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.

Worthy reads from Equitable Growth:
 
Here are links to four important pieces at the Washington Center for Equitable Growth providing context to the recent presidential primary debates:

1. Carmen Ye, “Why we need better re-employment policies for formerly incarcerated African American men,” in which she writes: “African American men … 33 percent of the 1.56 million Americans held in state or federal prisons … When these men are released from prison, what will their employment prospects look like? … Black applicants with no criminal record receive a callback or job offer at the same rate as white applicants with a felony conviction. Yet black applicants without a criminal record were three times as likely to get a callback as those with a record.”
2. Will McGrew, “Investments in early childhood education improve outcomes for program participants—and perhaps other children too,” in which he writes: “Governments that spend money on early childhood education get a lot of bang for their buck—an estimated 7 percent to 10 percent annual return for programs targeted at disadvantaged children … [plus] also long-term improvements in human capital and earnings. But do those test-score gains last? … Mariana Zerpa … finds that children in states with early childhood education programs are 30 percent less likely to repeat a grade between ages 6 and 8—and that this effect lasts at least until age 12.”
3. Equitable Growth, “Gender wage inequality in the United States: Causes and solutions to improve family well-being and economic growth”: “Disparities between men’s and women’s wages in the United States hinders economic growth by constraining family incomes and spending power. When comparing average full-time year-round incomes of men to those of women, research indicates that women make only 80.5 percent of men’s wages, a gap that is even larger when accounting for race. In the long run, these disparities heighten the risks of financial stress and inadequate retirement savings at times of economic shocks.”
4. 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. As noted above, 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.”

Worthy reads not from Equitable Growth:

1. The Tax Cuts and Jobs Act of 2017 was supposed to produce faster growth even though it was inequitable. But that hope appears to have been vain. Read Dan Drezner, “How Donald Trump is sanctioning the U.S. economy,” in which he writes: “Second-quarter GDP growth was only 2.1 percent … far short of the 3 percent target that President Trump has repeatedly promised. Data revisions released Friday wiped away what had been a prized talking point for the White House: GDP grew 2.5 percent for all of 2018, down from the 3 percent previously reported … [and] a far cry from Larry Kudlow’s 2018 claim that GDP growth would top 4 percent for a few quarters … Trump has unwittingly sanctioned the U.S. economy … has made himself the uncertainty engine for those interested in investing in the United States. And the effects are starting to be felt. In the second quarter, business investment was -0.6 percent. As in, negative … Part of the problem is the drying up of foreign direct investment … How will Trump react to the growth news? It is possible that he will respond in a mature fashion.”
2. These numbers on the human costs of the Supreme Court’s decision in National Federation of Independent Business v. Sibelius are only about one-quarter of what I had feared. Read Scott Lemieux, “Matters of Life and Death,” in which he writes: “15,000 people died in three years because Republican states refused to accept the Medicaid expansion … And let us not forget that this was all made possible by the intervention of the Supreme Court, based on arguments so weak that, as Joan Biskupic’s new bio finds, [Supreme Court Chief Justice] John Roberts himself initially rejected them … Regarding the expansion of Medicaid for poor people, all four liberal justices … voted to uphold the program … [and] punctured … arguments that Congress had exceeded its spending power and its ability to attach conditions … In the private March 30 conference, Roberts also voted to uphold the Medicaid expansion.”
3. At a recent conference, my fellow University of California, Berkeley professor and former President’s Council of Economic Adviser’s Chair Laura D. Tyson gave a powerful endorsement and shout-out to this book by my fellow UC-Berkeley professor Barry Eichengreen as the best survey of the history and prospect of what he calls “populism” and I would call “neo-fascism.” Read Barry Eichengreen’s new book, The Populist Temptation: Economic Grievance and Political Reaction in the Modern Era. Here are excerpts from a summary of the book: “Populists tend to thrive most in the wake of economic downturns, when it is easy to convince the masses of elite malfeasance. Yet while there is more than a grain of truth that bankers, financiers, and ‘bought’ politicians are responsible for the mess, populists’ own solutions tend to be simplistic and economically counterproductive. Moreover, by arguing that the ordinary people are at the mercy of extra-national forces beyond their control—international capital, immigrants, cosmopolitan globalists—populists often degenerate into demagoguery and xenophobia. There is no one solution … [but] there is an obvious place to start: shoring up and improving the welfare state … America’s patchwork welfare state was not well equipped to deal with the economic fallout that attended globalization and the decline of manufacturing in America … Lucidly explaining both the appeals and dangers of populism across history, this book is essential reading for anyone seeking to understand not just the populist phenomenon, but more generally the lasting political fallout that follows in the wake of major economic crises.”
4. Adopting robots may cost jobs, but not adopting robots appears to cost many more jobs. Read Wolfgang Dauth, Sebastian Findeisen, Jens Südekum, and Nicole Woessner, “Robots and firms,” in which they write: “Our study is based on firm-level data from Spain, a country with one of the highest robot density levels per worker in Europe. The data come from the Encuesta Sobre Estrategias Empresariales, an annual survey of around 1,900 Spanish manufacturing firms … We reveal significant job losses in non-adopting firms. Our estimates imply that 10 percent of jobs in non-adopting firms are destroyed when the share of sales attributable to robot-using firms in their industries increases from zero to one half. The same logic applies to changes in output and survival probabilities … Aggregate productivity gains are partly driven by substantial intra-industry reallocation of market shares and resources following a more widespread diffusion of robot technology, and a polarization between high-productivity robot adopters and low-productivity non-adopters.”

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

David Mitchell explains the findings in a new working paper by economists Christina Romer and David Romer of the University of California, Berkeley that looks at how policymakers’ perceptions of debt and budgetary constraints limit their stimulus spending in economic downturns.

In a new issue brief for Equitable Growth, University of Michigan economists Lisa Cook and Janet Gerson explore why—despite earning an increasing share of postsecondary degrees in STEM fields—there is not a corresponding increase in patenting activity among women and people of color. Discrimination remains at the heart of the problem, and the authors estimate that closing the gender and racial gap in the U.S. innovation process could increase U.S. Gross Domestic Product per capita by 2.7 percent. In an accompanying Value Added blog post, Will McGrew summarizes the authors’ findings about the causes of the problem and their recommended policy solutions, including better mentorship, as well as actions to prevent the role of discrimination in patent review.

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

Links from around the web

Four years ago, Seattle adopted a $15 minimum wage, the highest in the nation. New research from Jennifer Romich of the University of Washington into the effects of the changes found that jobs in restaurants and bars were not lost as a result of the change, and that low-wage workers experienced more rapid hourly wage growth, among other findings. [vox]

This week, the Department of Justice announced it was opening an antitrust review of whether online platforms such as Facebook, Inc., Google, Amazon.com Inc., and Apple Inc. are stifling competition. This is in addition to the taskforce created earlier this year by the Federal Trade Commission, which also has jurisdiction over antitrust, to look into the tech giants. [wsj]

While DoorDash announced a change in its policy for the allocation of tips in response to public outcry that they were not passing them directly along to workers, the issue illustrates the problems caused for delivery workers by their characterization as “independent contractors” rather than employees, allowing employers to avoid labor laws such as a minimum wage. [nyt]

A new working paper by Harvard economists Nathaniel Hendren and Benjamin Sprung-Keyser analyzed U.S. social safety net programs and found that programs that invested in children’s health and education had a net return on taxpayer dollars because they increased their future earnings and therefore how much they paid in taxes. [wsj]

Friday figure

Figure is from Equitable Growth’s “The intersectional wage gaps faced by Latina women in the United States” by Kate Bahn and Will McGrew.