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 released the next episode of our In Conversation series, in which our Executive Director and Chief Economist Heather Boushey discusses the research of prominent economists and how their work relates to contemporary policy debates on inequality and growth. In this edition, Heather talks to University of California, Berkeley economist Emmanuel Saez on the theory of optimal taxation, the necessity of raising taxes on the wealthy to reduce inequality and fund public investments, and the meager evidence of positive growth impacts of severe tax cuts, such as those implemented in Kansas.

Equitable Growth Research Assistant Raksha Kopparam discusses the findings of a new addition to Equitable Growth’s working paper series by economists Elena Prager at the Kellogg School of Management at Northwestern University and Matt Schmitt at the Anderson School of Management at the University of California, Los Angeles on “Employer Consolidation and Wages: Evidence from Hospitals.” Using data on a decade of hospital mergers, Prager and Schmitt show that mergers reduce wage growth for workers in situations where they result in a substantial increase in market concentration and where workers’ skills are industry-specific. Emphasizing the important role of collective organizing as a counter-balance to monopsony power, Prager and Schmitt find that this effect is weaker in markets with stronger labor unions.

In his weekly “Worthy Reads” column, UC-Berkeley economist and Equitable Growth columnist Brad Delong highlights recent research and writing in economics from Equitable Growth and other economists. This week, Brad highlights Prager and Schmitt’s working paper and University of Chicago economist Damon Jones’ seminar at Equitable Growth on his research with University of Pennsylvania economist Ioana Marinescu studying “The Labor Market Impacts of Universal and Permanent Cash Transfers: Evidence from the Alaska Permanent Fund.” Additionally, Brad points to a column by Economic Policy Institute Communications Director Pedro Nicolai da Costa on the negative health effects of rising inequality as well as recent work by economists Dani Rodrik and Richard Baldwin on the role of technological changes in the good jobs of the future.

Equitable Growth economist Kate Bahn analyzes the findings of another new working paper in Equitable Growth’s series, titled “Monopsony power and guest worker programs,” by economists Eric M. Gibbons at The Ohio State University at Marion, Allie Greenman at the University of Nevada, Reno, Peter Norlander at Loyola University Chicago, and Todd Sorensen at UNR. Using administrative immigration data, the authors calculate that many guest workers experience heightened employer concentration, which noticeably drives down their wages. Kate notes that search frictions facing disadvantaged populations such as guest workers likely play an important role in increasing firms’ monopsony power to set artificially low wages—similar to the effect of market concentration itself. The working paper authors argue that enforcing wage regulations and increasing job mobility for guest workers would help improve their bargaining position and wages.

Links from around the web

Clare Lombardo delves into recent research on the drastic negative effects of persistent school segregation on racially based funding disparities. Specifically, she highlights the findings of a report by the nonprofit EdBuild, which calculated that predominantly white school districts receive $23 billion in additional funding compared to predominantly black school districts in the United States. Advocating for a renewed commitment to school desegregation and equalized school funding, the report points out that creating larger school districts (often along county lines), especially in the South, facilitates reductions in these funding disparities by increasing the income and racial diversity of the tax base funding schools in these larger districts. [npr]

Dylan Matthews discusses the release of a comprehensive report commissioned by Congress on the most effective policy interventions to halve child poverty in the United States. The authors of the report include several economists from Equitable Growth’s network: Janet Currie, of Princeton University, Hilary Hoynes of UC-Berkeley, and Tim Smeeding of the University of Wisconsin. The authors estimate that child poverty costs society between $800 billion and $1.1 trillion yearly due to its negative effects on health, earnings, and crime. Relying on evidence from the United States and other countries, the report offers a variety of potential policy solutions and argues that direct federal support in the forms of monetary allowances per child along with housing and food benefits have a much larger effect on reducing poverty than “work-based” benefits. [vox]

Kathleen Geier provides a constructive critique of the sweeping new child care proposal from Senator Elizabeth Warren (D-MA). As Geier points out, Sen. Warren’s plan is a welcome step to increasing the federal government’s role in ensuring access to universal childcare, given the substantial economic evidence on market failures in exclusively private provision of this essential service for U.S. families. Geier argues, however, that a greater public role is needed not only in financing but also in building the infrastructure for a veritable universal child care system in the United States. [in these times]

Friday Figure

Figure is from Equitable Growth’s, “Falling behind the rest of the world: Childcare in the United States.”

Worthy reads from Equitable Growth:

1. Great conversation between Heather Boushey and Emmanuel Saez from their “In conversation with Emmanuel Saez.” My favorite highlight: “Kansas … illustrates beautifully from a research perspective even though it’s a disaster in terms of public policy [that] … tax avoidance … pass-through businesses … huge incentives for high-income earners to reclassify … a big erosion of the wage income tax base in the state … [resulted in] a much bigger negative impact on tax revenue than would have been predicted mechanically … When governments have actually to balance their budgets, they realize that taxes are useful, and that brings the two pieces of the debate together … Certainly Kansas didn’t experience an economic boom.”
2. Damon Jones came to Equitable Growth and presented a paper about Alaska’s Oil Dividend Fund that made me significantly more optimistic about Universal Basic Income. His “Labor Market Impacts of Universal and Permanent Cash Transfers,” includes these points about the UBI concept: “UBI-like cash transfer in Alaska: unconditional, universal, long-run, captures macro effects. The macro effects of Alaska PDF on labor supply less negative than the macro effects of an unconditional cash transfer … a very small *(0.001) and insignificant effect on employment to population.” [Equitable Growth will be posting a video of his presentation in early March.]
3. Excellent working paper from the very sharp Elena Prager and Matt Schmitt on how hospital mergers appear to be as much about gaining market power with respect to health-care workers as about gaining market power with respect to patients and their insurers. There continues to be very little evidence that they are about efficiencies of any kind. Read their “Employer Consolidation and Wages: Evidence from Hospitals,” in which they write: “We find evidence of reduced wage growth in cases where both (i) the increase in concentration induced by the merger is large and (ii) workers’ skills are at least somewhat industry-specific. Following such mergers, annual wage growth is 1.1 percentage points slower for skilled non-health professionals and 1.7 percentage points slower for nursing and pharmacy workers than in markets without mergers … Observed patterns are unlikely to be explained by merger-related changes aside from labor market power. Wage growth slowdowns appear to be attenuated in markets with strong labor unions, and we do not observe reduced wage growth after out-of-market mergers that leave employer concentration unchanged.” [Also read Raksha Kopparam’s summary of the working paper.]
4. Equitable Growth has money to spend to support research. It is very easy and straightforward to apply. Request for Proposals: “Equitable Growth supports inquiry utilizing many different kinds of evidence, relying on a variety of methodological approaches and cutting across academic disciplines. We are especially interested in projects using data linking individuals, households, and/or firms, and those that utilize geocoded data or rigorous comparative case studies—including across places in the United States, as well as comparing the experience of different countries—that allow for insight into the role of place in shaping economic opportunities and outcomes.”

Worthy reads not from Equitable Growth:

1. I am still recovering from my joint appearance at San Francisco’s Commonwealth Club with Steve Moore, and my having to listen to an extraordinary number of things from his mouth that simply were not true. It is draining to find oneself thinking over and over again: “But this is different than you said last year” and “but that prediction will be so obviously wrong in six months.” Menzie Chinn has a similar reaction in “Why Isn’t Stephen Moore Still Bragging about Coal As #1?,” in which he writes: “Recall from July 2017, when Stephen Moore wrote an article entitled ‘When It Comes To Electric Power, Coal Is No. 1’? No more. Now, lying has never been an impediment to Mr. Moore claiming something that was untrue (see [1] [2] [3] [4] [5] [6] [7])—but in this case perhaps it’s just so clearly untrue, he was chastened. So much for ‘winning’ (coal edition). Not that I’m complaining [See this graphic].”
2. Pedro Nicolaci da Costa, newly-installed over at EPI, is doing a bang-up job. Read his “These 5 Charts Show Inequality Is Bad for Your Health—Even If You Are Rich,” in which he writes: “Pickett and Wilkinson kept coming back to a single uniting factor—inequality: ‘What the research shows—not just ours but that of hundreds of researchers around the world—is that inequality brings out features of our evolved psychology, to do with dominance and subordination, superiority and inferiority, and that affects how we treat one another and ourselves, it increases status competition and anxiety, anxieties about our self worth, worries about how we are seen and judged’ … Here are five charts from their presentation.”
3. Simon Wren-Lewis says a “Green New Deal” needs to be not just technocratically efficient but politically popular. Read his “How to Pay for the Green New Deal,” in which he writes: “Tackling climate change is resisted by powerful political forces that have in the past prevented the appropriate taxes, subsidies and regulations being applied. Which is a major reason why the world has failed to do enough to mitigate climate change … Just as proponents of a Green New Deal are savvy about the need to overcome the resistance of, for example, the oil and gas industry, they also realize that the Green New Deal needs to be politically popular. So the New Deal package has to include current benefits for the many, perhaps at the expense of the few … If you cannot make the polluter pay, it is still better to take action to stop climate change even if future generations have to pay the cost of that action.”
4. Dani Rodrik has, I think, a better way to frame the problems that he and Richard Baldwin are both thinking about this winter. Read “The Good Jobs Challenge,” in which Rodrik writes: “[For] developing countries … existing technologies allow insufficient room for factor substitution: using less-skilled labor instead of skilled professionals or physical capital. The demanding quality standards needed to supply global value chains cannot be easily met by replacing machines with manual labor. This is why globally integrated production in even the most labor-abundant countries, such as India or Ethiopia, relies on relatively capital-intensive methods … The standard remedy of improving educational institutions does not yield near-term benefits, while the economy’s most advanced sectors are unable to absorb the excess supply of low-skilled workers. Solving this problem may require … boosting an intermediate range of labor-intensive, low-skilled economic activities. Tourism and non-traditional agriculture … public employment … non-tradable services carried out by small and medium-size enterprises, will not be among the most productive, which is why they are rarely the focus of industrial or innovation policies. But they may still provide significantly better jobs than the alternatives in the informal sector.”
5. Richard Baldwin has a new book and has coined the ugliest word I have ever seen to promote it. It is very interesting, and I think it is largely right. But I think it does have a big problem with the word “globotics.” “Globalization” and “robots,” even robot-enabled globalization and globalization-enabled robots, are two very different processes with very different implications. Squashing them into one makes his argument less coherent than it might have been. Read Baldwin’s “The Globotics Upheaval: Globalization, Robotics, and the Future of Work,” in which he writes: “A new form of globalization will combine with software robots to disrupt service-sector and professional jobs in the same way automation and trade disrupted manufacturing jobs … Software robots … pervasive translation that open[s] new opportunities for outsourcing to tele-migrants … Future jobs will be more human and involve more face-to-face contact since software robots and tele-migrants will do everything else.”

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

Will McGrew discusses the background of the shrinking manufacturing industry in the United States. He explains how the decline in the quantity of manufacturing jobs can be attributed to anti-union policies implemented at the state level. He recommends investing in human capital and research and development in order to secure a competitive and sustainable future for U.S. manufacturing.

Brad DeLong compiles his most recent worthy reads on equitable growth both from Equitable Growth and outside press and academics.

Links from around the web

Neil Irwin at The New York Times highlights the proposed wealth tax put forth by presidential candidate Senator Elizabeth Warren (D-MA), which would shift the burden of taxes toward those U.S. households that have accumulated mass wealth. Constructed by University of California, Berkeley economists Emmanuel Saez and Gabriel Zucman (an Equitable Growth Steering Committee member and grantee, respectively), this proposal would tax wealth of $50 million or more at 2 percent a year and add an extra 1 percent tax on wealth of more than $1 billion. Irwin breaks down the proposed wealth tax and then examines its promise and pitfalls. [nyt]

Catherine Rampell of The Washington Post discusses the reintroduction of the FAMILY Act by Senator Kirsten Gillibrand (D-NY) and Representative Rosa L. DeLauro (D-CT). Paid family leave, often seen as a “woman’s issue,” is frequently framed as a policy geared to increasing fairness, personal achievement, and bonding time between a mother and child. Yet Rampell points to the macroeconomic benefits of paid family leave, including the potential to boost productivity, increase the women’s labor force participation rate, and create a path for upward mobility. [wapo]

Politicians on both sides of the aisle have expressed concern over the rising costs of prescription drugs in the United States. Prices have become so unaffordable that Americans have turned to purchasing their prescriptions in Canada or Mexico at an exorbitantly cheaper price. While the importation of prescription drugs is illegal in the United States, President Trump and Democrats are pushing to legalize this practice, thus increasing affordability of life-saving medication. [politico]

Former Federal Reserve chair Janet Yellen (an Equitable Growth Steering Committee member) spoke with Leslie Hook of the Financial Times about the merits of a carbon tax as an affordable alternative to a Green New Deal. Yellen indicates that a $40 per ton tax would reduce carbon emissions, meet the climate change commitment agreed to in the Paris Accord, create sustainable environmental conditions for future generations, and be redirected back to the public in dividend payments. This proposed tax has drawn support from more than 3,300 economists and academics across the political spectrum. [ft]

Senator Bernie Sanders (I-VT) recently announced his candidacy for the U.S. presidency, pledging to run on a platform including Medicare for All, paid family leave, and a $15 minimum wage. Citing Equitable Growth Executive Director Heather Boushey, The Washington Post’s Jeff Stein explains how Sen. Sanders’ platform issues, such as gender pay equity and paid family leave, promote increased economic inequality, as families with more time off granted by employers tend to be wealthier. [wapo]

Friday Figure

Figure is from Equitable Growth’s, “Building a competitive, talent-driven future for U.S. manufacturing requires investing in our nation’s high-tech advantage”

Worthy reads from Equitable Growth:

1. Read Alix Gould-Worth, “A Valentine’s Day love letter to the Unemployment Insurance program,” in which she writes: “UI’s social insurance structure is part of its allure. Both means-tested and social insurance programs are vital to the health and well-being of the U.S. population. But research shows that claimants feel less stigma when applying for and receiving benefits from social insurance programs than means-tested programs. And typically, social insurance programs enjoy support that protects them from being dismantled by overeager budget cutters. But what makes UI different from all other social insurance programs? Why does it hold a special place in my heart? Let me count the reasons.”
2. Save for white baby boomers and pre-baby boomers who rode the post-World War II wave of government-sponsored housing finance and inflation on the one hand and union and white-collar defined-benefit pensions on the other, by and large the “middle class” in terms of wealth has always been a multigenerational phenomenon. What with keeping-up-with-the-Joneses and the slings-and-arrows-of-fortune, several generations of middle-class incomes are required to build up anything that can be called a middle-class wealth stock. And racial discrimination has made it impossible for African Americans to have such a run of security. Read Equitable Growth grantee Darrick Hamilton’s “Racial Equality Is Economic Equality,” in which he writes: “Race is a stronger predictor of wealth than class itself. The 2017 Survey of Consumer Finances indicates that the typical black family has about $17,600 in wealth (inclusive of home equity); in contrast, the typical white family has about $171,000. This amounts to an absolute racial wealth gap where the typical black family owns only 10 cents for every dollar owned by the typical white family! This disparity has endured over time. The racial wealth gap is an inheritance that began with chattel slavery, when blacks were literally the capital assets for a white landowning plantation class. The gap continued after Emancipation, when discriminatory laws and institutions established insurmountable barriers to the American middle class for black families. Today, hundreds of years removed from chattel slavery, there has virtually never been a substantive black middle class when defined by wealth. In contrast, the implementation of FDR’s New Deal and post-war vision facilitated an asset-based white middle class to cumulatively build wealth and pass it on to their heirs.”
3. It looks as though declining rates of marriage and increasing rates of cohabitation among the American working class are not—whatever hordes of American Enterprise Institute funders are eager to pay people to say—in any sense a “sociological breakdown,” but rather economic precarity. Read Daniel Schneider, Kristen Harknett, and Matthew Stimpson, “Job Quality and the Educational Gradient in Entry into Marriage and Cohabitation,” in which they write: “Men’s and women’s economic resources are important determinants of marriage timing … Declining job quality and rising precarity in employment and suggests that this transformation may matter for the life course … The 1980–1984 U.S. birth cohort from the National Longitudinal Survey of Youth … Men and women in less precarious jobs—jobs with standard work schedules and jobs that provide fringe benefits—are more likely to marry. Further, differences in job quality explain a significant portion of the educational gradient in entry into first marriage. However, these dimensions of job quality are not predictive of cohabitation.”
4. There are many, many ways of generating adverse selection effects that confound statistical studies, and very, very few good instruments. Thus, I have found myself always very suspicious of the working paper by Patrick L. Baude, Marcus Casey, Eric A. Hanushek, Greg Phelan, and Steven G. Rivkin, “The Evolution of Charter School Quality,” in which they write: “Quality dynamics among Texas charter schools from 2001–2011 … Exits, improvement of existing charter schools, and higher quality of new entrants increased charter effectiveness relative to traditional public schools … Reduced student mobility and an increased share of charters adhering to ‘No Excuses’-style curricula contribute to these improvements. Although student selection into charter schools becomes more favorable over time in terms of prior achievement and behavior, such compositional improvements appear to contribute little to the charter sector gains. Moreover, accounting for student composition in terms of prior achievement and behavior has only a small effect on estimates of the higher average quality of ‘No Excuses’ schools.”

Worthy reads not from Equitable Growth:

1. One of my hobbyhorses is that a “semi-skilled” worker is an unskilled worker with a union. Read Byron Auguste, “Low Wage, Not Low Skill: Why Devaluing Our Workers Matters,” in which he writes: “Such jobs require optimizing time trade-offs, quality control, emotional intelligence, and project management. They are not low skill, but they are low wage. Why does this matter? When we stereotype or lazily assume low-wage workers to be ‘low skill,’ it reinforces an often unspoken and pernicious view that they lack intelligence and ambition, maybe even the potential to master ‘higher-order’ skilled work. In an economy that is supposed to operate as a meritocracy—but rarely does—too often, we see low wages and assume both the work and workers are low-value.”
2. Here is a group of economists who seem, to me, to be aiming for the “equitable growth” space. Check out “Economists for Inclusive Prosperity,” in which they write: “We believe the tools of mainstream economists not only lend themselves to, but are critical to the development of a policy framework for what we call ‘inclusive prosperity.’ While prosperity is the traditional concern of economists, the ‘inclusive’ modifier demands both that we consider the interest of all people, not simply the average person, and that we consider prosperity broadly, including nonpecuniary sources of well-being, from health to climate change to political rights.”
3. And here is the launch explanation of the analytical perspective that the brand-new group Economists for Inclusive Prosperity hopes to take. It is good. Read Suresh Naidu, Dani Rodrik, and Gabriel Zucman, “Economics After Neoliberalism,” in which they write: “Economists of the real world … understand that we live in a second-best world rife with market imperfections and in which power matters enormously … The competitive model is rarely the right benchmark … This requires an empirical orientation, an experimental mindset, and a good dose of humility to recognize the limits of our knowledge … Throughout [our] proposals is the sense that economies are operating well inside the justice-efficiency frontier, and that there are numerous policy ‘free-lunches’ that could push us towards an economy that is morally better without sacrificing (and indeed possibly enhancing) prosperity.”
4. Read Hilary Hoynes and Jesse Rothstein, “Universal Basic Income in the US and Advanced Countries,” in which they write: “Advanced economies … [have] well developed, if often incomplete, safety nets … a framework … compare various UBIs to the existing constellation of programs.”
5. The real lesson from AI-machine learning is that AI-machine learning is a lot like “human judgment,” observes Andrew Hill. Read his “Amazon offers cautionary tale of AI-assisted hiring,” in which he writes: “Amazon, one of the most innovative and data-rich companies in the world, leapt on that possibility as early as 2014. It built a recruiting engine that analysed applications submitted to the group over the preceding decade and identified patterns. The idea was it would then spot candidates in the job market who would be worth recruiting … Unfortunately, the data were dominated by applications from men, and the AI taught itself to prefer male candidates, discriminating against CVs that referred to ‘women’s’ clubs, and setting aside graduates from certain all-women’s colleges. The initiative was downgraded and the research team scrapped.”

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

The FAMILY Act was reintroduced this week in the U.S. Congress—proposed legislation that would establish a federal program to provide workers with paid leave following the birth or adoption of a child, or to care for a seriously ill family member, or to recover from their own illness. Equitable Growth’s executive director and chief economist, Heather Boushey, highlighted the overwhelming research that, in number of states with paid leave insurance programs, mothers who use paid leave were more likely to remain in the workforce and that there has been no evidence of higher employee turnover or rising wage costs for businesses.

Kate Bahn and Raksha Kopparam published their monthly analysis of the Job Openings and Labor Turnover Survey data released by the U.S. Bureau of Labor Statistics. The JOLTS data reflects robust labor market conditions, an unchanged unemployment-per-job openings ratio, and a quits rate that edged down slightly.

Equitable Growth’s Heather Boushey provided testimony before the Subcommittee on Select Revenue Measures’ hearing on “How Middle-Class Families are Faring in Today’s Economy.” Her remarks detailed the stagnating wages of low- and middle-income earners and called on policymakers to expand on refundable tax credits, provide access to affordable childcare, and offer paid family and medical leave.

Equitable Growth grantee Heidi Williams’s column “Who Profits from Patents in the United States” summarizes from her research that the bulk of shared profits at start-up firms are returned as higher wages to employees at the top of firms’ earning distributions because it would be costly for those firms to replace them.

This Valentine’s Day, Equitable Growth’s Alix Gould-Werth expressed her love to the Unemployment Insurance program. Like Cardi B, she’s grateful to FDR for the Social Security benefits available to workers upon retirement, but she loves Unemployment Insurance’s ability to help workers who lose a job through no fault of their own. She suggests some updates to the program to match today’s U.S. labor market realities as well.

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

Links from around the web

Kelsey Piper at Vox discusses research from Equitable Growth grantees Hilary Hoynes and Jesse Rothstein on universal basic income and their analysis that pilot programs of UBI aren’t helpful to conclude whether UBI is a good idea and that it remains unclear who would get the money, how much money, and how the program would be funded. (vox)

Jonathan Rothwell at The New York Times argues that regional inequality in the United States contributes little to total inequality and that the issue has shifted to localized inequality. Rothwell points to research from former Equitable Growth Steering Committee member Raj Chetty, who concluded that a child’s neighborhood explains most of the geographic variation in upward mobility rather than a state or geographical region. (nyt)

Retail employees are desperate for reliable work schedules, reports Jacob Passy at MarketWatch. He examines a study from Equitable Growth grantees Daniel Schenider and Kristen Harknett, who surveyed 28,000 retail and food-service workers from the 80 largest retail firms in the United States and the toll that unfair scheduling takes on workers. (marketwatch)

Senator Elizabeth Warren (D-MA) recently proposed a wealth tax on the ultra-rich to address wealth inequality. Equitable Growth Steering Committee member Emmanuel Saez and Equitable Growth grantee Gabriel Zucman estimate that a tax like this could raise $2.75 trillion over a 10-year period. Alvin Chang at Vox developed his own interactive wealth tax calculator, where individuals can propose at what net worth individuals would begin being taxed at and at what percentage. (vox)

Wondering when the last time the United States had the levels of wealth inequality seen today? You would have to go back to 1929, just before the Great Depression. Andrew Keshner at MarketWatch highlights the research of Equitable Growth grantee Gabriel Zucman, who notes that the riches 0.1 percent of adults’ share of total household wealth hovered around 25 percent before plunging below 10 percent in the late 1970s and since then rebounding to around 20 percent today. (marketwatch)

Friday Figure

Figure is from, “Equitable Growth’s JOLTS Day Graphs: December 2018 Report Edition”

Worthy reads from Equitable Growth:

1. It is time for Equitable Growth’s monthly charticle about the most useful monthly employment report—not the (usually) first-Friday report, but rather the JOLTS report. See Kate Bahn and Raksha Kopparam’s “JOLTS Day Graphs: December 2018 Report Edition,” in which they note: “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 December 2018. 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.”
2. I must confess that my knee-jerk reaction, given my socialization into the neoliberal cult when young, to paid leave programs is to worry that loading responsibility for providing social insurance onto employers is a hazardous activity—it is not the 1920s, and we are not certain that paternalistic companies engaged in welfare capitalism can do more to enhance societal well-being than ardent socialists and social democrats. But evidence is piling up from the laboratories of social insurance that are the states that my knee-jerk reaction is wrong. Read Heather Boushey, “Increasing Evidence of the Benefits of Paid Leave Means Congress Needs to Consider a Federal Program like the FAMILY Act,” in which she writes: “The existing state programs—the oldest, in California, dates back to 2004—have provided a laboratory for researchers to study labor and health outcomes for individuals, performance and productivity outcomes for firms, and broader macroeconomic outcomes of paid family and medical leave. This work builds on a considerable body of research from long-established programs in some European countries. The answers to many questions are already coming into focus … In states with paid leave insurance programs, mothers who use paid leave are more likely to remain in the workforce in the year following a birth. The women experiencing the benefits of these new programs are more likely to be less educated, which makes sense given that they are less likely to have had access to paid leave in the absence of a state program … In instances where paid leave is provided there is less reliance on public assistance to contend with family medical emergencies. Moreover, there has been no evidence of higher employee turnover or rising wage costs for businesses. Research on parental leave programs abroad also suggests that paid leave of the length contemplated by the FAMILY Act, up to 12 weeks, has a positive effect on women’s income and likelihood of remaining in the workforce.”

Worthy reads not from Equitable Growth:

1. This paper, “Optimal Taxation of Top Labor income: A Tale of Three Elasticities,” has become a classic for all wishing to think clearly about progressive income taxation. Note that the conclusions of the authors—Thomas Piketty, Emmanuel Saez, and Stefanie Stantcheva—in favor of a high top marginal rate do rest on strong and proper state actions to close loopholes and shut down tax havens. They write: “A model where top incomes respond to marginal tax rates through … (1) the standard supply-side channel … the tax avoidance channel, [and] (3) the compensation-bargaining channel through efforts in influencing own-pay setting … The first elasticity (supply side) is the sole real factor limiting optimal top tax rates. The optimal tax system should be designed to minimize the second elasticity (avoidance) through tax enforcement and tax neutrality … in which case the second elasticity becomes irrelevant. The optimal top tax rate increases with the third elasticity (bargaining) as bargaining efforts are zero-sum in aggregate … There is a strong correlation between cuts in top tax rates and increases in top 1 percent income shares since 1975, implying that the overall elasticity is large. But top income share increases have not translated into higher economic growth, consistent with the zero-sum bargaining model. This suggests that the first elasticity is modest in size and that the overall effect comes mostly from the third elasticity. Consequently, socially optimal top tax rates might possibly be much higher than what is commonly assumed.”
2. Put me, for one, down as welcoming a sensible technocratic debts-and-deficits debate. Read Brendan Greeley, “Give the Kids Permission to Fool Around,” in which he writes: “Several weeks ago Alphaville was forwarded a panicked email from the Committee for a Responsible Federal Budget … The subject … ‘Be wary of mischaracterisations of Olivier Blanchard’s debt report … Here’s Mr. Blanchard, in his own words, talking to Alphachat … ‘use it for the right things. If the economy is very weak and monetary policy cannot be used, use it. If there is public investment to be done, the infrastructure is in terrible shape, use it … It’s a tool, it’s not a tool you should avoid to use at any price. It’s a tool you should use when you need to.’”
3. Migration—temporary and permanent—is turning out to be one of the magic bullets for global economic growth. Read Ricardo Hausmann, “The Tacit-Knowledge Economy,” in which he writes: “Know-how resides in brains, and emerging and developing countries should focus on attracting them, instead of erecting barriers to skilled immigration. Because knowledge moves when people do, they should tap into their diasporas, attract foreign direct investment in new areas, and acquire foreign firms if possible … Recent research at Harvard University’s Center for International Development (CID) suggests that tacit knowledge flows through amazingly slow and narrow channels. The productivity of Nuevo León, Mexico, is higher than in South Korea, but that of Guerrero, another Mexican state, resembles levels in Honduras. Moving knowledge across Mexican states has been difficult and slow. It is easier to move brains than it is to move tacit knowledge into brains, and not only in Mexico. For example, as the CID’s Frank Neffke has shown, when new industries are launched in German and Swedish cities, it is mostly because entrepreneurs and firms from other cities move in, bringing with them skilled workers with relevant industry experience … Knowledge moves when people do.”
4. Read Olivier Coibion, Yuriy Gorodnichenko, and Mauricio Ulate, “Is Inflation Just Around the Corner? The Phillips Curve and Global Inflationary Pressures,” in which they write: “An expectations-augmented Phillips Curve can account for inflation not just in the United States but across a range of countries, once household or firm-level inflation expectations are used … We find that the implied slack was pushing inflation below expectations in the years after the Great Recession but the global and U.S. inflation gaps have shrunk in recent years thus suggesting tighter economic conditions. While we find no evidence that inflation is on the brink of rising, the sustained deflationary pressures following the Great Recession have abated.”
5. Yes, it looks like the world economy is now entering a recession—one that the United States is, so far, escaping. Read Brad Setser, “China’s Slowdown and the World Economy,” in which he writes: “China, it now seems, has entered into a real slump … China’s total imports remained pretty strong though until the last couple of months. But they have now turned down. China (still) isn’t that important a market for the rest of the world’s manufactures. China’s overall imports (of goods) are significant, at around $2 trillion. But about a third are commodities, about a third are parts for re-export (think $800 billion of processing imports vs. exports of around $2.4 trillion), and a bit less than a third are imports of manufactures that China actually uses at home … A fall in Chinese auto demand has a big impact on Chinese domestic output (most Chinese cars are made in China, with largely Chinese parts, thanks to China’s tariff wall), a measurable impact on the profits of some foreign firms with successful Chinese JVs, a modest impact on German exports and, at the margin, a measurable impact on global growth in oil demand.”
6. There is no Phillips Curve-breakdown puzzle in the behavior of inflation over the past decade once one recognizes that (a) the employment-to-population ratio, and not the unemployment rate, is the right measure of how bad the job market is, and (b) that people have been—I think largely because of misinformation from the press—thinking that inflation is higher than it, in fact, is. Read Laurence M. Ball and Sandeep Mazumder, “The Nonpuzzling Behavior of Median Inflation,” in which they write: “Inflation behavior is easier to understand if we divide headline inflation into core and transitory components, and if core inflation is measured by the weighted median of industry inflation rates … [that] filters out large price changes in all industries. We illustrate the usefulness of the weighted median with a case study of inflation in 2017 and early 2018. We also show that a Phillips Curve relating the weighted median to unemployment appears clearly in the data for 1985–2017, with no sign of a breakdown in 2008.”