If advocates of a higher minimum wage in the city of Seattle succeed, it might look something like what has happened in the District of Columbia. There, the city council has voted to raise it to $11.50 an hour and has the votes to override a veto from Mayor Vincent Gray.More
The Washington Post’s Ezra Klein is surely correct in writing that Wednesday President Obama gave “perhaps the best single economic speech of his presidency.” The president said, “I believe this is the defining challenge of our time: Making sure our economy works for every working American.”
But changing the trajectory of policy and change that has caused the worst inequality since the Gilded Age is a different matter.
Technology has played a role, at the very least in widening the rewards the market gives different actors, in making it even harder on people with only a high-school education or less. Many anti-immigration critics say this is a big problem, and there is some truth to this inasmuch as immigration has been at very high levels over the past 20 years.
But policy is responsible for most of the problem.
Policy made it easier to bust unions and more difficult for workers to unionize. Court decisions have tilted the balance away from worker rights and protections.More
It is too early to know how the holiday retail season turns out, but some early indicators are not good. According to the National Retail Federation, sales through the entire Black Friday weekend actually declined by 3.9 percent compared with the same period last year.
The data will be noisy until after the first of next year, but some metrics are clear.
The average American family makes less, adjusted for inflation, than it did in 1989. Although productivity has risen, wages have largely stagnated. Nearly 40 percent of workers made less than $20,000 in 2012. Older workers are increasingly left to work in the low-wage fast-food sector.
The lowest-income households have barely seen any growth in recent decades. Economic mobility, once a cornerstone of a growing middle class, has become more difficult. Even before the devastating Great Recession, the top 1 percent (and the top one-hundredth of 1 percent) had seen their share of income skyrocket.More
If you haven’t already read the wonkishly titled Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy, it is definitely worth your time.
Written by David Wilcox, the head of research at the Federal Reserve, and two other Fed economists, this paper argues that the Great Recession and the years of weak recovery have done long-term damage to the American economy.
It’s not just sustained high unemployment, weak output and continued stagnant wages. The consequences are a negative feedback loop of lost productive capacity. They use the term “hysteresis” to describe the phenomenon, in this case the ecosystem of the economy being dependent on past conditions, not merely those of the present.
Most important, their research shows that the crisis and its aftermath “shaved” almost 7 percent off potential output based on the trend up to 2006. That’s almost $1.2 trillion.More
Well, no. If the trend holds and SeaTac voters approve a $15-per-hour minimum wage, it will be very hard to translate this victory into a national movement.
SeaTac is a tiny municipality with only 12,000 registered voters. It has a large number of low-wage restaurant and hotel businesses that are captive to their proximity to Seattle-Tacoma International Airport. They will have little choice but to pay the new wage.
For that same reason, SeaTac won’t likely be a useful laboratory to examine the unintended consequences that critics warned about, or the benefits that supporters claim.
Enacting the wage in a city such as Seattle would be much more difficult, even though Mayor-elect Ed Murray has paid lip service to it. Business community resistance would be fierce and potent. And businesses would have more options: Move, close, cut back hours and refuse to hire the least-skilled workers.More
The Census Bureau reported today that median household income was essentially stagnant last year, at $51,017. Adjusted for inflation, that leaves income 8.3 percent lower than where it stood in 2007 before the recession. The poverty rate was 15 percent, with 46.5 million of our fellow citizens living at or below the official poverty line. That’s 2.5 percentage points higher than in 2007 and close to a post-War on Poverty record. Of this, 43 percent were in “deep poverty,” with half below the poverty line. In 2000, the rate of poverty was 11.3 percent. In the late 1950s, before LBJ’s War on Poverty began, the rate was above 22 percent.
The Gini ratio, which measures income inequality was basically unchanged at 0.477. Still, it is at a record high. In the late 1960s, it stood around 0.39. As was reported recently, the top 1 percent made up all their losses from the downturn and have accumulated a record share of national income.
Breaking down the numbers reveals a grim picture of not just stagnation, but in many cases a retrograde move. The typical American family makes less than it did in 1989.More
The seminal event that took place 50 years ago was officially called The March on Washington for Jobs and Freedom. The progress since then is undeniable: No more “colored-only” facilities, no more de jure segregation of Jim Crow. The Voting Rights Act was passed in 1965, with essential Republican support — although that is now being eroded. We are far from Dr. King’s dream but we are a different country and, in matters of racial equality, a better one. The “jobs” part of the march is a different matter. The marchers advocated “jobs for all,” in addition to decent housing, good and integrated education and a minimum wage that would be $13 in today’s dollars.
In July, the unemployment rate for African-Americans was 13.4 percent vs. 6.8 percent for whites. That’s July 2013. For Hispanics, it was 9.5 percent. For African-Americans age 16 to 19, it was a staggering 41.6 percent compared with 20.3 percent for whites. Ground has been lost since 2000, when the black unemployment rate had fallen to 7.6 percent from 13 percent in 1993. According to the Census Bureau, median income for black males was $23,584 in 2011; for black females it was $19.561. Both were down substantially from 2002. For whites, the numbers were $35,344 for men and $21,379 for women (also losing ground).More
Four years after the official end of the recession, the average American household has recovered only 62.8 percent of the wealth it lost in the crash. The findings come from a new report by William Emmons and Bryan Noeth at the Federal Reserve Bank of St. Louis. That’s in real dollars. All household net wealth has rebounded 114.3 percent from the trough to a record high, but it doesn’t account for inflation or increased population. Adjusted for these factors, the number is well below where it stood in 2006. And the recovery is highly uneven, mostly benefiting the better off with the stock-market boom and saving the big banks.
According to the Fed’s Survey of Consumer Finances, household finances were “severely” affected by the downturn. Median household wealth dropped 39 percent. Among those worst hurt were the young, those with less than a college education, minorities and those carrying heavy debt. With wages largely stagnant, wealth was increasingly dependent on housing, which was in a bubble. In a separate essay by Emmons and Ray Boshara, the importance of household balance sheets to the larger economy is explained. This element was largely discounted by many macroeconomists before the collapse.
It has come as somewhat of a surprise, therefore, that many economists now are calling the Great Recession of 2007-09 a “balance-sheet recession” and that balance-sheet failures of the type described above are seen as important contributors to the downturn and weak recovery.
The well-off are doing very well in Washington, according to a new study from the state Office of Financial Management, which studied the distribution of income, wealth and taxes across Washington households from 2005 to 2009. In 2009, 54.8 percent of total income went to the top 20 percent of households, while 1.6 percent went to the bottom 20 percent. In 2005, the top 20 received 57.4 percent of total Washington income, while the bottom 20 got 1.5 percent of income.
More than half the total wealth in the state was held by the top 5 percent, in a study that noted the wealth estimates for the richest Washingtonians were probably understated. Those in the bottom 10 percent had a negative net worth.
“Washington has a top-heavy income and wealth distribution,” the study concluded. On the other hand, economic mobility was not dead. Slicing the households into tens, the researchers found that more households moved to a higher slice than a lower one, and lower groups were more likely to move up. Incomes and wealth were reduced for all groups by the Great Recession, with the higher-end taking a bigger hit. Those in the middle held their own. Also, every group lost purchasing power from 2005 to 2009.More
A reader, no doubt trying to play “gotcha,” sent me an email, subject line: “Dr. Paul Krugman.” The reader writes, ” ‘The effects of federal public works spending were largely offset by other factors, notably a large tax increase, enacted by Herbert Hoover…’ Dr. Paul Krugman, New York Times, 11-10-2008.” End of email.
Krugman’s actual point was that Hoover’s tax increase was one of the drags on the economy inherited by Franklin Delano Roosevelt. And although the New Deal put millions to work and alleviated suffering, it never deployed enough stimulus needed to fill the demand hole left by the Great Depression. Krugman writes:
And F.D.R. wasn’t just reluctant to pursue an all-out fiscal expansion — he was eager to return to conservative budget principles. That eagerness almost destroyed his legacy. After winning a smashing election victory in 1936, the Roosevelt administration cut spending and raised taxes, precipitating an economic relapse that drove the unemployment rate back into double digits and led to a major defeat in the 1938 midterm elections.More