Edward Conard

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  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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
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  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
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Macro Roundup


Monday, March 2, 2020

AI Summary. Including Social Security wealth, the authors estimate that US wealth inequality has not increased over roughly three decades: real Social Security wealth rose from $5.6tn to over $42tn, cutting the top 1% share by 9 percentage points and leaving the top 10% share 3 points lower.

Sylvain Catherine University of Pennsylvania
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Wealth inequality has not increased over the last three decades when Social Security is included, according to Sarin’s analysis @UofPenn. Real Social Security wealth surged from $5.6tn in 1989 to over $42tn in 2016.

Does counting Social Security wealth change measured wealth inequality trends?

Core argument: Sarin's analysis finds that including Social Security wealth lowers the top 1% wealth share by 9 percentage points in 2016 relative to estimates that exclude it.

Sarin's analysis reveals that wealth inequality has not increased over the last three decades when Social Security is included. Real Social Security wealth surged from $5.6tn in 1989 to over $42tn in 2016, representing 58% of the wealth of the bottom 90% by 2016. Social Security's share of wealth for the bottom 90% grew from 17.2% in 1989 to 63.4% in 2016, even after adjusting for systematic risk. Including Social Security reduces the top 1% wealth share by 9 percentage points in 2016 compared to estimates excluding it. The top 10% share declined by 3 percentage points, while the top 1% share increased slightly by 1.2 percentage points between 1989 and 2016. This contrasts with findings that exclude Social Security, which show a rise of over 10 percentage points for both groups. The study underscores the importance of accounting for public transfer programs like Social Security in assessing wealth concentration and economic progressivity.

Takeaways by Macro Roundup® AI

  1. Sarin's analysis finds that including Social Security wealth lowers the top 1% wealth share by 9 percentage points in 2016 relative to estimates that exclude it.
  2. Real Social Security wealth rose from $5.6tn in 1989 to over $42tn in 2016, and its share of the bottom 90%'s wealth grew from 17.2% to 63.4%, even after adjusting for systematic risk.
  3. Counting Social Security, the top 10% wealth share fell 3 percentage points and the top 1% share rose 1.2 percentage points between 1989 and 2016, versus gains of over 10 percentage points for both groups when it is excluded.

New working paper from Sarin (frequent Summer's collaborator) incorporates Social Security into estimates of wealth inequality and finds that, "... Wealth inequality has not increased in the last three decades when Social Security is accounted for. When discounted at the risk-free rate, real Social Security wealth increased substantially from $5.6 trillion in 1989 to just over $42.0 trillion in 2016. When we adjust for systematic risk coming from the covariance of Social Security returns with the market portfolio, this increase remains sizable, growing from over $4.6 trillion in 1989 to $34.0 trillion in 2016. Consequently, by 2016, Social Security wealth represented 58% of the wealth of the bottom 90% of the wealth distribution. Redistribution through programs like Social Security increases the progressivity of the economy, and it is important that our estimates of wealth concentration reflect this...."

"...We find that wealth inequality has not increased once the old age retirement program is accounted for....We document that Social Security wealth has risen: In 1989, Social Security represents 17.2% of the wealth held by the bottom 90% of the wealth distribution. By 2016, this share had grown to 63.4%. Even after adjusting for systematic risk, Social Security rose from only 14.2% of the total wealth of the bottom 90%to 57.7%....This fact is well-illustrated by a simple back-of-the-envelope exercise. Piketty et al. (2018) report household wealth, excluding Social Security, totaled $79 trillion1 in 2016. The Social Security Administration (SSA) estimates that aggregate Social Security wealth was $33 trillion in the same year. We can naively assume that the top 1% receives a disproportionate share (10%) of total Social Security wealth. Social Security is progressive so this assumption vastly overstates the share of Social Security wealth at the top. Even so, including Social Security decreases the top 1% wealth share in 2016 by 9 percentage points relative to prior estimates.... Our most conservative estimates suggest that between 1989 and 2016 the top 10% share declined by 3.0 percentage points and the top 1% share increased only slightly by 1.2 percentage points. This differs drastically from recent work that excludes Social Security and finds the top 10% and 1% shares rose by over 10 percentage points over this period.The inequality estimates in this paper are still overstated, because we exclude programs like disability insurance and Medicare, which constitute a larger share of the wealth of the bottom of the distribution than the top. Overall, this paper makes the point that public transfer programs like Social Security make the U.S. economy more progressive, and it is important for inequality estimates to reflect this. Much more work is needed to arrive at a fuller understanding of wealth concentration in America.....".

Social Security and Trends in Inequality: Extended Excerpt Image 1


Sylvain Catherine, Max Miller and Natasha Sarin, "Social Security and Trends in Inequality," University of Pennsylvania, February 29, 2020, https://papers.ssrn.com/sol3/papers.cfm

Tuesday, March 3, 2020

AI Summary. The average age at which great scientists and inventors produce their most important work rose by about six years over the 20th century, a shift attributed mainly to longer early-life investment in education. Those starting later do not show greater productivity in their later years, shortening their effective innovative careers.

Economist Staff The Economist
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The average age at which great scientists & inventors produce their most important work increased by 6 years over the 20th century, primarily due to extended early-life investment in education.

Does longer schooling shorten the innovative careers of great scientists?

Core argument: The average age at which great scientists and inventors produced their most important work rose by six years over the 20th century, primarily because of extended early-life investment in education.

The average age at which great scientists and inventors produce their most important work increased by six years over the 20th century, primarily due to extended early-life investment in education. This shift suggests that while education is crucial for fostering innovation, it also delays the onset of productive careers, potentially shortening the working lifespan of these individuals. Despite starting later, these thinkers do not exhibit increased productivity in their later years. This trend highlights the need for policy makers and educational institutions to balance the depth of education with the timing of entry into the workforce to maximize innovation output. Understanding this dynamic is essential for optimizing research funding and ensuring a steady flow of groundbreaking work that drives economic growth and technological advancement.

Takeaways by Macro Roundup® AI

  1. The average age at which great scientists and inventors produced their most important work rose by six years over the 20th century, primarily because of extended early-life investment in education.
  2. Great thinkers who begin their productive careers later show no offsetting gains in productivity in their later years, potentially shortening their working lifespan.
  3. The tradeoff between depth of education and the timing of entry into the workforce bears on how policy makers and educational institutions can maximize innovation output from research funding.

, “…Benjamin Jones of Northwestern University has found that the average age at which great scientists and inventors produce their most important work rose by six years over the course of the 20th century, thanks to the need for more early-life investment in education. But although important thinkers begin their careers later than they used to,they are no more productive later in life. Education, while critical to discovery, shortens the working lives of great scientists and inventors….” Economist Staff, “How to get more innovation bang for the research buck,” The Economist, February 27, 2020, https://www.economist.com/finance-and-economics/2020/02/27/how-to-get-more-innovation-bang-for-the-research-buck

AI Summary. Research finds ethnic minorities in China face employment discrimination: Hui job-seekers must send twice as many applications as Han applicants to get a callback, and Uighurs nearly four times as many, rising to six times for Uighurs in the top 1% academically. The pattern holds in state-owned enterprises despite mandates to hire minority workers.

Economist Staff The Economist
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Research indicates significant employment discrimination against Chinese minorities, with Hui job-seekers needing to send twice as many applications as Han applicants, and Uighurs nearly four times as many.

Do ethnic minorities in China face hiring discrimination?

Core argument: Research finds that Uighur job-seekers in China must send nearly four times as many applications as Han applicants, and Hui applicants about twice as many, to find work.

Research indicates significant employment discrimination against Chinese minorities, with Hui job-seekers needing to send twice as many applications as Han applicants, and Uighurs nearly four times as many. For highly educated Uighurs in the top 1% academically, the disparity is even more pronounced, requiring six times the applications compared to equally qualified Han candidates. This trend persists across smaller cities and major regions like Guangdong, Beijing, and Shanghai. State-owned enterprises, despite mandates to hire more minority workers, exhibit similar biases. In an international context, Tibetans and Uighurs face greater employment challenges than minorities in other countries with reliable data, highlighting a critical issue in China's labor market dynamics.

Takeaways by Macro Roundup® AI

  1. Research finds that Uighur job-seekers in China must send nearly four times as many applications as Han applicants, and Hui applicants about twice as many, to find work.
  2. Among Uighurs in the top 1% academically, the gap widens to six times the applications required of equally qualified Han candidates, and the pattern holds in smaller cities as well as Guangdong, Beijing and Shanghai.
  3. State-owned enterprises show biases against Chinese minorities despite mandates to hire more minority workers, and Tibetans and Uighurs face greater employment difficulty than minorities in other countries with reliable data.

, “…The study shows that on average, Hui job-seekers had to send twice as many applications as Han applicants do to hear back, and Uighurs nearly four times as many.The gap was even greater for highly educated workers: Uighur candidates who were in the top 1% academically needed to send six times as many applications as equally qualified Han candidates. This difference was also similar in both smaller cities and in the provincial-level regions of Guangdong, Beijing and Shanghai. State-owned enterprises, which have an official mandate to hire more minority workers, appeared at least as biased as other firms. These figures are especially troubling when placed in an international context. The Economist tracked down over 100 résumé experiments conducted in 15 countries over the past 20 years. These experiments have mainly been done in Western countries where research funding is readily available. Still, we find that Tibetans and Uighurs in China have a much tougher time looking for jobs than minorities in any other countries with reliable data..”

Economist Staff, "China’s minorities have a tough time finding jobs," The Economist, February 22, 2020, https://www.economist.com/graphic-detail/2020/02/22/chinas-minorities-have-a-tough-time-finding-jobs

AI Summary. An analysis using Bureau of Labor Statistics data finds the weeks of income needed to cover a year of major expenses fell 9.6%, from 19.8 weeks to fewer than 18 weeks, contradicting the Cost of Thriving Index claim of a 77% rise from 30 to 53 weeks.

Mark Perry American Enterprise Institute
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Mark Perry @AEI: The number of weeks of income required to cover a year of major expenses for the average consumer unit has declined by 9.6% since 1985.

Has the income needed to cover major household expenses risen?

Core argument: An analysis using BLS data finds the weeks of income needed to cover a year of major expenses fell 9.6% from 1985 to 2018, contradicting Oren Cass's claim of a 77% increase from 30 to 53 weeks.

Contrary to Oren Cass's assertion that the number of weeks of income required to cover a year of major expenses has increased by 77% from 30 weeks in 1985 to 53 weeks in 2018, an analysis using BLS data reveals a 9.6% decline over the same period. The average consumer unit needed nearly 20 weeks (19.8) of income in 1985, which decreased to fewer than 18 weeks by 2018. This represents a significant difference of 35 weeks compared to Cass's claim. Consequently, while Cass suggests that the average male worker would need to work until early 2021 to cover major expenses, the analysis indicates that the typical American household would only need to work until the first week of May to meet annual expenditures on housing, education, transportation, and health care.

Takeaways by Macro Roundup® AI

  1. An analysis using BLS data finds the weeks of income needed to cover a year of major expenses fell 9.6% from 1985 to 2018, contradicting Oren Cass's claim of a 77% increase from 30 to 53 weeks.
  2. The average consumer unit needed 19.8 weeks of income in 1985 to cover major expenses, falling to fewer than 18 weeks by 2018, a 35-week difference from Cass's figure.
  3. Where Cass concludes the average male worker would need to work until early 2021 to cover major expenses, the alternative analysis puts the typical American household at the first week of May for housing, education, transportation, and health care.

, “…While Cass claims that the number of weeks of income needed to cover a year of household expenditures on the four major categories has increased over time by 77%, from 30 weeks in 1985 to 53 weeks in 2018, my analysis using BLS data suggests the opposite:The number of weeks of income to cover a year of major expenses for the average consumer unit has declined since 1985 by 9.6%, from nearly 20 weeks (19.8) to fewer than 18 weeks in 2018. That’s two-thirds less than the 53 weeks of income Cass claims is necessary to cover major family expenses (see tables above) and a whopping difference of 35 weeks!According to Cass, the average male worker would have to work until the first week of 2021 to cover major family expenses this year, while my analysis shows that the typical American household would only have to work until the first week of May this year to pay for annual major expenditures on housing, education, transportation, and health care….”

Mark Perry, "An alternative analysis to Oren Cass’s flawed “Cost of Thriving Index” with a much different conclusion," American Enterprise Institute, February 28, 2020, https://www.aei.org/carpe-diem/an-alternative-analysis-to-oren-casss-cost-of-not-thriving-index-using-bls-data/

AI Summary. In U.S. survey data on young men, higher scores on the Armed Services Vocational Aptitude Battery, especially its math and verbal sections, are associated with higher hourly wages across racial groups, while white men generally earn more than Black and Hispanic men.

Bureau of Labor Statistics Bureau of Labor Statistics
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Analysis of hourly male wages reveals significant disparities based on race & cognitive test scores, with higher ASVAB scores associated with higher wages across racial groups.

How do aptitude test scores and race relate to men's wages?

Core argument: Hourly male wages in the National Longitudinal Survey of Youth 1997 rise with ASVAB scores, particularly the math and verbal sections, a pattern that holds across racial groups.

Analysis of hourly male wages reveals significant disparities based on race and cognitive test scores, as evidenced by data from the National Longitudinal Survey of Youth 1997. The survey highlights that individuals with higher ASVAB [Armed Services Vocational Aptitude Battery] scores, particularly in math and verbal sections, tend to earn higher wages. This trend is consistent across racial groups, although the wage gap persists, with white males generally earning more than their Black and Hispanic counterparts. The data underscores the importance of cognitive skills in determining wage outcomes, suggesting that policies aimed at improving educational attainment and skill development could help mitigate these disparities. Furthermore, the differences in survey years for ASVAB (1999) and SAT (2007) indicate that individuals are at varying lifecycle stages, which may influence wage trajectories.

Takeaways by Macro Roundup® AI

  1. Hourly male wages in the National Longitudinal Survey of Youth 1997 rise with ASVAB scores, particularly the math and verbal sections, a pattern that holds across racial groups.
  2. White males in the National Longitudinal Survey of Youth 1997 generally earn more than Black and Hispanic males, with the wage gap persisting even as higher cognitive test scores accompany higher wages within each group.
  3. The ASVAB was administered in 1999 and the SAT in 2007 in the survey data, placing individuals at differing lifecycle stages that may influence wage trajectories.

Hourly wage data by test score attached, note the ASVAB data is a 1999 Survey whereas the SAT data is 2007 so individuals are at different points in lifecycle

Bureau of Labor Statistics, “National Longitudinal Survey of Youth 1997,” Series Gender, Combined Race and Ethnicity, ASVAB Math and Verbal Score Percent (AFQT ~ 1999 Survey) Total Income From Wage and Salary in Past Year (2017 Survey), 2016 Employment Total Hours Worked, Number of Weeks Worked In Any Job 2016, Highest SAT Math Score 2007, Highest SAT Verbal Score 2007, Accessed March 3, 2020, https://www.nlsinfo.org/investigator/pages/search