1. The very sharp Adriana Kugler, one of Equitable Growth’s grant recipients, on MPR news. I would highlight the urgency of accomplishing the tasks with respect to reforming unemployment benefits that she lays out. This really must be done before the next recession, which could come any year. And they should be done immediately. In the end, the United States may turn out, all in all, to have handled the coronavirus pandemic better than other North Atlantic economies because of the extraordinary vaccine success and a fiscal response that was, for once, at the proper scale. But the average accomplishment of the comparison group was so bad that “best in class” is very weak praise indeed. Listen to Kugler on MPR and read a synopsis of the report, in which she explains that critics of the benefit increases should remember that the dollar amounts in question are relatively modest. Even including boosts from the Federal Pandemic Unemployment Compensation program, the average American family of four would receive only $26,400 from a year of unemployment benefits. “’That doesn’t exactly make you rich,’ Kugler said. … Many unemployed workers found it difficult to navigate the arcane federal-state system that in many cases proved under-resourced and outdated. Some workers without recent full-time employment fell through the cracks due to complicated qualification rules. And structural racism persists in the construction of the system as a whole. The work of undertaking these and other reforms is urgent, and ‘it needs to be done before the next recession,’ Kugler said.”
2. Equitable Growth Steering Committee member Alan Blinder, in an op-ed in The Wall Street Journal, “Biden’s Plan Encourages True Supply-Side Economics;” asks: “Do you remember supply-side economics … the doctrine that claimed that lowering taxes (especially on the wealthy) would cause a gusher of growth and bring in more new revenue than it lost[?] It wasn’t true, as the Reagan and Bush tax cuts demonstrated. …The Trump tax cuts … [did] little to stimulate growth as well. But certain supply-side policies really could be counted on. … Some of them were even tax cuts. … But many of the most promising supply-side policies involve government spending, including investment in physical infrastructure like roads, bridges, ports and airports. The argument for more public investment is essentially the same as the argument for more private investment. … Selecting the right projects, however, is crucial. This means not limiting ourselves to physical investments like factories and roads, because investments in human capital offer many of the highest returns. Fortunately, much of President Biden’s American Jobs Plan and American Families Plan pushes in that direction. … Opponents of programs like these often denigrate them as ‘socialism.’ I like to praise them as real supply-side economics.”
Worthy reads not from Equitable Growth:
1. No. We do not know yet how the coronavirus pandemic has altered workplace and work-from-home technologies and preferences, and how it has altered relative bargaining power over health and safety on the one hand and convenience and commuting on the other. Any other questions? Read Anna North, “Bosses are acting like the pandemic never happened,” in which she writes: “The last year transformed work in terrifying ways. … Workers were forced to take on health risks … with line cooks facing the highest risk of Covid–19 mortality of any occupation. … While essential workers risked their lives on the job, millions of others were able to work from the relative safety of their homes. … The pandemic may have brought some workplaces closer to what Prithwiraj Choudhury … calls a ‘work from anywhere’ ideology. … But now, some companies are trying to turn back the clock on remote work.”
This is a post we publish each Friday 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 relevant and interesting articles 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
May is AANHPI Heritage Month in the United States, a period of time to commemorate the achievements and contributions of Asian Americans, Native Hawaiians, and Pacific Islanders. Kate Bahn and Carmen Sanchez Cumming look into the intersectional wage divides facing AANHPI women in the U.S. labor market, broadening the research in this area, which often obscures the difficulties this group of workers face in terms of employment, career advancement, and earnings. They examine racial, gender, and intersectional penalties that AANHPI women run up against in the workforce, and study what percent of these divides is due to explained or unexplained factors, the latter of which is typically assumed to be the result of discrimination. Bahn and Sanchez Cumming also note the importance of disaggregating data among subgroups of the AANHPI population, as there are many variations in the lived experience of, for instance, Asian American women of Indian and Chinese descent and those of Vietnamese descent or Native Hawaiians and Pacific Islanders. The co-authors close out their issue brief with actions policymakers can take to address these wage differentials and promote economic security for AANHPI women workers, their families, and their communities.
Every month, Equitable Growth highlights a group of scholars at the frontier of social science research in a series called Expert Focus. This month, Christian Edlagan, Maria Monroe, and I showcase the work and backgrounds of researchers across disciplines doing economic research on AANHPI populations and their lived experiences in the United States. Asian Americans are the fastest-growing racial or ethnic group in the country and face distinct challenges. They also have experienced a troubling surge in anti-Asian violence and discrimination during the coronavirus pandemic and recession. The scholars we write about this month are studying intergenerational mobility, wage equality, labor market participation, health and well-being outcomes, and the disparate impact of the coronavirus on AANHPI populations—while also highlighting the need for disaggregated data to more accurately capture the diversity of the many distinct Asian American subgroups in the United States.
New research looks into COVID-19 lockdown policies in the United States and their impact on consumer spending. Jacob Robbinssummarizes the findings of his and co-author Raissa Dantas’ working paper on the decline and rise of retail and personal consumption amid the coronavirus pandemic and recession. They find that in the early weeks of the pandemic, fear of catching the coronavirus was the main factor driving consumer spending declines, rather than state- or city-imposed restrictions on behavior, such as stay-at-home orders. When fear of COVID-19 declined but these restrictions were still in place, spending on services directly affected—such as retail and restaurants or other in-person services—remained depressed. This indicates, Robbins writes, that the public health restrictions had their intended deterrence effect and worked to reduce the spread of the virus. The Biden administration should therefore continue its long-term focus on fighting the pandemic rather than putting policies in place that may harm workers and consumers in exchange for short-term Gross Domestic Product gains.
Anticompetitive behavior in the pharmaceutical industry often leads to higher prices for consumers and fewer options in the form of generic competitors to brand-name drugs. But in 2019, Congress passed the bipartisan CREATES Act, which has thus far worked to stop two of these anticompetitive practices and pave the way for generic manufacturers to open up the marketplace. Michael Kades explains the two behaviors—sample blockades and safety protocol filibusters—that the CREATES Act addresses and how they have been used in the past to hamper efforts to create generics and biosimilars. He also discusses how the CREATES Act deters these actions, and other bipartisan measures Congress can take again to prevent other anticompetitive pharmaceutical industry practices such as pay-for-delay settlements and citizen petition abuse.
Links from around the web
Aggregate economic data are misleading and often do not tell the whole story of how most people are experiencing the economy or economic growth. This is true of Gross Domestic Product and of many other economic indicators that are commonly used in the United States. Marketplace’s Kai Ryssdal and Richard Cunningham explain why breaking down the data works to create equitable policy and target those policy interventions to the populations that really need the support. Ryssdal talks to Rhonda Vonshay Sharpe about how breaking down these data can achieve these goals, particularly amid the coronavirus recession and recovery, which has disproportionately affected women and people of color in the United States. Equitable Growth’s Austin Clemens and Michael Garvey recently explained why disaggregated data is needed as a result of structural racism’s enduring legacy and the disproportionate impacts of the coronavirus recession on people of color. Christian Edlagan and Raksha Kopparam also recently discussed the importance of disaggregating data on AANHPI workers amid the coronavirus pandemic.
Register for an upcoming event on economic data disaggregation
Data Infrastructure for the 21st Century: A Focus on Racial Equity
Supply-side economics alone has been proven ineffective at growing the U.S. economy and creating jobs. It must be accompanied by government investment in infrastructure—and, as Alan Blinder writes in an op-ed for The Wall Street Journal, that includes the care economy. Areas such as pre-Kindergarten, child care, and paid leave would all but guarantee high returns for the government’s investment in the form of increased human capital and improved economic and health outcomes for workers and their families. The Biden administration understands that these areas are badly in need of investment, Blinder continues, and has included them in the American Jobs Plan and American Families Plan proposals to Congress. “Opponents of programs like these often denigrate them as ‘socialism’,” Blinder concludes. “I like to praise them as real supply-side economics.”
Some employers are complaining these days about the difficulties of hiring workers, yet at the same time they are offering too-low wages, removing hazard pay, or not taking action to protect workers’ safety amid the public health crisis. Vox’s Anna Northlooks at how work has transformed in the past year, for both those in-person occupations deemed essential and for the workers who transitioned to clocking in remotely. North examines the various practices that were implemented to navigate the coronavirus and how they are slowly being withdrawn by employers—perhaps prematurely, as coronavirus cases continue to spread and deaths from COVID-19 still are a daily occurrence, albeit at a lower rate than for most of the pandemic. This has led some workers to hesitate to go back to work and sometimes even to strike or protest to demand more protections and higher wages.
Like other women of color, Asian American, Native Hawaiian, and Pacific Islander women run up against structural barriers that hurt their U.S. labor market outcomes, including disadvantages that are the result of racial discrimination, gender discrimination, and the interaction between the two. Yet there is little research on how the experiences of AANHPI women in the U.S. labor market are filtered through the interplay of race and gender. Indeed, current economic narratives tend to overlook the obstacles this group of workers face in terms of employment, opportunities for career advancement, and earnings.1
In this issue brief, we build on methodology developed when examining the racial-gender differences in the earnings of Black workers by Marlene Kim at the University of Massachusetts Boston, research on the intersectional wage divide faced by Black women by Mark Paul of the New College of Florida, Darrick Hamilton of the New School, and Khaing Zaw and William Darity Jr. of Duke University,2 and on work on the intersectional wage divide faced by Latina women by Kate Bahn and Will McGrew. Using Current Population Survey data by the U.S. Census Bureau over a 7-year period, we estimate the magnitude of, and factors that go into, the wage disparities experienced by AANHPI women by performing a so-called Blinder-Oaxaca wage decomposition—an econometric strategy that allows us to estimate which portion of the wage divide is “explained” and which portion is “unexplained.”
The explained portion in this brief refers to wage disparities that can be attributed to differences between two groups’ mean demographic and so-called human capital characteristics, which provide an approximation of a worker’s predicted productivity. These characteristics include metrics, such as level of educational attainment and occupation, as well as other factors that can explain wage levels, such as geographic location and age.
The unexplained portion in this brief captures the share of the wage divide that cannot be accounted for by differences between two groups’ observed characteristics, which is often interpreted as the closest estimate of outright discrimination and which cannot be otherwise measured with economic data. The unexplained portion of the wage divides presented here, then, may capture the effect of outright discrimination in addition to other unobserved characteristics. For instance, there is evidence that factors such as access to social networks, precise measures of years of work experience, the gendered division of unpaid care work, and English language proficiency—factors not accounted for in our model—also play a role in explaining racial and gender wage divides.
In her 2009 paper “Race and gender differences in the earnings of Black workers,” Kim finds that Black women experience earnings penalties that stem from the interaction of race and gender. Similarly, in their 2018 working paper “Returns in the labor market: A nuanced view of penalties at the intersection of race and gender,” Paul, Zaw, Hamilton, and Darity use an intersectional framework to analyze discriminatory pay disadvantages. They find that Black women do not face a single racial or gender wage penalty. Rather, this team of researchers finds that the unexplained portion of the wage divide between Black women and White men is larger than the sum of the individual racial and gender wage disadvantages.
Referencing the terminology of intersectionality coined by critical race theory scholar Kimberlé Crenshaw, these findings reflect that the interaction of multiple socially salient identities—such as gender and race and ethnicity—construct unique experiences worthy of individual examination. Consistent with the findings by Kim, as well as Paul and his co-authors, we find that AANHPI women’s intersectional wage penalty is greater than the aggregation of the unexplained gender and racial effects.
In addition, per our estimates, more than 160 percent of the wage divide between AANHPI women and White men—a gap of approximately 13 cents on the dollar—is unexplained by the characteristics included in our analysis. As such, if the two groups had the same rates of return on their demographic and productivity-linked characteristics, per our model, then AANHPI women would earn $1.08 for every dollar White men make—in large part due to their relatively higher levels of human capital.
There are also important differences in the magnitude and composition of the wage divides faced by AANHPI women along the lines of national origin or ethnicity and immigration status. In contrast with White men, for example, the higher-than-average hourly wages of Asian American women of Indian and Chinese descent can be fully explained by the observed characteristics included in our analysis. Importantly, some groups of AANHPI women face unexplained wage penalties, and these disadvantages are especially large for Vietnamese and Native Hawaiian and Pacific Islander women. AANHPI women born outside of the United States are also found to experience a substantial wage penalty.
The economic opportunities available to specific demographic groups represent the overall structural barriers of the U.S. labor market. For AANHPI women, as well as for all women workers by demographic characteristics, differences in causes of the gender wage divide between subgroups and over time are relevant to designing policies that will allow for women and their families’ economic security—which, in turn, fosters broadly shared growth across the U.S. economy when workers are not held back from their full potential and can engage fully in economic activity as vibrant consumers.
AANHPI women in the U.S. labor market
The AANHPI community is the fastest-growing racial group in the United States, and the Asian American population is projected to double in size by 2060. These demographic dynamics are often overlooked in U.S. labor market analyses due, in part, to data limitations.3
Drilling down further into the available data, Asian American workers tend to have unemployment rates near those of White workers but experienced a greater increase in joblessness at the onset of the coronavirus recession. Like in the Great Recession of 2007–2009, unemployed Asian American workers are currently more likely to be without a job for long periods of time than unemployed workers of other racial or ethnic groups. Asian American women also exemplify the troubling trend of declining labor force participation among prime-age U.S. workers since the late 1990s, with an especially pronounced drop in participation, alongside a similarly stark decline for Black men.
This drop may have been influenced by occupational segregation—the over- or underrepresentation of a group of workers in certain types of jobs—as well as by family structures. AANHPI women are disproportionately represented in high-risk occupations such as registered nurses while also being more likely to live in multigenerational households. The share of the AANHPI population living in multigenerational households is higher than for other racial or ethnic groups and is also rising. Between 2009 and 2016, the share of the AANHPI population living in multigenerational households climbed from 26 percent to 29 percent.
This unique intersection of circumstances demonstrates the need for an intersectional lens for economics research on AANHPI women, families, and communities that takes into account the interplay of race and gender. (See Table 1.)
Table 1
While AANHPI men and women have higher average earnings than men and women of the other major racial and ethnic groups, these aggregate statistics mask important inequities within the AANHPI community. Research by Rakesh Kochhar and Anthony Cilluffo of the Pew Research Center, for example, shows that income is more unequally distributed among the Asian American and Pacific Islander population than among any other major racial or ethnic group, with Asian American and Pacific Islander families in the top 10 percent of the income distribution, earning 10.7 times as much as those in the bottom 10 percent. This disparity is particularly striking given that in 1970, the income divide between these AAPI families near the bottom of the income distribution and those near the top was narrower than for their White, Black, and Latinx peers.
There are also substantial differences in economic outcomes along the lines of national origin and ethnicity. For instance, Asian Indian, Taiwanese, and Filipino households in the United States have annual incomes that are well above the U.S. median, while Bhutanese and Burmese households in the United States have annual incomes that are well below it. In addition, there is substantial occupational sorting across national origin and ethnicity. U.S. workers of Filipino and Thai decent, for example, have a significantly higher representation among front-line workers during the COVID-19 pandemic, compared to other AANHPI groups, as well as White workers. Even among the AANHPI community, more data and research are needed on differences in barriers, opportunities, and outcomes of workers by their national origin and ethnicity.
In the case of AANHPI women specifically, disparities in U.S. labor market outcomes are evident in their overrepresentation in both high- and low-wage occupations. An analysis by the National Women’s Law Center shows, for example, that Asian American and Pacific Islander women make up about 3 percent of the U.S. workforce, yet they represent 4.2 percent of all workers in the highest-paying jobs and 4.3 percent of all workers in the lowest-paying jobs in the U.S. economy. In 2019, more than 1.4 million AAPI women—about 30 percent of all AAPI women workers—held jobs that typically pay less than $15 dollars an hour.
Wage divides faced by AANHPI women
While race and gender represent two distinct social identities, they are not experienced as independent from one another. Rather, as proposed by intersectionality theory, race and gender—along with other socially salient identities such as class, national origin, and sexual orientation—overlap and interact to shape individuals’ social outcomes. In the context of the U.S. labor market, holding multiple socially salient identities affects workers’ earnings, employment opportunities, and overall experiences in a way that is specific and qualitatively different from the sum of the effects of the individual identities.
Applying this framework to our analysis and using a modified version of the model by Kim at University of Massachusetts-Boston and also used by Paul, Zaw, Hamilton, and Darity, in the following sections, we break down the wage divides between AANHPI women and AANHPI men, White women, and White men to understand the racial wage divide facing AANHPI women, the gender wage divide facing AANHPI women, and the intersectional wage divide faced by AANHPI women.
The wage divide between AANHPI women and White women
Some groups of AANHPI women reached or surpassed the earnings of White women in the second half of the 20th century. Research finds, for instance, that Japanese, Chinese, Filipina, Asian Indian, and Korean American women have equal or higher average earnings than White women in the United States at least since the late 1970s.4 The fact that many AANHPI women’s earnings rose relative to both the earnings of White women and the earnings of White men during this time was probably in part the result of their gains in terms of educational attainment, as well as the enactment of legislation that outlawed employment discrimination and removed formal barriers to well-paying technical and professional jobs following the Civil Rights movement.
Yet there are mixed findings on the question of whether AANHPI women currently experience a pay penalty vis-à-vis White women. One set of studies finds that that U.S.-born AANHPI women have higher earnings than similar White women even after accounting for demographic factors and characteristics associated with worker productivity.5 A possible reason behind the advantage, research by Emily Greenman at Penn State University proposes, is that Asian American women are less likely to take time out of the labor force and tend to make smaller reductions in their hours of work after having a child, resulting in fewer breaks in their employment histories and higher earnings over time.
But other studies do not find an earnings advantage. ChangHwan Kim and Yang Zhao of the University of Kansas, for example, find that after accounting for field of study and geographic concentration—characteristics that are usually not accounted for in studies finding a pay premium—Asian American women with a college degree are no longer found to have an earnings advantage over comparable White women. In addition, the authors show that first-generation Asian American women and Asian American women who did not earn their high school degree in the United States continue to have substantially lower earnings than comparable White women.
Importantly, Kim and Zhao also find that while U.S.-born Asian American women with a college degree do not seem to have a disadvantage with similar White women in terms of earnings, they are more likely to be unemployed and less likely to supervise big teams. This last finding is consistent with evidence that AANHPI workers are held back by a specific kind of glass ceiling—a structural barrier in which stereotypes and discriminatory boundaries limit access to upper-management jobs and positions with institutional power.
Per our estimates, geographic location—that AANHPI women are more likely to live in cities and regions where wages, as well as the cost of living, tend to be higher—explains 67 percent of the divide, and greater levels of educational attainment explain 59 percent of the wage divide between AANHPI women and White women. For example, while 63.7 percent of AANHPI women have at least a bachelor’s degree, 49.4 percent of White women have a bachelor’s degree or more. An unexplained portion represents 21 percent of the AANHPI women-to-White women wage divide, but it is not statistically significant. (See Figure 1.)
Figure 1
The wage divide between AANHPI women and AANHPI men
The unadjusted gender wage divide between AANHPI women and AANHPI men is large.6 Across our study period, 2013 to 2019, AANHPI women made only 79 cents for every dollar AANHPI men made—a 21-cent gap. Across the major U.S. racial and ethnic groups, the gender wage divide is only larger for White workers, with White women making 78 cents for every dollar White men make. (See Table 2.)
Table 2
The magnitude of the disparity is puzzling given that AANHPI men and women are more likely to hold the same type of job than men and women of other racial and ethnic groups, and that occupational segregation is one of the largest contributors to the overall gender wage divide in the United States. Indeed, research by Ariane Hegewisch and Heidi Hartman of the Institute for Women’s Policy Research shows that AANHPI workers do not only experience less job segregation on the basis of gender than White, Black, and Latinx workers, but they are the only group that made consistent progress toward job integration between the late 1980s and the late 2010s.7
We find that 71 percent of the gender wage divide between AANHPI men and women is unexplained by the characteristics included in our analysis. Importantly, industrial segregation—more so than occupational segregation—is the largest explained cause behind the wage divides between AANHPI women and AANHPI men. As such, the sorting of AANHPI women into relatively lower-paying industries accounts for 16 percent of the wage divide, occupational sorting explains 9 percent, and mean differences in educational attainment account for 6 percent. (See Figure 2.)
Figure 2
The wage divide between AANHPI women and White men
Turning to the intersectional wage divide faced by AANHPI women, we find that more than the entire AANHPI women-to-White men wage divide—163 percent—is unexplained. This means that AANHPI women’s wage boost—through observed characteristics such as high levels of educational attainment, occupational distribution in relatively well-paying occupations, and concentration in geographic regions where wages (and the cost of living) tend to be higher—is more than offset by factors that are unexplained by this model, or can be interpreted as likely the result of discrimination.
In addition, if the effects of being both Asian American, Native Hawaiian, or Pacific Islander and of being a woman were merely additive, researchers would expect an unexplained wage divide between AANHPI women and White men of 0.174 log points, given the 0.156 log point unexplained advantage AANHPI men have over AANHPI women and the 0.018 unexplained advantage White women have over AANHPI women. Instead, we find that the unexplained portion of the wage advantage White men have over AANHPI women, 0.218 log points, is greater than the sum of the separate unexplained effects.8 As proposed by U-Mass’s Kim and also by Paul, Zaw, Hamilton, and Darity in their studies of the intersectional wage penalties faced by Black women, this is why economists, as well as policymakers, should take intersectionality theory seriously in their analyses of labor market disparities. (See Figure 3.)
Figure 3
We also decompose the wages earned by White men and AANHPI women to examine the advantage or penalty the two groups experience relative to all other workers in the U.S. economy. As with the previous model, we find that most of the wage advantage that White men have over other workers (here, we exclude AANHPI women from the estimation) is unexplained by demographic or human capital characteristics. This means workers from historically marginalized demographic groups appear to face discriminatory wage penalties that cannot be accounted for by differences in characteristics associated with productivity alone, yet the most historically privileged group—White men—appears to receive a premium that is beyond what can be explained by their average human capital characteristics.
In contrast, AANHPI women’s wage advantage over all workers except for White men is driven by observed characteristics, with educational attainment explaining 65 percent, occupational and industrial distribution 28 percent, and geographic location 25 percent.9 (See Figure 4.)
Figure 4
The intersectional wage divides faced by AANHPI women of different national origin or ethnicity and citizenship subgroups
Due to the wide range of U.S. labor market outcomes experienced by workers within the AANHPI community, in this section, we decompose the wage divides by disaggregating data according to national origin or ethnicity, as well as by citizenship status. First, we again modify the models put forth by U-Mass’s Kim and by Paul, Zaw, Hamilton, and Darity, and examine the wage divides between various subgroups of AANHPI women and all other workers in the U.S. economy, but exclude White men. We repeat the same strategy for White men and exclude AANHPI women.
There are big disparities in the magnitude and composition of the wage divide between other workers in the U.S. economy and different groups of AANHPI women. For instance, virtually all the wage advantages that Asian Indian, Japanese, Chinese, Korean, and Filipina women have over other workers in the U.S. economy are accounted for by the demographic and human capital characteristics included in the model. Strikingly, however, Filipina, Vietnamese, and Native Hawaiian and Pacific Islander women experience large unexplained pay penalties.10 For Native Hawaiian and Pacific Islander women, the unexplained portion of the wage divide represents nearly all their pay disadvantage vis-à-vis other U.S. workers. (See Figure 5.)
Figure 5
Finally, we perform the wage decomposition by citizenship status and find that AANHPI women who were not born in the United States experience a substantial unexplained wage penalty. On average, naturalized and noncitizen AANHPI women earn higher wages than other naturalized and noncitizen workers (these estimates exclude White men) but face a pay penalty that cannot be accounted for with the characteristics included in our model. In contrast, U.S.-born, naturalized, and noncitizen White men are found to experience a substantial unexplained wage advantage vis-à-vis other workers (excluding AANHPI women) with the same citizenship status. (See Figure 6.)
Figure 6
About three-fourths of AANHPI workers in our sample were not born in the United States. When studying the U.S. labor market barriers faced by Asian and Asian American immigrants, researchers have proposed that English proficiency and place of education—factors we do not account for in our estimations—as well as racial bias, appear to play a role in explaining some poorer economic outcomes.
When studying why Asian immigrant men earned less than similar U.S-born White men, for example, Zhen Zeng and Yu Xie at the University of Michigan found that educational credentials obtained abroad are undervalued in the U.S. labor market and thus play an important role in explaining the pay penalties faced by some Asian immigrants more so than their immigration histories. In addition, Marlene Kim at U-Mass Boston finds that when incorporating the number of years worked in an occupation and the number of years worked for a current employer, U.S.-born Asian American men are also found to face a pay discrimination. Studies that use proxies for experience in the labor market, such as this one, can therefore fail to capture this penalty by underestimating the years of work experience AANHPI workers have vis-à-vis White workers.
Conclusion
The wide range of labor market outcomes that AANHPI women experience is often obscured by insufficient data and by economic narratives that fail to capture important inequities among this group of workers. Moreover, overlooking how the interaction of socially salient identities such as gender, race, and ethnicity affect AANHPI women’s earnings and employment opportunities does not only mask their lived experiences but also holds back policy efforts that could start to work against these inequities and discriminatory disadvantages.
For instance, while a large share of AANHPI women hold high-wage jobs, an even larger share work in positions that are among the worst-paid in the U.S. economy. An effective way to promote economic security for AANHPI women workers and all workers in the lower end of the wage distribution—as well as to promote broad-based economic growth—is to raise the federal minimum wage floor. Stuck at $7.25 per hour for more than a decade, research shows that lifting the minimum wage would benefit all workers, and especially women workers and workers of color.
Policymakers also should ensure that there are substantial investments to the care infrastructure of the United States. A large and growing share of AANHPI adults and of U.S. adults in general live in multigenerational households. As more people live with both their young children, adult children, and aging parents, access to affordable and high-quality care is becoming increasingly important. As such, investments in home- and community-based services and greater access to paid family and medical leave, research finds, would boost labor force participation, support the well-being of care recipients and their families, and support the overall U.S. economy.
These investments also could boost the wages and job quality of the millions of women who work in the care economy. Women not only tend to do the lion’s share of the unpaid work of caring for their families and communities but also tend to do the (generally poorly paid) professional care work, representing the vast majority of workers in jobs such as nursing assistants and home health aides. While they make up about 4 percent of the U.S. workforce, AANHPI women represent about 8 percent of registered nurses and 6 percent of personal care aides.
The high average levels of education of AANHPI women demonstrate that education alone is not sufficient to offset wage divides based on demographic characteristics. Boosting worker power through fostering pro-worker institutions such as labor unions or increasing worker information with pay transparency can offset discriminatory pay practices such as those that lead to unexplained pay penalties faced by AANHPI women. The insufficiency of the human capital model in explaining wage divides demonstrates that other structural forces, among them racism and xenophobia, influence pay practices, but worker power and solidarity can help workers to claim earnings equivalent to the value they create.
In addition, given that AANHPI women face large unexplained intersectional penalties, it is important for policymakers to strengthen the enforcement of labor standards. In the case of wage violations, for instance, research by Janice Fine of Rutgers University, Daniel J. Galvin of Northwestern University, Jenn Round of Rutgers University, and Hana Shepherd of Rutgers University finds that immigrant workers and women workers would particularly benefit from a more efficient enforcement of labor law since they are especially vulnerable to wage theft by employers.
Finally, the diversity of economic outcomes within the AANHPI community highlights the need for disaggregated data in order to design equitable and efficient policies. The analysis here demonstrates the extent of within-group variation in economic outcomes, yet understanding contributing factors can be limited when there is not sufficient sample sizes of groups within the U.S. economy. Identifying which communities face disadvantages in terms of, for example, access to healthcare, income support programs, housing, and educational opportunities is essential to design, fund, and evaluate interventions. Together, these policies would represent a step forward toward both greater equity and a more dynamic U.S. economy.
This issue brief uses data from the Annual Social and Economic Supplement of the Current Population Survey collected between 2014 and 2020. Our sample is represented by full-time workers (workers who worked at least 26 weeks the previous calendar year and at least 35 hours per week) between the ages of 25 and 64 and who earned at least one dollar of wage and salary income the previous calendar year. Our sample does not include unpaid family workers and those in the armed forces. Hourly wages are calculated by dividing total wage and salary income by the number of weeks and usual hours worked the previous calendar year.
Table 3 shows the sample sizes and means of the variables included in our analysis for the four main groups we identify by race and gender: AANHPI women, AANHPI men, White women, and White men. The reported AANHPI women-to-White men gap is calculated using the ratio of their (geometric mean) wages.
The onset of the coronavirus pandemic and the rising death toll from COVID-19, the disease caused by the virus, initiated an unprecedented decline in consumer spending in the United States, dwarfing the effects of any previous recession. Understanding what is driving consumer spending—and, in particular, the effects of lockdown policies—is crucially important in designing policies for a full economic recovery, as consumption is two-thirds of Gross Domestic Product.
Yet policies that maximize GDP and employment do not maximize welfare because crowded stores and restaurants can cause widespread COVID-19 infections in customers and workers, leading to further outbreaks. As many countries and states have learned by hard experience, a premature reopening is a recipe for a dramatic rise in cases, hospitalizations, and deaths. The very purpose of restrictions on retail and restaurant activity is to decrease visits, and thus spending decreases. As such, the declines in consumer spending that restrictions bring are not the costs of these policies; in fact, they are the benefits.
In our new working paper, I and my co-author, Raissa Dantas, a Ph.D. candidate in economics at the University of Illinois at Chicago, analyze the causes of the decline and rise in retail spending in the United States—a striking decline of almost 20 percent 2 months after the crisis, followed by a rapid recovery and then a transition to a slow increase. (See Figure 1.)
Figure 1
We find equally striking results about the interplay between fear of COVID-19 and restrictions on consumer behavior. In the early weeks of the pandemic, spending declines were driven fully by fear of catching the coronavirus, and not by restrictions on consumer behavior such as stay-at-home orders. In April and May, however, fear of COVID-19 declined while restrictions on nonessential shopping remained in place. We find the retail and restaurant spending restrictions caused substantial declines in spending for the categories directly affected by restrictions, such as nonessential in-store retail items and full-service in-restaurant dining. Even in recovery, consumption remains depressed, compared to previous recessions.
These results show that the restrictions put in place by governments had their intended effect. The restrictions successfully deterred a large majority of consumers from behavior that would have been beneficial to a superficial measure of welfare—aggregate GDP—but which would have led to the increased spread of the coronavirus and COVID-19. Two studies by the Centers for Disease Control and Prevention and Johns Hopkins University demonstrate that allowing indoor dining is associated with a substantial rise in COVID cases and that stay-at-home orders are effective in reducing COVID-19 infections.
In our working paper, we analyze the effects of business restrictions on consumer spending using data from Earnest Research, a company that analyzes spending data from a panel of 6 million U.S. households. The data allow for a detailed look at how consumers are spending their money. Importantly, the panel distinguishes between spending that is done in-store, and will therefore be affected by stay-at-home orders and retail shutdown policies, and online/essential retail, which is not affected by the laws.
To summarize our findings, we present a case study of four states in Figure 2 below. Two of them—Illinois and Massachusetts—instituted retail shutdowns, while two others—Nebraska and Arkansas—did not. At the beginning of the lockdown, nonessential in-store spending fell close to zero in all four states, even those that did not institute shutdowns. In these early weeks, the fear of COVID-19 was the driving force behind the decline in retail spending, since spending declined by similar amounts even in states without lockdowns. After a few weeks, however, spending sharply increased in the two states without lockdowns, Nebraska and Arkansas, while spending remained near its lows in Illinois and Massachusetts, where lockdowns were still in effect. (See Figure 2.)
Figure 2
We find that when states reopen, the effect on consumption is immediate, with sharp and large increases in spending. The raw data thus suggest that in the early weeks of the spread of COVID-19, spending declines were mainly driven by fear of the disease, and the restrictions put in place by governments were not “binding,” meaning that even in their absence, spending would have decreased. By mid-April and May, however, the fear of COVID-19 had somewhat subsided, and the restrictions on consumer behavior were binding constraints and, when lifted, caused large increases in retail spending.
The restrictions on nonessential in-store spending did not simply shift spending into other retail categories. Retail shutdown policies are associated with a 10 percent decline in aggregate retail spending and restaurant shutdown policies with a 9 percent decline. The recovery in retail spending displayed in Figure 1 is thus partially driven by the end of the lockdowns. We estimate that 34 percent of the trough-to-peak recovery was caused by retail reopenings and 15 percent of the trough-to-peak recovery in restaurant spending was due to restaurant reopenings.
As the coronavirus vaccines continue to proliferate and consumers become comfortable dining indoors, shopping in stores, and going to movies, spending will continue to recover, and it is likely that the remaining constraints on restaurant and entertainment capacity will become binding. In making reopening decisions, then, state and local governments must not chase the false idol of aggregate GDP growth and unemployment policies that punish workers, but rather, should wisely choose public health and long-term prosperity.
The Biden administration has prioritized fighting the coronavirus pandemic and resulting recession through vaccinations and supporting those who cannot work through expanded federal unemployment benefits and economic recovery payments. This is the way forward as scientists and vaccine manufacturers continue to assess the threats to public health posed by new variants of the coronavirus. These priorities must continue.
In December 2019, Congress passed the Creating and Restoring Equal Access to Equivalent Samples, or CREATES, Act, bipartisan legislation to stop anticompetitive strategies that delay competition in pharmaceutical markets and increase prescription drug costs. The act incorporates polices advocated by the Washington Center for Equitable Growth.
The CREATES Act strengthens the 1984 Hatch-Waxman Act, which itself has saved American consumers and the U.S. healthcare system trillions of dollars (more than $1 trillion between 1999 and 2010 alone) by establishing a process for generic drug producers to bring their products to the marketplace. Even more money could have been saved, but some brand-name drug manufacturers, which enjoy monopoly or near-monopoly profits, have found ways of extending those profits by slowing or preventing competition from generic drugs.
The CREATES Act addresses two of these dubious pharmaceutical company practices—which are estimated to have increased prescription drug costs by hundreds of millions to billions of dollars a year—with the goal of strengthening market competition and helping make more generic drugs accessible, thus reducing healthcare costs and saving lives. It does so through relatively minor and cost-free changes. Both a recent report from the Food and Drug Administration and anecdotal evidence from the generic industry, which are discussed below, provide strong evidence that the CREATES Act is working.
Overview of the problem the CREATES Act addresses
Under the Hatch-Waxman Act, generic companies do not need to prove their product is safe and effective. That would be costly, duplicative (because the brand-name company has already done that testing), and unethical (because such proof requires giving some patients placebos, which is unethical when the drug has already been proven effective).
Instead, the generic manufacturer must show its product is a bioequivalent, or the same in all relevant respects, to the branded product. Although bioequivalency testing is much less expensive, it requires that the generic company test its product against the branded product.
Moreover, some drugs that pose a health threat if used incorrectly require a safety protocol to ensure that they are used properly. These requirements, like most FDA requirements, exist to ensure that products are safe and effective, not to delay competition or provide branded companies with windfall monopoly profits. Nevertheless, if a branded company can find a way to prevent the bioequivalence test or prevent FDA approval of a safety protocol for the generic product, there is no competition, and the branded company protects its monopoly profits.
The problem Congress sought to address in 2019 was simple: Prevent the branded companies from unfairly using two legal requirements to delay or prevent generic competition. Let’s consider each of these anticompetitive practices, so-called sample blockades and safety protocol filibusters, in turn.
Sample blockades
As may be obvious, a generic company cannot prove bioequivalence if it cannot obtain samples of the branded drug with which it plans to compete. Before the CREATES Act, some companies used a variety of tactics to ensure that generic companies could not obtain those samples. By time the CREATES Act was enacted, there were 55 generic products for which companies could not obtain the needed branded samples, according to the Food and Drug Administration.
The CREATES Act established a process that requires brand-name companies to provide generic companies with needed samples if the product is not generally available. It is designed to eliminate brand companies’ incentive to even try to deny the generic companies the samples they need. The process the act created is quick, the requirements are straightforward, and the bill imposes substantial penalties if a branded company acts in bad faith.
At the same time, the law ensures that the generic companies receive what they need but no more. This was a concern of brand-name companies, alongside worries that generic companies’ testing procedures have FDA approval.
While there are no detailed studies to confirm how this provision of the CREATES Act is working, I have talked to many representatives in the generic drug industry, who report that the longstanding problem of sample blockades has entirely or almost entirely disappeared. Interestingly, the formal process has been invoked few times, if at all; its mere existence as a threat has altered corporate behavior.
Safety protocol filibuster
The second tactic addressed by the CREATES Act is a little more complicated but just as effective. For drugs subject to safety protocols to ensure their safe use by consumers, originally a generic had to negotiate with the branded company to develop a shared protocol before the generic could receive FDA approval.
But the branded company had a very big advantage. It already had its protocol accepted and its product on the market while the two companies negotiated a new shared protocol system. The process effectively gave patent-holding companies veto power over generic companies’ protocols, and thus the ability to filibuster negotiations endlessly without repercussion.
And they did. Brand-name manufacturers would routinely nitpick, create impossible conditions, and “slow walk” the process, to the point where agreements were rare. It would take years of fruitless negotiating before a generic company could seek FDA permission to develop a different but equally safe protocol. Generic companies, for example, spent 3 unsuccessful years trying to negotiate a shared protocol system with Jazz Pharmaceuticals PLC for Xyrem, a then-billion-dollar treatment for narcolepsy, before the Food and Drug Administration was willing to approve separate protocols. Until the CREATES Act, only in one case was a generic able to successfully negotiate a shared system prior to receiving FDA approval.
The CREATES Act has essentially eliminated this problem by flipping the presumption. Instead of requiring the generic drug company to try to reach an agreement with a branded competitor that has every reason to delay negotiations, generic companies can now propose their own safety protocols to the Food and Drug Administration from the start, although they are free to develop a joint one with a branded company as well.
The provision’s effect has been immediate. Now that the negotiation process cannot delay competition, branded manufacturers are far more willing to reach shared protocols with generic competitors. According to the FDA’s Office of Generic Drugs’ 2020 annual report, within a year of the CREATES Act becoming law, the agency had approved shared protocols for two products, a stand-alone generic protocol for a third product, and a modification of protocols that enabled another pair of branded and generic companies with separate protocols to share the same protocol going forward.
Conclusion
The early success of the CREATES Act shows that strong congressional action can change industry behavior, and sometimes even small legislative changes can make a significant difference. The CREATES Act had many legislative co-sponsors: Sens. Patrick Leahy (D-VT), Chuck Grassley (R-IA), Amy Klobuchar (D-MN), and Mike Lee (R-UT), alongside Reps. David N. Cicilline (D-RI), Jim Sensenbrenner (R-WI), Jerry Nadler (D-NY), Doug Collins (R-GA), Peter Welch (D-VT), and David McKinley (R-WV).
They should be proud of this legacy, but there is still much work to be done to eliminate the legal loopholes that allow the pharmaceutical industry to sustain high prices and collect excessive profits by preventing competition. Billsarepending in Congress that would address other anticompetitive practices: pay-for-delay patent settlements, in which manufacturers of brand-name drugs pay a competitor to keep generic or biosimilar versions of their drugs out of the market; and citizen petition abuse, in which drug companies use a public comment process to slow down FDA approval of generics.
Like the CREATES Act, these bills are bipartisan and targeted. The question is whether the CREATES Act was the exception or whether it heralds the possibility of continued legislative reform to protect and promote competition in the pharmaceutical industry.
Equitable Growth is committed to building a community of scholars working to understand how inequality affects broadly shared growth and stability. To that end, we have created the monthly series, “Expert Focus.” This series highlights scholars in the Equitable Growth network and beyond who are at the frontier of social science research. We encourage you to learn more about the researchers featured below, those featured in prior installments, and our broader network of experts.
May is AANHPI Heritage Month in the United States, a period of time to commemorate the achievements and contributions of Asian Americans, Native Hawaiians, and Pacific Islanders.11 This large and diverse demographic group—the fastest-growing racial or ethnic group in the United States—faces distinct challenges, and has been uniquely impacted by the coronavirus pandemic, the ensuing recession, and a troubling wave of anti-Asian violence and discrimination across the country since last March. The Asian American community traces its origins to more than 20 countries in East and Southeast Asia and the Indian subcontinent, and there are more than 21 distinct Native Hawaiian and Pacific Islander ethnic groups on which the U.S. Census Bureau collects data. These groups are not a monolith—each subpopulation has vastly different cultures, histories, languages, economic characteristics, and more—and the diversity of experience among AANHPI populations is often misrepresented when data for these populations are aggregated.
This month’s Expert Focus looks at scholars across disciplines doing economic research on AANHPI populations and their experiences in the United States. This includes work on intergenerational mobility, wage equality and access to the U.S. labor market along race and gender lines, health outcomes, and recently, the disparate impacts of the coronavirus pandemic and recession on AANHPI communities. These researchers also have worked to improve research and data collection methods—from oversampling to data disaggregation, and other initiatives to ensure the data more accurately capture the diversity of Asian American subgroups in the United States.
Raj Chetty
Harvard University
Raj Chetty is the William A. Ackman professor of public economics at Harvard University and the director of Opportunity Insights, which uses data to examine how to give children from disadvantaged backgrounds a better chance at success. The resulting—and widely cited—Opportunity Atlas project presents various data on children’s outcomes in adulthood based on the neighborhood in which they grew up, and allows users to filter the data based on income level, gender, and race, including for Asian American children. This important database provides a unique and disaggregated look at intergenerational mobility in the United States, and how socioeconomic and demographic differences impact outcomes in adulthood. Chetty’s research combines empirical evidence and economic theory to design more effective public policy, from tax policy and Unemployment Insurance to education and housing access. He also is a former member of Equitable Growth’s Steering Committee and in 2018, Equitable Growth featured a working paper by Chetty and co-authors on the innovation and invention gap among women and people of color, including Asian Americans, in the United States.
ChangHwan Kim
University of Kansas
ChangHwan Kim is a professor of sociology and the director of Graduate Studies in the Sociology Department at the University of Kansas. He specializes in the areas of stratification, work and organizations, race and ethnicity, and Asian American and Korea studies, using quantitative methods, panel models, and diverse statistical decompositions. A common thread of his work is to generate knowledge and findings that guide policymakers who are looking to address socioeconomic polarization in U.S. society and the economy. A 2014 study with co-author Yang Zhao, also of the University of Kansas, finds that even when accounting for demographic and other factors, such as years of work, industry, and geographic region, Asian American women who have graduated from college supervise fewer workers than their White counterparts. This finding highlights that variables in human capital alone cannot fully account for the underrepresentation of Asian Americans in high-level positions, which suggests that discrimination and stereotypes likely play a role in preventing access to these roles.
Paul Ong
University of California, Los Angeles
Paul Ong is an economist, research professor, and the director of the Center for Neighborhood Knowledge at the University of California, Los Angeles Luskin School of Public Affairs. He is also the founder and former editor of AAPI Nexus, one of the few national journals focusing on policies, practices, and community research to benefit the nation’s burgeoning Asian American and Pacific Islander communities. Ong’s research centers on the U.S. labor market status of people of color and immigrants, sustainability and equity, the racial wealth gap, and the role of urban structures in the reproduction of inequality. He has served as an advisor to the U.S. Census Bureau, the U.S. Department of Justice, the California Department of Social Services, and the Employment Development Department, among others. Ong has published several books, including on Asian immigration and Asian American race relations in the United States, and has written extensively over the past year on the disparate impacts of the coronavirus on Asian Americans, including the surge in anti-Asian sentiment that has led to increased violence and discrimination against these communities.
Sela Panapasa
University of Michigan
Sela Panapasa is an associate research scientist in the Research Center for Group Dynamics at the University of Michigan Institute for Social Research. Her research interests lie in family demography, race and ethnicity, health disparities, and comparative studies. She is currently studying the impacts of socio-demographic change on the health and well-being of Pacific Islanders living in the United States across their life course, with the goal of providing baseline data needed to address and eliminate health disparities among Native Hawaiian and other Pacific Islanders. Panapasa also has chaired the U.S. Census Bureau’s Advisory Committee on Native Hawaiian and Pacific Islanders, advising the agency on best practices for reaching these communities in the decennial census count. She also served on the U.S. Department of Health and Human Services Office of Minority Health Advisory Committee on Minority Health, advising the office on improving data on the health of hard-to-survey populations. This work led to the 2014 Native Hawaiian and Pacific Islander National Health Interview Survey. Her focus on collecting and assessing socioeconomic and health data for Pacific Islanders is an important contribution to the existing literature, and she is a proponent of the push to disaggregate data on subgroups and difficult-to-reach groups within the AANHPI populations.
Janelle Wong
University of Maryland
Janelle Wong is a professor of American Studies and a faculty member in the Asian American Studies program at the University of Maryland, College Park. Her research interests include Asian American studies, race, religion and politics, political participation, immigration, and political attitudes and behaviors. She is a senior researcher at AAPIData.com, which publishes demographic data and policy research on Asian Americans and Pacific Islanders—an issue she co-authored a research article on in 2018, arguing that accurately collecting these data is a civil rights issue. Wong also recently published, with co-author Sono Shah at the Pew Research Center, an analysis of the 2016 National Asian American Survey that finds overarching political consensus within the Asian American population across policy and issue areas. She has also written on best practices for collecting data online among communities of color, and has advocated for affirmative action policies and other Asian American issues. Her 2011 book, Asian American Political Participation: Emerging Constituents and their Political Identities, was based on the first nationally representative survey of Asian Americans’ political attitudes and behavior, which was conducted in eight different languages with six different Asian American subgroups.
Equitable Growth is building a network of experts across disciplines and at various stages in their career who can exchange ideas and ensure that research on inequality and broadly shared growth is relevant, accessible, and informative to both the policymaking process and future research agendas. Explore the ways you can connect with our network or take advantage of the support we offer here.
1. This is (part of) the argument that Stephen S. Cohen and I were trying to make in our 2016 book Concrete Economics: The Hamilton Approach to Economic Policy. Our conception of how our economic policy was in the past—when successful, pragmatic, and utilitarian—has been largely lost during the ideological age of the past generation. Read Nic Johnson, Robert Manduca, and Chris Hong, “The American anti-austerity tradition,” in which they write: “The victory of neoliberalism beginning in the 1980s has … totally vitiated our historical imaginations, it can be hard to picture the American past as anything other than a laissez faire frontier society … Recogniz[ing] our unfamiliar history can give policymakers the confidence they need to move forward on the public investments necessary … Three early 20th century perspectives on the U.S. economy … Underconsumption theory … When workers can’t afford to buy everything they produce, it creates imbalances in the economy that are papered over by unsustainable extensions of credit … Channel finance … When financial markets fail to support productive investment, they encourage bubbles, hurt workers, and slow growth … Secular stagnation … When the state fails to boost investment, mature capitalism suffers from a congenital insufficiency of aggregate demand. Mass unemployment creates social and political antagonisms that are a danger to democracy. Each of these perspectives over time coalesced into a set of policy prescriptions, some of which were implemented then and all of which offer important lessons for policymakers today.”
Worthy reads not from Equitable Growth:
1. I am very unhappy that we do not yet have a handle on exactly what the coming of robotization is going to do to the demand for different skill and experience levels of labor. We should know this by now. We don’t. We need to know this if we are going to plan. Read Karen Eggleston, Yong Suk Lee, and Toshiaki Iizuka, “Robots and labour in the service sector,” in which they write: “Firm-level studies are important for understanding how robots augment some types of labour while substituting for others, yet evidence outside manufacturing is scarce. This column reports on one of the first studies of service sector robots, which suggests that robot adoption has increased some employment opportunities, provided greater flexibility, and helped to mitigate turnover problems among long-term care workers. The wave of technologies that inspires fear in many countries may be a remedy for the social and economic challenges posed by population ageing in others.”
2. A very nice explication of current thinking at the Federal Reserve by Steve Matthews. I think Matthews is right here. And I think the Fed is right here. Read his “Fed Officials Have Six Reasons to Bet Inflation Spike Will Pass,” in which he writes: “Acceleration in U.S. price growth this year will have “only transitory effects on underlying inflation,” Fed Vice Chair Richard Clarida said Wednesday. Governor Lael Brainard said the day before that officials should be “patient though the transitory surge.” Powell has made the same argument … Measures of expected inflation suggest price gains … [after] the next year or so … [will] drop back to more normal levels …Powell said … “It seems unlikely, frankly, that we would see inflation moving up in a persistent way that would actually move inflation expectations up while there was still significant slack in the labor market”… The sticky-price index rose a modest 2.4% over 12 months through April … A number of structural factors have led to global disinflation over the past three decades … Outside of passing on commodities prices, most U.S. firms remain reluctant to raise prices on other goods … Business survey shows limited price increases over next 5–10 years … “Base effects will contribute … to core inflation in April and May,” Powell said … “and they’ll disappear.”
This is a post we publish each Friday 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 relevant and interesting articles 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
Amid increased government spending to combat the coronavirus and the ensuing recession alongside overblown fears of inflation, some policymakers are pushing for austerity and against additional public investments. But U.S. history shows that anti-austerity policies are proven to bolster and grow the U.S. economy equitably. Nic Johnson, Robert Manduca, and Chris Hong look back at three widely held anti-austerity perspectives from the early 20th century—underconsumption theory, channeling finance, and secular stagnation—that laid the groundwork for the New Deal and the post-World War II economic boom. Underconsumption theory is the idea that when workers can’t afford to buy everything they produce, it creates imbalances in the economy that are obscured by unsustainable credit and debt levels. The proponents of this idea at the time suggested channeling finance and steadying financial institutions to break the resulting vicious cycle and open wealth-building opportunities for more Americans. Lastly, secular stagnation is the theory that describes the economic condition where the number of profitable investment opportunities is not sufficient to absorb the savings in the economy. The co-authors explain how each of these three perspectives can teach us a great deal these days about growing the economy sustainably and broadly, and provide a path forward that doesn’t embrace austerity or financialization. Adhering to these perspectives, they conclude, would also work to address the rampant inequality evident across the U.S. economy and society since the 1980s.
This week, Director of Markets and Competition Policy Michael Kades submitted a statement for the record with the U.S. House Oversight and Reform Committee for a hearing on anticompetitive behaviors in the U.S. pharmaceutical industry and soaring prescription drug prices. Kades provided a summary of the anticompetitive behavior in which pharmaceutical company AbbVie (whose CEO was testifying in the hearing) has long engaged—namely, pay-for-delay patent settlements, frivolous patent litigation, and product hopping—and how Congress can act to change these market dynamics that lead to concentration and soaring profits for drug companies, and rising costs and fewer options for consumers. He recommends that Congress stop pay-for-delay settlements, which allow a company to pay its generic competitors to not release or defer the release of their product; restore the Federal Trade Commission’s disgorgement authority, depriving companies of illegal profits earned as a result of anticompetitive behavior; and deter strategic behavior that protects monopolies, such as product hopping, or the release of “new and improved” products that are not significantly different from their predecessors in order to quash generic competition. These actions would help lower prescription drug costs for consumers in the United States and protect competition in the pharmaceutical industry.
Head to Brad DeLong’s latest Worthy Reads column, where he provides summaries and analysis of recent must-read content from Equitable Growth and elsewhere.
Links from around the web
For those anxiously reading headlines about inflation, The New York Times’ Neil Irwin provides some reassuring advice in The Upshot blog. He proposes asking five essential questions whose answers shine some light on the mechanisms through which the value of a dollar changes over time. He first suggests looking at whether the increases in prices for goods and services are relative or dispersed across industries and sectors and then whether the prices that are rising are likely to continue going up, to plateau, or to go back down. He then asks whether wages are also rising and whether inflation is rapid and erratic or steady. Finally, he asks whether we are actually, in fact, experiencing inflation or if it’s simply a price shift for assets and investments. Irwin breaks down the aspects of each of these areas that could be concerning, as well as those that are not, finding ultimately that the inflation alarm bells are currently ringing prematurely (while advising readers to keep a close eye out for several warning signs).
The U.S. government should tax rich people in order to pay for its investment priorities. It’s simply the right thing to do, argues Vox’s Emily Stewart. The well-off have disproportionately benefitted from economic growth and stock market booms, particularly over the past 40-plus years as economic inequality has become pervasive in the United States. And it’s well-documented that the rich have gotten a lot richer during the coronavirus pandemic and resulting recession—and that they know how to evade taxes better than the rest of us. Stewart cautions that changes to tax law must be robust enough to close loopholes and prevent tax avoidance from savvy filers, while also urging Congress to act. As President Joe Biden angles to get his American Jobs Plan and American Families Plan passed, taxing the rich is a fair way to pay for a lot of these important public investment policies—and they can afford it, Stewart writes. While it won’t pay for everything the Biden administration has proposed, it will work to redistribute the tax burden and reduce the inequality that has come to define the U.S. economy.
The financialization of the U.S. economy has directed U.S. savings into more and more unproductive speculative investments. Consumption has become increasingly buoyed by unsustainable “indebted demand.” And the threat of secular stagnation due to inequality looms increasingly large against the backdrop of changing demographics and environmental degradation. To many, these are the novel economic conditions that are confounding conventional wisdom, driving an explosion of questioned assumptions.
But in fact, the United States has been here before. In the early 20th century, these concepts were not just familiar to economists and policymakers—they also formed the core of a pragmatic U.S. economic tradition stretching back deep into national history. Translated into practice by the New Deal nearly a century ago, they laid the groundwork for the post-World War II economic growth of the ensuing decades.
That may sound surprising since the victory of neoliberalism beginning in the 1980s has so totally vitiated our historical imaginations, it can be hard to picture the American past as anything other than a laissez faire frontier society. But as we face mounting threats to our economy and society, learning to recognize our unfamiliar history can give policymakers the confidence they need to move forward on the public investments necessary to save the environment, fight inequality, and boost growth today.
Beyond place-based: Reducing regional inequality with place-conscious policies
Three early 20th century perspectives on the U.S. economy
The economic convulsions that followed the end of World War I and the Spanish flu pandemic in the early 20th century led some U.S. intellectuals, economists, and policymakers alike to question the consequences of the growing economic inequality and low investment levels that characterized the period. Many of them grasped the connection between economic inequality, economic growth, and the importance of robust aggregate demand.
Their ideas have a great deal to teach us now. Eavesdropping on their conversations can help connect these problems today with prior experiences in the American past. Specifically, there are at least three coherent perspectives on the U.S. economy that were developed during this time that are worth revisiting. Each offers its own diagnosis and prescription; none involves embracing austerity and finance. Rather, they center on public investments to equitably benefit U.S. workers and their families. Specifically:
Underconsumption theory. When workers can’t afford to buy everything they produce, it creates imbalances in the economy that are papered over by unsustainable extensions of credit.
Channel finance. When financial markets fail to support productive investment, they encourage bubbles, hurt workers, and slow growth.
Secular stagnation. When the state fails to boost investment, mature capitalism suffers from a congenital insufficiency of aggregate demand. Mass unemployment creates social and political antagonisms that are a danger to democracy.
Each of these perspectives over time coalesced into a set of policy prescriptions, some of which were implemented then and all of which offer important lessons for policymakers today. Let’s briefly examine each in turn.
Underconsumption theory
The core claim of underconsumption theory is straightforward: When workers can’t afford to buy everything they produce, it creates imbalances in the economy, including global trade imbalances, that are papered over by the extension of unsustainable debt and credit. A few years later, the bubble bursts and a financial crisis results. (See Figure 1.)
Figure 1
This theory was developed and popularized by the Pollak Foundation of Economic Research, a think tank funded by Waddill Catchings, the senior partner and largest shareholder at the investment bank Goldman Sachs. His co-author, William Trufant Foster, was an economist and educator, best known for authoring the blueprint for Reed College and serving as its first president. Their diagnosis of the U.S. economy was that the maldistribution of income and finance led to the economic fragilities that caused the Great Depression. Their solutions were to raise wages, organize labor, and invest in the social safety net.
If that perspective sounds radical today, it didn’t prevent the Pollak Foundation from gaining traction among a wide swath of political, academic, and business leaders in the 1920s and 1930s. Catchings, Foster, and the Pollak Foundation inspired some of the key leaders of President Franklin Delano Roosevelt’s New Deal. By 1935, the Pollak Foundation counted Secretary of Agriculture Henry Wallace, Sen. Robert Wagner, and Secretary of War George Dern among its inner circle, as well as leading academics such as Irving Fisher, Ernst Lindley, and Paul Douglas.
Foster and Catchings also used their network from Goldman Sachs to draw in a surprisingly wide amount of support from business. Among their financial backers were the U.S. Chamber of Commerce, the National Industrial Conference Board, and the influential McClure Newspaper Syndicate.
Many business leaders accepted core tenets of underconsumption theory, but they balked at the idea of government investment and collective bargaining. The so-called Fordist wage, initially just an attempt to reduce employee turnover, eventually came to symbolize the effort to privately resolve this problem. Henry Ford’s insight was that only if his workers had the wages to pay for his cars could his company succeed. Without demand for goods and services from workers, no level of productivity would be capable of generating sustainable profits.
The limitation of Ford’s solution, of course, was that his workers mostly did not spend their high wages on Ford cars. They spent it on groceries, clothing, entertainment, and other aspects of the good life. Ford’s high wages were generating externalities for the rest of the economy, which his corporation in particular did not capture. The private-market idea that firms should just raise their wages out of enlightened self-interest was hamstrung by a coordination problem: Only if all firms simultaneously increased their wages would that boost demand for Ford cars sufficiently to justify that wage hike, but each firm has an incentive to shirk this collective obligation.
Facilitating this coordination was the job of unions and government. The Fair Labor Standards Act instituted higher wages through the first national minimum wage law and mandatory overtime pay. The National Labor Relations Act empowered organized labor to demand even higher wages. And the Reconstruction Finance Corporation used public funds to invest in key infrastructure to employ labor. These laws are often remembered as efforts to create a more egalitarian economy, but their supporters also saw them as instruments of macroeconomic stability and growth. As World War II price czar Chester Bowles argued in 1946, steadily increasing minimum wage laws are necessary “to prevent the backward businessmen from undermining the wage structure and from living off the purchasing power provided by the payrolls of businessmen who pay decent wages.”
As recently as the 1990s, the conservative economist Greg Mankiw estimated that something like 50 percent of Americans were living hand-to-mouth and consumed all their income—a sure sign that the forces of underconsumption were at work. The situation is likely even worse today, after the Great Recession of 2007–2009, the ensuing decade of tepid wage gains, and then, the onset of the coronavirus recession. Net productivity has grown by almost 70 percent since 1979, but hourly wages are up only 12 percent.
The result is a massive gap between what U.S. workers are producing and what they can afford to buy. As in the 1920s, the gap has been papered over by ever-growing consumer debt. At the most fundamental level, returning to sustainable prosperity in the years to come will require broad-based income gains for those who have lost out over the past 40 years.
The earlier generation of pragmatic economists and economic policymakers also understood that savings are only good for the U.S. economy if they result in productive investment. Otherwise, some combination of unemployment, slower growth, and changes in interest rates is the result. When economic inequality is high, the savings of the rich go up while the savings of the rest of us go down, and the wealthy lend to the less wealthy instead of engaging in fixed investment. This kind of credit maintains consumption in the short run at the expense of employment-generating investment.
Channel finance
In addition to the fundamental solution to this problem—reducing inequality—these thinkers also recommended channeling finance to break out of this vicious circle. One of those men was Marriner Eccles, a famous Utah banker and then-chairman of the Federal Reserve after 1935. Inspired by Foster and Catchings, Eccles became involved in the 1933 Emergency Banking Act, and wrote the 1934 National Housing Act and the 1935 Banking Act—all of which helped steady U.S. financial institutions, bolster the public’s trust in financial markets, and prepare the ground for more productive investments by U.S. financial institutions.
Eccles’ key insight was that savings were only economically useful if they were channeled into productive investment: building houses, paving roads, and upgrading factories. Left to their own devices, Eccles knew, financial institutions in an unequal society would tend to shy from these productive investments because of the risk inherent in their long time horizons and would favor less risky consumer credit instead. It was up to the state to channel savings into productive investments through interventions in the financial sector.
The Federal Housing Administration did this by providing government insurance to banks issuing mortgages in case the loans defaulted, making them less risky and hence bringing the interest rate down. The FHA both allowed for low down-payment mortgages and created a national secondary market for loans by standardizing them—a process that changed the way mortgages were issued. Instead of the then-usual 5-year balloon mortgage (with borrowers taking on the risk of either refinancing the loan or paying it off at the end of the term), the FHA sponsored the now-standard 30-year mortgage and allowed for low down-payment loans. By subsidizing mortgage lending through its insurance program, the FHA channeled savings into the construction of new houses while also making homeownership more widely available.
Other steps to regulate financial markets were instituted by the Fed, under Eccles’ personal direction. Regulation Q put a ceiling on the interest rate that financial institutions could pay on deposits. Since there is a correlation between risk and return, this gave the less risky financial institutions a chance to compete. In later years, this was followed by closer supervision and limits on bank transactions with their affiliates, including increased collateral requirements, making them safer.
Then, there was the creation of two key financial regulatory institutions to further buoy public confidence in U.S. financial markets. One was the Federal Deposit Insurance Corporation; the other was the Securities and Exchange Commission. Finally, the Glass-Steagall Act prohibited investment banking and commercial banking within the same financial institutions in the United States, preventing banks from investing in speculative securities or pumping those securities to their clients.
The impact of these interventions was a long period of financial market stability, in which productive, long-term investments were attractive uses of capital. Different types of financial institutions, such as thrifts, savings and loan companies, investment banks, and commercial banks, channeled savings in the U.S. economy into specific U.S. investments.
Importantly, Eccles and his friends were bankers themselves, and they didn’t want to hold down finance or make banking unprofitable. Rather, they sought to treat the flow of funds like a river, a public resource that has to be managed, contained, locked, damned, diked, and stabilized for the common good. From their perspective, the point was to direct the river, not to dry it up.
Secular stagnation
“Secular stagnation” is a term Harvard University economist Alvin Hansen used to describe an economic condition where the number of profitable investment opportunities is not sufficient to absorb all the savings in the economy. During the Great Depression, Hansen worried that this would become the natural state of the U.S. economy, as the closing of the Western frontier, declining population growth rates, and the slower pace of technological growth meant there would simply be fewer sites for capital to invest than there had been in the 19th century.
The flow of history, it turns out, delivered up different results. Globalization, the baby boom, the long second industrial revolution, and the 1990s tech boom held off those forces that were expected to decelerate capital investment for several more generations. But today, we are again facing falling population growth rates and slowing technological progress. This means reality has finally caught up with the concept of secular stagnation—an idea before its time. (See Figures 2 and 3.)
Figure 2
Figure 3
Through conversations with his students, Hansen came to realize that the government could stabilize a mature economy with public investment. In the late 1930s, he became an economic evangelist for deficit spending, training a whole cadre of students in what was then the new and exciting Keynesian theory, before he became active in government during World War II.
Among Hansen’s students was Paul Samuelson, the textbook author and Nobel Laureate, and Paul Sweezy, the famous editor of the magazine Monthly Review. Their diagnosis of secular stagnation led them to advocate for the federal government to soak up the excess savings in the U.S. economy and use it to create public goods, from medical care to public housing, from better schools to national parks and beautiful art. They argued that without such public investments, the economy would not be able to expand.
These theorists worried that the masses would look to authoritarian strongmen for salvation in the absence of democratic public investment to generate employment. In 1938, they very presciently warned:
The dangers of delay are strikingly brought home to us by the experience in other lands, where governments which refused to accept the responsibility for the proper functioning of their national economies have in case after case fallen victim to their own inaction, and where, in all too many instances, democracy itself has perished […] Such a dictatorship would revive economic activity, but it would be activity devoted increasingly to producing weapons of death and destruction which must sooner or later be used to plunge the country into a holocaust of slaughter and bloodshed.
The demands of wartime
As the secular stagnation theorists had warned, then came World War II, first in Asia, then Europe, and then to the shores of the United States. World War II changed the matrix of forces in the U.S. economy. Public-private coordination of industrial production guaranteed a level of fixed investment (initially geared toward war production, then to Cold War investments) and higher wages.
Importantly, the justification for big government and overcoming secular stagnation became moralized in the public discourse. Some people were entitled to economic security because of the sacrifices they had made for the nation in war—or so the mainstream political discourse said. A far cry from the robust and universalist democratic state envisioned by theorists of secular stagnation, the wartime political culture that served as a justification of big government also became a limit on its extent.
Central to this compact was the idea that the “soldiers had earned it.” The policy changes enacted at the time signaled a changing view of the relationship between the government and the U.S. economy—one in which public investments in the nation’s human capital development rose to the fore. Yet in practice, many Black soldiers returning from the war were unable to access the benefits afforded to the rest of their fellow GIs. And women who had worked in factories during the war were encouraged to return home to build families during the baby boom.
Woman working on an airplane motor at North American Aviation, Inc., plant in California, June 1942.
When these limits to the postwar compact were tested by popular movements in the 1960s, the upshot was not the universalization of economic democracy, but rather a backlash that tightened those limits even further. The Reagan Revolution of the 1980s set the stage for the past 40 years of rising inequality, low investment, and anemic growth.
Today’s secular stagnation theorists are similarly concerned that the lack of sufficient public investments in the U.S. economy makes it very difficult to confront growing economic inequality to boost the wages and wealth of average American families. This time around, history tells us, it will be crucial for the moralization of the state investment project to be universalist from the start, focused on confronting global climate change and all forms of inequality. The failure to respond adequately to the previous economic crisis a decade ago was the precondition for today’s fight against a rising fascist bloc both at home and around the world.
The lessons of the 20th century that are applicable today
Less than a century ago, the chairman of Goldman Sachs, the chairman of the Federal Reserve, and Harvard University’s leading economists all had in common with New Deal politicians their robust sense of the connection between economic inequality, growth, and aggregate demand. These activist intellectuals and policymakers understood that the foundations of stable and sustainable capitalism rested on institutions that secured high pay for workers, channeled investment for public purposes, and pushed past the frailties of mature capitalism.
These are issues that western capitalism is now wrestling with again. It is time for policymakers to rejoin the mainstream of U.S. history, moving beyond the supply-side myths that have increasingly hamstrung the U.S. economy for the past four decades.
—Nic Johnson is a Ph.D. candidate in history at the University of Chicago and is working on a history of American Keynesianism. Robert Manduca is an assistant professor of sociology at the University of Michigan, who researches economic inequality and urban and regional economic development. Chris Hong is a Ph.D. student at the University of Chicago studying the economic and intellectual history of Old Regime France and the Age of Revolutions.The authors are organizers of Reviving Growth Keynesianism, a project that explores the history of American economic thought.
Michael Kades Director, Markets and Competition Policy Washington Center for Equitable Growth Statement for the Record House Committee on Oversight and Reform “Unsustainable Drug Prices (Part III): Testimony from AbbVie CEO”
May 18, 2021
This committee has done important work investigating prescription drug prices and the burden they place on both Americans’ pocketbooks and their health. As a former litigator and regulator with the Federal Trade Commission for almost 20 years, I hope to offer some historical context in which to understand the issues confronting the committee today.
Too often, too many pharmaceutical companies focus their innovation on new ways to delay competition, increase profits, and aggravate the burden on Americans struggling to pay their healthcare costs rather than on developing new lifesaving medications. AbbVie, whose CEO is testifying today, too often has been the posterchild for developing and employing anticompetitive practices that increase costs without any offsetting benefit.
Professor Craig Garthwaite, who is also testifying today, has correctly warned that there can be a trade-off between lowering cost and promoting innovation.12
These are hard questions that deserve careful consideration. But the type of anticompetitive conduct in which AbbVie has historically engaged represents the easy case. Congress can end these practices without any fear of deterring innovation.
AbbVie and pay-for-delay patent settlements
Before Humira and before Ibruvica, Solvay Pharmaceuticals—which AbbVie eventually acquired—protected its lucrative monopoly over Androgel, a testosterone replacement cream. Solvay paid not one, but two companies to refrain from selling their generic testosterone cream, in a practice known as a pay-for-delay patent settlement. The generic products would have taken 90 percent of branded Androgel’s sales at a substantial price discount. Although Solvay sued both companies for patent infringement, Solvay reached lucrative settlements with each generic competitor. The generic companies agreed to keep their testosterone creams off the market until 2015. Until then, each company would market Solvay’s branded product and receive a royalty on the branded product’s sales. Instead of trying to take sales from the monopolist, as a competitor should, the two companies would be trying to increase them; Solvay was literally sharing its monopoly profits to deter competition.
In a seminal case, Federal Trade Commission v. Actavis, the Supreme Court held that this type of agreement could violate the antitrust laws. By this time, AbbVie owned Solvay and the product Androgel. AbbVie could have quickly settled the case and opened the market to competition. Instead, AbbVie chose to fight tooth-and-nail for roughly 6 years, only settling with the FTC on the eve of trial. That delay helped prevent competition, allowed AbbVie to extract additional monopoly rents from consumers, and gave it the time to effect the product hopping strategy discussed below. The lesson here is that too many pharmaceutical companies use delay in the legal process to avoid judgement, increasing the effectiveness of their anticompetitive conduct.
AbbVie and frivolous patent litigation
By 2011, AbbVie faced a new competitive threat. Perrigo, a third generic company, filed an application to sell generic Androgel. Solvay itself had reached this conclusion and chosen not to sue Perrigo. AbbVie, which had acquired Solvay, ignored the merits. It understood that the time it would take Perrigo to win the patent case would keep the generic company off market for years and extend AbbVie’s Androgel monopoly.
The FTC brought an antitrust case against AbbVie. Antitrust cases based on sham litigation are somewhat of a unicorn because the legal standards are so high. The plaintiff must prove that “the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits” and that “the baseless lawsuit conceals an attempt to interfere directly with the business relationships of a competitor . . . through the use [of] the governmental process—as opposed to the outcome of that process—as an anticompetitive weapon.”13
Despite those high standards, the District Court ruled in the FTC’s favor. Indeed, it found it indisputable that AbbVie’s case was objectively baseless—so frivolous that the court, in an antitrust case, did not need to hold an evidentiary hearing on the issue.14The court further found that the FTC had satisfied its burden on the second element as well.15 Finally, it ordered AbbVie to give up almost half a billion dollars that it earned by filing a sham lawsuit that delayed competition.16
The case has, however, an unfortunate ending. Although the Court of Appeals upheld the liability determination, it decided that the FTC could not deprive AbbVie of its illegal profits. In an unrelated case, the Supreme Court recently stripped the FTC entirely of its powers to seek monetary remedies like the one described here.
In short, AbbVie filed frivolous litigation, the very process of that litigation—not its outcome—delayed competition, that delay increased its profits by hundreds of millions of dollars—and AbbVie suffered no consequences.
AbbVie and product hopping
Neither the pay-for-delay settlement nor the frivolous litigation were isolated strategies. AbbVie had a larger plan to move patients from the original formulation of Androgel to a new version, a strategy referred to as product hopping.
New Androgel was not significantly better than the original, but it would blunt competition from the generic version of the original Androgel. AbbVie’s combined strategies delayed competition from generic versions of original Androgel until 2014, and AbbVie was able to convert 83 percent of the market before a generic entered. Once generic versions of the original version entered, however, new Androgel ceased gaining market share.
The pay for delay settlement and the sham litigation gave AbbVie additional years to move the market to the new, but not better, product.17 Had generic versions of the original product been available, consumers would have saved hundreds of millions of dollars by using the less expensive but equally effective generic alternative.
Implications for the Oversight hearing
Long ago, AbbVie moved on from Androgel, but this committee should not ignore the lessons of history. While strategies such as patent thickets may look different, they may be complex variations on a theme. For example, Humira’s original patents were set to expire in 2016. As that date approached, however, AbbVie began seeking a multitude of new patents for what seems to be minor improvements at best, but which have secured its monopoly for years and perhaps a decade or two.18 This committee should be skeptical of claims that every strategy that extends a company’s monopoly is necessary to protect innovation; too many are simply anticompetitive tactics to prevent legitimate competition.
On the bright side, Congress can change market dynamics. Pharmaceutical companies respond to rules and incentives. For example, federal courts, beginning in 2005, took a very lenient view of pay-for-delay patent settlements. In response, pharmaceutical companies increasingly entered into them. When, however, the Supreme Court rejected that approach, pharmaceutical companies largely abandoned this practice. (See Figure 1.)
Figure 1
Similarly, for years, some branded companies denied generic companies sample products that the generic manufacturers needed to obtain regulatory approval from the Food and Drug Administration, while other branded companies refused to negotiate required safety protocols with the generic companies. According to the U.S. Food and Drug Administration, these practices were increasing prescription drug costs by $13.4 billion per year.19 In December 2019, Congress passed the CREATES Act to stop these practices. Both the Food and Drug Administration and the industry believe the bill has largely been successful.20
There are three proposals that Congress could adopt to limit anticompetitive conduct in the pharmaceutical industry.
Stop pay-for-delay agreements: Despite the U.S. Supreme Court’s clear signal in the Actavis case that pay-for-delay settlements can be anticompetitive, the Federal Trade Commission continues to spend substantial resources and time challenging clear violations. Tougher laws, such as the Protecting Consumer Access to Generic Drugs Act21 or the Preserve Access to Affordable Generics Act,22 would deter such conduct and free up limited resources to attack other anticompetitive conduct.
Restore the Federal Trade Commission’s disgorgement authority: A relatively simple modification to the Federal Trade Commission Act would clarify the FTC’s authority to deprive companies of any illegal profits they earned—authority that is critical to deterring highly profitable but anticompetitive conduct. Something is wrong when courts decide there are no repercussions for violating the antitrust laws.
Deter strategic behavior such as product hopping and patent thickets when done to protect monopolies: By modifying patent law, the antitrust laws, and FDA law, Congress can likely deter purely rent-seeking activity that harms consumers without undermining legitimate incentives to innovate new and better pharmaceutical products.
Conclusion
This committee’s investigation is critical to understanding the scope of the problems that unnecessarily increase prescription drug costs. My statement has offered some historical context to understand today’s issues. Abbvie’s history of preventing competition through weak patents and frivolous lawsuits should should inform this Committee investigation into Abbvie’s current practices with regard to Humira and Imbruvia. I would be happy to work with the committee in any way to help it complete its important work.
