Worthy reads from Equitable Growth:

1. A working paper that I thought was very good but that, for some reason, did not get a lot of attention is “The wages of care: Bargaining power, earnings and inequality” by Nancy Folbre and Kristin Smith, who write: “The earnings of managers and professionals employed in care industries (health, education, and social services), characterized by high levels of public and non-profit provision, are significantly lower than in other industries.” My take was always this was overwhelmingly because “feminized” occupations have low pay.
2. Another working paper from our past that should have gotten more buzz than it did is “The U-shape of over-education? Human capital dynamics & occupational mobility over the life cycle” by Ammar Farooq, who writes: “the proportion of college degree holders working in occupations that do not require a college degree is U-shaped over the life cycle and … there is a rise in transitions to non-college jobs among prime age college workers.” Yes, “overeducation” is a thing.
3. Applause for our attempt to focus on the broader implications of rising monopoly. Read Noah Smith, “Economists Gear Up to Challenge the Monopolies,” who writes: “The antitrust movement is making a comeback. … Think tanks like the Washington Center for Equitable Growth are starting to zero in on the issue as well.” Also read “How the rise of market power in the United States may explain some macroeconomic puzzles” by co-author and former Equitable Growth visiting fellow Jacob Robbins, who writes: “Gauti Eggertsson, Ella Getz Wold, and I at Brown University argue that these diverse trends are closely connected, and that the driving force behind them is an increase in monopoly power together with a decline in interest rates.”
4. Homeowner bankruptcy and foreclosure are liquidity events, not solvency events, argue Peter Ganong and Pascal Noel in “Liquidity vs. wealth in household debt obligations: Evidence from housing policy in the Great Recession.” They write: “We use variation in mortgage modifications to disentangle the impact of reducing long-term obligations with no change in short-term payments (‘wealth’), and reducing short-term payments with approximately no change in long-term obligations (‘liquidity’).”

Worthy reads not from Equitable Growth:

1. A plea for economists and policymakers to focus on unionization, societal priorities, and worker bargaining power—rather than speculate about “artificial intelligence” trends that are, really, probably 50 years away from achieving criticality. Read Sarita Gupta, Stephen Lerner, and Joseph A. McCartin’s “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.’”
2. This former president of the Minneapolis Fed has become one of the very best Fed watchers and Fed analysts. Read Narayana Kocherlakota’s “The Fed Should Prepare for the Unexpected,” in which he writes: “The staff paper downplayed and Powell ignored what I see as the most important risk.”
3. Read Kevin Drum’s “Technology Is the Key to Success, But Probably Not the Technology You Enjoy,” in which he writes: “I’d put it more bluntly: unless they’re forced to at the point of a metaphorical gun … service-sector managers are lazy … in a very specific way: they don’t really understand technology.” Yet, somehow, manufacturing managers learned to understand electricity in the 1920s and 1930s. How? Why? According to Kevin’s theory, it was that they were forced to learn or watch their firms disappear in the Great Depression.
4. Sociological distance, the present and the legacy of past discrimination, and preventive treatment in Oakland, California, means that perhaps 20 percent of the black-white cardiovascular health gap is due to the fact that black patients are seen by sociologically distant white doctors. Read Marcy Alsan and her co-authors’ working paper “Does Diversity Matter for Health? Experimental Evidence from Oakland,” in which they write: “We study the effect of diversity in the physician workforce on the demand for preventive care among African-American men.”
5. I disagree with Jeff Frankel in his column “The Depth of the Next US Recession,” in which he writes “Whatever the immediate trigger of the next US recession, the consequences are likely to be severe. … Pro-cyclical fiscal, macro-prudential, and even monetary policies … [leave] authorities …in a weak position to manage the next inevitable shock.” My take is that the Federal Reserve has not been doing a good job since 2010. Its central task as of 2010 was to get the U.S. economy rapidly back to full employment at a configuration of economic variables that would give it a short-term safe nominal interest rate of 5 percent or more so it would have room to properly fight the next recession whenever it should come. You could argue that the rest of the government makes it impossible for the Fed to do a good job. But you cannot argue that the Fed should be satisfied with the job it has done since 2010.

Worthy reads from Equitable Growth:

1. 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.”
2. 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.
3. 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.”
4. 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:

1. 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.”
2. 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.
3. 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.”
4. 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.”
5. 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.”
6. 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.
7. 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.”
8. 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.’”

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.”

Worthy reads from Equitable Growth:

1. 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?”
2. 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.”
3. 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?”
4. “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.”
5. 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.”
6. 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:

1. 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.”
2. One year ago today, Alice Wu’s research about sexism at an online economics forum made the news. Read Claudia Sahm: “Alice in Wonderland.”
3. 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.”
4. 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.”
5. 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.”
6. 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.”
7. 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.”
8. 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.”
9. 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.”

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.