Must-Read: Jared Bernstein: Models of the Minimum Wage

Must-Read: The economics of the regulation of natural monopolies tells us that such entities reduce utility by artificially restricting what they produce in order to improve their terms-of-trade and profits–and that one tool to deal with this is rate regulation. The Card-Krueger and other evidence on low-wage employment suggests the same rationale for the minimum wage:

Jared Bernstein: Models of the Minimum Wage: “We can introduce some ideas… that comport a bit more with reality…

…In the low-wage labor market… workers/employers are not that responsive in terms of employment to changes in wages (dlog(emp)/dlog(wage)=small number like -0.1 to -0.3, or something…). When you draw inelastic supply and demand curves, you end up predicting a lot less unemployment…. If this model is more accurate, significant estimates of job loss effects are hard to pull out of the data. Which they are…. [The world is] trying to tell us something about low-wage workers and their employers’ tempered responsiveness to increases in the wage floor…. There’s [also] a model… [of a] a monopsony labor market…. The monopsony model may sound arcane—the classic example is the one-company coal town–but it may not be too much of a reach to conclude that the low-wage labor market in a given town or city works kind of like this…. The competitive model as conventionally drawn is misleading. Economic models vastly simplify… can yield some insights…. But at the end of the day… when the theory doesn’t match the evidence, trust the evidence.

Must-Read: Miles Corak: Inequality: A Fact, an Interpretation, and a Policy Recommendation

Must-Read: That Miles Corak describes the three aspects of rising-inequality denial as “a common storyline” is a measure of how completely divorced from reality even so-called policy professionals in the right-of-center echo chamber have become. Sensible technocratic dialogue is thus going to remain very, very difficult for quite a while to come…

Miles Corak: Inequality: A Fact, an Interpretation, and a Policy Recommendation: “A common storyline…. Inequality has not increased…

…even if it has… little… can be done… and even if… policy has punch, the effort… diverts attention from more pressing problems, like poverty…. [But we can] address both inequality and poverty in a smart way…. A more nuanced interpretation… give[s]… another storyline…. Inequality has increased; there is something that can be done about it; and if public policy has punch, the effort directed to fighting inequality contributes to solving other pressing problems, like poverty.

Must-Read: Belle Sawhill: Where Have All the Workers Gone?

Must-Read: I really want to see what happens to these numbers in a high-pressure low-slack economy…

Isabel Sawhill: Where Have All the Workers Gone?: “Among male heads of household between the ages of 25-54…

…[not at work,] 27 percent say it is because they are ill or disabled…. [But] we excluded from the sample anyone on disability…. Another 22 percent said they couldn’t find work–not too surprising in a year when the unemployment rate was still over 7 percent. The remaining half… going to school, taking care of home or family… retired (despite being under 55), or… some other reason for why they weren’t working…. These are all men in their prime working years and that their lack of work leaves them and anyone else in their household at or near the poverty line…. Women heading households are somewhat similar… with far fewer reporting that they are ill or disabled and more of them reporting that they are taking care of home or family…

Must-Read: Gabriel Zucman: GSPP Policy Research Seminar: Wealth Inequality in the United States Since 1913: Evidence from Capitalized Income Tax Data

Must-Read: Gabriel Zucman is talking at Berkeley on November 30 on the sharpness of the peak in wealth accumulation. It’s not any sort of broad-based phenomenon, it’s all at the peak–the surge in incomes at the very top, coupled with their inability or unwillingness to increase their spending to match…

Gabriel Zucman : GSPP Policy Research Seminar: Wealth Inequality in the United States Since 1913: Evidence from Capitalized Income Tax Data: “We estimate wealth by capitalizing the incomes reported by individual taxpayers…

…accounting for assets that do not generate taxable income…. Wealth concentration has followed a U-shaped evolution over the last 100 years: It was high in the beginning of the twentieth century, fell from 1929 to 1978, and has continuously increased since then. The rise of wealth inequality is almost entirely due to the rise of the top 0.1% wealth share, from 7% in 1979 to 22% in 2012–a level almost as high as in 1929…. The increase in wealth concentration is due to the surge of top incomes combined with an increase in saving rate inequality…. Monday, November 30, 12:10–1:00 Room 105, GSPP (Corner of Hearst and LeRoy, across from Cory Hall.)

Wealth Inequality in the US since 1913 Gabriel Zucman

Must-Read: Duncan Weldon: Are the Robots Taking Enough Jobs?

Actor Arnold Schwarzenegger poses for photographers at a preview of the film ‘Terminator: Genisys’. (AP Photo/Jacques Brinon)

Must-Read: Human smiles and human truly creative thought look to remain economically valuable. So learn how to smile!

Duncan Weldon: Are the Robots Taking Enough Jobs?: “Andy Haldane has warned that new technologies could replace up to 15 million British jobs…

…Ignazio Visco, trod much the same ground. Both policymakers are taking the threat of computerisation… seriously…. Historically… waves of new technology have created as many jobs as they have destroyed…. This time might be different, the next wave of labour-saving technology looks to be replacing human brains, rather than human brawn, and the impact could be far more wide-reaching. And, even if this time isn’t different… adjustments… in the past led to a generation or more of economic pain…

Must-See: Ron Lee et al.: Do Millennials Stand a Chance? Giving the Next Generation a Fair Shot at a Prosperous Future

Must-See: Ron Lee, Hilary Hoynes, Henry Brady, Alex Gelber, Jesse Rothstein (November 18, 2015): Do Millennials Stand a Chance? Giving the Next Generation a Fair Shot at a Prosperous Future:

Wednesday, November 18, 2015 from 8:00 AM to 11:00 AM (PST) :: California Memorial Stadium :: 210 Stadium Rim Way

Explaining the “History of Technology” series and equitable growth


Let me recite what history teaches,” wrote the 20th century American novelist Gertrude Stein. “History teaches.

Does history teach? In particular, does history teach about job destruction and creation? Can the study of history, both in case studies and in the broad strokes of trends, help us understand how structural changes in the U.S. economy have affected growth and inequality in the past? Can they give clues about what we can expect in the future?

The Washington Center for Equitable Growth set out to answer those questions by establishing a Working Group on the History of Technology. In a Washington, D.C. policy environment dominated by economists and political scientists, we wanted to see if the tools and concepts of the history of technology can be deployed in ways that complement those other disciplines. After all, historical precedents are routinely cited in policy discussions, but rarely are they subjected to the close analysis that professional historians can bring to the conversation.

Our working group of technology historians seeks to answer the question of whether there are elements of previous mass technological shifts that may aid in the management of workforce disruptions brought about by the post-high-tech revolution. The group considered this question in light of the overarching mission of Equitable Growth to investigate whether and how economic inequality affects economic growth and stability. By casting an informed look back to previous technology-driven job upheavals, we may find shifts in inequality and growth—shifts that indicate whether these phenomena are linked. If so, then perhaps answers to today’s growing income and wealth gaps will lie in some combination of spontaneous forces and active interventions by government or through public-private alliances.


The “History of Technology” series of essays

Equitable growth and Southern California’s aerospace industry
By Matthew H. Hersch, Assistant Professor of the History of Science at Harvard University
and a Research Associate of the Smithsonian Institution’s National Air and Space Museum

Not all inequality is the same: Slavery versus economic creativity in Civil War America
By John Majewski, Interim Dean of Humanities and Fine Arts and Professor in the Department
of History at the University of California, Santa Barbara

Engineering, industrialism, and socioeconomic orders in the Second Industrial Revolution: What U.S. policymakers today could learn from emerging technology professions and innovation at the turn of the 20th century
By Adelheid Voskuhl, Associate Professor of the History and Sociology of Science at the
University of Pennsylvania

Responsible innovation: The 1970s, today, and the implications for equitable growth
By Cyrus C.M. Mody, Professor and Chair in the History of Science, Technology, and Innovation
in the Faculty of Arts and Social Sciences at Maastricht University in the Netherlands

Energy transitions in the United States and
worker opportunities past, present, and future

By Christopher F. Jones, Assistant Professor in the School of Historical, Philosophical,
and Religious Studies at Arizona State University

Environmental regulation and technological development
in the U.S. auto industry

By Ann Johnson, Associate Professor, Department of Science and
Technology Studies, Cornell University

Emerging technologies, education, and the income gap
By Michael E. Gorman, Professor, Department of Engineering and Society, University of Virginia

 


We did not look for technological speculation or “futurism” in our work. But any technology that is or has been in operation for the last couple of hundred years has been fair game for our group, from the steam engine and railroad to nanoengineering, synthetic biology and microchip production, as well as the workforces related to those endeavors. Otherwise, in charging our group of historians, we brought no preconceptions in this regard. Nor do we think that there will necessarily be a clear line from previous experience to the future. Some past events and concepts might be a dead end, but some might provide a foothold, however modest, on understanding what lies ahead.

Whatever the case, historical lessons are too important to be ignored in considering the future of job creation in a post-high-tech world. In the words of the 18th century Scottish philosopher David Hume—a decidedly less musical but no less nuanced writer than Gertrude Stein—the future tends to resemble the past. The challenge, we might add, is ascertaining which tendencies will turn out to matter in the years ahead.

Jonathan D. Moreno is the David and Lyn Silfen University Professor at the University of Pennsylvania, where he teaches and researches medical ethics and health policy, the history and sociology of science, and philosophy. Moreno has served as an advisor to many U.S. governmental and nongovernmental organizations, including the Department of Defense, the Department of Homeland Security, the Department of Health and Human Services, the Centers for Disease Control and Prevention, the Federal Bureau of Investigation, the Howard Hughes Medical Institute, and the Bill and Melinda Gates Foundation. Moreno is an elected member of the National Academy of Medicine (formerly the Institute of Medicine) of the National Academies and is the U.S. member of the UNESCO International Bioethics Committee. 

 

The consequences and causes of declining geographic mobility in the United States

Horace Greeley, were he alive today, would be disappointed to see so many Americans not taking his famous advice—“Go West!”—to heart.

U.S. workers are not only moving west at a declining rate, but they are becoming less likely to move east, north, and south as well. The U.S. Census Bureau recently released data on geographic mobility in the United States that shows the rate at which workers move to different states and counties is still historically low. This now-three-decade-long trend has some important implications for the U.S. economy, even if we aren’t exactly sure what’s causing it.

One of the advantages of the U.S. labor market has long been that its high levels of labor mobility let workers move to a new area if job prospects dry up. If there are fewer jobs in Indiana, you can move to California. In fact, a 1992 paper by economists Olivier Blanchard, now of the Peterson Institute for International Economics, and Lawrence Katz of Harvard University shows that mobility was the key way people responded to losing a job.

But that’s less the case now, according to new research by economists Andrew Foote of the U.S. Census Bureau, and Michel Grosz and Ann Huff Stevens of the University of California, Davis. Looking at the impact of mass layoffs, the researchers find that workers are now twice as likely to exit the labor force as they were before the Great Recession of 2007–2009. Moving is still the largest response to being laid off, but it has become increasingly less important. The three economists’ finding is very similar to the findings of a working paper by  several International Monetary Fund researchers.

The declining rate of workers moving–and its changing importance in the labor market–raises the question of what’s actually causing the decline. One obvious culprit is the changing demographics of the United States: Older workers are less likely to move. But as Adam Ozimek of Moody’s Analytics points out, there are analyses of this declining migration rate that have accounted for this change and still found a significant decline in labor mobility. Ozimek points to research suggesting a role for occupational licensing in pushing down the rate in geographical moves. Although he notes that the decline isn’t well enough understood at this point to make definitive conclusions.

The research we do have, however, suggests other potential explanations—although some make more sense than others. For example, research by economists Raven Molloy and Christopher Smith of the Federal Reserve Board of Governors, and Abigail Wozniak of the University of Notre Dame shows that the decline in mobility is intimately linked with changes in the labor market. Workers are less likely to move somewhere because the gains to getting a new job in any location have declined as well. In this case, geographic mobility tracks job-to-job mobility. Of course, this just shifts the question to why job-to-job mobility has declined. It could be because workers are better sorted to their jobs so they don’t need to move, or because of a declining demand for workers—a collapsing of the job ladder.

The answer of this now-slightly-different question remained unsolved. But at least in the search for the answers, we have some guidance on the right set of questions to ask.

Must-Reads Found on November 16 and November 17, 2015

  • Larry Mishel: Uber Is Not the Future of Work: “Driving mostly for supplementary income on a transitory basis…” :: I’m with Larry Mishel here: Why do people think Uber-type companies are an important deal, again? Uber, AirBNB, Criagslist… and what else?
  • Steven Pearlstein: The Value and Limits of Economic Models: “The alleged failings of economics are now widely understood…. Rodrik no doubt set out to offer an evenhanded view of modern economics, [but] in the end he winds up delivering a fairly devastating critique…” :: Let me agree with Steve Perlstein here: the economics that Dani Rodrik praises is not the strongest current, outside of our liberal-arts non-business school ivory towers, and not always even in them.
  • John Fernald: The Pre-Great-Recession Slowdown in U.S. Productivity Growth: “Counting “free” digital goods wouldn’t raise market productivity much…” :: I do not understand what John Fernald is getting at here: Who cares if it is not “market” but “home” production?
  • Mark Thoma: Where Fed’s Critics Got It Wrong in GOP Debate: “The Federal Reserve was instrumental in easing the impact of the Great Recession…” :: Critics of expansionary macro policies in a high-slack low-inflation economy have taken over Republican-Party economic policy. Can somebody please tell me what is going on?

Must-Read: Larry Mishel: Uber Is Not the Future of Work

Must-Read: I’m with Larry Mishel here: Why do people think Uber-type companies are an important deal, again? Uber, Airbnb, Craigslist… and what else?

Larry Mishel: Uber Is Not the Future of Work: “The rise of Uber has convinced many… that freelancing via digital platforms is becoming increasingly important…

…[But] a look at Uber’s own data about its drivers’ schedules and pay reveals them to be much less consequential than most people assume… distracts from the central features… that should be prominent in the public discussion: a disappointingly low minimum wage, lax overtime rules, weak collective-bargaining rights, and excessive unemployment, to name a few…. Curiously, the best evidence of Uber’s relatively small impact on the American labor market comes from data released and publicized by the company itself. David Plouffe, an Uber strategist… ‘Here in the U.S., there are more than 400,000 active drivers… half the drivers work less than 10 hours per week… a third of drivers said they used Uber to earn money while looking for a job.’… Driving mostly for supplementary income on a transitory basis conflicts with the notion, promoted by the company, that Uber, and gig work more generally, are a major feature of how people will earn a living in the future…