Weekend reading: “She works hard for the money” edition

Posted on by Maria Monroe

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.”

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Equitable Growth’s Jobs Day Graphs: October 2018 Report Edition

Posted on by Austin Clemens

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

1.

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.

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Brad DeLong: Worthy reads on equitable growth, October 26–November 1, 2018

Posted on by Maria Monroe

Worthy reads from Equitable Growth:

  1. 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.”
  2. 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).”
  3. 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:
 

  1. 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!”
  2. 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.”
  3. 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.”
  4. 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.”
  5. 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.”
  6. 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.”
  7. 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.”
  8. 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.”
  9. 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.”

 

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The intersectional wage gaps faced by Latina women in the United States

Posted on by Maria Monroe

Overview

Today is Latina Equal Pay Day, the day in 2018 when Hispanic women in the United States have to work to earn as much as white men in the United States earned in 2017 alone. Like other women of color, Latinas face multiple structural barriers in the U.S. labor market, including both gender discrimination and racial and ethnic discrimination.1 Empirical evidence demonstrates, however, that these dual barriers are more than the sum of their parts and could instead result in even greater economic difficulties for Latina women.

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The intersectional wage gaps faced by Latina women in the United States

Using U.S. Census Bureau data over an 8-year period, we perform a so-called Blinder-Oaxaca decomposition—an econometric method that determines how much of mean wage differences can be explained by mean differences in human capital and other variables—to estimate the wage gap faced by Hispanic women as a whole, as well as the wage gaps faced by Hispanic women by national origin, immigration history, and education level. In addition to finding that unexplained wage gap for Hispanic women is greater than the aggregation of the absolute ethnic and gender effects, we also identify particular groups of Hispanic women at an even greater disadvantage.

In this issue brief, we build on the work of economists Mark Paul of New College of Florida, Khaing Zaw of Duke University, Darrick Hamilton of the New School, and William Darity Jr. of Duke University in their 2018 working paper, “Returns in the labor market: A nuanced view of penalties at the intersection of race and gender.”2 Our empirical analysis allows us to separate out the portions of Hispanic women’s wage gap that are explained and unexplained by various demographic and human capital variables. The unexplained portion, usually understood as a proxy for outright discrimination, represents by far the largest portion of the wage gap (22 cents per dollar out of a total gap of 40 cents). We further break down this white-men-to-Hispanic-women gap into a wage premium for white men (18 percentage points, or 18 cents per dollar) and a wage penalty for Hispanic women (22 percentage points, or 22 cents per dollar).

In addition to overt wage discrimination, the explained portion of the wage gap is largely caused by structural barriers that reduce Latinas’ expected earnings. The largest explained causes of the white-men-to-Hispanic-women gap include the segregation of Hispanic women into lower-paying occupations (8 cents) and lower-paying industries (3 cents) and the disparity in access to education and skills training for many Hispanic women (6 cents).

When Latinas are held back from labor market opportunities, their families face worse economic outcomes, and the entire U.S. economy loses out on the higher aggregate demand and productivity growth that could be realized in a more dynamic labor market powered by closing wage gaps and increasing occupational integration. As Hispanic Americans become a larger proportion of the population, their well-being affects the overall distribution of economic outcomes. Ensuring this population has access to good jobs and the social safety net is critical to addressing economic inequality.

The economic research on Hispanic women in the labor market

Hispanic workers are one of the fastest-growing populations in the labor force, yet many are still held back by structural disparities and discrimination that result in low wages and other negative labor market outcomes. The U.S. population identifying as Hispanic has grown from 9.6 million in 1970 to 57.5 million in 2016, comprising the second-largest racial or ethnic group after whites and the second fastest-growing group after Asians.3 Contemporary economic research substantiates that Hispanic women face weaker economic outcomes relative to other groups (notably Asian American and white women), including lower earnings, higher occupational segregation, and lower labor force participation—all of which ultimately produce greater economic precarity for their families and dampen economic growth.

The late date for Latina Equal Pay Day demonstrates the differential economic well-being faced by Latinas compared to white men in terms of earnings. A report for the Economic Policy Institute by economists Marie Mora of the University of Texas-Rio Grande Valley and Alberto Dávila of Iowa State University finds that the wage gap between Hispanic men and white men is explained to a greater extent by human capital variables such as education, experience, and immigration status, while the wage gap between Hispanic women and white men narrows less when controlling for these factors.4 Comparing workers with equivalent human capital characteristics, Mora and Dávila find an adjusted or unexplained gap of 15 percent for Hispanic men and 33 percent for Hispanic women—relative to white men.

Mora and Dávila also find significant differences based on the generation of immigration. The wage gap between second-generation Hispanic workers and second-generation white workers is narrower than the gap between first-generation Hispanic and white workers.5 But beyond this drop from the first to the second generation, the gap doesn’t narrow further for later generations.

Seminal research by Cornell University economists Francine Blau and Lawrence Kahn finds that occupational segregation is one of the largest factors contributing to the gender wage gap faced by women.6 Researchers at the Institute for Women’s Policy Research examine occupational segregation within racial and ethnic groups, and find that Latinos and Latinas have had the least convergence in occupational segregation in recent decades.7 Confirming the differences in occupational segregation among women by race and ethnicity, analysis by the U.S. Department of Labor finds that Hispanic women are overrepresented in occupations that pay less such as service occupations, compared to non-Hispanic white women.8

Research by economists Olga Alonso-Villar and Coral del Río at the University of Vigo in Galicia, Spain, details the decline of occupational segregation for Hispanic women since 1940.9 While segregation for Hispanic workers has increased over the past decade, Hispanic women are now less segregated than Hispanic men, who are the most segregated group compared to other demographic groups of workers (after increasing their level of segregation steadily since 1970). Nevertheless, Alonso-VIllar and del Río find that occupational segregation brings down Hispanic women’s wages more than those of Hispanic men, as the occupations in which Hispanic women are overrepresented pay less on average. (See Figure 1.)

Figure 1

In addition to their lower earnings and heightened occupational segregation, Hispanic women’s rates of labor force participation have historically lagged behind those of other men and women in the United States. After several decades of convergence in the wake of the women’s movement, women’s labor force participation today is slightly lower than that of men for all racial and ethnic groups. Hispanic women in particular had the lowest labor force participation rate of any group of women by race and ethnicity until only very recently—they surpassed Asian women as of 2016 and are now approaching parity with white women.10 At the same time, as labor force participation rates have declined for most workers,11 Hispanic women are one of the few groups that has gained ground over the past 10 years. This trend is expected to continue: The U.S. Bureau of Labor Statistics predicts that Hispanic women’s labor force participation rates will be above that of white non-Hispanic women within the next 10 years.

Among Hispanic Americans, country of origin also has a strong impact on labor force participation. Analysis conducted by the Institute for Women’s Policy Research using the American Community Survey found that the overall labor force participation among Hispanic women is close to 59 percent, but this ranges from 70.1 percent for women of Bolivian origin to 55.9 percent for women of Cuban origin.12 These data indicate that changes in the composition of the country of origin and characteristics of the Hispanic population over time may be affecting long-term trends in Hispanic women’s labor force participation rates.

Age and family structure play important roles in women’s labor force participation, as well as employment opportunities. Hispanic Americans have a younger median age than white Americans 13 and have a higher fertility rate.14 Paula England of New York University, Carmen Garcia of Seminole Community College, and Mary Richardson formerly of Northwestern University find that the higher fertility rates of women of Mexican origin helps explain their lower labor force participation.15 Other research finds that mothers of young children have lower employment rates.16 And while mothers of all races and ethnicities are working at much higher rates than they were half a century ago, childcare responsibilities may limit their opportunities, as these women balance caregiving responsibilities that may affect the hours they can work, their commute to work, and whether they can relocate for better jobs.

In addition to their lower labor supply on what economists call the extensive margin (lower labor force participation), Hispanic women also have lower labor supply on the so-called intensive margin (fewer hours) even when they work full-time. (See Table 1.)

Table 1

Depressed labor force participation and work hours bring down earnings for individual Hispanic women workers and may also contribute to a more precarious and anti-competitive labor market for all workers. A large population of prime-working age laborers outside of the labor force or working fewer hours than desired could give employers greater bargaining power vis-à-vis workers since they have the option to draw from this reserve of workers rather than improve wages, benefits, and working conditions for current employees.

Conversely, labor force participation can be strengthened by efforts to raise Latinas’ earnings in the labor market. Many of the policy recommendations outlined below to provide childcare and better work-life balance, to enforce workplace protections, and to increase pay equity would likely help boost labor supply as well by attracting inactive workers into the labor market and encouraging both part-time and full-time workers to increase their hours.

The intersectional wage gap faced by Hispanic women as a group

Analyzing the wage gap faced by black women as a case study, the Equitable Growth working paper by Paul, Zaw, Hamilton, and Darity finds that women of color face wage gaps that are explained by more than the sum of the gender wage gap and the racial wage gap.17 As Paul, Hamilton, and Darity explain in a column summarizing their paper, “examining these two wage gaps through the lens of intersectional theory … enables researchers to understand how workers with multiple socially salient identities such as race and gender are affected in ways that are qualitatively different from the mere sum of the effects of each identity taken separately on outcomes in U.S. labor markets.”18 This is why it is important for academics and policymakers alike to delve beyond top-line numbers on the gender wage gap faced by women of color to understand how each aspect of their labor market experience influences the wage gaps they face.

A nuanced understanding of the wage gap can help policymakers craft solutions that help Latinas share in the gains of economic growth and enhance the well-being of their families. Using data from the U.S. Census Bureau’s Current Population Survey for the years 2011 through 2018, we provide post-Recession estimates of the wage gap for Hispanic women as a group, as well as for subgroups by national origin, education, nativity (nation of birth), and citizenship. Our empirical strategy is a Blinder-Oaxaca decomposition of the unexplained and explained contributions of various demographic and human capital variables to the wage gap Hispanic women face vis-à-vis white men. We follow a similar strategy as Francine Blau and Lawrence Kahn in their study decomposing the gender wage gap using Panel Study of Income Dynamics data compiled by the University of Michigan, and our model is very similar to the one developed by Paul, Zaw, Hamilton, and Darity in their Equitable Growth working paper on the wage gap for African American women.19

As in the case of their decomposition, the wage gap faced by Hispanic women is intersectional—that is, it is the product of group-based discrimination and inequalities that affect women as a whole and Hispanics as a whole, as well as those affecting Hispanic women in particular. Legal scholar Kimberlé Crenshaw at the University of California, Los Angeles and Columbia University originally introduced the term intersectionality “to denote the various ways in which race and gender interact to shape the multiple dimensions of Black women’s employment experiences.”20

Applying the concept to the labor market, Paul, Zaw, Hamilton, and Darity demonstrate that black women experience a larger wage gap than black men and white women—larger, in fact, than the addition of the race- and gender-based penalties. We break down the white-man-to-Hispanic-woman wage gap for full-time workers using a modified version of their decomposition model, and drawing on Mora and Dávila’s analysis of the wage gap for Hispanic men and women, we include variables for citizenship and nativity in addition to the variables included in specifications by Paul, Zaw, Hamilton, and Darity. (See Figure 2.)

Figure 2

This Blinder-Oaxaca decomposition uses the observations in the Current Population Survey dataset for Hispanic women and white men to estimate the portion of the wage gap explained by average differences between the two groups in levels of the enumerated variables, as well as the portion unexplained by these differences. As in the case of black women, the unexplained gap constitutes the majority of the wage penalty for Hispanic women compared to white men, and this portion is considered the closest approximation of outright discrimination. Alternatively, among the explained variables, educational inequality and workplace segregation by occupation and industry—which are themselves caused by various forms of discrimination and inequality—are the largest contributors to the gap.21

In addition to applying this model, we further disaggregated Hispanic women’s wage gap into a white male premium and a Hispanic woman penalty. The white male premium represents the per-capita wage boost that white men receive over all other workers in the U.S. economy except Hispanic women, whereas the Hispanic woman penalty represents the per-capita wage disadvantage of Hispanic women versus all other workers in the U.S. economy except white men. Like the aggregate gap calculated above, both of these components in turn have explained and unexplained portions. (See Figure 3.)

Figure 3

In log points, the aggregation of the Hispanic woman penalty and the white man premium is equivalent to the total white-men-to-Hispanic-women gap, and their relative magnitudes can be used to calculate the percentage point contribution of each component to the aggregate gap. Importantly, both models confirm the empirical evidence presented by Paul, Zaw, Hamilton, and Darity of the role of intersectionality in the labor market. Specifically, Hispanic women’s total wage gap (40 percent, as calculated with Paul et al.’s specification) is larger than the addition of their gender wage gap with Hispanic men (9 percent) and their ethnic wage gap with white women (26 percent).

The intersectional wage gaps faced by Hispanic women of different national, educational, nativity, and citizenship subgroups

To calculate the wage gaps faced by subgroups of Hispanic women, we used our modification of Paul, Zaw, Hamilton, and Darity’s Blinder-Oaxaca decomposition approach, in which explained and unexplained portions are estimated for the wage premium for white men, as well as the wage penalty for various subgroups of Hispanic women compared to all other workers in the U.S. economy. As the sample size of any one of these subgroups decreases, the accuracy of the sample means that the explained variables calculated from the dataset’s observations of this group, as well as those of white men, also decreases.22

Disaggregating the white male premium and the Hispanic woman penalty for various subgroups of Hispanic women can help paint a fuller picture of wage gaps for Hispanic workers based on country of origin, immigration history, and education. This methodological approach demonstrates how white men and Hispanic women of different countries of origin are respectively advantaged and disadvantaged compared to other workers in the economy, while also facilitating a direct wage comparison between the two groups. Applying this empirical strategy of estimating mean differences to calculate the explained gap and consequently the residual unexplained gap, we specifically consider the role of education, national origin, nativity (location of birth and parents’ birth), and citizenship in creating intersectional wage gaps for different groups of Hispanic women compared to white men.

There are statistically significant differences in the wage gap for Hispanic women with different national origins, immigration histories, citizenship statuses, and education levels, but the wage gap is substantial and greater than 20 percent across the entire population of Hispanic women. In terms of national origin, the unexplained and explained portions of the white man wage premium, along with the wage penalty for the largest ethnic subgroups of Hispanic women, are displayed below. Probably reflecting their pronounced economic challenges, Central American women face the largest wage gaps, followed by Mexican and Dominican women. (See Figure 4.)

Figure 4

In terms of nativity and citizenship status, native-born citizens face the lowest wage gaps, while foreign-born noncitizens face the largest wage gaps. Importantly, the large penalty for Hispanic women who are foreign born that we calculated does not reflect the greater rates of recent immigration among Hispanic women versus white men in the United States as a whole. Instead, it represents the sharp wage gap imposed on immigrant Hispanic women—compared to white men who are also immigrants. (See Figures 5 and 6.)

Figure 5

Figure 6

In a similar analysis, we calculated the wage gap for Hispanic women with different levels of education. While the wage gap is large at all levels, it decreases gradually with rising education levels. (See Figure 7.)

Figure 7

The disaggregation of the white male premium and Hispanic woman penalty detailed in Figure 7 sheds light on the mechanism through which the wage gap changes with rising education. Regardless of their level of education, white men benefit from approximately similar wage premiums—just above 20 percent. Alternatively, Hispanic women who receive a high school diploma experience a wage gap that is about 10 log points (or roughly 10 cents per dollar) lower than Hispanic women who dropped out before graduating high school. In contrast, the benefit of some college is marginal in closing the wage gap, and the benefits of a bachelor’s degree are even smaller.

Policy recommendations and conclusion

The intersectional structural barriers faced by Hispanic women that lead to reduced wages affect both their own lifetime earnings, as well as the economic security of their families. As these women are increasingly breadwinners in their families, their opportunities in the U.S. labor market are crucially important to the well-being of their communities.23 The complicated factors that result in their wage gap—such as differential returns to education and occupation—require holistic policy approaches that provide opportunities alongside addressing structural inequalities.

Because Hispanic women still face limited benefits in terms of the wage gap for getting a college education after graduating from high school, just encouraging higher education will not resolve the gender wage gap. Instead, addressing outright wage discrimination, occupational segregation, and work-life supports for Hispanic women of all ages is crucial to ensure that Hispanic women and all other women can be fairly remunerated and represented equal to men based on their skills, interests, and ambitions—their human capital.

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. Wage discrimination can be addressed through new policies around transparency within organizations in addition to salary history bans in applications, as well as effective enforcement of current anti-discrimination laws.24 While pay transparency is rare in private-sector employment, it is common in the public sector. Along with stronger affirmative action regulations, pay transparency likely contributes to an overall lower gender wage gap in the public sector—roughly half the aggregate wage gap, compared to the private sector.25

Collective bargaining agreements also mimic pay transparency by clearly defining pay scales for different positions.26 As such, pay gaps are lower for union workers. Similarly, banning salary history helps eliminate outright wage discrimination by preventing workers from carrying around lower wages as they change jobs. If a worker is underpaid in one job, and their next job bases their new salary on previous salary, then workers who are more likely to face discriminatory pay at any given employment may face the cumulative effects of this discrimination throughout their careers. Both collective bargaining and banning salary history seek to balance information asymmetries that benefit employers.

Because Latinas are underrepresented throughout higher education and the workplace, affirmative action is a fundamentally necessary response to ensure that underrepresented groups are able to access opportunities at all stages of their careers. Georgetown McCourt School of Public Policy professor Harry Holzer and University of California, Irvine professor David Neumark conducted a meta-analysis of the broad economics literature on affirmative action and find that programs can increase diversity without sacrificing efficiency. 27

Indeed, evidence from Sweden on the effectiveness of affirmative action quotas on productivity of local governments finds that great equity of opportunity leads to more efficient outcomes since a broader pool of public officials (not just men) are able to gain public-sector employment.28 Previous research at Equitable Growth found positive empirical evidence documenting the benefits of occupational integration via affirmative action for the wages of women and people of color, scientific and business innovation, and aggregate productivity growth in the economy at large.29

Access to education and training also are particularly important for workers who historically have had less access to typical measures of human capital such as years of college or college completion. Lower levels of education and training do not fully explain the barriers faced by Latinas, whose wage gap barely narrows for those with college or an advanced degree compared to those with only a high school diploma.30 Workers with more education, however, are still more likely to earn more. Hispanic men and women who graduate from high school have a lower rate of college enrollment compared to both their black and white counterparts.31 Increasing the quality of Kindergarten through 12th grade education and accessibility to higher education is another necessary piece of improving economic outcomes for Latinas, particularly as many fast-growing occupations require post-secondary education.32

Access to training and apprenticeship is especially important for underrepresented groups. Women workers are only 7.3 percent of those in registered apprenticeships.33 Of women who are in apprenticeship programs, less than 10 percent are Hispanic, compared to men in apprenticeships, almost 16 percent of whom identified as Hispanic. Furthermore, women earn less in their apprenticeship programs than men do. Hispanic women earn the least in apprenticeship programs compared to all other groups by racial, ethnic, and gender breakdown. Policymakers who oversee apprenticeship registrations can both encourage increased equity in current apprenticeships, as well as expanded apprenticeships into new industries and occupations. All the while, policymakers must ensure that these apprenticeships continue to be paths to training while earning living wages.

One of the most important undertakings in addressing disparate U.S. labor market outcomes for women workers is to implement myriad of policies that help people balance both their work life and their families’ care needs. As Equitable Growth’s Senior Director for Family Economic Security Elisabeth Jacobs demonstrates,34 research increasingly suggests that the stability of the family as an economic unit is beneficial for both individual workers, as well as the broader U.S. economy. For Latinas, who are more likely to be mothers to young children since they are a younger population in the United States, these supports (including affordable childcare and access to different lengths of leave) are crucial to their ability to engage in the labor market. Furthermore, segmented labor markets—where low-income, ethnic minority, and rural workers are primarily relegated to jobs that typically offer less pay and fewer benefits—mean that Latin Americans are less likely than whites to have access to paid sick days, paid vacation, and flexible schedules, all of which are the types of supports that help workers balance family needs with their workforce participation.35

Research by Equitable Growth grantees Maya Rossin-Slater of Stanford University, Christopher Ruhm of the University of Virginia, and Janet Waldfogel of Columbia University find that the introduction of a nearly universal paid leave program in California increased Hispanic mothers leave-taking by 6 percentage points, compared to a not-statistically significant 4.4 percentage points for non-Hispanic whites.36 (This program was similarly as beneficial to black women, who increased their leave taking from only one week to seven weeks of parental leave.) This access to paid leave allowed mothers to maintain their attachment to the labor force, ultimately increasing their work hours and subsequent wages by 6 percent to 9 percent.

None of these policy interventions is a silver bullet on its own, but together they would support greater economic opportunity for Latina workers and all other workers. As the wage decomposition in this brief demonstrates, the wage gap for Hispanic women is primarily caused by unexplained discrimination, followed by workplace segregation and restricted access to educational opportunities. Ensuring greater equity means fostering a more dynamic U.S. labor market in which Latina workers are able to invest in their human capital and productivity and get access to more opportunities that will help them earn higher wages, support their families, and jumpstart innovation and productivity growth in the economy.

Ultimately, U.S. labor market reforms to this end would not only reduce income inequality but also help power a stronger, more diversified U.S. economy in which workers who have been structurally disadvantaged would contribute to aggregate productivity, innovation, and demand and share in the fruits of stronger and more stable economic growth.

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Competitive Edge: Protecting the “competitive process”—the evolution of antitrust enforcement in the United States

Posted on by Maria Monroe

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 Sallet 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.

Jonathan Sallet

The Federal Trade Commission this week tackles a central question of competition: Are the goals of antitrust enforcement in the United States best pursued by applying what’s known as the consumer welfare standard?

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). Indeed, the view that monopolies will seldom if ever harm consumers rests uneasily in the context of a body of law given the name “anti-trust” precisely because the Sherman Antitrust Act of 1890 was designed to combat trusts, the giant monopolies of the late 19th century and early 20th century.

At various points, the Chicago School has been invoked by those arguing that antitrust should focus on short-term price effects or that monopoly power will inevitably be disturbed by future competition or that foreclosure is unlikely or that vertical mergers will always (or almost always) benefit competition. And the influence of the Chicago School on the application of antitrust law over the past four decades has been extremely significant.

So the question remains: What does it mean just to safeguard “consumer” welfare?

From its inception, the term has been surrounded by uncertainly, in part because the influential Chicago-School jurist and former Solicitor General of the United States Robert Bork himself thought that competitive effects should look beyond consumers to what economists label “total welfare” or the overall value produced by a particular market’s organization, independent of the specific way that gains or losses to individual firms are distributed. And now, the term is under attack. Barry Lynn of the Open Markets Institute urges the two antitrust agencies of the federal government, the Federal Trade Commission and the U.S. Department of Justice’s antitrust division, to formally abandon the consumer-welfare approach, partly because of the evidence he believes demonstrates increased market concentration in the U.S. economy.

This week, the Federal Trade Commission will hear leading scholars both defend the consumer welfare standard and suggest alternative formulations. What is striking about the alternatives being offered is how closely they group around a focus on the “competitive process.” So, for example, Carl Shapiro from the University of California–Berkeley’s Hass School of Business will offer “The Protecting Competition Standard,” under which “a business practice is judged to be anti-competitive if it harms trading parties on the other side of the market as a result of disrupting the competitive process.” This approach, he explains, broadens the central idea behind the consumer welfare standard to account for trading parties other than final consumers, while incorporating both economics and evidence to strengthen antitrust enforcement.

Using similar language, Columbia Law School professor Tim Wu argues for the “protection of competition” as an approach that better orients antitrust enforcement toward “protecting a competitive process that actually rewards firms with better products.” And University of Tennessee law professor Maurice Stucke and his co-author Marshall Steinbaum at the Roosevelt Institute have proposed the use of a new “effective competition” standard, along with legislative changes to effectuate it, noting that “competition policy is principally concerned about promoting a competitive process.” (Barry Lynn and I are both among the other presenters on this question.)

But what difference does a change in terminology make? After all, antitrust specialists generally recognize that antitrust is not limited to short-term price impacts. And the importance of the competitive process has been recognized. For example, the D.C. Circuit’s Microsoft decision emphasized the importance of the competitive process when it explained that antitrust law “directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself.”

That said, antitrust litigation can be complicated. In front of a generalist judge, government enforcers rightly bear the burden of persuasion—they need not bear an unnecessary burden of explanation.

There are important circumstances in which the term “consumer welfare” can cause unnecessary confusion. Consider carefully the emphasis by UC Berkeley’s Shapiro on harm to “trading parties.” From the perspective of a seller, that means consumers. But from the perspective of a powerful buyer, it means upstream sellers—think of a sawmill that buys the output of logging operations. Or consider employers that agree not to compete against each other for the “purchase” of labor, a practice the two federal antitrust agencies have said will be subject to criminal prosecution as the flip side of an agreement among sellers to fix prices. The workers who are harmed may not be the consumers of those employers but they are “sellers” who, along with the competitive process, have been harmed.

Buyer power (which does not always require monopsony—the flip side of monopoly) is getting increased attention, which adds to the importance of providing a clear picture of potential competitive effects. Last month, the Federal Trade Commission held a hearing on just this issue, and earlier in the year noted antitrust scholar Herb Hovenkamp, the James G. Dinan University Professor at the University of Pennsylvania Law School and Wharton School, in a paper with co-author Ioana Marinescu, professor of economics at the University of Pennsylvania School of Social Policy & Practice, focusing on mergers impacting labor markets and positing that “the antitrust law against anticompetitive mergers affecting employment markets is certainly underenforced, very likely by a significant amount.”

So, for example, during the Department of Justice’s challenge to the merger of healthcare insurers Anthem Inc. and Cigna Corp., the antitrust division’s buyer-power claim (which was not ruled on by the district court) ran headlong into assertions that no problem could exist if that greater buyer power translated into lower prices to customers. But, argue Scott Hemphill of New York University’s School of Law and economist Nancy Rose of the Massachusetts Institute of Technology in a recent article in The Yale Law Journal, “the proper focus is harm to sellers.”

Consider also mergers of so-called intermediate buyers—companies that buy from upstream providers and sell to consumers. Such mergers can harm competition because of their effect on, for example, restaurants buying from food-distribution companies, as in the proposed merger between Sysco Corp. and U.S. Foods Holding Corporation that the Federal Trade Commission successfully blocked. In that case, the district court expressly recognized competitive effects on customers “ranging from the corner diner to hospital and nursing home cafeterias to hospitality venues.”

Against this, it could be argued that current law does the job. After all, the Federal Trade Commission won a preliminary injunction in the Sysco case. And U.S. Assistant Attorney General of the Antitrust Division, Makan Delrahim, recently invoked a complaint filed by the Department of Justice in 2016, asserting that information-exchange among prospective buyers of the Dodgers Channel in Los Angeles “deprived LA area Dodgers fans of a competitive process.”

But, from a litigator’s perspective, the use of the term “consumer welfare” injects issues into such cases that threaten confusion without advancing understanding. The importance of considering practical litigation impact was identified by Equitable Growth’s Michael Kades in the September 21st FTC hearing, when he emphasized that if the government has to continually prove basic facts in every case and even the easiest cases are hard, then antitrust laws are failing to protect competition. The continuing confusion about the role of consumers in cases where anti-competitive effects are focused on other traders or the impact of exclusion is defended on the ground that competitors are not consumers helps demonstrate that the “competitive process” better describes the inquiry at hand.

Legal phrases are not talismanic. The application of any formulation requires hard work, a close eye on evidence, and continued attention to competitive effects. But it is notable that this week leading antitrust scholars will focus us on protecting the competitive process as the next step in the evolution of antitrust.

—Jonathan B. Sallet is a senior fellow at the Benton Foundation and previously general counsel of the Federal Communications Commission and deputy assistant attorney general in the Antitrust Division of the U.S. Department of Justice.

Getting the information we need to advance the conversation on paid leave in the United States

Posted on by Maria Monroe

Over the course of their careers, most workers will experience a life event—whether it is a serious personal medical issue, the birth of a child, or the need to care for a loved one who is ill—that they will need to address outside of work. Paid leave provides the right to time off with pay so that workers can continue to cover the electricity bill and put food on the table while they focus their attention on addressing their needs or the needs of their family members. Yet only 16 percent of civilian workers in the United States have access to paid family leave through their employers.

To address this gap, six states and the District of Columbia have paid family leave laws on the books, and six bills on paid leave have been introduced at the federal level. Research funded by Equitable Growth finds that 63 percent of small- and medium-sized employers in New York and New Jersey support the paid leave programs in their states. Other research finds that these programs affect labor supply: California’s paid leave program is associated with an 18 percentage point increase in new mothers’ likelihood of working a year after giving birth.

Still, much remains to be learned about existing paid leave policies that could help legislators and administrators implement strong policies. Are there unintended consequences of paid leave programs? How does personal medical leave affect health outcomes?

Researchers can’t answer key questions about paid leave without the data that tell the story. So, last week, the Washington Center for Equitable Growth brought together researchers who study paid leave and related topics, state data administrators, and experts in federal and private-sector data systems to talk about data. The day-long meeting was part of Equitable Growth’s Paid Leave Research Accelerator project.

Paid leave is a topic that touches outcomes that are often studied in siloes. The researchers in attendance were experts in topics ranging from women’s labor supply to public health, from childhood poverty to gerontology, and from sick days to Temporary Disability Insurance. They shared information about an alphabet soup of surveys that contain valuable information on caregiving in the United States, among them NHANES (National Health and Nutrition Examination Survey), NHATS (National Health and Aging Trends Study), ATUS (American Time Use Survey), HRS (Health and Retirement Study), PSID (Panel Study of Income Dynamics), MOPS (Management and Organizational Practices Survey), and NSOC (National Study of Caregiving). Stay tuned for a report from Equitable Growth that will share more information on each data source—what it contains and how to access it—so that researchers can break disciplinary siloes and get the data they need to answer pressing policy questions on paid leave.

When the topic turned to administrative data, the attendees at the Equitable Growth event benefitted tremendously from the presence of paid leave administrators in states large (California, Washington) and small (Rhode Island, New Jersey). The administrators and academics brought together important perspectives on the equity implications of research on paid leave as they considered how much data state programs should collect. First, they considered the “more is more” perspective: They outlined the promise of administrative data for answering pressing policy questions, argued for the collection of key demographic variables needed to understand the equity implications of paid leave, and discussed strategies for accessing and building administrative datasets.

Second, they considered the “less is more” perspective: They discussed the fears constituents have about the use of their data, the importance of streamlined enrollment procedures from a behavioral science perspective, and the idea that when less data is collected, more members of vulnerable groups may access benefits. These two lines of thought lead to an equity research paradox: To understand who is accessing benefits and why, we need detailed demographic data. Yet the most vulnerable groups of applicants may be the most likely to be deterred from accessing benefits by requests for demographic information.

At the end of the day, attendees gained insight into new data sources to use, a deeper understanding of the ethical considerations around administrative data use, and ideas of how to move forward in fully understanding the effects of these policies. New research shows the unintended consequences of some paid leave policies. To better understand these impacts and design smart policies, researchers and policymakers alike need good data. In the coming year, Equitable Growth will release a report that fleshes out these ideas in more depth and offers tools and resources to help researchers access the right data to answer their research questions.

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Weekend reading: The “family policy is economic policy” edition

Posted on by Maria Monroe

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

In a new report for Equitable Growth, Elisabeth Jacobs explores the evidence from the United States on the need for paid family and medical leave and surveys a wide range of literature that examines the impact of paid leave on the U.S. labor market, health outcomes, and broader macroeconomic consequences. The report lays out a research agenda designed to accelerate the evidence base for state and federal policymakers. You can read the full report here, and its key takeaways here.

Alix Gould-Werth unpacks the findings of a new paper by Kristen Harknett of the University of California, San Francisco and Daniel Schneider and Matthew Stimpson of the University of California, Berkeley into the negative impact of the decline in economic well-being and the rise of incarceration on marriage rates. While some policymakers call for the promotion of marriage to combat its decline among less-educated Americans, Gould-Werth explains that this research suggests such calls are putting the cart before the horse. “If policymakers instead start by improving economic circumstances, rates of marriage are likely to increase,” she writes. “This could lead to a virtuous circle, in which people have the resources they need to form the families they desire, which, in many cases, may further bolster their economic circumstances or insulate them from economic hardship.”

Check out Brad Delong’s latest worthy reads from Equitable Growth and around the web.

Links from around the web

University of Massachusetts Amherst economist and Equitable Growth grantee Arindrajit Dube proposes an update to the Earned Income Tax Credit to expand it to people without earnings. Dube estimates that about 35 percent of the benefits of this expansion of the current EITC program would go to people in extreme poverty and it would cost less than other proposals to expand the program. [the hill]

Senator Cory Booker (D-NJ) is introducing legislation to create “American Opportunity Accounts” to ensure all children have at least a small nest egg they can count on at age 18. The idea is similar to the “baby bonds” proposed by Professors Darrick Hamilton of the New School and Sandy Darity of Duke’s Sanford of Public Policy, respectively, both of whom also are Equitable Growth grantees. [vox]

Economists do not agree on what explains the persistently sluggish growth in wages in the U.S. economy despite low unemployment rates. Ernie Tedeschi walks through the various hypotheses and examines where the data supports them or doesn’t. [nyt]

A new report from Georgetown University found that in the United States there are currently around 13 million jobs requiring only a high school degree and paying at least $35,000, but that three-quarters of them belong to men, highlighting the persistence of occupational segregation. [wapo]

The common narrative about what areas of the United States are experiencing economic growth generally assumes that wage growth is stronger in urban areas than in rural areas, but that simplistic explanation belies the variation between and within regions. While median wages and salaries are higher in urban areas, wage growth between 2001 and 2016 was actually above the national average in rural counties while urban counties had below-average gains. [city lab]

Friday Figure

Figure is from “Paid Family and Medical in the United States: A Research Agenda” by Elisabeth Jacobs

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Brad DeLong: Worthy reads on equitable growth, October 19–25, 2018

Posted on by Maria Monroe

Worthy reads from Equitable Growth:

  1. I think this is 100 percent correct: Proper conservative thinkers should be focusing not on increasing rates of marriage, but rather on increasing the proportion of people who are marriageable in the sense of having the economic resources and security that make marriage a good idea. When people stay unmarried, it is usually for good reasons. Conservatives may object, arguing it would mean that social democracy was a waypost on the road to attaining conservative family-stability goals. But it looks like that is, in fact, the case. And denying reality is rarely a good idea. This is why you should read Alix Gould-Werth’s “What upticks in U.S. economic inequality and incarceration mean for marriage,” in which she writes: “Increasing inequality in the United States has consequences beyond the material circumstances of those at the bottom of the income distribution … Some experts call for the promotion of marriage. Schneider and his co-authors’ work suggests that these policy proposals may be putting the cart before the horse. If policymakers instead start by improving economic circumstances, rates of marriage are likely to increase. This could lead to a virtuous circle.”
  2. For most of human history, “women’s work” consisted of jobs that had great flexibility in when and how and in what duration they could be done—gardening, textiles, and so forth. If our organization of work today is not going to have a sharp, disparate impact on women, policymakers need to be working much harder to bring that kind of flexibility to all jobs. Read Elisabeth Jacobs, “Paid Family and Medical Leave in the United States,” in which she writes: “Caregiving needs span the life cycle, and changes in women’s labor force participation in the United States mean that the majority of families no longer have a stay-at-home spouse to provide unpaid care. Yet too many workers who need time off to care for a new baby, a sick loved one, an aging family member, or their own health may do so only at the expense of their own financial well-being—and the cumulative cost of this failure takes a broader toll on the health of the U.S. economy.”
  3. Greg Leiserson’s stuff on assessing fiscal policy is very good. It should be making a bigger splash. Read his “How should Treasury and the IRS conduct cost-benefit analysis of tax regulations?” Here is his opening presentation of the slides: “The traditional tools of tax analysis are the appropriate tools for the cost-benefit analysis of tax regulations, and that cost-benefit analysis should report estimates of the revenue, distribution, and compliance-cost impacts of a proposed regulation. Social benefits and social costs are not quantified in this approach—and should not be quantified—because doing so would require assumptions about the value of revenues and the appropriate distribution of the tax burden. Treasury and the IRS should not claim to have definitive answers to these questions in a regulatory impact analysis.”
  4. It is hard to believe that it is now 64 years after Brown v. Board of Education, and we are still inadequately dealing with school segregation. Read Delaney Crampton, “Gerrymandered school districts perpetuate segregation by keeping low-income students out, which is bad for economic growth,” to understand why this is an alarmingly contemporary problem. He writes: “Brown v. Board of Education was the unanimous U.S. Supreme Court ruling that led to the beginning of the end of blatant racial segregation of children in public schools. Actual desegregation took decades to enforce and is still incomplete in many local school districts across the United States. But what’s equally troubling is a new type of segregation in some school districts—gerrymandered school borders that fence out students from economically stressed families, which often means new segregation along racial and ethnic lines.”
  5. Let me circle back to highlight this again. The persistent and repeated attempts to draw a sharp distinction between equality of opportunity and equality of result do not stand up to even the slightest scrutiny: Read Elisabeth Jacobs and Liz Hipple, “Are today’s inequalities limiting tomorrow’s opportunities?,” in which they write: “Miles Corak found that in countries where inequality is high such as the United Kingdom and United States, there is a strong relationship between a parent and a child’s economic outcomes. Conversely, in countries where inequality is lower such as Norway and Denmark, the relationship between a parent and child’s economic outcomes was not as strong. … The development of human potential is insufficient on its own to power upward mobility. Individuals must also be able to fully deploy their human potential by efficiently and effectively matching opportunities in the labor market. Yet structural changes to the labor market, persistent discrimination, and the importance of parental financial resources in young adulthood prevent the full and effective deployment of human potential.”

 

Worthy reads not from Equitable Growth:
 

  1. The Federal Reserve’s public view of the likely path of the U.S. economy now lacks coherence. This is a bad thing. It may mean that the Federal Reserve’s private view of the likely path of the economy now lacks coherence, in which case policy will lack coherence. It certainly means that market participants can no longer plan on the Federal Reserve having a known coherent view of the economy. Read Joe Gagnon, “Tension Remains at the Heart of the Fed’s Forecast,” in which he writes: “The Federal Open Market Committee (FOMC, or Fed) surprised no one at its September meeting by raising the target for the federal funds rate a quarter of a percentage point to a range of 2 to 2.25 percent. The FOMC has been tightening monetary conditions very slowly since late 2015.”
  2. Read Sarita Gupta, Stephen Lerner, and Joseph A. McCartin, “It’s Not the ‘Future of Work,’ It’s the Future of Workers That’s in Doubt,” in which they write: “Nearly every discussion of labor’s future in mainstream media quickly becomes mired in a group of elite-defined concerns called ‘The Future of Work.’ … Rarely has a phrase been so ubiquitous in discussions of the economy or social policy … [but] it is the concentration of wealth and power in this new economy, not computerization or artificial intelligence, that represents the gravest threat to our future.”
  3. The must-read of must-reads on the links between behavioral finance and macro: John Maynard Keynes (1936): “The State of Long-Term Expectation,” in which he wrote: “If I may be allowed to appropriate the term ‘speculation’ for the activity of forecasting the psychology of the market, and the term ‘enterprise’ for the activity of forecasting the prospective yield of assets over their whole life, it is by no means always the case that ‘speculation’ predominates over ‘enterprise.’ As the organisation of investment markets improves, the risk of the predominance of speculation does, however, increase.”
  4. Read Antonio Fatás, “Europe’s fiscal policy doom loop,” in which he writes: “The damage done by procyclical fiscal policy in the euro area between 2010 and 2014 is likely to be even larger … Fiscal policymakers … created a ‘doom loop’, with unfounded pessimism feeding into policy … the consequences of those policies increasing pessimism … hysteresis, permanently reducing GDP.”
  5. Read Jiahua Che and Yingyi Qian, “Insecure Property Rights and Government Ownership of Firms,” in which they write: “We develop a theory of the ownership of firms in an environment without secure property rights against state encroachment. ‘Private ownership’ leads to excessive revenue hiding, and ‘state ownership’ (i.e., national government ownership) fails to provide incentives for managers and local governments in a credible way … ‘Local government ownership’… may better serve the interests of the national government.”
  6. A very interesting study of what appears to be highly successful job search assistance in Nevada. Read Day Manoli, Marios Michaelides, and Ankur Patel, “Long-Term Effects of Job-Search Assistance: Experimental Evidence Using Administrative Tax Data,” in which they use “Administrative tax data [to] examine the long-term effects of an experimental job-search assistance program operating in Nevada in 2009.”

 

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What upticks in U.S. economic inequality and incarceration mean for marriage

Posted on by Maria Monroe

Forty-six percent of unmarried Americans hope to someday marry, yet falling rates of marriage make their prospects of tying the knot increasingly dim. A large body of research underpins the debate over the causes of this decline, variously identifying women’s increasing economic independence, changing attitudes toward marriage, and increased use of effective contraception as potential causal factors. Perhaps the most prominent theory in sociology, however, argues that a decrease in the number of “marriageable men” leaves women without partners.

What makes a man “marriageable”? In addition to being a romantic arrangement and a family form, marriage is an economic institution. So, when men lack economic resources, they may be less likely to marry. Another factor that could affect marriageability is criminal justice involvement. When men are confined to jail or prison, or when a criminal record trails after them following release, they may become less attractive candidates for marriage.

Interestingly, two trends may have simultaneously depressed rates of marriage in the United States. First, economic well-being has declined for people at the middle and bottom of the income distribution. Second, incarceration has boomed during precisely the same period in which marriage rates have fallen. In 1969, average earnings for men without college diplomas were 14 percent higher than in 2013. In 1969, about 200,000 people were incarcerated, but in 2013, that number was closer to 1.4 million.

A 2018 paper in the Journal of Marriage and Family argues persuasively that the decrease in the number of marriageable men—due to economic hardship and incarceration—is a major factor driving the falling rates of marriage. The paper, written by Kristen Harknett of the University of California, San Francisco and Daniel Schneider and Matthew Stimpson of the University of California, Berkeley looks across five decades of data from the Panel Study of Income Dynamics to document and explain the downward trend in marriage among men and women from 1969 to 2013.

While previous literature has examined single cohorts to show that people are less likely to marry when they face economic hardship, by using a dataset that follows multiple generations across the full period of decline, the authors are able to show just how much of the marriage decline can be accounted for by concurrent changes in the distribution of resources and incarceration levels. For instance, for men who finished high school but did not complete a bachelor’s degree, declining economic fortunes explain at least a third of the marriage decline in this period. (See Figure 1.)

Figure 1

The authors of that paper, Harknett, Schneider, and Stimpson, also demonstrate that mass incarceration appears to have affected rates of marriage in this period by shrinking the pool of marriageable men with whom low-educated women might form relationships. Their research finds that increasing rates of incarceration explain 28 percent of the marriage decline among women without high school diplomas, probably because their potential partners have been incarcerated. (See Figure 2.)

Figure 2

The work of these three researchers indicates that increasing inequality in the United States has consequences beyond the material circumstances of those at the bottom of the income distribution. Lower bank account balances, for example, affect people’s romantic lives and family composition. What does this mean for policy? Because other research shows that married people have higher rates of economic security, some experts call for the promotion of marriage. Schneider and his co-authors’ work suggests that these policy proposals may be putting the cart before the horse. If policymakers instead start by improving economic circumstances, rates of marriage are likely to increase. This could lead to a virtuous circle, in which people have the resources they need to form the families they desire, which, in many cases, may further bolster their economic circumstances or insulate them from economic hardship.

Schneider and his co-authors also show that incarceration has effects that ripple beyond the immediate impact on the confinement of and concomitant declines in well-being among incarcerated people. Incarceration affects not only the family relationships of African American and low-educated men who are most likely to be incarcerated but also the family formation of low-educated women. While much literature investigates whether marriage is a protective factor against justice involvement, policymakers may again wish to move the proverbial cart and focus on the long-reaching benefits that reducing incarceration may have for families.

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Weekend reading: “state of the economy” edition

Posted on by Maria Monroe

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 Kate Bahn and Austin Clemens analyzed the data from the most recent release of the Job Openings and Labor Turnover Survey (commonly known as JOLTS) by the U.S. Bureau of Labor Statistics. The data substantiate a tightening labor market with hiring, firing, and other labor market flows largely restored to their pre-Great Recession levels—despite persistent inequalities across demographic groups.

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

Delaney Crampton wrote a value-added blog post this week on modern gerrymandering of local school districts in the United States. The piece looked at the recent trend of school districts being redrawn to keep low-income students out, the impact it has on these students, and possible policy solutions for addressing the issue.

Links from around the web

“Is the American Economy rigged?” That is the big question that Joseph Stiglitz attempts to tackle in a piece by the same name. In the piece, Stiglitz points out the epic heights of inequality that the United States has climbed to over the past 40 years and attempts to explain how we got to where we are. (scientificamerican)

Matthew Yglesias looks back on the Great Recession and asserts his concerns that bad macroeconomic stabilization policy may be a source of future avoidable suffering. Yglesias argues that little has been done to stop the next “Great Recession.” (vox)

Despite President Trump’s disapproval and the bad news for prospective borrowers, Neil Irwin argues that rising interest rates are good news for the long-term direction of the economy. In his piece, Irwin says that rising interest rates point to a more persistent recovery and are not driven by expectations that inflation will soar higher. (nyt)

Katherine Newman dissects whether a record stock market and low unemployment can survive in the long run despite high inequality. Newman unpacks this question by reviewing the work of multiple economists. (washingtonpost)

The United States falls in the middle of the pack when it comes to helping its residents reach their potential, well behind many East Asian and European countries. Andrew Van Dam and Jeanne Whalen breaks down data from the World Bank, which estimates the United States enables its population realize around 76 percent of its potential. (washingtonpost)

Friday Figure

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

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