Economic inequality—on the rise since the 1980s—is occurring at the same time that intergenerational mobility is on the decline. Intergenerational mobility measures the relationship between children and their parents’ incomes. Raj Chetty of Harvard University and his co-authors investigated the relationship between intergenerational mobility and economic inequality in the United States in their 2016 article in Science, “The Fading American Dream: Trends in Absolute Income Mobility since 1940.” The authors tracked the economic progress of cohorts of children born between 1940 to 1980 and found that absolute mobility decreased for each successive cohort. In the 1940 cohort, 92 percent of children earned more than their parents. However, by the time the 1980 cohort turned 30 years old, only 50 percent of them were able to do the same.
We visualize this declining mobility in the infographic below using the economic paths of two children, one born in 1950 and the other born in 1980. If the child born in 1950 grew up in a household with a median income of $29,000 annually, as an adult, that child would be able to out-earn their parents even if they were earning below-median incomes. But the child born in 1980 who grew up in a household earning a median income of $53,000 annually would have to have a better job than their parents in order to out-earn them. That 1980 child could be at the 60th percentile of the income distribution—a full 10 percentage points above their parents’ place in the distribution—and still barely out-earn them with an income of $55,000. The cost of downward mobility has also grown even steeper over time, with children in the 1980 cohort unlucky enough to slip into the bottom fifth of the income distribution, earning less than $16,000 per year versus $28,000 in the earlier cohort. (See Figure 1.)
Figure 1
The bar graphs above each child’s path in Figure 1 above show patterns of growth during the child’s lifetime. The green bars show us that total growth was distributed more or less equally across all five income quintiles for the earlier time period. This era of equitable growth corresponded to the era of upward mobility. Then, the pattern changed over the next three decades. The orange bars, which represent how total growth in the later time period was distributed across those same income quintiles, show how growth was concentrated among the top income earners and was even negative for those at the very bottom. This period of unequally distributed growth is also when we see the lower rates of mobility for the 1980 cohort.
How much did rising inequality versus lower economic growth over the latter time period affect mobility outcomes? Figure 2 below shows the mobility trajectory of kids born in 1940 and 1980. Chetty and his co-authors conducted two counterfactual simulations:
A cohort experiencing the 1940 growth rate and 1980 levels of income inequality, represented by the green line
A cohort experiencing 1940 levels of income inequality and 1980 growth, represented by the purple line
When counterfactual one is applied, the gap between the 1940 cohort and the 1980 cohort closes by only 29 percent, while counterfactual two closes about 70 percent of the gap. (See Figure 2.)
Figure 2
This disparity indicates that addressing economic inequality would have a greater positive effect on intergenerational mobility than would boosting economic growth. As our GDP 2.0 project illustrates, the unequal distribution of growth has made GDP a misleading metric that does not paint a representative picture of how Americans experience and benefit from growth, especially among the bottom half of income earners.
By measuring how growth is distributed, we will be better able to assess how economic growth is impacting households across income levels and who is benefiting from current economic trends. GDP 2.0 statistics would help facilitate the diagnosis of concerning phenomena in the economy, such as indicating falling intergenerational mobility, increases in inequality that could presage weakness in future consumer spending, and that the U.S. economy is not working for every American. These results suggest that policymakers need to prioritize GDP growth that promotes low- and middle-class households, rather than just growth concentrated at the top. Increasing the GDP growth rate alone will not be sufficient enough to restore mobility to the levels witnessed in the 1940s, especially with the current distribution of income.
At our “Vision 2020 conference” last month, the Washington Center for Equitable Growth announced the forthcoming release of a compilation of 21 innovative, evidence-based, and concrete ideas to shape the 2020 policy debate. This compilation of essays into a book, Vision 2020: Evidence for a Stronger Economy, will be released mid-to-late January.
Several of the contributors to this book of essays spoke at the Vision 2020 conference—which brought together leading voices from the policymaking, academic, and advocacy communities to highlight the most pressing economic issues facing Americans today.
Chief among the themes of Vision 2020 are the exploration of recent transformative shifts in economic thinking that demonstrate how inequality obstructs, subverts, and distorts broadly shared economic growth, as well as what can be done to fix it. “Through these essays, the Washington Center for Equitable Growth aims to infuse cutting-edge research findings and prominent academics into the current policy debate,” said David Mitchell, director of external and government relations at Equitable Growth. “Our goal is for future decisions about the U.S. economy to be informed by the best available evidence.”
Essay authors who spoke at the Vision 2020 conference include:
Heather Boushey, president and CEO of the Washington Center for Equitable Growth, who will write about new ways to measure the economy
Arindrajit Dube, professor of economics at the University of Massachusetts Amherst, who will write about minimum wage and sectoral wage boards
Dania Francis, assistant professor of economics at the University of Massachusetts Boston, who will write about reparations
Bradley Hardy, associate professor of public administration and policy at American University, who will write about race and economic mobility
Alexander Hertel-Fernandez, assistant professor of international and public affairs at Columbia University, who will write about labor unions
Additional contributors to the essay compilation and their topics include:
Kimberly Clausing, professor of economics at Reed College, on trade policy
Robynn Cox, assistant professor of social work at the University of Southern California, on criminal justice policy
Blythe George, post-doctoral sociologist at the University of California, Berkeley, on Native American resilience in the face of incarceration and drug use
Darrick Hamilton, professor of public affairs at The Ohio State University, and Naomi Zewde, assistant professor of public health and health policy at The City University of New York, on student debt
Aaron Kesselheim, professor of medicine at Harvard University, on prescription drug costs
Susan Lambert, professor of social service and administration at University of Chicago, on stable scheduling in the workplace
Yair Listokin, professor of law at Yale University, on macroeconomics and the law
Trevon Logan, professor of economics at The Ohio State University, and American University’s Hardy, on race and economic mobility
Taryn Morrissey, associate professor of public policy at American University, on childcare
Suresh Naidu, professor of economics and international and public affairs at Columbia University, and Sydnee Caldwell, incoming assistant professor of business administration and economics at University of California Berkeley, on U.S. labor market monopsony
Maya Rossin-Slater, assistant professor of health policy at Stanford University, and Jenna Stearns, assistant professor of economics at University of California, Davis, on paid leave
John Sabelhaus, visiting scholar at the Washington Center for Equitable Growth, on fiscal and monetary policy
Diane Schanzenbach, professor of human development and social policy at Northwestern University, and Hilary Hoynes, professor of public policy and economics at the University of California, Berkeley, on the Supplemental Assistance Nutrition Program, on supplemental nutrition assistance
Fiona Scott Morton, professor of economics at Yale University, on antitrust policy
Leah Stokes and Matto Mildenberger, assistant professors in the Department of Political Science and affiliated with the Bren School of Environmental Science & Management at the University of California, Santa Barbara, on climate policy and economic inequality
Emily Wiemers, associate professor of public administration and international affairs at Syracuse University, and Michael Carr, associate professor of economics at University of Massachusetts Boston, on U.S. workers’ earnings instability and mobility
Owen Zidar, associate professor of economics and public affairs at Princeton University, and Eric Zwick, associate professor of finance at the University of Chicago, on income tax reform
For more information on the Vision 2020 conference and to view the recorded panels, click here. To sign up for notifications on upcoming content, including the Vision 2020 essay compilation, and events, click here.
A spirit of optimism about the ability of government to address fundamental issues underlying U.S. economic inequality and a determination to advance evidence-based policies for broad-based economic growth infused an all-day policy event hosted by the Washington Center for Equitable Growth on November 1.
At “Vision 2020: Evidence for a Stronger Economy,” which was designed to help inform economic policy ideas in advance of the 2020 elections, speakers and participants engaged in thoughtful discussion on a number of key topics. Those topics included the effects of the decline of union power, structural racism in the economy, the rise of monopsony power in the labor market, and more.
The speakers at the conference made clear that the depth of structural problems, such as racial and gender income and wealth gaps, the decline of worker power, and economic concentration, make dramatic changes in policy essential, yet they also acknowledged the difficult political, economic, and societal barriers to achieving real change. There are no simple solutions, and inequality has caused the economic and political decks to be stacked against systemic reform.
Attendees heard several major threads woven through the day of panels, speeches, and conversations (to watch video from the day’s session, click here, and for photos, click here).
The first major theme was that the change needed to achieve broad-based economic growth and significantly diminished inequality is not possible without the legislative and regulatory tools of the federal government. This point was made by several speakers. Carmen Rojas, formerly of The Workers Lab, related that her former organization’s efforts to empower workers were initially aimed at getting the private sector to act, but the organization found that “government is actually key to scaling anything that would benefit working people.” She noted that this “should have been obvious, given the history of the labor movement in this country, and unfortunately, it wasn’t.”
Economy in Focus: Building Worker Power
Federal Trade Commissioner Rohit Chopra emphasized the power of the federal government needed to be brought to bear on corporate concentration. The FTC, he said, “should be about confronting massive concentrations of power in our economy, ending conflicts of interest in some of the biggest businesses in our society, going after the practices that diminish workers’ wages and independence, and fundamentally, making sure that the economy is competitive and delivers benefits for everyone who wants to work hard.”
And Harvard University’s Lizabeth Cohen, discussing the political challenges facing supporters of the Green New Deal, pointed to the New Deal implemented by President Franklin Delano Roosevelt in response to the Great Depression, as the “gold standard” for the federal government taking responsibility in a national emergency.
The second major theme of the day was that inequality in the United States has led to the concentration of economic power at the top of the income distribution, which has led to a comparable aggregation of political power. That confluence of power has turned policy in favor of elites and stands in the way of change.
Equitable Growth President and CEO Heather Boushey said that inequality gave those at the top not only economic power but also political power. As inequality has risen, she said, “it’s not just the buying of a particular piece of legislation, but how that concentration of economic resources gives people that political and social power to set the agenda, to decide what it is that we’re going to talk about, what it is that’s important to us.” She added, “How can you have democratically accountable institutions when you have so much concentration of wealth in the hands of individuals and across markets?”
Panel: Toward a New Economy
On this topic, Alexander Hertel-Fernandez of Columbia University also invoked FDR, who, he said, “understood that public policy is a tool for building both economic and political power.” Explaining one of the reasons wages have lagged and unions have declined, Hertel-Fernandez pointed to the post-World War II era when he said, “employers realized that they could use public policy to entrench their economic positions and … since the New Deal … the story of declining worker power is not just one of automatic changes in the economy. Employers have worked in new domains and invested in old domains to change policies in ways that disadvantage workers.”
As Tom Perriello of the Open Society Foundations put it:
I think we need to understand the interrelationships of economic [and] corporate power with democratic power and with racial power. And we see right now an unbelievable concentration of wealth, but that concentration of wealth is able to translate itself into political power that affects the ability to produce results for the very parties or organizations that want to build power by standing up for working-class people, middle-class folks of all races.
He added that there “are very few examples through human history, including American history, of multiracial democracy existing with genuine equality of voice.” He argued that “to sustain that kind of multi-identity democracy is difficult in part because of how those with power can divide in order to prevent the building of power.”
Citing a specific example, Karen Dynan of Harvard University discussed the student debt burden facing millennials, especially people of color, and noted that the problem is not with the federal student loan program in general. College is a worthwhile investment for most students, she said, particularly those from low-income families. But weak regulation, she noted, fails to hold colleges—in particular, private for-profit colleges—accountable for luring students into taking on significant debt and then too often failing to deliver value in the form of college degrees. In the same session, Claudia Sahm, formerly with the Federal Reserve and now the director of macroeconomic policy at Equitable Growth, noted that the victims of for-profit colleges were disproportionately the first in their families to attend college. Both Dynan and Sahm made clear that the for-profit college industry has used its political power to weaken regulation.
Panel: Macroeconomic Implications of Inequality
The third theme, a loss of trust, probed the diminution of Americans’ confidence in institutions—in politics and government, in business, and in the media—resulting from economic anxieties and the concentration of power.
In describing the different political landscapes faced by President Franklin D. Roosevelt and today’s supporters of the Green New Deal, Harvard’s Cohen pointed to the difference in the level of trust among the American people. “The New Deal of the 1930s was most remarkable for how it inspired a generation of Americans to trust the federal government as capable of solving many of the nation’s and their personal problems,” she said. “That confidence would persist during at least three more post-war decades. Today, however, we are in a very different place. Trust in the federal government has eroded.”
Boushey said that inequality subverts trust in institutions, and the people most in need of political and economic change mistrust the ability of government, political parties, and other organizations to support them and their families. It makes the public less willing to pay taxes, she said, because there is less confidence that resources will be spent in ways that make their lives better.
Duke University’s Sarah Bloom Raskin, describing how an increasing number of Americans have lost their economic resilience, or the financial ability to withstand economic shocks, noted that people become alienated from the political system as they lose confidence that it can produce change for them. “As income levels get a match on the political side, we lose a political and a regulatory responsiveness that actually could be doing something to address these questions of resilience,” she said. “People then lose confidence in [actual] solutions to do anything for them.”
Finally, the President of the Services Employees International Union Mary Kay Henry said that this weakening of trust in institutions was affecting the efforts of unions to gain the support of workers.
The fourth theme was that economic anxieties felt by much of the U.S. population are due, in considerable part, to the decline of worker power—the ability, mainly through labor unions, to stand up for higher wages from employers.
In a conversation about the rise of monopsony—when firms, rather than labor markets, set wages—Arindrajit Dube of the University of Massachusetts Amherst said that the most significant trends limiting wages over the past several decades have been the loosening of certain constraints on employers, such as fairness norms, labor unions, and more meaningful minimum wages. Hertel-Fernandez emphasized the inadequacy of the law and of the judiciary to address the “malign neglect” of labor law by employers. He cited the potential revamping of labor laws as an opportunity to find out what workers want in labor organizations. Likewise, Cecilia Muñoz of New America focused on how the nature of work is changing and stressed the need to engage workers in the conversation about how best to empower them to affect work’s future direction. Rojas cited the need to build new models of worker power, using 21st century technology. And the FTC’s Chopra said that he hopes the FTC will bring an antitrust case that focuses on labor market competition, noting that the agency has been too weak with respect to enforcement in this area.
But perhaps the most powerful evocation of how workers are faring in today’s economy was a story told by the SEIU’s Henry, who made the case for workers to be able to organize in entire sectors to combat the increasing concentration in many industries. She told the audience about a hospital worker named Nyla Payton, an employee at the University of Pittsburgh Medical Center. Hospital mergers have given UPMC something close to monopsony power over the labor market for hospital workers in the Pittsburgh region, she said. Henry spoke in detail about how the institution has abused that power to impose egregious working conditions on its workers and prevent them from forming a union.
Fighting Power with Power: Unions for All
The fifth theme of the day was the experience of individuals and families in the U.S. economy as fundamentally different based upon race, ethnicity, and gender.
The economic and political disparities faced by people of color and by women (and especially by women of color) were a major theme throughout the day. Dania Francis of the University of Massachusetts Boston pointed to the impact of the gaping racial wealth gap on human capital investment. She noted that wealth, in addition to being a source to draw on for such investment, is protective (providing shelter from life’s unexpected setbacks), affords opportunities (to be an entrepreneur, to take risks), and perpetuates itself (is intergenerational). “Who are we losing?” she asked.
Similarly, Camille Busette of The Brookings Institution said that the asset creation process “is very racialized.” She pointed to government policies such as redlining, the exclusion of blacks from certain kinds of jobs, and other structural issues built upon existing disparities to contribute greatly to the racial wealth gap. Even for African Americans who owned homes before the 2007 financial crisis, a disproportionate amount of those were bought using subprime loans, so they were set up to fail, and those assets disappeared. “The reason that we have a racial wealth gap,” she said, “is that we have racism.”
In the same session, Opportunity at Work’s Byron Auguste discussed the skills gap, pointing out that if employers wanted more workers in a particular field, then they could raise compensation for those jobs. He also said that the conversation about the skills gap misses a key point. “We’re thinking about the skills gap backwards,” he argued. “The skills gap is the consequence of an opportunity gap … it’s not the cause.” He said that artificial credentials requirements for certain jobs, such as a bachelor’s degree for office administrative assistants, tended to exclude black workers.
Bucknell University’s Nina Banks told the story of Sadie Alexander, who, in 1921, became the first African American woman to receive a Ph.D. in economics in the United States (at the University of Pennsylvania). Since nobody would hire her, she went on to earn a law degree at UPenn as well and became one of the leading civil rights voices challenging the legacy of slavery. She did so from the point of view of an economist. Concerned about the status of African American workers—who were frequently the last hired and therefore first fired—she focused on the need for full employment policies and was possibly the first economist to advocate a federal jobs guarantee, a policy idea that is enjoying renewed attention in the current economic and political debate.
And finally, the last theme of the day was elicited by the session moderators, as well as through audience questions, which asked for evidence-based policy recommendations from the panelists and speakers. Among them were the following:
Bradley Hardy of American University pointed to the need to direct considerably greater public resources into education, safety net programs, skills training, and other programs critical to building human capital.
Monica Garcia-Perez of St. Cloud State University urged policymakers not to focus only on the job market. She said it was a symptom, not the fundamental problem. She called for wellness benefits such as health insurance and retirement to be separated from jobs, so that individuals and families could receive them regardless of whether they are employed.
Maya Rockeymoore Cummings of Global Policy Solutions said the policy changes that were most needed were programs that support families along the continuum of life, such as paid family leave, universal childcare, and long-term care, and while expressing strong support for Social Security, pointed to the need to strengthen other retirement benefits to provide greater income to seniors.
Francis called for a program of reparations that includes a direct transfer of resources in order to help African Americans reduce the wealth gap created by the legacy of slavery, Jim Crow laws, and other state-sanctioned discrimination.
Henry, in addition to supporting sectoral collective bargaining, which is the norm in many European countries, called for “a new American social wage” that includes benefits such as healthcare, childcare, parental leave, vacation, and pension support. Similarly, Dube called for sectoral wage standards and for wage boards to enforce them.
Auguste noted the need for greater income support for those learning new skills to improve their status in the job market, and for student loan forgiveness in unusual circumstances such as the financial crisis.
Busette called for the elimination of the juvenile justice system, which she said has a deeply negative, lifelong impact on countless African American boys.
Dynan and Sahm stressed the need for policies to inject money into the U.S. economy when a recession is beginning by providing benefits to low- and middle-income Americans, who are most likely to spend those resources. Sahm pointed to the proposals contained in Recession Ready, a book of ideas compiled by Equitable Growth and the Hamilton Project.
These and other policy ideas will be compiled into a collection of 20 innovative, evidence-based, and concrete ideas to shape the 2020 policy debate, which Equitable Growth’s Director of External and Government Relations David Mitchell announced will be published in January by Equitable Growth. Several of the speakers at “Vision 2020” are among the academics who are contributing essays.
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
Apparently, the time for niceties between generations has come to a close with just two words: “OK, boomer.” The phrase is being thrown around like a new four-letter word on the internet, while new research from Equitable Growth shows that perhaps there’s an economic undertone to this latest intergenerational animosity: Millennial workers have not fared as well in the post-Great Recession period as other working-age groups. As Kate Bahn writes in a post about the research, local unemployment shocks during the Great Recession had a negative impact on the employment of all age cohorts, but millennials (defined as those born between 1980–1994) were the most negatively affected. Millennials’ earnings also suffered the worst during and after the Great Recession, compared to other generations, and they are less likely to be working for a high-paying employer today. These persistent negative outcomes for millennials demonstrate “how inequality reduces economic opportunity for those who have less to start with in terms of jobs and earnings” and how a tight labor market doesn’t necessarily translate into positive economic outcomes for all workers, writes Bahn.
Three recent reports—one from the Stigler Center, one commissioned by the United Kingdom, and one to the European Commission—examine antitrust and competition issues in the digital arena. Michael Kades discusses each report in detail, providing an overview of current digital market conditions, what that means for competition online, and potential remedies to some of the biggest issues facing digital market competition: the acquisition of nascent competitors and online platform discrimination. Kades writes that “a combination of antitrust enforcement and competition-enhancing regulations likely provides the best path forward to exploiting the benefits of these markets while limiting the dangers they pose for competition.” His column summarizes the paper about these three reports that he submitted to the American Bar Association’s Fall Forum.
Check out Brad DeLong’s latest worthy reads for his takes on recent Equitable Growth content and posts from around the web.
Links from around the web
A new study indicates that a higher minimum wage does not lead to higher unemployment, writes Dylan Matthews in an explainer on raising the wage floor for Vox.com. Matthews summarizes the recent research, which finds that “even if a few workers lose jobs, those costs are significantly outstripped by increased wages for workers who keep their jobs.” Matthews points out, however, that some economists remain skeptical, particularly regarding long-term effects on job growth and the level to which the minimum wage is raised. The disagreements and varying research results point to larger structural forces, Matthews concludes: “There are big monied interests opposed to minimum wage increases, and smaller but real monied interests (specifically unions) supportive of them.”
For all the talk of late about wealth taxes and fighting billionaires, writes Noah Smith for Bloomberg, you’d think the number of ultra-wealthy people had skyrocketed in the past few years alone. Wealth inequality has been high in the United States for decades, so Smith asks, where did all this class resentment come from? It probably has its roots in the bursting of the housing bubble, he argues, when the vast majority of the country lost everything they had been saving, but the wealthy largely made it through with barely a scratch. This immunity to financial setbacks highlights how rare it is these days for wealthy people to lose their fortunes just like the rest of us, Smith writes—and why policymakers looking to avoid class conflicts should support ideas that will help reduce financial risks for the middle class.
Republicans have now come up with a plan for paid family leave, which has long been a policy for which Democrats have fought. If both sides want it, then what’s the hold up? Claire Cain Miller of The New York Times’ The Upshot argues that the big divide between the two parties is over which workers would gain access to the paid leave, and where the money to pay for it would come from. Generally, she explains, Democrats want to create a new federal fund, financed by a payroll tax increase, that covers paid leave for new parents and workers needing time to care for their own serious illness or that of a family member. Republicans support using people’s existing Social Security benefits to cover leave for new parents and reducing the amount they’d then receive when they retire—essentially, treating Social Security like an individual account more than a larger social insurance fund. There have been a flurry of bills proposed in Congress, and the Trump administration has, so far, not taken sides on which one it will back. The administration, however, plans to host a summit on the issue at the White House next month.
A brilliant must read is Kevin Rinz’s “Did Timing Matter? Life Cycle Differences in Effects of Exposure to the Great Recession,” in which he writes: “Exposure to a recession can have persistent, negative consequences, but does the severity of those consequences depend on when in the life cycle a person is exposed? I estimate the effects of exposure to the Great Recession on employment and earnings outcomes for groups defined by year of birth over the ten years following the beginning of the recession. With the exception of the oldest workers, all groups experience reductions in earnings and employment due to local unemployment rate shocks during the recession. Younger workers experience the largest earnings losses in percent terms (up to 13 percent), in part because recession exposure makes them persistently less likely to work for high-paying employers even as their overall employment recovers more quickly than older workers. Younger workers also experience reductions in earnings and employment due to changes in local labor market structure associated with the recession. These effects are substantially smaller in magnitude but more persistent than the effects of unemployment rate increases.”
This is why the financial system is so effective at clipping the edges off of the return of the non-rich is an immense scandal—Read Somin Park, “Wealthier Individuals Receive Higher Returns to Wealth,” in which she writes: “Why do the wealthy get higher returns from their wealth? In part, it’s because they invest a higher share of their assets in the stock market and other risky assets, and therefore are rewarded for their risk tolerance with higher average returns. Wealthier investors also benefit from the scale of their wealth, for example, by using checking accounts that pay higher rates for larger deposits and buying financial advice that leads to higher returns—what the authors call “economies of scale in wealth management.” Yet the authors also find that risk compensation and scale, while important, are not enough to fully account for the variation in returns, or, in economic parlance, “return heterogeneity.” Bank deposit accounts are safe assets that bear essentially no risk. If return heterogeneity were explained by compensation for risk-taking, then there should be no variation in the returns that people get from deposit accounts holding the same amount of wealth. The authors [of a recent working paper] find, however, that there is sizable heterogeneity: People with more education tend to deposit at high-return banks. Persistent variation in returns is therefore also explained, in part, by differences in financial sophistication and differences in ability to access and use superior information about investment opportunities.”
From last March, but very much worth reading, is Elisabeth Jacobs and Kate Bahn’s “U.S. Women’s Labor Force Participation,” in which they write: “For women in the United States, labor force participation rates have not followed a straight path. It has been a complicated narrative, deeply affected by women’s family roles, by discrimination, by the changing economy, by technological change, and by their own choices. And it is a continuing story, with surprising twists that economists continue to explore. In a sense, this story begins with its first twist, in the 18th and 19th centuries. To be clear, this is a twist for us today, not for those who experienced it. From our modern perspective, we might assume that significant participation by women in the workforce was practically nonexistent until it began rising gradually in the 20th century. We would be wrong. A number of economists, and especially Claudia Goldin of Harvard University, have shown that women in the 18th and 19th centuries played a considerably more important role in the economy than we might have thought. They were critical to their families’ economic well-being and their local economies, not in their rearing of children or taking care of household responsibilities but by their active participation in growing and making the products that families bartered or sold for a living.”
Definitely this week’s most important must read is Dylan Matthews’s “Should the Minimum Wage Be Raised? The Economic Debate, Explained,” in which he writes: “There’s still disagreement … [b]ut it looks like in many cases, pay raises swamp any lost jobs … Dube, Cengiz, Lindner, and Zipperer find that much of the disagreement between the Card/Krueger and Neumark/Wascher approaches is attributable to a quirk in the late 1980s and early 1990s. During that period, blue states experienced an economic downturn relative to red states that predated the biggest blue state minimum wage increases; that made it look like minimum wages were lowering employment growth, when what was really happening was that blue states both had lower employment growth and separately increased their minimum wages. “In our QJE paper we showed that the specifications under argument (lot of controls, little controls) actually all suggest little job loss in the post 1995 period; and that this appears to be driven by the quirky 80s boom/bust,” Dube told me. “None of us knew this until recently. This is actually progress”… Dube notes in his review that the best evidence we have suggests minimal job impacts on minimum wages of up to 60 percent of the median wage. The median hourly wage in El Centro, California is about $15.50, meaning the $13 an hour minimum (effective January 1 of next year) is over 80 percent of the median wage there. The effects there might be very different.”
In all his columns on Project Syndicate about how dangers of global warming are overblown, Bjorn Lomborg does not appear to have ever called for a carbon tax—at least, searching the website for “Bjorn Lomborg carbon tax” produces no hits. I wonder why not. What’s the upside to you of our not yet having implemented a carbon tax, Bjorn? Read Bjørn Lomborg, “Humans Can Survive Underwater,” in which he writes: “Climate change is a problem we need to tackle, and we should be particularly mindful of how it will hurt the poorest in society. But the bigger, unreported story is that today’s climate policies will do very little to resolve the “challenge” of more people living below the high-tide mark … Even when we read stories from the world’s top media outlets, we need to maintain perspective. Deaths from climate-related causes (floods, hurricanes, droughts, wildfire, and extreme temperatures) have declined by 95 percent over the past hundred years. Furthermore, despite the constant barrage of claims that the global climate crisis is spiraling out of control, the cost of extreme weather as a proportion of GDP has been declining since 1990. Alarming media stories that twist the facts about rising sea levels are dangerous because they scare people unnecessarily and push policymakers toward excessively expensive measures to reduce greenhouse-gas emissions. The real solution is to lift the world’s poorest out of poverty and protect them with simple infrastructure.”
For a reminder that we know depressingly little about what really works to accelerate economic growth read Ricardo Hausmann, Lant Pritchett, and Dani Rodrik, “Growth Accelerations,” in which they write: “We focus on turning points in growth performance. We look for instances of rapid acceleration in economic growth that are sustained for at least eight years and identify more than 80 such episodes since the 1950s. Growth accelerations tend to be correlated with increases in investment and trade, and with real exchange rate depreciations. Political-regime changes are statistically significant predictors of growth accelerations. External shocks tend to produce growth accelerations that eventually fizzle out, while economic reform is a statistically significant predictor of growth accelerations that are sustained. However, growth accelerations tend to be highly unpredictable: the vast majority of growth accelerations are unrelated to standard determinants and most instances of economic reform do not produce growth accelerations.”
Looking forward to the next recession, and to the unwillingness of politicians to reserve fiscal space for fighting it, makes Keynes message more urgent than ever. Read Paul Krugman’s “Introduction to Keynes’s General Theory,” in which he writes: “In the spring of 2005 a panel of “conservative scholars and policy leaders” was asked to identify the most dangerous books of the 19th and 20th centuries … Charles Darwin and Betty Friedan ranked high on the list. But The General Theory of Employment, Interest, and Money did very well, too. In fact, John Maynard Keynes beat out V.I. Lenin and Frantz Fanon. Keynes, who declared in the book’s oft-quoted conclusion that “soon or late, it is ideas, not vested interests, which are dangerous for good or evil,” would probably have been pleased … It’s probably safe to assume that the “conservative scholars and policy leaders” who pronounced The General Theory one of the most dangerous books of the past two centuries haven’t read it. But they’re sure it’s a leftist tract, a call for big government and high taxes … The arrival of Keynesian economics in American classrooms was delayed by a nasty case of academic McCarthyism. The first introductory textbook to present Keynesian thinking, written by the Canadian economist Lorie Tarshis, was targeted by a right-wing pressure campaign aimed at university trustees. As a result of this campaign, many universities that had planned to adopt the book for their courses cancelled their orders, and sales of the book, which was initially very successful, collapsed. Professors at Yale University, to their credit, continued to assign the book; their reward was to be attacked by the young William F. Buckley for propounding “evil ideas.” But Keynes was no socialist—he came to save capitalism, not to bury it. And there’s a sense in which The General Theory was … a conservative book … Keynes wrote during a time of mass unemployment, of waste and suffering on an incredible scale. A reasonable man might well have concluded that capitalism had failed, and that only … nationalization … could restore economic sanity … Keynes argued that these failures had surprisingly narrow, technical causes … because Keynes saw the causes of mass unemployment as narrow and technical, he argued that the problem’s solution could also be narrow and technical: the system needed a new alternator, but there was no need to replace the whole car.”
The national debate on economic policy recently turned along generational lines, with the popularization of the sarcastic phrase “OK, Boomer.” The premise is that prototypical baby boomers are misguided in their critique of structural economic policies that many millennials argue would create a U.S. economy where gains of growth are shared by a broader swath of people.
The reasons for this generational division may be borne out by the evidence. New research from Kevin Rinz of the U.S. Census Bureau follows the employment and earnings trajectories of workers before, during, and after the Great Recession of 2007—2009. Rinz finds that younger workers in the millennial generation lost out on the gains of the economic recovery since 2009 while workers in other age groups largely recovered.
These variations are due to structural factors in the U.S. economy that contribute to lower earnings, such as interfirm wage inequality and increasing employer concentration, as well as the impact of economic downturns on individuals’ investments in human capital. Bearing the brunt of these trends is sparking these younger millennial workers to call for structural changes that would alter the negative consequences of economic inequality that they face.
As Rinz notes in his new Equitable Growth working paper, much of the analysis of the labor market effects of the Great Recession are focused on workers who were in their prime working years, commonly ages 25 to 44 (across generations prior to the boomers) and who have the strongest labor force attachment, particularly men. But the question remains for younger workers, most of whom were not yet in their prime working years when the recession began: How does exposure to an economic downturn affect workers as they make decisions about investing in their own human capital through higher education and begin their careers in the labor market?
To investigate this, Rinz follows a modified approach of research by Equitable Growth grantee Danny Yagan at the University of California, Berkeley by estimating the employment and earnings effects by generational cohort on individuals resulting from local unemployment shocks between 2007 and 2009. Using a 2 percent sample of the 2018 Census Numident file linked to W-2 earnings data from 2005 to 2017, Rinz is able to connect self-identified key features of individuals, such as their birth year and other demographic data, to administrative data on their employment and earnings histories. He then estimates the impact of unemployment shocks in different commuting zones, following the method used in Yagan’s research, on both employment and earnings in the years following.
Rinz finds that average local unemployment shocks had a negative impact on the employment of all age cohorts, but that millennials (born in 1980—1994) were the most negatively affected, with the greatest decline in employment compared to Generation X (1965—1979), baby boomers (1944—1964), and the Silent Generation (1928—1945). Rinz also finds that millennials’ employment levels recovered more quickly than the other generations. Interestingly, millennials who were exposed to greater unemployment shocks during the Great Recession were actually more likely to be employed by 2017, compared to millennials exposed to smaller unemployment shocks. (See Figure 1.)
Figure 1
So, millennials’ employment opportunities recovered, but their earnings did not. Rinz finds that the average loss of earnings due to exposure to a local unemployment shock stabilized around $3,000 for all workers. But he also finds that from 2007 to 2017, millennials with more exposure to unemployment shocks lost 13 percent in cumulative earnings, compared to 9 percent for Generation X and 7 percent for baby boomers. Baby boomers also experienced more significant earnings recovery, with their earnings losses shrinking 65 percent by 2010. (See Figure 2.)
Figure 2
To investigate the reasons for these continued losses, Rinz examines the impact of education decisions, employer match (economic parlance for workers matching into jobs for which they are best suited), and labor market concentration. He finds that exposure to an economic downturn can have an ambiguous effect on education decisions by reducing the opportunity cost of leaving the labor force to pursue education but also reducing the resources available to invest in education.
Rinz finds that millennials in areas with unemployment shocks completed less education. If local labor market conditions forced millennials to leave school and take whatever job they could get, this would depress their earnings in the long run. (See Figure 3.)
Figure 3
Rinz also finds that exposure to a local unemployment shock persistently made millennials less likely to work for high-paying employers into the future. Being part of a large reserve of individuals looking for work may reduce these workers’ bargaining power for commanding higher wages in the future, even once they are back at work, because millennials exposed to unemployment shocks had larger employment declines. On top of this, Rinz finds in his previous research that the impact of local labor market concentration has reduced the earnings for millennials, although this effect is smaller in magnitude than the impact of unemployment shocks.
Persistent negative outcomes for younger workers demonstrate how inequality reduces economic opportunity for those who have less to start with in terms of jobs and earnings. This demonstrates how the competitive forces of a tight labor market—as measured by low overall unemployment during the now 10-year economic recovery since the end of the Great Recession—does not necessarily translate into better opportunities for all workers, such as higher wages for younger workers.
No wonder millennials, whose economic well-being continued to suffer after the Great Recession, roll their eyes when older generations, who lost less of their long-term earnings, claim that structural change is not necessary. These younger workers intuitively understand that structural change may be the only thing that allows for more broadly shared economic growth.
The debate over the role of large internet companies and their impact on the U.S. economy ranges from those who see nothing wrong to proposals to break them up. Within that broad debate, three recent reports—the “Market Structure and Antitrust Subcommittee” from the Stigler Center, “Unlocking Digital Competition,” a report commissioned by the United Kingdom, and “Competition policy for the digital era,” a report to the European Commission—coalesce around three broad principles.
First, digital markets have unique characteristics. Although those characteristics can generate important benefits, they also make it easier to throttle competition, harm consumers, and stifle innovation. Second, all three reports (although not exclusively) focus on two types of threats: the acquisition of nascent competitors by dominant firms, and the dangers when a company has a dominant position as a platform or digital marketplace. Third, a combination of stricter antitrust enforcement regulation is likely the best way to address the problem.
These reports reflect one view on the challenges and potential solutions to promoting competition in online markets. This column summarizes the paper about these three reports that I submitted to the American Bar Association’s Fall Forum being held today in Washington.
Online markets, which include everything from Alphabet Inc.’s Google unit selling advertising on its search result pages to Amazon.com Inc.’s marketplace to Apple Inc.’s App Store, all exhibit network effects. As the recent U.K. competition report explains, network effects can “occur when the benefits to a user increase as the number of users increases” or “when the benefits to users on one side of a platform market increase with the number of users on the other side of the market.”
Examples of these network effects are the exponential utility of mobile telephones as they became ubiquitous or (back in the day) a newspaper’s print circulation, which was more valuable to advertisers the larger the circulation. The same is true for information online. The more people who use Google search, the more valuable it is to advertise on its search results pages. As more people sell products on eBay Inc.’s online platform, more people will use it to buy products, and the reverse is true as well.
A second feature of online markets are substantial returns to scale. As the recent European Commission competition report explains, “new technologies of information are incompatible with traditional modes of competition” because “they show very strong returns to scale,” meaning the cost of producing or providing the service to many customers is little more expensive than to a few. Although returns to scale are common in many markets, the scale of the scale makes information technologies unique. The fixed cost to Google of updating calendars for 100 million users, for example, is not much more than if it serves a fraction of that number.
Third, digital markets have distribution costs that are close to zero and boast dramatic economies of scope based on data-driven products. For instance, an online platform that combines mapping software with email allows it to offer, say, higher quality restaurant recommendations. Similarly, on the revenue side, more customers and more products can lead to higher revenue per customer, and machine learning, once developed, can provide benefits across many products.
Fourth, unlike other industries, at minimal costs, information technologies and platforms have global reach in the sense that it is much easier for digital platforms to reach a worldwide market than traditional brick-and-mortar businesses, according to the Stigler report. The same report also discusses how insights from behavioral economics explain how consumer behavior can be and is exploited to maintain a dominant position.
As a result, internet search is free, consumers pay no fee to use eBay or Amazon, and Facebook.com Inc.’s users do not pay directly for the social network. This is not to say that there is no price. Users are giving up their data and attention.
What does all this mean for competition policy? There are some dramatic benefits. The European Commission competition report finds that consumers can “communicate seamlessly with virtually anyone around the world mostly for free,” while “the accessibility of information has greatly increased not least thanks to the emergence of new information intermediaries.” What’s more, the report finds that “the data revolution promises to bring about a revolution in healthcare, finance, mobility, and education, [with] digitization … impacting essentially every industry, from manufacturing to services to agriculture.”
But there are also dramatic risks. Without sufficient competition, innovation will slow, meaning economies fail to achieve the true benefits of these advances, and only a few firms and their shareholders will benefit from the developments that do occur. The UK competition report finds that these very same dynamics of network effects, economies of scale and scope, and near-zero distribution costs that have driven innovation in digital markets also create an opportunity to stifle competition. Digital markets are subject to tipping, or a winner-take-all scenario. Often, once one or two companies reach a certain size, they have won the market. Existing competitors wither away, and new entrants face a significant disadvantage because they must build scale and invest heavily.
This dynamic, however, does not mean that a winner of today’s market is unassailable or that competition is irrelevant. Rather, competition in these markets is different. Instead of the day-to-day competition in a brick-and-mortar market—such as in the automobile industry between and among Ford Motor Co., General Motors, Inc., Honda, Volkswagen AG, and Toyota all competing to win each customer—the meaningful competition among online platforms are during those short periods where firms in the market battle for overarching dominance, such as Google dethroning Alta Vista back in the 1990s or Facebook replacing Myspace in the 2000s. In these types of markets, we are likely to see periods of fierce competition in which a new entrant, either by offering a new or dramatically different product, seeks to dethrone the incumbent.
Those competitive wars yield tremendous benefits to users of the product, although at the end of each war, there will likely be only one or two companies standing. As a result, the incentive and pay-off from eliminating these periods of competition is larger than in traditional markets. “Competition for the market cannot be counted on, by itself to solve the problems associated with market tipping and winner-takes-most,” argue the authors of the UK competition report, because “large incumbent digital players are very difficult to dislodge.”
The acquisition of nascent competitors and possible antitrust remedies
Major digital platforms and e-commerce sites have acquired a substantial number of companies and assets over the past decade. The economic conditions of these markets, however, means that such acquisitions may prevent the short periods of competition for the market that are the source of the benefits that online markets deliver. Some have raised these concerns regarding Facebook’s acquisition of online photo platform Instagram in 2012 or its 2013 purchase of online mapping firm Waze, a potential challenger to Google’s Maps service.
In traditional, nondigital markets, if a small company is an important competitive constraint, its size and youth would suggest that another company can easily replace it. In contrast, the combination of factors that create winner-take-all markets makes it difficult to confidently conclude either that a particular nascent competitor will become a threat or that it is easily replaced. Yet these nascent threats “may be the most important source of competition faced by the incumbent firm,” according to the Stigler report. That means the cost of underenforcement—failing to prevent the acquisition of a potential competitor that would have disrupted the dominant incumbent—is high.
The UK competition report, the European Commission competition report, and the Stigler report offer related solutions. They variously suggest that antitrust regulators consider:
An analysis that focuses less on the likelihood a merger will have an effect and more on the cost-benefit look at a merger where the likelihood of the effect is less than 50 percent but the size of the harm is large
A more skeptical antitrust investigation when a market exhibits the characteristics of tipping or winner-take-all dynamics
A new antitrust presumption of illegality for mergers between dominant firms and uniquely likely future competitors
The bottom line is that these three reports agree antitrust law must be flexible enough to address the risks to market competition posed by the acquisition of nascent competitors by the big incumbent digital platform firms.
Online platform discrimination and possible antitrust remedies
Digital platforms and e-commerce sites, once they obtain a dominant position, can take actions that further limit competition without offsetting benefits. A dominant platform may also compete with those that rely on the platform and use its position to favor its own products. Or a dominant platform might impose rules that prevent others from developing competing platforms. Policies that make it difficult for customers to take their data from one service to another or that prevent interoperability also increase entry barriers and can limit competition.
The UK competition report, the European Commission competition report, and the Stigler report, to varying degrees, acknowledge that competition law alone is unlikely to resolve these problems and see regulation as providing a more effective solution. Broadly, the three reports suggest that antitrust law is best addressed at stopping or preventing harm, while regulatory policy can promote competition.
The three reports variously recommend that:
A new digital antitrust agency be established
A separate digital markets unit be set up within existing antitrust agencies
A new set of regulations specific to digital markets be crafted
In practice, this approach suggests that regulations can lower the barriers that limit competition and solve general problems. Regulations can promote interoperability, allowing companies’ products or systems to work with existing dominant online platforms. New rules that allow companies to offer complementary services on existing platforms can lead to greater competition. And regulations on data portability that make it easier for consumers to move from one platform to another can promote multihoming, where consumers or businesses use multiple platforms simultaneously.
Conclusion
There is no question that the discussion about competition on and among digital platforms and e-commerce will continue. Three recent reports discussed here, however, broadly agree that a combination of antitrust enforcement and competition-enhancing regulations likely provides the best path forward to exploiting the benefits of these markets while limiting the dangers they pose for competition.
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
Need a refresher on the difference between wealth inequality and income inequality, and why intergenerational transfers of wealth are contributing to inequality? Look no further than Liz Hipple’s conversation with Fabian Pfeffer, an associate professor of sociology at the University of Michigan in Ann Arbor. Hipple and Pfeffer discuss topics ranging from racial disparities in wealth transfers across generations to the psychological processes of intergenerational transmission of wealth to how to use policy to ensure more equitable intergenerational transfers of wealth. Pfeffer’s research also touches on multigenerational wealth transmission, or grandparent-to-grandchild transfers, which, it turns out, may predict grandchild educational outcomes. “Children with parents who are similar on many, many observable characteristics are still distinct in their educational achievements depending on their grandparents’ wealth level,” Pfeffer says. “Racial disparities in wealth transmission are also stark once you expand beyond just two generations.”
This week, Brad DeLong shared his takes on twoweeks of Worthy Reads from Equitable Growth and around the net.
Inequality has been growing steadily in the United States for decades, to the point that in some areas of the country, the gap between the rich and the poor is reaching Roaring Twenties levels. This extreme inequality is the result of globalization policies and conscious choices made by elected leaders and the courts, writes Abby Kingsley for FastCompany. But which policy decisions, exactly, had a real impact on inequality, and when? Kingsley and her colleagues “looked through archives, examined economic programs, and [spoke] to experts in labor, trade, law, and tax policy to identify key points where policymakers chose to create inequality.” Their in-depth timeline, going back to 1949, lays out the case for how we got to this point.
Inequality may also persist because of vast power differentials between rich and poor. This has led to widening gaps in pay, supposedly based on skill level or productivity, but in reality, “skills that really matter in the workplace are much more evenly distributed than many people assume. Most low-wage workers are underpaid relative to their measured intelligence and personality traits, and many of the highest paid professionals—including doctors, lawyers, and financial managers—are overpaid according to the same metrics,” writes Jonathan Rothwell for The New York Times’ The Upshot blog. In fact, he argues, if workers were paid based on traits such as cognitive ability, years of experience, conscientiousness, and emotional stability—which he shows are evenly distributed across the population—then the United States would be as egalitarian as Sweden. And that’s without high-quality education and skills training being available to everyone.
“Democrats have a clear theory of how they’ll make the economy fairer, but do they have a theory for making it grow faster?” asks Emily Stewart for Vox. Progressives have spent a good deal of time figuring out how to redistribute resources to make the economy work for everyone, but now are looking at ways to make the markets themselves more fair, not just the benefits that markets produce. Stewart runs through how to differentiate between redistribution and growth, potential policy changes to boost innovation and productivity, and how now is a good time for progressives to be proposing these big ideas.
Very nice congressional testimony on labor-side monopsony from Kate Bahn before the U.S. House of Representatives Judiciary Committee, in which she said: “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. 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.”
Greg Leiserson was a panelist at the Penn Wharton Budget Model’s “The Wealth Tax Debate,” during which the panelists examined: “Presidential candidates such as Elizabeth Warren and Bernie Sanders have proposed taxes on wealth. Why a wealth tax? Will it likely raise the money they hope? What are the trade-offs? What has been the experience of other countries?”
Very smart congressional testimony from Jason Furman on data and privacy in online platforms’ market power, in which he said: “The major digital platforms are highly concentrated and, absent policy changes, this concentration will likely persist with detrimental consequences for consumers. More robust competition policy can benefit consumers by helping to lower prices, improve quality, expand choices, and accelerate innovation. These improvements would likely include greater privacy protections given that these are valued by consumers. However, it is not clear that competition will be sufficient to adequately address privacy and several other digital issues. More robust merger enforcement should be part of the solution to expanding competition, including better technical capacity on the part of regulators, more forward-looking merger enforcement that is focused on potential competition and innovation, and legal changes to clarify these processes for the courts. A regulatory approach that is oriented toward increasing competition by establishing and enforcing a code of conduct, promoting systems with open standards and data mobility, and supporting data openness is essential. This is because more robust merger enforcement is too late to prevent the harms from previous mergers, and antitrust enforcement can take too long in a fast-moving market.”
Worthy reads not from Equitable Growth:
That Uber Technologies Inc. is so exercised about being treated as an employer suggests that a substantial part of the firm’s hopes for profitability hinge on successfully running a let’s-make-someone-else-pay-for-our-workers’-social-insurance game. Read Bloomberg Law’s Daily Labor Report, “Uber Hit With $650 Million Employment Tax Bill in New Jersey,” in which it reports: “Uber Technologies Inc. owes New Jersey about $650 million in unemployment and disability insurance taxes because the rideshare company has been misclassifying drivers as independent contractors, the state’s labor department said. Uber and subsidiary Rasier LLC were assessed $523 million in past-due taxes over the last 4 years, the state Department of Labor and Workforce Development said in a pair of letters to the companies. The rideshare businesses also are on the hook for as much as $119 million in interest and penalties on the unpaid amounts, according to other internal department documents. … Uber extended declines on news of New Jersey’s efforts, falling as much as 3.9 percent. Ridehailing competitor Lyft Inc. also dropped. The state’s determination is limited to unemployment and disability insurance, but it could also mean that Uber is required to pay drivers minimum wages and overtime under state law.”
Yes, we know that job training programs can be very effective. But how can we keep them effective as they scale up? Normally, we rely on markets and the profit motive to incentivize preserving effectiveness with scale. But with social insurance and other pro-poor programs, the beneficiaries do not have the social power to use the market to keep the programs that serve them on track. Read Paul Osterman, “An MIT economist on how to turn bad jobs into good ones,” in which he writes: “Research shows the benefits of retraining and raising wages outweigh the costs … Part of the problem lies in low skill levels. In Massachusetts, 53 percent of workers who earn $15 an hour or less have no more than a high school degree. But we also know that most people can improve their skills. Effective job training programs, such as those offered by the workforce development organization JVS Boston, can make a real difference. As an example, in the past year, its 12-week pharmacy technician training program placed 45 people in better-paying jobs; graduates went from earning an average of $13 an hour before gaining new skills to $17 an hour after. We have good evidence that well-run job training programs, ones that include significant investments in training, support services (for example, help with small unexpected expenses), and coaching for participants, are effective in moving people into better jobs and raising their earnings. High-performing programs are also characterized by strong relationships with employers. We know how to make these work, but we face two big challenges: spreading the model to reach more workers, and providing the resources needed to pay for it.”
The point of the actions by the U.S. Senate majority and of the current political appointees at the U.S. Department of Health and Human Services is not to create flexibility, but to make it legal to provide not-insurance. Read Sarah Gantz, “A Philly Woman’s Broken Back and $36,000 Bill Shows How Some Health Insurance Brokers Trick Consumers into Skimpy Plans,” in which she writes: “She was left with $36,000 in hospital bills that she’s still paying off. ‘What the hell did I do? How did I get into this mess?’ said Martin, 54, of Horsham, PA, recalling the panic she felt after the December 2017 fall. ‘I have a broken wrist, a broken back, and I don’t have real health insurance’ … Access to these plans was limited under the Affordable Care Act, but the websites selling such plans have gotten bolder in their marketing as President [Donald] Trump and free-market Republicans chip away at ACA rules, saying people need more affordable alternatives. But shopping savvy isn’t necessarily enough to protect consumers. The insurance brokers who rely on such websites for leads use scripts carefully worded to instill trust and push consumers to act quickly.”
