Page 130 – Equitable Growth

Brad DeLong: Worthy reads on equitable growth, August 24–30, 2018

Posted on August 30, 2018August 29, 2018 by Emilie Openchowski

Worthy reads from Equitable Growth:

IMHO, Robert Manduca’s new column for Equitable Growth is closely akin to William Julius Wilson’s “the declining significance of race.” Read “How rising U.S. income inequality exacerbates racial economic disparities,” in which Manduca writes: “In 1968 … median African American family income was 57 percent of the median white American family income. In 2016, the ratio was 56 percent. The utter lack of progress is striking.”
Read Delaney Crampton’s “Why accessibility to broadband matters in reducing economic inequality in the United States,” in which he writes: “a strong correlation between household income and in-home connectivity [has been found]—a pattern that persists across both rural and economically depressed urban communities.” How much of this correlation is causal? And how much is associational? I do not think we really know, in spite of studies of the build-out of broadband in France. The United States is a very different country. Nevertheless, I, for one, think that it is long past time to put universal broadband in the same bucket as basic sanitation and rural electrification—as something that is part of the citizens’ share of being an American.
I’m very excited to see that “The Washington Center for Equitable Growth applauds the introduction of the ‘Measuring Real Income Growth Act of 2018’” by Sens. Chuck Schumer (D-NY) and Martin Heinrich (D-NM). Heather Boushey and I have written extensively about the need to track growth not just for the U.S. economy as a whole but also for Americans at every point along the income curve, as have Heather and Austin Clemens, most extensively in their report earlier this year titled “Disaggregating growth.”
Equitable Growth alumnus Nick Bunker reminds us of this Equitable Growth working paper from a year and a half ago by Emmanuel Saez, Thomas Piketty, and Gabriel Zucman, “Economic growth in the United States: A tale of two countries,” in which they write: “We combine tax, survey, and national accounts data to build a new series on the distribution of national income.”

Worthy reads not from Equitable Growth:

Even though “The IT revolution and the globalization of R&D” is written by another member of the J. Bradford Alliance, I am not sure about their view that “when U.S. multinationals are able to import talent or export R&D work, this reinforces U.S. technological leadership.” That is not how I read Shenzhen, at least. Read Lee Branstetter, Britta Glennon, and J. Bradford Jensen’s column, in which they observe: “U.S. firms have begun shifting R&D investment towards nontraditional destinations such as China, India, and Israel.”
Read Susan Dynarski, “For better learning in college lectures, lay down the laptop and pick up a pen,” in which she writes: “When college students use computers or tablets during lecture, they learn less and earn worse grades. The evidence consists of a series of randomized trials, in both college classrooms and controlled laboratory settings.” This may, to some degree, be the growing pains of new technology. There were people who strongly objected to printing on the grounds that the only way to truly “grok” a book was to copy it out, word-for-word by hand. In their view, printing produced a bunch of shallow intellectual “poseurs” who would have only a surface and inadequate knowledge of the books that they had not really read but only skimmed. And Socrates’ attitude toward writing as a greatly inferior “simulacrum and inadequate mimesis” that could not create the true knowledge obtained through real dialogue is well-known. Nevertheless, we believe that we have managed to adapt to printing and indeed to the creation of manuscripts rather than just the oldest oral master-and-apprentice intellectual technologies. Perhaps we will find different things to be true once we have trained our information-technology networks to be our servants as trusted information intermediaries and intellectual force multipliers, rather than (as they now are) the servants of the advertisers that pay them and thus that try to glue our eyeballs and attention to screens—whether or not having our eyeballs and attention so-glued helps us become more like our best selves. But as of now, the empirical evidence has become overwhelming.
In “Is America Encouraging the Wrong Kind of Entrepreneurship?” Robert E. Litan and Ian Hathaway examine “William Baumol’s … idea … that may help explain America’s productivity slump. Baumol’s writing raises the possibility that U.S. productivity is low because would-be entrepreneurs are focused on the wrong kind of work.”
Isabel Z. Martínez, Michael Siegenthaler, and Emmanuel Saez write in “The Myth of Intertemporal Labour Supply Substitution” that “macroeconomists tend to assume that people work more when their wages are temporarily higher.”
Will Wilkinson observes in “‘Socialism’ vs. ‘capitalism’ is a false dichotomy” what the left and the right get wrong about the debate. He writes: “We need go-go capitalism to afford a generous welfare state.”
I disagree with Simon Wren Lewis in “The biggest economic policy mistake of the last decade, and it had nothing to do with academic economists,” where he claims that “Alesina or Rogoff featured so much in … austerity … not because they were influential, but because they were useful to provide some intellectual credibility to the policy that politicians of the right wanted to pursue.” It’s not one or the other. They gave credibility. And because they gave credibility, the media-political machine made them influential. And their influence was such that they neutralized the rest of us, who understood what was going on and were desperately trying to stop it.
Justin Wolfers writes in “Money Really Does Lead to a More Satisfying Life” that “lottery winners said they were substantially more satisfied with their lives than lottery losers [and that] these effects are remarkably durable … still evident up to two decades after a big win.”
Justin Fox notes in “Why German Corporate Boards Include Workers for Co-Determination” that “one of the world’s most successful capitalist nations, Germany, currently requires 50 percent employee representation on the supervisory boards of large corporations, and that most countries in the European Union now also encourage or require some such form of employee ‘co-determination.’”

The Washington Center for Equitable Growth applauds the introduction of the “Measuring Real Income Growth Act of 2018”

Posted on August 28, 2018 by Emilie Openchowski

Sens. Chuck Schumer (D-NY) and Martin Heinrich (D-NM) introduced the “Measuring Real Income Growth Act of 2018” today, which directs the U.S. Bureau of Economic Analysis to report on how the benefits of economic growth in the United States are divided between low-, middle-, and high-income families. The bill implements, in part, the policy agenda laid out in Equitable Growth’s report “Disaggregating Growth: Measuring who prospers when the economy grows.”

These statistics will be some of our only windows into understanding how overall economic performance connects to the lived economic experiences of American workers up and down the income ladder. The data also will be a critical guide to policymaking in this new era of economic disruption. The Washington Center for Equitable Growth urges members of Congress to support the bill.

The findings in the bill cite research by Thomas Piketty, Equitable Growth Steering Committee Member Emmanuel Saez, and Equitable Growth grantee Gabriel Zucman. Their research shows that “growth was once distributed relatively evenly across all individuals in the United States […] by contrast, the majority of individuals in the United States have seen income and wage growth significantly below what is suggested by national measures of output and income.”

Following is a statement by Heather Boushey, Equitable Growth’s executive director and chief economist:

We commend Sens. Schumer and Heinrich for introducing this legislation. This is an important first step toward understanding how today’s economy is or is not working for most U.S. families.

It is not enough to know how rapidly the economy is growing. Americans want and need to know how the economy is performing for people like them. Evidence shows that broad-based economic growth is key to building a strong economy, and that starts with collecting the data that allow policymakers to understand how the economy is performing for all Americans.

Our statistical agencies do incredible work tracking and reporting on the state of the economy, but they are currently limited in their ability to accurately measure how economic progress is distributed amongst Americans. The first step for policymakers seeking to address economic inequality is measuring and understanding it. The “Measuring Real Income Growth Act of 2018” will make resources available to ensure that the government measures not only how much the economy is growing but also how that growth is distributed.

Boushey and Equitable Growth Computational Social Scientist Austin Clemens have written extensively on the need to add Distributional National Accounts to the quarterly Gross Domestic Product reports compiled by the Bureau of Economic Analysis:

“Policymakers can’t tackle inequitable growth if it isn’t measured” (June 2018) by Austin Clemens
“What if we took equity into account when measuring economic growth?” (November 2017) by Heather Boushey and Austin Clemens
“Here’s why you should interpret tomorrow’s GDP growth estimate skeptically” (October 2017) by Austin Clemens
“The once and future measurement of economic inequality in the United States” (March 2017) by Austin Clemens
“Distributional National Accounts and measuring 21st century growth” (December 2016) by Heather Boushey

How workplace segregation fosters wage discrimination for African American women

Posted on August 28, 2018June 18, 2019 by Emilie Openchowski

Overview

Earlier this month, Equitable Growth released a working paper on the wage gap faced by African American women to coincide with Black Women’s Equal Pay Day, the date in 2018 when black women in the United States must work, on average, to make as much as white men made in 2017 alone.¹ The paper, authored by economists Mark Paul of the New College of Florida, Darrick Hamilton of the New School, and William Darity Jr. and Khaing Zaw of Duke University, calculates the wage gap for black women compared to white men and breaks down the different factors contributing to this persistent gap.

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082818-african-american-women-paygap

Using a wage decomposition strategy, the authors quantify a wage gap for black women of 36 percent (36 cents for every dollar earned by a white man), and they also determine that 55.5 percent of this 36-cent gap (20 cents for every dollar earned by a white man) is not explained by human capital variables, including age, education, family structure, occupation, or industry. This unexplained wage gap is often interpreted by economists as the closest approximation of genuine discrimination. Of the observed variables, however, racial and gender differences in industry and occupation—collectively referred to as workplace segregation—explain by far the largest portion of the gap (28 percent, or 10 cents for every dollar earned by a white man). The authors emphasize that these differences “themselves may result from discriminatory practices.”²

Consistent with this finding, trends in workplace segregation in recent decades and numerous empirical studies investigating its causes and effects provide strong evidence for the discriminatory nature of the workplace segregation faced by African American women. In fact, workplace segregation is not efficient, but instead profoundly distortionary—dampening black women’s wages and weakening aggregate growth. This issue brief details the trends in workplace segregation over the past eight decades, the channels through which segregation contributes to workplace discrimination, and the continuing causes of this persistent discrimination.

Trends in workplace segregation of black women: 1940–present

Olga Alonso-Villar and Coral del Río, two professors of economics at the University of Vigo in Galicia, Spain, have conducted extensive quantitative research on occupational segregation of black women, along with other racial and ethnic groups by gender, in the United States.³ Using the segregation index data generated by Alonso-Villar and del Río, changes in segregation levels for black women since 1940 in the aggregate, as well as by region and education, can be detailed. The index they construct represents the fraction of black women who would need to change jobs in order for their occupational distribution to be consistent with the average occupational distribution of all workers in the U.S. economy. (See Figure 1.)

Figure 1

Over the course of this period, the aggregate occupational segregation of black women was reduced by more than half—from an index of 69 percent in 1942 to 32 percent in 2008–2010. Currently, 32 percent of African American women would thus have to change jobs in order to reflect the general distribution of workers among jobs in the economy. In a separate paper, Alonso-Villar and del Río calculate that this level of occupational segregation faced by black women is 38 percent greater than the segregation affecting black men and 43 percent greater than the segregation affecting white women.⁴

As explained in more detail below, Alonso-Villar and del Río break down segregation trends for three 20-year intervals and disaggregate the respective effects of social movements and technological change in the multidecade decline in workplace segregation for black women. The authors define these social-movement effects as changes in the specific distribution of black women across occupations, likely as a result of changes in social norms. Technology effects are changes in the distribution of all workers across occupations due to structural changes in the economy as a whole such as the rapid mechanization of the agricultural sector in the post-World War II era.

Between 1940 and 1960, technological changes and the ongoing Great Migration of African Americans into the Northern and Western regions of the country helped facilitate black women’s moves from jobs often as farm laborers and domestic workers to growing and higher-paying white-female-dominated occupations in health care, clerical work, and other service sectors outside the South. The subsequent passing of civil rights protections and federal enforcement of affirmative action between 1960 and 1980 brought about an even sharper national decline in segregation—this time including the South—as black women further increased their representation in clerical occupations and also gained growing access to various management, professional, and technical occupations, which had formerly been dominated by white men.⁵

Beginning in the 1980s through 2000, the pace of desegregation slowed dramatically as a result of declining civil rights enforcement and a judiciary increasingly hostile to discrimination claims.⁶ While African American women dramatically boosted their average levels of education and increased their numbers in managerial and professional occupations, many administrative support and service occupations came to be characterized by an overrepresentation of black women.⁷ For many black women with limited resources and professional connections, these administrative and service occupations thus became “the highest rungs in the [job] ladder,” explain Alonso-Villar and del Río.⁸ Since 2000, workplace segregation for black women at all levels of education has essentially stagnated, as was recently pointed out by economist Valerie Wilson and her co-author Madison Matthews at the Economic Policy Institute.⁹

While black women remain underrepresented in entry- and middle-level positions across occupations and at all levels of education, disparities at the top are the most striking. A recent report by Lean In and McKinsey & Co., based on a survey of 222 companies employing more than 12 million people, documents that women of color as a group (including black, Latina, Asian American, Native American, and mixed race women) constitute only 3 percent of so-called C-suite executives, 6 percent of vice presidents, and 11 percent of managers.¹⁰ Likewise, using U.S. Census Bureau data, Ph.D. candidate in sociology William Scarborough of the University of Illinois at Chicago calculates that black women hold only 4 percent of all manager positions in the United States. As explained in more detail below, these discrepancies reflect the cumulative effect of discriminatory norms, policies, and behaviors throughout the corporate managerial pipeline.¹¹

The contribution of workplace segregation to the wage gap for black women

Workplace segregation is seriously damaging for black women’s wages because it concentrates them in lower-paying occupations, on average, compared to white men and other groups.¹² As discussed above, the authors of Equitable Growth’s recent working paper—Paul, Hamilton, Darity, and Zaw—separate out the effects of various observable variables (including occupation and industry) on the wage gap faced by black women vis-à-vis white men, enabling them to calculate the relative size of the explained and unexplained gaps, as well as the respective contributions of relevant human capital and demographic variables to the former. (See Figure 2.)

Figure 2

Quantitative research demonstrates that pervasive wage penalties based on occupational racial and gender compositions are not rooted in productivity differences, but rather in social norms and stereotypes. Controlling for a large number of variables in local labor markets, sociologists Matt Huffman of the University of California, Irvine and Philip N. Cohen of the University of Maryland find that race- and gender-based devaluation of jobs associated with particular demographic groups are widespread—with occupational wage penalties largest in the most segregated labor markets.¹³ This reality has led many economists, including the former president of Bennett College, Julianne Malveaux, to advocate for a comparable-worth approach to pay equity, mandating that African American women receive equal pay for jobs of equal value.¹⁴

Wage penalties depress black women’s wages across occupations and at all skill levels. While Alonso-Villar and del Río demonstrate that segregation levels for black women decrease to some extent with education, they find relatively comparable wage penalties for them no matter their educational backgrounds.¹⁵ As organizer and writer Alicia Garza has interrogated and sociologists Paula England of New York University and Michelle Budig of the University of Massachusetts Amherst, along with economist Nancy Folbre of UMass Amherst, have reported, African American women are particularly disadvantaged by the wage penalty for care work given their overrepresentation in the field and the substantial wage devaluation affecting care workers.¹⁶ Beyond their concentration in the lowest-paying occupations, black women also are overrepresented in many middle-income jobs that pay less than male-dominated jobs with similar skill requirements.¹⁷

In addition to these clear effects on the “explained” wage gap, there is evidence from behavioral economics and social psychology that workplace segregation may also worsen the “unexplained” gap by fostering environments where harassment and discrimination are widespread. Indeed, there is a large body of evidence in the social sciences substantiating that minority groups are at the highest risk of discrimination and harassment in work environments where they are heavily underrepresented.¹⁸

A highly segregated workplace culture has been empirically demonstrated to substantially lower the wages of black women—along with those of black men, LGBTQ workers, women of all races and ethnicities, and other underrepresented groups—in a variety of ways.¹⁹ It can lead to pay discrimination against black women due to the prevalence of discriminatory stereotypes and norms.²⁰ It can result in work sabotage whereby black women are undermined in their efforts to fulfill their job responsibilities and lose out on the chance to take on the most highly remunerated tasks.²¹ It can cut them off from social networks that provide access to information necessary to maximize earnings potential.²² And it can push them to take jobs in lower-paying firms even if they remain in the same occupation.²³

Comparing average earnings levels by demographic group vis-à-vis the average level for all workers in the economy, Alonso-Villar and del Río calculate the size of the penalty/premium for various gender groups by ethnicity and race, as well as the relative contributions of the groups’ occupational segregation to the wage gap. They find that black women face larger earnings penalties than white women and black men—both in terms of segregation and in terms of within-occupation inequalities, although the combined effects on earnings relative to the economy’s average are negative and substantial for all three groups. (See Figure 3.)

Figure 3

This evidence makes clear that black women face significant wage discrimination even when working in the same jobs as white men.²⁴ On the other hand, the research below explains how the jobs in which black women end up are often determined by discrimination as well.

Discriminatory causes of workplace segregation of black women

Workplace segregation is traditionally understood to be the result of the sorting of workers in the labor market on the basis of skills, preferences, and ambitions, yet recent empirical research demonstrates that differences in workers’ skills and interests are too small to explain the high levels of race- and gender-based segregation in the contemporary workforce. Indeed, while there are some average differences in certain measures of academic performance among adolescents and young adults, the performance distributions by gender and race are heavily overlapping and insufficient to explain the large extent of persistent segregation—as neuroscientist Lise Eliot of Rosalind Franklin University of Medicine has detailed extensively.²⁵ On top of various studies questioning the reliability of test scores in measuring academic and earnings potential, there also is evidence indicating that documented academic disparities probably reflect the cumulative effects of discrimination and inequality.²⁶ Rigorous empirical studies substantiate this claim, finding nonexistent or negligible racial and gender gaps in cognitive skills among the youngest children.²⁷

Instead of adhering to the traditional human capital explanation of sorting based on skills and interests, contemporary economic and legal scholars argue that labor market preferences—both among groups that face discrimination and among those that perpetrate it—are largely determined by education, workplace, and other institutions that exist in the status quo.²⁸ As I explained in a previous issue brief for Equitable Growth on the efficiency case for workplace integration, economists propose several theories to explain why such institutions continue to limit black women’s labor market opportunities.²⁹ In the stratification economics model proposed by Professor Darity or in the identity economics model developed by economists George Akerlof of Georgetown University and Rachel Kranton of Duke University, economically advantaged groups such as white men in the United States support institutions that perpetuate segregation in order to maximize their own socioeconomic power or sense of identity.³⁰

Another explanation is offered by Harvard economist Claudia Goldin. Pointing instead to the informational distortions created by occupational segregation in the status quo, she posits that members of society may discriminate based on stereotypes they erroneously infer about the skills of black women and other disadvantaged groups from their current underrepresentation in the highest-paying occupations.³¹

Consistent with all of these frameworks, one major driver of occupational segregation is the racial and ethnic disparity in access to resources, which hurts children’s educational outcomes and thus their long-term labor market opportunities. In their study on intergenerational mobility for different racial/gender groups in the United States, economists Raj Chetty and Nathaniel Hendren of Harvard University and Maggie Jones and Sonya Porter of the U.S. Census Bureau illustrate that much of the occupational segregation faced by black women can be explained by controlling for parents’ income.³² These results prove that for many black women, it is access to resources as children rather than differences in preferences or abilities that determines their limited occupational options as adults. Importantly, however, Chetty and his co-authors find persistent race- and gender-based segregation among the children of parents in the eighth income decile—those making between approximately $90,000 and $115,000 as a household—pointing to the important role of discrimination even among children in upper-income families.³³

Together with resource disparities, recent empirical studies chronicle several ways in which family members, schools, and society at large can impose limits on black women’s labor market opportunities.³⁴ To start, children’s career aspirations are fundamentally influenced by their parents’ occupations, as well as widespread social views on the appropriate occupational choices for various groups.³⁵ In elementary and high school, students’ interests are also determined based on the occupations of the role models and social networks to which they are exposed.³⁶ Later on, in college, research by psychologist Colleen Ganley of Florida State University and her co-authors finds that perceived levels of discrimination—as opposed to interests in particular fields—are the primary determinant explaining women’s underrepresentation in STEM, or science, technology, engineering, and math, and certain non-STEM majors such as economics, philosophy, and, to a lesser extent, business.³⁷

Educational institutions can also foster discriminatory norms and beliefs about black girls and women among economically advantaged groups. Despite progress since the mid-20th century, stereotypes about and biased attitudes toward black women remain widespread in contemporary media messages.³⁸ Counteracting these harmful tropes requires conscious efforts to expose children to a diverse array of classmates and counter-stereotypical role models. Unfortunately, the contemporary reality of widespread race- and income-based school segregation does the exact opposite—keeping African American girls out of many of the highest performing white-dominated schools and thus allowing pernicious stereotypes and prejudices to thrive in these largely homogenous student bodies.³⁹ Recent efforts to improve outcomes for black boys by creating all-male schools have likewise been criticized by black feminist scholars for excluding black girls from these enrichment opportunities, particularly given the dearth of evidence justifying segregated educational programs.⁴⁰

In addition to the role of institutions in shaping labor market preferences at a young age, research demonstrates that workplace structures—and the experiences they generate—also have a profound impact on occupational segregation. In a recent article, legal scholar Vicki Schultz of Yale Law School leverages legal and social science evidence to argue that sex segregation and unchecked “subjective authority” (i.e., mangers’ substantial power to determine their employees’ career outcomes with limited standards and accountability) work in concert to create climates of discrimination and harassment, keeping women, especially queer women and women of color, out of white-male-dominated fields.⁴¹ In many historically white male workplaces, including financial, management, and STEM professions, negative experiences of discrimination have been empirically documented to begin early on in a worker’s tenure, and they accumulate as black women and members of other minority groups move through their careers.⁴² Indeed, the experiences of harassment, work sabotage, and network closure discussed above do not only result in wage discrimination in highly segregated occupations; they also push black women out of white-male-dominated fields into lower-paying occupations.⁴³

As legal scholar Kimberlé Crenshaw of Columbia University and the University of California, Los Angeles and sociologist Enobong Branch of the University of Massachusetts Amherst (among other researchers) have theorized and empirically documented, black women are uniquely disadvantaged as they face the discriminatory stereotypes, resource disparities, and other inequalities affecting African Americans and women in general—as well as those affecting black women in particular.⁴⁴ This reality means that economic penalties imposed on black women are not necessarily additive and are instead often greater than the mere aggregation of race- and gender-based effects.⁴⁵

Economist Cecilia Conrad, who currently serves as the managing director of the MacArthur Fellows Program of the MacArthur Foundation, has argued that the unique complex of stereotypes and inequalities faced by black women is a central explanation for the lack of effective public policy targeted at increasing their incomes and economic security.⁴⁶ Along with sociologist Rose M. Brewer of the University of Minnesota and economist Mary C. King of Portland State University, Conrad calls for a more nuanced and intersectional analysis of the interplay between race, gender, and class in economics, as well as greater empirical focus on the specific challenges faced by black women.⁴⁷

Conclusion

While the persistence of U.S. workplace segregation in the 21st century is discouraging, particularly given its large negative effects on black women’s wages, the good news is that historical and contemporary research shows that segregation can be deeply malleable. After all, the trends over the past eight decades described by Alonso-Villar and del Río did not take place in a vacuum but were instead the result of massive social movements and subsequent policy and legal reforms that pressured firms to hire more black women along with members of other economically disenfranchised groups. Empirical evidence also demonstrates that occupational integration can both dramatically increase black women’s wages—accounting for 56 percent of black women’s earnings growth from 1960 to 2010—and decrease the prevalence of the discriminatory stereotypes and norms that are both causes and effects of workplace segregation.⁴⁸

Beyond these encouraging implications for the wages of black women and the economic security of their families, there is growing evidence that desegregating the workplace also would boost human capital skills, productivity, innovation, and growth. In terms of human capital, Chetty and his co-authors find that controlling for parents’ income, black women have higher rates of college attendance compared to white men, demonstrating the large benefits of removing barriers to their economic advancement.⁴⁹ Furthermore, there is burgeoning evidence that increasing racial and gender diversity at all levels strengthens productivity, innovation, and financial performance in firms across industries.⁵⁰

Combined, these microeconomic improvements can have massive aggregate effects. Economists Chang-Tai Hsieh and Erik Hurst of the University of Chicago and Charles I. Jones and Peter J. Klenow of Stanford University estimate that occupational integration by race and gender was responsible for one-quarter of the growth in aggregate output per worker since 1960.⁵¹ These results make clear that workplace segregation of black women does not just restrict their opportunities; it also holds back the broader U.S. economy.

Weekend reading: “Mind the gap” edition

Posted on August 24, 2018August 31, 2018 by Ed Paisley

This is a weekly post we publish on Fridays with links to articles that touch on economic inequality and growth. The first section is a round-up of what Equitable Growth published this week and the second is the work we’re highlighting from elsewhere. We won’t be the first to share these articles, but we hope by taking a look back at the whole week, we can put them in context.

Equitable Growth round-up

Equitable Growth released comments to the Federal Trade Commission regarding the agency’s proposed hearings on 11 broad-based topics related to competition. Equitable Growth’s comments identify three overarching questions: whether monopoly power is prevalent in the U.S. economy; if antitrust laws have balanced the benefits and costs of deterring anticompetitive conducts; and whether the FTC has the resources to fulfill its competition mission.

Delaney Crampton wrote a value added blog post this week reflecting on conference panels on broadband access that took place at the annual Netroots Nation gathering in New Orleans. The piece examined the effects that limited broadband access has on low-income and rural communities, and how accessibility to high-quality broadband resulted in lower unemployment and higher wages.

Guest author Robert Manduca examined how racial economic inequality remains an undeniable part of American life. Manduca discusses how the family income gap between whites and blacks remains virtually unchanged from the 1960s and demonstrate how economic inequality and racial inequality are fundamentally intertwined.

Links from around the web

Unemployment is reaching historic lows in the U.S. economy, yet pay remains stagnant even as demand for skilled labor is reaching a pinnacle. Steve Matthews, Matthew Boesler, and Jeanna Smialek shed light on this issue by interviewing employers across construction, long-haul trucking, and childcare industries, finding that impediments keeping wages from growing are diverse and often are hard to change. (Bloomberg Businessweek)

Asian Americans are the most economically divided racial or ethnic group in the country, according to new analysis of U.S. Census Bureau data. Adeel Hassan and Audrey Carlsen discuss how the number of Asians living in poverty has grown by 44 percent at the same time that Asian Americans have become the highest-earning group in the nation. (NYT)

Rachel Premack discusses how a woman’s birth place and where she lives as an adult largely determine her future income, promotions, and how early she marries or has a baby—regardless of where she ends up living during these periods of her life. Premack notes that women from the Southeast and Appalachia were disproportionately affected by sexism from their home states later into their careers than those from New England, the West Coast, and the Upper Midwest. (Business Insider)

Alexis Gravely examines how the benefits from the Tax Cuts and Jobs Act of 2017 not only are accruing mostly to the wealthy but also are trending to favor whites over minorities. As the cuts become less generous for low-income individuals once individual cuts expire, minorities will be affected far more than whites, especially due to the repeal of the Affordable Care Act’s individual mandate. (Pubic Integrity)

Executive pay has increased by nearly 1,000 percent over the past four decades while income for the average American has grown by just 11 percent. Andres Melin argues, however, that workers are more frustrated by the 20 percent wage difference that persists between men and women in the workplace and by how women continue to be shut out from the highest-paying jobs. (Bloomberg Businessweek)

Friday figure

Figure is from “How rising U.S. income inequality exacerbates racial economic disparities.”

Brad DeLong: Worthy reads on equitable growth, August 17–23, 2018

Posted on August 23, 2018August 23, 2018 by Emilie Openchowski

Worthy reads from Equitable Growth:

Antitrust law and policy is probably the most “relatively autonomous” piece of our whole legal system. The laws as enacted by Congress and signed by the president change rarely and slowly. How those laws are enforced—and how business is then conducted in the shadow of the possibility of resort to the courts for antitrust cases—changes much more radically and substantially. It is a dance of intellectual fashion, some serious benefit-cost analysis, and a great deal of lobbying and lobbying-funded motivated reasoning. My view is that the answers to the three questions Michael Kades suggests the Federal Trade Commission examine are: yes, no, and no, respectively. But it is very good that the FTC is thinking about this. Read Michael Kades in “Equitable Growth comments to the Federal Trade Commission on the agency’s proposed competition hearings,” in which he writes: “Equitable Growth suggests that the hearings include the following three topics: Is monopoly power prevalent in the U.S. economy? Do the antitrust laws as applied by the courts correctly balance the benefits and costs of deterring anticompetitive conduct and permitting procompetitive conduct? Does the Federal Trade Commission have the resources it needs to fulfill its competition mission?”
Paul Krugman, in “How’s That Tax Cut Working Out” writes that “As Greg Leiserson of the Washington Center for Equitable Growth points out, ‘every month in which wage rates are not sharply higher than they would have been absent the legislation, and investment returns are not sharply lower, is a month in which the benefits of those corporate tax cuts accrue primarily to shareholders’. A tax cut that might significantly raise wages during, say, Cynthia Nixon’s second term in the White House, but yields big windfalls for stock owners with only trivial wage gains for the next five or 10 years, is not what we were promised.” See Greg Leiserson, “Assessing the economic effects of the Tax Cuts and Jobs Act,” in which he writes: “Key takeaways: An assessment … should focus on the impact … on wage rates … [on] the return on business investment, and … [on] future federal budget deficits, as these will determine the impact … and the fiscal sustainability of the law.”
Very much worth listening to are Heather Boushey, Helaine Olen, and Katie Denis on WHYY’s Radio Times: “Americans vs Vacations,” in which they note: “Half of American workers didn’t take all the paid vacation days they were entitled to in 2017. Why are so many of us unwilling or unable to take the vacation days that we’ve earned?”
“Pooling multiple case studies using synthetic controls: An application to minimum wage policies” was the first working paper the Washington Center for Equitable Growth published. It did not get the attention it deserved then. So why not hoist it? In it, Arindrajit Dube and Ben Zipperer write: “We assess the employment and wage effects of minimum wage increases between 1979 and 2013 by pooling 29 synthetic control case studies.”
Darrick Hamilton is asking the right questions. And he might have the right answers. But I suspect not. Yes, there is something very deep in America’s culture that discourages public responsibility for the conditions of poor and especially poor black Americans, to the country’s shame. Adam Smith in 1776 wrote in The Wealth of Nations that: “no society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity … that they who feed, clothe, and lodge … the people, should … be themselves tolerably well fed, clothed, and lodged.” We today can replace his “greater part” with “substantial part,” and it is still true. But I suspect that the health gaps between high-status, high-income, and high-wealth African Americans and their white peers have other origins—not that I know what those other origins are, mind you. Read Darrick Hamilton, “Post-racial rhetoric, racial health disparities, and health disparity consequences of stigma, stress, and racism,” in which he writes: “High achieving black Americans, as measured by education, still exhibit large health disparities.”
Adam M. Guren, Alisdair McKay, Emi Nakamura, and Jon Steinsson, in “Housing wealth effects: The long view” write that they “exploit systematic differences in city-level exposure to regional house price cycles” in their recent Equitable Growth working paper. Really surprised that there is no evidence of boom-bust asymmetry here. I am going to have to dig into what reasonable alternatives are and how much power they have.

Worthy reads not from Equitable Growth:

Noah Smith wonders if he can make a supply-and-demand argument to people who are allergic to “supply and demand” with a spoonful of sugar. He has three types of housing: newly built yuppie fish tanks, old housing that can switch between working class and yuppie, and newly built “affordable housing” unattractive to yuppies. Read Noah Smith, “Yuppie Fishtanks: YIMBYism explained without ‘supply and demand’,” in which he writes: “YIMBYism is the idea that cities need to build more housing in order to relieve upward pressure on rents.”
One year ago today, Alice Wu’s research about sexism at an online economics forum made the news. Read Claudia Sahm: “Alice in Wonderland.”
Dick Schmalensee says in “Handicapping the High-Stakes Race to Net-Zero” that “Economists argue that a broadly applicable incentive-based system … could reduce emissions at a much lower total cost than any alternative regime. Incentives to reduce emissions could be produced directly by a tax on emissions or through … cap-and-trade system. But the argument for relying primarily on financial incentives has historically not been very persuasive. … Even in California and the European Union, where cap-and-trade systems for CO₂ have been established, so-called “ancillary” or “belt-and-suspenders” policies that target particular sectors or sources have also been deployed.”
Read Kimberly Adams, “The disturbing parallels between modern accounting and the business of slavery,” in which she writes: “The common narrative is that today’s modern management techniques were developed in the factories in England and the industrialized North. … According to … Caitlin Rosenthal, that narrative is wrong.”
Yuriy Gorodnichenko, Debora Revoltella, Jan Svejnar, and Christoph Weiss, in “Dispersion in productivity among European firms,” employ “firm-level data from all EU countries to explore how the dispersion of resources affects macroeconomic performance.”
This is the most hopeful take on American productivity growth relative stagnation I have seen. I thought it was coherent and might well be right 20 years ago. I think it is coherent and might possibly be right today. But is that just a vain hope? Read Michael van Biema and Bruce Greenwald (1997), “Managing Our Way to Higher Service-Sector Productivity,” in which they write: “ What electricity, railroads, and gasoline power did for the U.S. economy between roughly 1850 and 1970, computer power is widely expected to do for today’s information-based service economy.”
Thiemo Fetzer in “Did Austerity Cause Brexit?” finds that “the rise of popular support for … UKIP … strongly and causally associated with an individual’s or an area’s exposure to austerity since 2010.”
Interesting. The question is always: do you make money by devoting effort to selling people things they will be happy they bought, or do you make money by devoting effort to selling people things they will be unhappy they bought—by grifting them? And what determines the balance of providing value versus deception in selling commodities aimed at different income classes? I am not sure they have it right here, but I am sure that this is very important. Read James T. Hamilton and Fiona Morgan, “Poor Information: How Economics Affects the Information Lives of Low-Income Individuals,” in which they explore “how information is produced for, acquired by, and utilized by low-income individuals.”
I concur with Noah Smith here that the biggest dangers of machine learning are not on the labor but on the consumer side. They won’t make us obsolete as producers. They could make us easier to grift as customers. Read Noah Smith, “Artificial Intelligence Still Isn’t All That Smart,” in which he writes: “Machine learning will revolutionize white-collar jobs in much the same way that engines, electricity and machine tools revolutionized blue-collar jobs.”

How rising U.S. income inequality exacerbates racial economic disparities

Posted on August 23, 2018April 9, 2019 by Emilie Openchowski

Fifty years after the U.S. civil rights movement, racial economic inequality remains an undeniable force in American life. The family income gap between blacks and whites today remains at almost exactly the level it was in the 1960s—just one of many indicators of the remarkably little progress toward racial convergence in family income. Many well-documented factors contribute to this income gap, among them ongoing discrimination in the labor market, racial differences in family structure, and segregation by occupation and neighborhood.

One underappreciated factor that contributes to the racial income gap is the lack of equitable growth in the U.S. economy at large. Since the 1970s, the share of national income going to the richest 1 percent almost doubled, while wages for most Americans remained stagnant. As I show in a recent paper, “Income Inequality and the Persistence of Racial Economic Disparities,” rising income inequality has disproportionately harmed African Americans, negating substantial improvements in relative terms and preventing what would otherwise have been a meaningful, if incomplete, convergence in incomes between blacks and whites. In short, inequitable growth over the past few decades is a major driver of our nation’s persistent racial income gap.

Let’s first look at the average income for African Americans as a fraction of the average income for whites over time. Whether we choose mean or median, family or household income, the picture is the same: There has been virtually no improvement in the average ratio of black to white income over time. Focusing on median family income, in 1968, just after the civil rights movement, the median African American family income was 57 percent of the median white American family income. In 2016, the ratio was 56 percent. The utter lack of progress is striking. (See Figure 1.)

Figure 1

It’s also a bit puzzling because racial gaps in many other social outcomes have contracted since the 1960s: College attainment, high school test scores, and life expectancy all have seen some convergence between blacks and whites, though progress in these areas is by no means complete.

So, why has there been so little progress toward equalizing incomes? Well, it turns out that the intransigent racial income gap is the result of two opposing trends. On the one hand, blacks have made real progress climbing to higher positions on the income distribution. From 1968 to 2016, the median African American climbed from the 25th percentile of the national family income distribution to the 35th percentile. While this progress is nowhere near complete, it was enough to narrow the gap in income ranks between blacks and whites by almost a third. In the 1960s, the large majority of whites earned more than the typical black person. By 2016, that proportion had declined substantially. This progress came despite continued racial disparities in parental wealth, access to educational resources, and treatment in the labor market. (See Figure 2.)

Figure 2

On the other hand, just as African Americans were entering the ranks of the middle class in large numbers for the first time, broader economic forces were undermining the financial security of families across all races. Starting in the 1970s, changes to the economy and to public policy began concentrating a larger and larger share of national income in the pockets of the richest members of society. Incomes for the middle class and the poor have hardly grown at all, while incomes for the richest 1 percent almost tripled.

These changes to the income distribution mean that as more African Americans succeed in overcoming the many obstacles to reaching the middle class, the payoff is not as great as it had been for social groups that climbed the income ladder earlier in U.S. history. To see this, consider the income earned at the 35th percentile, where the median African American stood in 2016. In 1968, a person at the 35th percentile had an income 69 percent of the national mean. But by 2016, income at the 35th percentile had fallen to be just 49 percent of the national mean. Because of rising income inequality, successfully reaching the middle of the income distribution did not provide the same economic reward to blacks as it had to previous groups of Americans. (See Figure 3.)

Figure 3

The effect of rising income inequality on racial disparities also becomes evident by simulating what the income gap would look like if the overall income distribution had stayed constant. If overall inequality hadn’t gone up, the ratio of median black family income to white family income would have climbed from 57 percent to 70 percent, decreasing the racial income gap by 30 percent. That would still be a far cry from racial economic equality, of course. Racial discrimination, residential segregation, neighborhood disinvestment, and other remnants of America’s long history of racial subjugation would all still be present even if overall economic inequality hadn’t gotten worse. But this simulation shows that in a world where our country’s growth were shared more equitably, we would have a substantially smaller racial income gap than we see today.

Of course, rising inequality has hurt Americans of all races—even for whites, the median income has declined by 14 percent as a share of the national mean over the past five decades. But because African Americans remain overrepresented among the poorer segments of society, economic shifts that have harmed almost everyone have also increased the average income gap between blacks and whites. These shifts were strong enough to undo what would otherwise have been substantial—though far from complete—progress toward racial equity in income.

These findings demonstrate how economic inequality and racial inequality are fundamentally intertwined. Over the past 50 years, a fairly large improvement in the relative position of African Americans was entirely undone by national economic shifts. Going forward, high levels of overall inequality will make it harder to achieve racial parity since any improvement in relative terms means less in terms of dollars.

Yet this analysis also shows how policies to make the economy more equal in general can contribute to greater equality between races—a point many civil rights leaders and academics have made over the years. The vast majority of Americans have an interest in reversing wage stagnation and making the economy more equitable. This offers a second front in the battle for racial equality. Efforts to reduce discrimination, equalize access to education, ensure equal treatment by the legal system, and otherwise end racial stratification should continue since they seem to be making real, if slow, progress. But these policies should be paired with broader economic policies to end wage stagnation for Americans of all races and, in so doing, reduce the gaps between racial groups.

—Robert Manduca is a Ph.D. student in sociology and social policy at Harvard University.

(This article summarizes findings from “Income Inequality and the Persistence of Racial Economic Disparities” in Sociological Science. This post is adapted from a piece that appeared on the Work In Progress blog of the American Sociological Association.)

Why accessibility to broadband matters in reducing economic inequality in the United States

Posted on August 21, 2018August 20, 2018 by Emilie Openchowski

A common thread at this year’s Netroots Nation—an annual summertime political convention that brings together progressive political activists and leaders to discuss an array of issues affecting the country and its people—was accessibility to broadband and how barriers to accessibility affect economic inequality, particularly among rural and low-income communities across the United States.

There is no question that accessibility to broadband is a requirement for individuals to thrive in today’s U.S. economy. On a panel discussion at the convention titled “The Federal Communications Commission’s War on the Poor,” communications leaders discussed the baleful consequences faced by rural and low-income people who disproportionately lack access to high-speed broadband. Students need broadband to access the internet to do homework and apply to colleges. Working families need it to apply to jobs and to access various government services, and seniors are increasingly reliant on broadband accessibility to connect to the growing world of telehealth.

Indeed, a study done in 2016 by the U.S. Department of Housing and Urban Development finds a strong correlation between household income and in-home connectivity—a pattern that persists across both rural and economically depressed urban communities. The study finds that while an overall two-thirds of U.S. adults aged 18 and older had access to broadband internet in their homes, just 41 percent of adults with household incomes less than $20,000 had it, while 90 percent of adults with household income higher than $100,000 had access. Another report looking into the effects on mobile access and broadband in Chicago confirms what individuals such as Montana Gov. Steve Bullock, who spoke at Netroots Nation, have been trying to convey. The report examines how segregation and concentrated poverty determine access to in-home broadband. The findings point out that internet service providers aren’t offering strong coverage to low-income housing areas or are often charging exorbitant installations fees to begin service in unserved neighborhoods. For people in these communities, it means a continuation of struggling to apply for and obtain jobs, fill out college applications and complete homework, and get easily connected to a variety of telehealth options.

Expanding broadband to underserved areas and to low-income individuals would help ameliorate economic inequality in the United States. In an analysis looking at the effects of providing greater broadband access in France, the evidence is clear that the adoption of high-quality broadband raised mean incomes and lowered income inequality. For every 1 percent increase in broadband penetration, mean income rose by 0.14 percent. The study also found that between 2009 and 2013, broadband adoption alone contributed toward 34 percent of income growth and 80 percent of reductions in income inequality. Part of this is explained by the fact that 31 percent of low-income individuals used the internet to search for jobs, compared to just 18 percent of high-income individuals. Thus, when people in low-income communities had accessibility to high-quality broadband at home, incomes began to rise for these households.

The analysis of the impact of broadband accessibility in France seems to align with findings here in the United States. Studies looking into the impact on job growth as it relates to broadband accessibility found that the availability of broadband services, regardless of adoption, added as much as 1.4 percent to the U.S. employment growth rate. This finding was backed up by a similar study that found that for every increase of 1 percent in a given state’s broadband penetration, there was an increase of up to 0.3 percent in that state’s employment rate each year. Some of this was attributed to the assumption that information communication technology skills are becoming increasingly required in even traditionally low-skilled occupations, and that having these basic skills increased the probability of landing a job interview.

Indeed, many state and local communities are gearing up to expand high-quality broadband precisely because of these economic ramifications. In North Carolina, for example, Gov. Roy Cooper has proposed a budget that would allocate $20 million to connect households and businesses to the internet and work on closing the “homework gap.” And small broadband companies such as Wilkes Communications, Inc. are becoming success stories in areas where large providers refuse to go.

The problem of unequal access to high-speed broadband was highlighted in a report, “A communications oligopoly on steroids,” published in 2017 by the Washington Center for Equitable Growth, authored by communications antitrust experts Gene Kimmelman and Mark Cooper. The two point out that broadband has become a modern-day necessity with virtually no substitutes, yet market conditions have made it so companies are not offering services to some communities where costs are high and incomes are low. This is why policymakers need to continue to examine the consequences of unequal broadband access to U.S. economic growth and prosperity.

Equitable Growth comments to the Federal Trade Commission on the agency’s proposed competition hearings

Posted on August 20, 2018August 20, 2018 by Ed Paisley

This summer, the Federal Trade Commission announced it would hold a series of hearings throughout the fall and winter on “whether broad-based changes in the economy, evolving business practices, new technologies, or international developments might require adjustments to competition and consumer protection enforcement law, enforcement priorities, and policy.” The hearings will cover 11 broad topics and asked for comments on those topics and the hearings in general.

The Washington Center for Equitable Growth submitted comments identifying three overarching questions the hearings should address related to competition policy:

Is monopoly power prevalent in the U.S. economy?
Do the antitrust laws as applied by the courts correctly balance the benefits and costs of deterring anticompetitive conduct and permitting procompetitive conduct?
Does the Federal Trade Commission have the resources it needs to fulfill its competition mission?

The complete comment submitted to the Federal Trade Commission can be downloaded below.

Download File
Comments for FTC Hearings from Equitable Growth

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