend with such schedules.

Take a look at Brad DeLong’s most recent worthy reads for this week, in which he provides his thoughts on content from Equitable Growth and elsewhere.

Links from around the web

The value of paid family leave goes well beyond a family’s bottom line, writes Benjamin Ryan in The Nation. He describes research showing the significant health benefits that families experience when they have the opportunity to take advantage of paid leave following the birth or adoption of a child. [nation]

With the appearance this week of the dreaded inverted yield curve in the U.S. bond market, which usually signals a recession somewhere down the road, Ryan Cooper in The Week reminds us that high economic inequality is likely making us more vulnerable to a downturn. Among other reasons, he notes that the wealthy spend a smaller fraction of their income. High inequality also means less business investment and, once families are hit by a recession, excessive borrowing. He also points out that a significant effect of the Tax Cuts and Jobs Act of 2017 was to “dump a giant pile of money on rich people with tax cuts, further exacerbating U.S. income inequality…” [theweek]

Speaking of inequality, in an age of persistently high economic inequality, writes The Atlantic’s Derek Thompson, work in high-cost metropolitan areas “catering to the whims of the wealthy—grooming them, stretching them, feeding them, driving them” is one of the fastest-growing industries. He notes that Equitable Growth Research Advisory Board member David Autor calls this “wealth work,” and he adds, “Perhaps the ultimate price of wealth work, for all of the opportunities for the low-skilled, is not only the threat of exploitation, but broader alienation.” [atlantic]

Research shows that adding a significant number of women to senior corporate leadership improves company performance. But Laura Forman at The Wall Street Journal writes that merely adding a token woman or two to a board of directors or to corporate management is not helpful. Firms with inadequate female representation in upper and middle management need to accelerate hiring plans to get the kind of critical mass that can improve revenues and profits. [wsj]

Carmen Heredia Rodriguez at Kaiser Health News describes the lack of serious competition for medication to treat snakebites. The poisonous competitive environment is due, at least in part, to the difficulty of gaining U.S. Food and Drug Administration approval for biosimilars. The prices charged for the two main current products, which are biologics, can only be described as painful. The two manufacturers feel no need to seriously compete on price. Until one or more biosimilars that match these drugs are approved by the FDA, the two current manufacturers will feel free to charge, essentially, whatever price they want. [npr]

Friday Figure

Figure is from Equitable Growth’s “Extensive nonstandard work hours among U.S. low-income mothers hinder their kids’ enrollment in center-based childcare,” by Cesar Perez.

Worthy reads from Equitable Growth:
 

1. There is a strange gap: A discipline such as economics, which aims at achieving the greatest good for the greatest number, ought to have long ago focused on how costly inequality is for all—or almost all—of us. Heather Boushey’s forthcoming book, Unbound: How Inequality Constricts Our Economy and What We Can Do About It, expertly fills that gap. Others agree. “In Unbound, Heather Boushey presents the strongest documentation I have seen for the many ways in which inequality is harmful to economic growth. Anyone interested in just about any aspect of economic policy, from education to antitrust to macroeconomics, will learn something from this important book.”—Jason Furman … “A rising tide used to lift all boats, but decades of rising economic inequality and wage stagnation have changed that. In Unbound, Heather Boushey provides a clear and compelling analysis of the many ways income and wealth inequality limits our economic potential, drawing important lessons from cutting-edge economic research. An invaluable addition to current economic policy debates, Unbound is a must-read for those striving for inclusive economic growth.”—Kim Clausing … “Copies of this book should be mailed to every legislator in the country. It is a powerful summary of an enormous amount of the latest and best economics research on inequality, presented clearly and explained with accessible prose.”—Suresh Naidu.
2. In his column, “Extensive nonstandard work hours among U.S. low-income mothers hinder their kids’ enrollment in center-based childcare,” Cesar Perez sends us to a paper by Alejandra Ros Pilarz, Ying-Chun Lin, and Katherine A. Magnuson, “Do Parental Work Hours and Nonstandard Schedules Explain Income-Based Gaps in Center-Based Early Care and Education Participation?,” in which they write: “Low-income children ages 0—5 years are less likely to be enrolled in center-based [Early Care and Education, or ECE] programs compared with higher-income children. Low-income working parents are also more likely to work jobs with nonstandard schedules, which are associated with lower rates of center-based ECE … Mothers’ work hours and schedules are predictive of 0—5-year-old children’s enrollment in center-based ECE, and accounting for mothers’ work hours and schedules significantly reduces income-based gaps in center-based ECE, particularly among infants and toddlers.”
3. Read my blog post, “The Flight to Safety in Asset Markets Has Now Become a Thing in Itself…,” in which I write: “The market has now delivered 100 basis points of easing in the 10-year Treasury window since the end of last October. On the 30-year bond, you would have made a 20 percent profit if you both [bought] last October and sold it today, compared to a 3.5 percent profit on the S&P Composite over the same period. That is a major, major sentiment shift. That means that a number of people short debt with riskier operations than the S&P Composite are about to face margin calls and rollover difficulties. We will shortly see how solvent the market judges them. No, it is not yet August 2007. But it is much closer to August 2007 than I expected to see for another generation.”

Worthy reads not from Equitable Growth:

1. The answer to the question “Is Trumponomics a failure?” is “Yes.” There is no large investment boom. There is no manufacturing recovery. There is no reduced trade deficit. There is increased inequality and corruption. Read Michael Rainey, “Is Trumponomics a Failure?,” in which he writes: “Trump’s two main economic policies—tax cuts and tariffs, both intended to boost manufacturing—have flopped. The tax cuts failed to produce a surge in business investment … the tariffs … are now dragging on the economy … No one is arguing that the economy is in ruins due to Trump’s policies … But Trump and Republicans promised that their economic plans would result in lasting, structural improvements, and those don’t appear to have materialized. [Paul] Krugman says … ‘Imagine how much better shape we’d be in if the hundreds of billions squandered on tax cuts … had been used to rebuild our crumbling infrastructure.”
2. The argument that the supply of savings to fund private investment was elastic with respect to the after-tax interest rate was not economically respectable back in 2017, when it was made. The solid preponderance of evidence then was that the supply of savings was inelastic. And so it has proved. Read Hunter Blair, “It’s Not Trickling Down: New Data Provides No Evidence that the TCJA Is Working as Its Proponents Claimed It Would,” in which he writes: “The strongest economically respectable argument from proponents of the Trump administration’s Tax Cuts and Jobs Act (TCJA) was that … higher dividends incentivize households to save more, or attract more savings from abroad. The increased savings push down interest rates, so that it’s easier for corporations to borrow money to invest in new plants and equipment. And this new capital stock gives workers more and better tools to work with, boosting their productivity, and eventually that increased productivity should boost wages … We now have 18 months of data on investment since the passage of the TCJA, plenty of time for its increased incentives for private investment to have taken hold. But the data doesn’t come close to supporting the story told by TCJA proponents.”
3. I would like to say that the very sharp Rana Foroohar is wrong here, that global recession probabilities are low. The problem is that we live in a world of multiple equilibria, and so—if enough people are now thinking like she is thinking—she may well be right. Read Rana Foroohar, “Braced for the Global Downturn,” in which she writes: “Well-meaning central bankers cannot offset the impact of an erratic U.S. president on the real economy … Last week’s market volatility… at heart, it’s about the inability of the Federal Reserve to convince us that its July rate cut was merely ‘insurance’… Any number of indicators now show … [that] the global downturn has already begun. Asset prices will undoubtedly begin to reflect this, and possibly quite soon.”
4. Read Hailey Waller, “Economy at Riskiest Point in a Decade, Lawrence Summers Says,” in which she writes: “The [United States] and world economies are at their riskiest moment since the global financial crisis a decade ago as trade tensions continue to grow, former Treasury Secretary Lawrence Summers said on Sunday. Summers spoke on CNN’s ‘Fareed Zakaria GPS’ about what he called a ‘sadomasochistic and foolish trade conflict’ the [United States] has engaged with China under President Donald Trump. ‘We are losing very substantial amounts in terms of uncertainty, reduced investment, reduced job creation, for the sake of benefits that are very unlikely to be of substantial magnitude … I don’t think there’s any question that American workers are going to be poorer, American companies are going to be less profitable, and the American economy is going to be worse off because of the course we’re on.’”
5. Tim Duy believes that the Federal Reserve will cut interest rates fast enough and far enough to avoid a recession, and that is the scenario driving the current inversion of the yield curve rather than a recession. After the recent declines in interest rates, I would give that only a 50-50 chance of being true. Equilibria are fragile, and multiple. At an equity P/E ratio of 20, a 100 basis-point fall in the very long bond rate should carry with it a 20 percent increase in equity value, holding risk-adjusted expected future cash flows constant. Yet the S&P Composite has not moved since late October. That is a hell of a large fall in risk-adjusted expected future cash flows. Read Tim Duy, “On Rising Recession Probabilities,” in which he writes: “My interpretation is that market participants have correctly anticipated the Fed’s reaction function with the expectation of substantial easing in the months ahead hence creating the inversion on the short end. This easing will be sufficient to derail impending recessionary threats. If the Fed’s easing was expected to be insufficient, I would expect that the ‘10s2s’ spread would be inverted. Consequently, at this point I still do not expect a recession in the near year. Under my baseline scenario, the Fed’s upcoming rates cuts will slightly steepen yield curve and the picture will look like 1995.”

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

In the most recent of our series of conversations with leading academic and policy thinkers, Equitable Growth President and CEO Heather Boushey sat down with University of California, Berkeley economist and Equitable Growth grantee Gabriel Zucman. His research focuses on global wealth, inequality, and tax havens. He is co-director of the World Inequality Database, which provides access to extensive data series on the world distribution of income and wealth. Zucman and Boushey discussed rising inequality in the United States and how it compares to that in other countries, the importance of measuring economic inequality, and the creation and usefulness of distributional national accounts.

The U.S. Bureau of Labor Statistics on August 6 released the June data from the Job Openings and Labor Turnover Survey, or JOLTS. Kate Bahn and Will McGrew produced four graphs using the data, which show that the job market remains tight, with the potential for restoring some lost bargaining power for U.S. workers.

Brad DeLong has provided us with his latest worthy reads with his takes on content from Equitable Growth and around the web.

Links from around the web

“Yes, America Is Rigged Against Workers,” writes Steven Greenhouse in The New York Times. He says the United States suffers from “anti-worker exceptionalism” because it treats its workers worse than most advanced economies. The United States is the only advanced industrial nation that does not guarantee paid maternity leave. And it has the lowest minimum wage as a percentage of the median wage of any member nation of Organisation for Economic Co-operation and Development. While economists debate why this is the case, there is one reason they all agree on, he writes: Labor unions are weaker here than in other industrialized nations. [nyt]

The four most recent former chairs of the Federal Reserve Board of Governors, including Equitable Growth Steering Committee member Janet Yellen, wrote an op-ed in The Wall Street Journal reminding the country—and policymakers, in particular—of the importance of maintaining the independence of the Fed. They argued that the institution must be able to act “free of short-term political pressures and, in particular, without the threat of removal or demotion of Fed leaders for political reasons.” The former chairs, who collectively served in the position for nearly 40 years and were appointed and reappointed by six presidents of both parties, did not cite a reason for the timing of their column. [wsj]

A program in Seattle seeks to prove a critical finding of former Equitable Growth Steering Committee member Raj Chetty that growing up in the right neighborhood can make all the difference in life outcomes, writes Nicholas Kristof in The New York Times. The Seattle program, Creating Moves to Opportunity, provides vouchers for low-income families to move to better neighborhoods, plus a “housing navigator” and additional assistance in finding homes and getting settled. Kristof points to new research by Chetty showing that families are taking advantage of this opportunity, and the evidence from previous research by Chetty and others suggests that we will likely see significant benefits for their children in the years to come. [nyt]

In the wake of a court decision blocking the Obama administration’s proposed rule to substantially increase the number of workers eligible for overtime pay, several states are moving forward with proposals of their own to accomplish the same goal within their boundaries, reports Rachel Feintzeig in The Wall Street Journal. The U.S. Labor Department is developing a new national proposal that is substantially more modest than the Obama plan, she writes. [wsj]

Friday Figure

Figure is from Equitable Growth’s “JOLTS Day Graphs: June 2019 Report Edition,” by Kate Bahn and Will McGrew.

Worthy reads from Equitable Growth:
 

1. At each stage of the process by which the innovation workforce is built, being black and being female is a powerful disadvantage at making it through the filter and proceeding to the next stage. Read Lisa Cook and Jan Gerso, “The implications of U.S. gender and racial disparities in income and wealth inequality at each stage of the innovation process,” in which they write: “Gender and racial disparities exist at each stage of the innovation process, from education to training, and from the practice of invention to the commercialization of invention, and can be costly to the U.S. economy. These disparities can also lead to increased income and wealth inequalities at each stage for those who would otherwise participate in the innovation economy. Let’s look at each stage to assess this problem in further detail.”
2. A better-run IRS would devote much more in the way of resources to investigating “independent contractor” fraud and abuse. Read Corey Husak, “How U.S. companies harm workers by making them independent contractors,” in which he writes: “Being classified as either an employee or an independent contractor can determine whether workers in the United States have access to reliable pay, benefits, and protection from discrimination. Intense fights are cropping up across the country as companies try to argue that their workers are just ‘independent contractors’ and do not qualify for many protections under U.S. labor law, while workers and some courts say the opposite, that some workers are actually employees. Many ‘gig economy’ companies, such as Uber Technologies Inc., base their business models around misclassifying their workers as self-employed. Billions of dollars in worker pay is at stake.”
3. Heather Boushey interviews the great Gabriel Zucman. The most important point is that the increase in inequality in the United States has been largely a choice—a choice of those elected, even if the one elected was done so by a margin of 5-4 Supreme Court justices or collected 3 million fewer popular votes. Read “In Conversation with Gabriel Zucman,” which he explains: “There is this widespread view that rising inequality is a mechanical consequence of globalization and technical change, spurred in large part by competition with China and the substitutions between workers and machines. But, you know, France has computers too, and also trades with China—and generally trades more than the United States. So, it does not seem possible to explain the stagnation of U.S. working-class income by globalization and technical change. It’s more likely that this stagnation of income for the bottom half of the U.S. income distribution comes from policy changes. Things such as the collapse of the federal minimum wage, the declining power of unions, changes to taxation, to access to higher education.”

Worthy reads not from Equitable Growth:

1. Martin Wolf has an aggressive thumbs-down on Facebook Inc.’s Libra payments system. Basically, it is “fool me once, shame on you; fool me twice, shame on me.” Facebook’s claim that it is built on “blockchain technology” seems simply wrong, and a grift—a second-order grift, given that “blockchain technology” is already a grift. Plus, he writes that “Facebook has been grossly irresponsible over its impact on our democracies. It cannot obviously be trusted with our payments systems. … Beware.” The fact that Facebook’s past behavior has created such a strong anti-Facebook presumption in somebody as reasonable and fair as Martin is, I think, a powerful thing to note. Read Martin Wolf, “Facebook Enters Dangerous Waters With Libra Cryptocurrency,” in which he writes: “Facebook seems likely to dominate Libra’s technical development. That will surely give it predominant influence … The claim that it is based on ‘blockchain’ technology seems rather questionable … There is indeed potential for greatly improved payment systems. But the emergence of a payment system on a network of Facebook’s scale would raise some huge questions … This would be true even if the lead sponsor were not Facebook. But it is. So beware.”
2. This baseline assumption seems, to me, to be a very useful position to start from—that groups of people who behave differently have different powers and face different constraints, not that they want different things. Read George J. Stigler and Gary S. Becker, “De Gustibus Non Est Disputandum,” in which they write: “The establishment of the proposition that one may usefully treat tastes as stable over time and similar among people is the central task of this essay. The ambitiousness of our agenda deserves emphasis: We are proposing the hypothesis that widespread and/or persistent human behavior can be explained by a generalized calculus of utility-maximizing behavior, without introducing the qualification ‘tastes remaining the same.’”

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

Being classified as either an employee or an independent contractor can determine whether workers in the United States have access to reliable pay, benefits, and protection from discrimination. Many “gig economy” companies, writes Corey Husak, base their business models on misclassifying their workers as self-employed. Billions of dollars in worker pay and benefits is at stake for these workers, who generally lack the meaningful work independence one associates with true independent contractors.

Michael Kades continues to track the progress in the U.S. Congress of bipartisan legislation to contain prescription drug prices by injecting greater competition into the marketplace. Last month, two Senate committees passed legislation that the Washington Center for Equitable Growth advised Congress would help achieve this goal. This follows action by the full House on related or identical bills. The legislation has had strong bipartisan support throughout the process, and the White House is supportive, but Kades points out that barriers remain.

The U.S. Bureau of Labor Statistics issued its monthly report on the U.S. labor market. Kate Bahn and Will McGrew perused the report, which covers July, and compiled five graphs highlighting important trends.

Catch up on Brad DeLong’s latest worthy reads from Equitable Growth and around the web.

Links from around the web

What’s the best way to gauge the health of the U.S. economy? Not necessarily by measuring Gross Domestic Product, writes Gretchen Frazee at PBS. She notes that it disregards key factors that affect people’s well-being, such as health and the environment, and cites Equitable Growth grantee Nancy Folbre, who notes that it ignores unpaid work, including taking care of one’s children. [pbs]

Chicago’s city council has approved a “fair workweek” ordinance that requires large employers to give workers at least two weeks’ notice of their schedules and compensate them for last-minute changes, writes Alexia Elejalde-Ruiz at the Chicago Tribune. A lack of schedule stability is gaining increasing attention as both a source and product of income inequality. [Chicago Tribune]

There are a number of ways to see that an economic expansion is near or at an end and a recession is on the horizon or actually underway, writes Ben Casselman at The New York Times. Recessions are inevitable, and recognizing them before the economy has already begun contracting has been more art than science. But that may no longer be true. Casselman cites Equitable Growth Research Advisory Board member Claudia Sahm‘s rule of thumb, which focuses on changes in the unemployment rate. [nyt]

The DoorDash tipping controversy continues to make for interesting reading. Columnist Farhad Manjoo writes that the issue “lays bare how shaky and capricious the entire digital economy is for workers.” “What worries me,” he adds, “is that these laborers are invisible ‘ghost workers’ hidden behind screens and apps and algorithms and digital tip jars, working for unpredictable, A.I.-dictated, sub-minimum wage…” [nyt]

Friday figure

Figure is from Equitable Growth’s “How U.S. companies harm workers by making them independent contractors,” by Corey Husak.