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”

Worthy reads from Equitable Growth:

1. Equitable Growth earlier this week convened an event, “Racial and Gender Wage Gaps: Overcoming Structural Barriers to Shared Growth,” that was very much worth attending. In case you missed it, you can find some highlights here. The event featured “a conversation on wage gaps for women and people of color, and what we can do about it. Wage stagnation and falling economic mobility are endemic economic problems in the United States. Their effects fall most severely on communities of color and women, who also face large wage gaps compared with white men. Key to solving wage stagnation and overall income inequality is a recognition that deeply ingrained structural forces keep many Americans from sharing in economic prosperity. This event will feature research and discussion from policy experts on the wage gaps in U.S. society.”
2. Equitable Growth Executive Director Heather Boushey had a “fun chat” on Monday with David Beckworth about their work together on a new book, Recession Ready: Fiscal Policies to Stabilize the American Economy.
3. Boushey also appeared in this piece by PBS Newshour, “Amid Long Economic Expansion, Why so Many Americans Are Still Struggling,” in which she explained: “We need to understand and do more to address the ways that inequality obstructs, subverts, and distorts the processes that lead to growth …. Reams of … evidence … that investments in early childhood are some of the most important … We’re not making the investments that our economic competitors are in early childhood … We’re not making those investments because we haven’t created the tax revenue to do that.”
4. It was the philosopher Santayana who wrote that those who do not remember history are condemned to repeat it. Unfortunately, the rest of us are condemned to repeat it alongside them. Thus, it is very, very important that we stamp out those who do not remember history. How? By educating them. The piece of history we need to remember as we approach the next recession, whenever it starts, is that there never was any evidence that austerity is good or necessary during the bust. Read my “Risks of Debt: The Real Flaw in Reinhart-Rogoff,” in which I write: “Economists … don’t watch just quantities … but prices. And the prices of government debt are the rate of inflation, the nominal interest rate, and the level of the stock market as people trade bonds for commodities, bonds for cash, and bonds for stocks. And all three of these prices are flashing green: saying that markets would prefer and it would be better for the economy if government debt were growing at a faster pace than under current forecasts … The principal mistake Reinhart and Rogoff committed in their analysis and paper—indeed, the only significant mistake in the paper itself—was their use of the word ‘threshold.’”

Worthy reads not from Equitable Growth:

1. Central banks may remain independent if they manage economies in a way that produces a modicum of stability and prosperity. If they fail to do so—if their management produces instability and poverty—I can guarantee you that they will not remain independent. Read Barry Eichengreen, “Unconventional Thinking about Unconventional Monetary Policies,” in which he writes: “Defenders of central-bank independence argue that quantitative easing should have been avoided last time and is best avoided in the future because it opens the door to political interference with the conduct of monetary policy. But political interference is even likelier if central banks shun QE in the next recession.”
2. From the past, and worth highlighting. Why? Because when the next recession comes, the usual suspects will, once again, start claiming that they should not do anything to shorten or cushion it. And the usual suspects will, once again, be wrong. Read Paul Krugman’s 2008 piece, “Hangover Theorists,” in which he writes: “Somehow I missed this: via Steve Levitt, John Cochrane explaining that recessions are ‘good’ for you … The basic idea is that a recession, even a depression, is somehow a necessary thing, part of the process of ‘adapting the structure of production.’ We have to get those people who were pounding nails in Nevada into other places and occupations, which is why unemployment has to be high in the housing bubble states for a while. The trouble … is twofold: 1. It doesn’t explain why there isn’t mass unemployment when bubbles are growing as well as shrinking—why didn’t we need high unemployment elsewhere to get those people into the nail-pounding-in-Nevada business? 2. It doesn’t explain why recessions reduce unemployment across the board, not just in industries that were bloated by a bubble … The current slump is affecting some non-housing-bubble states as or more severely as the epicenters of the bubble … Unemployment is up everywhere. And while the centers of the bubble, Florida and California, are high in the rankings, so are Georgia, Alabama, and the Carolinas. So the liquidationists are still with us. According to Brad DeLong, ‘Milton Friedman would recall that at the Chicago where he went to graduate school such dangerous nonsense was not taught…’ But now, apparently, it is.”
3. Why does our economic system work as well as it does, and why is it as intelligent as it is? This is a deep question in need of much more thought. Michael Jordan thinks it noteworthy that the human brain is not the only system that looks capable of “intelligent behavior.” I wonder if the things that have made our economy appear intelligent in the past may disappear in the future. Read Jordan’s “Dr. AI or: How I Learned to Stop Worrying and Love Economics,” in which he writes: “I view the scientific study of the brain as one of the grandest challenges that science has ever undertaken, and the accompanying engineering discipline of ‘human-imitative AI’ as equally grand and worthy … [But] what else is intelligent on Earth? Perhaps the Martians will notice that in any given city on Earth, most every restaurant has at hand every ingredient it needs for every dish that it offers, day in and day out. They may also realize that, as in the case of neurons and brains, the essential ingredients underlying this capability are local decisions being made by small entities that each possess only a small sliver of the information being processed by the overall system … This system is intelligent by any reasonable definition—it is adaptive (it works rain or shine), it is robust, it works at small scale and large scale, and it has been working for thousands of years … The Martians may be happy to conceive of this system as an ‘entity’—just as much as a collection of neurons is an ‘entity.’ Am I arguing that we should simply bring in microeconomics in place of computer science? And praise markets as the way forward for AI? No, I am instead arguing that we should bring microeconomics in as a first-class citizen into the blend of computer science and statistics that is currently being called ‘AI.’ This blend was hinted at in my discussion piece; let me now elaborate.”