David Autor: Why Technological Innovation Could Increase Inequality

Jul 21, 2014

The Next American Economy project brought together 30 experts from various disciplines to envision tomorrow's economic and political challenges and develop today's solutions. Their assignment: be bold, and leave the conventional wisdom -- and their own opinions -- behind.

The Next American Economy project brought together 30 experts from various disciplines to envision tomorrow's economic and political challenges and develop today's solutions. Their assignment: be bold, and leave the conventional wisdom -- and their own opinions -- behind. Their goal: not to provide a researched analysis, but to stimulate debate on critical questions.In the debut entry in our new video speculation series, MIT economist David Autor talks about the future of economic polarization.

There is a long-running debate between those who worry robots are taking our jobs and those who scoff at that “lump of labor fallacy” as just another version of Luddite thinking. In the video below, Professor David Autor, the MIT economist famous for his description of how technology has helped hollow out the middle class, outlines the debate and describes how it might be possible that both sides are right.

Professor Autor discusses a scenario in which technological innovation continues to reduce the need for low-skilled labor while increasing the demand for higher-skilled workers, thus increasing wages at the top while reducing wages at the bottom.

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Daily Digest - July 21: What Young Women Voters Want

Jul 21, 2014Rachel Goldfarb

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Not Your Father's Electorate (Richard Heffner's Open Mind)

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Not Your Father's Electorate (Richard Heffner's Open Mind)

Roosevelt Institute Vice President of Networks Taylor Jo Isenberg discusses the issues that young female voters are focused on today, zeroing in on economic concerns like paid leave.

The FCC Wants to Let Cities Build Their Own Broadband. House Republicans Disagree. (Vox)

Timothy B. Lee draws on Roosevelt Institute Fellow Susan Crawford's work to explain why municipalities should be allowed to build publicly-owned high-speed Internet networks.

The Bad Boss Tax (In These Times)

Sarah Jaffe looks at the "bad business fee" plan developing in Minnesota, which would fine employers for the de facto subsidies they receive when their workers are on public assistance.

Republicans Want to Control, Not End, the Fed (WaPo)

A GOP proposal would force the Federal Reserve to choose a mathematical rule for setting interest rates, but Matt O'Brien says that would be a hugely ineffective way to create policy.

Rep. Keith Ellison Wants to Make Union Organizing a Civil Right (MSNBC)

Ned Resnikoff reports on the Congressman's planned bill, which would allow workers to individually sue their employers for anti-union retaliation.

Part-Time Schedules, Full-Time Headaches (NYT)

Continuing his look at the problems that on-call schedules create for part-time workers, Steven Greenhouse emphasizes the near-impossibility of getting ahead without regular schedules.

The Last Hope for Extending Long-Term Unemployment Insurance May Have Just Gone Poof (MoJo)

Patrick Caldwell writes that with the GOP using a bit of budget trickery called pension smoothing to pay for highways, Democrats have to find a new option for funding long-term unemployment insurance.

New on Next New Deal

What Will the American Economy Look Like 26 Years From Today?

Roosevelt Institute Senior Fellow Bo Cutter introduces a series of speculations on the future of the American economy, with a focus on changes in technology, cities, and labor.

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What Will the American Economy Look Like 26 Years From Today?

Jul 21, 2014Bo Cutter

Earlier this summer, the Next American Economy project brought together 30 experts from various disciplines to envision tomorrow's economic and political challenges and develop today's solutions. Find out what they had to say.

Participants in our recent convening speculated:

Earlier this summer, the Next American Economy project brought together 30 experts from various disciplines to envision tomorrow's economic and political challenges and develop today's solutions. Find out what they had to say.

Participants in our recent convening speculated:

“The post-WWII model of full-time, permanent employment proved itself the historical aberration we predicted: in 2040, only 12 percent of the American workforce is directly employed by corporate enterprises or government departments, and the average length of time spent on any one job is under six months.”

“New platforms and services will spring up to solve the problems of the micro-gig economy using distributed, peer-to-peer models of social insurance that will be hyper-local, but not based on geography. They will be based on the micro-niche identities that we build online -- accountants for bacon. Latinos who play Dungeons & Dragons. What have you.”  

“In the late '20s, the Know Everything Party assumed their final national political victories of mandating every American household be limited to three robots, one 3D printer, and own a minimum of three guns would be enough to secede and be left alone. After 15 years of explosive growth in income and wealth inequality, unimaginable to us in 2014, it all came to a head in our second Civil War, or what historians are calling the Bloodless War.”

Guided by the belief that we are on the precipice of fundamental and lasting economic change, the Next American Economy project gathered a group of 30 academics, business leaders, organizers, and technologists, and asked them to envision the long-term economic and political future of the United States. We gave our participants free rein to be bold in their speculations – to deviate from data, the conventional wisdom, or even their own expert opinions. The goal was not to predict the future, but to debate a series of critical questions: (a) Are we at an inflection point in the nature of innovation and technological change? (b) How will the rise of cities change the geography of economic activity? (c) How will economic trends alter the nature of work and employment? (d) Is the trend of widening income inequality likely to continue or stagnate?

What followed was a series of prescient, thoughtful, and often hilarious three- to four-minute speculations on topics ranging from the gig economy to the future of finance, from imminent civil war to the transformation of Google into a car company, and many more. Each speculation on its own could foster a day of debate and a sea of responses. For this reason, we will release one video speculation a day for the next three weeks, starting with David Autor’s description of economic polarization.

Our recent meeting was a first step toward our broader goal of identifying the trends likely to shape the future in order to identify the policy interventions needed to ensure the best possible outcome. The group identified key topics for further investigation and also found some areas of broad consensus.

  • 79 percent of participants believe “technological change will persist and will be big enough to disrupt business-as-usual."

  • 42 percent believe “a new paradigm of work is emerging and will change the nature of jobs for a large percentage of the population” and an additional 29 percent believe “a new paradigm has already emerged and you East Coast intellectuals are way behind the times.”

  • A total of 74 percent believe that even if an entrepreneurship booms leads to productivity growth it will not lead to job creation.

  • Nearly half (48 percent) believe that if inequality trends continue, the political backlash will be so extreme that our current system will change drastically in the next 25 years.

You can learn more about our project and find our forthcoming research on our website.

Roosevelt Institute Senior Fellow Bo Cutter is Director of the Next American Economy project. He was formerly a managing partner of Warburg Pincus, a major global private equity firm, and served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.

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Daily Digest - July 18: BRICS Bank Shifts Balance of Power in the Global Economy

Jul 18, 2014Rachel Goldfarb

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Nobel Economist Joseph Stiglitz Hails New BRICS Bank Challenging U.S.-Dominated World Bank & IMF (Democracy Now)

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

Nobel Economist Joseph Stiglitz Hails New BRICS Bank Challenging U.S.-Dominated World Bank & IMF (Democracy Now)

Roosevelt Institute Chief Economist Joseph Stiglitz says this bank will support the developing world's needs, and reflects fundamental shifts in global economic power.

Port Trucking Industry Rips Off Drivers, Responsible Employers, and Taxpayers (The Hill)

Roosevelt Institute Senior Fellow Richard Kirsch looks at the port truck drivers' strike in California as evidence of the need for stronger policy on independent contractors.

Help a City, Write Its Budget (Bloomberg View)

Roosevelt Institute Fellow Susan Crawford endorses participatory budgeting as one of the best ways to build strong civic engagement, and says technology can help.

The Economy’s Big Mystery: Why Workers are Disappearing From the Job Market (WaPo)

Zachary Goldfarb looks at two theories from the White House Council of Economic Advisors that attempt to explain the drop in labor force participation since the recession began.

Stop the Tax Inversions of Free-Riding Corporations (AJAM)

By failing to pass laws that prevent companies from reincorporating aboard to avoid taxes, David Cay Johnston says Congress is supporting their shirking of responsibility.

What Happens When Detroit Shuts Off the Water of 100,000 People (The Atlantic)

Rose Hackman writes that Detroit residents have been forced to pay bills beyond their means or turn to illegal means to access water. The UN has declared this a human rights violation.

States with Better 'Business Climates' Also Have Higher Inequality (CityLab)

A new study finds an unfortunate connection between policies that encourage business and economic growth and rising inequality, writes Richard Florida.

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Daily Digest - July 17: Are We Building a Sustainable Future?

Jul 17, 2014Rachel Goldfarb

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Why This One UN Report on Sustainable Development is Different from the Rest (UN Dispatch)

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

Why This One UN Report on Sustainable Development is Different from the Rest (UN Dispatch)

Campus Network Senior Fellow for Defense and Diplomacy Nehemiah Rolle says the Global Sustainable Development Report incorporates a broad array of both science and policy data.

Will a Fox, Time Warner Deal Be Approved? (Bloomberg TV)

Roosevelt Institute Fellow Susan Crawford says the Federal Communications Commission has an interest in regulating these big mergers to protect the future of U.S. communications.

Imagining Economic Policy Focused on Women (Real News Network)

Roosevelt Institute Senior Fellow Rob Johnson points to minimum wage, work sharing, and paid family leave as key policies for improving women's opportunities and thus the economy as a whole.

Punish the Executives, Not Just the Banks (New Yorker)

The short-term incentives for individuals on Wall Street continue to encourage risky and destructive business practices, writes James Surowiecki, which is why bank settlements aren't effecting change.

America’s Unrequited Corporate Love Affair (MSNBC)

Timothy Noah says the trend toward reincorporating abroad to avoid U.S. taxes is only part of a larger negative shift in the relationship between American corporations and the state.

Hobby Lobby's Harvest: A Religious Exemption for LGBT Discrimination? (LA Times)

Michael Hiltzik looks to Dr. Martin Luther King, Jr. to explain why President Obama should not allow a religious exemption in his executive order barring discrimination against LBGT workers.

New on Next New Deal

Fighting Bad Science in the Senate

Roosevelt Institute Fellow Andrea Flynn says that even when they won't pass, strongly pro-choice bills like the Women's Health Protection Act are a means of fighting anti-choice falsehoods.

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Fighting Bad Science in the Senate

Jul 17, 2014Andrea Flynn

The Senate hearing for the Women's Health Protection Act shows just how important it is for women's health advocates to push for the facts.

The Senate hearing for the Women's Health Protection Act shows just how important it is for women's health advocates to push for the facts.

The propensity of anti-choice advocates to eulogize false science was on full display on Tuesday’s Senate hearing on the Women’s Health Protection Act (WHPA). That bill is a bold measure that would counter the relentless barrage of anti-choice legislation that has made abortion – a constitutionally protected medical procedure – all together inaccessible for many U.S. women.

The bill was introduced last year by Senators Richard Blumenthal and Tammy Baldwin and Representatives Judy Chu, Lois Frankel and Marcia Fudge. It prohibits states from applying regulations to reproductive health care centers and providers that do not also apply to other low-risk medical procedures. It would, essentially, remove politicians from decisions that – for every other medical issue – remain between individuals and their providers.

The WHPA is long overdue. For the past three years, conservative lawmakers have used the guise of protecting women’s health to pass more than 200 state laws that have closed clinics, eliminated abortion services, and left women across the country without access to critical reproductive health care. The WHPA would reverse many of those policies and prevent others from being passed.

Tuesday's hearing was representative of the broader debate over abortion rights. Those in favor of the bill argued that securing guaranteeing unfettered access to reproductive health care, including abortion, is critical to the health and lives of U.S. women and their families.

Those in opposition used familiar canards about abortion to argue the law would be calamitous for U.S. women. Representative Diane Black of Tennessee had the gall to make the abortion-leads-to-breast cancer claim, one that has been disproven many times over. Others repeatedly cited the horrific cases of Kermit Gosnell, insinuating that all abortion providers (abortionists, in their lingo) are predatory and that late term abortions are a common occurrence. In fact, if women had access to safe, comprehensive and intimidation-free care, Kermit Gosnell would have never been in business. Given the opposition’s testimony, you’d never know that late term abortion is actually a rarity. According to the Centers for Disease Control, more than 90 percent of all abortions occur before 13 weeks gestation, with just over 1 percent taking place past 21 weeks.

At one point Representative Black argued that abortion is actually not health care. The one in three U.S. women who have undergone the procedure would surely argue otherwise.

Perhaps the most ironic testimony against the WHPA – and in favor of abortion restrictions – came from Senator Ted Cruz, who hails from Texas, a state with so many abortion restrictions that women are now risking their health and lives by self-inducing abortions or crossing the border to get care in Mexico. Senator Cruz attempted to validate U.S. abortion restrictions by referencing a handful of European countries with gestational restrictions on abortions. This was a popular argument during the hearing for Texas’ HB2 – the bill responsible for shuttering the majority of clinics in that state.

Cruz wins the prize for cherry picking facts to best support his argument. When citing our European counterparts, he conveniently ignored that such abortion restrictions are entrenched in progressive public health systems that enable all individuals to access quality, affordable (often free) health care, including comprehensive reproductive healthcare. Senator Cruz and his colleagues have adamantly opposed similar policies in the U.S., particularly the Affordable Care Act’s provisions for contraceptive coverage and Medicaid expansion. On the one hand conservatives lean on European policies to argue for stricter abortion restrictions at home, and on the other they claim those policies are antithetical to the moral fabric of the United States.

Would Cruz support France’s policies that enable women to be fully reimbursed for the cost of their abortion and that guarantees girls ages 15 to 18 free birth control? Or Belgium’s policy that enables young people to be reimbursed for the cost of emergency contraception? Or the broad exceptions both countries make for cases of rape, incest, and fetal impairment, to preserve woman’s physical or mental health, and for social or economic reasons? He absolutely would not.

Given the House of Representatives seems to be more motivated by suing the President than by voting on – let alone passing – laws that will actually improve the health and lives of their constituents, it’s highly unlikely the WHPA will become law. But Tuesday's debate – and the bill itself – is significant and shows a willingness among pro-choice advocates to go on the offense after too many years of playing defense.

Bills such as the WHPA – even if they face a slim chance of being passed by a gridlocked Congress – provide an opportunity to call out conservatives' use of bad science in their attempts to convince women that lawmakers know best when it comes to their personal medical decisions. And they allow us to remind lawmakers and citizens that despite all of the rhetoric to the contrary, abortion is a common, safe and constitutionally protected medical procedure, and that regulating it into extinction will only force women into back-alley practices like those run by Gosnell, costing them their health and their lives.

Those in support of the WHPA showed anti-choice lawmakers that the days of make a sport of trampling women’s health and rights are numbered.

Andrea Flynn is a Fellow at the Roosevelt Institute. Follow her on Twitter @dreaflynn.

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Daily Digest - July 16: Flawed Models for Understanding the Wage Fight

Jul 16, 2014Rachel Goldfarb

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A Biased Report on the Minimum Wage? (East Bay Express)

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A Biased Report on the Minimum Wage? (East Bay Express)

Darwin BondGraham speaks to Roosevelt Institute Fellow Annette Bernhardt, who says a study criticizing plans for a $12.25 minimum wage in Oakland used bad methodology.

Obama Administration Urges Immediate Action on 'Inversions' (WSJ)

The administration has asked Congress to put an end to these reincorporations abroad for tax purposes, and called instead for "economic patriotism," reports John D. McKinnon.

House Votes to Pay for Roads With Underfunded Pensions (The Wire)

Arit John explains the latest short-term plan for funding the Highway Trust Fund, which he says involves spending future tax revenue now and will lead to more shortfalls in the long run.

Hobby Lobby: A New Tool for Crushing Workplace Unionization? (MSNBC)

Ned Resnikoff explains how the Hobby Lobby decision could play out if an employer claims religious opposition to collective bargaining, as is already permitted for religious schools.

A Push to Give Steadier Shifts to Part-Timers (NYT)

Steven Greenhouse looks at the momentum behind laws that aid part-time workers by requiring further advance notice, extra pay for on-call work, and preference for more hours.

New on Next New Deal

Search Models, Mass Unemployment, and the Minimum Wage

Roosevelt Institute Fellow Mike Konczal looks at what's wrong with the models some economists are using to understand high unemployment and prolonged job vacancies.

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Daily Digest - July 15: Privatization Gets Marked 'Return to Sender'

Jul 15, 2014Rachel Goldfarb

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Staples, Postal Service to End Plan for Mini Post Offices in Stores (WSJ)

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Staples, Postal Service to End Plan for Mini Post Offices in Stores (WSJ)

Kris Maher, Drew Fitzgerald, and Tom Gara report on the decision to end this pilot program, which the postal workers' union and other labor groups had denounced as privatization.

  • Roosevelt Take: Roosevelt Institute Senior Fellow Richard Kirsch explains how the Postal Service and Staples plan was exacerbating the low-wage economy.

Another Week, Another Settlement (The Economist)

The Economist examines the controversy over Citigroup's $7 billion settlement announced yesterday, which continues the trend of placing blame on companies instead of individuals.

Equal Opportunity Employment Officials Take New Aim at Pregnancy Bias (NYT)

Due to an increase in pregnancy discrimination complaints, the Equal Employment Opportunity Commission has issued new enforcement guidelines, reports Steven Greenhouse.

Restaurant CEOs Make More Money in Half a Day Than Their Employees Make in a Year (MoJo)

Jaeah Lee reports on a new analysis of top restaurant CEO pay, which shows that the CEOs take home an average of 721 times the amount that minimum wage workers are paid.

When You're Poor, Money Is Expensive (The Atlantic)

Derek Thompson explains why accessing money becomes more difficult without bank accounts and credit, and says the financial tech sector could make things easier for the poor.

Labor Organizing Is a Civil Right (Blog of the Century)

The National Labor Relations Act provides only negligible penalties for firing labor organizers, so Imhotep Royster suggests extending Civil Rights Act protections to those organizers.

New on Next New Deal

In Defense of Public Service: Roosevelt Honors Commitment to Common Good

Roosevelt Institute Communications Manager Tim Price reflects on the vindication felt by the life-long public servants honored at last week's Distinguished Public Service Awards.

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Search Models, Mass Unemployment, and the Minimum Wage

Jul 15, 2014Mike Konczal

How have search models influenced the current economic debates? John Quiggin had an interesting post up at Crooked Timber about how poorly the branch of economics that falls under search theory has done in the age of the internet. (Noah Smith has follow-up.)

Search and matching models are fascinating to me because they are central to both the debate over mass unemployment during the Great Recession as well as how economists understand the minimum wage. And here you can see search model being deployed for worse and for better.

The Great Recession

In his 2010 Annual Report, Federal Reserve Bank of Minnesota President Narayana Kocherlakota gave a presentation using the popular Diamond-Mortensen-Pissarides (DMP) search model to explain what he thought was wrong with the labor markets. Given that Kocherlakota was dissenting against QE2 at the time, a lot of eyes were on his arguments. Many focused on his infamous argument he later reversed that low rates cause disinflation, but I found this equally fascinating at the time.

The economy suffered from low job openings. But why were employers not creating job openings and hiring? Kocherlakota summarized the DMP model in this graphic:

Job openings and hires are a function of unemployment, productivity, and what was going on with the unemployed. He concluded that productivity after taxes was falling because of an increase in government debt, regulations and the proposed repeal of some of the Bush-era tax cuts. Also expansions of social insurance, including unemployment insurance and presumably the Medicaid expansion in Obamacare, was increasing the "utility" of not working. This, he believed, was the major reason why unemployment was so high and job openings so low. Using a back-of-the-envelope estimate with made-up numbers, he proposed that the natural rate of unemployment could be around 8.7 percent - very close to the then current 9.0 percent unemployment.

Think about this model and the recession long enough, and two things should jump out. The first is that this model, going back to Robert Shimer’s (2005) seminal work on the topic, is terrible at explaining movements in unemployment. The volatility in vacancies and productivity aren’t anywhere near the magnitude necessary to cause unemployment movements that we see in recessions. Productivity would need to drop significantly to create the changes in unemployment we see in recessions, and it doesn’t move to anywhere near that extent.

The second is that, as Robert Hall and many others have pointed out, productivity actually increased during the recent recession. It’s moving the wrong direction for it to impact unemployment the way we’d see it during the Great Recession. The unemployment-to-vacancy ratio also increased - 2009 was a fantastic time to create job openings according to this model, yet they collapsed. This is extra problematic given that economists have tried to respond to the initial problem by amplifying productivity movements in their models. But, out here in the actual world, the thing is simply moving in the wrong direction to make any sense.

Note that there’s no place for things like aggregate demand or the zero lower bound to plug into the equation. The only things that can matter are things like taxes, government uncertainty and social insurance, and they all work in the negative direction. That search models have become so influential to the background knowledge of unemployment helps explains the default ideology of why economists were so eager to find "structural" explanations for why unemployment was so high.

Minimum Wage

There’s some debate on this, but it looks like economists are softening on their opposition to raising the minimum wage, particularly if the question is phrased as whether or not a slightly higher minimum wage would pass a cost-benefit test. Search theory might be a reason why. If you are schooled in thinking of the labor markets in a search model, the idea that the minimum wage might not have an adverse employment effect makes more sense. A higher minimum wage means that low-wage workers will search harder for low-end jobs. They’ll be more likely to accept those jobs, and less likely to turn them over as well. These all would help raise the equlibrium employment level.

Even further, if you think that each job has a bit of a search friction surrounding it, then the idea that the employer has a little bit of monopoly power over the job makes sense. Employers might not raise wages to a market clearing rate because that, in turn, would mean having to raise the wages for all their workers. A minimum wage pushes against that. Understanding the labor markets through this lens ideas helps explain why any disemployment effects are minimial compared to the economics 101 story.

As I read it, much of this theory took hold in labor economics to help explain the data people were seeing. Why were there so many vacancies in fast food? Why didn't minimum wage hikes obviously cause unemployment in the data? This should tell us something - theory, when built up out of observations and data, can tell us something useful. But the same theory moved over to the business cycle, where it ignores conflicting data and is propelled downward by partisan and ideological forces, can be an utter disaster.

Follow or contact the Rortybomb blog:
 
  

 

How have search models influenced the current economic debates? John Quiggin had an interesting post up at Crooked Timber about how poorly the branch of economics that falls under search theory has done in the age of the internet. (Noah Smith has follow-up.)

Search and matching models are fascinating to me because they are central to both the debate over mass unemployment during the Great Recession as well as how economists understand the minimum wage. And here you can see search model being deployed for worse and for better.

The Great Recession

In his 2010 Annual Report, Federal Reserve Bank of Minnesota President Narayana Kocherlakota gave a presentation using the popular Diamond-Mortensen-Pissarides (DMP) search model to explain what he thought was wrong with the labor markets. Given that Kocherlakota was dissenting against QE2 at the time, a lot of eyes were on his arguments. Many focused on his infamous argument he later reversed that low rates cause disinflation, but I found this equally fascinating at the time.

The economy suffered from low job openings. But why were employers not creating job openings and hiring? Kocherlakota summarized the DMP model in this graphic:

Job openings and hires are a function of unemployment, productivity, and what was going on with the unemployed. He concluded that productivity after taxes was falling because of an increase in government debt, regulations and the proposed repeal of some of the Bush-era tax cuts. Also expansions of social insurance, including unemployment insurance and presumably the Medicaid expansion in Obamacare, was increasing the "utility" of not working. This, he believed, was the major reason why unemployment was so high and job openings so low. Using a back-of-the-envelope estimate with made-up numbers, he proposed that the natural rate of unemployment could be around 8.7 percent - very close to the then current 9.0 percent unemployment.

Think about this model and the recession long enough, and two things should jump out. The first is that this model, going back to Robert Shimer’s (2005) seminal work on the topic, is terrible at explaining movements in unemployment. The volatility in vacancies and productivity aren’t anywhere near the magnitude necessary to cause unemployment movements that we see in recessions. Productivity would need to drop significantly to create the changes in unemployment we see in recessions, and it doesn’t move to anywhere near that extent.

The second is that, as Robert Hall and many others have pointed out, productivity actually increased during the recent recession. It’s moving the wrong direction for it to impact unemployment the way we’d see it during the Great Recession. The unemployment-to-vacancy ratio also increased - 2009 was a fantastic time to create job openings according to this model, yet they collapsed. This is extra problematic given that economists have tried to respond to the initial problem by amplifying productivity movements in their models. But, out here in the actual world, the thing is simply moving in the wrong direction to make any sense.

Note that there’s no place for things like aggregate demand or the zero lower bound to plug into the equation. The only things that can matter are things like taxes, government uncertainty and social insurance, and they all work in the negative direction. That search models have become so influential to the background knowledge of unemployment helps explains the default ideology of why economists were so eager to find "structural" explanations for why unemployment was so high.

Minimum Wage

There’s some debate on this, but it looks like economists are softening on their opposition to raising the minimum wage, particularly if the question is phrased as whether or not a slightly higher minimum wage would pass a cost-benefit test. Search theory might be a reason why. If you are schooled in thinking of the labor markets in a search model, the idea that the minimum wage might not have an adverse employment effect makes more sense. A higher minimum wage means that low-wage workers will search harder for low-end jobs. They’ll be more likely to accept those jobs, and less likely to turn them over as well. These all would help raise the equlibrium employment level.

Even further, if you think that each job has a bit of a search friction surrounding it, then the idea that the employer has a little bit of monopoly power over the job makes sense. Employers might not raise wages to a market clearing rate because that, in turn, would mean having to raise the wages for all their workers. A minimum wage pushes against that. Understanding the labor markets through this lens ideas helps explain why any disemployment effects are minimial compared to the economics 101 story.

As I read it, much of this theory took hold in labor economics to help explain the data people were seeing. Why were there so many vacancies in fast food? Why didn't minimum wage hikes obviously cause unemployment in the data? This should tell us something - theory, when built up out of observations and data, can tell us something useful. But the same theory moved over to the business cycle, where it ignores conflicting data and is propelled downward by partisan and ideological forces, can be an utter disaster.

Follow or contact the Rortybomb blog:
 
  

 

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In Defense of Public Service: Roosevelt Honors Commitment to Common Good

Jul 14, 2014Tim Price

Honorees at the 2014 FDR Distinguished Public Service Awards felt vindicated -- but why does public service need vindicating?

Honorees at the 2014 FDR Distinguished Public Service Awards felt vindicated -- but why does public service need vindicating?

Outside of election night victory speeches, it’s rare to see America’s elected officials express much happiness in public. In a political culture dominated by partisan rancor, personal attacks, and donor-friendly positioning, governing seems a joyless affair. Nor are the American people pleased with their leaders’ performance; polls reflect widespread dissatisfaction with all levels of government. So it was inspiring, refreshing, and a little surprising to see the sense of pride and achievement on display last Thursday evening in Washington as the Roosevelt Institute honored Vice President Joe Biden, Congressman George Miller, Senator Tom Harkin, and Congresswoman Rosa DeLauro at the 2014 FDR Distinguished Public Service Awards.

Presented annually, the Distinguished Public Service Awards recognize and celebrate individuals who carry forward the spirit of Franklin and Eleanor Roosevelt by devoting their lives to the public good. During this year’s ceremony, the audience heard from the four honorees as well as presenters including Dr. Jill Biden, House Democratic Leader Nancy Pelosi, Senator Al Franken, and former Senator Christopher Dodd. The speakers reflected on the honorees’ long list of policy achievements, from fighting for higher wages and paid family leave to passing the Americans with Disabilities Act. There was a smattering of amusing anecdotes (Senator Harkin’s ’70s-era polyester suits were evidently considered both an electoral liability and a fire hazard). And everyone who stood at the podium found a way to talk about their distinct but deeply felt personal connections to the Roosevelt legacy. Above all, they seemed genuinely moved to be celebrated rather than insulted for their work.

The most striking speech of the night was delivered by Vice President Biden. He received the Roosevelt Institute’s highest honor, the Freedom Medal, for promoting the vision of worldwide democracy and human rights that FDR famously expressed in his 1941 Four Freedoms Address. The Vice President spoke of his award as a “vindication” of a career spent in public service; and about his long-held belief that, setting aside their individual political views and policy preferences, all elected leaders got to be where they are because their constituents “saw something good in them,” and because they in turn wanted to do some good for their constituents.

It’s a nice thought. In practice, there is plenty of cause for cynicism, especially in light of the flawed or absent policy response to the Great Recession and the ongoing crisis of inequality in the U.S. And when politicians do fail to uphold the public good, they should be held accountable. But there is also no doubt that a great deal of America’s anti-government culture, and of the political dysfunction that keeps government from working effectively, has been created and nurtured by right-wing ideologues who view government as a problem in and of itself. If public servants as a category are in need of vindication, it is largely because of this conservative effort to denigrate the very idea of working through government to achieve common goals.

Thursday’s awards were a welcome reminder that not everyone has given in to this cynicism – that the term “career politician” can be an affirmation and not just an epithet. It was obvious from listening to these men and women speak that they have felt a powerful call to serve, and have made a leap of faith that progress is possible through long years of hard work and dedication. That was what Franklin and Eleanor Roosevelt believed as well, and they proved it with bold and ambitious New Deal programs that built the American middle class from the ground up, reshaping the U.S. forever. By honoring those who continue their work today, maybe we can encourage all Americans to make that leap once again.

Tim Price is the Communications Manager for the Roosevelt Institute.

Photos: (Top) Congressman Miller, Congresswoman DeLauro, and Senator Harkin with Roosevelt Institute Board Chair Anna E. Roosevelt. (Bottom) Vice President Biden accepting his award accompanied by wife Jill. Credit: Crystal Vander Weit.

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