• Andrew McAfee: Immigration Reform Is Key to Our Economic Future

    Apr 17, 2015Laurie Ignacio

    Our series on The Good Economy of 2040 continues with MIT’s Andrew McAfee. To build a better economy over the next 25 years, McAfee says, we’ll need a more open immigration system that welcomes skilled workers. "When the world’s most talented, ambitious, tenacious, capable people want to come here and build their lives and their careers…it absolutely makes no sense to me that we put all these ridiculous Kafkaesque barriers in their way."

    Our series on The Good Economy of 2040 continues with MIT’s Andrew McAfee. To build a better economy over the next 25 years, McAfee says, we’ll need a more open immigration system that welcomes skilled workers. "When the world’s most talented, ambitious, tenacious, capable people want to come here and build their lives and their careers…it absolutely makes no sense to me that we put all these ridiculous Kafkaesque barriers in their way."

    To read more about skilled immigration, check out the following articles:

    Getting a Visa Took Longer Than Building Instagram, Says Immigrant Co-Founder (Bloomberg)

    The basics of the US immigration system (Vox)

    Andrew McAfee is a principal research scientist at MIT and cofounder of its Initiative on the Digital Economy, where he studies how computer technologies are changing business, the economy, and society. His 2014 book on these topics, The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies (co-authored with Erik Brynjolfsson), has been both a New York Times and Wall Street Journal top ten bestseller. He writes two blogs, academic papers, and articles for publications including Harvard Business Review, The Economist, the Wall Street Journal, and The New York Times. He’s talked about his work on The Charlie Rose Show and 60 Minutes, and at TED and the Aspen Ideas Festival. McAfee was educated at Harvard and MIT.

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  • Clinton's Executive Pay Comments Show We're Still Too Focused on Fairness

    Apr 17, 2015Susan Holmberg

    Hillary Clinton surprised many progressives earlier this week with her remarks on a model populist issue. "There’s something wrong when CEOs make 300 times more than the typical worker. There’s something wrong when American workers keep getting more productive…but that productivity is not matched in their paychecks.”

    Hillary Clinton surprised many progressives earlier this week with her remarks on a model populist issue. "There’s something wrong when CEOs make 300 times more than the typical worker. There’s something wrong when American workers keep getting more productive…but that productivity is not matched in their paychecks.”

    Indeed. From 1978 to 2013, executive compensation at American firms rose 937 percent, compared with a sluggish 10.2 percent growth in worker compensation over the same period. In 2013, the average CEO pay package at S&P 500 Index companies was worth $11.7 million. Numbers for 2014 are just starting to be released, but Microsoft’s Satya Nadella is thus far topping the list at $84 million in mostly stock awards.

    Too often the CEO pay debate, which tends to come into focus during our annual rite of corporate proxy season, hinges on a question of ethics. Is paying CEOs excessive amounts fair to workers? No, of course not, as so many fast food workers, whose CEOs make approximately 1,200 times more than they do, rightfully voiced yesterday.

    One of the problems, however, with expressing CEO pay as a fairness issue is that it is too often countered with accusations of envy. And this doesn’t get us very far. (Note that Clinton’s language—“there’s something wrong”—plays into the fairness framing.) Our efforts to reform CEO pay would be much stronger if we also talked about how bad the status quo is for our economy and thus our society.

    There are two main reasons CEO pay should be a concern to anyone who cares about economic prosperity in the United States, including Hillary Clinton. One reason stems from the total amount CEOs are paid. The other relates to the structure of CEO pay, in particular that the bulk of their compensation comes in the form of stock options and stock grants.

    Total Amount of CEO Pay

    A handful of high-profile economists—Thomas Piketty, Joseph Stiglitz, and Robert Reich, to name a few—have begun to make the case that a high degree of economic inequality precipitates financial instability because it leads to a decline in consumer demand, which has tremendous spillover effects in terms of investment, job creation, and tax revenue, not to mention social instability.

    Research clearly demonstrates that the growth of executive pay is a core driver of America’s rising economic inequality. According to the Economic Policy Institute, “[e]xecutives, and workers in finance, accounted for 58 percent of the expansion of income for the top 1 percent and 67 percent of the increase in income for the top 0.1 percent from 1979 to 2005.” Another calculation by economists Ian Dew-Becker and Robert Gordon finds that the large increase in share of the 99.99th percentile is mostly explained by the incomes of superstars and CEOs.

    The Structure of CEO Pay

    Several studies show that equity-heavy pay, because it makes executives very wealthy very quickly, distorts CEOs’ incentives, inducing them to take on too much risk. Instead of bearing this risk themselves, they shift it onto the rest of society, as we saw during the financial crisis. This model also encourages executives to behave fraudulently, as in the backdating scandals of a decade ago, and lessens their motivation to invest in their businesses. According to economist William Lazonick, in order to issue stock options to top executives while avoiding the dilution of their stock, corporations often divert funds to stock buybacks rather than spending on research and development, capital investment, increased wages, or new hiring. To top it all off, these pay packages cost taxpayers billions of dollars due to the performance pay tax loophole.

    Hillary Clinton’s comments on CEO pay could be a signal that she is willing to adopt at least some of the progressive messaging championed by Senator Elizabeth Warren. We can enhance that message by making better economic arguments for why we need to reform skyrocketing CEO pay.

    For more, see my primer on the executive pay debate.

    Susan Holmberg is a Fellow and Director of Research at the Roosevelt Institute.

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  • For U.S. Women, Inequality Takes Many Forms

    Apr 14, 2015Ariel Smilowitz

    The gender wage gap is a complex problem, and we'll need to address factors like race and region to solve it.

    The gender wage gap is a complex problem, and we'll need to address factors like race and region to solve it.

    Although we are only a few months into 2015, it has already proven to be a watershed year for women’s rights around the world. On the heels of the International Women’s Day March for Gender Equality, the He for She and Planet 50-50 by 2030 Campaigns, and the twentieth anniversary of the Beijing Declaration and Platform for Action, international advocates and officials alike are coming together to evaluate the progress that has been made over the past several years. This raises the question: what is the current status of women in the United States?

    The Institute for Women’s Policy Research (IWPR)—in partnership with a multitude of organizations including the Ford Foundation, the Roosevelt Institute Campus Network, and the Center for American Progress—just released the 2015 edition of its project on the Status of Women in the States, with newly updated data and trend analyses on women’s economic, social, and political progress in the United States. The findings? Although we have indeed experienced progress toward gender equity, it’s likely that we won’t see equal pay for American women within our lifetime. (For more on this topic, see this post by Roosevelt Fellow Andrea Flynn.)

    The road to achieving gender equality in the U.S. is quite clearly checkered with significant potholes.

    Over the next several weeks, IWPR will be releasing a series of reports that include data on U.S. women’s employment and earnings, poverty and opportunity, work and family, violence and safety, reproductive rights, health and well-being, and political participation. The data and trend analyses found in these reports can be explored by topic and differing demographics (women of color, older women, immigrant women, and Millennials, to name a few), as well as on a national or state level. The first two chapters on employment and earnings and poverty and opportunity have already been released, revealing a number of insights on the state of women within this country. Some highlights:

    • In just about every state in the country, Millennial women are more likely than Millennial men to have a college degree, yet Millennial women also have higher poverty rates and lower earnings than Millennial men.
    • Although more women are receiving high school diplomas and completing college than ever before, a considerable proportion of women either do not graduate high school or finish their education with only a high school diploma.
    • By the time a college-educated woman turns 59, she will have lost almost $800,000 throughout her life due to the gender wage gap.

    There are incredibly large disparities throughout different regions of the United States; southern women are the worst off with regard to employment and earnings. Furthermore, the status of women differs notably by race and ethnicity, with Hispanic women having the lowest median annual earnings compared to other women.

    In general, women’s economic security is directly linked to their family income, which includes earnings from jobs, but women tend to be concentrated in fields that lead to jobs with relatively low wages. Even women who do go into higher-paying fields still earn less than their male peers. This helps explain why, in 2013, about 14.5 percent of women ages 18 and older had family incomes that placed them below the federal poverty line, compared with 11 percent of men. However, even this estimate does not fully capture the extent of the hardship that women continue to face in the U.S.

    What can we conclude from this data? As a recent article in The Washington Post puts it: “When it comes to equal pay, the American woman is stuck in a proverbial waiting room. But the number on her ticket, the length of her stay, largely depends on where she lives and to whom she was born.” In other words, the status of women in this country is incredibly complex, and as a result, there is no simple, one-size-fits-all solution to achieving gender equality.

    Gender equality is an intricate mosaic, a picture that cannot be complete without understanding and exploring the dynamic regional, national, and demographic factors at play. As a result, we cannot approach these issues without thoroughly peeling back and exploring each layer. It is necessary for all of us to reassess how we measure, monitor, and evaluate the status of women so that we can effectively determine both the progress that has already been made toward achieving full gender equality and the challenges and obstacles that lie ahead.  

    Ariel Smilowitz is a senior at Cornell University and the Northeast Regional Policy Coordinator for the Roosevelt Institute | Campus Network.

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  • Four Reasons We Still Need Equal Pay Day

    Apr 14, 2015Andrea Flynn

    Happy Equal Pay Day!

    It would certainly be happier if we didn’t need an Equal Pay Day, wouldn’t it?

    But it’s 2015 and the wages of U.S. women continue to lag behind those of their male counterparts of equal age, education, and professional experience.

    Happy Equal Pay Day!

    It would certainly be happier if we didn’t need an Equal Pay Day, wouldn’t it?

    But it’s 2015 and the wages of U.S. women continue to lag behind those of their male counterparts of equal age, education, and professional experience. More than 50 years ago President John F. Kennedy signed the Equal Pay Act, which prohibited discrimination “on account of sex in the payment of wages by employers.” At that time, women were paid 59 cents for every dollar paid to their male counterparts. In the half-century that has passed, that gap has shrunk by less than 20 cents; women today make approximately 78 cents for every dollar paid to their male counterparts. For women of color, the injustices are even starker. Black and Latina women are paid only 64 and 56 cents, respectively, for every dollar paid to white, non-Hispanic men, which represents an annual loss of nearly $19,000 for Black women and $23,279 for Latinas.

    Conservatives like to scoff at this day. They argue away the gender pay gap by saying the data overstates the problem, and besides, women do things like have babies and step out of the workforce to take care of them, so it makes sense they would be paid less. This (il)logic ignores the fact that many women actually don’t ever step out of the workforce to take care of their children because they simply cannot afford to do so. Indeed, 95 percent of part-time workers and low-wage workers do not have access to paid family leave, and 2-in-5 U.S. workers (nearly 40 million people) are not guaranteed a single paid sick day. The conservative reasoning also suggests that it’s perfectly acceptable for women to be routinely penalized for having and raising their families, even though research shows that paid family leave makes it more likely that women will return to work and get paid at the same wage or higher.

    Not only are women today still getting paid less than their male counterparts, but that pay inequity is compounding other circumstances that are driving U.S. families into a spiral of economic insecurity. Wages have been stagnant for roughly five decades. Out-of-pocket health care costs are on the rise. Conservatives are steadfast in their attempts (many of them successful) to dismantle the social safety net, weaken labor protections, and chip away at economic supports for working families. Minimum-wage jobs—two-thirds of which are held by women, including 22 percent by women of color—do not even begin to make middle-class life affordable in this country.

    The rationale for equal pay seems obvious to many, but our continued inability to even make progress toward that end—let alone achieve it—is a clear indication that we still need to make the case. So here it goes.

    1. It is the right thing to do. Period.

    2. Guaranteeing pay equity would improve the lives of women and families.

    According to a 2014 report released by the Institute for Women’s Policy Research (IWPR), implementing equal pay would mean an income increase for nearly 60 percent of women in the United States. Two-thirds of single mothers would get a 17 percent raise (equal to more than $6,000 a year), and the poverty rate among these families would drop from 28.7 to 15 percent. The increase in earnings would expand access to health care, food and housing security, and educational opportunities, and would have countless long-term benefits for children, who are especially vulnerable to the pernicious stresses of poverty.

    3. Equal pay means a stronger economy.

    The IWPR study found that if women were to receive equal pay, the U.S. economy would generate $447.6 billion in additional income—growth equal to 2.9 percent of the 2012 gross domestic product (GDP).

    Pay equity would reduce poverty among working women by half and would therefore reduce the need for safety net programs that have become a lifeline for working families that cannot make ends meet. The total increase in women’s earnings as a result of pay equity would be 14 times greater than combined federal and state expenditures on Temporary Assistance to Needy Families (TANF).

    4. It’s 2015. If not now, when?

    If the gender pay gap continues to shrink at the snail’s pace of the past few decades, it won’t actually close until 2058. 2058! At this rate hover boards and moon vacations will be in vogue before women are paid an equal wage.  

    The increased focus on inequality and growing support for progressive economic policies like paid sick and family leave and minimum wage hikes—not to mention an election cycle in which conservatives will need to prove they aren’t actually waging a war on women—provide a window of opportunity to push for equity once and for all.

    I, for one, would like this day to be obsolete before another half-century passes by. 

    Andrea Flynn is a Fellow at the Roosevelt Institute.

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