Category Archives: Economy

An Uneven Recovery, 2009-2011- A Rise in Wealth for the Wealthy; Declines for the Lower 93%

Source: Richard Fry and Paul Taylor, Pew Research Center, Social & Demographic Trends project, April 23, 2013

From the summary:
During the first two years of the nation’s economic recovery, the mean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%, while the mean net worth of households in the lower 93% dropped by 4%, according to a Pew Research Center analysis of newly released Census Bureau data.

From 2009 to 2011, the mean wealth of the 8 million households in the more affluent group rose to an estimated $3,173,895 from an estimated $2,476,244, while the mean wealth of the 111 million households in the less affluent group fell to an estimated $133,817 from an estimated $139,896.

These wide variances were driven by the fact that the stock and bond market rallied during the 2009 to 2011 period while the housing market remained flat….Because of these differences, wealth inequality increased during the first two years of the recovery. The upper 7% of households saw their aggregate share of the nation’s overall household wealth pie rise to 63% in 2011, up from 56% in 2009. On an individual household basis, the mean wealth of households in this more affluent group was almost 24 times that of those in the less affluent group in 2011. At the start of the recovery in 2009, that ratio had been less than 18-to-1. …
Related:
A Recession for the 93 Percent, Good Times for the 7 Percent
Source: Mijin Cha, Dēmos, Policy Shop blog, April 24, 2013

Unpacking the U.S. Labor Share

Source: James Heintz, Political Economy Research Institute, University of Massachusetts, Amherst, Thomas Weisskopf Festschrift Conference Paper, March 2013

From the abstract:
James Heintz addresses the question of why the labor share of U.S. national income appears to remain remarkably constant over long periods of time, despite significant shifts in economic performance, policies, the distribution of power and institutions. As Heintz notes, the constancy of the labor share seems to contradict other trends, such as falling real wages since the early 1970s for average non-supervisory workers.

In seeking to explain this disparity, Heintz builds on the approach to decomposing aggregate variables that Tom Weisskopf pioneered in “Marxian Crisis Theory and the Rate of Profit in the Postwar U.S. Economy.” Heintz decomposes the U.S. labor share up to 2010 according to three criteria: 1) how price movements affect the interpretation of the distribution of income between labor and capital; 2) how the trend of the labor share might change through focusing only on production and non-supervisory workers, as opposed to observing labor income as one broad category; and 3) how deindustrialization and the rise of a service economy have affected movements of the labor share. Heintz finds that underlying the constant labor share is a pattern in which the best-paid employees have seen their incomes rise at the expense of more vulnerable workers. Heintz shows that we can understand these distributional shifts in income within the aggregate labor share in three interrelated ways: a shift from low to high-skilled workers, from production workers to the non-production, supervisory class of employees; and from traditional manufacturing to high-end service sector workers.

Austerity Economics and the Struggle for the Soul of U.S. Capitalism

Source: Robert Pollin, Political Economy Research Institute, University of Massachusetts, Amherst Working Paper Series, Number 321, April 2013

From the abstract:
Amid the wreckage of the 2008-09 Wall Street collapse and Great Recession, orthodox economists and political elites in both the United States and Western Europe have been strongly pushing the idea that austerity is the only viable policy option. The basis for the austerity hawks’ claim is that both the U.S. and European economies are being consumed by out-of-control levels of public indebtedness. Public spending must therefore be slashed before economic collapse becomes a real possibility.

Are the austerity hawks correct that there is simply no alternative to their agenda? In fact, the austerity hawks’ arguments are wrong across the board. Focusing on the U.S. case, this paper shows that the austerity hawks claims about large deficits causing high inflation and interest rates have been consistently wrong for four years. Moreover, the U.S. is nowhere near experiencing a fiscal crisis in the commonsense definition of the term, which is to say, the government is facing difficulties in meeting its commitments to creditors.

The paper then reviews the recent experiences of U.S. state and local governments, which show how the austerity agenda is attacking the foundations of what is already a modest U.S. welfare state. It is becoming increasingly clear that many, if not most, austerity hawks view this period as an opportunity to eviscerate the public sector, labor unions, social insurance and other basic social protections. The paper closes by sketching some ideas capable of countering the austerity agenda, by both moving the U.S. economy toward full employment in the short-term and sustaining full employment in the long term.

Early Childhood Education as an Essential Component of Economic Development

Source: Arthur MacEwan, Political Economy Research Institute, University of Massachusetts, Amherst, January 2013

From the abstract:
The economic development impact of K-12 and higher education is widely acknowledged, but the role of early childhood education is often given insufficient attention. At the basis of the role of early childhood education as an essential component of economic development lie two necessities: child care for children whose parents are in the paid labor force, and the increasing importance of well-developed cognitive and social/behavioral skills in the work force. Taken together, these necessities demands that high quality early childhood education is universally available.

Beyond its direct role in economic development, early childhood education is important as a tool to move toward greater social equity. The evidence strongly indicates that children from low-income families benefit substantially, both cognitively and socially/behaviorally, from high quality early childhood education, thus helping to close the achievement and opportunity gap between income groups.

While the goal of universal availability of early childhood education is often recognized, in the United States less than half of three- and four-year-olds were enrolled in preschool programs in the 2008-2010 period. Enrollment in the New England states varies widely, with 62% of three- and four-year-olds enrolled in Connecticut in this period, but only 42% in Maine.

This report argues that it is highly desirable and valuable to society for state governments to support universal early childhood education. In doing so, governments will be putting in place an essential component of economic development, a component that will provide both a long-run foundation for their states’ economic development and an immediate boost to their states’ economic progress. Moreover, they will be providing an important service to families and strengthening equality of opportunity.

Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff

Source: Thomas Herndon, Michael Ash, Robert Pollin, University of Massachusetts, Amherst, Political Economy Research Institute, Working Paper Series no. 322, April 2013

From the abstract:
Herndon, Ash and Pollin replicate Reinhart and Rogoff and find that coding errors, selective exclusion of available data, and unconventional weighting of summary statistics lead to serious errors that inaccurately represent the relationship between public debt and GDP growth among 20 advanced economies in the post-war period. They find that when properly calculated, the average real GDP growth rate for countries carrying a public-debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0:1 percent as published in Reinhart and Rogoff. That is, contrary to RR, average GDP growth at public debt/GDP ratios over 90 percent is not dramatically different than when debt/GDP ratios are lower.

The authors also show how the relationship between public debt and GDP growth varies significantly by time period and country. Overall, the evidence we review contradicts Reinhart and Rogoff’s claim to have identified an important stylized fact, that public debt loads greater than 90 percent of GDP consistently reduce GDP growth.
See also:
Download the data and code files upon which the results are based
Download a text document that describes the files in the code and data archive

Labour solidarity in crisis? Lessons from General Motors

Source: Magdalena Bernaciak, Industrial Relations Journal, Volume 44, Issue 2, March 2013
(subscription required)

From the abstract:
Why was the 2008–09 economic downturn not matched by an internationally coordinated trade union response? Drawing on the evidence from General Motors, this article argues that this was due to states’ extraordinary involvement in the economy during the crisis, which provided strategic alternatives to labour transnationalism at the national level.

2013 Local Economic Conditions Survey

Source: Christiana K. McFarland and J. Katie McConnell, National League of Cities, Research Brief on America’s Cities, April 2013

From the summary:
The National League of Cities annual Local Economic Conditions Survey of city officials gauges the performance of local economic indicators and drivers of local fiscal health. Findings from this year’s survey include:
– Tepid improvement in housing starts, commercial and residential property values, business activity and health of the retail sector;
– Persistent lack of growth in incomes and employment;
– Workforce skills not keeping pace with employer demand, as well as basic needs of the most vulnerable populations not being met; and
– Decrease in the number and scope of investment projects if a federal limitation is placed on the tax-exemption of municipal bonds.

Creating a Positive Work Environment for LGBT Faculty: What Higher Education Unions Can Do

Source: American Federation of Teachers, April 2013

…This third report in our series on diversity in higher education discusses the challenges faced by the LGBT community in our institutions of higher education and how these challenges stem from the broader issue of a lack of federal protection for LGBT civil rights. The report highlights the perceptions of LGBT faculty, staff and students about the campus climates in which they live and presents practical advice to higher education unions about how to make their institutions more inclusive and welcoming for the LGBT community…..

Here are the key findings:
■ LGBT discrimination is real. LGBT faculty, staff and students still experience the negative impacts associated with homophobia, discrimination, and perceived or actual threats to their physical safety.
■ It matters that various bases for discrimination intersect. In order to improve the campus climate for LGBT people of color, for example, we must confront discrimination based not only on sexual identity, gender identity and gender expression, but also on race and ethnicity.
■ Institutional commitment matters. Institutions can show support for the LGBT community by providing resources and setting policies that address LGBT concerns. Overall, creating equitable policies for this population has a positive impact on the campus climate for everyone.
■ The academy provides an intellectual home for LGBT diversity. It is important that the LGBT community sees itself openly reflected in the intellectual life of the academy—that its members’ contributions are noted and that their scholarship is valued….

Unfit For Work: The Startling Rise Of Disability In America

Source: Chana Joffe-Walt, NPR, March 2013

The story of disability is, to a large extent, the story of the U.S. economy….

…In the past three decades, the number of Americans who are on disability has skyrocketed. The rise has come even as medical advances have allowed many more people to remain on the job, and new laws have banned workplace discrimination against the disabled. Every month, 14 million people now get a disability check from the government.

The federal government spends more money each year on cash payments for disabled former workers than it spends on food stamps and welfare combined. Yet people relying on disability payments are often overlooked in discussions of the social safety net. People on federal disability do not work. Yet because they are not technically part of the labor force, they are not counted among the unemployed.

In other words, people on disability don’t show up in any of the places we usually look to see how the economy is doing. But the story of these programs — who goes on them, and why, and what happens after that — is, to a large extent, the story of the U.S. economy. It’s the story not only of an aging workforce, but also of a hidden, increasingly expensive safety net.

For the past six months, I’ve been reporting on the growth of federal disability programs. I’ve been trying to understand what disability means for American workers, and, more broadly, what it means for poor people in America nearly 20 years after we ended welfare as we knew it. Here’s what I found…
See also:
Sorry Ira: There are Factual Errors in Your Story on Disability Insurance
Source: Shawn Fremstad, Center for Economic and Policy Research, CEPR blog, March 27, 2013

…I won’t take on the entire story here, but I want to note one quite clear-cut and basic factual error. In the story, reporter Chana Joffe-Walt unequivocally states: “People on federal disability do not work.” This is factually incorrect. According to researchers at Mathematica and SSA, about 17 percent of disability beneficiaries worked in 2007. Their earnings were generally very low (about 4.8 percent had annual earnings of $1,000 or less), but that doesn’t justify the reporter’s unequivocal characterization of all disability beneficiaries as non-workers….

This Is What Happens When You Rip a Hole in the Safety Net
Source: Bryce Covert, Nation, March 28, 2013

TANF and SSI: The Rest of the Story
Source: Elizabeth Lower-Basch, Center for Law and Social Policy (CLASP), 2013

Preview of the 2013 Comprehensive Revision of the National Income and Product Accounts: Changes in Definitions and Presentations

Source: U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current Business, Volume 93 Number 3, March 2013

As part of the 14th comprehensive revision of the NIPAs, to be released in July, a variety of changes will update the accounts to more accurately portray the evolving U.S. economy.