‘Skills gap’ arguments overlook collective bargaining and low minimum wages

Opponents and supporters of former Gov. Scott Walker’s bill to take away public worker bargaining rights chant slogans and carry signs on February 19, 2011 in Madison, Wisconsin.

As the U.S. economy slowly but steadily recovered from the Great Recession beginning in 2009, Gross Domestic Product grew, employment rose, and the unemployment rate declined. These were all consistent with an economic recovery, but one very important metric has not caught up. Wages, seemingly defying the laws of labor supply and demand, remained essentially flat. The economy was growing, demand for workers was rising faster than the supply, yet the nominal price of their labor was not increasing any faster than inflation. As a result, the additional income produced by a growing economy was going not to workers, but to capital—investors and employers. And while real wage growth has begun to pick up in recent months, it is still below target for a tight labor market.

In the post-World War II era, as productivity rose, wages for U.S. workers went right up with it. Workers enjoyed the fruits of their hard work, made ever more efficient and productive by improving technology. But in the 1970s, as the Economic Policy Institute has demonstrated, wages and productivity became decoupled. As the EPI figures show, productivity has risen fairly steadily since then, yet wages have stagnated.

Over time, one theory—which was advanced about the flattening of wages and today is almost accepted wisdom—was that wages were rising at a healthy clip for skilled workers; it was only relatively low-skilled workers for whom wages were flat. There were higher-skilled jobs available, the theory went, but not enough workers with those skills. Hence, the supposed “skills gap” between supply and demand for skills.

But if the problem of growing wage inequality were primarily a problem of skills, then to make wages grow, policymakers would need to reduce the skills gap. The way to do that, so the argument still goes, is for workers to become better educated and better trained by getting higher degrees and by learning new trades. And this should be a priority for government—to fund such skills acquisition across the age and educational spectrum.

Yet interestingly, and not coincidentally, among those supporting this interpretation of wage stagnation most aggressively were businesses. It was as though employers had nothing to do with setting those flat wages. And it was as though businesses had no responsibility to train their workers in new skills so they could earn higher wages. For businesses, fixing the skills gap rested on the shoulders of workers themselves, perhaps with support from the government by making education more accessible.

There’s no question that investment in human capital—in education and training, in particular—should be a high priority. Such investments pay dividends for individuals, for the economy, and for society. Moreover, this is a shared responsibility of government, individuals, and, yes, businesses. But education and training are only a necessary condition for wage growth, not a sufficient one. Moreover, whether the amount of such investment was related to the flattening of wages is an entirely different matter.

Indeed, as the recovery nears its decade-long mark and the jobs market continues to tighten, wages have finally begun to move upward modestly because of a tightening labor market. But there is a way to go for wages to reach a level reflecting long-run productivity increases and to overcome historical wage disparities between groups of workers.

The skills gap isn’t the problem

The skills gap has always been an interesting idea, but there has never been empirical evidence to back up the underlying theoretical foundation. While it’s true that workers with more education tend to earn more, disparities by race and gender within education levels are still rampant. In recent years, some outstanding research has taken a look behind the curtain of this popular story.

In 2016, Alicia Sasser Modestino of Northeastern University, Daniel Shoag of Harvard University, and Joshua Balance of the Federal Reserve Bank of Boston found that a significant element of the alleged skills gap was inflated job requirements. These researchers showed that when the labor market was slack during the Great Recession and the years following, employers engaged in “opportunistic upskilling” by adding job requirements that they had not deemed necessary before. Those requirements tended to fall by the wayside as the recovery proceeded and the job market became more robust.

In 2018, Heidi Shierholz and Elise Gould of the Economic Policy Institute showed that real wages were not rising significantly even in high-skill occupations with very low unemployment. If there were a skills shortage, they argued, then wages would be rising in the occupations where those shortages existed. They noted that computer and mathematical science occupations—the skills for which often figure in conversations about skill shortages—had a low unemployment rate of 2.3 percent in 2018 but real wage growth of less than 1 percent.

Plus, there is a spate of evidence that a worker’s level of education, while certainly important to wage levels, is not conclusive. Race, in particular, is shown to be a significant factor in wage differentials. A 2014 Center for Economic and Policy Research report by Janelle Jones (now of the Hub Project) and John Schmitt (a former Equitable Growth research director and now of EPI) showed that white college graduates recovered far more rapidly from the Great Recession than did black college graduates. One reason is that black college graduates, on average, are younger than white graduates, but this does not explain the entire disparity between the groups.

Another piece of evidence that a skills gap was not the cause of stagnating wages is related to the significant increase in the number of care-work jobs, which face a pay penalty owing to the societal devaluation of care work—not because it is not actually valuable, as shown in research by Equitable Growth grantee Nancy Folbre of University of Massachusetts Amherst and Paula England of New York University. Rachel Dwyer of The Ohio State University showed that care work specifically illustrates the problem of increasing job polarization. As the U.S. population has aged, there has been a sharp rise in care-work employment, and it has been predominately in low-skill, low-wage jobs. While there are high-wage positions as well, there are not the kind of middle-wage jobs to which low-wage workers would gain access by gaining new skills.

Diminished union power and low minimum wages are the problem

What, then, explains the decades-long stubbornness of wages, including in the years the U.S. economy was recovering from the recession?

As a partial explanation, a growing number of researchers are pointing to monopsony—the power of individual firms in an increasingly concentrated economy to set wages, rather than the broader labor market setting wages through competition for workers. Douglas A. Webber of Temple University, in his 2015 paper “Firm market power and the earnings distribution,” found labor supply elasticity to be lower than it would be in a competitive market, thus showing that firms were able to exercise greater power over the wages of their workers. As I’ve written previously, he found that “dynamic monopsony across the economy may be one of the reasons we experience high income inequality in the United States, and why most workers have not been able to share in the economic growth of the wealthiest nation.”

Another important contributing factor is the steep, decades-long decline in union membership. In their working paper, “Unions and Inequality Over the Twentieth Century: New Evidence from Survey Data,” Suresh Naidu of Columbia University, Henry S. Farber and Ilyana Kuziemko of Princeton University, and Daniel Herbst, now of the University of Arizona, concluded that there is a sustained wage premium for union membership, and that this premium is most significant for lower-wage workers. They concluded that there is a significant relationship between the level of U.S. union membership and the level of inequality in the U.S. economy.

Each of these explanatory factors for wage stagnation—the rise of monopsony and the decline of unions—points to the role of power in wage determination. Likewise, the wage disparities experienced by nonwhite workers and women who have equivalent education to their white and male counterparts is also due to structural power imbalances resulting from historical legacies of racism and sexism. If the current small increase in wage growth is to be sustained, not only in the current recovery but also when the economy inevitably slows, structural changes will be needed. In the imperfectly competitive monopsony model, employers are able to set wages below the marginal revenue productivity of labor. This deadweight loss can be reduced or eliminated by increasing minimum wages and through effective collective bargaining by unions against monopsonistic employers.

There is no denying the importance of education and training to long-term outcomes for workers. But that does not mean the solution to stagnant or inadequate wage increases lies in addressing a skills gap. To address the wage problem, Congress and regulators need to ensure that workers retain the ability to organize into unions, and unions need to have the power to bargain collectively—and effectively—to negotiate fair wage levels. In addition, policymakers need to establish wage floors that spill over into higher pay for workers along the distribution. Policies like these will compensate for power imbalances that have maintained wage stagnation.

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Brad DeLong: Worthy reads on equitable growth, May 3–9, 2019

Worthy reads from Equitable Growth:

  1. This surprises me: “Motherhood” is not what I would have expected to see as one of the most durable and stubborn forms of either statistical or prejudicial discrimination. Yet here it is. Read Eunjung Jee, Joya Misra, and Marta Murray-Close, “Motherhood Penalties in the U.S., 1986-2014,” in which they write: “The motherhood penalty remains quite stable over time … The gross gap in pay between childless women and mothers of two or more … has narrowed … because mothers’ have increased … education and workforce experience.”
  2. If you are in Washington, D.C., sign up for our joint event with the Hamilton project on Thursday, May 16. You will not be sorry. Here’s the invitation: “Preparing for the Next Recession: Policies to Reduce the Impact on the U.S. Economy.”
  3. It is certainly true that you have to look at both demand and supply to figure out what happens in equilibrium. But Milton Friedman’s first rule is that supply curves do slope upward. Things have to be very weird indeed for equilibrium effects to do more than modestly attenuate impact effects. Sometimes things are really weird. But that is not the way to bet. Read “In Conversation with Raj Chetty,” in which he notes: “Empirical research has recently mainly been focused on identifying individual-level effects. But trying to figure out how things play out in equilibrium is a very challenging problem, which, I think, is something we should have on our agenda to focus on going forward.”
  4. The late and persistent apparent rise in margins pretty much everywhere in the U.S. economy is one of the most surprising things to happen in the past generation. I do not know anyone very confident about why this has taken place or what all of its implications are. But it does seem highly likely that it calls for tougher antitrust policy. Here we have some very smart words from a murderers’ row of thoughtful experts—Jonathan B. Baker, Nancy L. Rose, Steven C. Salop, and Fiona Scott Morton. Read their “Competitive Edge: Principles and presumptions for U.S. vertical merger enforcement policy,” in which they write: “Agencies should consider and investigate the full range of potential anti-competitive harms … Agencies should decline to presume that vertical mergers benefit competition on balance in … oligopoly markets … Agencies should evaluate claimed efficiencies resulting from vertical mergers as carefully and critically as they evaluate claimed efficiencies resulting from horizontal mergers … Agencies should decline to adopt a safe harbor for vertical mergers, even if rebuttable … Agencies also should consider adopting presumptions (rebuttable) that a vertical merger harms competition when certain factual predicates are satisfied.”

Worthy reads not from Equitable Growth:

  1. This paper seems to rest on a distinction between “removing inefficiencies” and “transformational growth” that they do not theorize, yet should. That very few of those countries that have grown faster than the North Atlantic economies over the past two decades are on anything like South Korea’s trajectory is surely true. But why not? Why doesn’t the removal of one inefficiency lead to a chain-reaction removal of others? Read Paul Johnson and Chris Papageorgiou, “It’s too Soon for Optimism about Convergence,” in which they write: “Many analysts … claim that poorer countries are catching up with advanced economies … [But] most of the economic achievements in developing economies have been the result of removing inefficiencies which are merely one-off level effects. While these effects are not unimportant and are necessary in the process of development, they do not imply ongoing economic growth.”
  2. Picking winners—seeing which are the industries in which subsidizing efficient producers will produce large externalities via the creation of communities of engineering practice—has never been that difficult. It has been actually winning that is difficult: creating the institutional and political-economic discipline so that the subsidies flow where they should, rather than where the politically powerful wish them to flow. What is nice about Reda Cherif and Fuad Hasanov’s new working paper is that they have some good suggestions as to how to make this more general than it has been. Read Andrew Batson’s take on the research, “Rediscovering the Importance of Export Discipline,” in which he writes: “The new IMF working paper on industrial policy, by Reda Cherif and Fuad Hasanov, has gotten a lot of notice … But for anyone who has already done some reading on the history of successful Asian economies, particularly Taiwan and South Korea, it is not exactly surprising.”
  3. It is interesting to note that Adam Smith’s one explicit use of the phrase “Invisible Hand” in his Wealth of Nations is not a situation in which the competitive market equilibrium is Pareto-optimal. It is of a situation with two market failures—a home bias psychological failure among the merchants of Amsterdam, and agglomeration economies for mercantile activity in Amsterdam. And the two offset each other. Read Glory Liu, “How the Chicago School Changed the Meaning of Adam Smith’s ‘Invisible Hand,’” in which she writes: “For Friedman and Stigler, economics’ scientific power came from its ability to predict outcomes based on two central insights … self-interest … [and,] of course, the invisible hand … What makes the Smith of Milton Friedman and George Stigler so … problematic … is that they ‘economized’ Smith in a way that obscured if not precluded the relevance of his moral philosophy.”
  4. A new book is out about equitable growth, Jump-Starting America, which I have just added to my must-read list. No, I have not read it yet, but check out Jonathan Gruber and Simon Johnson’s recent video on the topic at the Institute of International Economics.
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JOLTS Day Graphs: March 2019 Report Edition

Every month the U.S. Bureau of Labor Statistics releases data on hiring, firing, and other labor market flows from the Job Openings and Labor Turnover Survey, better known as JOLTS. Today, the BLS released the latest data for March 2019. This report doesn’t get as much attention as the monthly Employment Situation Report, but it contains useful information about the state of the U.S. labor market. Below are a few key graphs using data from the report.

1.

The quits rate held steady at 2.3% for the 10th month in a row, reflecting a steady labor market where workers are confident leaving their jobs to find new opportunities.

2.

The rate of hires-per-job opening was little changed at 3.8%, reflecting 5.7 million hires in March.

3.

The number of job openings increased to 7.5 million in March and remains below one, indicating fewer unemployed workers than there are job openings.

4.

The Beveridge Curve continues to reflect an expansionary labor market, above the levels of the early 2000s expansion because of the historically low unemployment rate.

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Competitive Edge: Principles and presumptions for U.S. vertical merger enforcement policy

Antitrust and competition issues are receiving renewed interest, and for good reason. So far, the discussion has occurred at a high level of generality. To address important specific antitrust enforcement and competition issues, the Washington Center for Equitable Growth has launched this blog, which we call “Competitive Edge.” This series features leading experts in antitrust enforcement on a broad range of topics: potential areas for antitrust enforcement, concerns about existing doctrine, practical realities enforcers face, proposals for reform, and broader policies to promote competition. Jonathan B. Baker, Nancy L. Rose, Steven C. Salop, and Fiona Scott Morton have authored this month’s contribution.

The octopus image, above, updates an iconic editorial cartoon first published in 1904 in the magazine Puck to portray the Standard Oil monopoly. Please note the harpoon. Our goal for Competitive Edge is to promote the development of sharp and effective tools to increase competition in the United States economy.


Jonathan B. Baker Nancy L. Rose Steven C. Salop Fiona Scott Morton

Most discussions of U.S. merger policy focus on horizontal mergers. These are transactions that combine firms at the same level of production, such as would have occurred in the wireless phone telecommunications sector when AT&T Inc. attempted to acquire T-Mobile US, Inc. By contrast, vertical mergers combine firms at different levels of production, such as when AT&T acquired Time Warner in 2018. Vertical merger analysis also applies to the combination of firms producing complementary products, such as when Ticketmaster Entertainment LLC acquired the live events promotion company LiveNation.

U.S. antitrust laws cover vertical mergers, and the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice investigate them. Until the recent AT&T/Time Warner case, however, the agencies had not litigated a vertical merger in court for 40 years. There are only about two vertical merger enforcement actions per year across the two agencies. These are seldom resolved with divestitures or merger abandonments, but rather are routinely settled with consent decrees that regulate behavior.

There seems to be consensus that the DOJ’s 1984 Vertical Merger Guidelines, now 35 years old, reflect neither modern theoretical and empirical economic analysis nor current agency enforcement policy. There also is little dispute that antitrust enforcement should be based on rigorous economic analysis. Yet widely divergent views of preferred enforcement policies were expressed by the FTC’s commissioners when resolving office supply company Staples, Inc.’s acquisition of Essendant and Fresenius Medical Care AG’s acquisition of NxStage, by the various amicus briefs filed in connection with the appellate review of the Justice Department’s unsuccessful challenge to AT&T’s acquisition of Time Warner (here, here, and here), by Assistant Attorney General Makan Delrahim, by the participants the FTC’s competition policy hearing on vertical mergers, and by two of us (here, here, and here).

This broad range of views suggests the difficulty that the two federal antitrust enforcement agencies will face in formulating new vertical merger guidelines. The D.C. Circuit’s decision in United States v. AT&T offered some guidance by applying the same legal standards for vertical mergers as are applied to horizontal mergers, but the court left substantial gaps that the agencies will need to fill.

Based on our review of the economic literature on vertical integration and our experience analyzing vertical mergers, we are concerned that there is too little vertical merger enforcement. Recent empirical studies have identified a number of cases in which vertical mergers have led to higher prices. And a recent private antitrust case successfully attacked a merger that was both vertical and horizontal and had been cleared by the Justice Department in 2012 with no remedy.

We recommend an approach to reduce false negatives, which erroneously allow mergers that harm competition, while keeping low the risk of false positives, which erroneously condemn mergers that are pro-competitive. Our analysis focuses on oligopoly markets where vertical mergers are most likely to raise concerns and most likely to be subject to agency investigation and enforcement. Oligopoly markets are those with a small number of competitors and barriers to entry, where the firms take rivals’ responses into account when making market decisions. These include digital markets where production economies of scale and network effects can create oligopoly structures and entry barriers, leading to the exercise of market power and raising competitive concerns with vertical mergers.

We recommend that the two antitrust agencies adopt the following five principles to guide vertical merger enforcement, which we discuss in more detail in our longer article.

  • The agencies should consider and investigate the full range of potential anti-competitive harms when evaluating vertical mergers.
  • The agencies should decline to presume that vertical mergers benefit competition on balance in the oligopoly markets that typically prompt agency review, and not set a higher evidentiary standard based on such a presumption.
  • The agencies should evaluate claimed efficiencies resulting from vertical mergers as carefully and critically as they evaluate claimed efficiencies resulting from horizontal mergers, and should require the merging parties to show that the efficiencies are verifiable, merger-specific, and sufficient to reverse the potential anti-competitive effects.
  • The agencies should decline to adopt a safe harbor for vertical mergers, even if rebuttable, except perhaps when both firms compete in unconcentrated markets.
  • The agencies also should consider adopting presumptions (rebuttable) that a vertical merger harms competition when certain factual predicates are satisfied.

We set out several possible presumptions here that could be invoked when at least one of the markets is concentrated. These identify conditions under which economic analysis suggests that the merger creates the greatest likelihood of anti-competitive effects. By successfully establishing a presumption, the plaintiff would satisfy its prima facie case, thereby shifting the burden of production to the merging firms. These presumptions are:

  • Input foreclosure presumption. One concern is that a vertical merger will harm competition in the downstream market if the upstream merging firm in a concentrated market is a substantial supplier of a critical input to the competitors of the other merging firm, and a hypothetical decision to stop dealing with those downstream competitors would lead to substantial diversion of business to the downstream merging firm. This diversion might be increased if other upstream suppliers raise their prices in response. In this situation, a vertical merger can raise the costs of the unintegrated rivals and permit the merged firm to exercise market power in the downstream market.
  • Customer foreclosure presumption. A mirror effect can occur that harms competition in the upstream market if the downstream merging firm is a substantial purchaser of the input produced in a concentrated upstream market, and a decision to stop dealing with the competitors of the upstream merging firms would lead to the exit, marginalization, or significantly higher variable costs of one or more of those competitors by diverting a substantial amount of business away from them. In this situation, a vertical merger can reduce competition in the upstream market and permit the merged firm to exercise market power. It also can lead to an increased likelihood of input foreclosure.
  • Elimination of potential entry presumption. Competition also may be harmed if either or both of the merging firms has a substantial probability of entering into the other firm’s concentrated market absent the merger. In this situation, the merger would eliminate the possibility that entry—or the fear of that entry, if the incumbent firm charges excessive prices—would make the market more competitive.
  • Disruptive or maverick seller presumption. One seller can constrain coordination in its concentrated market if it has different pricing incentives from the other firms. A vertical merger that eliminates a downstream firm that has prevented or substantially constrained coordination in the upstream market can harm competition if the upstream market is concentrated and the upstream firm supplies the maverick’s competitors. In this situation, the constraining influence of the disruptive or maverick firm could be eliminated, leading to higher market prices.
  • Disruptive or maverick buyer presumption. This presumption would be invoked if the downstream merging firm purchases the product sold by the other merging firm or its competitors—and, by its conduct, that firm has prevented or substantially constrained coordination in the sale of that product by the other merging firm and its competitors in a concentrated input market. In this situation, the constraining influence of the disruptive or maverick firm could be eliminated, leading to higher market prices.
  • Evasion of regulation presumption. If the downstream firm’s maximum price is regulated, competition nonetheless may be harmed from a vertical merger. This can occur, for example, if the regulation permits the downstream firm to raise its price in response to cost increases. The regulated downstream firm could raise the price of the input supplied to it by its upstream merger partner, increasing upstream profits and downstream prices. Evasion of regulation could also occur if the merger involves firms that sell complementary products. The newly merged firm could raise the price of the bundle and attribute the price increase to the unregulated product.
  • Dominant platform presumption. Competition may be harmed if a dominant platform company acquires a firm with a substantial probability of entering in competition with it absent the merger, or if that dominant platform company acquires a competitor in an adjacent market. Rivals in vertically adjacent or complementary product markets are often potential entrants, so this presumption reaches nascent threats to competition created by eliminating the potential entrants through the merger. This presumption can be understood as an application of the elimination of potential entry presumption and an input or customer foreclosure presumption in a setting where network effects and economies of scale would be expected to raise barriers to entry, and thus endow a dominant platform with substantial market power.

If the two antitrust enforcement agencies adopt any or all of the presumptions, then they should allow them to be rebutted by evidence showing that anti-competitive effects are unlikely. Hence none of the presumptions would create a per se prohibition of vertical mergers. The agencies also should continue to investigate vertical mergers that raise competitive concerns even if these presumptions are not applied. These presumptions set out conditions where concerns are greatest. These are not the only conditions where there are potential concerns.

Vertical mergers can substantially harm competition. Adopting these five principles will anchor effective vertical merger enforcement by reducing false negatives while keeping false positives low. We hope the agencies will follow our recommendations. These recommendations also could be useful to the courts, or if the Congress decides to amend Section 7 of the Clayton Antitrust Act.

The authors are: Jonathan Baker (research professor of law, American University Washington College of Law; chief economist, Federal Communications Commission, 2009–2011; director, Bureau of Economics, Federal Trade Commission, 1995–1998); Nancy L. Rose (Charles P. Kindleberger Professor of applied economics and department head, Massachusetts Institute of Technology; deputy assistant attorney general for Economic Analysis, U.S. Department of Justice, 2014–2016); Steven C. Salop (professor of economics and law, Georgetown University Law Center); and Fiona Scott Morton (Theodore Nierenberg Professor of economics at the Yale School of Management; deputy assistant attorney general for Economic Analysis, U.S. Department of Justice, 2011–2012). The issues discussed in this column are examined in more detail in the authors’ longer article that will be published this summer in Antitrust magazine.

How corporate headquarters could support store managers in providing predictable work schedules

Over the past decade, a new body of research has emerged showing that when low-wage workers in the United States are confronted with unpredictable schedules, they suffer vis-a-vis their pocketbooks, productivity, psychological well-being, and physical health. So, too, can their employers because the profitability of companies can take a hit when they rely on unpredictable work schedules for their employees. Cities from Emeryville, California to Philadelphia are taking notice and passing fair workweek laws that are designed to improve schedule quality for food service and retail workers.

When policymakers think about who ensures that low-wage workers in the service and retail sectors have predictable work schedules, they may imagine a manager in the backroom with a calendar and a marker and the ability to craft a schedule thoughtfully and in advance. But new research published in the journal Work and Occupations suggests that it might make more sense to instead picture a polished office in corporate headquarters, where executives in suits sit around a conference table discussing labor budgets, product shipment timelines, whether a sale will boost profits, and whether building a sense of team should be part of the corporate culture. The new study suggests that decisions in corporate headquarters related to budgets, sales, product shipment, and worker retention have the power to improve the predictability of worker schedules.

To conduct the study, Susan Lambert, Julia Henly, and Meghan Jarpe of the University of Chicago—along with Michael Schoeny at Rush University—worked with an unnamed national women’s clothing chain to conduct an experiment in which they tested an intervention designed to improve the predictability of worker schedules. They randomly assigned some of the firm’s stores to post four weeks of work schedules at the beginning of the month (though managers could make changes to the schedule at any point). This was the “treatment” group. All other stores were in the “control” group and continued to post schedules as usual—posting a weekly schedule a few days before the workweek began. The four researchers measured employees’ experiences of schedule predictability using an employee survey in all stores before and after the treatment stores implemented the intervention, and they then conducted interviews with managers to understand how the intervention worked.

Initially, some managers expressed hesitation about the intervention, but when the study got underway, they complied as best they could, with “treatment” store managers posting schedules further in advance than those in “control” stores. Many of the “treatment” managers reported that, in the end, they liked the change to scheduling practices and even wanted to continue implementing a version of it after the study concluded.

Yet when the researchers compared the treatment and control groups at the end of the study, they found no differences in how predictable employees perceived their schedules to be across treatment and control stores. And that’s where things get interesting.

The researchers combed through their interview data to understand why they weren’t seeing effects. One major take-away was that when schedules were posted at the beginning of the month, workers still only had a few days’ notice of their shifts for the first days of the month and thus may have continued to feel as though their schedules were not predictable overall. Another take-away was that managers made frequent changes to the posted schedules. The researchers listened carefully to what managers said about the factors that made it hard for them to post schedules in advance, which may have also prevented them from sticking to the schedules as posted. Again and again, managers described decisions coming out of company headquarters as impediments to creating predictable schedules.

This is interesting because the company they studied voluntarily participated in the study. The head honchos at the firm wanted to see what would happen if workers had more predictable schedules, and they allowed their managers to participate in the study and make changes to improve predictability. But it turns out that the power to provide predictable schedules is in the hands of both headquarters staff as well as frontline managers.

Decisions made by headquarters staff, for example, included holding sales and product shipments, both of which can affect whether managers have the information they need to plan schedules in advance. At the retail firm under study, the managers would work to implement the intervention but then would find out at the last minute about a sale (which would increase store traffic) or a product shipment (which workers need to unpack) and would then need to increase staffing. These managers reported that more notice from headquarters would support them in designing a schedule they could provide in advance and stick to.

Additionally, to provide advanced notice to workers effectively, managers needed timely information about monthly budgets and dedicated time to work on crafting schedules. But headquarters did not allot manager time for making schedules and did not always provide budget information in a timely manner. Two managers explained: “When [I] was given the payroll hours on time, [I] was able to post more schedules in advance,” and “Getting the entire month [of] payroll at one time [from corporate headquarters] is the number one factor in being able to [provide advance notice of schedules to workers].”

Finally, companies make many decisions that affect worker turnover, and when turnover is high, it makes the schedules of all employees unpredictable. A manager interviewed by the research team explained, “You just can’t schedule people you don’t have. I was doing schedules and I was just typing in the word “new hire” instead of the actual person’s name with the hopes I would hire a new person by the time I got to that week. So when I actually did hire a new person, I would have to go in again and tweak the schedule to when they are available.”

This finding—that corporate decisions that are seemingly unrelated to worker schedules can shape the stability and predictability of work schedules—is echoed in other research. In a study of a scheduling intervention at the retailer The Gap Inc., researchers found that last-minute changes to product shipments, unexpected sales, and even spur-of-the-moment visits from corporate leadership affected the ability of managers to plan schedules in advance. Describing visits from corporate leadership, one Gap manager remarked that “We got four days’ notice [for a visit from corporate leadership]. I had to add in 100–150 hours [to the schedule to prepare the store],” and another noted that she “probably extended 2–3 shifts every day in the run up to the visit.”

This new and existing research shows how corporate decisions on subjects from shipment schedules to store visits can unexpectedly influence frontline worker schedules. What does that mean for policymakers who want to improve scheduling practices?

First, the exciting news is this: The study shows that even when managers balk at changes to scheduling practices, they can comply with those changes and are sometimes surprised by how much they like the new practices. Perhaps this is not so surprising given the many similarities between many workers and managers.

Then, the lesson learned is this: When a company implements new scheduling practices, change should ripple up and down its organizational chart. In thinking about how multifaceted change could occur, the study’s authors make the point that the way companies structure their work reflects trends in larger society. Employers, for example, make last-minute decisions about shipment schedules and promotions because of the financialization of the economy: Their firms are valued based on short-term returns to shareholders, which means that employers have incentives to cut corners (and staffing) even when these choices may be harmful to employees, employers, or the economy in the long term.

The authors point out, though, that just as larger societal trends can affect the actions of firms and the well-being of workers, so too can firms and workers shape these larger societal trends. Local fair workweek laws and the federal Schedules That Work Act are designed to curb companies from making last-minute schedule changes in an attempt to turn a quick profit, but if enough laws such as these are passed and enforced, then they can also fundamentally reshape the way firms think about their role in the economy. The study’s authors note that it is this type of cultural shift—a re-orientation of thinking, where firms serve the broader economic good rather than narrowly focusing on their shareholders—that would ultimately facilitate the ability of firms to reshape the way decisions are made across the organization and improve job quality.

Each small action taken by firms, policymakers, and workers to improve scheduling practices can build toward a larger cultural shift. This new research from Lambert, Henly, Jarpe, and Schoeny suggests that employers who hope to improve the schedules of their workers by directing managers to provide predictable schedules to frontline workers—and, in the process, improve worker well-being, long-run profits, and the health of the broader economy—should take a holistic look at company practices so managers have the support they need to improve worker schedules.

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Weekend reading: “A shifting economy” edition

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

Equitable Growth’s Will McGrew breaks down recent research from Equitable Growth grantee Alexander Bell and co-authors Raj Chetty, Xavier Jaravel, Neviana Ptekova, and John Van Reenen suggesting that exposure to innovation is more effective than financial incentives stimulating innovation.

Liz Hipple and Elisabeth Jacobs highlight increasing economic inequality over the past several decades and how it impacts U.S. economic mobility with the help of an infographic included below.

Equitable Growth’s chief economist Heather Boushey had an op-ed in The Guardian where she explains how in order to have an economy where growth is widely shared, we must first reexamine how we judge what economic progress looks like and change the power dynamics in the labor market itself.

Brad DeLong rounds up his latest worthy reads on equitable growth from both inside and outside Equitable Growth.

Elisabeth Jacobs explains how research on paid leave, especially research based on existing paid family and medical leave policies in the United States, should inform how state and federal policymakers think about how best to design an effective paid leave policy that meets the needs of working families.

Bonnie Kavoussi details how rising corporate monopoly and monopsony power is increasing income inequality in the United States.

Kate Bahn and Will McGrew dissect the latest data on the labor market for the month of March in Equitable Growth’s monthly Job’s Day graphs report.

Links from around the web

We’ve all heard that robots are taking over our jobs, but The Week’s Jeff Spross thinks we should shift focus to another narrative. Spross highlights research that suggests the automation taking place now is no different than what we have seen in past eras, and the real issue is rising inequality, stagnation, and unemployment made by poor policy choices and power dynamics in the U.S. economy. (theweek)

Sarah Chaney and Eric Morath of The Wall Street Journal outline a recent shift of women filling jobs in male dominated, blue-collar fields. While the number of women in the workforce over the past decade has stayed consistent, more women have taken jobs as truck drivers, plumbers, police officers, and auto mechanics. (wsj)

The New York Times’s Noam Scheiber breaks down the U.S. Department of Labor’s recent decision that an unidentified company’s workers could be classified as contractors instead of employees. This would set up the ability for other companies to avoid paying its workers the federal minimum wage and overtime. (nyt)

Economics professor Daron Acemoglu at the Massachusetts Institute of Technology discusses on Project Syndicate how technology can be used to enhance worker productivity and that the falloff in the creation of high-wage jobs isn’t an inevitable result of advances in artificial intelligence and robotics. (projectsyndicate)

As the first Medicare-for-all hearings begin on Capitol Hill, Vox’s Dylan Matthews offers an alternative: Medicare for Kids. Matthews argues that since kids would age out of the proposed program rather than age into it (as retirees do currently with Medicare), it would create a natural constituency for a future Medicare-for-all initiative because these people would want to hold onto a benefit they currently enjoy. (vox)

Friday Figure

Figure is from Equitable Growth’s “Rising income inequality exacerbates downward economic mobility” by Liz Hipple and Elisabeth Jacobs.

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Equitable Growth’s Jobs Day Graphs: April 2019 Report Edition

Earlier this morning, the U.S. Bureau of Labor Statistics released new data on the U.S. labor market during the month of April. Below are five graphs compiled by Equitable Growth staff highlighting important trends in the data.

1.

The employment rate for prime-age workers declined slightly in April, but remains on its upward trajectory as the unemployment rate reaches its lowest level in almost 50 years.

2.

Wage growth is approaching healthy levels, with a 3.2% year-over-year increase in average hourly earnings as of April.

3.

There was an increase in the amount of workers who entered their jobs from being out of the labor force in April, demonstrating how a tight labor market brings in people left out of the labor market.

4.

An increasing proportion of unemployed are reentrants to the labor force, signaling confidence about job prospects.

5.

Fewer workers are working part-time involuntarily, while those who are working part-time by their own choice has changed little.

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How market power has increased U.S. inequality

Overview

A growing body of research has found that the market power of the United States’ largest companies has grown significantly since the 1980s. Due to increased market power, firms are earning higher profits by raising prices and paying their workers less, then transferring wealth from consumers and workers to shareholders. Because shareholders, on average, are wealthier than customers and workers, this dynamic, in principle, should exacerbate inequality. Recent empirical work confirms this result.

Researchers have proposed different explanations for rising market power, such as reduced antitrust enforcement and the rise of “winner-take-most” markets. Reduced antitrust enforcement appears to be a compelling explanation, at least in part, since the U.S. government relaxed its antitrust enforcement at the same time that market power began to grow. Moreover, market power has grown more in the United States than in other countries, suggesting that U.S. policy has played a role.

This issue brief examines the latest evidence on how market power has grown, how it has increased inequality, and different explanations for growing market power.

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How market power has increased U.S. inequality

The growing evidence of greater market power

Markups and corporate profits have been on the rise since the 1980s. A markup is the difference between a product’s price and its marginal cost, or the cost of making one additional unit. High markups are a common measure of monopoly power because when a firm has less competition, it has more leverage to charge high prices. Similarly, high corporate profits are a sign of market power since they represent the rents that firms are able to capture.

While average markups in the U.S. economy were relatively stable between 1955 and 1980, they have tripled since 1980, from 21 percent above firms’ marginal costs to 61 percent above marginal costs today, according to a recent paper by Jan De Loecker of KU Leuven, Jan Eeckhout of UPF Barcelona, and Gabriel Unger of Harvard University.1 Recent papers by Robert E. Hall of Stanford University2 and James Traina of the University of Chicago3 also find that U.S. markups have risen since the 1980s, although they find more modest increases than De Loecker, Eeckhout, and Unger’s paper.

Markups are rising across the developed world. In advanced economies, markups have risen by an average of 39 percent since 1980, while rising less in developing countries, according to a recent paper by Federico Diez, Daniel Leigh, and Suchanan Tambunlertchai of the International Monetary Fund.4

Nonetheless, markups have risen more in the United States than in the rest of the world, suggesting that higher U.S. markups may be a result of U.S. policy. U.S. markups have risen more than the global average since 1980, according to a paper by KU Leuven’s Jan De Loecker and UPF Barcelona’s Jan Eeckhout.5 (See Figure 1.) A new analysis by the International Monetary Fund finds that markups have risen twice as much in the United States as in the average advanced economy since 2000.6 In the eurozone, in contrast, market power has remained stable in recent years, and markups have actually declined, according to a recent European Central Bank paper.7

Figure 1

Rising corporate profits can also be a sign of increased market power.8 In a perfectly competitive economy, profits would be competed down to zero. As a firm faces less competition, it can capture more of the surplus, increasing its profits that would otherwise go to consumers or workers. By multiple measures, corporate profits have surged since the 1980s. The before-tax profit share of Gross Domestic Product has more than doubled since 1980 to 14 percent of GDP, according to a new paper by Ufuk Akcigit of the University of Chicago and Sina T. Ates of the Federal Reserve.9 Average profits have risen from 1 percent of sales to 8 percent of sales since 1980, according to De Loecker, Eeckhout, and Unger’s paper.10 Simcha Barkai of London Business School finds that since 1984, profits have increased from 2.2 percent gross value added to 15.7 percent.11 (See box.)

The consequences of growing market power

As a matter of theory, growing market power can aggravate economic inequality because the shareholders that benefit are richer than the consumers and workers that lose out. The top 1 percent in net worth owns 50 percent of all stocks held by U.S. households, according to research by Goldman Sachs Group Inc. analyzing Federal Reserve data.22 The very richest derive the bulk of their income from investments, and market power increases the value of their portfolios. In contrast, as a group, consumers who pay higher prices or workers whose wages stagnate own less stock.

A recent paper by Joshua Gans of the University of Toronto, Andrew Leigh of the Parliament of Australia, Martin Schmalz of the University of Oxford, and Adam Triggs of Australian National University confirms that increased markups are likely to increase inequality.23 The paper finds that the top 20 percent of the U.S. income distribution owns 89 percent of all stocks, while the bottom 60 percent owns just 7 percent of stocks. In contrast, the top 20 percent spends as much as the bottom 60 percent. Thus, when markups rise, the gap between the top 20 percent and the bottom 60 percent widens. The paper finds that market power has decreased the bottom 60 percent’s share of income and increased it for the top 20 percent.

Market power has increased inequality globally by transferring wealth from consumers to shareholders. In rich countries, market power boosts the wealth of the top 10 percent and reduces the incomes of the bottom 20 percent because the rich own stakes in businesses that rise in value, while the poor get hurt by higher markups, according to a paper by Sean Ennis, Pedro Gonzaga, and Chris Pike of the Organisation for Economic Co-operation and Development.24

Rising market power entrenches inequality because the rich save and invest at higher rates, becoming larger shareholders over time. The rich can afford to save more because of their higher incomes. The wealthiest 1 percent saves 20 percent to 25 percent of their income on average, while the bottom 90 percent saves only 3 percent of their income on average, according to a paper by Emmanuel Saez and Gabriel Zucman of the University of California, Berkeley.25 As the rich build their savings, the benefits of market power compound over time, as they invest more and more in stocks that rise in value, allowing them to amass even more wealth. On the other hand, the higher prices and lower wages that result from market power make it more difficult for most people to save and build wealth.

Market power has harmed the nonrich not only as consumers, but also as workers. The share of national income going to workers has fallen significantly since the 1970s, and recent research suggests that this is due to growing market power.26 The rise of superstar firms and “winner-take-most” markets has led to a decline in the labor share of income, according to a paper by David Autor of the Massachusetts Institute of Technology, David Dorn of the University of Zurich, Lawrence Katz of Harvard University, Christina Patterson of MIT (and a visiting scholar at the Washington Center for Equitable Growth), and John Van Reenen of MIT.27 They attribute this to growing market concentration driven by greater efficiency: A small number of dominant firms are capturing a growing share of total sales, and these firms tend to pay a lower share of their income to workers. (See box above.)

Causes of increased market power and its implications

It appears that a decline in antitrust enforcement has played a role in growing market power, but researchers also have proposed additional explanations. Some economists claim that leading firms are gaining market power because they’re more efficient. Autor, Dorn, Katz, Patterson, and Van Reenen write in their paper on superstar firms that markets have become “winner-take-most” because of stronger network effects and greater competition due to globalization and new technology.28 Thus, they write, “firms with superior quality, lower costs, or greater innovation reap disproportionate rewards relative to prior eras.” Van Reenen also writes in a recent paper that leading firms are gaining market share because they are more productive, and this may be partly due to their investment in intangible capital.29

Some researchers, such as Herbert Hovenkamp of the University of Pennsylvania, suggest that leading firms may be charging higher markups to pay for technology that has high fixed costs.30 Top research and development spenders include major companies such as Amazon.com Inc. and Alphabet Inc.31

This increased investment has made it harder for other firms to catch up. A new paper by Ufuk Akcigit of the University of Chicago and Sina T. Ates of the Federal Reserve finds that reduced knowledge diffusion between firms has boosted markups and the profit share of GDP, and thus market power.32 They find evidence suggesting that increased use of patents by firms on the technological frontier may be reducing knowledge diffusion. They find that the share of patents held by the top 1 percent of firms with the most patents has risen from 35 percent in the early 1980s to nearly 50 percent today, while the share of patents held by new businesses has plunged from 7 percent to 4 percent. Moreover, top firms are solidifying their lead by buying up patents from other companies: The share of patent purchases by the top 1 percent of firms has risen from around 30 percent in the early 1980s to around 50 percent today.

There is also evidence suggesting that laxer antitrust enforcement has allowed market power to grow in the United States. The signs of increased market power—especially higher markups and higher corporate profits—date back to the early 1980s. At the same time, during Ronald Reagan’s presidency,33 the Chicago School of economics revolutionized antitrust enforcement to make it more hands-off, with the argument that most mergers were efficient.34

Experts are concerned that once companies reach a certain level of dominance, they can use their significant resources to thwart competition by buying potential competitors or through other anti-competitive measures. However, regulators have largely stayed on the sidelines as big firms have acquired or merged with their competitors. Mergers have consolidated many U.S. industries as antitrust enforcement has declined, according to an Equitable Growth report by John Kwoka of Northeastern University.35

The number of antitrust cases filed by the Justice Department under the Sherman Antitrust Act of 1890 has fallen precipitously since the 1970s, according to Justice Department data.36 For instance, the Justice Department filed only one district court monopoly lawsuit under Section 2 of the Sherman Act between 2008 and 201737—down from 62 district court monopoly lawsuits between 1970 and 1979.38

The U.S. government revamped its merger guidelines in 1982 to make them friendlier to mergers, writing: “In the overwhelming majority of cases, the Guidelines will allow firms to achieve available efficiencies through mergers without interference from the Department [of Justice].”39 Merger policy became more lenient after the adoption of the 1982 Merger Guidelines, and market concentration levels began to rise around the same time, according to a recent paper by Carl Shapiro of the University of California, Berkeley.40

Judges have increasingly sided with dominant firms. Courts have a tradition of respecting the precedents set by the highest courts, and in two major cases—Verizon v. Trinko41 and Credit Suisse v. Billing42—the Supreme Court ruled in favor of alleged monopolies, in decisions that united both liberal and conservative justices. Howard Shelanski of Georgetown University suggests in a paper that these Supreme Court decisions would have led the United States to lose its landmark anti-monopoly case against AT&T Inc., which led to the breakup of AT&T in the early 1980s, if it had happened today.43 It appears that declining antitrust enforcement and changing court attitudes toward monopolies have allowed dominant firms to grow bigger and more powerful, leading to increased market power.

Conclusion

Equitable Growth has made it a priority to investigate monopoly power and its link to economic inequality. There is growing evidence that market power has grown since the 1980s, and this has contributed to increased economic inequality by transferring wealth from consumers and workers to shareholders. Market power has raised prices and suppressed wages, while boosting corporate profits. There is also evidence that declining antitrust enforcement has played a role in increased market power. Many questions still need to be answered, and this research increases the urgency of better understanding the causes and consequences of market power.

Bonnie Kavoussi is a policy fellow at the Washington Center for Equitable Growth.

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What does the research tell us about how best to design paid leave policies?

This week, House Ways and Means Chairman Richard Neal (D-MA) announced the first-ever hearing in the House of Representatives to focus exclusively on the issue of paid family and medical leave. Following on the heels of the reintroduction of the FAMILY Act in February and the introduction of the New Parents Act and the Child Rearing and Development Leave Empowerment, or CRADLE Act in March, this year is quickly shaping up to be one featuring new ideas and options for policies to help the millions of Americans who are forced to choose between work and caregiving in ways that are harmful not only to families’ economic security and well-being, but also to the U.S. economy.

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What does the research say about paid family and medical leave policy design options in the United States?

The policies proposed to date differ dramatically in the details, and a rapidly growing body of research tells us a great deal about whether and how different elements of policy design affect a variety of outcomes, ranging from economic security to firm performance to broader macroeconomic indicators such as labor force participation. In a new fact sheet from the Washington Center for Equitable Growth, we summarize what this research tells us about some of the policy design choices.

This new work builds on our ongoing project catalyzing new research on paid leave using data from the three states (California, New Jersey, and Rhode Island) that have had paid family and medical leave policies in place for years. The project, called the Paid Leave Research Accelerator, also is laying the groundwork for additional research in the three states (New York, Washington, and Massachusetts) and Washington, D.C., all of which have new programs in various stages of implementation. In addition to a comprehensive review summarizing what policymakers and academics know and what they have left to learn about paid family and medical leave, Equitable Growth also has surveyed the data landscape and offered up recommendations to practitioners and researchers who are committed to creating evidence-backed social policy tackling the caregiving conundrum in America.

As federal policymakers dig into this critical issue, the Washington Center for Equitable Growth will continue to provide resources, such as our newly released fact sheet, to inform and advance the debate.

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Brad DeLong: Worthy reads on equitable growth, April 26–May 2, 2019

Worthy reads from Equitable Growth:

  1. There are lots and lots of business practices that could and should be ruled illegal restraints on trade. Read Colleen Cunningham, Florian Ederer, and Song Ma’s working paper, “Killer Acquisitions,” in which they write: “This paper argues incumbent firms may acquire innovative targets solely to discontinue the target’s innovation projects and pre-empt future competition. We call such acquisitions “killer acquisitions.” We develop a parsimonious model illustrating this phenomenon. Using pharmaceutical industry data, we show that acquired drug projects are less likely to be developed when they overlap with the acquirer’s existing product portfolio, especially when the acquirer’s market power is large due to weak competition or distant patent expiration. Conservative estimates indicate about 6 percent of acquisitions in our sample are killer acquisitions. These acquisitions disproportionately occur just below thresholds for antitrust scrutiny.”
  2. An event coming on May 16: Preparing for the next recession is perhaps the most productive and urgent policy analysis task today. Here are the details for “Preparing for the Next Recession: Policies to Reduce the Impact on the U.S. Economy”: “A Hamilton Project and Washington Center for Equitable Growth Policy Forum … Historically, the United States has responded to recent recessions with a mix of monetary policy action and discretionary fiscal stimulus. However, since monetary policy options may be limited during the next recession, policymakers should consider adopting a range of fiscal policy measures now to help stabilize the economy when a future downturn inevitably occurs. This can be achieved with a range of fiscal policy responses aimed at expediting the next recovery through strengthening job creation and restoring confidence to businesses and households.”
  3. In the real world, sometimes threats need to be exercised to move prices, and sometimes they don’t. I have high hopes that we will learn a lot about this from Antoine Arnoud’s forthcoming dissertation, “Automation Threat and Wage Bargaining.” The details can be found in this Equitable Growth 2018 grantee announcement: “One doctoral grant will support research on how economic inequality affects the quantity and quality of innovation, and whether technological innovations, in turn, impact inequality: Antoine Arnoud (Ph.D. candidate, Yale University) proposes to study a novel mechanism through which automation in the labor market might have an impact on wages through the threat, rather than the actuality, of automation.”
  4. Greatly looking forward to another 2018 Equitable Growth grantee research paper, “The impact of antitrust on competition.” Here is the announcement with the details: “Fiona Scott Morton (Yale University School of Management) will collect empirical metrics of antitrust enforcement outcomes to create a novel dataset, which she will use to analyze merger effects beyond prices such as employment, and to determine whether mergers in the high-tech sector are motivated by increased efficiencies or by the elimination of competitors.”

Worthy reads not from Equitable Growth:

  1. An impressive finding. Heartwarming. Much stronger than I thought it would be, so very nice to know. Read Barbara Biasi, “School Finance Equalisation Increases Intergenerational Mobility,” in which she writes: “Rates of intergenerational mobility vary widely across the United States. This column investigates the effects of reducing differences in revenues and expenditures across school districts within each state on students’ intergenerational income mobility, using school finance reforms passed in 20 U.S. states between 1986 and 2004. Equalization has a large effect on mobility, especially for low-income students. The effect acts through a reduction in the gap in inputs and in college attendance between low-income and high-income districts.”
  2. Okay, but what drives these differential rates of return, anyway? And how much can this really approach the dream of taxing luck and inheritance rather than enterprise? Read Fatih Guvenen, “Use It Or Lose It: Efficiency Gains from Wealth Taxation,” in which she writes: “When individuals differ from each other in the rate of return they earn … capital income and wealth taxes have opposite implications for efficiency, as well as for some key distributional outcomes. Under capital income taxation, entrepreneurs who are more productive … pay higher taxes. Under wealth taxation, on the other hand, entrepreneurs who have similar wealth levels pay similar taxes regardless of their productivity … A revenue-neutral tax reform that replaces capital income tax with a wealth tax raises average welfare by about 8 percent in consumption-equivalent terms … The optimal wealth tax is positive, yields larger welfare gains than the tax reform, and is preferable to optimal capital income taxes … Wealth taxes can yield both efficiency and distributional gains.”
  3. This is not right. Prospectively, Robert Barro was modeling a permanent supply-side boost to the level of Gross Domestic Product driven by higher investment to the tune of an extra $800 billion annually. Barro’s prospective model conclusion was not of a temporary demand-side boost. His shift to the demand side in his paper with Jason Furman was a six-month-later climb-down. I know this. He knows this. I know he knows this. He knows I know he knows this. Why bother saying this? I think the point is to fuzz the issue. Barro made three assessments: one, that the Tax Cuts and Jobs Act of 2017 would boost output by 4 percent and it might achieve its full effect in 10 years; one, that the TCJA would boost output by 7 percent with an 0.4 percent first-year effect; and one with Jason Furman that was not so much a model-based forecast of the impact, but a reduced-form claim if past correlations held. It is this last one that he now focuses on. Read Robert Barro, “My Best Growth Forecast Ever,” in which he writes: “America’s real GDP growth rate of 3.2 percent for the first quarter of this year is impressive, as was the 3 percent average growth in 2018 (measured from the fourth quarter of 2017 to the fourth quarter of 2018). Since the end of the Great Recession—from 2011 to 2017—the U.S. economy grew by only 2.1 percent per year, on average. What accounts for the recent acceleration?”
  4. A worthy read: “Further Thinking on the Costs and Benefits of Deficits” by Jason Furman and Lawrence H. Summers.
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