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

This Labor Day week brought us three Equitable Growth pieces relating to workers and the economy.

The Phillips Curve—the economic rule of thumb that says when unemployment drops, inflation rises—is dead, and something needs to take its place. Wages, a key inflation factor, can no longer be counted on to rise significantly in an era of sustained low unemployment. The reason, write Kate Bahn and Austin Clemens, is that the “demise of unions and the rise of monopsony markets, where people only have the choice to work for a small number of employers, have devastated the bargaining position of workers.” They continue, “Addressing inequality and the collapse of worker power will require a new analytic lens … [E]conomic policymaking institutions should embrace economic indicators that shed light on our new, unequal economy. Pivoting to measures of economic progress that are broken down by level of income, race, or gender will provide a better picture of how all U.S. workers and their families are faring.”

A working paper by David Howell, professor of economics and public policy and director of the doctoral program in public and urban policy at the New School, documents the “concentration of young workers in lousy- and low-wage jobs” since the 1970s. A 2014 Equitable Growth grantee and now a member of our Research Advisory Board, Howell says the data suggest “that their plummeting decent-job rates cannot be adequately explained by supply-side failures to invest in education or by the job-destroying forces of globalization and computerization. More consistent with this paper’s job quality results are major shifts in institutions, policies, and employer human resource strategies that have undermined worker bargaining power.”

Finally, the U.S. Bureau of Labor Statistics issued its monthly report on the U.S. labor market for August, documenting that the trends above continued: low unemployment, inadequate wage gains, and workers without a college education continuing to lag behind other workers. Kate Bahn, Will McGrew, and Raksha Kopparam have put together five graphs highlighting these important trends in the monthly announcement.

And be sure to check out Brad DeLong’s worthy reads, which provide Brad’s takes on content from Equitable Growth and around the web.

Links from around the web

A longstanding practice in the economics profession that has raised increasing questions is ending. The American Economic Association, writes The Wall Street Journal’s David Harrison, is implementing new rules forbidding universities and other employers from interviewing thousands of candidates for university and other jobs in hotel rooms during the organization’s annual conference. The only exception will be the use of a living room in a suite taken for that purpose.

With the tech industry facing increasing government scrutiny over antitrust issues, The Washington Post’s Reed Albergotti reports on Apple Inc.’s practice of taking ideas from apps created by outside developers that are sold and used on its devices and incorporating them into its own products. He writes that “Apple plays a dual role in the app economy: provider of access to independent apps and giant competitor to them.” He notes that “some apps have simply buckled under the pressure, in some cases shutting down. They generally don’t sue Apple because of the difficulty and expense in fighting the tech giant—and the consequences they might face from being dependent on the platform. The imbalance of power between Apple and the apps on its platform could turn into a rare chink in the company’s armor as regulators and lawmakers put the dominance of big technology companies under an antitrust microscope.”

The Washington Post’s Robert Samuels reports on the results of an experimental program that is providing a small number of low-income mothers in Mississippi with a year of universal basic income—$1,000 a month—to determine the potential impact of such a program. The initiative is being carried out by a nonprofit organization. The concept, Samuels notes, has gained considerable traction “from the presidential debate stage to Silicon Valley, where tech titans such as Mark Zuckerberg and Elon Musk have promoted it as a way to fend off a gloomy future in which automation and climate change eliminate millions of jobs.”

And one final story on the challenges faced by workers and unions: Slate’s Mark Joseph Stern tells us that Alaska is trying to crush its public employee unions by making it extremely difficult for workers to sign up for unions. The tactics the state is planning to use are unique, to say the least, and, so far, do not appear to have been covered in any other national press outlet.

Friday Figure

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

Worthy reads from Equitable Growth:
 

1. Looking forward to this: “Please join us Oct. 30th for Programs w/a Purpose with @HBoushey, Pres./CEO of @equitablegrowth. She will discuss her book [Unbound: How Inequality Constricts Our Economy and What We Can Do about It],” in which she will discuss how “many fear that efforts to address inequality will undermine the economy as a whole … but the opposite is true: rising inequality has become a drag on growth and an impediment to market competition. Unbound breaks down the problem and argues that we can preserve our nation’s economic traditions while promoting shared economic growth.” (An invitation to the official launch of Unbound on September 18 is here.)
2. Worth highlighting from last January, as even U.S. businesses begin to worry that our system gives too much a share of good things to shareholders. Read Greg Leiserson, “Wealth taxation: An introduction to net worth taxes and how one might work in the United States,” in which he writes: “Probably the most significant challenge in implementing a net worth tax is that determining tax liabilities requires a valuation for all of the assets subject to the tax … Such a tax would impose burden primarily on the wealthiest families—reducing wealth inequality—and could raise substantial revenues … the United States taxes wealth in several forms already. Thus, the policy debate is less about whether to tax wealth and more about the best ways to tax wealth and how much it should be taxed. A net worth tax could be a useful complement to—or substitute for—other means of taxing wealth, as well as a tool for increasing overall taxation of wealth.”
3. From 2 years ago, Liz Hipple saying very smart things about what is at stake in the debate over antitrust policy. Read her “Understanding the importance of antitrust policy for U.S. economic competitiveness and consumer choice,” in which she writes: “Changes in antitrust policy’s presumptions about the competitive consequences of increases in concentration … over the past 50 years [have] shifted from a viewpoint that held that even modest increases in concentration would result in above-competitive prices and profits to one in which it was believed that tougher merger standards sacrificed cost efficiencies, which presumably would be passed along to consumers. While antitrust policy has moderated somewhat from that so-called Chicago school view, the FTC enforcement data from 1996 through 2011 nonetheless demonstrate that there has continued to be a shift away from merger enforcement actions in all but the most concentrated markets. Furthermore, while the latest merger guidelines, published in 2010, emphasize the multiplicity of relevant factors beyond just cost efficiencies in evaluating the likelihood of possible harms from a merger, they also further relax the thresholds for the levels and changes in concentration at which a merger might be presumed to lessen competition.”

Worthy reads not from Equitable Growth:

1. There are many proposals to revamp education in economics and to get economists to their right place in the public sphere—whatever that “right place” might turn out to be. The highly estimable Martin Wolf is here, on the side of those who think that economics ought to focus on basic principles, arresting stories, and big data as a way of figuring out which stories are, in fact, representative of broader trends. He is critical of over-mathematization and, more so, of over-theorization. I, at least, am reminded of Larry Meyer’s take on Robert Lucas’s brand of economics: “In our firm, we always thanked Robert Lucas for giving us a virtual monopoly. Because of Lucas and others, for two decades, no graduate students are trained who were capable of competing with us by building econometric models that had a hope of explaining short-run output and price dynamics. [Academic economics Ph.D. programs] educated a lot of macroeconomists who were trained to do only two things—teach macroeconomics to graduate students, and publish in the journals.” Read Martin Wolf, “Why Economists Failed as “Experts”—and How to Make Them Matter Again,” in which he writes: “Michael Gove was wrong, in my view, about expertise applied in the Brexit debate. But he was not altogether wrong about the expertise of economists. If we were more humble and more honest, we might be better recognized as experts able to contribute to public debate … At bottom, economics is a field of inquiry and a way of thinking. Among its valuable core concepts are: opportunity cost, marginal cost, rent, sunk costs, externalities, and effective demand. Economics also allows people to make at least some sense of debates on growth, taxation, monetary policy, economic development, inequality, and so forth. It is unnecessary to possess a vast technical apparatus to understand these ideas. Indeed, the technical apparatus can get in the way … The teaching of economics to undergraduates must focus on core ideas, essential questions, and actual realities. Such a curriculum might not be the best way to produce candidates for Ph.D. programs. So be it. The study of economics at university must not be seen through so narrow a lens. Its purpose is to produce people with a broad economic enlightenment. That is what the public debate needs. It is what education has to provide.”
2. The very sharp Barry Eichengreen has a theory of why President Donald Trump wants to put ex-tight money advocate Judy Shelton on the Federal Reserve Board. It is certainly a more plausible and sensible theory of what he is aiming at than any other theory that I have seen put forward. But I fear that it is wrong: Understanding a word or deed of the Trump administration from the standpoint that there is a coherent vision of the world from which it is plausible and sensible seems deeply flawed to me. Read Barry Eichengreen, “Trump’s Cross of Gold,” in which he writes: “Shelton is a proponent of fixed exchange rates. Her belief in fixed rates is catnip to an administration that sees currency manipulation as a threat to winning its trade war. Team Trump wants to compress the U.S. trade deficit and enhance the competitiveness of domestic manufactures by using tariffs to raise the price of imported goods. But a 10 percent tariff that is offset by a 10 percent depreciation of foreign currencies against the dollar leaves the relative prices of U.S. imports unchanged … Thus, the challenge for Team Trump is to get other countries to change their policies to prevent their currencies from moving. That’s what the demand for stable exchange rates and an end to ‘currency manipulation’ is all about … But in the absence of a global conference—something that would be anathema to Trump—the way to get there is the same as under the 19th century gold standard … If the United States moves first, ‘preemptively’ as Shelton puts it, other countries will follow. Behind this presumption, however, lie a number of logical nonsequiturs. First, other countries show little desire to stabilize their exchange rates … Second, gold is no longer a stable anchor … Today … the stabilizing capacity of the mining industry is weaker … Arguments for a gold standard and pegged exchange rates are deeply flawed. But there is a silver lining, as it were: nothing along these lines is going to happen, Governor Shelton or not.”
3. Very interesting work on gender peer effects in U.S. graduate education. Read Valerie K. Bostwick and Bruce A. Weinberg, “Nevertheless She Persisted? Gender Peer Effects in Doctoral STEM Programs,” in which they write: “We study the effects of peer gender composition, a proxy for female-friendliness of environment, in STEM doctoral programs on persistence and degree completion. Leveraging unique new data and quasi-random variation in gender composition across cohorts within programs, we show that women entering cohorts with no female peers are 11.9 percentage points less likely to graduate within 6 years than their male counterparts. A 1 standard deviation increase in the percentage of female students differentially increases the probability of on-time graduation for women by 4.6 percentage points. These gender peer effects function primarily through changes in the probability of dropping out in the first year of a Ph.D. program and are largest in programs that are typically male-dominated.”
4. Here’s a piece of evidence that affirmative-action programs do not, in fact, harm beneficiaries via mismatch. Read Joshua D. Angrist, Parag A. Pathak, and Román Andrés Zárate, “Choice and Consequence: Assessing Mismatch at Chicago Exam Schools,” in which they write: “The educational mismatch hypothesis asserts that students are hurt by affirmative action policies that place them in selective schools for which they wouldn’t otherwise qualify. We evaluate mismatch in Chicago’s selective public exam schools … show that … mismatch arises because exam school admission diverts many applicants from high-performing Noble Network charter schools, where they would have done well … Exam school applicants’ previous achievement, race, and other characteristics that are sometimes said to mediate student-school matching play no role in this story.”

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

This was a big week for Equitable Growth, as we announced our annual round of competitive academic grants for research on the channels by which inequality affects economic growth. The new grants amount to more than $1 million. This is the sixth annual set of grants by the organization, bringing to nearly $5 million the funding Equitable Growth has awarded since its founding in 2013, and the number of scholars at top U.S. universities and colleges receiving grants to nearly 200. “The topics of the funded research are central to addressing the challenges faced by U.S. workers and their families,” writes Equitable Growth’s Academic Programs Director Korin Davis. “They range from how firms set wages and the power workers have in demanding fair pay, to the economic effects of antitrust enforcement and mergers.” Davis describes the 14 grants to academic researchers and the 13 grants to doctoral students here. Descriptions of the grants, as well as grantee biographies, can be found here. Equitable Growth’s 2019 Request for Proposals can be found here.

What do workers want? Specifically, what do they want from unions? With union membership having shrunk dramatically, research shows that large numbers of nonunion workers would vote for one if they could. Most will never get the chance under current U.S. laws and enforcement practices. But what if there were an opportunity to rewrite those laws and current practices? Equitable Growth grantee Alex Hertel-Fernandez, in a working paper with his colleagues William Kimball and Thomas Kochan, and in a column explaining the paper, describes the results of a survey of more than 4,000 workers that teases out what workers value most in unions.

Worker strikes for better wages and benefits may be coming back, and they need to if strong wage gains and a fair balance between workers and management are to be restored, writes Equitable Growth Director of Labor Market Policy and economist Kate Bahn in advance of Labor Day. The decline of union membership is a key factor in the stagnant wages of recent decades, and Bahn asserts that strikes are a necessary tool for combating increased monopsony—the ability of firms, rather than competitive forces, to set wages. She provides a brief history of strikes in the United States and points to research by Hertel-Fernandez showing that public attitudes toward strikes improve when people experience strikes in their state and have the opportunity to learn more about the issues workers seek to address.

Brad DeLong’s worthy reads, with content from Equitable Growth and elsewhere, are here in time for the Labor Day weekend.

Links from around the web

Taxing wealth is an idea that is gaining greater currency. As The Wall Street Journal reporter Richard Rubin notes, a number of policymakers and presidential candidates are supporting various ideas, and right-of-center think tanks are considering them as well. Equitable Growth is an excellent resource on the subject: This report on net worth taxes by Equitable Growth Director of Tax Policy and chief economist Greg Leiserson, along with Will McGrew and Raksha Kopparam, is especially useful. Rubin describes some key proposals and their potential economic and political benefits and pitfalls.

Employers in the gig economy have been accused of skirting U.S. labor laws by classifying their workers as independent contractors, but Vox’s Alexia Fernández Campbell reports on major legislation in California that would significantly limit that practice, and on matching federal legislation. She notes that companies such as Uber Technologies, Inc. and Lyft, Inc. are aggressively lobbying to defeat the bill in California and that it is becoming an issue in the 2020 presidential campaign.

“The rich can’t get richer forever, can they?” asks the title of a piece by Liaquat Ahamed in The New Yorker. His answer is, essentially, we’ll see. He describes the increasing economic inequality in the United States and elsewhere over the past few decades and summarizes books on the subject by Binyamin Appelbaum and Branko Milanovic. “The enormous influence of the Chicago School helps explain why research into inequality and income distribution was long sidelined in this country,” Ahamed writes. But Milanovic and other European economists—including Thomas Piketty, Equitable Growth Steering Committee member Emmanuel Saez, and Equitable Growth grantee Gabriel Zucman, to whom he refers as the French brigade—have “succeeded in focussing public attention on the issue of inequality.”

Earlier this year, Equitable Growth teamed with The Brookings Institution’s Hamilton Project on a project to help the nation prepare for the next recession. They produced a book, Recession Ready: Fiscal Policies to Stabilize the American Economy, that contains a number of concrete proposals for programs and policies to put in place now to help shorten and ameliorate the effects of the next recession. Now, some of these proposals form the basis for a plan announced recently by Sen. Michael Bennet (D-CO). Matthew Yglesias explains that plan for Vox.

As the baby-boom generation ages, the care needs of the nation’s elderly are growing, writes Eduardo Porter in The New York Times. Much of the burden is being taken up by their children, especially their daughters. In the absence of a national paid leave program, this burden is an important factor depressing the U.S. female labor participation rate, which, in 2017, ranked 30th among the 36 industrialized countries currently in the Organisation for Economic Co-operation and Development. “By knocking many women in their prime earning years from the work force, the growing strain from care is weighing down the American economy,” Porter writes.

Friday Figure

Figure is from Equitable Growth’s “What kind of labor organizations do U.S. workers want?” by Alex Hertel-Fernandez.

Worthy reads from Equitable Growth:
 

1. Read Alexander Hertel-Fernandez, William Kimball, and Thomas Kochan, “How U.S. Workers Think About Workplace Democracy: The Structure of Individual Worker Preferences for Labor Representation,” in which they write: “Although never as powerful as in other advanced democracies, unions remain incredibly important economic and political organizations in the United States. Yet we know little about the structure of workers’ preferences for labor unions or other alternative labor organizations. We report the results of a conjoint experiment fielded on a nationally representative sample of more than 4,000 employees. We explore how workers’ willingness to join and financially support labor organizations varies depending on the specific benefits and services offered by those organizations. While workers value some aspects of traditional American unions very highly, especially collective bargaining, they would be even more willing to join and support organizations currently unavailable under U.S. law and practice. We also identify important cleavages in worker support for labor organizations engaged in politics and strikes. Our results shed light on the politics of labor organization, as well as civic association and membership more broadly.”
2. Read Raksha Kopparam, “The Federal Reserve’s new Distributional Financial Accounts provide telling data on growing U.S. wealth and income inequality,” in which she writes: “The Federal Reserve Board … Distributional Financial Accounts … provides quarterly estimates of wealth distribution in the country from 1989 to 2019. The new dataset was created by integrating the Federal Reserve Board’s Financial Accounts with the Survey of Consumer Finances. Together, they contain reliable measures of the distribution of household-sector assets and liabilities from 1989, which gives policymakers and economists alike new insight into how the distribution of wealth has changed since the 1990s.”
3. Read Korin Davis, “Equitable Growth invests $1.064 million in advancing research on inequality and growth.”

Worthy reads not from Equitable Growth:

1. We have a social insurance system in which employers play a large role as intermediaries between individual workers and the government. We have such a system in large part because right-wingers in the 1920s argued that you did not need government-provided social insurance because private employers could and would step up to the task in order to boost the morale of their workers. What Uber Technologies, Inc. and Lyft, Inc. are now complaining about was originally a piece of a movement to keep government small. Thus, there is a certain historical irony in their attempt to shed their part of the social welfare mission that their predecessor entrepreneurs of a century ago assured one and all that they were eager to embrace. Read Matthew Chapman, “Uber and Lyft put up $60 million for ballot fight to avoid paying their drivers as employees” in which he writes: “On Thursday, Bloomberg News reported that ride-sharing giants Uber and Lyft are prepared to spend $60 million in support of a potential California ballot question in 2020 that would prevent their workers from being classified as employees. The push comes as the California legislature advances AB 5, which would require any workers who perform functions that aren’t outside the course of their employer’s business to be classified as an employee—codifying a decision last year by the California Supreme Court. Uber and Lyft have kept their margins low by classifying their workers as self-employed contractors who just happen to use their app as a social network to find passengers. This means that they are not covered by a number of protections that employees receive, like the right to unionize or to receive overtime pay.”
2. I believe all these effects are very real. It still amazes me that we are not seeing them in aggregate productivity growth numbers. Read Sean Gallagher, “The fourth Industrial Revolution emerges from AI and the Internet of Things,” in which he writes: “IoT has arrived on the factory floor with the force of Kool-Aid Man exploding through walls … Smart, cheap, sensor-laden devices paired with powerful analytics and algorithms have been changing the industrial world … Companies are seeing more precise, higher quality manufacturing with lowered operational costs; less downtime because of predictive maintenance and intelligence in the supply chain; and fewer injuries on factory floors because of more adaptable equipment. And outside of the factory, other industries could benefit from having a nervous system of sensors, analytics to process ‘lakes’ of data, and just-in-time responses to emergent issues—aviation, energy, logistics, and many other businesses that rely on reliable, predictable things could also get a boost. But the new way comes with significant challenges, not the least of which are the security and resilience of the networked nervous systems stitching all this new magic together … And then there’s always that whole ‘robots are stealing our jobs’ thing. (The truth is much more complicated).”
3. Those who are already doing well in world labor markets are able to benefit—or at least to lose less—from disruption. It is those who are not doing so well who find their inferiority of position amplified by occupation. Read Per-Anders Edin, Tiernan Evans, Georg Graetz, Sofia Hernnäs, and Guy Michaels, “The individual consequences of occupational decline,” in which they write: “Outcomes for similar workers in similar occupations over 28 years … the consequences of large declines in occupational employment … [m]ean losses in earnings and employment for those initially working in occupations that later declined are relatively moderate, [but] low-earners lose significantly more.”