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

Wealth disparities between the rich and the poor in the United States have broadened over the past 30 years, according to the Federal Reserve Board’s Distributional Financial Accounts, released earlier this month. Raksha Kopparam analyzes the new data, which show that the bottom 50 percent of wealth owners in the United States are only now returning to the levels of wealth they had in 2000, and that their share of the nation’s wealth is glancingly small. At the other end of the spectrum, the top 1 percent have seen their wealth grow by 600 percent since 1989.

The domestic outsourcing of jobs in the United States is fast becoming a dominant explanation for the destruction of the social contract of work, a historic concept in which norms of fairness and solidarity between firms and their employees played a major role in wage setting and workplace standards for some U.S. workers—though of course many others such as African American workers were consistently more marginalized. Kate Bahn reviews relevant research literature from a wide array of sources, including Equitable Growth, and finds that the U.S. labor market is increasingly characterized by the fissured workplace, in which workers are employed at firms with core competencies and all other duties or certain functions in the production process are contracted out, and, not coincidentally, by monopsony, the ability of firms rather than markets to set wages. These trends, she notes, are at least partly responsible for stagnant wages and declining job quality.

The United States remains the only industrialized nation without a national paid leave program, despite evidence that these programs can benefit working parents and employers as well. In 2004, California became the first of what are now eight states, plus the District of Columbia, to establish a publicly funded program for family leave. Katherine Policelli and Alix Gould-Werth report this week on new research by Alexandra Stanczyk showing that California’s paid leave program helped new mothers avoid poverty. “The introduction of paid leave in California,” they write, “is tied to a 10.2 percent decrease in risk of new mothers dropping below the poverty threshold and disproportionately helps women with lower levels of education and who are unmarried.”

Brad DeLong has again passed along his worthy reads for the past week or so, with content from Equitable Growth and elsewhere.

Links from around the web

This week, the influential Business Roundtable, whose members are the chief executive officers of nearly 200 of the largest corporations in the United States, issued a statement declaring that maximizing profits for shareholders should no longer be the sole purpose of a company. The statement declares that the concerns of other stakeholders—workers, consumers, suppliers, and communities—also need to be corporate priorities. In a column published later in the week, Eric Posner, a professor at the University of Chicago Law School, expresses some skepticism. “While the statement is a welcome repudiation of a highly influential but spurious theory of corporate responsibility,” he writes, “this new philosophy will not likely change the way corporations behave. The only way to force corporations to act in the public interest is to subject them to legal regulation.” [atlantic]

“Most Americans say it’s not ideal for a child to be raised by two working parents,” writes The New York Times’ Claire Cain Miller. “Yet in two-thirds of American families, both parents work. This disconnect between ideals and reality helps explain why the United States has been so resistant to universal public child care. Even as child care is setting up to be an issue in the presidential campaign, a more basic question has recently resurfaced: whether mothers should work in the first place.” Miller adds: “…[I]n the United States, people have long had conflicted feelings about whether society and government should make it easier for mothers to work outside the home, and these are complicated by attitudes about race and poverty.” [nyt]

German Lopez was skeptical of unions. Then, the Vox senior correspondent joined one. He describes how he went, in a year and a half, from opposing the unionization of the Vox Media editorial staff to celebrating with his colleagues when the union signed a contract agreement with the company. He explains that he was not opposed to unions in general but thought Vox was a generous company, and that some workers would take advantage of union protections. But after he did the research, which he describes in this piece, he was sold, not only on the Vox union but on the deep importance of unions for all workers. “I had done a complete 180 on unions,” he writes. [vox]

“You have a better chance of achieving ‘the American dream’ in Canada than in America” may be a startling headline, but the data don’t lie, former Equitable Growth Steering Committee member Raj Chetty tells Ezra Klein in a one-on-one interview. Chetty discusses his recent research on families, neighborhoods, and mobility; on the significant return on public investments in children; on the impact of poverty on life expectancy; and on the “fading of the American dream,” the expectation that children will be better off than their parents. [vox] (See also Equitable Growth’s In Conversation with Raj Chetty.)

We tend to think of doctors as having very long, sometimes erratic hours, which can be another way of saying family-unfriendly hours. But Claire Cain Miller, in another interesting analysis, finds that things have changed. “Medicine has become something of a stealth family-friendly profession, at a time when other professions are growing more greedy about employees’ time,” she writes. “[M]edicine has changed in ways that offer doctors and other health care workers the option of more control over their hours, depending on the specialty and job they choose, while still practicing at the top of their training and being paid proportionately.” And Miller cites Claudia Goldin’s research showing female doctors are likelier than women with law degrees, business degrees or doctorates to have children. Other research shows they’re also much less likely to stop working when they do. [nyt]

Friday Figure

Figure is from Equitable Growth’s “The Federal Reserve’s new Distributional Financial Accounts provide telling data on growing U.S. wealth and income inequality,” by Raksha Kopparam.

Worthy reads from Equitable Growth:

1. I am skeptical of claims of wage stagnation over the past 40 years in the United States. Our modern information and communications technologies are worth a good deal, as is pollution control. I think the argument is better made in the sense of Karl Polanyi: People thought that they would have a certain style of middle-class life, but stagnant paid wages and rising housing and other prices have led to grave disappointment. It is not the future that people in the past had ordered, and so many are very upset. Read Heather Boushey “In Conversation with Gabriel Zucman,” in which Zucman notes: “Even this mediocre growth performance is much more than what’s been experienced by most of the population. Almost 90 percent of the population has seen its income grow by less than that. And for half of the U.S. population—about 120 million adults today—there’s been zero growth in average pretax income since 1980. This means that in 1980, for the bottom 50 percent, average income before government intervention was $16,000 a year, adjusted for inflation. Today, it’s still $16,000 a year. That’s a generation-long stagnation in income for half of the population.”

2. Kate Bahn thinks about the “fissured workplace” interacting in your daily life with people of other social classes as valued colleagues. This is, perhaps, a powerful glue holding the society together that we have, to a substantial extent, lost. Read Kate Bahn, “Domestic outsourcing of jobs leads to declining U.S. job quality and lower wages,” in which she writes: “One prototypical example is janitorial work, where most office cleaners today are employed by a janitorial services company that is contracted by the building owner where individual office places lease their space. These kinds of fissured employment patterns have led economists and other social science researchers to examine a variety of empirical research questions about what has caused domestic outsourcing, what the impacts have been and for whom, and what the future of the firm will be.”

3. So far, it looks like a very good benefit-cost ratio for California’s paid leave program. Read Katherine Policelli and Alix Gould-Werth, “California Paid Family Leave reduces poverty,” in which they write: “Between 2004 and 2013, the California paid leave program increased household income levels and lowered poverty rates for mothers of 1-year-olds … an average $3,407 increase in income … Also … good news specific to the bottom end of the income distribution: The introduction of paid leave in California is tied to a 10.2 percent decrease in risk of new mothers dropping below the poverty threshold and disproportionately helps women with lower levels of education and who are unmarried.”

Worthy reads not from Equitable Growth:

1. I am, usually, a strong advocate of “play your position.” And I try to practice what I preach. But this week I cannot. Here is President Donald Trump in the past explaining why Jay Powell was his choice to be chair of the Fed: “That is why we need strong, sound, and steady [pause] leadership at the United States Federal Reserve. I have nominated Jay to be our next Federal Chairman. [pause] And so important, because he will provide exactly that type of leadership. He’s strong. He’s committed. He’s smart. And, if he is confirmed by the Senate, Jay will put his considerable talents to work, leading our nation’s independent central bank. Jay has learned the respect and admiration of his colleagues for his hard work, expertise, and judgment. Based on his record, I am confident Jay has the wisdom and leadership to guide our economy through any challenges that our great economy may face.”

2. And now here is President Trump, complaining because Jay Powell is following the monetary policy that Trump knew he would follow when he nominated him: “Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed, but the Democrats are trying to “will” the Economy to be bad for purposes of the 2020 Election. Very Selfish! Our dollar is so strong that it is sadly hurting other parts of the world. The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!.” Is Trump trying to convince his base that Jay Powell was somehow the choice of the dastardly Democrats rather than his own choice? Has Trump forgotten that Jay Powell was his choice and is doing what Trump chose him to do? I used to think that there was some method here. But now the signs of cognitive decline seem strong enough that I do not think it wise to make that assumption.

3. Okay, back, finally, to playing my position. We now have, or ought to have, the information sources to create much more finely grained and much more accurate economic and social indicators. We should work hard to do so. Read Joseph Stiglitz, Martine Durand, and Jean-Paul Fitoussi, “Who Are You Going to Believe, Me or the Evidence of Your Own Eyes?,” in which they write: “We need to develop datasets and tools to examine the factors that determine what matters for people and the places in which they live. Having the right set of indicators, and anchoring them in policy, will help close the gap between experts and ordinary people that are at the root of today’s political crisis … The Stiglitz-Sen-Fitoussi Commission … final report was published in 2009 … The production of goods and services in the market economy—something which [Gross Domestic Product] does try to capture—is of course a major influence, but even in the limited domain of the market, GDP doesn’t reflect much that is important. The most used economic indicators concentrate on averages, and give little or no information on well-being at a more detailed level, for instance how income is distributed … Economic insecurity today is only one of the risks individuals face … The Group considered how to better measure the resources needed to ensure economic, environmental and social sustainability.”

4. The very sharp Martin Wolf fears that attachment to Modern Monetary Theory may produce predictable distortions in politicians’ thoughts. Read his “States Create Useful Money, but Abuse It,” in which he writes: “What then are the problems with MMT? … Suppose holders of money fear that the government is prepared to spend on its high priority items, regardless of how overheated the economy might become … fear that the central bank has also become entirely subject to the government’s whims … They are then likely to dump money … The focus of MMT’s proponents on balance sheets and indifference to expectations that drive behaviour are huge errors … If politicians think they do not need to worry about the possibility of default, only about inflation, their tendency may be to assume output can be driven far higher, and unemployment far lower, than is possible without triggering an upsurge in inflation.”

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.