Competitive Edge: Antitrust enforcers need reinforcements to keep pace with algorithms, machine learning, and artificial intelligence
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. Terrell McSweeny has 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.
Algorithmic price fixing isn’t science fiction. The U.S. Department of Justice’s Antitrust Division and the United Kingdom’s Competition and Markets Authority have already brought their first case in which competitors agreed to use specific pricing algorithms for the sale of posters online. This particular case did not stretch the traditional antitrust framework for price fixing because humans were involved. But as technology becomes more powerful and autonomous, some competition experts are raising concerns about whether analog antitrust doctrines can keep pace. The debate is far from settled, but it is increasingly clear that 21st century regulators are going to need technological expertise to aid them in making enforcement decisions.
Competition regulators in major markets around the world are actively assessing whether technology requires changes to their antitrust enforcement frameworks. Here in the United States, the Federal Trade Commission is wrapping up a series of public hearings on “Competition and Consumer Protection in the 21st Century” by focusing on algorithms, artificial intelligence, and predictive analytics. It plans to examine ethical and consumer protection issues associated with the use of these technologies and how competitive dynamics are affected by them.
In their most basic form, algorithms are instructions that computers follow to process data and solve problems. They are essential building blocks of our digital lives. Frequently they are used to set prices. Increasingly sophisticated pricing algorithms can offer more personalized prices or different prices for people based on information about them. Algorithms can help consumers quickly and easily locate and compare prices of products. Personalized pricing based on a customer’s ability to pay, expected individual demand, and other data points can improve efficiency and benefit consumers, though it doesn’t always work that way. For instance, studies find that people are shown higher prices on mobile devices than on desktop computers or higher prices depending on how far they are from a store location. Some antitrust experts worry that the pricing algorithms that are increasingly common in both digital and analog markets might facilitate coordination—either expressly or tacitly—thereby minimizing competition on price to the detriment of consumers while remaining undetected by antitrust enforcers.
It is important for competition enforcers to study changes in technology that affect competition, but it doesn’t necessarily follow that pricing algorithms will collude or that they will be used in collusive schemes. If pricing algorithms are truly personalized—that is, quoting different prices for different people based on a number of different data points—then collusion is unlikely since it will be nearly impossible for would-be conspirators to discipline “cheaters,” or those competitors who are deviating from the agreement.
There are two key concerns that antitrust regulators must grapple with regarding pricing algorithms, particularly in highly concentrated industries. The first has to do with technical capabilities. As the use of algorithms becomes more common, will regulators be able to understand and detect when algorithms are being used to collude? The second concern has to do with pricing algorithms automatically and independently gravitating to higher prices without human intervention or agreement. Such conduct might be hard to detect and address under existing law.
Much of the current antitrust debate also is focused on whether regulators properly understand and address the role of data in digital markets. Data’s significance as a competitive asset depends on the facts. Some data, for example, are public or can be obtained from data brokers for a fairly nominal cost. And some data can be nonrivalrous, meaning it can be used by many companies at the same time. But other data are proprietary and can operate as a barrier to entry. Antitrust agencies have proven relatively capable of addressing competition issues around data, but the demands on agencies to engage in highly technical, fact-based examinations are only likely to increase as data becomes more important in the world of predictive analytics and artificial intelligence.
Against this backdrop, it is essential for antitrust agencies to rely not only on legal and economic expertise but also technological expertise. While antitrust frameworks have proven relatively adaptable, a key question is whether the agencies themselves have the capabilities required for the digital age. Some regulators are already incorporating technologists into their work. Brazil, for example, has a technology lab. Similarly, the European Union’s Commissioner for Competition Margrethe Vestager has suggested that the Directorate General for Competition create its own algorithms in order to figure out if collusion is taking place.
In the United States, the Federal Trade Commission created a position for a chief technologist in the FTC chair’s office in 2011 and expanded its research and technology capabilities with the creation of the Office of Technology Research and Investigation, or O-Tech, in 2015. But that office is currently housed in the agency’s Bureau of Consumer Protection, suggesting its work and resources are mostly directed toward the consumer protection mission of the agency. The Federal Trade Commission should consider creating an independent and fully staffed office for the chief technologist or even a Bureau of Technology to enhance its required technological expertise and support its competition mission.
—Terrell McSweeny is a former commissioner of the Federal Trade Commission and previously held senior positions in the White House, the U.S. Department of Justice, and the U.S. Senate. She currently is a partner at the law firm Covington and Burling LLP.
Weekend reading: “Workers deserve higher wages” 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
This week, Equitable Growth economist Kate Bahn and computational social scientist Austin Clemens 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 a strengthened labor market characterized by elevated quit rates, fewer unemployed workers per job vacancy, and fewer hires per job opening.
University of California, Berkeley economist and Equitable Growth guest blogger Brad Delong highlighted recent research and writing on labor markets and other topics in macroeconomics in his weekly reads column. In addition to elevating Equitable Growth’s upcoming event next week on “Building a New Consensus on Antitrust Reform,” he points readers to Sarah Jane Glynn’s report on gender wage inequality for Equitable Growth and empirical evidence from Harald Dale-Olsen on the positive impact of unions on regional productivity.
Yesterday, Korin Davis, our Academic Programs Director, discussed the launch of our sixth Request for Proposals for Equitable Growth’s grantmaking program. On top of explaining how Equitable Growth develops the RFP with the advice of our staff, Steering Committee, and Research Advisory Board, she highlights some of the topics of research funded by Equitable Growth over our past five years of grantmaking.
Links from around the web
Whitney Filloon at Eater digs into a recent quote from the CEO of fast-food giant The Wendy’s Company, confirming the negative effects of low wages on aggregate demand and thus overall economic growth. On the company’s quarterly earnings call, the CEO argued that low wage growth for working and middle-class Americans has hurt sales for the company. In addition to reviewing some statistics on the relatively low wages of workers in the fast food industry, Filloon points out recent efforts of groups such as Fight for $15 to raise wages for this group of workers—including at Wendy’s.
At Bloomberg, Michelle Jamrisko and Dan Murtaugh unpack a speech by former Federal Reserve Chair and current Equitable Growth Steering Committee member Janet Yellen at the New Economy Forum in Singapore. In her speech, Yellen argued that while the monetary policy role of central banks may be more limited than fiscal policy in fighting inequality, central banks can nevertheless help alleviate inequality by securing full employment for low-income workers across racial groups and maintaining post-crisis financial regulations, which reduce the likelihood of another economic downturn with disproportionate impacts on low-income workers.
David Leonhardt of The New York Times looks into the research on another negative effect of inequality: ethnic division. In particular, Leonhardt summarizes some of the key findings of a new book by Steven Pearlstein of The Washington Post. Among other topics, Pearlstein’s book, Can American Capitalism Survive?, explains how wage stagnation in recent decades for working class Americans across ethnic groups has led to scapegoating, which turns these groups of workers against each other while economic and political forces continue to drive rising inequality.
Gareth Hutchens of The Guardian published a recent interview with Columbia University economist and Nobel laureate Joseph Stiglitz. Hutchens discusses some of the findings of Stiglitz’s 2012 book, The Price of Inequality, notably including the disproportionate income gains of the top 1 percent and the top 0.1 percent of income earners compared to the bottom 90 percent over the past 40 years. Hutchens also includes quotes from Stiglitz detailing the negative effects of inequality on economic growth, environmental protection, and democratic institutions.
Friday Figure
Figure is from Equitable Growth’s, “JOLTS Day Graphs: September 2018 Report Edition.”
Veterans in the U.S. labor market face barriers to success that can and should be addressed
The transition of U.S. military veterans back into the civilian labor market is an issue steeped in complexities. Veterans face unique hurdles that can impede them from finding work in the civilian job market, including lower rates of higher education and a lack of understanding how to translate military experience into civilian job terms, to say nothing of the health challenges veterans face, such as Post Traumatic Stress Disorder.
Anna Zogas of the University of Washington observes in her 2017 research that the U.S. military does an extremely effective job of training veterans to operate within the military and an extremely poor job of preparing them, especially young servicemembers, for post-military jobs. In 2008, the year in which the highest number of U.S. troops were deployed overseas, 52 percent of servicemen and servicewomen were under 25 years old, and only 4.5 percent held a bachelor’s degree or higher. Zogas’ research finds that among the post-9/11 veterans surveyed in Los Angeles, 61 percent reported the need for additional education assistance and 65 percent said that they needed assistance finding civilian employment. These numbers actually exceeded the veterans who reported needing assistance with physical and mental health care, which clocked in at 56 percent and 47 percent, respectively.
A 2015 study from the University of Southern California School of Social Work, in partnership with Veterans of America, reported similar issues for veterans trying to enter the civilian labor market after their military service. The study found that the unemployment rate of veterans ages 18 to 65 is higher than the unemployment rate of nonveterans. This research focused on interviews with individuals in jobs that had the responsibility of assisting veterans with finding employment. From these interviews, the researchers gleaned that there was often a lack of understanding among both employers and veterans regarding suitable positions based on military-specific skills, responsibilities, and experiences that could translate into civilian workplace environments.
Additionally, that study found that many veterans held unrealistic employment expectations. Almost all of the service providers interviewed reported that their veteran clients lacked knowledge about the types of jobs that would be available to them after their military service, about the level at which they would enter the workforce, and about the kind of compensation they could expect to receive. This gap in expectations leaves veterans feeling as if they are completely starting over in their careers, as they find themselves in entry-level positions that often pay lower wages than they earned as service members.
Reports of earnings from the U.S. Census Bureau and a report from Colleen Chrisinger at the University of Oregon found mixed results for veterans’ unemployment and net worth, depending on their ages. In Chrisinger’s report, she found that there were some positive signs such as evidence suggesting no relationship between being a veteran and wages among white veterans (though this was not the case for nonwhite veterans) and actually found a wage premium for recent veterans regardless of race with a high school education or less compared to nonveterans.
But using data from the Bureau of Labor Statistics, her research found that post-9/11 veterans faced higher unemployment rates compared to nonveterans, with a rate of 12.1 percent compared to 8.7 percent in 2011 and 9.9 percent compared to 7.9 percent in 2012. In addition, Chrisinger found that these veterans were associated with higher risks of homelessness compared to nonveterans. Similarly, the U.S. Census data found that among all men who own or rent a house ages 55 to 64 years old, veterans had lower median net worth than nonveterans ($160,809 compared to $232,669—approximately 31 percent lower).
For veterans, one of the toughest barriers for entering the labor market can be physical or psychological ailments. Zogas’s research delved into this issue, too, finding that in a survey of 1,845 post-9/11 veterans, 65 percent reported a physical or psychological complaint. Individuals who reported these complaints also reported having greater difficulty transitioning into civilian life, including barriers to employment, with 23 percent being unemployed.
In a similar study among Vietnam-era veterans, those diagnosed with PTSD were 8.6 percentage points less likely to be currently working than a veteran without a PTSD diagnosis. Additionally, veterans with PTSD who were employed were more likely to have lower hourly wages compared to those without a PTSD diagnosis. This concern also was highlighted in the 2015 study by USC’s School of Social Work, which detailed service-provider interviews regarding unemployment among their veteran clients, in addition to those with criminal backgrounds and/or dishonorable discharge. Along with the unique challenges that these service providers faced in helping find employment for their veteran clients, those veterans reporting physical/psychological complains and those who had criminal backgrounds or were dishonorably discharged faced additional barriers, with many employers displaying an unwillingness to hire them.
Zogas finds that the Department of Veterans Affairs’ spending on programs related to improving veterans’ education and post-military employment has been growing substantially. Vocational rehabilitation training that includes support for apprenticeships, on-the-job training, postsecondary training at colleges, technical, and business schools, as well as supportive case management all have been expanding post-9/11, with spending on these programs totaling $92.7 billion from 2002 through 2015. Between these years, the agency’s total investment in education for veterans and preparing them for re-entry into the civilian labor market has more than doubled. In 2002, the VA spent $1.9 billion on employment and education, constituting 3.6 percent of its total expenses for the year. By 2015, that amount had more than doubled to more than 8 percent of the agency’s annual expenditures.
These expenditures also included counseling veterans about employment and relocation assistance, access to health and life insurance, financial planning, resume writing, and job search skills. Chrisinger’s report also outlined individuals who took advantage of the VA’s Disabled Veterans’ Outreach Program, which provides eligible veterans with case-managed intensive employment and training services, connections with potential employers, and referrals to other programs—including medical services from the VA. The report found that those veterans, both women and men, who used this program experienced higher earnings than nonveterans at both six months and one year after exiting the program.
Veterans face unique challenges entering the civilian job market related to education and differences between employer and employee expectations, to say nothing of the unique physical and psychological burdens that come with veteran status. It is why academics and policymakers alike must continue to do research to better understand the burdens of servicemen and servicewomen entering into the civilian labor market to ensure economic prosperity for our 20.4 million veterans.
Equitable Growth releases 2019 Request for Proposals
The Washington Center for Equitable Growth is mission-driven to advance evidence-based ideas and policies that promote strong, stable, and broad-based economic growth. One of the core ways we further that mission is through our academic grants program, which supports cutting-edge scholarly research investigating the various channels through which economic inequality may or may not impact economic growth and stability. On Monday, November 5, 2018, Equitable Growth issued its 2019 Request for Proposals and is inviting researchers at U.S. universities—both faculty members and Ph.D. candidates—to explore the questions we are hoping to answer and consider applying for a research grant.
Founded in 2013, Equitable Growth has awarded roughly $4 million to more than 150 researchers over 5 years of grantmaking. Findings from funded research, as well as that of our in-house experts, Steering Committee members, and Research Advisory Board, have informed policy debates on a wide range of topics at all levels of government, from legislative proposals for fair work scheduling to the importance of the minimum wage for broad-based economic growth.
Our grantmaking is organized around key drivers of economic growth, allowing us to ask questions to better understand the mechanisms through which inequality may be affecting growth. After 5 years of funding research, we have, for the first time, altered how we organize our grantmaking. While the underlying questions have not changed, the reorganization captures what we’ve learned about what makes the U.S. economy grow. The updated funding channels are: macroeconomic policy, market structure, the labor market, and human capital.
While not drastically different from our previous funding channels, this new organization reflects important findings from recent research. One case in point: A growing body of research into the relationship between inequality and economic mobility highlights the notable variations in economic outcomes across place and by race. These findings, among others, led us to refine our focus on human capital to better understand how economic inequality might be impeding the acquisition and cultivation of human capital. This and similar research also leads us in our new round of grantgiving to ask about the effectiveness of people-based versus place-based policies to counteract the dynamics of inequality.
Other research funded by Equitable Growth focused on a similarly disturbing trend—despite dropping interest rates, the return to capital has remained steady, and firms are reaping record profits, yet they are not investing in their operations or workforces. Instead, the share of income going to labor has declined while the share going to capital has increased. The authors conclude that these trends can be explained by a sizable increase in monopoly power. This and other studies lead Equitable Growth to focus on market structure as a key mechanism through which inequality may be affecting economic growth.
Similarly, the labor market is one of the most important institutions determining economic growth, particularly its distribution, as labor income is more than two-thirds of national income. Skill levels and the efficient matching of skills to jobs are key for economic growth. Yet the labor market is not a perfectly competitive market, but rather one that is regulated by a wide array of institutions that affect labor income and its distribution. A wealth of research on stagnating wages, pay inequality, and other issues facing workers led Equitable Growth to place a heavier emphasis on the two-way link between equitable growth and the labor market.
Finally, there is increasing political unrest in the United States. Democratic institutions are fundamental to the stability and smooth functioning of the U.S. economy. To help us understand what role inequality may play in levels of trust in government, its institutions, and the ability of elected officials to make policies to ensure strong, stable, and broadly shared growth, Equitable Growth has included questions related to political economy within its macroeconomic policy funding channel.
After 5 years of grantmaking, we have learned a lot, but we still have a lot to learn. We encourage you to read our 2019 Request for Proposals—an open solicitation to researchers at U.S. universities to apply for funding for new, cutting—edge research on inequality and growth—and to explore our funded research.
Brad DeLong: Worthy reads on equitable growth, November 2-8, 2018
Worthy reads from Equitable Growth:
- If I did not have to teach next Wednesday, I would be at this event: “Building a New Consensus on Antitrust Reform” Wednesday, November 14, 2018 at noon. Here’s the invite pitch: “Please join the Washington Center for Equitable Growth … for a conversation on reforming federal antitrust law [with] Sen. Amy Klobuchar (D-MN), Ranking Member of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights, [who] will deliver keynote remarks. … RSVP is required by Friday, November 9.”
- This is a remarkably nihilistic column from Bob Solow, a member of Equitable Growth’s Steering Committee. Read his “A Theory Is a Sometime Thing,” in which he writes: “One can speculate. Maybe a patchwork of ideas like eclectic American Keynesianism, held together partly by duct tape, is always at a disadvantage compared with a monolithic doctrine that has an answer for everything, and the same answer for everything. Maybe that same monolithic doctrine reinforced and was reinforced by the general shift of political and social preferences to the right that was taking place at about the same time. Maybe this bit of intellectual history was mainly an accidental concatenation of events, personalities, and dispositions. And maybe this is the sort of question that is better discussed while toasting marshmallows around a dying campfire.”
- The U.S. unemployment rate continues to be a relatively bad indicator of how many workers are available for employers to hire at the currently prevailing wage. The flows of workers from out of the labor force directly into employment without their ever being a week in which they say they are unemployed and looking for a job continue to be large and continue to astound me in magnitude. This metric continues to be a relatively better indicator of how many workers are available for employers to hire at the currently prevailing wage. Check out Equitable Growth’s Jobs Day Graphs for this tidbit: “Workers previously out of the labor force are re-entering at higher rates, continuing the long-term upward trend.”
- Definitely read (or re-read) Sarah Jane Glynn from this past April, “Gender wage inequality: What we know and how we can fix it,” in which she writes: “Policies … could help reduce … pay inequality between men and women … The future economic competitiveness of the nation is under threat due to the lack of policies that would boost the labor force attachment, productivity, and wages of workers now and their children tomorrow.”
Worthy reads not from Equitable Growth:
- More evidence that unions are not at all anti-productivity. I first saw this point made a generation ago in Freeman and Medoff’s book What Do Unions Do?. Now, very much worth reading is Harald Dale-Olsen, “Wages, Creative Destruction, and Union Networks,” in which he writes: “Do unions promote creative destruction? … Increased unionization yields a positive impact on regional productivity, exceeding the wage growth, partly due to the closure of less productive firms, but also enhanced productivity of the survivors and new entrants.”
- The massive technological improvements in information technology that have made it much easier to write articles and publish journals have had surprising and counterintuitive effects on health academic economists, at least, seeking to gain reputation. Here we have some not so modest proposals for reform from James Heckman and Sidharth Moktan, “The Tyranny of the Top Five,” in which they write: “The appropriate solution requires a significant shift from the current publications-based system of deciding tenure to a system that emphasizes departmental peer review of a candidate’s work. Such a system would give serious consideration to unpublished working papers and to the quality and integrity of a scholar’s work.”
- I still find it surprising that this argument is not conventional wisdom inside the Federal Reserve among its governors, bank presidents, and staff. I do not understand what they are seeing in the data flow that I am not seeing. Read Neel Kashkari, “Pause Interest-Rate Hikes to Help the Labor Force Grow,” in which he writes: “The Fed has raised the federal-funds rate eight times in the past three years, and inflation now stands right at the 2 percent goal. A hard inflation ceiling would justify pre-emptive rate increases to ensure inflation doesn’t climb any higher. But the symmetric objective gives the Federal Open Market Committee the flexibility to see how the economy evolves before determining if further rate increases are necessary. The FOMC should seize this opportunity for a pause.”
- This is absolutely brilliant, both on the difficulties in forecasting technology and also on the difficulties of forecasting uses to which we will put technology. Read Rodney Brooks, “The Seven Deadly Sins of AI Predictions,” in which he writes: “Imagine we had a time machine and we could transport Isaac Newton from the late 17th century to today, setting him down in a place that would be familiar to him: Trinity College Chapel at the University of Cambridge. Now show Newton an Apple. Pull out an iPhone from your pocket, and turn it on so that the screen is glowing and full of icons, and hand it to him.”
- Up until 2000, it looked like we had an unemployment-rate (or vacancy-rate) adaptive-expectations price Phillips curve. Since the mid-1990s, we had a nonemployment-rate static-expectations wage Phillips curve. How long before another structural shift? We do not know. But right now Team Slack has the empirical evidence. And Team Slack says: The economy still has plenty of room to grow. Check out Jay C. Shambaugh’s tweet, “Score One for Team Slack,” in which he notes: “As @ModeledBehavior notes, it is not clear how long this relationship will hold, but it looks really good in 2018 (even better than in 2017). Almost impossible to argue slack is not part of wage growth story even if you don’t think it is whole story.”
- While Paul Krugman believes that “old-fashioned macroeconomics” did very well from 2005 to 2015, I have significant doubts. The gap between the short-term safe interest-rate that the Federal Reserve controls and the long-term risky real interest rate, which is what matters for the economy, was never and is not now well-understood. But here we do have substantial progress being made. Read Ricardo J. Caballero, “Risk-Centric Macroeconomics and Safe Asset Shortages in the Global Economy: An Illustration of Mechanisms and Policies,” in which he writes: “In these notes I summarize my research on the topic of risk-centric global macroeconomics. Collectively, this research makes the case that a risk-markets dislocations perspective of macroeconomics provides a unified framework to think about the mechanisms behind several of the main economic imbalances, crises, and structural fragilities observed in recent decades in the global economy. This perspective sheds light on the kind of policies, especially unconventional ones, that are likely to help the world economy navigate this tumultuous environment.”
JOLTS Day Graphs: September 2018 Report Edition
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The quits rate held steady at 2.4 in September, with workers leaving jobs at a higher rate than they did in the last economic expansion.
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The hire-per-job-opening rate was little changed over the month, increasing slightly from .81 to .82, and still at historically low levels.
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The vacancy yield was little changed and is still less than one unemployed worker per job opening.
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The job openings rate decreased from 4.7 to 4.5, but with continued low unemployment, the relationship between the two still reflects a tight labor market.
Weekend reading: “She works hard for the money” 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 Alix Gould-Werth rounded up some of the key takeaways from a day-long, Equitable Growth-hosted event that was part of our Paid Leave Research Accelerator project. The piece broke down some of the data surrounding access to paid leave across the United States and touched on the research and administrative data shared by participants. Stay tuned for a comprehensive report that will contain information from each data source so that researchers can access the data needed to help answer questions surrounding paid leave.
In our antitrust and competition blog “Competitive Edge,” featuring leading experts in antitrust enforcement, guest author Jonathan Sallet tackles the Federal Trade Commission’s question of whether the goals of antitrust enforcement in the United States are best pursued by applying the consumer welfare standard and what it means to safeguard “consumer” welfare. Sallet discusses the current standard derived from the University of Chicago and alternative formulations that the Federal Trade Commission heard from scholars this week.
Equitable Growth Economist Kate Bahn and research assistant Will McGrew released their issue brief on the intersectional wage gaps that Latinas in the United States face. Some of their findings include the largest causes for the wage gap for Hispanic women compared to non-Hispanic white men are discrimination, workplace segregation, and education inequality. The issue brief offers the first empirical evidence of a white male premium and Hispanic woman penalty compared to other workers in the U.S. economy.
Brad DeLong rounds up his latest worthy reads on equitable growth from both inside and outside Equitable Growth.
The U.S. Bureau of Labor Statistics on Friday released new data on the U.S. labor market during the month of October. Kate Bahn and Austin Clemens put together five graphs highlighting important trends in the data. They find that wage growth is still low enough to caution against tightening monetary policy and that while education and heath sectors have the strongest job growth, construction and manufacturing are converging back to pre-Recession levels.
Links from around the web
Have your family’s finances improved over the past year? That question might depend on the gender of the person you are asking. Ben Casselman and Jim Tankersley discuss a different type of gender gap—one in which men are 50 percent more likely to think their family’s economic outcomes have improved over the past year and that women are more likely to expect “periods of widespread unemployment or depression” over the next five years. (nyt)
Khalida Ali questions whether employers ceasing to ask for salary history would lead to workers being paid fairly. Ali argues that while it is a step it the right direction, it only solves the issue of initial pay equity, but that many other layers, including systemic racism and prejudice plaguing the financial success and development of those affected, still remains to be solved. (fastcompany)
Heidi Stevens details the story of Jacqueline Priego, who turned her real life experience in the labor market as a Latina into a web series about women navigating workplace discrimination, immigration, and tokenism. Stevens notes that Latinas are over-represented in low-wage jobs and under-represented in high-wage jobs and share frustration that it takes Latinas nearly two years to catch up with what white men earned in 2017. (chicgaotribune)
In recognition of Latina Equal Pay Day, Ludmila Leiva asks ten Latinas to share what they wished they had known at the start of their careers. Many of the stories documented echoed similar sentiments, among them knowing that it is okay to be a voice in the room, needing skills on how to negotiate and manage finances, understanding that there are bigger forces against an individual regardless of how hard they work, and simply lack of access to information. (refinery29)
Friday Figure
Figure is from Equitable Growth’s “The intersectional wage gaps faced by Latina women in the United States.”
Equitable Growth’s Jobs Day Graphs: October 2018 Report Edition
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Prime-age employment increased to 79.7 percent, its highest level since the Great Recession.
2.
Wage growth increased to 3.1 percent, but is still low enough to caution against tightening monetary policy.
3.
Despite a tightening labor market on many metrics, the long-term unemployment rate is unchanged over the past month.
4.
Care work jobs like education and health continue to have the strongest job growth, but construction and manufacturing are also converging back to pre-Recession levels.
5.
Workers previously out of the labor force are re-entering at higher rates, continuing the long-term upward trend.
Brad DeLong: Worthy reads on equitable growth, October 26–November 1, 2018
Worthy reads from Equitable Growth:
- Signs of low social power and knowledge among Hispanic women in the United States today are evident in that many employers seem to judge that they can get away with paying Hispanic women less—that they will not find out, or will have few options if they do: Read Kate Bahn and Will McGrew, “The intersectional wage gaps faced by Latina women in the United States,” in which they write: “’Unexplained’ wage discrimination for full-time workers with the exact same job is the largest portion of the overall wage gap experienced by Hispanic women … can be addressed through … transparency within organizations … While pay transparency is rare in private-sector employment, it is common in the public sector.”
- The curious thing is that, at its origin, industrial organization economics at the University of Chicago was very focused on preventing the growth of and breaking up monopolies. It still is not clear to me how George Sigler reoriented it so completely. Read Jonathan Sallet, “Competitive Edge: Protecting the “competitive process”—the evolution of antitrust enforcement in the United States,” in which he writes: “ Over the past forty years, the consumer welfare standard has become closely associated with the so-called “Chicago School” of antitrust doctrine—named after the scholarship centered at the University of Chicago—a central theme of which is that a monopoly is unlikely to cause harm to consumers, either through vertical integration (the merger of companies at different points in the production process) or exclusionary conduct (for example, the kind of actions at issue in the Microsoft case that enabled the company to maintain its monopoly).”
- Michael Kades was part of a very sharp panel on the future of the Federal Trade Commission convened by the New America Foundation. Chicago School founder Henry Simmons once said that the FTC should be the most important part of government. It is not clear that he was wrong: Watch Michael, along with Sarah Morris, Hal Singer, Charlotte Slaiman, Brandi Collins-Dexter, and Brian Fungi, in the video “The Future of the Federal Trade Commission.”
Worthy reads not from Equitable Growth:
- Equitable Growth alumnus Nick Bunker continues to watch the state of the labor market in real time. Read his “That’s Not to Say That Wage Growth Is Now Adequate or at a Healthy Level,” in which he writes: “Time for our quarterly check-in on wage and compensation growth with the ECI. And here we are!”
- Speaking of Nick Bunker, who wrote “The Flat Phillips Curve and U.S. Labor’s Share of Income” last April (when he was still with Equitable Growth), which discussed a still-immediate issue: “The possible reasons behind the currently flat Phillips Curve are numerous, and whether this relationship will hold up for long is very much up for debate. But the fact that a higher labor share isn’t a clear-cut sign that accelerating inflation will soon arrive might give the Fed some comfort that its recent bet on a flatter Phillips Curve might pay off.”
- If you believe in the “plucking model”—by which the economy, when “plucked” into a state below normal employment by a negative shock, then returns to normal—there is not a strong reason to begin a recession watch until normal employment has resumed or has almost resumed. It has. So, it is time to start a “what will cause the next recession?” watch. Tim Duy argues that it will not be weakness in housing. I concur. The current weakness in housing is what the Federal Reserve wants to see and is the intended effect of its raising interest rates—a little less employment in housing construction producing a little more room for higher employment in other sectors. Read Tim Duy, “Decision Time,” in which he writes: “Remember the recession calls in 2016 when manufacturing rolled over? The thinking was that every time industrial production falls by 2 percent a recession followed, and this time would be no different. But it was different. Those calls did not play out because the shock was largely contained to that sector; recessions stems [sic] from shocks that hit the entire economy. And even if a recession could be boiled down to a single indicator, I would pick the yield curve over housing.”
- Lend freely at a penalty rate on collateral that is good in normal times—that would seem to be the key. It is not clear to me that we have learned that much about fighting financial crises since Bagehot. Read David Warsh, “What Have We Learned Since Bagehot?,” in which he writes: “Fighting Financial Crises: Learning from the Past … by Gary Gorton and Ellis Tallman … offers five ‘guiding principles’ for dealing with financial crises in the future. Find the short-term debt … Suppress bank-specific information … emergency lending facilities … Prevent systemically important institutions from failing … And consider that certain laws and regulations need not be applied during a financial crisis.”
- The earliest worry about skill-biased technical change I have found, from Friedrich Engels’s “Outlines of a Critique of Political Economy,” in which he wrote: “In the struggle of capital and land against labour, the first two elements enjoy yet another special advantage over labour—the assistance of science; for in present conditions science, too, is directed against labour. Almost all mechanical inventions, for instance, have been occasioned by the lack of labour-power; in particular Hargreaves’, Crompton’s and Arkwright’s cotton-spinning machines.”
- Young transpacific whippersnapper Dan Wang is thinking about Shenzhen, Silicon Valley, the American Midwest, China, and America as he tries to figure out how governments and societies should nurture economic growth. Read his “How Technology Grows (a Restatement of Definite Optimism),” in which he writes: “Technology should be understood in three distinct forms: as processes embedded into tools (like pots, pans, and stoves); explicit instructions (like recipes); and as process knowledge, or what we can also refer to as tacit knowledge, know-how, and technical experience. Process knowledge is the kind of knowledge that’s hard to write down … When firms and factories go away, the accumulated process knowledge disappears as well.”
- A brief meditation on the place of economics in the public sphere and on the accountability of politicians triggered by the economic catastrophe that is Venezuela today. Read Ricardo Hausmann, “The Venality of Evil,” in which he writes: “Paul Samuelson once commended macroeconomics for having transformed ‘the pre-war dinosaur into a post-war lizard’. The discovery of the mechanisms by which large economic fluctuations occur had led to an understanding of how to use fiscal and monetary policies, to tame, if not to prevent, crises such as the Great Depression.”
- If you believe those less-than-professional economists who still wish to be identified with the policies enacted by a Republican-dominated government, we ought to be seeing annual investment spending leaping upward by $800 billion this year, as last year’s corporate tax cut unleashes an investment and entrepreneurial bonanza. We are not. But there are no apologies going to regret, re-thinking, or even curiosity about why their forecasts have not come true. And there is very little scrutiny from the press corps about why they confidently made such predictions and how they justified making them to themselves in private. Robert Barro, Mike Boskin, John Taylor, and company: We are looking at you. There really should be an intellectual accountability moment here. Read Pedro Nicolaci da Costa, “Tax cuts fail to boost corporate investment plans, Fed survey shows,” in which he writes: “Trump claimed the tax bill would lead to a huge boost in business spending—but there’s no sign of it yet.”
- Evidence that the ultra-high pressure economy of World War II was a powerful emancipatory shock for discriminated-against African Americans in the United States is presented by Andreas Ferrara, “World War II and African American Socioeconomic Progress,” in which he writes: “This paper argues that the unprecedented socioeconomic rise of African Americans at mid-century is causally related to the labor shortages induced by WWII.”