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 we commemorated the Rev. Martin Luther King Jr. and his tireless efforts to bring about a more just society this past week, we are also reminded of the heaps of work we still need to do in order to achieve his dream. The economic gaps between black and white Americans, especially with regard to earnings and wealth, remain profound, and black women face even bigger hurdles due to double discrimination based on gender and race. This week, we took a look at how governmental policies have worked to reinforce these gaps in the past and how they can work instead to close them.

Inequality is constricting the U.S. economy and obstructing productivity and growth, which is why Equitable Growth seeks sensible, evidence-backed solutions to address these issues throughout various areas of the economy—from taxes and antitrust to family economic security and labor. Now, we’ll be raising these concerns and seeking answers via Medium, where our President and CEO Heather Boushey just launched an account and will be posting regularly on issues we care about.

More and more economists are coming around to the idea that the United States needs to do more to measure economic well-being than calculate Gross Domestic Product. Austin Clemens reviews a recent event, in which a panel of high-profile economists discussed the shortcomings of using GDP as the sole measure of economic growth. Most of the panelists argued in favor of maintaining the GDP reports as they are and releasing more detailed data separately. Though releasing more in-depth data is a good idea, doing so without altering the much-anticipated and much-discussed quarterly GDP reports would likely mean most people would continue to focus on GDP and ignore the new data. Instead, Equitable Growth proposes a new kind of GDP report, what we call GDP 2.0, in which growth is broken out by income to accurately measure who prospers when the economy grows.

The U.S. Congress is once again considering the Family and Medical Insurance Leave Act, or FAMILY Act. So this week we looked at the five states that have already implemented paid leave programs, as well as the others that are in the process of doing so. Our issue brief explains what the research says about the effects of implementing paid family and medical leave, who typically takes this leave and for how long, wage-replacement options, and job protection during leave periods.

Brad DeLong’s latest Worthy Reads column lays out his takes on must-read content from Equitable Growth and around the web.

Links from around the web

Oftentimes during economic downturns or recessions, colleges and universities can act as a natural shock absorber for young people. As the job market shrinks and people are laid off, enrollment in colleges rises. This was certainly the case during the Great Recession of 2007-2009, and likely will be the case again in the next downturn, writes Susan Dynarski for The New York Times. But during and after the Great Recession, many public colleges couldn’t keep up with higher demand, and either restricted enrollment, spent less money per student, or increased tuition fees—causing many students to enroll in for-profit colleges instead and to take out large loans in order to afford their degrees. The ramifications of this series of events are still being felt today, with high levels of debt and default among young workers. Before the next recession, Dynarski warns, we must ensure that public colleges are adequately supported, which will most likely require federal action.

Nearly 10 million children live in low-opportunity neighborhoods in the United States, meaning they have limited access to good schools, parks, and healthy food options, reports Erica Pandey for Axios. This means an incredibly high number of children are being born into disadvantage, as studies show that where a child is raised affects many aspects of their future lives, including health and economic outcomes. There is also a clear racial divide, continues Pandey, writing that of these 10 million children, 4.5 million are Hispanic and 3.6 million are black. These racial disparities will certainly play a role in maintaining the racial economic gaps.

Despite what the Trump administration says, it is becoming more clear with each day that the enormous tax cuts provided to the wealthy and to large corporations in the 2017 Tax Cuts and Jobs Act will not end up paying for themselves. So why are we still hearing this line of argument? “The claim that tax cuts don’t cost money is a lie that won’t die, because proponents of tax cuts have learned that many voters like to hear it,” writes The New York Times Editorial Board. “Two years later, the results are in. The annual federal budget deficit has topped $1 trillion.”

If there is one thing most people across the political spectrum nowadays can agree on, it is to be mad at tech companies, explain Nancy Scola and Cristiano Lima for Politico, “from Democrats who want to break up the ‘big four’ of Apple, Amazon, Google and Facebook to Republicans—including [President Donald] Trump himself—who think the industry and its products are biased against conservatives.” But one congressman in particular, Rep. David Cicilline (D-RI), who also happens to be the chairman of the House subcommittee on antitrust, is wading heavily into the fray. Last year, he announced that a (rather surprising, considering the partisan times we are living in) bipartisan group of House members were opening an investigation into whether digital markets are illegally anti-competitive. And though his chances of “fundamentally revamping the country’s antitrust laws or resetting regulators’ approach to Silicon Valley [are] slim,” Scola and Lima write, he seems more than willing to take on the heavy burden of trying.

Friday Figure

Figure is from Equitable Growth’s “For Juneteenth: A look at economic racial inequality between white and black Americans,” by Liz Hipple and Maria Monroe.

Worthy reads from Equitable Growth:

1. This feature, started by Equitable Growth alumnus Nick Bunker, is always one of my monthly must-reads. The JOLTS data set is a uniquely valuable source of information. Read the latest from Raksha Kopparam and Kate Bahn, “JOLTS Day Graphs: November 2019 Report Edition,” in which they write: “Every month the U.S. Bureau of Labor Statistics releases data on hiring, firing, and other labor market flows from the Job Openings and Labor Turnover Survey, better known as JOLTS … This report doesn’t get as much attention as the monthly Employment Situation Report … Below are a few key graphs using data from the report.”
2. Here’s a very relevant chart, titled “Racial Income Inequality in the U.S. Has Changed Little in the Past 48 Years,” from Robert Manduca’s 2018 report “How rising U.S. income inequality exacerbates racial economic disparities.”
3. David Rotman at MIT Technology Review noted Heather Boushey’s book Unbound: How Inequality Constricts Our Economy and What We Can Do About It in his “The Best Books in 2019 on the Economy We Live in,” in which he writes: “The year 2019 produced some evidence-based antidotes to the trendy political narratives of robot domination and the collapse of capitalism. I’m struck by the number of truly brilliant books on economics this year. My list of favorites is below … Unbound: How Inequality Constricts Our Economy and What We Can Do about It, by Heather Boushey: Think rising levels of inequality are just an inevitable outcome of our market-driven economy? Then you should read Boushey’s well-argued, well-documented explanation of why you’re wrong.”

Worthy reads not from Equitable Growth:

1. I am teaching a brand-new course this semester—brand new for me, that is, and I have stolen the concept and the readings and the organization from Harvard’s Melissa Dell. It is looking at the history of “economic growth”—both the process and the idea: “The History of Economic Growth: Econ 135.”
2. The very sharp David Glasner on how Arthur Burns did a really lousy job as Fed Chair and left his successors with a horrible mess. Read his “Cleaning Up After Burns’s Mess,” in which he writes: “After prolonging monetary stimulus unnecessarily for a year, Burn erred grievously by applying monetary restraint in response to the rise in oil prices. The largely exogenous rise in oil prices would most likely have caused a recession even with no change in monetary policy. By subjecting the economy to the added shock of reducing aggregate demand, Burns turned a mild recession into the worst recession since 1937-38 recession at the end of the Great Depression, with unemployment peaking at 8.8 percent in Q2 1975. Nor did the reduction in aggregate demand have much anti-inflationary effect, because the incremental reduction in total spending occasioned by the monetary tightening was reflected mainly in reduced output and employment rather than in reduced inflation … When President Carter took office in 1977, Burns, hoping to be reappointed to another term, provided Carter with a monetary expansion to hasten the reduction in unemployment that Carter has promised in his Presidential campaign. However, Burns’s accommodative policy did not sufficiently endear him to Carter to secure the coveted reappointment … A year after leaving the Fed, Burns gave the annual Per Jacobson Lecture to the International Monetary Fund. Calling his lecture “The Anguish of Central Banking,” Burns offered a defense of his tenure, by arguing, in effect, that he should not be blamed for his poor performance, because the job of central banking is so very hard. Central bankers could control inflation, but only by inflicting unacceptably high unemployment. The political authorities and the public to whom central bankers are ultimately accountable would simply not tolerate the high unemployment that would be necessary for inflation to be controlled: “Viewed in the abstract, the Federal Reserve System had the power to abort the inflation at its incipient stage fifteen years ago or at any later point, and it has the power to end it today. At any time within that period, it could have restricted money supply and created sufficient strains in the financial and industrial markets to terminate inflation with little delay. It did not do so because the Federal Reserve was itself caught up in the philosophic and political currents that were transforming American life and culture.”

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

Every month, the U.S. Bureau of Labor Statistics releases data on hiring, firing, and other labor market flows from the Job Openings and Labor Turnover Survey, better known as JOLTS. Today, the BLS released the data for November 2019, showing that the number of new hires remained about the same, while the rate of job openings decreased slightly. Raksha Kopparam and Kate Bahn put together four graphics to illustrate this and other observations about the data.

A new working paper looks at how the extension of the federal minimum wage in the 1960s led to the decrease in earnings differences between black and white workers in the late 1960s and early 1970s. After the 1966 Fair Labor Standards Act expanded the federal minimum wage to new industries such as agriculture, restaurants, nursing homes, and other service industries—areas where nearly one-third of black workers were employed—wages rose dramatically for workers in these newly covered industries, with no effect on employment. Ellora Derenoncourt and Claire Montialoux show that the impact on black workers was nearly twice as large as the impact on white workers, and argue that their research suggests that “minimum wage policy can play a critical role in reducing racial economic disparities.”

Head over to Brad DeLong’s latest worthy reads for his takes on recent must-reads from Equitable Growth and around the web.

Links from around the web

A few years ago, West Virginia passed stricter work requirements for its supplemental nutrition assistance program—similar to the ones embraced the Trump administration that will go into effect in April—mandating at least 20 hours per week of work or training for work in order to receive access to the safety net program. Campbell Robertson of The New York Times followed up on the new state-level regulations, looking at how the change affected both state employment rates and the daily lives of people who rely on the program. “The policy seems straightforward,” he writes, “but there is nothing straightforward about the reality of the working poor, a daily life of unreliable transportation, erratic work hours and capricious living arrangements.” His investigation found that employment rates have not increased noticeably under the restrictions—often the argument for implementing such a change—while the most apparent impact has been “at homeless missions and food pantries, which saw a big spike in demand that has never receded.”

“If there’s one thing many Americans agree on,” write Scott Lanman and Stephanie Flanders for Bloomberg, “it’s the importance of education as a bedrock of the U.S. economy.” In an episode of the news outlet’s Stephanomics podcast, education and the disparities in outcomes and resources between school districts as a result of funding being left to state and local governments takes center stage. The episode looks at how difficult it can be to improve access and quality of education when districts are subject to the whims of the real estate market and demographic shifts—and what states can do about it.

As the gig economy expands further, where can we expect it to stop? The gigantic spread of app-based companies into various aspects our lives arrives with drastic consequences for many full-time employees, from taxi drivers to bellmen to chefs. “The service sector, in contrast to manufacturing, is just beginning to contend with automation and technological displacement—in the form of robots, apps and algorithms,” writes E. Tammy Kim in The New York Times. And while it seems there may be no limit to where the gig economy can go, how the service sector adapts and reacts to app-based employment may act as a guide for the future, Kim posits that “only a broad-based fight for fair treatment and lawful classification [as full-time employees, not contractors] can dismantle the ideology of labor built into Uber and its ilk: that all workers should be as productive and loyal as lifetime employees, and expect nothing in return.”

Friday Figure

Figure is from Equitable Growth’s “JOLTS Day Graphs: November 2019 Report Edition” by Raksha Kopparam and Kate Bahn.

Worthy reads from Equitable Growth:

1. Lisa Cook and Jan Gerson provide a large estimated benefit of leveling the gender and racial playing field with respect to innovation in “The implications of U.S. Gender and Racial Disparities in Income and Wealth Inequality at Each Stage of the Innovation Process.” They write: “Since the 1960s, both women and underrepresented minorities in the United States have obtained an increasing share of bachelor’s … and other advanced degrees in … STEM … [y]et there has been no similar increase in patenting activity among these groups … The core problem is the continued discrimination experienced by disadvantaged minorities and women at every stage of the innovation process, from childhood and youth exposure and mentoring in the STEM fields to postsecondary educational barriers to advancement, and from discriminatory denials of patent applications to the lack of opportunity to participate in the development of patentable ideas in the technology workplace. Closing this gender and racial gap in the U.S. innovation process could increase U.S. Gross Domestic Product per capita by 2.7 percent.”
2. Here are some of my thoughts, now two decades old, on Piketty and other issues. Surprisingly, I still think much the same as I did then, in “Bequests: An Historical Perspective,” in which I wrote: “Practically every major aspect of our system of inheritance today is less than two hundred and fifty years old. Two hundred and fifty years ago, inheritance proceeded through primogeniture—as if those leaving bequests cared not for the well-being of their descendants but only for the wealth and power of the lineage head. Before the industrial revolution, inheritance played an overwhelming and crucial role in wealth accumulation and wealth distribution that it does not play today. Migration to the New World was accompanied by a rapid shift in the perception of the purpose of inheritance as the old patterns failed to flourish in a land-rich, rapidly-growing frontier-settler economy. By the start of the twentieth century inherited wealth was regarded with suspicion in America, with even some of the richest calling for estate taxes to keep the rich from diverting the public trust of their fortunes into the pockets of their descendants. Thus the coming of social democracy to America brought with it high statutory rates of tax on large estates, which nevertheless did not raise a great deal of revenue.”

Worthy reads not from Equitable Growth:

1. This is a must must read. This is a great paper by Alberto Alesina and Stefanie Stantcheva about why “Americans continue to regard their economic prospects more optimistically than Europeans, who fear that the poor are stuck in poverty.” Coming to grips with what generates this may be the most important question in political economy today. Read “Mobility: Real and Perceived,” in which they write: “Americans, by and large, view the market economy as fair: if one works hard, poverty can be left behind; and wealth is generally deserved by those who have accumulated it … Europeans, by contrast, believe that the poor will remain stuck in poverty, no matter how hard they try, and that many of the rich don’t deserve their wealth, which originated mostly from birth and connections in an “unfair” economy, based upon privileges. They believe that social mobility is low and that something like an American dream in their country is an illusion … A key difference in the responses of Europeans and Americans is … [that] European respondents are more pessimistic than Americans, though their statistical chances now look better … Individuals more pessimistic about social mobility favored government spending on programs designed to equalize opportunities and favored a progressive tax system. Interestingly, the respondents who believed that social mobility is low seem to favor equal-opportunity policies more than ex-post-redistribution of income. American respondents showed a distinctive—and counterintuitive—geographical pattern. In areas such as the South and the Southeast, where upward mobility is relatively low, Americans were overly optimistic about prospects of upward mobility. The opposite was the case in areas where mobility is higher, as in the North and Northwest. This is an intriguing pattern that will require more study to understand.”
2. Populism—in today’s climate, neo-fascism would be a better phrase because the original populists actually had policies that were popular and effective (in some cases at least) in boosting the well-being of the people—is only strengthened by a small amount via the economic insecurity channel. But other factors boosting populism have currently made it influential enough that that small boost can be politically decisive. Read this excellent piece of work by Yotam Margalit, “Economic causes of populism: Important, marginally important, or important on the margin,” in which he writes: “A common explanation for the rise of populism is economic insecurity driven by forces such as trade, immigration, or the financial crisis. This column, part of the Vox debate on populism, argues that such view overstates the role of economic insecurity as a driver. In particular, it conflates economic insecurity being important in explaining the overall populist vote and being important by affecting election outcomes on the margin. The empirical findings indicate that the share of populist support explained by economic insecurity is modest.”
3. Economics’ woman-underrepresentation problem appears due to a drip, drip, drip, drip of small factors everywhere along the pipeline. Here Nagore Triberri and her coauthors find that there is a substantial slice of papers of high enough “quality” (as measured by future citations) to get published that do not get published because they are written by women. Yet referees assess papers written by men and women similarly. And editors do not seem biased in their use of referees. Read “Gender Neutrality in Economics: The Role of Editors and Referees,” in which they write: “Women economists are under-represented across the discipline, from university departments to academic conferences and publishing houses. This column focuses on the editorial process and asks whether the referees and editors of four leading economics journals made gender-neutral publishing decisions between 2003 and 2013. The findings suggest that the gender of the referee does not affect the valuation of a paper and that editors are gender-neutral in valuing advice from referees. However, papers written by women appear to face a higher bar in the quest to be published.”