Fixing the Gender Wage Gap Is a Crucial Step for Women, But Not the Only Step
The Atlantic’s Derek Thompson wrote a great review of Claudia Goldin’s latest work on closing the wage gap at the upper level of the distribution. Goldin postulates that the final steps to closing the gender wage gap begin at the top rungs of the income distribution. Goldin examines MBA graduates’ earnings over their life span, and finds that the wage gap would start to close if firms didn’t have an incentive to disproportionately reward individuals “who worked long hours and who worked particular hours.” Men may be more able to choose to work long hours in a way that women, particularly in their first 10-15 years of work, may not choose to do for any number of reasons (most obviously: having kids), and whoever is willing to work these longer hours (usually men) gets disproportionately rewarded. To close the gap, Goldin calls for changes to the way jobs are structured—in short, greater work time flexibility.
While Goldin’s analysis is currently my favorite analysis for understanding gender wage inequality at the top—and I applaud her call to give high wage professionals more autonomy and encourage more flexible work schedules—her analysis doesn’t solve the question of how to close the wage gap for the majority of American workers, those who earn low- and middle-wages. (I’m also skeptical of the idea that there aren’t substantial incentives among those in power to keep the structure of high wage professions as it is or that work time flexibility will be enforced by companies even if it’s created.) For the majority of women, gender wage gaps are one way that women get the raw deal, but it is not the only way.
What To Watch on Jobs Day: 6.5 Percent Threshold Is Obsolete
In tomorrow’s jobs report, we could well see the headline unemployment rate nudge down to 6.5 percent. This is the threshold at which the Federal Open Market Committee (FOMC) of the Federal Reserve had indicated they may move the short-term policy rates they control up from zero, thereby providing less monetary stimulus to the recovery.
Easing back on this stimulus would be a mistake. The economy remains far from full employment, and the headline unemployment rate is far understating the degree of economic slack remaining in the economy. This is demonstrated by the 5.85 million “missing workers”—potential workers who, because of weak job opportunities, are neither employed nor actively seeking a job. Further evidence can be seen in the 7.7 million “jobs-gap”—the number of jobs needed to restore the labor market to its pre-Great Recession health. Subdued wage and price inflation measures provide yet more evidence. The year-over-year change in the “market-based” core price deflator for personal consumption expenditures fell to 1.1 percent for all of 2013. And just today, data on unit labor costs (a key predictor of inflationary pressures in the economy) indicated that these slightly fell in the last quarter of 2013.
The President’s Budget: More Investment in Our Future is Needed
The President released his fiscal year 2015 budget stating that his goal is “to speed up growth, strengthen the middleclass, and build new ladders of opportunity into the middle class,” all while reducing budget deficits.
There is much to like in the budget proposal. Mr. Obama wants to expand the Earned Income Tax Credit for childless workers, which will encourage work and reduce poverty. He also provides additional funds for child care, education, research, and infrastructure. To pay for this he proposes to eliminate various tax loopholes for hedge fund managers and multinational corporations.
Seeing as how this budget proposal has virtually no chance of outmaneuvering the GOP blockade, its chief value is to demonstrate a vision of America that better addresses the core economic problems of the middle and working classes. And in this vein, the President’s budget could have been better.Read more
Ending Currency Manipulation Would Substantially Erase State Jobs Deficits
Last week my colleague, Rob Scott, published a report highlighting the impact of ongoing currency manipulation on employment in the United States. In the report, Scott explained that currency manipulation by U.S. trading partners—including China, Denmark, Hong Kong, South Korea, Malaysia, Singapore, Switzerland and Taiwan—distorts trade flows in two ways. It raises the cost of U.S. exports, and lowers the cost of U.S. imports.
Currency manipulation has cost the U.S. economy millions of jobs, including a disproportionately large share of manufacturing jobs. The impact of these job losses is clearly evident in the Midwest, which suffered significant manufacturing job losses. Further, the displacement of manufacturing jobs not only meant fewer job opportunities, but also the elimination of unionized jobs that pay family-supporting wages. Ending currency manipulation would likely lead to significant growth in the American manufacturing sector, a necessary step to begin rebuilding a strong middle class.
Elderly Women the Most Vulnerable, Social Security the Most Protective
Social Security (and other social insurance programs like Medicare and Medicaid) has significantly helped reduce elderly poverty over the last several decades. The U.S. Census Bureau reported that 15.3 million elderly people would have been in poverty in 2012 without Social Security. That would have meant close to four times more elderly people in poverty. The figure below illustrates how declines in elderly poverty are directly associated with sharp increases in per capita Social Security expenditures—evidence that direct government transfers keep many people from falling below the poverty line.
But Social Security, Medicare and Medicaid—as valuable as they are—do not provide a lavish lifestyle. Most of America’s 41 million seniors live on modest retirement incomes that cover just the costs of basic necessities and support a simple, yet dignified, quality of life. To highlight how official poverty measures may paint too rosy a picture of the living standards of America’s seniors, my colleague Dave Cooper and I showed nearly half of the elderly population in the United States are “economically vulnerable,” defined as having an income that is less than two times the supplemental poverty threshold (a poverty line more comprehensive than the traditional federal poverty line). A data update to that analysis shows that 47.9 percent of the elderly are economically vulnerable.
Camp Plan Shows Once Again that Lowering Tax Rates Shouldn’t Be an Economic Priority
Yesterday, House Ways and Means Committee Chairman Dave Camp (R-MI) released his long-awaited (at least among budget nerds) tax reform proposal. For those used to dealing with GOP fiscal policy proposals in recent years, it was strangely careful and serious. Yet, this proposal still highlighted the excessive importance policymakers attach to “tax reform that lowers rates,” which has been a north star of fiscal policy wonks seemingly since the dawn of time. The idea is that lowering rates will spur economic efficiency, but to make up for revenue lost to lower rates, one must broaden the tax base to which the new, lower rates apply.
Lowering income tax rates, however, reduces revenue so much—especially from wealthy individuals and businesses—that it’s mathematically difficult to make up what’s missing without completely gouging the working and middle classes. This is why Republicans have shied away from the details that would make their top-line tax reform goals work. (They are then pilloried, and rightly so, for ignoring mathematical realities.) It’s easy to lower tax rates; it’s hard to then figure out where the money is going to come from to make up for it. And the payoff in terms of increased growth from all this angst is decidedly modest. Under Rep. Camp’s plan, the federal government would lose more than $1.2 trillion over the next ten years from lower tax rates for individuals and businesses, and another $1.4 trillion by repealing the Alternative Minimum Tax. Here are the good and bad of just some of the provisions that make up for the lost revenue:
NYT Reporters’ Anti-Public Pension Bias Leads to Faulty Conclusions
I love the New York Times. But its reporters’ slant on public employee pensions has been driving me crazy, and the latest story by Mary Williams Walsh and Rick Lyman didn’t help. Walsh has been carrying a vendetta against public pensions for many years, so it is no surprise that the article makes the unsupportable claim that none of the 40 state pension overhauls has “come close to closing their pension gaps quickly enough to keep pace with a rapidly agingand retiring—public work force.” I leave it to the reader to fully decipher that statement, but it seems to reflect the story’s headline, that “Public Pension Tabs Multiply as States Defer Costs and Hard Choices.” It implies that despite the states’ pension overhauls, things are getting worse everywhere because public employees are aging and retiring faster than the financing is improving. It’s surely meant to be alarming, as is the chart of Moody’s Investor Service data showing 13 states with “unfunded pension liability greater than annual revenue.”
Moody’s, itself, tells a different story. Moody’s points out that its data are 20 months old and don’t reflect current balance sheets or the enormous market gains of the last 18-20 months. Moody’s points out that “A run-up in financial markets has helped shrink public pension shortfalls” since June 30, 2012, because “Investment returns provide the lion’s share of the retirement systems’ revenue”:
But fiscal 2012 ended for most states on June 30, 2012, and since then, a run-up in financial markets has helped shrink public pension shortfalls. Investment returns provide the lion’s share of the retirement systems’ revenue, and in 2013, pensions’ holdings reached record amounts.
That could make fiscal 2012 the high-water mark for pension problems that have rocked state governments over the last decade and led to a wave of pension reforms recently, according to Moody’s.
Pension liabilities “for 2012 may reflect a cyclical peak as a result of subsequent strong market returns and a rising interest rate trend,” the rating agency said.”
A Strong Precedent for a Better Accountability System
Education policy in both the Bush and Obama administrations has suffered from failure to acknowledge a critical principle of performance evaluation in all fields, public and private—if an institution has multiple goals but is held accountable only for some, its agents, acting rationally, will increase attention paid to goals for which they are evaluated, and diminish attention to those, perhaps equally important, for which they are not evaluated.
When law and policy hold schools accountable primarily for their students’ math and reading test scores, educators inevitably, and rationally, devote less instructional resources to history, the sciences, the arts and music, citizenship, physical and emotional health, social skills, a work ethic and other curricular areas.
Over the last decade, racial minority and socio-economically disadvantaged students have suffered the most from this curricular narrowing. As those with the lowest math and reading scores, theirs are the teachers and schools who are under the most pressure to devote greater time to test prep, and less to the other subjects of a balanced instructional program.
Detroit’s Bankruptcy Reflects a History of Racism
This is black history month. It is also the month that the Emergency Manager who took political power and control from the mostly African American residents of Detroit has presented his plan to bring the city out of the bankruptcy he steered it into. This is black history in the making, and I hope the nation will pay attention to who wins and who loses from the Emergency Manager’s plan.
Black people are by far the largest racial or ethnic population in Detroit, which has the highest percentage of black residents of any American city with a population over 100,000. Eighty-three percent of the city’s 701,000 residents are black. It continues to be an underreported story that a white state legislature and white governor took over the city and forced it to file for bankruptcy against the will of its elected representatives. It is also underreported that white governors and the white state legislature failed to provide Detroit with its fair share of state tax revenues – a significant contributor to the city’s current financial distress.
Detroit’s bankruptcy plan calls for the near-elimination of the retiree health benefits that city workers earned over the years, as well as drastic cuts in the pensions that retired and current workers have earned and counted on. It is telling, I think, that for the first time since the Michigan constitution was adopted 50 years ago, the governor chose in this case to ignore the Michigan constitution’s guarantee that public employee pension benefits will be paid in full, given that Detroit’s public workforce is majority black and represented by unions that opposed the governor’s election.
America Without Unions
This piece originally appeared on the Huffington Post.
The recent defeat of its effort to unionize workers at Volkwagen’s Chattanooga, Tennessee factory was a crushing blow to the United Auto Workers, and a setback to the embattled U.S. labor movement, which could have used the morale boost of a high-profile victory.
It was also a big loss for the vast majority of Americans who must work for a living, whether they are union members or not. Without a large robust unionized sector, there is little hope that the relentless spread of low-wage work, job insecurity and economic inequality will be reversed.
Labor unions were key to the post-World War II social contract under which the benefits of economic growth were broadly shared. Collective bargaining agreements set industry-wide standards for wages and working conditions, which put pressure on nonunion firms to keep up or face union organizing drives. Politically, unions were the most important force supporting Social Security, Medicare, unemployment compensation, overtime, job safety, progressive taxes and full employment policies that promoted prosperity far beyond their membership.