Daily Digest - December 8: What Changes When China is the Largest Economy?

Dec 8, 2014Rachel Goldfarb

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The Chinese Century (Vanity Fair)

Roosevelt Institute Chief Economist Joseph Stiglitz considers the implications of China becoming the world's largest economy, particularly as the U.S. system perpetuates so much inequality.

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The Chinese Century (Vanity Fair)

Roosevelt Institute Chief Economist Joseph Stiglitz considers the implications of China becoming the world's largest economy, particularly as the U.S. system perpetuates so much inequality.

U.S. Jobs Report Beats Forecasts as 321,000 Positions Added in November (The Guardian)

Heidi Moore looks at the November jobs report, which surprised many economists with its strength. She emphasizes that many of the jobs created are low-wage.

Even at 321,000 Jobs a Month, It Will Be Nearly Two Years Before the Economy Looks Like 2007 (Working Economics)

Charting out scenarios for catching up with the jobs shortfall, Elise Gould points out that even a "good" jobs report like this one isn't indicative of a speedy recovery.

Recovery at Last? (NYT)

Paul Krugman considers what recent positive economic news means for our understanding of this recession. He thinks it's proof that government paralysis slowed the recovery.

Wall Street to Workers: Give Us Your Retirement Savings and Stop Asking Questions (In These Times)

David Sirota looks at current cases in which public officials have refused to release information about the fees paid to investment firms by public pension funds.

  • Roosevelt Take: Roosevelt Institute Fellow Saqib Bhatti explains how predatory municipal finance deals are harming taxpayers in his recent report.

Labor's New Reality -- It's Easier to Raise Wages for 100,000 Than to Unionize 4,000 (LA Times)

Harold Meyerson looks at the labor movement's shift toward focusing on issues that impact many workers who are not members, a project in which Los Angeles is at the center.

Elizabeth Warren Doesn't Like This Treasury Nominee. Here's Why. (Mother Jones)

Erika Eichelberger explains Senator Warren's opposition to Antonio Weiss's nomination, which is based on his lack of experience in banking regulation and coziness with the financial sector.

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Daily Digest - December 5: Policy Created This Economy – And Policy Can Fix It

Dec 5, 2014Rachel Goldfarb

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The Poor Used to Have the Most Opportunity in America. Now the Rich Do. (WaPo)

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

The Poor Used to Have the Most Opportunity in America. Now the Rich Do. (WaPo)

In the 1960s, the bottom 10 percent saw faster growth than the top 1 percent, but Matt O'Brien says policy has since promoted fundamental economic shifts that benefit the rich.

  • Roosevelt Take: Roosevelt Institute Chief Economist Joseph Stiglitz says that policy, in the form of tax reform, can fix the inequality in the U.S. economy.

Strong Voice in ‘Fight for 15’ Fast-Food Wage Campaign (NYT)

Steven Greenhouse profiles Terrance Wise, who works at a Burger King in Kansas City, MO and has become a leader in the fast food workers' movement over the past two years.

Apple and Camp Bow Wow: Sharing Strategies to Keep Wages Low (Working Economics)

Ross Eisenbrey ties non-compete clauses at low-wage jobs to tech companies' refusal to "poach" each other's workers: in both cases, corporate entitlement keeps wages down.

Chicago Raises Minimum Wage to $13 by 2019, But Strikers Say It’s Not Enough (In These Times)

Those who have been fighting for a $15-per-hour minimum wage are sticking to that number and accusing Mayor Emanuel of political opportunism, writes Will Craft.

Does the Media Care About Labor Anymore? (Politico)

Timothy Noah argues that strong labor reporting, taking a close look at workers and the labor movement's ideas, will be needed to get the economy back on track.

JPMorgan Said to Put Mortgage-Bond Trader on Leave Amid Scrutiny (Bloomberg)

Jody Shenn reports on the latest in a string of suspensions at JPMorgan, which is currently under strong regulatory scrutiny due to recent mortgage securities fraud cases.

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Daily Digest - December 4: Fixing Overtime Will Boost the Economy

Dec 4, 2014Rachel Goldfarb

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An Overdue Fix to Overtime (Other Words)

Roosevelt Institute Senior Fellow Richard Kirsch argues that raising the salary limit for mandatory overtime pay would help the underemployed, too, as they would likely get more hours.

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An Overdue Fix to Overtime (Other Words)

Roosevelt Institute Senior Fellow Richard Kirsch argues that raising the salary limit for mandatory overtime pay would help the underemployed, too, as they would likely get more hours.

Study Finds Violations of Wage Law in New York and California (NYT)

Steven Greenhouse reports on a new Department of Labor study that finds that in 2011, between 3.5 and 6.5 percent of workers in New York and California were paid less than the minimum wage.

Even the Night Owls Need to Go Home Eventually (Pacific Standard)

Jake Blumgart looks at the Philadelphia subway system's shift to 24-hour weekend service, which was advertised as a nightlife service but has been heavily used by workers who get off late.

Legislator to Introduce Right-to-Work Legislation (Bloomberg Businessweek)

Todd Richmond reports on the Wisconsin GOP Assembly member who plans to introduce the legislation despite warnings from Democrats that it could lead to protests like Wisconsin saw in 2011.

Are Cities the Next Front in the Right’s War on Labor? (The Nation)

Moshe Marvit looks at anti-union groups' plans to push right-to-work laws on a local level, which has no legal precedent but is likely to be attempted anyway in labor-friendly states.

Democrats, It’s Time to Move On (WSJ)

Focusing on the could'ves and should'ves of the midterms won't deliver the economic momentum that American voters want, writes William Galston. Democrats need to instead focus on these next two years.

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Daily Digest - December 2: When Union Organizers Fight on Two Fronts

Dec 2, 2014Rachel Goldfarb

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What a Housekeeper at Harvard’s Hotel Tells Us About Inequality (WaPo)

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What a Housekeeper at Harvard’s Hotel Tells Us About Inequality (WaPo)

Lydia DePillis speaks to one of the housekeepers fighting for a union at a DoubleTree owned by Harvard and operated by Hilton. DePillis says that split makes organizing more difficult.

It Is Time for a Retail Workers’ Bill of Rights (The Nation)

John Nichols says San Francisco's model for "jobs with just hours" should be brought to a national scale, though he doubts legislative action will be possible with this Congress.

Illinois, Chicago Could Be on Track for Separate Minimum Wages (Chicago Tribune)

Hal Dardick and Monique Garcia report on the current push for a $13-per-hour minimum wage in Chicago by Mayor Emanuel and a $10-per-hour minimum wage for the state.

The Paid Vacation Route to Full Employment (HuffPo)

Dean Baker suggests that policies that reduce the average number of hours worked would increase demand for labor – and paid vacation and sick leave is an important step.

Underinsurance Remains Big Problem Under Obama Health Law (NYT)

Aaron E. Carroll says underinsurance, in which out-of-pocket costs or deductibles are unaffordably high, is still causing people to skip needed care, which means they aren't really covered.

Janet Yellen, the Most Important Person in DC in 2015 (CNBC)

If Republicans push through their "Audit the Fed" bill, Ben White says Yellen's challenging role in communicating complicated policy changes to the markets will only get harder.

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Universities Can Prevent the Race to the Bottom for Labor Standards

Dec 1, 2014Alan SmithJulius Goldberg-Lewis

Some of the negative changes in the workplace brought on by new technologies can be countered by institutions like universities setting higher standards.

Some of the negative changes in the workplace brought on by new technologies can be countered by institutions like universities setting higher standards.

The past 30 years have seen a revolution in communication and analytic technology, one that has begun to shape the nature of firms and the types of work that exist in the labor market. Internet communication technology (ICT) allows firms to share information across the world at speeds that are nearly instantaneous and practically for free. With this explosion of information has been a concerted effort on the parts of firms, governments, and individuals to capture and analyze the torrent of information being produced every second.

ICT is driving transaction costs to zero, and with it comes a hollowing out of traditional corporate infrastructure. Tasks that were once cheaper to do in-house can now be outsourced to private contractors in the U.S. or around the world. The firms that are most heralded as ‘the next big thing’ are no longer producers of widgets, but platforms that connect individuals. Facebook and Twitter do not provide content, but provide access; Uber and Lyft are not taxi companies, but rather platforms that connect individual demanders and suppliers. On the other side, incumbent firms are using ICT to develop to-the-minute data on sales patterns, allowing them to track exactly when and where their workers are needed. Whether it’s in the form of surge pricing‘just-in-time’ scheduling, or contracting out nearly every function of a company, the use of ICT has profound and evolving implications for consumers and workers.

With the explosion of technology has come a scramble to achieve maximum efficiency and minimal cost. As production expands horizontally, as opposed to vertically, Millennials are discovering that a life-long career simply can’t exist in a market that’s trending towards more and more freelance and contract work. One result of all this is that Millennials have begun to look to the stories of retirement parties and 30-year Rolexes as anachronistic Mad Men-style stories of an age long gone. We don't think of ourselves as working for the same place for long periods of time, and any notion of a pension or a retirement plan is hard to imagine. 

The second troubling effect of this is a lack of accountability of the largest and most powerful corporations. The old economic model of in-house labor allowed labor disputes, liability, and accountability to be tracked to a single corporate entity. As firms increasingly turn to specialized contractors to build their websites, staff their calling centers and warehouses, drive their taxis, and run their cafeterias, corporate responsibility becomes similarly defuse. When workers lose overtime pay at an Amazon fulfillment center, should the contractor or the parent company be at fault? Should the private contractor hold all the accountability, or should Amazon accept some responsibility? There is no sense that this new wave of "sharing economy" businesses is doing anything other then creating structured marketplaces, and skimming money off the top. This leaves the people doing the work – as Uber drivers and Airbnb hosts – without anything to hold on to. As firms continue to contract, and subcontract, the economic befits to workers shrink dramatically, and there is an increased incentive to cut costs and corners. These cases are just coming to the surface, and no doubt will shape the labor landscape immensely.

It is precisely because of this complex and rapidly changing social situation that anchor institutions like colleges and universities need to take the lead in providing wages and careers that make sense. Anchor institutions, which are generating more attention in the post-recession economy, are those mission-driven institutions that are large sources of capital, purchasing, and employment, and which are tied to their communities. Unlike traditional firms, an anchor cannot move to another country for lower taxes, and they are often public or receive large amounts of public investment. Anchors hold a special place in our society: they are not corporations governed by a single-bottom line reality, and their missions are often directed toward and even mandate the promotion of the social good.

They also have real economic clout: One classic anchor type, universities, account for approximately 3 percent of U.S. gross domestic product, and they employ more than 3 million people. The hospital industry has an even larger impact with some 5 million employees. And these anchor institutions, tied as they are to location, are perfectly positioned to end the race to the bottom that is happening in other sectors. They will be able to reap the benefits from more money being injected in a local community, and they will grow as the social safety net continues to grow around them.

Anchors, working together, can do more than create a few hundred jobs at good wages with a real retirement plan. Anchors working together can set strong city-wide baselines for wages, and serve as a driving factor for economic development, public safety, local purchasing, and quality-of-life initiatives. Further, anchors actually have a values-based, mission-driven call to this work. As Millennials become a greater share of the workforce, it is on us to ensure that the economy of the future is one that promotes responsibility, accountability, growth, and equality. The technological strides of the past few decades have been enormous, and while they have allowed businesses to continue on a race to the bottom, they have also connected and mobilized a generation. In order to shift the national dialogue, the Campus Network has always believed that one must start at the local level. In order to ensure that the businesses of the future work for everyone, it must be shown that they can. The global brand of anchor institutions, from top tier universities to pioneering hospitals, have the soapbox, the moral imperative, and the means to drive this change, and a more democratic economy can begin to grow based on the successes of anchor reinvestment.

Alan Smith is the Associate Director of Networked Initiatives at the Roosevelt Institute.

Julius Goldberg-Lewis is the Midwestern Regional Coordinator for the Roosevelt Institute | Campus Network and a senior at the University of Michigan.

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Daily Digest - November 26: What Are One-Day Strikes Achieving?

Nov 26, 2014Rachel Goldfarb

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

The Daily Digest is taking a short break for Thankgiving. It will return on Monday, December 1.

Why Wal-Mart Workers Keep Using One-Day Strikes (Bloomberg Businessweek)

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

The Daily Digest is taking a short break for Thankgiving. It will return on Monday, December 1.

Why Wal-Mart Workers Keep Using One-Day Strikes (Bloomberg Businessweek)

Josh Eidelson explains that one-day strikes are on the rise because, while they don't shut down workplaces, they embarrass employers and engage the public just like work-stopping strikes of the past.

Exclusive: Kmart Workers Say They Risk Being Fired If They Don’t Come In On Thanksgiving (ThinkProgress)

Bryce Covert reports on the scheduling practices of some major retailers that will open on Thanksgiving. One Kmart employee she spoke to is quitting rather than miss Thanksgiving with her husband, who has cancer.

The Rich Are Getting Richer, But It Has Nothing To Do With Their Paychecks (Vox)

Salaries and wages of the top 400 taxpayers have fallen in recent years, reports Danielle Kurtzleben, but their incomes continue to rise, and their tax rates drop, thanks to capital gains.

San Francisco Passes First-In-Nation Limits on Worker Schedules (Politico)

Marianne Levine writes about the city's new restrictions on how chain stores can alter their employees' schedules. Changes within two weeks will require additional "predictability pay."

Obama Threatens Veto of Emerging Tax-Break Agreement in Congress (Bloomberg)

Richard Rubin reports on the president's opposition to this deal, which extends a set of corporate tax cuts but doesn't extend lapsing expansions of the child tax credit and earned income tax credit.

Why Living-Wage Laws Are Not Enough—and Minimum-Wage Laws Aren’t Either (The Nation)

Jonathan Lange, who led the first living wage campaign in Baltimore, says that without building worker power more generally, these laws fall short.

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Daily Digest - November 13: When Government Intervention is the Best Remedy for a Health Crisis?

Nov 12, 2014Rachel Goldfarb

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

Ebola and Inequality (Liberian Observer)

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

Ebola and Inequality (Liberian Observer)

Roosevelt Institute Chief Economist Joseph Stiglitz says the Ebola crisis reveals the absolute need for a government role in health care. Drug companies aren't creating cures for diseases that primarily impact the poor.

Don't Forget the Kinda Unemployed (U.S. News & World Report)

Mike Cassidy points out the workers who are missed by the traditional unemployment rate: involuntary part-timers and marginally attached workers. While unemployment has improved, underemployment is still elevated.

Is Wage Stagnation Killing the Democratic Party? (Vox)

While Ezra Klein agrees that wage stagnation is a major issue today, he doesn't think it impacted the midterms as much as the difference between midterm and presidential year electorates.

VW to Allow Labor Groups to Represent Workers at Chattanooga Plant (NYT)

Steven Greenhouse reports on Volkswagen's new policy, which will create formal structures for groups representing at least 15 percent of plant workers to meet with company officials.

If Democrats Want to be the Party of the People, They Need to Go Full Populist (The Week)

It's time to reject neoliberal commitment to markets and convince the American people of the power of economic populism and income transfer programs, writes Ryan Cooper.

  • Roosevelt Take: Roosevelt Institute Senior Fellow Richard Kirsch points out that the populist narrative was key in Democratic midterm wins.

Did Obama Shoot Himself in the Foot on Net Neutrality? (MoJo)

Erika Eichelberger suggests that the president may have lost the fight on net neutrality back in 2013, by appointing a Federal Communication Commission chairman who is so friendly to the industry.

Study: Social Welfare Programs Help Fight Poverty in America (The Guardian)

Jana Kasperkevic looks at a new study showing just how important social safety net programs are in reducing poverty; without food stamps, another 8 million Americans would be in poverty.

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California Community Colleges Building the Workforce of Tomorrow

Oct 29, 2014Rachel Kanakaole

A new program offering career-focused bachelor's degrees at California Community Colleges could begin to shift the combined higher education and employment crises in the state.

"Education is the key to unlock the golden door of freedom." George Washington Carver

A new program offering career-focused bachelor's degrees at California Community Colleges could begin to shift the combined higher education and employment crises in the state.

"Education is the key to unlock the golden door of freedom." George Washington Carver

Living in a society where possessing a college degree is key to securing a well-paying job, the opportunity and access to obtain those degrees is crucial. As students strive to build a better standard of living for themselves and their communities, policy makers and higher education advocates have been stuck with the strenuous task of finding more creative and impactful solutions to educating people. In an era of high demand yet seemingly limited supply, class offerings at the university level in California have become increasingly scarce, leaving it to community colleges to increase their role in educating the workforce of tomorrow.

Historically, community colleges are known for offering two-year degrees and certificate programs to students who are looking to quickly enter the workforce. While there is a transfer student population planning to transition to a four-year university, that is not their widely known purpose, at least not in California. According to the Vision Statement posted on the website of the California Community Colleges Chancellor's Office, community colleges are designed to "provide access to lifelong learning for all citizens and create a skilled, progressive workforce to advance the state’s interests." In the advancement of this mission statement, Governor Jerry Brown has just signed into law a pilot program allowing certain community colleges to offer a bachelor's degree program for courses not currently offered at the California State University (CSU) or University of California (UC) level.

Senate Bill 850, drafted by Senator Marty Block from San Diego calls for selected districts to develop a pilot program to offer a bachelor's degree program beginning in the 2017-2018 school year, and ending in 2022-2023. It is the intention of the pilot program to offer degrees in courses not otherwise available at traditional four-year institutions, focusing on more direct, career-driven programs such as dental hygiene or radiology. According to the text of the bill itself, the intention is "to produce more professionals in health, biotechnology, public safety, and other in-demand fields." Advocates of the bill stress that the pilot program is not trying to compete with the UC or CSU systems, which is why it was tailored to specific fields. In an attempt to keep costs affordable for students, pricing for classes in the program are capped at the rates offered by CSUs. Also, in order to prevent money from the Board of Governors (BOG) waiver from being shifted away from students still obtaining the traditional two-year degrees and certificates, the bill calls for students enrolling in the pilot program to apply for a Free Federal Financial Aid Application or California Dream Act application in lieu of a BOG waiver.

The most promising aspect of this bill is its mission to fill the gap between employers who need workers, and workers who need employers to provide jobs. It is specifically outlined in the bill that districts must "identify and document unmet workforce needs in the subject area of the baccalaureate degree to be offered and offer a baccalaureate degree at a campus in a subject area with unmet workforce needs in the local community or region of the district." The districts have an added responsibility to strategically plan which BA programs to offer in order to most beneficially serve the surrounding community. While we won't know the impact this law will have on California Community Colleges just yet, considering the fact it passed with a unanimous vote, the least we can say is our representatives believe there is some positive change to be made.

While this program is nothing brand-new, with colleges in twenty-one other states already offering BA degrees in similar areas described in the bill, it is new to California, and has the potential to begin to shift the dynamic regarding education and workforce needs across the state. Florida is a great example of a state that allows community colleges to offer BA degrees. Educators in Florida saw enrollment in community college BA programs quadruple in a period of five years. Currently, twenty-five of their twenty-eight community colleges offer BA degree programs. This just goes to show, while SB 850 is by no means the end-all solution to the crisis affecting the higher education or employment systems in California, it is a step forward in the direction of progress for students and workers everywhere.

Rachel Kanakaole is the Chapter Head of the San Bernardino Valley Community College chapter of the Roosevelt Institute | Campus Network and one of the New Chapters Coordinator for the Western Region.

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It's Essential the Federal Reserve Discusses Inequality

Oct 28, 2014Mike Konczal

Janet Yellen gave a reasonable speech on inequality last week, and she barely managed to finish it before the right-wing went nuts.

It’s attracted the standard set of overall criticisms, like people asserting that low rates give banks increasingly “wide spreads” on lending -- a claim made with no evidence, and without addressing that spreads might have fallen overall. One notes that Bernanke has also given similar inequality speeches (though the right also went off the deep end when it came to Bernanke), and Jonathan Chait notes how aggressive Greenspan was with discussing controversial policies to crickets on the right.

But I also just saw that Michael Strain has written a column arguing that by even “by focusing on income inequality [Yellen] has waded into politically choppy waters.” Putting the specifics of the speech to the side, it’s simply impossible to talk about the efficacy of monetary policy and full employment during the Great Recession without discussing inequality, or discussing economic issues where inequality is in the background.

Here are five inequality-related issues off the top of my head that are important in monetary policy and full employment. The arguments may or not be convincing (I’m not sure where I stand on some), but to rule these topics entirely out of bounds will just lead to a worse understanding of what the Federal Reserve needs to do.

The Not-Rich. The material conditions of the poorest and everyday Americans are an essential part of any story of inequality. If the poor are doing great, do we really care if the rich are doing even better? Yet in this recession everyday Americans are doing terribly, and it has macroeconomic consequences.

Between the end of the recession in 2009 and 2013, median wages fell an additional 5 percent. One element of monetary policy is changing the relative interest in saving, yet according to recent work by Zucman and Saez, 90 percent of Americans aren’t able to save any money right now. If that is the case, it’s that much harder to make monetary policy work.

Indeed, one effect of committing to low rates in the future is making it more attractive to invest where debt servicing is difficult. For example, through things like subprime auto loans, which are booming (and unregulated under Dodd-Frank because of auto-dealership Republicans). Meanwhile, policy tools that we know flatten low-end inequality between the 10 and 50 percentile -- like the minimum wage, which has fallen in value -- could potentially boost aggregate demand.

Expectations. The most influential theories about how monetary policy can work when we are at the zero lower bound, as we’ve been for the past several years, involve “expectations” of future inflation and wage growth.

One problem with changing people’s expectations of the future is that those expectations are closely linked to their experiences of the past. And if people’s strong expectations of the future are low or zero nominal growth in incomes because everything around them screams inequality, because income growth and inflation rates have been falling for decades, strongly worded statements and press releases from Janet Yellen are going to have less effect.

The Rich. The debate around secular stagnation is ongoing. Here’s the Vox explainer. Larry Summers recently argued that the term emphasizes “the difficulty of maintaining sufficient demand to permit normal levels of output.” Why is this so difficult? “[R]ising inequality, lower capital costs, slowing population growth, foreign reserve accumulation, and greater costs of financial intermediation." There’s no sense in which you can try to understand the persistence of low interest rates and their effect on the recovery without considering growing inequality across the Western world.

Who Does the Economy Work For? To understand how well changes in the interest-sensitive components of investment might work, a major monetary channel, you need to have some idea of how the economy is evolving. And stories about how the economy works now are going to be tied to stories about inequality.

The Roosevelt Institute will have some exciting work by JW Mason on this soon, but if the economy is increasingly built around disgorging the cash to shareholders, we should question how this helps or impedes full output. What if low rates cause, say, the Olive Garden to focus less on building, investing, and hiring, and more on reworking its corporate structure so it can rent its buildings back from another corporate entity? Both are in theory interest-sensitive, but the first brings us closer to full output, and the second merely slices the pie a different way in order to give more to capital owners.

Alternatively, if you believe (dubious) stories about how the economy is experiencing trouble as a result of major shifts brought about by technology and low skills, then we have a different story about inequality and the weak recovery.

Inequality in Political and Market Power. We should also consider the political and economic power of industry, especially the financial sector. Regulations are an important component to keeping worries about financial instability in check, but a powerful financial sector makes regulations useless.

But let’s look at another issue: monetary policy’s influence on underwater mortgage financing, a major demand booster in the wake of a housing collapse. As the Federal Reserve Bank of New York found, the spread between primary and secondary rates increased during the Great Recession, especially into 2012 as HARP was revamped and more aggressive zero-bound policies were adopted. The Fed is, obviously, cautious about claiming pricing power from the banks, but it does look like the market power of finance was able to capture lower rates and keep demand lower than it needed to be. The share of the top 0.1 percent of earners working in finance doubled during the past 30 years, and it’s hard not to see that not being related to displays of market and political power like this.

These ideas haven’t had their tires kicked. This is a blog, after all. (As I noted, I’m not even sure if I find them all convincing.) They need to be modeled, debated, given some empirical handles, and so forth. But they are all stories that need to be addressed, and it’s impossible to do any of that if there’s massive outrage at even the suggestion that inequality matters.

Follow or contact the Rortybomb blog:
 
  

 

Janet Yellen gave a reasonable speech on inequality last week, and she barely managed to finish it before the right-wing went nuts.

It’s attracted the standard set of overall criticisms, like people asserting that low rates give banks increasingly “wide spreads” on lending -- a claim made with no evidence, and without addressing that spreads might have fallen overall. One notes that Bernanke has also given similar inequality speeches (though the right also went off the deep end when it came to Bernanke), and Jonathan Chait notes how aggressive Greenspan was with discussing controversial policies to crickets on the right.

But I also just saw that Michael Strain has written a column arguing that by even “by focusing on income inequality [Yellen] has waded into politically choppy waters.” Putting the specifics of the speech to the side, it’s simply impossible to talk about the efficacy of monetary policy and full employment during the Great Recession without discussing inequality, or discussing economic issues where inequality is in the background.

Here are five inequality-related issues off the top of my head that are important in monetary policy and full employment. The arguments may or not be convincing (I’m not sure where I stand on some), but to rule these topics entirely out of bounds will just lead to a worse understanding of what the Federal Reserve needs to do.

The Not-Rich. The material conditions of the poorest and everyday Americans are an essential part of any story of inequality. If the poor are doing great, do we really care if the rich are doing even better? Yet in this recession everyday Americans are doing terribly, and it has macroeconomic consequences.

Between the end of the recession in 2009 and 2013, median wages fell an additional 5 percent. One element of monetary policy is changing the relative interest in saving, yet according to recent work by Zucman and Saez, 90 percent of Americans aren’t able to save any money right now. If that is the case, it’s that much harder to make monetary policy work.

Indeed, one effect of committing to low rates in the future is making it more attractive to invest where debt servicing is difficult. For example, through things like subprime auto loans, which are booming (and unregulated under Dodd-Frank because of auto-dealership Republicans). Meanwhile, policy tools that we know flatten low-end inequality between the 10 and 50 percentile -- like the minimum wage, which has fallen in value -- could potentially boost aggregate demand.

Expectations. The most influential theories about how monetary policy can work when we are at the zero lower bound, as we’ve been for the past several years, involve “expectations” of future inflation and wage growth.

One problem with changing people’s expectations of the future is that those expectations are closely linked to their experiences of the past. And if people’s strong expectations of the future are low or zero nominal growth in incomes because everything around them screams inequality, because income growth and inflation rates have been falling for decades, strongly worded statements and press releases from Janet Yellen are going to have less effect.

The Rich. The debate around secular stagnation is ongoing. Here’s the Vox explainer. Larry Summers recently argued that the term emphasizes “the difficulty of maintaining sufficient demand to permit normal levels of output.” Why is this so difficult? “[R]ising inequality, lower capital costs, slowing population growth, foreign reserve accumulation, and greater costs of financial intermediation." There’s no sense in which you can try to understand the persistence of low interest rates and their effect on the recovery without considering growing inequality across the Western world.

Who Does the Economy Work For? To understand how well changes in the interest-sensitive components of investment might work, a major monetary channel, you need to have some idea of how the economy is evolving. And stories about how the economy works now are going to be tied to stories about inequality.

The Roosevelt Institute will have some exciting work by JW Mason on this soon, but if the economy is increasingly built around disgorging the cash to shareholders, we should question how this helps or impedes full output. What if low rates cause, say, the Olive Garden to focus less on building, investing, and hiring, and more on reworking its corporate structure so it can rent its buildings back from another corporate entity? Both are in theory interest-sensitive, but the first brings us closer to full output, and the second merely slices the pie a different way in order to give more to capital owners.

Alternatively, if you believe (dubious) stories about how the economy is experiencing trouble as a result of major shifts brought about by technology and low skills, then we have a different story about inequality and the weak recovery.

Inequality in Political and Market Power. We should also consider the political and economic power of industry, especially the financial sector. Regulations are an important component to keeping worries about financial instability in check, but a powerful financial sector makes regulations useless.

But let’s look at another issue: monetary policy’s influence on underwater mortgage financing, a major demand booster in the wake of a housing collapse. As the Federal Reserve Bank of New York found, the spread between primary and secondary rates increased during the Great Recession, especially into 2012 as HARP was revamped and more aggressive zero-bound policies were adopted. The Fed is, obviously, cautious about claiming pricing power from the banks, but it does look like the market power of finance was able to capture lower rates and keep demand lower than it needed to be. The share of the top 0.1 percent of earners working in finance doubled during the past 30 years, and it’s hard not to see that not being related to displays of market and political power like this.

These ideas haven’t had their tires kicked. This is a blog, after all. (As I noted, I’m not even sure if I find them all convincing.) They need to be modeled, debated, given some empirical handles, and so forth. But they are all stories that need to be addressed, and it’s impossible to do any of that if there’s massive outrage at even the suggestion that inequality matters.

Follow or contact the Rortybomb blog:
 
  

 

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Daily Digest - October 28: The Fed's Top Priority Should Be Wages, Not Inflation

Oct 28, 2014Rachel Goldfarb

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

Fed Can Influence Banks to Spread Opportunity (NYT)

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Fed Can Influence Banks to Spread Opportunity (NYT)

Roosevelt Institute Chief Economist Joseph Stiglitz writes that the Federal Reserve should hold back on interest rate increases until wage growth has made up for workers' recession losses.

How 'Flexible' Schedules Have Become a Trap for Working Parents (Vox)

Roosevelt Institute Fellow Andrea Flynn and Elizabeth Weingarten explain how erratic scheduling practices prevent the financial stability working parents need.

What's a 'Living Wage' in Wisconsin? (Bloomberg Businessweek)

Because Wisconsin's minimum wage law says it should also be a living wage, a group of low-wage workers are suing to have it raised, reports Josh Eidelson.

The Other Side of the Growing Disconnect Between Where You Live and Work (Pacific Standard)

Jim Russell looks at an example of a company bringing in lower-paid workers from other countries to explain how global wages hurt people's ability to pay rent in expensive cities.

Efforts to Regulate CEO Pay Gain Traction (Boston Globe)

Katie Johnston looks at some state-level efforts, including a Massachusetts initiative to fine hospitals that pay executives more than 100 times their lowest-paid employees.

How a Divided Senate Could Threaten Social Security (The Nation)

John Nichols says that if the independents running for Senate were to emphasize ending gridlock above all else, their compromises could cause unacceptable harm.

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