Category Archives: Economy

Place-Based Poverty

Source: Focus, Vol. 32 no. 1, Spring/Summer 2015

The five articles in this issue all touch on place-based poverty topics; whether and how location matters. The first article summarizes a lecture given by Raj Chetty at the University of Wisconsin–Madison on improving equality of opportunity in America, where he argued that a child’s chance of upward mobility varies greatly by where they grow up, with considerable variation existing even within some metropolitan areas. Next are two articles on food access in Detroit, an area often identified as being home to numerous “food deserts.” Scott W. Allard, Maria V. Wathen, Sandra K. Danziger, and H. Luke Schaefer use survey data to evaluate the distance that poor and near-poor households in Metropolitan Detroit must travel to access food assistance and food retailers. They conclude that their results offer little support for most conventional food desert hypotheses about food access, finding instead that many vulnerable populations have greater or at least similar access to these resources compared to less vulnerable populations. Dorceta E. Taylor and Kerry Ard suggest a way of reframing the food desert discussion in Detroit, combining environmental justice analysis, and the idea that a city’s food environment is a system that is influenced by a variety of factors. Alexandra K. Murphy and Scott W. Allard look at the rise of suburban poverty, and argue that because of the great diversity of locations that contain the suburban poor, no single policy approach will work for all suburbs. They also note that poverty still exists in urban and rural areas as well; it has not simply moved to the suburbs. Finally, Leah Platt Boustan discusses the Great Black Migration out of the South between 1940 and 1970, and how it affected the economic well-being of both blacks who migrated and blacks who were native to the North. Taken together, these articles make a strong case that location does, indeed, matter greatly.
Related:
Focus+ -electronic supplement which includes links to additional readings and videos related to the articles in the issue

Getting it right! The positive impact of LAGERS defined benefit plan on the Taxpayer, Employee, Employer, and Retiree

Source: Missouri Local Government Employees Retirement System, 2014

There is a common misconception that taxpayers bear all the costs of funding defined benefit public pensions. The truth is, investment return funds the lion’s share of benefits and taxpayers receive substantial economic benefits from public pension plans. LAGERS paid over $230 million in retirement benefits in 2014, $216 million of which stayed in Missouri. The protected monthly retirement benefit earned by local government retirees creates an economic stabilizer within Missouri communities. LAGERS retirees receive a pension check each month, so they don’t need to adjust their spending habits based on the markets….
Related:
2014 Economic Impact Report
Source: Missouri Local Government Employees Retirement System, 2014

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The Future of Work and Workers

Source: Pacific Standard, 2015

A special project in which business and labor leaders, social scientists, technology visionaries, activists, and journalists weigh in on the most consequential changes in the workplace.

Articles include:
Stagnation, Automation … Frustration
Source: Steven Greenhouse, August 27, 2015
….Let’s explore two major workplace issues, starting with wage stagnation. This is a huge problem, and unfortunately many Americans don’t realize how serious it is. Wages for the typical worker are up just 1.6 percent over the past six years, and, believe it or not, after-inflation wages remain below where they were in 1973. Try to raise a family on that. Median household income—$52,250—remains 8.6 percent or nearly $5,000 below its peak back in 2000. Forty-two percent of American workers earn less than $15 an hour—that translates to just $31,200 a year for a full-time worker…. One doesn’t have to be an Einstein to realize that wage stagnation has contributed to America’s income inequality—the worst it’s been since the Gilded Age of the 1920s. … A second major issue: the effects of automation. For more than a century, economists have maintained that new technologies create as many jobs as they destroy. …

The World Needs a New Business Model
Source: Sharan Burrow, Pacific Standard, August 26, 2015
….The world needs a new business model. The world’s GDP has trebled since 1980, yet inequality is at historic levels. The hidden workforce of the richest companies in the world work long hours for poverty wages, too often in unsafe environments or with unsafe products…..

Creative Destruction and the New World of Work
Source: John Irons & Alyson Wise, Pacific Standard, August 25, 2015
….With technology proliferating at an increasingly rapid pace, we face a pressing need for modernized labor laws, systems, and organizations that will promote greater resilience and inclusion. Creating these will require us to re-frame, re-imagine, and build upon Joseph Schumpeter’s notion of creative destruction. This is both a challenge and an opportunity for the 21st century…..

Preparing Students for a Changing World of Work
Source: Freeman A. Hrabowski III, Pacific Standard, August 24, 2015
Our nation’s workforce continues to evolve in a workplace transformed by new ideas, products, processes and services—the offspring of our highly productive innovation ecosystem. At the same time, the workforce is affected by increasing globalization and major demographic shifts—including an aging Baby Boomer generation and growing minority and immigrant populations. These changes have created a more competitive economy that affects the substance and conditions of the work we will do across occupations, the participation of underserved groups in the economy, and the ways colleges and universities prepare students for careers….

Caring for the Crowdworker Going It Alone
Source: Mary L. Gray, Pacific Standard, August 21, 2015
…..While we must develop robust mechanisms that prevent individuals from scamming platforms in the on-demand economy, we must with equal vigilance penalize employers for misclassifying, delaying, or failing to pay workers, one of the greatest challenges facing those making a living at freelancing today. Supporting the many people who may never enjoy the security of a 40-hour workweek will be one of the most important conversations we have about the on-demand sharing economy…..

Shorter Hours, Higher Pay
Source: Dorothy Sue Cobble, Pacific Standard, August 20, 2015
Most Americans work too much and are paid too little. Reversing these trends is the most important thing we can do to improve the lives of workers and their families today. Time and money are connected but not in the way we often think. For all too long we’ve been trying to raise our pay by lengthening our hours. In truth, we need to shorten our hours. Then and only then will we be able to raise our pay…..

Organize the Immigrant Workers
Source: Kent Wong, Pacific Standard, August 19, 2015
….The United States is home to 11 million undocumented immigrants. A national campaign for legalization and a path to citizenship has repeatedly been blocked in Congress. But immigrant workers are actively forming and joining unions. Their emergence as a powerful force bodes well for the future of the U.S. labor movement and is an inspiration to other workers struggling for justice and dignity in the U.S. and throughout the world. ….The American labor movement will be well served if it continues to advance an aggressive campaign to organize immigrant workers and to build a new labor movement for the new working class…..

The Transformation of Work at the Heart of Middle East Unrest
Source: Ragui Assaad, Pacific Standard, August 18, 2015
He is a 28-year-old Egyptian with a degree in sociology. He graduated six years ago and has since had three jobs as a waiter in various Cairo coffee shops and restaurants. He wants to marry but can’t convince his sweetheart’s parents he is ready, given his employment situation. He lives with his parents, both government employees who will soon retire with government pensions. He, on the other hand, can only dream of a job that would guarantee him a pension. Millions of educated youth like this find themselves shut out of the middle class because of an inability to convert their education into the kind of decent job their parents found a generation ago. Even as access to education has expanded dramatically in the region, the quality of employment for educated workers has deteriorated markedly. I’d argue that the gap between what these young people expected for their education and what they have achieved is the main source of the anger and frustration driving the Arab uprisings….

Who Owns the Robot in Your Future Work Life?
Source: Richard Freeman, Pacific Standard, August 17, 2015
….The key to whether we all benefit from robots at work or whether robots exacerbate the inequality of income between the super-wealthy few and the rest of society depends on who owns the robot. The first law of a robotized labor market is that as artificial intelligence and computing power improve, robots will better substitute for human work. The second law is that technological progress will reduce the cost of the robot substitutes over time. The third law, a corollary of laws one and two, is that the wages of workers in occupations undergoing robotization will fall…..

Labor Law Must Catch Up
Source: Richard L. Trumka & Craig Becker, Pacific Standard, August 14, 2015
American workers will continue to become more productive as the digital revolution advances. But United States labor law must be reconstructed to recognize changes in work and the employment relationship and to once again effectively permit workers to organize and designate representatives to bargain with their employers. Otherwise, workers will not share the increased income generated by their productivity, ultimately threatening economic growth….

The Water Cooler and the Fridge
Source: Mario L. Small, Pacific Standard, August 13, 2015
….The simple opportunity to run into others may be one of the most overlooked privileges of modern work life, and the one aspect of the office that work from home can rarely replicate. The water cooler chat became ubiquitous in the workplace because talk, as water, sustains life. One cannot run into colleagues on the way to one’s refrigerator….

We Have Been Here Before
Source: Paul Saffo, Pacific Standard, August 12, 2015
This is not the first time society has fretted over the impact of ever-smarter machines on jobs and work—and not the first time we have overreacted. In the Depression-beset 1930s, labor Jeremiahs warned that robots would decimate American factory jobs. Three decades later, mid-1960s prognosticators offered a hopeful silver lining to an otherwise apocalyptic assessment of automation’s dark cloud: the displacement of work and workers would usher in a new “leisure society.”….

Why Wages Aren’t Keeping Up
Source: Robert Solow, Pacific Standard, August 11, 2015
One of the more puzzling and damaging features of the American labor market in the last few decades has been the failure of real (i.e. inflation-adjusted) wages and benefits to keep up with the increase in productivity. …. The custom is to think of value added in a corporation (or in the economy as a whole) as just the sum of the return to labor and the return to capital. But that is not quite right. There is a third component which I will call “monopoly rent” or, better still, just “rent.” It is not a return earned by capital or labor, but rather a return to the special position of the firm. ….The suggestion I want to make is that one important reason for the failure of real wages to keep up with productivity is that the division of rent in industry has been shifting against the labor side for several decades. This is a hard hypothesis to test in the absence of direct measurement. But the decay of unions and collective bargaining, the explicit hardening of business attitudes, the popularity of right-to-work laws, and the fact that the wage lag seems to have begun at about the same time as the Reagan presidency all point in the same direction: the share of wages in national value added may have fallen because the social bargaining power of labor has diminished. This is not to say that international competition and the biased nature of new technology have no role to play, only that they are not the whole story. Internal social change and the division of rent matter too…..

A Nightmare Scenario—and Three Things That Might Prevent It
Source: Andrew Schrank, Pacific Standard, August 10, 2015
What worries me most about the future of work and workers is the possibility that the technological determinists are right, or that scientific innovation will outpace social adaptation and wreak political and economic havoc. Skilled as well as unskilled workers would be replaced by robots and computers. Jobs that couldn’t be automated would be outsourced to the lowest bidder, whether in Boston, Barranquilla, or Bangalore. The profits would be captured by “supermanagers,” who would increasingly dictate their own salaries as well as the salaries of their subordinates. And the average worker—or former worker, as luck would have it—would be left to pick up the pieces: overqualified, underemployed, or just plain out in the cold. …

Making Service Work Pay
Source: Lydia DePillis, Pacific Standard, August 7, 2015
…And what if this trend continues? What if the new opportunities available to the Skillet Johnsons of the world continue to be low-paying positions with little opportunity for advancement? With the exception of registered nurses, the 10 highest-growth occupations for the next decade make less than $33,000 per year, according to the Bureau of Labor Statistics. That’s not the kind of employment base you need to rebuild a middle class. Part of the answer is better, cheaper education to match people with higher-paying jobs where there’s more demand, like nursing or computer programming. But Johnson thinks there’s another piece of the puzzle: Transforming those low-paying jobs into careers that can support a family. …

The Interplay of Public Pensions and the Broad Economy

Source: Dennis Lockhart, Federal Reserve Bank of Atlanta, Speech to the Public Pension Funding Forum Speech – Berkeley CA, August 24, 2015

Atlanta Fed President and CEO Dennis Lockhart, discusses ways that public pensions and the broad economy interact.

• Lockhart says that state and local government spending cuts can become a headwind in a downturn and subsequent recovery, and pension funding gaps can exacerbate this tendency. But he doesn’t see the underfunding of public pension funds as a systemic risk.
• Lockhart believes the time to address funding gaps is before the next downturn arrives.
• Lockhart says that since the recession ended, the U.S. economy has grown at an average annual rate of 2.1 percent. His baseline forecast is for moderate growth with continuing employment gains and a gradually rising rate of inflation.
• Consistent with the picture of moderate growth, Lockhart expects the normalization of monetary policy—that is, interest rates—to begin sometime this year, and to proceed gradually, in an environment of low rates for quite some time. ….

Good Jobs Are Back: College Graduates Are First in Line

Source: Anthony P. Carnevale, Tamara Jayasundera, Artem Gulish, Georgetown University Center on Education and the Workforce, 2015

From the summary:
The growth of U.S. jobs and wages during the recovery is analyzed in Good Jobs Are Back: College Graduates Are First in Line. The findings show that since 2010, the economy has produced 6.6 million employment opportunities. Out of these career opportunities, 2.9 million are considered good jobs. The key finding revealed that 2.8 million good jobs went to college graduates. Some of the largest growing professions seek high-skilled workers and offer large benefits packages. Most good jobs are full time and twice as likely to provide health insurance and retirement plans. The competitive wages and good benefits of these good jobs offer created a healthy job market during the recovery.

Key Findings:
Benefits
Eighty-six percent of workers in good jobs are full-time; 68 percent of good jobs provide health insurance; and 61 percent of good jobs include an employer-sponsored retirement plan

Occupation
Managers, STEM (science, technology, engineering, and mathematics) and healthcare professionals account for the majority of growth in the good jobs tier.

Middle-wage Jobs
Middle-wage jobs have not fully recovered, remaining 900,000 jobs below their pre-recession employment levels.

Low-wage Jobs
Low-wage jobs pay $32,000 or less but comprise only 27 percent (1.8 million) of the jobs added after the recession.
Related:
https://cew.georgetown.edu/cew-reports/goodjobsareback/#full-report“>Technical Report
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The Measurement of Wealth: Recessions, Sustainability and Inequality

Source: Joseph E. Stiglitz, National Bureau of Economic Research (NBER), NBER Working Paper No. w21327, July 2015
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From the abstract:
This paper considers two central problems in our statistical frameworks which impair the ability to use wealth to assess economic sustainability or the impacts of economic downturns. Some increases in wealth may reflect increased economic rents – in particular, land and exploitation rents – and their capitalized value, unrelated to an increase in the productive capacity of the economy. Another major problem in our wealth accounts is the “missing capital” required to explain the marked decrease in economic output, at the time of the recession and in the years following, that cannot be fully accounted for by a decrease in measured inputs. When account is taken of this missing capital, the adverse effects of austerity appear much greater than suggested by the standard national income accounts.

Fiscal Policies and the Prices of Labor: A Comparison of the U.K. And U.S

Source: Casey B. Mulligan, National Bureau of Economic Research (NBER), NBER Working Paper No. w21358, July 2015
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From the abstract:
This paper measures the 2007-13 evolution of employment tax rates in the U.K. and the U.S., especially as they are influenced by changes in tax and safety net benefit rules. The magnitudes of the U.S. changes are greater, in the direction of taxing a greater fraction of the value created by employment, and primarily achieved with changes in implicit tax rates. Even though both countries implemented temporary “fiscal stimulus,” their tax rate dynamics were different: the U.S. stimulus increased rates whereas the U.K. stimulus reduced them. The U.K. later increased the tax on employment during its so-called “austerity” period. Employer-cost dynamics are also different in the two countries. The tax rates calculated in this paper are a first ingredient for cross-country comparisons of labor market and fiscal policy dynamics during and after the financial crisis.

Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity

Source: Joseph E. Stiglitz, Nell Abernathy, Adam Hersh, Susan Holmberg, Mike Konczal, Roosevelt Institute, 2015

From the abstract:
In this new report, the Roosevelt Institute exposes the link between the rapidly rising fortunes of America’s wealthiest citizens and increasing economic insecurity for everyone else. The conclusion is clear: piecemeal policy change will not do. To improve economic performance and create shared prosperity, we must rewrite the rules of our economy.
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skyrocketing CEO pay

increasing the tax at the top 5%

Partisan Conflict and Private Investment

Source: Marina Azzimonti, National Bureau of Economic Research (NBER), NBER Working Paper No. w21273, June 2015
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From the abstract:
American politics have been characterized by a high degree of partisan conflict in recent years. Combined with a divided government, this has led not only to significant Congressional gridlock, but also to spells of high fiscal policy uncertainty. The unusually slow recovery from the Great Recession during the same period suggests the possibility that the two phenomena may be related. In this paper, I investigate the hypothesis that political discord depresses private investment. To this end, I first present a reduced-form political economy model to illustrate how news about political disagreement affects investment through agents’ expectations. I then construct a novel high-frequency indicator of partisan conflict consistent with the model. The index, computed monthly between 1981 and 2015, uses a semantic search methodology to measure the frequency of newspaper articles reporting lawmakers’ disagreement about policy. Using a 2SLS approach, I estimate that a 10% increase in the partisan conflict index is associated with a 3.4% decline in aggregate private investment in the US.