Weekend reading: Vision 2020 edition

Posted on by David Evans

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

Emblematic of Equitable Growth’s mission to promote ways to encourage strong, stable, and broad-based economic growth is our Vision 2020 conference today. Coming together at our event are leading policymakers, academics, journalists, and thought leaders to discuss and advance specific policies for the next Congress and administration to consider. Speakers include Federal Trade Commissioner Rohit Chopra, International President of the Service Employees International Union Mary Kay Henry, Equitable Growth President and CEO Heather Boushey, and many more, covering topics ranging from boosting labor power to busting monopolies, from addressing structural racism to incorporating climate change into economics. The event also introduces our Equitable Growth 2020 project, which will feature around 20 essays to be published in January 2020, cataloguing these and other policy ideas. Read more here about today’s sessions and speakers.

How does exposure to strikes affect the way workers see striking and labor organizing more broadly? A new Equitable Growth working paper suggests that firsthand exposure to strikes and those participating in them increases public support for both the strikes and the workers. Looking at schools where teachers had walked out of classrooms, the researchers found that support for the teachers and knowledge of their demands among parents of students in those schools was quite high—and parental support for future strikes, especially those regarding school funding, was equally high. In a column covering the research’s findings, Kate Bahn and co-author of the original study Alexander Hertel-Fernandez write that “the most striking finding was that parents exposed to the teacher walkouts also became more interested in taking labor action such as strikes at their own jobs.”

Bahn also testified before the House Judiciary Committee this week in a hearing on “Antitrust and Economic Opportunity: Competition in Labor Markets.” In her testimony, she focused on monopsony—when a labor market lacks competition among employers when hiring workers—and its effect on the U.S. labor market and on stagnating wages as well as its contribution to U.S. economic inequality and gender wage gaps. She concluded with a summary of why understanding monopsony and its powerful effects is such a vital part of advancing policies that will grow the economy for everyone.

Equitable Growth announced two exciting new hires this week: soon-to-be Director of Macroeconomic Policy Claudia Sahm, currently a section chief at the Federal Reserve Board; and Mehrsa Baradaran, professor at University of California, Irvine School of Law, who will join our Board of Directors. We are looking forward to welcoming both Sahm and Baradaran to our team and learning from their expertise and valuable experience.

Links from around the web

What does the walkability of your neighborhood growing up have to do with your future economic outcomes? Apparently quite a lot, according to a new study covered by Richard Florida for CityLab. The study finds that even considering other factors, the more walkable a child’s neighborhood, the higher their earnings will be in adult life. The study uses Walk Score, an economic mobility measure based on data developed by Harvard University economist Raj Chetty and his research team, to compare walkability and its effects on school quality, income inequality, race, social capital, and the share of single-parent families across more than 380 commuting zones in the United States. The study’s co-authors write that “the more walkable an area is … the more likely Americans whose parents were in the lowest income quintile are to have reached the highest income quintile by their 30s.”

After the Great Depression, political upheaval and an intellectual revolution changed the way we thought about economic policy solutions in order to boost employment and productivity and grow the economy. The world economy today is “stuck in a low-growth trap, argues Mervyn King for Bloomberg “This time around, we’ve got the political turmoil but no comparable questioning of the ideas underpinning economic policy. This needs to change,” The economy these days is different than it used to be, King continues, and as such, traditional economic models and policies must be adapted to reflect the reality of the 21st century—before the next financial crisis hits.

The United States, once considered a free-market haven where market competition drove down the cost of everything from internet service to cellphone plans to plane tickets, is now dominated by market concentration. Many services “are now much cheaper in Europe and Asia than in the United States, and the price differences are staggering,” writes Thomas Philippon for The Atlantic. “In 1999, the United States had free and competitive markets in many industries that, in Europe, were dominated by oligopolies,” he writes. “Today the opposite is true.” Philippon attributes this change to two phenomena: first, that other countries were inspired by the United States and caught up, and second, that the United States became complacent about antitrust enforcement and fell behind. This process has contributed to the erosion of the middle class and the expansion of inequality in the United States.

Looking solely at the unemployment rate and Gross Domestic Product in the United States, you would think that the economy is booming for everyone. But, writes Patricia Cohen for The New York Times, these statistics largely ignore the many Americans who can’t find a job that provides them with a decent living. Despite the impressive labor market gains over the past few years, there are many Americans whose realities are not reflected in low unemployment rates and who continue to be left behind by the economy recovery. “One in four workers say they have unpredictable work schedules.” Cohen writes. “One in five adults who are employed say they want to work more hours. Annual wage growth has struggled to reach 3 percent. And nearly 40 percent of Americans, a Federal Reserve report found, are in such a financially precarious state that they say they would have trouble finding $400 for an unexpected expense like a car repair or a medical bill.”

Friday figure

Figure is from Equitable Growth’s “Testimony by Heather Boushey before the Joint Economic Committee” and part of her presentation at our Vision 2020 event today in Washington, DC.

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New board member Mehrsa Baradaran brings expertise on economic inequality and the racial wealth gap

Posted on by Maria Monroe
Mehrsa Baradaran joins the Washington Center for Equitable Growth’s Board of Directors.

The Washington Center for Equitable Growth is pleased to announce that Mehrsa Baradaran, professor at University of California, Irvine School of Law, will join the Board of Directors. Baradaran is a leading scholar on banking law and financial inclusion and has developed a number of policies to address economic inequality and the racial wealth gap.

In her most recent book, The Color of Money: Black Banks and the Racial Wealth Gap, Baradaran explores the history behind the racial wealth gap and the reasons for which it has persisted for more than 150 years. Baradaran focuses on the role of black banks, ostensibly created to help build wealth in the black community, that emerged in the late 1960s.

In response to demands from black activists for reparations and race-specific economic redress following the Civil Rights Act of 1964, the Nixon administration offered the solution of “black capitalism,” of which black banking was a crucial feature. It allowed President Richard Nixon to maintain a segregated economy and keep the support of white voters. In the context of housing segregation, racism, and Jim Crow, all of which were still prevalent in the United States at the time, “not only was it impossible for black banking to be separate and equal, they could not even be separate and profitable,” Baradaran observes in The Color of Money.

Baradaran will be speaking on the racial wealth gap at Equitable Growth’s Vision 2020 conference on November 1. The event will bring together leading voices from the policymaking, academic, and advocacy communities in Washington, D.C., to highlight the most pressing economic issues facing Americans today.

Baradaran argues that even today, policymakers push tax breaks and incentives purported to revitalize black or low-income neighborhoods—such as the “opportunity zones” program created by the 2017 tax law—without awareness of the racist origins of these market-based solutions. Black ghettos that suffered from generations of forced racial segregation under federal law were rebranded as enterprise zones, then as opportunity zones.

These ideas build on work from her earlier book, How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy, which documents the demise of community-based banks and credit unions—“banks with souls”—and the shift toward check­-cashing services, payday lenders, and title vendors charging fees and interest higher than any chartered bank could legally impose among families in the bottom 50 percent of the income distribution. (See her video about How the Other Half Banks here.)

Baradaran proposes restoring postal banking, which existed in the United States in the early 20th century, as a way to help those who are “underbanked,” or insufficiently served by banks and have to turn to alternative and often predatory financial services as a result. As the world’s largest retail network with more than 30,000 retail locations, the U.S. Postal Service is already equipped to handle essential banking services. Not only is the postal service an institution that is not motivated by profit and must legally serve all Americans, but also more than half of locations are found in ZIP codes that currently aren’t served by any banks, putting them in an ideal position to serve the underbanked.

Baradaran’s research and ideas to address U.S. economic inequality go beyond banking. She proposes “A Homestead Act for the 21st Century” to build wealth for Americans who were excluded from historical programs that supported intergenerational wealth. Her program would create a public trust to purchase abandoned properties in target cities and grant them to qualified residents, combined with a holistic suite of public investments in infrastructure and jobs to revitalize local communities.

Notably, Baradaran has underscored the importance of thinking critically about reparations, starting with the measurement of wealth that was extracted and deprived from communities. She said in a recent interview, “though I talk a lot about fixing the racial wealth gap through housing and through a variety of different policies, I think what is the most important policy thing that we can do is to talk about reparations in a serious methodological way. Just to measure the harms done, to look at the theories of justice that would justify a solid and robust reparations program.”

The racial wealth gap, Baradaran argues, isn’t an issue limited to the well-being of a subset of the U.S. population. The racial wealth gap is intimately tied to the issue of wide economic inequality in the United States and must be central to solutions to reduce inequality. In her words, “You can’t understand why we have the gaps that we do and the inequalities that we do until you understand it was all based on anti-black racism and segregation.”

Baradaran’s work has played an immensely important role in drawing attention to the institutions and financial structures that have created and perpetuated economic and racial inequalities in the United States. We are thrilled for this opportunity to learn from and work in partnership with professor Baradaran to advance a new economic vision.

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Equitable Growth hosts Vision 2020 Conference in Washington, highlighting connection between economic inequality and growth

Posted on by Maria Monroe

Economic inequality in the United States has grown over the past few decades to levels not seen in nearly a century. As a result, more than any presidential election in recent memory, the 2020 campaign has become an arena for debating transformative ideas to address the generational challenges of income and wealth inequality. Inequality and the need to achieve strong, broad-based economic growth are the structural problems that underlie fundamental issues from taxation to lagging wages, from healthcare and higher education to climate change and competition.

Equitable Growth is committed to providing a platform for bold policy ideas that can be adopted in 2021 by the new Congress and whoever the president might be. To help advance the conversation about these and other evidence-based policy proposals and the research behind them, Equitable Growth is hosting Vision 2020: Evidence for a Stronger Economy, an all-day conference in Washington on Friday, November 1. The event will bring together leading voices from the policymaking, academic, and advocacy communities to explore bold new ideas and discuss how the issues that candidates are debating are affected by ongoing shifts in economic thinking about how inequality obstructs, subverts, and distorts broadly shared economic growth.

Speakers will include:

  • Federal Trade Commissioner Rohit Chopra, who will discuss his vision for modernizing federal antitrust power and enforcement
  • Mary Kay Henry, international president of the Service Employees International Union, who will address her agenda for workers, “Unions for All,” which would, among other things, enable unions to bargain at the sectoral level
  • Sarah Bloom Raskin, a Rubinstein Fellow at Duke University, a former U.S. deputy secretary of the Treasury, and a former member of the Federal Reserve System Board of Governors, who will participate in a panel on the causes and consequences of economic inequality
  • Bucknell University economist Nina Banks, who will tell the story of Sadie Alexander, the first African American economist, and describe why her ideas are increasingly relevant today (Alexander, who was not able to practice economics when she received her doctorate in 1921 due to racial and gender exclusion, became, in 1945, one of the first U.S. economists to champion a federal jobs guarantee.)
  • Cecilia Muñoz, former director of the White House Domestic Policy Council and current vice president for Public Interest Technology and Local Initiatives at New America, who will serve on a panel on the role of state and local stakeholders in addressing structural inequality and boosting broadly shared growth

The day’s sessions will include:

Toward a New Economy

Raskin, Dania Francis of the University of Massachusetts Amherst, and Equitable Growth President and CEO Heather Boushey will discuss the causes and consequences of economic inequality, along with bold policy solutions to tackle inequality and promote strong, sustained, and broad-based economic growth.

Macroeconomic Implications of Inequality

Harvard University economist Karen Dynan, University of California, Irvine School of Law professor Mehrsa Baradaran, and Claudia Sahm, currently a section chief at the Federal Reserve Board and soon to join Equitable Growth as its new director of macroeconomic policy, will join moderator Ylan Mui of CNBC to discuss the growing research evidence of the impact of inequality on economic growth. The panelists will discuss these findings and their implications for fiscal and monetary policymaking, as well as housing and financial regulation issues.

Envisioning a New Climate Economy

Historian Lizabeth Cohen of Harvard University will discuss what we can learn from how working Americans came to embrace President Franklin D. Roosevelt’s New Deal policies in the midst of the Great Depression, and its relevance to engaging Americans in the economic, social, and political change required by today’s climate crisis.

The Rise of Monopsony Power in the Labor Market

Equitable Growth director of Labor Market Policy and economist Kate Bahn will moderate a conversation with economist Arindrajit Dube of the University of Massachusetts Amherst and Columbia University political scientist Alexander Hertel-Fernandez about the role in the labor market of monopsony power, the ability of employers to suppress wages regardless of tightening labor supply. The panel will discuss the evidence of monopsony power and potential policies to address it.

Trust Busting in the 21st Century

The U.S. economy is increasingly dominated by a few firms. This has led to higher profits for shareholders but lower wages for workers, and has had additional impacts on innovation, entrepreneurship, and inequality. A clear consensus for how U.S. policymakers should combat concentration and anticompetitive behavior remains elusive. In this session, Federal Trade Commissioner Rohit Chopra will provide his vision for modernizing antitrust power and enforcement in a conversation with CNN reporter Brian Fung.

A Conversation About Structural Racism in the Economy

This panel, consisting of Camille Busette, director of the Race, Prosperity, and Inclusion Initiative at The Brookings Institution, Equitable Growth board member Byron Auguste, who is CEO and co-founder of Opportunity@Work, economist Monica García-Pérez of St. Cloud State University, and moderator Gillian White, deputy editor of The Atlantic, will discuss ideas for social, political, and economic policy changes to address persistent income and wealth gaps between racial groups and advance racial equity in the United States.

Fighting Power with Power: Unions for All

The history of the U.S. labor movement illustrates that unions play a critical role in mitigating inequality and empowering workers across the economy. Recent research also illustrates that an increasing proportion of nonunion workers have a desire to form a union in their workplace. In this session, Mary Kay Henry will address her agenda for workers, “Unions for All.”

The Front Line of Structural Change

Joining Muñoz in a conversation about the economics of place and race, with a focus on the role of state and local stakeholders will be Tom Perriello, executive director of Open Society-US, Maya Rockeymoore Cummings, president and CEO of Global Policy Solutions and chair of the Maryland Democratic Party, economist Bradley Hardy of American University, and moderator Anmol Chaddha, research director for the Equitable Futures Lab at the Institute for the Future.

Building Worker Power

Carmen Rojas, co-founder and CEO of The Workers Lab, will close out the event with a discussion of promising new strategies for building worker power, particularly for low-income workers, in today’s changing economy.

Equitable Growth is planning a number of other actions in the coming months to inform the 2020 policy conversation. Stay tuned!

Testimony by Kate Bahn before the U.S. House of Representatives Judiciary Committee

Posted on by Maria Monroe


Kate Bahn
Washington Center for Equitable Growth
Testimony before the U.S. House of Representatives Judiciary Committee hearing on “Antitrust and Economic Opportunity: Competition in Labor Markets”

October 29, 2019


Thank you Chair Nadler, Ranking Member Collins, Subcommittee Chair Cicilline and Subcommittee Ranking Member Sensenbrenner for inviting me to testify today. My name is Kate Bahn and I am the Director of Labor Market Policy and an economist at the Washington Center for Equitable Growth. We seek to advance evidence-backed ideas and policies that promote strong, stable, and broad-based growth.

The United States is in the longest labor market expansion in U.S. history, yet many workers still feel stuck with few opportunities or they are changing jobs but without advancing their skills or improving their incomes. The U.S. economy has been suffering from stagnant wage growth, rising income inequality, and a general decline in the dynamism that once produced a vibrant labor market. Economists and policymakers are increasingly recognizing that monopsony is a major cause of these dynamics.

Monopsony refers to a labor market that lacks competition among employers when hiring workers—the equivalent to the product-and services markets phenomenon “monopoly” that refers to a lack of competition among sellers of products or services. While monopoly means consumers pay higher prices or receive lower quality than in a competitive market, monopsony in labor markets means workers receive lower wages or worse working conditions than if there were a competitive market for their services. Monopsony has traditionally been thought of as a rare circumstance where a labor market only has one or very few employers, such as would be the case in a geographically remote mining town where workers don’t have outside options. But it also encompasses any situation in which workers aren’t moving between jobs in search of higher pay in part because they face so-called frictions that inhibit their ability to search for and find jobs that would be a better match.

New sources of data and innovative econometric methods have allowed researchers to test and confirm the premise that employers have geographic concentration over jobs that lead to lower pay. Using new data from CareerBuilder.com, economists Jose Azar at the IESE Business School at the Universidad de Navarra, Ioana Marinescu at the University of Pennsylvania, and Marshall Steinbaum at the University of Utah, Salt Lake City find that going from a less concentrated labor market to a more concentrated one was associated with a 17 percent decline in the wages employers were posting to the website.1 While mining towns may be more rare, increasing concentration in a number of sectors of the U.S. economy can still lend market power to individual employers, which leads to low wages.

While empirical estimations of concentration are one way to measure how anticompetitive markets are, many economists instead use something called labor supply elasticity, or how sensitive workers appear to be to wage changes, to then estimate the degree to which employers are able to exploit lower pay sensitivity by undercutting wages. This way of understanding and estimating monopsony was pioneered by economist Alan Manning of the London School of Economics in his 2003 book Monopsony in Motion. Manning applied the empirical estimation techniques of the job-search model to demonstrate that anytime workers are not switching jobs in response to wage changes, employers have monopsony power to suppress wages.

The once prevailing competitive labor market model predicts that firms that cut wages would immediately lose all their workers, but new research shows that workers do not behave as the competitive model predicts. In a recent meta-analysis of the monopsony research, economists Todd Sorensen and Anna Sokolova of the University of Nevada, Reno find that, on average, if an employer cuts wages by 5 percent, they only lose 10 percent to 20 percent of their workers over time, not all of them as a competitive model would predict. In these circumstances, individual employers are empowered to suppress wages without risking losing their supply of workers to their competitors.

In a dynamic monopsony model such as this, so-called search frictions and differences between jobs and workers—including workers having imperfect information about employers, caregiving responsibilities outside of work, and other constraints to job mobility—would give employers more power to set wages below competitive levels while still maintaining a sufficient supply of workers. These dynamics fosters inequitable outcomes for workers.

Research by Doug Webber of Temple University uses high-quality restricted-access data from the U.S. Census Bureau’s Longitudinal Employer Household Dynamics Survey to estimate economywide elasticity of 1.08. Webber’s estimations would imply wages 50 percent lower than economists would expect in a competitive labor market.2 Yet there is still a lot of variation among firms. Examining monopsony by industry, he finds that wages in manufacturing appear to be more competitive, while health care and administrative support are the least competitive, giving employers the most wage-setting power in these industries.

Dynamic monopsony across the U.S. economy may be one of the reasons we experience high income inequality in our nation, and why most workers have not been able to share in the economic growth of the world’s wealthiest nation. Webber calculates a “counterfactual earnings distribution,” hypothesizing what things would look like without the patterns of monopsony that he finds. He presumes a one-unit increase in firms’ labor supply elasticity and finds that it would be associated with a 9 percent reduction in the variance of the earnings distribution. In other words, reducing the impact of monopsony across the economy would make it more equitable for workers.

Evidence points to monopsony being particularly detrimental to women workers. Further research by Webber finds that monopsony contributes to the overall gender wage gap.3 This research estimates that women’s greater job-search frictions compared to men leads to 3.3 percent lower earnings. This is equivalent to $131 monthly penalty for the median female worker. This is essentially a tax on women workers, equivalent to half the taxes that workers pay on their income under the Federal Insurance Contributions Act.4 Webber’s analysis concludes that a majority of this difference is due to the marriage and child penalties that women face and that have no similar effect on men. The gender-specific social expectations that women face not only impact their disproportionate burden for caretaking in their families, but also reduces their economic opportunities in the labor market.

Monopsony also appears to be more prevalent in industries that have a disproportionate amount of women. Recent research by Elena Prager at Northwestern University and Matt Schmitt at the University of California, Los Angeles published by Equitable Growth finds that hospital mergers reduced wage growth for nurses and pharmacists, both occupations that are heavily dominated by women.5 They estimate that healthcare workers impacted by a merger had earnings that were 4.1 percent lower for skilled workers and 6.3 percent lower for health care professionals compared to workers not impacted by a merger.

A significant body of research in the monopsony literature also estimates that monopsony reduces earnings for teachers where women are overrepresented, and finds significant monopsony among teachers, especially women teachers.6 Economists Michael Ransom and Val Lambson of Brigham Young University find that these differences are due to women teachers being paid less than men even within the same school districts. These outcomes persist despite supposed pay rigidity in school districts with clearly defined salary scales.

Furthermore, gender-based discrimination in hiring and treatment at work may leave women captive to accept jobs in less-than-ideal conditions or quit and go into a potentially lower-paying, lower-quality jobs. Research suggests that sexual harassment is significantly underreported due to barriers in the complaint process and fears of retaliation.7 This often leaves women workers with two options: leave their jobs without a better employment opportunity or put up with harassment with little recourse. A 2017 study by sociologists Heather McLaughlin of Oklahoma State University, Christopher Uggen of University of Minnesota, and Amy Blackstone of the University of Maine finds that sexual harassment has negative financial costs on women.8 Rather than changing changes based on better opportunities, woman are changing jobs to avoid sexual harassment and taking jobs that pay less or offer less growth, thus stifling their career trajectory. This is reinforced by additional research from the U.S. military, finding that sexual harassment increases turnover of servicewomen, even when controlling for factors that one would predict would increase job attachment, such as job satisfaction and organizational commitment.9

In cases of decreased competition for workers, workers who have experienced harassment on the job may just simply not be able to find another adequate job and could stay in a hostile work environment. As McLaughlin, Uggen, and Blackstone note in their recent study on the financial consequences of sexual harassment, firm-specific human capital is closely linked to earnings, which means workers may be disinclined to leave their jobs when they’ve invested in their skills at their current employers. Employer monopsony power, such as exists in many rural labor markets today,10 may just make it impossible to find another job.

When women workers are more likely to quit their jobs for reasons other than seeking a better fit and higher pay or they stay in bad jobs, they ultimately will appear to have lower pay sensitivity. Employers are able to take advantage of women’s revealed lower pay sensitivity by offering them lower pay, without being worried about not being able to compete for a sufficient supply of labor. Contrary to theories of discrimination that believe discrimination would be competed away, in monopsony markets, women will have worse outside options when experiencing harassment at work.

Why is understanding monopsony power so important today? Evidence that helps policymakers understand the structure and the dynamics of the U.S. labor market will illuminate the importance of policies and institutions such as unions that ensure workers receive fair wages and that economic growth is broadly shared. This is the main thrust of Equitable Growth’s work on the U.S. labor market—endeavoring to improve our understanding of the forces and barriers that shape the lives of workers. A clearer picture of the labor market helps policymakers understand why workers earn what they do, what opportunities they have, and what policies can help all workers share in strong, stable, and broad-based growth.

Understanding the myriad of causes of U.S. labor market monopsony is crucial to implementing policies to address employer wage-setting power. No silver-bullet policy solution can solve monopsony when it is the result of multiple factors such as historical barriers and repressive social norms faced by women, so research that looks at the several causes of wage exploitation is a crucial step in increasing worker well-being. Instituting policies that increase the outside options available to workers, including policies that reduce search costs or make it easier for workers to change jobs, is a necessary step toward limiting the ability of employers to suppress wages and take advantage of workers. Similarly, policies that reduce discrimination and empowers workers help to make the market more operational. Ultimately, when workers are able to freely move about the labor market in search of better pay and a better fit, they will be more productive and be able to share in the economic growth that they create.

Posted in Uncategorized

Schooled by strikes: How strikes shape workers’ views about the U.S. labor movement

Posted on by Maria Monroe
Teachers rally in downtown Raleigh, N.C., demanding more support for public schools from law makers, May 1, 2019.

After 40 years of decline in the frequency and scale of labor strikes, U.S. workers are engaging in walkouts, strikes, and other workplace actions in record numbers. Nearly half a million workers were affected by labor action in 2018, the highest number since 1986. Most notable among these actions were the walkouts by public school teachers in traditionally conservative states that became known as the “Red for Ed” movement. The Chicago Teachers Union also is now on strike for the second time in 10 years.

What’s new about these actions is not just the level of activity but also the scope of their demands. In the Chicago strike, as in the Red for Ed walkouts more generally, teachers are demanding both better working conditions for themselves, as well as more resources for their communities. This new surge in strikes is markedly different from the past several decades of relative quiet labor union action. Several new academic studies examine why U.S. workers’ attitudes are changing toward engaging in strikes, but before we examine those studies, let’s first briefly examine the recent history of strikes.

Strikes in the United States have declined in recent decades for multiple reasons. Since the 1980s—and especially since the unsuccessful 1981 strike by the Professional Air Traffic Controllers Organization—employers are willing to simply replace striking workers. That reflects a more general tendency of U.S. businesses to wage a “no holds barred” offensive against labor organizing—even if it means flouting labor law and counting on weak enforcement and penalties from the federal government.

The minimal protections that remain on the books for labor unions are also poorly matched to cope with an increasingly fissured workplace, in which businesses shed legal responsibility for their workers through franchising or subcontracting relationships. Because labor law bars secondary boycotts or strikes of businesses that are not workers’ direct employers, workers in fissured firms often lack the right to strike.

Workers’ diminished ability to exercise collective action has undercut wages since there is no countervailing power against employers who exploit their workers under conditions of monopsony. This decline in worker power has contributed to wage stagnation even amid the current economic expansion and low unemployment levels. Accordingly, the rise in income inequality has closely tracked the decline in union density.

Workers have recognized these developments. Recent research by William Kimball and Thomas Kochan of the Massachusetts Institute of Technology finds that workers are increasingly supportive of the idea of having unions in their workplaces. The percentage of nonunion workers saying that they would vote for a union at their job increased from about a third in the mid-1990s to nearly half by 2017.

Building off of this, recent Equitable Growth-funded research by one of the authors of this column, Alexander Hertel-Fernandez of Columbia University, along with Kimball and Kochan, looks into the specific aspects of labor organizations in which workers are interested. They find that workers prioritize collective bargaining, portable social benefits and training, and help with searching for jobs. Yet they also find that workers, especially conservative and Republican workers, tend to dislike the use of strikes.

Workers’ ambivalence toward strikes may be driven by the decline of strikes themselves. As fewer unions engage in large-scale labor actions, fewer workers have had an opportunity to understand the connection between strikes, labor power, and gains in wages and working conditions. Just-released research by Hertel-Fernandez along with Suresh Naidu and Adam Reich, also of Columbia University, finds strong support for this idea, examining the families who were directly affected by teacher strikes and walkouts in the 2018 Red for Ed states.

Hertel-Fernandez, Naidu, and Reich conducted an online survey of nearly 4,500 adults living in the six original states that experienced teacher walkouts—Arizona, Colorado, Kentucky, North Carolina, Oklahoma, and West Virginia—in January 2019. The survey thus came about six months to a year after the first strikes and walkouts unfolded. A large proportion of respondents—80 percent—overall still remembered the teacher walkouts and were able to correctly articulate the striking teachers’ demands. Most respondents—about two-thirds across all six states—said that they “strongly” or “somewhat” supported the walkouts and their demands.

Perhaps surprisingly, respondents were equally supportive of future teacher strikes in their states, especially related to school spending. Sixty-eight percent of respondents said that they would approve of future strikes by teachers to boost state funding of schools.

Hertel-Fernandez, Naidu, and Reich also sought to examine the causal effects of firsthand exposure to the strikes on parents’ views about teachers and the labor movement in general. Studying the difference between parents who had firsthand exposure to the strikes because their children’s ages placed them just in or out of school, the authors found that firsthand contact with the strikes in a child’s school made parents more supportive of the strikes and the teachers.

But the most striking finding was that parents exposed to the teacher walkouts also became more interested in taking labor action such as strikes at their own jobs. Parents were not, however, necessarily more interested in joining traditional labor unions.

The effect of firsthand exposure to the walkouts on interest in labor action was especially large for parents who were Republican, conservative, or who lacked friends or family in unions—exactly the groups least likely to support the labor movement before the teacher walkouts. This confirms the idea that greater exposure to strikes can generate public support for the strikes and interest in imitating them, rather than backlash, as some might predict.

Both sets of surveys by Hertel-Fernandez and his co-authors reveal a disconnect in the public’s understanding of unions and strikes. In the first survey about preferences for new forms of labor representation, respondents were interested in collective bargaining but not strikes—even though workers’ strike rights grant the bargaining power needed to make collective demands of employers. In the second survey on the teacher walkouts, parents with firsthand exposure to the teacher walkouts correctly recognized strikes as a tool for advancing worker interests but did not necessarily perceive the role of traditional unions in organizing and/or supporting strikes.

The Red for Ed movement is emblematic of nontraditional forms of labor action. Along with Fight for Fifteen and OUR Walmart, these movements did not conduct traditional collective bargaining over a contract between a union and an employer and using the strike as a threat when the bargaining process faltered. Instead, they waged successful public campaigns that pressured powerful stakeholders to support improved job quality for broad sets of occupations and industries. Ruth Milkman of the City University of New York has noted that these are similar to those actions of workers and unions prior to the passage of the 1935 National Labor Relations Act, which protected the right to strike. While these successes have been heartening, the labor movement and effective pro-labor enforcement can also play a role in supporting collective action to build on these gains.

To rebuild worker power, the labor movement needs new laws that more adequately protect workers’ rights to organize and bargain with employers. One such example are the proposals being developed by Harvard Law School’s Labor and Worklife Program Clean Slate for Worker Power initiative led by Sharon Block and Benjamin Sachs. These ideas build on recent research highlighting the potential benefits of sectoral or regional bargaining, union-provided social benefits and training, worker representation in corporate governance, wage and working standards boards, and new worker-management councils.

Ultimately, a revived U.S. labor movement will require both greater grassroots energy and collective action—such as the teacher strikes and walkouts—and stronger traditional institutions of bargaining and representation. Widespread grassroots collective action is needed to build public awareness of, and support for, labor reform, while stronger traditional labor organizations are needed to translate worker demands into better wages, benefits, and working conditions at scale across the U.S. economy. Recent research, including the studies reviewed here, can play an important role in understanding how workers think about the labor movement and labor action—and the possibilities for rebuilding worker voice in the United States.

Posted in Uncategorized

Weekend reading: GDP 2.0 edition

Posted on by Maria Monroe

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

Looking only at Gross Domestic Product is no longer an adequate way to measure U.S. economic growth and prosperity across the income ladder because average income no longer reflects the fortunes of most families, writes Austin Clemens. “It does little good to target GDP as an outcome if the majority of GDP growth flows to a small group of families, leaving the rest with scraps,” he continues. But rather than getting rid of GDP—or the dataset to which it belongs, the U.S. National Income and Product Accounts—altogether, the U.S. Bureau of Economic Analysis should instead include a distributional component to its GDP reports. This idea, what Equitable Growth calls the GDP 2.0 project, would report on growth in each quintile of the income distribution, as well as at the very top, in order to adequately show who is prospering when the economy expands, modernizing how we measure growth in the 21st century economy.

Equitable Growth President and CEO Heather Boushey recently participated in a Reddit “Ask Me Anything,” or AMA, focused on economic inequality. People from around the world were able to submit their questions online on topics ranging from the prospect of a wealth tax to the role of the Federal Reserve in warding off the next recession to addressing racial disparities in income and wealth. Check out the AMA’s highlights here.

Young adults today in the United States are not achieving the same financial milestones as in recent past generations, writes Liz Hipple in an essay also published by New America in a collection on the millennial wealth gap. This wealth gap not only affects intergenerational mobility and exacerbates existing racial and economic inequalities in the country, but also impacts the next generation’s human capital development. As such, policymakers need to respond before it’s too late and the window of economic mobility for millennials shuts prematurely.

Brad DeLong provides his takes on recent must-reads from Equitable Growth and around the web in his latest worthy reads.

Links from around the web

Could it be, asks Sam Pizzigati on Inequality.org, that part of why so many Americans distrust government is its (inaccurate) assumption that GDP reflects everyone’s income reality? Quoting testimony from recent congressional hearings—including Heather Boushey’s last week—Pizzigati looks at why disaggregating GDP will provide a better representation of all Americans’ well-being across the income spectrum in light of today’s rampant inequality. He also highlights the policymakers who are already on board with the idea and the legislation they’ve introduced in Congress to get us there.

Before anyone gets too excited about the fact that joblessness is at a 50-year low, and that the most recent U.S. jobs report showed average hourly wages rising in September, keep in mind the wage growth reported is not actually economically significant, writes Teresa Ghilarducci for Forbes. Wages have, in fact, been growing at the same persistently slow rate year over year. Why? “Decades of eroding union membership, unequal trade penetration, rising healthcare costs, increasing tax and investment benefits for the wealthy few, and the wealthy spending of some of those funds on politics and lobbying—all of these are holding back wages,” Ghilarducci argues—while effectively stifling economic growth at the same time.

Despite the wild speculation about robots taking over everyone’s jobs, this prediction has yet to materialize. But what can be studied—and recently has been, reports Shirin Ghaffary for Vox.com’s Recode—is how technology is changing workers’ jobs right now. The new study, focused on warehouse work automation, shows that emerging technology probably won’t actually replace the more than 1 million warehouse workers in the United States anytime soon, and actually may help with the more monotonous and physically strenuous tasks on their plates. The bad news is, robots probably will also make their lives harder over the next decade. The study’s authors argue that automation will likely ratchet up the pressure on workers to complete tasks faster to boost productivity, increasing burnout and stress levels, and will limit the amount of human interactions workers experience on a daily basis. But, the co-authors say, this outcome is not inevitable—policymakers can still enact regulations to support workers as these transitions take place.

While many workers nowadays are lucky enough to have a standard 9-to-5 schedule, nearly one-fifth of U.S. workers’ schedules are volatile and variable, and many others work way beyond the traditional 40-hour week. In fact, writes Judith Shulevitz in The Atlantic, if you combine those with unpredictable schedules and those who work prolonged hours, you’d probably get to about a third of the U.S. workforce. “When so many people have long or unreliable work hours, or worse, long and unreliable work hours,” Shulevitz continues, “the effects ripple far and wide. Families pay the steepest price.”

Friday Figure

Figure is from Equitable Growth’s “GDP 2.0: Measuring who prospers when the U.S. economy grows,” by Austin Clemens.

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Brad DeLong: Worthy reads on equitable growth, October 19–25, 2019

Posted on by Maria Monroe

Worthy reads from Equitable Growth:

  1. Read Liz Hipple, “Public Policy Implications of the Millennial Wealth Gap,” in which she writes: “Wealth may shape the behavioral choices of the next generation, thereby shaping opportunity by providing some with a soft cushion for a slip down the economic ladder and others with no cushion at all … The ability to live with one’s parents allows young people to search longer for jobs that have better prospects for future earnings growth, increasing their chances of upward mobility and of successfully beginning to build wealth of their own. Another roadblock to millennials’ ability to fully deploy their human potential is the structural changes in the labor market over the past 30 years, which have depressed wages and thereby delayed wealth building. For example, young adults who replicate their parents’ educational and occupational backgrounds and end up in the same type of work and in the same relative place in the economic distribution earn less in inflation-adjusted terms than their parents did a generation ago.”
  2. Don’t miss the Equitable Growth event “Vision 2020: Evidence for a Stronger Economy,” on November 1, 2019 in Washington: “Vision 2020 will bring together leading voices from the policymaking, academic, and advocacy communities to highlight the most pressing economic issues facing Americans today. This daylong conference will explore recent transformative shifts in economic thinking that demonstrate how inequality obstructs, subverts, and distorts broadly shared economic growth and what we can do to fix it.”
  3. Re-read Heather Boushey’s “In Conversation with Leemore Dafny,” in which Dafny discussed: “How can it possibly be a bad thing for consumers if insurers use some of their bargaining power to bring down the prices of the inputs into the health insurance product? The answer to that question is that it depends on how they are bringing down those prices … From an antitrust enforcement perspective, savings passed through would be considered a benefit to consumers … a change in the division of existing surplus. But now, suppose something different—suppose that the only way the insurers get lower prices is not by taking away the margin, holding quantity constant, but by exercising their market power vis-à-vis these healthcare providers such as purchasing less, as well as paying less … Lower prices in this setting can have an impact on the quantity and/or the quality of services, and that’s called monopsony, and it’s the flipside of monopoly. And just as monopoly benefits the seller of a good, monopsony benefits the buyer, in this case, the insurer, but at the expense not only of the healthcare providers but also of consumers in general.”

 

Worthy reads not from Equitable Growth:

  1. Read Jed Kolko and Ann Elizabeth Konkel, “Job Search Behavior Changes as US Work Visa Requirements Tighten,” in which they write: “Searches for jobs in the United States that contained visa-related terms like ‘H1B visa’ or ‘work visa’ skyrocketed 673 percent from September 2017 to September 2018. The number of visa-related searches from abroad peaked in November 2018. Job seekers in India accounted for 22 percent of visa-related searches from outside the United States in 2018. The surge in visa-related searches probably reflects 2018 policy changes, which made acquiring a U.S. work visa more complex.”
  2. Yes, the Medicaid expansion part of the Affordable Care Act had a very high benefit-cost ratio. And those states that have blocked it have seen their poor suffer and die in not insignificant numbers for no comprehensible reason. Read Sarah Miller, Sean Altekruse, Norman Johnson, and Laura R. Wherry, “Medicaid and Mortality: New Evidence from Linked Survey and Administrative Data,” in which they examine: “Changes in mortality for near-elderly adults in states with and without Affordable Care Act Medicaid expansions [to] identify adults most likely to benefit using survey information on socioeconomic and citizenship status, and public program participation. We find a 0.13 percentage point decline in annual mortality, a 9.3 percent reduction over the sample mean, associated with Medicaid expansion for this population. The effect is driven by a reduction in disease-related deaths and grows over time. We find no evidence of differential pretreatment trends in outcomes and no effects among placebo groups.”
  3. The market can work well when it is competitive, but I am still waiting to hear the argument made coherently that it works well when it is characterized by monopolies, monopoly platforms, or cozy oligopolies. And I think I will wait a long time. Here, there is news that not only do I not understand what Facebook is trying to do with Libra, but others supposedly on the inside also do not understand it. Read Richard Partington, “How the Wheels Came Off Facebook’s Libra Project,” in which he writes: “Support for Mark Zuckerberg’s mission to reshape global finance is slipping away slowly but surely. When Facebook announced plans to launch a digital currency earlier this summer, it added a full-blown revolution in global finance to its typically vaulting Silicon Valley mission statement: to create a digital currency alongside its efforts to bring the world closer together through networks. Over the past month, that mission has gone badly awry. The Libra cryptocurrency project now faces existential threats from world leaders and central bankers worried about its harmful potential as a vehicle for money laundering, a threat to global financial stability, open to data privacy abuse, dangerous for consumers, and stripping nations of the control of their economies by privatizing the money supply. Seven high-profile partners in the Facebook-led consortium that is building the digital currency—known as the Libra Association—have quit in dramatic fashion in recent weeks, including PayPal, eBay, Visa, and Mastercard, as concerns mount.”
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Public Policy Implications of the Millennial Wealth Gap

Posted on by Maria Monroe

The essay below by Senior Policy Advisor Liz Hipple was published today by New America as part of a collection of essays in its new book, “The Emerging Millennial Wealth Gap: Divergent Trajectories, Elusive Pathways to Progress, and Implications for Social Policy.” While the income of a typical Millennial is only slightly below levels predicted by the experience of past generations, young adults in the United States today are on a lower trajectory in their wealth accumulation than their predecessors. Hipple connects this issue of the millennial wealth gap to the trend of downward intergenerational mobility, explaining how the two can interact to further exacerbate existing racial and economic inequalities as well as the consequences for the human capital development of the next generation.

A broad array of social science research—presented in this volume and elsewhere—presents a clear but troubling picture of the economic state of the Millennial generation. Young adults in America today have not achieved the same financial milestones as recent past generations. Whether measured in terms of income, assets, or net worth, Millennials are behind. If they were likely to catch up, public policy could perhaps stay agnostic. But given the combination of an economy characterized by depressed wages and shrinking benefits with a rising student debt burden, it seems more likely that their window for economic mobility is in danger of prematurely closing and public policy should respond.

The Millennial wealth gap should garner the increased attention of policymakers for a number of reasons, but especially because it is happening alongside trends of declining intergenerational mobility and rising economic inequality. These developments are interrelated and together have long-term consequences that will not only exacerbate existing racial and economic disparities but also limit the human capital development of future generations, which in turn has negative implications for future economic growth.

Recently, popular press attention has focused on the challenges Millennials face in the economy and their evolving relationship to the traditional markers of adulthood.11 For instance, marriage, child rearing, and homeownership rates among 25- to 34-year-olds today lag behind those of the previous generation.12 These are not merely the preferred reordering of life milestones established by their parents and grandparents. Rather, these are visible symptoms of the decline in intergenerational mobility, driven by the lack of financial resources among today’s young adults. Since today’s disadvantages accumulate over time and are passed down to future generations, it is essential for young families with children to be able to access economic resources to invest in their children’s development. The presence or absence of money in a household has huge implications for children’s later-in-life outcomes.

In a recent report, “Are today’s inequalities limiting tomorrow’s opportunities?” my co-author, Elisabeth Jacobs, and I document the accumulating social science research that attests to the relationship between a family’s economic resources and a child’s subsequent outcomes. We further explore the role of parents’ economic resources in the development of children’s human capital, and how economic inequality is undermining not only the development of that potential, but also children’s ability to fully and effectively deploy that human potential, thereby depressing their future upward mobility.13 While the report presents a thorough analysis of research to date, our findings in each of these areas establish a strong foundation for a significant public policy response.

Intergenerational Mobility

It may be helpful to begin by reviewing recent findings about intergenerational mobility in America, as declining mobility is the backdrop against which the emerging generational wealth gap is playing out.

Intergenerational mobility is the relationship between a parent’s and a child’s economic position. It’s an important metric of economic well-being because it indicates whether economic outcomes reflect individual merit and hard work, or whether parental advantage (or disadvantage) dictates outcomes. It’s also a meaningful indicator of whether or not there’s been economic growth, and if that growth has been equitably distributed. If growth has been stagnant, it can tell us if any gains have accrued disproportionately to a small group. Unfortunately, recent and compelling research has found that mobility in the U.S. has been declining. While more than 90 percent of children born in 1940 grew up to earn more than their parents did at age 30, the same could be said at the same age for only about 50 percent of children born in 1984, according to economist Raj Chetty and his co-authors,14 as illustrated in Figure 1.

Figure 1. Intergenerational Mobility.

Furthermore, mobility differs significantly between different racial and ethnic groups in the United States, with black Americans in particular experiencing unusually high rates of downward mobility and low rates of upward mobility. For example, black children born into the bottom household income quintile (the lowest 20 percent ranked by income) have a 2.5 percent chance of going on to be in the top income quintile as adults, whereas white children of the same economic status have a 10.6 percent chance. And while white children born into the top income quintile are almost five times as likely to still be in the top income quintile as adults as they are to fall to the bottom, black children born to parents in the top income quintile are just as likely to fall to the very bottom as they are to stay at the top.15

Despite the prevalence of explanations for these differences that emphasize factors that supposedly represent individual choices or hard work—such as marriage patterns or educational attainment—Chetty and his co-authors find that differences in family characteristics, including wealth, explain very little of this gap in intergenerational mobility for black and white Americans. In other words, all else equal, these findings of mobility outcomes indicate that racial discrimination clearly plays a role in explaining why these differences persist.

In our full paper, Jacobs and I explore more of the facts and statistics on intergenerational mobility in the United States, including how it has changed over time and manifests in different places and geographies. For the purposes of this discussion, though, the key takeaways to keep in mind are that the decline in mobility from the 1940 to the 1980 cohort means that young adults today are entering adulthood with lower earnings than previous generations. Consequently, they have less to save from. Additionally, the opportunity to save and build wealth in America is distributed differentially depending on your race and ethnicity. This should be the context for any policy discussion of the Millennial wealth gap.

Economic Inequality and Wealth Gaps Limits the Development and the Deployment of Human Potential

A large body of research indicates that in the U.S. the extent of economic resources at a family’s disposal impacts their children’s economic outcomes later in life. To give just one example, research has found that even just $1,000 in additional income from the EITC increases a host of positive indicators, including higher reading and math scores; increased probability of high school graduation, college completion, and employment; and increased earnings.16 While this example uses income, rather than wealth, as the measured financial resource, it demonstrates the importance of financial resources today on outcomes tomorrow.

To understand the connection between parental economic resources and children’s adult outcomes—and how economic inequality could be intermediating that relationship—Jacobs and I developed a framework for making sense of the channels linking the two concepts. One of those channels is the development of human potential. On a fundamental level, every individual is born with a certain amount of human potential, but the opportunity to develop that potential to its fullest varies dramatically based on the circumstances of family, community, institutional factors, and myriad other structural constraints. These inequalities of opportunity are often compounded across multiple realms, with major lines of research demonstrating the links between inequality and access to health, parental investments of time and money in their children, and the quality of early childhood education, as well primary and secondary schooling—all of which are critical pathways for the development of the human potential necessary for upward mobility.

As families have fewer resources to invest in their children today, the consequences of the Millennial wealth gap will extend into the generations of tomorrow. This dynamic has already been apparent in the relationship between wealth, educational opportunities, and the realization of long-term human potential. A case in point is the unfortunate reality that in the United States, buying a home in a “good” school district is often the single biggest way a parent invests in their child’s human capital development. In this process, it is wealth, rather than income, that is the means through which the home is purchased, making it especially consequential in determining the future outcomes of the next generation.

This dynamic reflects how the Millennial wealth gap risks exacerbating existing economic and racial inequalities. If, as explained in the chapter by William Emmons, Ana Kent, and Lowell Ricketts, Millennials have lower than expected wealth by a certain age, then it will be more difficult to self-finance a first home purchase. Those who can tap down payment assistance from their parents are at a distinct advantage. Winning the birth lottery takes on a whole new significance, as only those lucky enough to be born into families with enough wealth to be able to pass it along can get their own start in the wealth accumulation process.

It also means that policies that have historically and systemically blocked black Americans from building wealth continue to have consequences that reverberate today for black Millennials. For example, federal redlining17 denied black Americans access to traditional mortgages and therefore forced them into contract buying,18 which did not build equity. This means that racist policies that prevented the purchase of a house by grandparents or parents 50 years ago continue to have an impact. Not only is there less wealth to transfer directly, there is less wealth to invest in their children’s human capital development, whether it is through supporting education or jump-starting wealth building through the purchase of a home. Indeed, while 34 percent of white adult children receive financial support from their parents for higher education and 12 percent for homeownership, the same is true for only 14 percent and 2 percent of black adult children, respectively.19 Discrimination in the past, reflected in the racial wealth gap, continues to reverberate today and into the future.

But even if there were true equality of opportunity to fully develop one’s human potential, the development of human potential is insufficient on its own if individuals are not able to fully deploy their talents. And family economic resources—particularly wealth—also play a vital role in young adults’ ability to fully deploy their potential. For example, in addition to the relevance of parental resources for attendance and completion of postsecondary education, wealth can shape how an individual is able to get the most out of a college education and make use of that investment. Family wealth may provide an insurance function, allowing those with greater access to the cushion of family assets (and the absence of debt) to take risks that ultimately pay off with greater rewards. As sociologists Fabian Pfeffer of the University of Michigan and Martin Hällsten of Stockholm University explain:

[C]hildren who are able to fall back on their parents’ wealth when, for example, they drop out of college or experience a prolonged school-to-work transition period, or have early episodes of unemployment, are more likely to opt for long-term human capital investments, such as college attendance, or choose particularly competitive or protracted career paths that they may be able to sustain even in the face of early set-backs.20

These findings show that wealth may shape the behavioral choices of the next generation, thereby shaping opportunity by providing some with a soft cushion for a slip down the economic ladder and others with no cushion at all. Indeed, economist Greg Kaplan finds that the ability to live with one’s parents allows young people to search longer for jobs that have better prospects for future earnings growth, increasing their chances of upward mobility and of successfully beginning to build wealth of their own.21

Another roadblock to Millennials’ ability to fully deploy their human potential is the structural changes in the labor market over the past 30 years, which have depressed wages and thereby delayed wealth building. For example, young adults who replicate their parents’ educational and occupational backgrounds and end up in the same type of work and in the same relative place in the economic distribution earn less in inflation-adjusted terms than their parents did a generation ago.22 There are a number of reasons for these changes, including the fissuring of the workplace and the decline in job ladders, which we consider in depth elsewhere.23 What is relevant here is that these structural changes, coupled with the fact that Millennials entered the labor market during the Great Recession, threaten to cause long-term and persistent negative effects for Millennials’ earning potential, which will further weaken their ability to build wealth down the road.24

Policy Implications

Policymakers need to take these structural changes into account—and acknowledge this history of discrimination—as they craft future public policies to promote wealth building. Traditionally, the pillars of wealth building in America have been grounded in being able to access education, skills, and training; secure steady employment; increase ownership of assets over time; and receive family gifts, transfers, and inheritances. We’ve seen how these pathways are not open to everyone, and how the current cohort of young adults is faring poorly. For Millennials, education and skills have increased, but steady employment has gotten more precarious, especially for those who graduated into the Great Recession,25 which limits the income with which to increase ownership of assets over time. This leaves the fourth pillar—the receipt of family transfers—to take on a larger and increasingly disproportionate role in future wealth accumulation.

It is a problem for our democracy and our economy if family wealth determines long-term child outcomes. If the cushion of family assets (and the absence of debt) allows young adults to disproportionately take risks that can ultimately pay off with greater rewards, then those without such assets are needlessly disadvantaged. This creates a feedback mechanism in which privilege begets privilege. To prevent such a scenario from gaining momentum, policymakers must work to level the playing field. In doing so, they should push beyond solutions that emphasize merely equalizing access to activities that support human capital development, such as education and skills attainment. As we have seen, the development of human potential is insufficient on its own to address the forces depressing economic mobility and opportunities for wealth accumulation. Rather, policymakers must grapple with ways to remove the roadblocks young adults face when they seek to deploy their potential in the economy.

A forward-looking policy agenda should be grounded in a recognition that the structure of the U.S. labor market has changed in ways that fundamentally thwart upward mobility. Wage stagnation, fissuring of the workplace, and a decline in job ladders depress workers’ earning power. Discrimination, particularly racial discrimination, persists in ways that run afoul of basic principles of equity, disempowering some workers and advantaging others. Growing inequalities in household balance sheets shape behavior and risk preferences, allowing those born into wealth to accumulate additional advantages over a lifetime while those who enter the labor market further down the economic ladder face limited pathways upward.

None of these dynamics are inherently natural. Many have the potential to be fundamentally reshaped by policy. Familial advantage—or disadvantage—can be passed along to children in multiple ways. While this might seem daunting to policymakers contemplating solutions, it also means that there are multiple angles from which to tackle the problem. There will be no silver bullet or quick fixes, but the emerging Millennial wealth gap is too large to ignore. Instead, there should be a concerted effort to develop and implement policies to ensure that access to opportunity is truly equitable. Our collective goal should be to ensure that all members of our society are able to fully deploy their potential. To do so requires that wealth is not passed along mechanically from generation to generation, but that our collective resources support an economy where the human capital, innovation, and dynamic economic growth are unleashed rather than left by the wayside.

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Equitable Growth CEO Talks All Things Economic Inequality in Recent Reddit “Ask Me Anything” series

Posted on by Maria Monroe

The Washington Center for Equitable Growth President and CEO Heather Boushey earlier this month answered questions from across the world on economic inequality via the social networking platform Reddit as part of the “Ask Me Anything” series.

In her new book, Unbound: How Inequality Constricts Our Economy and What We Can Do About It, Boushey presents cutting-edge knowledge with journalistic verve, showing how inequality in the United States has become a drag on growth and an impediment to free market efficiency. She argues that policymakers can preserve the best of our economic and political traditions, and improve on them, by pursuing policies that reduce inequality and boost growth.

Boushey took questions for two hours on all things related to inequality, including the prospect of a wealth tax, the role of the Federal Reserve in warding off the next recession, addressing racial disparities in income and wealth, and more. Read more highlights of that discussion below.

Inequality is both a social and economic problem

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Inequality obstructs, subverts, and distorts the processes that lead to widespread improved economic well-being

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A menu of tax policies exist to tackle U.S. income and wealth inequality

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Monopoly power exacerbates inequality

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Those at the top hoard the best opportunities, thwarting the mobility of others

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Weekend reading: Worker scheduling practices edition

Posted on by Maria Monroe

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

How do scheduling practices affect working families, particularly families of color, in the United States? A series of working papers released this week shows that not only are low-quality and unpredictable schedules pervasive among low-wage workers, but also that these schedules perpetuate racial and ethnic inequality across the country. The researchers surveyed 30,000 workers at 120 of the largest retail and food-service companies in the United States to find out who suffers the most from these schedules, and discovered that black and Hispanic women tend to have the worst schedules, while white men have the best ones. They also discovered that the children of those with the worst schedules behave worse and have less consistent childcare than those with parents who have better schedules. Cesar Perez and Alix Gould-Werth put together 10 charts highlighting the main findings of the research, which was also covered in The New York Times The Upshot blog.

Despite the evidence that desegregation boosts outcomes for low-income and minority students without negatively affecting their better-off and white peers’ outcomes, school segregation remains a problem across the nation. In fact, though the United States saw a large decline in black-white school segregation from the 1960s through the 1980s, in the years since then, desegregation has stalled and resegregation has actually increased, according to a report by former Research Assistant Will McGrew. In a blog post covering the report, Liz Hipple describes how McGrew makes it clear that school segregation is not an inevitable outcome of individual choices or preferences for “good” school districts, but rather that policy and legal decisions shape these preferences by continuing to tie school funding to local property taxes. Not only does this limit opportunities for individual students to achieve their own full potential, it also obstructs future dynamism and growth in the U.S. economy. McGrew recommends various policy options to reverse the trend of resegregation and put us back on the path to progress.

Equitable Growth President and CEO Heather Boushey testified before the Joint Economic Committee this week in a hearing on “Measuring Economic Inequality in the United States.” In her testimony, Boushey argued that one of the most important ways to fight inequality in the United States today is to properly track and measure it—namely, by adding measures of growth within income quantiles to the Bureau of Economy Analysis’ National Income and Product Accounts to better reflect the realities of the modern economy.

Equitable Growth Steering Committee member Jason Furman testified today before the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law. He discussed concentration in digital platforms, and how competition would benefit consumers, touching on ways to protect this competition such as more robust merger enforcement and regulations.

Be sure to head over to Brad DeLong’s latest worthy reads for his takes on must-see content from Equitable Growth and around the web.

Links from around the web

More than 9 million people work in food service, and 16 million more work in the retail sector, and according to estimates one-third of these workers receive less than one week’s notice for their schedules. As a result, these workers tend to have higher stress levels, more volatile income, less stable childcare options, and often have to get second jobs in order to make ends meet. Stephanie Wykstra explains on Vox the fight for fair workweek policies, who would be most affected, how these policies would help workers, and the challenges facing supporters in getting companies to comply.

The United States has never been richer, writes Eric Levitz in New York Magazine’s The Intelligencer. In fact, if wealth were evenly distributed across the United States today, each individual would have close to $300,000 and every family of four would be millionaires. So, why is it that middle- and working-class households are working way more and earning way less than they were a few decades ago? Levitz argues that three policy failures that have led us here: the dramatic decline in wages and worker bargaining power; the ever-increasing and unaffordable costs of housing, healthcare, and education; and the failure to modernize the social safety net.

At least half of the Democratic candidates for president in the 2020 race have put forward robust labor platforms touching on ideas from broadening union membership to banning noncompete agreements to treating independent contractors as employees, reports Noam Scheiber for The New York Times. One of the more striking of these proposals is the idea known as sectoral bargaining, which would allow workers to bargain with employers on an industrywise basis rather than with individual employers, potentially increasing wages for millions of workers at a time—even those who aren’t unionized. Scheiber hypothesizes that the large number of candidates supporting sectoral bargaining and other labor platforms likely reflects stagnant wage growth, increasing economic insecurity, and deepening inequality in the United States.

Rather than hitting the glass ceiling at the very top of the management ladder, new research suggests that women may face obstacles to advancing higher up much earlier in their careers—namely, at the very first rung of the management ladder. In fact, writes Vanessa Fuhrmans for The Wall Street Journal, “men outnumber women nearly 2 to 1 when they reach that first step up—the manager jobs that are the bridge to more senior leadership roles.” And, according to the study, it’s not because women are pausing there to raise children or that they have less ambition than men.

Friday Figure

Figure is from Equitable Growth’s “How U.S. workers’ just-in-time schedules perpetuate racial and ethnic inequality,” by Cesar Perez and Alix Gould-Werth.

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