1. Remember: prime-age employment was something like 80 percent before the novel coronavirus hit. Fortunately for all of us, so far this shock is still predominantly supply-side and not demand-side. If it turns into a demand shock we will have a whole extra set of problems. Read “Equitable Growth’s Jobs Day Graphs: August 2020 Report Edition.”
2. It is a very good idea to do this. In fact, it is so good that I am astonished it is not yet been done, but it has not. Read Equitable Growth 20202 grantees’ Jose Joaquín Lopez and Jamein Cunningham’s grant description, “The evolution of civil rights enforcement and economic prosperity of minorities,” in which they write: “Despite the existence of a vast literature on U.S. labor market discrimination, there is still a lack of empirical evidence on the degree to which the private enforcement of anti-discrimination legislation through the federal courts has influenced racial divides … The authors will create a set of comprehensive measures of civil rights enforcement at the court level, providing the opportunity to track changes in enforcement across 90 U.S. District Courts between 1970 and 2019. These measures of enforcement will be linked to socioeconomic outcomes using data at the individual and household levels in order to shed light on how enforcement of civil rights legislation via the courts influence labor market outcomes and intergenerational mobility of minority groups. In addition, the authors will create a comprehensive dataset on the political party composition of judges across courts and over time to examine how presidential appointees have influenced the evolution of civil rights enforcement and their implications for racial inequities in U.S. labor market outcomes and intergenerational income mobility.”
3. This is simply an truly excellent two-pager. Read “Reforming Unemployment Insurance across the United States,” which details: “Longstanding problems with the Unemployment Insurance system in the United States are immediately evident amid the coronavirus recession and echo the problems experienced during the Great Recession …Administrative failures at state Unemployment Insurance agencies. Lack of a permanent Unemployment Insurance program that includes the self-employed and others traditionally left out of the program. Low benefit levels that require emergency top-offs. The temporary nature of fixes when recessions hit, which, in turn, requires renegotiations just months after political compromises are reached. The current disarray in the Unemployment Insurance system is neither a surprise nor an accident. It is the result of decades of conscious choices made by policymakers.”
Worthy reads not from Equitable Growth:
1. We are squeezing a generation’s worth of structural change into a year. A small amount of it will be reversed. But probably not much. Read John Quiggin, “The Economic Consequences of the Pandemic,” in which he writes: “The potential benefits of remote work and the likely struggle over who will get those benefits … the end of the goods economy and its replacement by an information and services economy … [means that] Investment demand by private firms is likely to stay low, even as greater public investment is desperately needed … We need to invest in human services like health (mental and physical), education and childcare, and in information platforms that break the monopoly power of the tech giants.”
2. The question of whether and how much harm the end of affirmative action had on California education is a much-disputed one. Here is evidence that the harm was great. Read Zach Bleemer. “Proposition 209 and Affirmative Action at the University of California,” in which he writes: “Affirmative action provided very large admissions advantages to mostly-lower-income Black and Hispanic applicants at every UC campus, especially the more- selective … enabled those URM applicants to enroll at more-selective and higher-quality universities, leading to higher degree attainment and higher California wages over the subsequent 15 years. As a result, Prop 209 caused a substantial decline in the number of high-earning, early-career URM Californians that persists more than 20 years later. Affirmative action policies have ‘winners’ and ‘losers,’ but because white and Asian students had alternative access to high-quality public and private universities, there is little evidence that they benefited by the end of affirmative action at UC. Several previous studies have suggested that Prop 209 caused improvements in overall and STEM degree attainment among URM Californians, potentially as a result of “mismatch” between more-selective universities and the academic preparedness of the URM students who benefited from affirmative action.”
3. And here is evidence on the strong positive effect of the 10 percent opportunity program in Texas. Read Sandra E. Black, Jeffrey T. Denning, and Jesse Rothstein, “Winners and Losers?: The Effect of Gaining and Losing Access to Selective Colleges on Education and Labor Market Outcomes,” in which they write: “College admissions processes are fundamentally a question of tradeoffs: given capacity, admitting one student means rejecting another. Research to date has generally estimated average effects of college selectivity, and has been unable to distinguish between the gains to students gaining access and the losses to students losing access. We use the introduction of the Top Ten Percent Rule and administrative data from the state of Texas to estimate the effect of access to a selective college on student graduation and earnings outcomes. Notably, we separately estimate the effects for students who gain and lose access due to the policy. We find that students who gain access to the University of Texas at Austin see increases in college enrollment and graduation with some evidence of positive earnings gains 7-9 years after college. In contrast, students who lose access do not see declines in overall college enrollment, graduation, or earnings.”
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
This coming Monday is Labor Day, a holiday in which we commemorate the U.S. workforce and celebrate the social and economic achievements of American workers over the years. One way to honor the labor force in the United States would be to boost labor standards and institutional support for collective action. Kathryn Zickuhr and Carmen Sanchez Cummingexplain the history of U.S. labor laws and how they were weakened over recent decades, to the detriment of U.S. workers and their career advancement. This coincided with a decline in unionization rates—and thus collective action—among the U.S. workforce as unions are proven to help workers negotiate for and achieve better pay and working conditions. Zickuhr and Sanchez Cumming show how workers benefit from strong labor laws and institutional support for collective action, and conclude with several policy ideas for lawmakers who want to reinforce worker power in the United States.
In a report for Equitable Growth, Janice Fine, Daniel Galvin, Jenn Round, and Hana Shepherd explain the importance of labor standards enforcement further, drawing on evidence from the Great Recession of 2007–2009 to show how high levels of unemployment weaken the labor market power of low-wage workers who remain employed. This makes these workers vulnerable to exploitation by employers, resulting in minimum wage violations that disproportionately affect Black, Latinx, and women workers. The co-authors describe the current, complaint-based enforcement system—where enforcement of labor standards is only triggered when a complaint is filed by a worker—which, they explain, is problematic in many ways, not least because it is reactive instead of proactive. The four co-authors urge policymakers at all levels of government to bolster labor standards enforcement, particularly and strategically in times of economic stress such as the one we are living through right now, to protect low-wage workers, who are already more vulnerable in recessions and less able to make ends meet. They also suggest moving from complaint-based enforcement to a strategic and co-enforcement approach in order to boost worker power and provide for a more robust system of labor standards enforcement.
Another way to pay homage to our workers is to send more direct payments to those who are struggling during the coronavirus recession. Michael Garvey and Claudia Sahmlook at the effects of the pandemic and economic downturn over the past several months. They also discuss how aid included in previous stimulus bills, such as the Coronavirus Aid, Relief, and Economic Security, or CARES, Act, helped workers, especially low-income workers, to weather the economic storm. New studies show that the direct payments sent to individuals and families were particularly useful in buffering the freefall in consumer spending and helping people get back to work. In fact, between 40 cents and 60 cents of every rebate dollar was spent, mostly within weeks or months of receiving the rebate. Unfortunately, Garvey and Sahm explain, much of this economic relief expired at the end of July. They call on policymakers to act swiftly to bring it back and protect workers and their families from financial catastrophe.
This recession is unlike any of the previous ones in our history, thanks to its root cause—a public health crisis—and the health measures needed to get to a recovery. These factors are not your standard economic determinants that have been used to guide us through past downturns, writesHeather Boushey on Medium, so it isn’t easy to make predictions of how the recovery will go. What is clear is that as everyday Americans and small businesses are struggling to get through this crisis, the stock market is recovering nicely, housing markets in well-off neighborhoods are booming, and big firms are raking in profits. This indicates a sideways Y shaped recovery, Boushey writes, as workers and certain firms suffer while other industries are either unaffected or are profiting. The situation is worsened by decades of historically high inequality, which left the United States vulnerable to shocks. Boushey urges policymakers to support and protect workers and their families, as well as small businesses, and tackle inequality head on to ensure a resilient economy.
Equitable Growth announced this week a record $1.07 million in research grants on economic inequality and broadly shared growth, our seventh and largest year to date. The funds will be distributed to 46 economists and social scientists, including faculty, postdoctoral scholars, and Ph.D. candidates at leading U.S. colleges and universities, as well as some scholars from government research agencies. This year, we placed a special emphasis on racial and ethnic elements of inequality, economic mobility, the impact of domestic outsourcing, market concentration, and climate and the environment. Learn more about our 2020 grantees and their work.
Did you miss last week’s rundown of our recently released factsheets guiding the next presidential administration and Congress on ways to reduce inequality in the coming years? Corey Husak and David Mitchell provide an excellent summary of the evidence-based guides and how the policymakers and economists coming to Washington in 2021 can take action in eight areas to spur strong, stable growth for all—which will be an essential task, considering the impact of the coronavirus pandemic and recession on U.S. society and the economy.
Links from around the web
There is no doubt we are in a recession right now, with high levels of unemployment and business closures wreaking havoc on our economy and society. But not everyone is feeling the pain the same way, writes Emily Peck for the Huffington Post. This downturn and pandemic have reinforced just how much income and wealth inequality exists in the United States, and how much of that inequality falls along racial lines, with White families much more likely to weather the storm with ease than Black and Latinx households. And this recession has the potential to further exacerbate these disparities, Peck continues, as many lower income families are struggling to afford food while the stock market has already rebounded from its dip in the spring, leaving most wealthy families with barely a scratch. And the uber-wealthy—America’s high net-worth individuals and billionaires—are having a banner year: The world’s 500 richest people gained more than $800 billion this year so far. But, Peck warns, if lawmakers don’t do something to help those who are being hit the hardest, this could end in an economic catastrophe that everyone will feel.
Black women are often left behind and left out, especially when it comes to the U.S. economy and policies to bolster it. But in order to make the economy work for everyone, those who are usually left out should be front and center. This is the premise of a fascinating interview from Marketplace’s Maria Hollenhorst and Kai Ryssdal with Janelle Jones, the managing director of policy and research at the Groundwork Collaborative, and Michelle Holder, an assistant professor of economics at John Jay College at the City University of New York. Jones and Holder explain why diversifying the voices in economics helps incorporate those usually marginalized by bringing lived experiences and varying perspectives on what works best and how to help vulnerable populations that are often ignored. And, they argue, “if we set up the economy in a way that makes sure Black women are doing well, the rest of us benefit.”
Earlier this week, the Trump administration announced a temporary eviction moratorium, ensuring millions of Americans won’t be kicked out of their homes. But it declined to include rent relief, setting up a potential crisis for renters at the end of the year, when the moratorium expires and unpaid rents and fees will be due. The Washington Post’s Kyle Swensonlooks at the looming crisis in the Washington, D.C. area specifically, where an estimated 1.15 million to 1.64 million people may lose their homes. In order to stabilize the housing market, rent relief will be essential, but, Swenson writes, as the federal government did not provide for it, that means it will fall on state and local governments to fund, costing a lot of money at a time when many of their budgets are strapped.
Heather Boushey and Equitable Growth were recently featured inThe New York Times. Katy Lederer writes about Boushey’s vision for economic policy that is grounded in evidence-based research and that reduces inequality. Our goal to ensure the economy works for everyone and we can all prosper is especially relevant during the coronavirus pandemic and recession, which, as seen above, is affecting already-vulnerable communities more than others. Lederer also summarizes Boushey’s two most recent books, Finding Time: The Economics of Work-Life Conflict and Unbound: How Inequality Constricts Our Economy and What We Can Do About It, drawing on their themes to explain how Boushey is part of a new generation of economists approaching age-old questions in innovative ways.
On September 4th, the U.S. Bureau of Labor Statistics released new data on the U.S. labor market during the month of August. Below are five graphs compiled by Equitable Growth staff highlighting important trends in the data.
While still well below its pre-coronavirus level, the employment rate for prime-age workers rose to 75.3% in August, having regained half of the losses since its low in April.
Unemployment rates remain highest for Black workers at 13.0%. Latinx unemployment fell to 10.5%, just below the Asian American unemployment rate of 10.7%. White unemployment declined to 7.3%.
While unemployment rates continue to decline for all education levels, the unemployment rate for workers with less than a high school education is still more than twice as high as for those with a college degree.
Employment rose across all sectors in August, and in leisure and hospitality has rebounded to roughly half of its lowest levels.
The proportion of unemployed workers who were on temporary layoff fell to 45.5% in August, while the share of permanent job losers rose to 30.6%.
Franklin Roosevelt signs the Wagner-Peyser Bill creating the US Employment Service, June 6, 1933.
The landmark U.S. labor laws enacted in the early to mid-20th century continue to represent the main legal structures governing employment relations in the United States. These laws were critical to the advancement of workers for much of the past century, but they weakened over time and must be updated and expanded to create a fair and inclusive economy for workers today and in the future.
The National Labor Relations Act of 1935, also known as the Wagner Act, encoded private-sector workers’ rights to join and form unions, bargain collectively with their employers, and participate in joint actions such as strikes. A few years later, the Fair Labor Standards Act of 1938 outlawed most forms of child labor, set an hourly minimum wage, and put in place overtime protections to rein in excessive work hours.
These labor laws and protections delivered for most U.S. workers. By banning many anti-union tactics and creating the National Labor Relations Board—the federal agency in charge of enforcing this legislation—the National Labor Relations Act sought to promote “equality of bargaining power” between employers and employees, making it easier for workers to unionize and fight for better working conditions. When passed, both the Fair Labor Standards Act and the Wagner Act excluded many workers of color and many women from their legal protections, reflecting the continuing structural racism and gender biases in the United States, at the time and reverberating still in our economy, despite key amendments to the law since the 1930s.
Still, in the decade that followed the passage of the National Labor Relations Act, the share of workers who were part of a union almost tripled, going from less than 12 percent in 1934 to 35 percent in 1945, and remained higher than 30 percent until the 1960s. Research shows that rising union membership rates, including eventually among workers of color, had a big equalizing effect in reducing income inequality in the middle decades of the 20th century.
Similarly, the Fair Labor Standards Act not only established basic labor rights and protections but also promoted more equitable labor market outcomes, especially after the law was amended in the ensuing decades. Take the 1966 amendments to the Fair Labor Standards Act, for example. Ellora Derenoncourt and Claire Montialoux of the University of California, Berkeley found that the introduction of the minimum wage to sectors such as agriculture, restaurants, and hospitals—sectors in which Black workers were overrepresented—explains more than 20 percent of the drop in the Black-White earnings divide during the late 1960s and early 1970s.
That this extension of basic labor rights and protections did not take place until the late 1960s, however, points to the exclusions embedded in much of the New Deal era legislation. By not covering agricultural and domestic workers, both the National Labor Relations Act and the initial Fair Labor Standards Act deliberately left out sectors in which Black workers represented a disproportionate share of the workforce.
Over time, the Fair Labor Standards Act was modified to cover the vast majority of workers. Other legislation in the 1960s also sought to expand workforce protections and rein in discrimination in the U.S. labor market. For instance, the 1964 Civil Rights Act outlawed employment discrimination on the basis of race, color, religion, sex, and national origin, enabling more workers of color to access high-wage occupations and women to increase their labor force participation, narrowing both the gender and racial wage divides.
Yet the main institutions upholding worker’s rights and protections in the United States faced sustained assault over the following decades. A steady and ongoing decline in union membership rates, falling enforcement capacity, and a regulatory framework that struggled to keep up with new forms of employment relationships steadily chipped away at authorities’ and workers’ ability to uphold labor standards.
What’s more, federal agencies such as the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, and the National Labor Relations Board all experienced funding or staffing declines over the past four decades. This fiscal squeeze curtails these agencies’ ability to push back against workplace discrimination, unsafe working conditions, and other workplace abuses even as the number of workers these agencies are supposed to protect grew. (See Figure 1.)
Figure 1
The decline in union density since the early 1960s points to a vicious cycle where, because unions are one of the most effective institutions helping protect workers’ rights, the weakening of organized labor further erodes labor standards. Today, noncompliance with basic labor standards is commonplace and particularly pervasive in low-wage occupations such as child care, repair, sewing and garment work, and housekeeping. For instance, using survey data of the 10 U.S. states with the biggest populations, a recent study shows that about 17 percent of low-wage workers covered by minimum wage protections are paid less than the minimum wage.
When examining changes in U.S. job quality since the late 1970s, David Howell at the New School and Arne Kalleberg at the University of North Carolina, Chapel Hill show that the share of workers holding low-wage jobs climbed from 39.1 percent in 1979 to 45.2 percent in 2017. This decline in decent jobs—calculated as those that pay at least two-thirds of the full-time mean wage—hit young workers without a college degree particularly hard. Declining job quality in the United States, compared to our peer nations, they write, shows that this decline is not inevitable or the natural result of mismatches in worker skills and employer demand. Instead, they find that policies for improving wages, working conditions, and workers’ bargaining power are key to checking this decline and addressing earnings inequality.
Indeed, institutional support for collective action is critical for job quality, worker power, and equitable economic growth. Independent contractors today do not have access to collective bargaining rights and are not covered by Fair Labor Standards Act protections. Public-sector, agricultural, and domestic workers are still unprotected by the National Labor Relations Act. Even though the demographic composition of these sectors has changed since 1935, exclusions from collective bargaining protections continue to have a disproportionate impact on some of the most vulnerable workers in the U.S. economy. For instance, more than 91 percent of domestic workers are women, 52 percent are workers of color, and 35 percent were born outside of the United States. The Clean Slate for Worker Power project, spearheaded by Sharon Block of Harvard University’s Labor and Worklife Program and Benjamin Sachs of Harvard Law School, puts forth policies that acknowledge how power dynamics shaped and continue to shape U.S. labor law. Among many other recommendations, their agenda proposes extending bargaining rights to sectors and workers not currently covered, regardless of industry or employment status, as well as giving workers a formal role in advising enforcement agencies’ strategies and priorities. Doing so would promote worker power and promote a more fair and inclusive U.S. economy.
GDP tells us little about who actually prospers when the economy grows.
Gross Domestic Product growth may once have indicated good fortune for the vast majority of Americans, but over the past several decades, many Americans were left increasingly behind. This reality is masked by a widely shared misunderstanding of what average growth really means for individual people. Growth tells us little about who actually prospers when the economy grows. As such, policymakers’ diagnoses of the U.S. economy, and their prescriptions for what ails it, are based on the wrong metric.
What is Gross Domestic Product?
Gross Domestic Product, or GDP, measures the total goods and services produced in a nation in a given time period. GDP growth is simply the percent change in this measure over time, indicating whether the economy in aggregate is growing or contracting. The problem with measuring GDP growth in the aggregate is that it misses completely the central economic issue of our time—how income growth diverged between those at the top of the income spectrum and the rest of society over the past four decades. (See Figure 1.)
Figure 1
What does GDP measure?
Gross Domestic Product can be understood as measuring the average progress of the economy. Our national preoccupation with GDP and the worldwide standardization of GDP as a measure of a country’s economic fortunes results today in policies justified by the economic maxim of “growing the pie.” But GDP was never intended to serve as a measure of well-being for the workers and families that make up the economy. For that, we need to understand how the economic pie is distributed.
If we wish to reverse the course of the past four decades, where income inequality grew rapidly, the first step is to measure how income inequality is changing right now. Aggregate GDP is no longer representative of the fortunes of most Americans. (See Figure 2.) A better understanding of how typical Americans are faring in the modern economy will require new metrics that build upon GDP or, in some cases, move beyond it completely.
Figure 2
What is GDP 2.0?
GDP 2.0 is a policy proposal by Equitable Growth that would extend existing GDP reports by adding a distributional component, so that policymakers and the American public alike know not just how much the economy grew overall but also how much incomes grew for those at the bottom, middle, and top of the income distribution. If realizing the promise of the American Dream is important, then adopting GDP 2.0 will align our economic policies with our values. (See Figure 3.)
Figure 3
What progress has been made to change how we measure economic growth?
Equitable Growth has been working for 5 years to change how the U.S. Department of Commerce’s Bureau of Economic Analysis reports economic growth. Thanks to this work, the dedication of BEA statisticians, and the many academics and advocates who have studied and critiqued the concept of growth over the years, real progress is being made to change how we think about economic progress. In March 2020, the agency released a prototype data series that shows how incomes have grown all along the income distribution. This prototype demonstrates that the economy treats people very differently at the bottom, middle, and top of the income distribution. These data should be released frequently, so every American can see not just how the economy is growing in aggregate, but also how it is growing for people like them.
The 2020 rebates buffered the freefall in spending and helped get people back to work.
The costs of the deepening coronavirus recession and the benefits of the federal government providing another round of direct economic aid to families are clear.
Let’s begin with the mounting costs of the public health and economic crisis before turning to what Congress must do now, and why another round of direct payments to all families is essential. Cases of the coronavirus recently hit nearly 6 million, with about 183,000 deaths. The rolling result of the pandemic in our economic lives, including temporary business closures, layoffs, shelter-in-place orders, and social distancing, continue to hurt everyone. Low-income families and families of color have been hardest hit. Millions have less money than before the crisis to pay their bills. And this is all happening before an expected second wave of infections and deaths are feared to spread across the country later this year.
The economic costs are accumulating quickly, too. Millions of U.S. workers have lost their jobs and even more are receiving smaller paychecks than before. Some were hit much harder by the crisis than others, including Black, Latinx, and Indigenous American families. As of June—before the case counts began to rise again—30 percent of Black families and 40 percent of Latinx families had lost at least one paycheck, according to a recent study. That compares to 20 percent of White families. Suffering also is widespread today, even relative to the Great Recession, especially for front-line workers, the majority of whom are Asian Americans, Native Hawaiians, or Pacific Islanders.
Additional economic relief from Congress is necessary to help those suffering the most. New research and incoming data show that the relief the U.S. Congress provided this past spring helped support low-income families to make ends meet, such as the findings in a study on poverty rates by the Center on Poverty & Social Policy at Columbia University. But most of that economic relief expired at the end of July. And then, Congress went home.
That support should not have ended. The Coronavirus Aid, Relief, and Economic Security, or CARES, Act included (among other measures) a one-time direct payment to families like the payments at the start of the Great Recession of 2007–2009. The main differences between the two are size, eligibility, and speed of delivery. In 2008, Congress sent out $600 per eligible adult and $300 per dependent child. The payments in 2020 were $1,200 per adult and $500 per child. That’s nearly $300 billion in total in the second quarter of 2020, or about 2 percent of annual consumer spending. In addition, enhanced jobless benefits, including an extra $600 per week, added $250 billion to the economy through July.
In addition, nearly every woman, man, and child with a Social Security Number was eligible for this direct payment in 2020, unless they had annual income of more than $150,000 for couples or more than $75,000 for individuals. Thus, eligibility for this rebate was much wider than in 2008, and included 85 percent of the U.S. population. The U.S. Treasury Department also got the money to people much faster this year, with the first direct deposits arriving as early as mid-April. Most families had their rebates by the end of May.
An arrayofnewstudies show that the 2020 rebates helped U.S. families. And despite many unique features of the current recession, numerous studies summarized in a report by one of the co-authors of this column demonstrates that the effectiveness of these rebates was similar to the 2008 rebates that helped families in the Great Recession.
First, the 2020 rebates buffered the freefall in spending and helped get people back to work. Consumer spending—as measured by transactions in their bank accounts—began to rebound as soon as families received their rebates. Of course, the rebates, along with other aid such as enhanced unemployment benefits, were not enough to reverse steep declines in spending, but they did provide some relief to many families. (See Figure 1.)
Figure 1
Surveys of families in May and June show that between 40 cents and 60 cents of every rebate dollar was spent, with most spending occurring within a few months of receiving the rebates. This adds up around 0.7 percent of aggregate consumer spending. Another survey, similarly shows that many people spent their payments. Thus, the rebates provided notable support to the economy early in the recession and helped to slow the downward spiral.
Some families were more likely to spend their rebates than others. Cash-strapped families with little in savings were most likely to spend a higher fraction of their rebates. In contrast, those with a financial cushion were more likely to save the rebates, building up money to spend at a later time. (See Figure 2.)
Figure 2
This $300 billion in payments was critically important to stabilizing the U.S. economy. Most of the spending occurred quickly—within weeks of receipt. Some sectors benefited more, as spending turned up most in food, rent, and other bills. Some of the rebates went to all types of spending, including big ticket purchases such as cars. Spending patterns did differ between 2020 and 2008. (See Figure 3.)
Figure 3
The payments to families in the spring of 2020 helped them directly, and the U.S. economy broadly, by supporting an upturn in consumer spending. In addition, the payments that were not spent can also benefit the economy. Some families saved their rebates, especially those who kept their jobs and their income steady. Unfortunately, families caught up in the economic collapse—often those with smallest financial cushion—were unable to save their payments.
As a result, they will be less able to weather future economic setbacks. The coronavirus pandemic and the ensuing recession rage on, and families can only spend their payments once. Many are now scrambling to pay the bills, and some are missing their rent or mortgage payments.
To add insult to injury, the extra $600 per week of the unemployment benefits expired at the end of July. Research by JPMorgan Chase Institute shows that these expanded unemployment benefits were a notable support to the income and spending of the recipients.
Targeting direct economic aid and enhanced unemployment benefits to families suffering the most today and going into the fall and winter is good policy and pushes back against a further increase in income inequality. The CARES Act, including direct rebates and enhanced jobless benefits, was integral for families and small business owners, especially those with less income and marginalized groups, to weather the onset of the coronavirus recession. It is imperative that substantial additional assistance be provided to those in need. We are facing a pandemic that threatens our well-being in countless ways, perhaps for years to come.
Congress must do more to support all families and keep us safe.
The Washington Center for Equitable Growth today announced research grants totaling $1,074,060—our largest year to date—to seek evidence on important issues related to the intersections between economic inequality and growth. The 46 economists and other social scientists who will participate in this funded research consist of faculty, postdoctoral scholars, and Ph.D. candidates at leading U.S. colleges and universities, as well as some scholars from government research agencies.
This is the organization’s seventh academic grantmaking cycle. As in the past, the successful applicants responding to the 2020 Request for Proposals were selected in a competitive process, with rigorous vetting by outside academics and approval by the Equitable Growth Steering Committee.
Equitable Growth funds research in four categories: human capital and well-being, the labor market, macroeconomic policy, and market structure. In this new round of grants, the organization placed a particular emphasis, sometimes across categories, on racial and ethnic elements of inequality, economic mobility, the impact of domestic outsourcing, market concentration, and climate and the environment. The Bill & Melinda Gates Foundation provided generous financial support for research investigating economic mobility, and the Alfred P. Sloan Foundation provided generous financial support for projects exploring the impact of domestic outsourcing on workers.
Equitable Growth has always had a focus on the racial and ethnic elements of inequality in the United States, and the events of 2020 have led the organization to commit to an even greater emphasis on racial inequality and justice, including a redoubling of efforts to strengthen the pipeline of early-career Black scholars and other scholars of color. A number of this year’s grants reflect these priorities.
“For too long,” said Equitable Growth President and CEO Heather Boushey, “the field of economics has ignored the intersection of race and power in research agendas. That must change. At Equitable Growth, we commit to doing our part by funding more research based on the lived experience and legacy of structural racism.”
One grant is especially timely, given the unequal impact of the coronavirus and the accompanying recession. A study by Andria Smythe of Howard University will advance understanding of the impact of recessions on future employment and earnings by studying the long-term effects of the 1980 recession on young workers from that period, with a focus on workers of color who resided in regions where the recession was deepest.
The staggering differences between Black and White household wealth are well known, as is the large percentage of households with insufficient savings to cover unexpected expenses, but there is little research on how month-to-month fluctuations in income affect actual consumption and how that varies by race and wealth. Peter Ganong, Pascal Noel, and Damon Jones of the University of Chicago will use a new dataset to explore this question, which has important implications for macroeconomics and policies to address income security and economic inequality.
Jamein Cunningham and Jose Joaquín Lopez of the University of Memphis will fill a gap in research on labor market discrimination by studying the degree to which the private enforcement of anti-discrimination legislation through lawsuits in the federal courts has influenced racial gaps in earnings and other socioeconomic outcomes. They will examine how these civil actions influence labor market outcomes and intergenerational mobility of Black Americans.
Another grant, to a professor at the University of California, Los Angeles, focuses on racial inequality issues related to climate change, one of two grants that reflect Equitable Growth’s inclusion in its request for proposals, for the first time, of issues relating to climate and the environment. Robert Jisung Park will examine the growing evidence that for those whose work regularly exposes them to the elements, such as construction workers, temperature stress resulting from climate change may be affecting cognitive performance, how much work an individual can perform, and workplace safety, all of which could reduce earnings and job quality for many workers. The study will question whether or not climate change is exacerbating economic inequality and how that effect could be mitigated.
The other faculty grant focused on environmental concerns was awarded to Spencer Banzhaf of Georgia State University and Randall Walsh of the University of Pittsburgh. They will advance research on environmental inequity and the disparate impact of pollution on different income groups. The researchers will investigate the relationships between pollution and race, income, and human capital in Pittsburgh over the period of 1910 to 2010. They will look at inequality in exposure to pollution and the effects of childhood exposure on adult income.
One grant to a Ph.D. candidate will explore the intersection of climate policy and economic inequality. Eva Lyubich of the University of California, Berkeley will investigate whether people have constrained choices in energy consumption due to where they live, and if that, in turn, may mean that traditional models of the efficiency of carbon taxation are incorrect.
Intergenerational mobility is the primary focus of the organization’s grants in the category of human capital and well-being in this grant cycle. As Equitable Growth Steering Committee member Janet Currie noted:
There’s a growing body of evidence that investments in early childhood have outsized returns later in life. But there’s still a lot we don’t understand about the mechanisms at play, especially the intersections between place, families’ socioeconomic status, race, and—more urgent than ever—the effects of pollution and climate change.
The new research grants addressing intergenerational mobility include the Smythe and Banzhaf-Walsh studies above, as well as the following three grants.
Fenaba Addo and Cliff Robb of the University of Wisconsin-Madison will study the impact of debt-free student aid, in the form of Promise Tuition grants, on the finances and degree attainment of low-income students who transfer to 4-year colleges from community colleges. Research has shown that college is important to upward economic mobility, but the cost of college can be a significant barrier to gaining admission and completing college. In addition to improving understanding of how Promise Tuition grants can best be structured, a goal of this study is to inform policy debates over college affordability and completion, as well as the question of whether postsecondary education in the United States is supporting or inhibiting intergenerational mobility.
While there is increasing understanding of trends in intergenerational mobility in the latter part of the 20th century, far less is known about mobility in the early part of the century. Martha Bailey of the University of California, Los Angeles and Paul Mohnen and Shariq Mohammed of the University of Michigan will produce a massive new database of mobility rates going back to 1900. The work will provide a far more comprehensive picture of changes in intergenerational mobility over time, supporting the work of many other researchers.
Another University of Michigan researcher, Fabian Pfeffer, also will develop a significant new database that will permit him to overcome the limitations of existing data to enhance understanding of wealth inequality. This will allow Pfeffer to answer pressing questions, such as how concentrated wealth is locally and the degree to which wealth distribution remains constant across generations.
An important contributor to the stubbornness of wages and the deterioration of conditions for workers before the coronavirus recession, despite the tight labor market, was domestic outsourcing, the shifting by large firms of the acquisition of many goods and services from in-house sources to a complex web of other companies, where bargaining power for workers was weaker.
“Over the past several decades, the labor market has seen major shifts in how work is organized, and not just through the rise of gig work, but by firms contracting for everything from janitorial services to human resources,” said Equitable Growth Steering Committee member Karen Dynan. “It’s imperative that policymakers understand the effects on workers, especially their wages, access to benefits, and opportunities for advancement.”
Four new Equitable Growth grants in the labor market category were awarded to researchers studying the impact of domestic outsourcing.
Johannes Schmieder of Boston University will be joined by James Spletzer and Lee Tucker of the U.S. Census Bureau’s Center for Economic Studies and David Dorn of the University of Zurich in examining the extent to which domestic outsourcing has contributed to earnings inequality in the United States. Using a methodology Schmieder first deployed to study the same issue in Germany, the researchers will connect two datasets that will enable them to see the impact of moving jobs to outsourced establishments such as call centers, janitorial service companies, and security services.
If you see an Amazon.com Inc. delivery van dropping off packages in your neighborhood, you will be looking at the subject of a study by Steve Viscelli of the University of Pennsylvania, who will examine the impact on workers of recent changes in “last-mile delivery.” Viscelli will interview Amazon delivery workers to discover how workers experience new technological and outsourcing practices in three categories—communication and monitoring, algorithmic planning and management, and the surveillance of delivery by customers—that are used to manage workers.
Siwei Cheng and Michael Hout of New York University will use a massive collection of job posting and resume data to study, in great detail, economywide trends in tasks and occupations to detect changes in how work is organized. The project will examine variations within occupational categories and connections across categories; use resume data to examine worker mobility; and investigate elements of job quality, such as nonwage benefits and employment relations, including the incidence of nonstandard work such as temporary, on-call, and contract-based employment.
David Autor of the Massachusetts Institute of Technology, Anna Salomons of the Utrecht School of Economics, and Bryan Seegmiller, also of MIT, will construct a database showing the creation of new types of jobs from 1900 to 2020. Previous research has compiled such data going back only to 1964. The authors aim to chart the evolution of new work over 12 decades, assess the potentially varying importance of new work in job creation and demands for certain skills over time, and test a set of economic hypotheses about where and when new work arises. The project can provide insight into changes in how new jobs are created, including the role of technology.
Markets and competition are a policy focus for Equitable Growth, and in this round of grantmaking, the organization is funding three market structure projects by industrial organization economists.
Prospective merger review—the examination of intended corporate mergers by government agencies to determine whether and under what circumstances they should be permitted—constitutes a large share of antitrust enforcement expenditures, yet there has been little research on its effectiveness. With the help of an Equitable Growth grant, Thomas Wollman of the University of Chicago, José Ignacio Cuesta of Stanford University, and Federico Huneeus of Yale University will use the introduction of prospective merger review in Chile in 2016 to estimate the impact of this procedure on antitrust enforcement actions, product prices, input prices, output, investment, and corporate research and development.
Vivek Bhattacharya and Gaston Illanes of Northwestern University will study the accuracy of the standard simulation techniques federal agencies use to predict the impact of prospective corporate mergers on prices. Such simulations help regulators decide whether a merger is likely to be anticompetitive, but little work has been done to determine their accuracy. The study will help determine whether predicted outcomes align with actual outcomes and if not, what the sources are of the prediction error, helping enforcement agencies assess whether their methods for judging mergers are sufficient.
The third project on market concentration funded by Equitable Growth is a study of the cement industry by Nathan Miller of Georgetown University. Miller will examine how the structure of the industry has been altered by technological change since the 1970s, why the share of income going to owners’ profits has risen while that going to workers’ wages has declined, and what role federal antitrust enforcement or merger review could have played in addressing these issues.
Three new Equitable Growth grants in the area of macroeconomic policy focus on the impact of wealth inequality on macroeconomic growth and the distributional effects of monetary and fiscal policy. In addition to the Ganong and others grant described above, new grants in this category are as follows.
Greg Kaplan of the University of Chicago will examine mark-ups, labor market inequality, and the distributional implications of monetary policy as part of a broader effort to develop a new macroeconomic model that incorporates realistic dynamics in the distribution of labor income in response to macroeconomic shocks. This is critical for understanding the impact of policies on economic inequality. Current macroeconomic models fail to capture the full dimensions of inequality because they do not adequately measure changes in the distribution of worker earnings.
Jacob Robbins of the University of Illinois at Chicago, a former Equitable Growth dissertation scholar, will construct a new dataset from previously unavailable IRS data to measure capital gains as a means of more accurately detailing the distribution of wealth in the United States. This will allow for more accurate estimates of wealth inequality, including more precise estimates for those at the top of the wealth distribution.
Ruth Milkman and Luke Elliott-Negri of the City University of New York and Suresh Naidu and Adam Reich of Columbia University will examine collective labor action in platform businesses. They will conduct two surveys, one to compare the attitudes of various kinds of food workers, including those at meat processing facilities, grocery stores, restaurants, and platform-based food delivery services, and a second, nationally representative sample to assess changing food consumption habits, as well as perceptions of food workers and collective action during the current pandemic. The surveys will assess the role customers might play as a source of power for workers who strike or protest working conditions, as well as the effects of different aspects of job quality on propensity to leave a current job.
Equitable Growth’s academic program is a year-round process. The staff and Steering Committee have already begun work on the 2021 Request for Proposals. And, as always, we will be publishing new research by our grantees, making sure policymakers and the public see the results, and continuing to build a bridge between policymakers and scholars who can provide the evidence they need to develop policies that support an economy that works for all.
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
As both major U.S. political parties convened over the past two weeks to officially nominate their candidates for president in 2020, Equitable Growth published a series of eight factsheets with easy-to-understand actions the next Congress and presidential administration can take to ensure broad-based economic growth for all Americans. The factsheets have descriptions of key resources Equitable Growth staff and our network have released, as well as lists of the top experts and scholars to watch in each area. Below are brief descriptions of each of the factsheets, in order of publication date.
Unemployment Insurance is a bedrock of the social safety net in the United States, but has long experienced problems, including administrative failures, lack of a permanent system to help those left out of the program (such as self-employed workers), low benefit levels, difficulty in accessing the program, and the temporary nature of fixes that occur when recessions strike. As the coronavirus recession demonstrates, these issues cause chaos and uncertainty at the exact moment that people are most likely to need access to unemployment benefits. Equitable Growth suggests several reforms to ensure that laid-off workers are able to get the help they need.
U.S. economic mobility is declining at the same time that inequality is rising. And Black Americans not only are more likely to experience downward mobility than White Americans but also face systemic and institutional barriers to wealth building, access to credit, and income security. Equitable Growth suggests several policies to promote mobility and address racially discriminatory structures facing Black Americans, from expanding refundable tax credits and consciously supporting wealth accumulation for low-wealth families to redirecting public investment from the criminal justice system to education and social services.
The coronavirus pandemic and recession it caused make clear the need for automatic stabilizers, which turn economic policies and supports on and off based on certain criteria such as the unemployment rate. Making aid distribution automatic will make it easier for those in need to get the help they need and prevent the politicization of aid in Congress, freeing up policymakers to focus on new aspects of recession relief. Equitable Growth suggests that automatic stabilizers be applied to enhanced jobless benefits, direct payments to families, and aid to state and local governments.
Wages have stagnated for most workers over the past four decades, as unionization rates and worker power have declined. The current pro-business environment tips the scales in the favor of employers, who can maximize profits by exploiting workers to produce more per hour while paying them less. Equitable Growth suggests boosting traditional labor market policies, supporting unionization, and enacting new pro-labor policies such as sectoral bargaining to reinforce worker power in the United States.
As our economy has been bludgeoned by a public health crisis, the importance of universal paid family and medical leave could not be more obvious. The United States is the only high-income country in the world that does not have a national paid family or medical leave program for all workers. While some states offer residents access to paid leave, and a temporary federal paid leave program was passed early in the coronavirus pandemic, these solutions are not broad enough to cover all workers in the U.S. economy. Equitable Growth suggests establishing a permanent national paid family and medical leave social insurance system with inclusive eligibility requirements, progressive wage-replacement structures, robust job protections, and appropriate leave lengths.
The U.S. tax code, as it stands, does a poor job taxing income from wealth because it allows taxpayers to defer (without interest) paying tax on investment gains until assets are sold. When they are eventually sold, the tax rate is much lower than the income tax rate. And, if taxpayers avoid selling off assets until they die, investment gains are erased, for income tax purposes. Equitable Growth suggests reforming the taxation of wealth to eliminate the two-tier system this creates, between middle-income families paying higher rates of tax on their income and wages and wealthy, disproportionately White families paying lower rates on investment income.
Recent research suggests the United States has a monopoly problem. Market power of U.S. corporations over workers and consumers means consumers pay more for what they need, workers earn less, innovation declines, and small businesses aren’t as likely to succeed. It also grows the wealth divides in this country by boosting the wealth of executives and stockholders while workers bear the brunt of monopolies’ costs. Equitable Growth suggests strengthening the U.S. antitrust laws to counter corporate power and boosting the power and funding of the U.S. antitrust enforcement agencies—the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice.
Small businesses are suffering during the coronavirus recession, but research indicates that the aid Congress passed earlier this year failed to prevent layoffs and bankruptcies among the smallest employers. Programs, such as the Paycheck Protection Program, provided marginal assistance to get through the worst of the shutdowns, but businesses in some of the hardest-hit areas of the country were not able to access the aid. Equitable Growth suggests restructuring business aid to rescue small businesses as quickly as big businesses, revamping accessibility and eligibility of the Paycheck Protection Program, and building up public financial systems to improve economic resilience.
The racial and ethnic disparities facing communities of color during the coronavirus pandemic public health and economic crises as a result of systemic racism and economic inequality are clear. But the effects on Asian Americans, Native Hawaiians, and Pacific Islanders is less obvious because these communities are not broken out into subgroups in administrative datasets. Within the AANHPI community, there are socioeconomic inequities that will make certain subgroups more vulnerable to economic or health challenges than others. This is particularly relevant now, as front-line essential workers are predominantly AANHPI and therefore more exposed to the virus and at-risk during the pandemic. Christian Edlagan and Raksha Kopparam discuss why disaggregating the data will allow policymakers to protect the most vulnerable workers in the U.S. economy, target the unique barriers to emergency support among various AANHPI subgroups, and address systemic racism.
In 2019, Equitable Growth co-hosted an event on women and the future of work with the Institute for Women’s Policy Research, the National Women’s Law Center, and MomsRising. A new report by Susan Green summarizes the conversations, research questions, and policy proposals discussed during the event. The main focus of the event was the intersection between technology, labor, and gender. Participants explored the risks and opportunities for how new workplace tools and automation can help achieve gender equity. These new tools are changing how workers are hired, monitored, and evaluated, which raises privacy concerns and threatens to push employers to make decisions based on algorithms rather than real-life experiences. Discussing these issues and finding solutions to them will be essential to ensuring more equitable, safe, and productive workplaces in the future.
Links from around the web
Black workers are more likely to be unemployed during the U.S. economic downturn, but are less likely to gain access to unemployment benefits, write ProPublica’s Ava Kofman and Hannah Fresques. Record numbers of workers are receiving Unemployment Insurance, thanks to both the vast number of jobs that have been lost as well as Congress’s temporary expansion of unemployment benefits to gig economy workers, part-time workers, and independent contractors. But despite being overrepresented in these nontraditional occupations, a smaller percentage of Black workers who have been laid off are receiving jobless benefits. This can partly be explained by geography, with many states in recent years making it harder than others to apply for and receive unemployment benefits and reducing the amounts given to those who do get them. But there’s more to the story than where workers are living. Kofman and Fresques examine the various historical and structural barriers and deterrents for Black workers to access Unemployment Insurance programs across the United States.
A set of maps in The New York Times reveals that neighborhoods in cities across the United States that were redlined in the 1930s are significantly warmer today than areas that were not. Redlining is a racist housing practice designed to withhold real estate investment in areas with mostly Black populations, effectively reducing homeownership rates among Black families, with consequences and implications for wealth building lasting through today. These neighborhoods, which tend to still be poorer and have more residents of color today, are an average of 5 degrees Fahrenheit hotter in the summer than wealthier and Whiter parts of the same cities, write Brad Plumer and Nadja Popovich. This is probably because they consistently have fewer trees or parks, which cool the air, and more paved surfaces or nearby highways that absorb and radiate heat. This not only has obvious consequences for residents’ health and lives—during a heat wave, every single degree increase in temperature can increase the risk of death by 2.5 percent—but also will continue to worsen with climate change.
While it is impossible to know for sure what the trajectory of the coronavirus recession and recovery will be, some economists estimate that it could look a lot like the devastating and lengthy recovery from the Great Recession of 2007–2009. Characterized by long-term unemployment, the Great Recession was brutal for many workers, who permanently lost their jobs, irreparably severing ties between employer and employee. And now, 6 months into the recession, writesAndrew Van Dam for The Washington Post, many workers who initially reported that they believed they’d be back to work soon are actually losing their jobs permanently. This is a worrying trend considering that long-term and permanent unemployment are both huge drags on an economic recovery. Whether this dire scenario is avoided, economists say, depends in large part on whether the coronavirus pandemic can be contained.
Child care providers are facing lower wages and financial losses, confusing new safety standards, and higher risk of exposure to the coronavirus and COVID-19, the disease caused by the virus, and many workers are leaving their jobs or being laid off as a result. In the Los Angeles Times, Rikha Sharma Rani looks at the state of California specifically, where almost 9,300 child care providers, or 1 in 4 in the state, have closed since mid-March. More than 1,200 of those closures will be permanent, Sharma Rani reports, eliminating almost 20,000 child care spots. This has far-reaching implications for economic recovery, as accessible child care is an essential part of reopening and getting families back on their feet. And with the pandemic still raging with no end in sight, it’s unclear how much worse it will get.
Small firms need to be rescued with the same speed as large firms.
The coronavirus economic rescue programs enacted by Congress this past spring failed to prevent layoffs and firm bankruptcies among the smallest employers in the United States. Existing resources, such as the Paycheck Protection Program, helped firms that needed a marginal boost to get through the worst of the shutdowns caused by the coronavirus pandemic. But the hardest-hit areas or businesses did not receive the help they needed because of the structure, timing, and delivery mechanisms of rescue aid.
What’s worse is that little data are available to evaluate whether rescue efforts have been equitable for Black and Latinx small business owners. Meanwhile, policy interventions through the Federal Reserve have efficiently saved the largest and most well-resourced companies. As a result of these imbalances, the U.S. economy may become increasingly lopsided, concentrated, and less dynamic, harming prospects for broad-based and stable growth and racial equity moving forward.
Heading into 2021, policymakers should prioritize restructuring business aid so that small firms can be rescued with the same speed as large firms. The Paycheck Protection Program should be altered to help firms in high-rent areas, firms that are smaller and less well-connected to the banking system, and firms owned by Black and Latinx entrepreneurs. Longer term, policymakers should build public financial systems to make our economy resilient for the next downturn, including:
Increasing the capacity of the Small Business Administration
Building a faster payment system
Ensuring universal access to the banking system
Creating established alternatives to ad hoc business rescue programs via the Federal Reserve
Emergency financial rescue has been primarily a subject handled by the U.S. Congress, the Federal Reserve, and the U.S. Department of the Treasury, through the Small Business Administration. The key resources below provide solutions that policymakers can deploy to strengthen small businesses and provide for more equitable economic growth.
Well-functioning economic delivery systems, like plumbing systems, are essential to stopping the cycle of economic contraction. In this piece, Fischer and Gould-Werth outline how policymakers must invest in our economic infrastructure if our economy is to emerge from the coronavirus recession more resilient. This includes an examination of U.S. small and large business rescue aid programs, as well as Unemployment Insurance systems and U.S. paid leave policies.
As policymakers consider how to keep the U.S. economy stable while efforts to control the public health crisis continue, it is useful to evaluate the early research on the efficacy of the Paycheck Protection Program—most notably, whether the money went to the hardest-hit areas, encouraged firms to keep employees on payroll, and kept small businesses from going bankrupt. It is unlikely that any businesses—and particularly, small businesses—will be able to return to normal anytime soon, and the early evidence suggests that the Paycheck Protection Program is struggling to meet its intended goals. Examining what we know about the program can provide a roadmap on how to deploy aid to American small businesses moving forward, and this piece offers up several short-term fixes, as well as needed structural changes.
Research from former Equitable Growth Steering Committee member Raj Chetty and the Opportunity Insights team finds that U.S. consumer spending fell dramatically over the spring and summer of 2020, driven by public health and safety concerns due to the novel coronavirus and COVID-19, the disease caused by the virus. These concerns keep people, especially those in high-income households, from purchasing in-person services. This indicates that until people feel safe engaging again in in-person services, such as dining out or getting haircuts, consumer spending on services will not meaningfully rebound. If policymakers want to fix the U.S. economy, then they must first fix the U.S. public health crisis. In the meantime, Chetty and his co-authors find that investing in social insurance programs—such as the expanded unemployment benefits enacted by Congress in the Coronavirus Aid, Relief, and Economic Security, or CARES, Act—is the best way to mitigate economic suffering during the recession, rather than stimulus measures targeted toward businesses or the rich.
Top experts
Amanda Fischer, policy director, Washington Center for Equitable Growth
Mehrsa Baradaran, professor of law, University of California, Irvine School of Law
Raj Chetty, William A. Ackman professor of public economics, Harvard University
Lisa Cook, professor of economics, Michigan State University
To view the other policy sheets in this series, please click here.
U.S. antitrust laws, as interpreted and enforced today, are inadequate to confront and deter growing market power in the U.S. economy.
Recent economic research establishes that the United States suffers from a growing market power problem. Market power, often referred to as monopoly power, means consumers pay more for the goods and services they need. Workers earn less. Small businesses have a harder time succeeding. Innovation slows. Market power exacerbates wealth inequality, too, because those who benefit from monopolies—the high-paid executives and stockholders of corporations—are wealthier, on average, than the consumers, workers, and small businesses who bear monopolies’ costs.
U.S. antitrust laws, as interpreted and enforced today, are inadequate to confront and deter growing market power in the U.S. economy. To restore a fair and competitive market, we need legislation that strengthens the law and counters growing corporate power, enforcers who are willing to aggressively enforce laws, and increased fiscal resources to enforce the law.
Antitrust enforcement is typically handled at the federal level by the Federal Trade Commission, the U.S. Department of Justice’s Antitrust Division, and federal courts. It is governed primarily by Congress’ century-old policy direction in the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. The key resources below provide solutions for corralling corporate power through these antitrust enforcement tools.
Fiona Scott Morton discusses the evidence of increasing market power in the U.S. economy, the benefits of stronger antitrust enforcement, and the law’s overly lenient approach to corporate actions that undermine competition. She concludes with an agenda to confront market power.
Competition policy in the United States has become a major public policy issue for the first time in decades, but discussion about the current U.S. antitrust enforcement regime has been less systematic. This report examines enforcement activity (the number and type of cases that enforcers bring), the resources Congress provides for antitrust enforcement, and, in the federal system, the merger filing-fee system that has become the primary source of antitrust funding. The report finds that antitrust enforcement is historically low by a number of measures and funding for enforcement has decreased substantially since 2010.
A joint statement to the U.S. Congress by top U.S. antitrust experts. They conclude that outdated and bad economic theory has undermined antitrust enforcement, allowing dominant companies to gain an unfair advantage in the marketplace to the detriment of other businesses and consumers, innovation, and productivity growth. They call on Congress to revise current law to align it with modern economic theory and to fix harmful judicial rules: “The signatories to this letter agree that antitrust enforcement has become too lax, in large part because of the courts, and that Congress must act to correct the state of antitrust enforcement.”
Top experts
Michael Kades, director of markets and competition, Washington Center for Equitable Growth
Nancy Rose, Charles P. Kindleberger professor of applied economics, Massachusetts Institute of Technology
Tim Wu, Julius Silver professor of law, science and technology, Columbia Law School
Fiona Scott Morton, Theodore Nierenberg professor of economics, Yale University
To view the other policy sheets in this series, please click here.
