Worthy reads from Equitable Growth:

1. And it’s monthly jobs day! Read Kate Bahn and Austin Clemens, “Equitable Growth’s Jobs Day Graphs: January 2020 Report Edition,” in which they write: “On February 7, the U.S. Bureau of Labor Statistics released new data on the U.S. labor market during the month of January. Below are five graphs compiled by Equitable Growth staff highlighting important trends in the data. Prime-age employment-to-population ratio increased to 80.6 percent in January, reflecting a healthy labor market 10 years into the expansion.”
2. Claudia Sahm is making the podcast circuit. Definitely worth listening to. Tune into Tracy Alloway and Joe Weisenthal, “This Is How to Use Fiscal Stimulus to Stave Off The Next Recession,” in which they open with: “There’s a growing consensus that governments need to act more aggressively in using fiscal policy to stave off the next recession, and that monetary policy simply isn’t powerful enough. But how do you actually go about it? What do you spend the money on, and how do you get politicians to disburse it in a timely manner? On this week’s Odd Lots, we speak with Claudia Sahm, a former Fed economist who is now at the Washington Center for Equitable Growth, on ways to systematize and automate an early and aggressive fiscal response to economic weakness. Sahm has achieved fame for her so-called “Sahm Rule” which can provide policymakers with an early warning sign of when a recession might be brewing.”

Worthy reads not from Equitable Growth:

1. The early February report on the change from December to January in the U.S. employment situation is never worth a great deal because there are big and variable seasonal factors that affect both the December and the January levels. But it looks good. The (small) manufacturing recession continues to fail to spill over into the rest of the economy, which continues to add jobs without straining people’s willingness to set to work at current real wage rates. Labor-force participation begins to rise. And it begins to look more and more as though all the claims over the past two decades that labor-force participation for U.S. workers ages 25 to 54 years old was on the decline—that fewer prime-age Americans needed and wanted to work—was simply wrong. It was the awful barely-recovery that started in 2009 that pushed prime-age labor-force participation down from 2010 to 2014, not any secular or structural trends. Check out the U.S. Bureau of Labor Statistics, “Employment Situation Summary,” in which they report: “Total nonfarm payroll employment rose by 225,000 in January, and the unemployment rate was little changed at 3.6 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in construction, in health care, and in transportation and warehousing.”
2. The repeated waves of automation in manufacturing eliminate—or at least severely reduce the salience of—tasks. Whether those waves amount to “deskilling” on the level of occupations is a subtle and empirical question, for what tasks make up on occupation and how those tasks can shift about without destroying the occupation is a complicated and subtle thing. We do not have a good handle on this, theoretically or conceptually. But here we have the smart and hard-working David Kunst doing useful work. Read his “Deskilling Among Manufacturing Production Workers,” in which he writes: “Has technological progress in manufacturing been skill-biased or deskilling? This column argues that the conventional distinction between white-collar and production workers has concealed substantial deskilling among manufacturing production workers since the 1950s. Automation has reduced the demand for skilled craftsmen around the world, thereby reducing the number of jobs in which workers with little formal education could acquire significant marketable skills.”
3. Here’s a sophisticated look at some of the issues around the “wealth tax” that we do not (yet) have a good handle on. Read Josh Gans, “Does Being Rich Make You Better at Allocating Capital?,” in which he writes: “While we can all agree that the wealth tax likely deters risk-free saving, where the money actually goes otherwise is quite open. It could go to consumption, which will cause actual resource use in ways that are certainly not in the direction people concerned with redistribution would like although just how much of that there can be given that the wealthy haven’t managed to do that spending previously is arguable. It could go to philanthropy, which is a form of consumption (at least from the point of view of the donator) and is something that could be beneficial (but we have to consider whether the wealthy are the most productive to make those decisions—more on that another time). Or it could go to political influence, which is a mixture of consumption (the naked expression of power) or investment to help them get wealthier (the well-dressed expression of power) but in actuality depends on how much other rich people are spending on these activities in terms of the potential return (a complicated game). Finally, where the money could go is to riskier investment because at the margin this is now more attractive than risk-free investment.”

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

Ahead of this week’s State of the Union address by President Donald Trump, Equitable Growth released a series of graphs highlighting the way inequality restricts, subverts, and obstructs widespread economic growth in the United States—and how big-picture numbers, such as Gross Domestic Product or the unemployment rate, hide how this inequality is actually affecting average American families and businesses. The graphs show how inequality obstructs intergenerational mobility, how concentrated economic power subverts government institutions, and how inequality distorts microeconomic decisions, which consequently affects the macroeconomy. These are especially important points to remember during and after a major address such as the State of the Union, in which the economy plays a major role: “Any description of today’s economy that does not include a discussion of inequality, its causes, and its effects is at best incomplete and at worst misleading,” the post concludes.

In the second installment of her column covering the Federal Reserve, Claudia Sahm discusses another one of the Fed’s responsibilities: encouraging banks to meet the credit needs of the communities where they operate, a mandate under the Community Reinvestment Act. Hearings last week before the House Committee on Financial Services looked into how to modernize the act, which was first enacted in 1977 and updated in 1995 to address the racial and socioeconomic gaps in access to credit in the United States. While these gaps remain, the primary driver for updating the act now are changes in the banking industry and the regulatory burden on banks, as well as banks’ and communities’ desire for more transparency and clarity. In the column, Sahm goes through the history of the act, why it was first put in place, why it is still necessary, and how the act can be improved.

The House of Representatives voted this week on the Protecting the Right to Organize Act of 2019, or the PRO Act, which would make it easier for unions to organize new workers and workplaces, and ensure that U.S. workers receive fair wages and good working conditions. Ahead of the vote, Kate Bahn and Corey Husak released a factsheet about the act and how it would work to fight income inequality. They review the research from Equitable Growth’s network that bolsters the four main points of the act—addressing the power imbalance between workers and owners, clarifying the right to strike under the First Amendment of the Constitution, making it easier for workers to form a union, and preventing employers from misclassifying workers as contractors.

A new Equitable Growth working paper looks at the scope and extent of monopsony across labor markets, and is the first meta-analysis of monopsony measured by labor supply elasticity. In a column summarizing the methodology and findings of the paper, Kate Bahn explains that the researchers looked at two measurements of elasticity—direct and indirect—to show that estimation methods greatly influence findings on monopsony. The researchers also looked at specific empirical tools used to measure elasticity and aspects of research design to determine some best practices for elasticity estimation. Bahn concludes that, despite differences in methodologies, measurements, and results, it is clear that “monopsony is a broad force across labor markets and results in wage markdowns for many workers.”

Each month, the U.S. Bureau of Labor Statistics issues a monthly report on the U.S. labor market, and this week it released the data for January. Kate Bahn and Austin Clemens put together five graphs highlighting these and other important trends in the monthly announcement.

Links from around the web

If you receive health insurance through your employer, what your employer contributes toward your healthcare may actually be (directly or indirectly) taken from your wage, according to health economists. So, asks Austin Frakt for The New York Times’ The Upshot blog, under a Medicare for All plan, when employers don’t have to spend as much to provide you with insurance, does that mean your wage will rise? While research suggests the answer may be yes for many workers, the reality may be more complicated, depending “on the nature of the labor market, which varies across markets and jobs,” Frakt writes, before going into the various possibilities in both the public and private sectors under proposed Medicare expansion plans. Ultimately, he concludes, someone will have to pay, but “to the extent the cost of health insurance is shifted away from employers and to the federal government under Medicare for all, it seems wages would rise, at least for some people.”

A recent study of tax returns shows that the tax code is not race-neutral, reports Michelle Singletary for The Washington Post, and this bias “exacerbates income and wealth inequalities.” Various loopholes, tax breaks, and other benefits disproportionately benefit white households, while African American, Hispanic, and low-income families are left at a disadvantage. While the researchers made clear they do not suggest the Internal Revenue Service is purposefully giving beneficial tax provisions to wealthy white households, they do show that the tax system and specific provisions actively impact economic inequality. Despite the parts of the tax code that typically benefit lower-income minority households, such as the Earned Income Tax Credit, Singletary writes, “the system overall still skews in favor of those who are more well off. … It’s past time to correct provisions that continue to deepen our nation’s wealth divide.”

There has been an almost 40 percent decline in administrative assistant and secretarial jobs since 2000—more than 1.6 million of these jobs have disappeared, reports Rachel Feintzeig for The Wall Street Journal. Feintzeig looks at how this trend affected the accounting and consulting firm Ernst & Young, which, in 2014, piloted a program that made deep cuts to its executive assistant staff. She writes that the U.S. Bureau of Labor Statistics estimates the number of secretarial jobs will decrease another 20 percent by 2028—and another study of six mature economies by McKinsey Global Institute suggests that up to 10 million women will have to change their careers by 2030. This career path is traditionally dominated by women and has had a slower fade-out than jobs in the manufacturing industry, for example, where job losses garner much more news despite the numbers of losses in the two sectors being relatively equal over the past two decades.

A new column series from The Guardian will explore the various obstacles that women in the United States face under capitalism, from why it costs more to be a woman, to why mothers are treated differently in the United States compared to other developed economies, to how social pressure to look and behave certain ways affects women. The first of the “Feminist economics” series, by Noa Yachot and Nicole Clark, introduces many of these issues in the context of an economy that is allegedly working better than ever for women, in which women hold a (very slight) majority of payroll jobs and make up a majority of the college-educated workforce—while also facing higher healthcare costs, lower pay, and more household responsibilities than their male peers.

Friday Figure

Figure is from Equitable Growth’s “The State of the Union speech should not ignore inequality that obstructs, subverts, and distorts the U.S. economy” by Equitable Growth.

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

The most important economic decision taken this week may have been made not by Congress or the executive branch, but by the Federal Reserve’s Federal Open Market Committee, argues our Director of Macroeconomic Policy Claudia Sahm in the debut of her new column. The connection between the Fed and its decisions and U.S. workers and their wages is stronger than you might think, she continues, describing the historical context surrounding the meeting this week, including the Fed’s actions during and after the Great Recession. Despite the Fed’s dual mandate to pursue both stable prices and maximum employment across the nation, almost every policy meeting of the Fed discusses inflation while its commitment to pursuing maximum employment for all groups of workers has been more halfhearted. Likewise, there have been few discussions about the unequal effects of policies on different racial groups. But, Sahm concludes, this may change in the future, as the Fed has begun reviewing its approach to monetary policy.

Why is the gender wage gap in the United States persisting despite many efforts to close it? While discrimination and differences in the places women tend to work can explain some of the difference, write Heather Boushey and Kate Bahn, research shows that women’s continued greater responsibility for family care also plays a role. In a reproduced column that originally appeared in 2019 in the Labor and Employment Relations Association journal LERA Perspectives on Work, Boushey and Bahn review the research on the role of care in the labor market and how other economic trends and structures, such as monopsony, affect the gender wage gap.

Earlier this week, legislators in Congress held hearings on various proposals to provide paid family and medical leave to U.S. workers, including the FAMILY Act, which, Alix Gould-Werth writes, is the most universal and ambitious of the pending plans. Equitable Growth released a fact sheet late last week covering evidence from the states that have existing paid leave proposals, as well as states that are currently implementing paid leave, to provide insight into what aspects are most important to allowing workers to balance their caregiving and labor market responsibilities.

Harvard University’s Labor and Worklife Program recently launched its “clean slate for worker power” agenda, which provides a series of policy recommendations surrounding the legal framework around organized labor in order to ensure all workers experience the gains of economic growth. Kate Bahn summarizes some of the policy proposals found in the agenda, including graduated representation, ways to address the exclusion of certain types of U.S. workers from representation, and support for workers to participate in our democracy, such as by voting. Bahn concludes that this new agenda “would shape the economic forces that determine individual and collective well-being so that the concerns of today’s economy, such as rising monopsony power and persistent racial inequality, are addressed through a rebalancing of power toward the workers who contribute to economic growth.”

Equitable Growth’s Director of Tax Policy Greg Leiserson wrote a chapter called “Taxing Wealth” in a new book published by The Brookings Institution’s Hamilton Project. He makes the case for reforming the taxation of wealth in the United States, detailing four specific approaches and the economic effects, the pros, and the cons of each one. You can read the abstract on our website, and find the full chapter over on the Brookings site.

In Brad DeLong’s Worthy Reads column, he recommends and provides analysis on some of the week’s most important content, both from Equitable Growth and around the web.

Links from around the web

The idea of “full employment,” one of the Federal Reserve’s mandates, has long been a politically charged term in the United States because economists don’t agree on how low exactly unemployment can fall without triggering inflation. Case in point: In 2019, the Fed was forced to lower interest-rate increases that it had put in place in 2018, in part because it had underestimated the number of jobless U.S. workers. But, writes Matthew Boesler for Bloomberg Businessweek, “Fed officials are currently engaged in some deep introspection about what they got wrong. At the center of those discussions is the notion of full employment.” Boesler goes through the political history of the term, which began around the Great Depression as something “more than just a single number estimated under scientific pretenses by central bank technocrats,” and has since evolved and been redefined under different economic schools of thought and presidential administrations.

A recent analysis at the Brookings Institution delved into the monthly jobs reports put out by the U.S. Bureau of Labor Statistics to examine the positive trends—low unemployment rates, a decade of growth, higher wages—in more detail. The researchers, Martha Ross and Nicole Bateman, found a much less rosy picture than what we often read about: 53 million workers between the ages of 18 and 64 earn barely enough to live on, about $18,000 per year on average. They show that these statistics are not only describing young people just entering the labor market, or students working part-time, or otherwise financially secure workers, but actually that millions of hardworking adults “struggle to eke out a living and support their families on very low wages.” And, rather than just pushing for upskilling, more training, and higher education, Ross and Bateman argue that we need to take a closer look at the jobs our economy is providing, the wages those jobs are paying, and to whom specifically.

Why do we talk so much about providing families with choices when it comes to care responsibilities, asks Claire Cain Miller in The New York Times’ The Upshot blog, when many parents, and especially mothers, feel they actually have little choice in the matter when making decisions about work and family? The word “choice” ignores the structural barriers that are actually forcing these choices: The United States doesn’t provide universal paid family leave, free childcare, or public preschools to working families, and rising costs from healthcare to housing are overwhelming household budgets, while many women still experience earnings inequities after giving birth. Cain Miller dissects the idea of choice in the context of U.S. political history, particularly in the arena of family and gender policy, and how “the language of choice continues to shape policy debates.”

The United States is potentially facing yet another housing crisis: many Americans’ inability to afford housing, even at the lowest entry point of the housing market and regardless of the desire to rent or buy. This is likely because there simply isn’t enough housing to go around, writes Felix Salmon for Axios, and prices are rising too fast. A recent study shows that “entry-level houses are worth on average 50 percent more than they were at the beginning of 2012,” and certain metropolitan areas in the country have seen prices go up by as much as 89 percent since 2012. The cost of building housing has also gone up, meaning builders have less incentive to create new units. “Whether you rent or own ultimately matters much less than whether you have a place to live at all,” Salmon concludes.

Friday Figure

Figure is from Equitable Growth’s “Why Americans need to know more about the Federal Reserve” by Claudia Sahm.