Edward Conard

Top Ten New York Times Bestselling Author

  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, February 19, 2020

AI Summary. Federal Reserve Bank of New York data show unemployment among recent college graduates aged 22-27 at 3.9%, 0.3 percentage points above the overall rate, with the wage gap between high school graduates and lower-earning college graduates the smallest in 15 years. Over 40% of recent graduates work in jobs not requiring a degree.

Alexandre Tanzi and Katia Dmitrieva Bloomberg
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The college employment premium has vanished, with 40% of recent grads in roles not requiring a degree & 12.5% earning $25,000 or less annually. @AlexandreTanzi @KatiaDmitrieva

Are recent college graduates losing their employment and wage advantage?

Core argument: Unemployment among recent U.S. college graduates aged 22–27 reached 3.9% in December, 0.3 percentage points above the overall rate, according to Federal Reserve Bank of New York data indicating the college employment premium has vanished.

Recent data from the FRBNY [Federal Reserve Bank of New York] indicates that the college employment premium has vanished, as unemployment among recent college graduates aged 22-27 reached 3.9% in December, 0.3 percentage points higher than the overall rate. The wage gap between high school graduates and the lower-earning half of college graduates is now the smallest in 15 years. Over 40% of recent grads are employed in roles not requiring a degree, with about 12.5% earning $25,000 or less annually. This trend is exacerbated by a saturated job market for degree-holders and rising demand for skilled trades, such as electricians and plumbers. Despite a robust job market, many college graduates struggle with student debt, contributing to the $1.6tn national student debt burden. The economic implications are significant, as these trends may influence future educational and labor market policies.

Takeaways by Macro Roundup® AI

  1. Unemployment among recent U.S. college graduates aged 22–27 reached 3.9% in December, 0.3 percentage points above the overall rate, according to Federal Reserve Bank of New York data indicating the college employment premium has vanished.
  2. The wage gap between high school graduates and the lower-earning half of college graduates is the smallest in 15 years, with over 40% of recent graduates in jobs not requiring a degree and about 12.5% earning $25,000 or less a year.
  3. A saturated job market for degree-holders and rising demand for skilled trades such as electricians and plumbers accompany a $1.6tn national student debt burden weighing on college graduates.

Bloomberg reports on some recent moves in the FRBNY Labor Market for Recent College GraduatesSeries. Currently the overall UI rate and the UI rate for recent college graduates is at par (see chart), and the wage premium continues to narrow btw high school graduates and the 25thpercentile of college graduates (second chart).

In Hot U.S. Jobs Market, Half of College Grads Are Missing Out: Extended Excerpt Image 1


"....But in recent years,while high-school graduates have seen a sharp pickup in earnings, the lower-earning half of college graduates haven’t -- and the gap between them is now the smallest in 15 years…. Unemployment among Americans aged between 22 and 27 who recently earned a Bachelor’s degree or higher was 3.9% in December -- about 0.3 percentage point above the rate for all workers….. More than four in 10 recent graduates are working in jobs that don’t usually require a college degree, the New York Fed says. And roughly one in eight is working in a field where typical pay is around $25,000 a year or less..."

Alexandre Tanzi and Katia Dmitrieva, "In Hot U.S. Jobs Market, Half of College Grads Are Missing Out,"Bloomberg, February 14, 2020, https://www.bloomberg.com/news/articles/2020-02-14/in-hot-u-s-jobs-market-half-of-college-grads-are-missing-out
In Hot U.S. Jobs Market, Half of College Grads Are Missing Out

Millions of Americans are seeing little return from their expensive college degrees -- even in today’s hot jobs market.

For the first time in decades, recent college graduates are more likely to be out of work than the population as a whole, according to the New York Federal Reserve. And for the lower-earning half of college grads, the wage premium is shrinking fast.

In Hot U.S. Jobs Market, Half of College Grads Are Missing Out: Extended Excerpt Image 2


Unemployment among Americans aged between 22 and 27 who recently earned a Bachelor’s degree or higher was 3.9% in December -- about 0.3 percentage point above the rate for all workers.

It’s another worrying sign for a generation that borrowed record amounts of money to get through higher education, as the cost of tuition soared. America’s $1.6 trillion in student debt is weighing on the economy and spurring politicians to offer fixes that range from targeted aid to across-the-board forgiveness.

The strong job market should be helping graduates to pay what they owe -- and at the top end of the wage scale, it is. But in recent years, while high-school graduates have seen a sharp pickup in earnings, the lower-earning half of college graduates haven’t -- and the gap between them is now the smallest in 15 years.

In Hot U.S. Jobs Market, Half of College Grads Are Missing Out: Extended Excerpt Image 3


More than four in 10 recent graduates are working in jobs that don’t usually require a college degree, the New York Fed says. And roughly one in eight is working in a field where typical pay is around $25,000 a year or less.

The economy is creating a lot of jobs like that -- and it’s expected to create even more. In the occupations that are forecast to grow fastest over the next decade, according to the Bureau of Labor Statistics -- from home care to restaurant cooks -- typical salaries range from $24,000 to $26,500.

In Hot U.S. Jobs Market, Half of College Grads Are Missing Out: Extended Excerpt Image 4


Part of the problem is that the jobs market is saturated with degree-holders, while tight labor conditions have ramped up demand for a different kind of skills -- bringing benefits to electricians and plumbers, for example.

Those workers still have plenty of ground to make up. Pay for Americans who only have high-school qualifications has been in long-term decline -- and even after the gains of recent years, they earn less than they did in 1990.

In Hot U.S. Jobs Market, Half of College Grads Are Missing Out: Extended Excerpt Image 5


Meanwhile, better-off college graduates have been the big winners over the past 30 years -- even if their gains have flattened out lately. But the bottom half of college grads have been losers in both the short and the long run.

That’s likely the group that is having the most trouble paying back the money they borrowed to go to college -- and they might be engaged in that struggle all through their working lives. Already, 5% of student debt is held by seniors, and the figure has been steadily rising.

Thursday, February 20, 2020

AI Summary. Germany's minimum wage increase raised wages 6.7% for workers previously paid below the new floor and is associated with higher productivity as employment shifted toward larger firms, without significant effects on unemployment or the employment rate. About 25% of the productivity gain is attributed to that shift, while the number of very small firms fell in the most affected regions.

Delphine Strauss Financial Times
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Germany’s minimum wage increase in 2015 boosted productivity as employment shifted to larger firms, but hit small businesses, causing some to close. @DelphineStrauss

Does a higher minimum wage raise productivity by shifting workers to larger firms?

Core argument: Germany’s 2015 minimum wage introduction raised wages 6.7% for workers previously earning below the minimum and boosted productivity as employment shifted toward larger firms, without significantly affecting unemployment or the employment rate.

Germany's minimum wage increase in 2015 led to a 6.7% rise in wages for workers previously earning below the minimum, boosting productivity as employment shifted to larger firms. This shift occurred without significantly affecting unemployment or the employment rate. Approximately 25% of the productivity gain was attributed to workers moving to larger companies offering higher wages, more full-time jobs, and a skilled workforce. However, the policy adversely impacted small businesses, causing some to close and potentially reducing consumer choice. In regions most affected, the number of small firms with fewer than three employees decreased, while the share of larger companies grew. Larger firms were better positioned to absorb the wage increase, contributing to overall productivity gains during a period of economic growth.

Takeaways by Macro Roundup® AI

  1. Germany’s 2015 minimum wage introduction raised wages 6.7% for workers previously earning below the minimum and boosted productivity as employment shifted toward larger firms, without significantly affecting unemployment or the employment rate.
  2. About 25% of the productivity gain from Germany’s minimum wage is attributed to workers moving to larger companies that offer higher wages, more full-time jobs, and a skilled workforce.
  3. In the German regions most affected by the minimum wage, the number of small firms with fewer than three employees fell while the share of larger companies grew, with some small businesses closing and consumer choice potentially reduced.

FT reports on A study of the impact of an uptick in the minimum wage in Germany. Study found it had a positive impact on productivity as employment shifted to larger firms, without a substantial effect on either unemployment or the employment rate; but the increase hurt small business and may have reduced consumer choice. However lead author notes this played out in a hot economy.

“…Germany’s introduction of a minimum wage in 2015 drove workers from small businesses to larger, more productive companies, helping to boost overall productivity at the expense of smaller organisations, Research has shown. Thepolicy led to a 6.7 per cent increase in wages for workers who had previously been paid below the minimum…without any substantial effect on either unemployment or the employment rate….Abouta quarter of the increase could be explained by workers moving to larger companies that paid higher average wages, with more full-time jobs, a more skilled workforce and a lower level of staff turnover, according to the research, which was based on administrative data and published on Tuesday. But it also suggested thatthe minimum wage caused some small companies to go out of business — potentially leading to reduced competition and less choice for consumers. In the regions most exposed to the policy, the number and share of companies with fewer than three employees fell in the years after it took effect, while the share of larger companies increased, the researchers found. Larger companies were more likely to be able to afford to pay the higher wage, they suggested. “ led to increases in average productivity,” said Christian Dustmann, the paper’s lead author, although he noted that this finding was from a period when the country’s economy had been thriving….”

Delphine Strauss, “Germany’s minimum wage boosted productivity but hit small companies,”Financial Times, February 18, 2020, https://www.ft.com/content/3bc67eee-5180-11ea-90ad-25e377c0ee1f

AI Summary. U.S. business dynamism has been declining since 1980 with a marked acceleration after 2000, and the share of transacted patents reassigned to the top 1% of firms rose from 30% in the 1980s to 55% by 2010. The authors argue that heavy patent acquisition by market leaders has crowded out smaller firms and slowed knowledge diffusion.

Sina Ates Federal Reserve Board
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New Federal Reserve data shows a dramatic increase in patents reassigned to top 1% firms, from 30% in the 1980s to 55% by 2010, crowding out smaller firms and potentially impacting business dynamism.

Does patent buying by market leaders explain declining business dynamism?

Core argument: The share of transacted U.S. patents reassigned to the top 1% of firms rose from 30% in the 1980s to 55% by 2010, according to Federal Reserve data.

U.S. business dynamism has been declining since 1980, with a marked acceleration post-2000, as evidenced by Federal Reserve data showing a significant increase in the share of patents reassigned to the top 1% of firms. In the 1980s, 30% of transacted patents were reassigned to these leading firms, but this figure surged to 55% by 2010. This shift has crowded out smaller firms, as the likelihood of patents being reassigned to small firms has dropped dramatically over the past two decades. The concentration in patent production and reassignment has surged, with large firms expanding their intellectual property arsenals. This trend suggests that the heavy use of patents by market leaders may have contributed to a decline in knowledge diffusion, impacting overall business dynamism and innovation.

Takeaways by Macro Roundup® AI

  1. The share of transacted U.S. patents reassigned to the top 1% of firms rose from 30% in the 1980s to 55% by 2010, according to Federal Reserve data.
  2. U.S. business dynamism has declined since 1980 with a marked acceleration after 2000, while the likelihood of patents being reassigned to small firms dropped sharply over the past two decades.
  3. Concentration in patent production and reassignment has surged as large firms expanded their intellectual property arsenals, suggesting that heavy patent use by market leaders may have contributed to declining knowledge diffusion and innovation.

Federal Reserve note implicitly supports the superstar firms thesis, finding that American business dynamism started declining in 1980, but accelerated in 2000. Note suggests that a steady decrease in diffusion has disproportionately impacted the decrease in overall dynamism as smaller firms share of patents declined. Data“…showsthe dramatic increase the share of patents reassigned to top 1 percent of firms with the largest patent stocks among all reassigned patents since the 1980s. Reciprocally, Panel Bshows the steady decline in the share of patent reassignments registered to small buyers over the same time period….”

Ufuk Akcigit and Sina Ates, “What Happened to U.S. Business Dynamism?,” Federal Reserve Board, February 14, 2020, https://www.federalreserve.gov/econres/notes/feds-notes/what-happened-to-us-business-dynamism-20200214.htm

“…As in patent registries, we observe stark trends in patent reassignments since the 1980s. Figure 3a focuses on the purchasing trends of the top 1 percent of firms with the largest patent portfolios. The figure reveals that while 30 percent of the transacted patents were reassigned to the firms with the largest patent stocks in the 1980s, the share went up to 55 percent by 2010. This drastic increase has crowded out small players in the market, as illustrated in Figure 3b. The figure shows the likelihood of a patent to be assigned to a small firm, conditional on that patent being transacted from another small firm and recorded. In the past two decades, the fraction of transacted patents that are reassigned to small firms has dropped dramatically, implying a shift of ownership from the hands of small firms to large ones. These figures reveal that concentration in patent production and reassignment has surged, and firms with the largest patent (knowledge) stock have further expanded their intellectual property arsenals. Given that patents are exclusively used to prevent competitors from using the patent holders’ technology, these trends can imply that the heavy use of patents by market leaders might have caused the decline in knowledge diffusion from the best to the rest….”

AI Summary. Employment among people aged 25–54 is expanding by roughly 750,000 a year, and nearly one-third of these added workers previously identified as disabled, a group that does not necessarily receive Social Security Disability Insurance. Those workers are the largest single source of new hires.

Ernie Tedeschi Reason
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@ErnieTedeschi 1/3 of prime age employment growth comes from previously “disabled” workers, a trend that could have significant implications for labor force participation rates and overall economic productivity.

Are previously disabled workers the largest source of new prime-age hires?

Core argument: Prime-age (25–54) employment is expanding at roughly +750,000 annually, with nearly one-third of those new workers coming from people who previously identified as disabled.

Prime-age employment is expanding at a rate of approximately +750,000 annually, with nearly one-third of these new workers emerging from individuals who previously identified as disabled. This group, which does not necessarily include those on SSDI [Social Security Disability Insurance], represents the largest single source of new hires. The influx of these workers into the labor market highlights a significant shift in labor force dynamics, suggesting that barriers to employment for those with disabilities are decreasing. This trend could have substantial implications for labor force participation rates and overall economic productivity, as it indicates a previously untapped pool of labor is now contributing to economic growth. The integration of these workers may also influence policy discussions around disability and employment support systems.

Takeaways by Macro Roundup® AI

  1. Prime-age (25–54) employment is expanding at roughly +750,000 annually, with nearly one-third of those new workers coming from people who previously identified as disabled.
  2. Workers who previously identified as disabled, a group that does not necessarily include SSDI recipients, are the largest single source of new prime-age hires.

Terrific chart from Ernie shows prime-age employment is growing at a pace of around +750,000 a year. Almost a third of these job finders are coming from the ranks of the disabled(doesn’t mean SSDI, just that they self-identified as disability as their reason for not being in labor force)and they are the single biggest source of new worker hires.

Ernie Tedeschi, "Change in Prime Age (25-54) Employment," February 20, 2020, https://twitter.com/ernietedeschi/status/1230489362883678210