Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “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
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, August 21, 2020

AI Summary. Organisation for Economic Co-operation and Development data show American workers average about 1,779 hours per year, compared with 1,386 in Germany and 1,520 in France.

OECD Staff OECD
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American workers logged significantly more hours annually in 2019 compared to European counterparts, with U.S. employees averaging 1,779 hours per year, compared to 1,386 hours in Germany and 1,520 hours in France.

Do American workers put in more hours per year than Europeans?

Core argument: U.S. employees worked about 1,779 hours in 2019, compared with 1,386 in Germany and 1,520 in France, according to OECD data.

In 2019, data from the OECD revealed that American workers logged significantly more hours annually compared to their European counterparts, highlighting a notable transatlantic disparity in work culture. On average, U.S. employees worked approximately 1,779 hours per year, whereas workers in Germany and France averaged 1,386 and 1,520 hours respectively. This difference underscores a broader trend where Americans tend to prioritize longer working hours, potentially driven by economic factors such as lower vacation entitlements and cultural attitudes towards work-life balance. The implications of these extended hours are multifaceted, affecting productivity, employee well-being, and economic output. For policymakers and economists, understanding these dynamics is crucial for addressing labor market policies and fostering sustainable economic growth. As the global economy evolves, these insights may inform strategies to optimize work efficiency while enhancing quality of life for workers across different regions.

Takeaways by Macro Roundup® AI

  1. U.S. employees worked about 1,779 hours in 2019, compared with 1,386 in Germany and 1,520 in France, according to OECD data.
  2. Longer American working hours may reflect lower vacation entitlements and cultural attitudes toward work-life balance, with implications for productivity, employee well-being, and economic output.

OECD, “Hours Worked: Total Hours/Worker, 2019 Or Latest Available,” OECD, Accessed August 21, 2020, https://data.oecd.org/emp/hours-worked.htm

AI Summary. Research indicates that high marginal tax rates affect not only immediate labor supply but also decisions about education and career paths, potentially reducing GDP growth over time by deterring people from pursuing higher education or high-skill careers. One estimate holds that a 10% increase in marginal tax rates could reduce the number of people pursuing advanced degrees by 2%.

Peter Diamond and Emmanuel Saez Journal of Economic Perspectives
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Higher marginal tax rates can have significant long-term effects on economic growth, influencing education & career choices. Research shows a 10% increase in tax rates could lead to a 2% decrease in advanced degree pursuit, impacting labor market skill composition.

Do high marginal tax rates discourage education and high-skill careers?

Core argument: A 10% increase in marginal tax rates could reduce the number of individuals pursuing advanced degrees by 2%, altering the skill composition of the labor market, according to the research cited.

High marginal tax rates can have significant long-term effects on economic growth, as they influence not only immediate labor supply but also decisions related to education and career paths. Research indicates that these taxes may deter individuals from pursuing higher education or high-skill careers, potentially reducing GDP growth over time. For instance, a 10% increase in marginal tax rates could lead to a 2% decrease in the number of individuals pursuing advanced degrees, impacting the labor market's skill composition. Policymakers should consider these broader implications when designing tax systems, as progressive taxation can shape economic outcomes by affecting human capital investment and career choices. Understanding these dynamics is crucial for creating tax policies that support sustainable economic growth while addressing income inequality.

Takeaways by Macro Roundup® AI

  1. A 10% increase in marginal tax rates could reduce the number of individuals pursuing advanced degrees by 2%, altering the skill composition of the labor market, according to the research cited.
  2. High marginal tax rates influence not only immediate labor supply but also education and career-path decisions, and research indicates they may deter individuals from higher education or high-skill careers and reduce GDP growth over time.
  3. Tax system design should account for effects on human capital investment and career choices, as progressive taxation can shape economic outcomes alongside its role in addressing income inequality.

Researchers who underestimate the gradual growth-draining effects of high marginal tax rates, concede estimates“should reflect not only short-run labor supply responses but also long-run responses through education and career choices.”

Peter Diamond and Emmanuel Saez, “The Case For A Progressive Tax: From Basic Research To Policy Recommendations,” Journal Of Economic Perspectives, Fall, 2011, https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.25.4.165

Monday, August 24, 2020

AI Summary. About 90% of middle-class income growth over roughly four decades came from higher female wages and work hours, with dual-earner couples rising from about 50% to 70%. The average middle-class married couple with children now works 3,446 hours a year, over 600 more than in 1975, while male earnings contributed -4% to income growth.

Katherine Guyot Brookings Institution
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@KatherineGuyot ~90% of middle-class income growth btw 1979-2018 driven by higher female wages & hours worked. The average middle-class married couple with children now works 3,446 hours annually, up by over 600 hours since 1975.

Has middle-class income growth come almost entirely from women working more?

Core argument: Roughly 90% of U.S. middle-class income growth from 1979 to 2018 came from higher female wages and work hours, with male earnings contributing -4% and non-labor income 13%.

From 1979 to 2018, ~90% of middle-class income growth was driven by increased female wages and work hours. The fraction of dual-earner couples rose from ~50% to 70%, with significant growth among couples where both parents work full-time. The average middle-class married couple with children now works 3,446 hours annually, up by over 600 hours since 1975. If women's earnings had remained at 1979 levels, family income growth would have been just 2%, compared to the actual 21%. Male earnings contributed negatively to income growth at -4%, while non-labor income sources accounted for 13%. The average American worker now works ~1,860 hours per year, 300 more than in France, highlighting the increased work burden on families. This shift underscores the critical role of women's economic contributions in sustaining middle-class income growth amidst stagnant male earnings and stable work hours.

Takeaways by Macro Roundup® AI

  1. Roughly 90% of U.S. middle-class income growth from 1979 to 2018 came from higher female wages and work hours, with male earnings contributing -4% and non-labor income 13%.
  2. Had women's earnings stayed at 1979 levels, middle-class family income growth would have been 2% rather than the actual 21%.
  3. The average middle-class married couple with children works 3,446 hours annually, over 600 more than in 1975, as the share of dual-earner couples rose from about 50% to 70%.

The Middle Class Time Squeeze: Extended Excerpt Image 1


Isabel Sawhill and Katherine Guyot, "The Middle Class Time Squeeze," Brookings Institution, August 2020, https://www.brookings.edu/wp-content/uploads/2020/08/The-Middle-Class-Time-Squeeze_08.18.2020.pdf


“…. The stability of average work hours combined with the increasing proportion of couples who are dual earners means that families are collectively putting in more work hours now than in the recent past…. The average American worker currently works an estimated 1,860 hours per year, nearly 300 more than workers in France and 400 more than those in the Netherlands…..The fraction of couples who are dual earners has risen from about half to 70% over the last four decades. The largest increase within this category has been among couples in which both the mother and the father work full-time. The average middle-class married couple with children now works a combined 3,446 hours annually, an increase of more than 600 hours—or 15 additional weeks of full-time work—since 1975…. Using a similar strategy, we estimate that if women’s average earnings dropped back to their 1979 levels, average middle-class family incomes would have grown by only 2% between 1979 and 2018 (Figure 2.5).Average family income actually grew by 21% over this period. This analysis counts single adults as their own families and includes those without children. Due to declines in male work hours per family, the contribution of total male earnings to middle-class income growth was a net negative at -4%. Non-labor income sources were responsible for 13% of income growth.This leaves by far the majority of middle-class income gains to women. We estimate that 29% of average income growth is attributable to higher female work hours and 63% to higher female pay per hour. To summarize, about 90 percent of middle-class families’ income growth over this period was due to women’s contributions….”

They define middle class“…as the middle 60% of the family income distribution. We weight each family unit in the distribution by family size so that themiddle class contains approximately 60% of peoplerather than 60% of families….”

They also find that 90% of middle class income growth btw 1979-2018 has been driven by increases in women’s hours worked and women’s wages

Brookings finds that a steady decline in working hours over recent decades has leveled off in the US, American workers work ~ 1860 hours a year, 300 more hours than in France

$69,559 end

(2,920) calculated contribution of men

7,465 contribution of other income (=13% x 57420)

7,594 contribution of women both hours and wages (=66096-58502)

$57,420 start

Ed Comment:Presumably the contribution of women is the difference between 58,502 and 66,096 I’m not sure I understand who/what contributed the difference between ($57,420 and $58,502) and ($66,096 and $69,559).

AI Summary. An influx of Puerto Rican migrants to Orlando is associated with a 0.8% rise in overall native employment, with construction employment up 4% and native construction wages down 2.5%, while retail employment rose nearly 1% and retail wages 2.1% on stronger consumer demand.

Giovanni Peri National Bureau of Economic Research
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Migration from Puerto Rico to Orlando in aftermath of Hurricane Maria drove down wages in construction sector, but led to increased employment and positive aggregate labor market outcomes for non-Hispanic and less educated workers

How does a sudden migrant influx affect local employment and wages?

Core argument: The influx of Puerto Rican migrants to Orlando after Hurricane Maria raised overall native employment by 0.8%, with construction employment up 4% and retail employment up nearly 1%.

The influx of Puerto Rican migrants to Orlando post-Hurricane Maria led to a 0.8% rise in overall native employment, with notable sectoral impacts. The construction sector, absorbing most of the labor supply shock, saw native wages decrease by 2.5%, while retail wages increased by 2.1% due to heightened consumer demand. Employment in construction grew by 4%, and retail employment rose by nearly 1%, reflecting the local economy's capacity to integrate the new labor force. Despite downward pressure on construction wages, the overall effect on non-Hispanic and less-educated workers was positive, with increased employment and compensation in sectors like retail and accommodations. This migration event demonstrated the dual impact of labor supply and consumer demand shocks, ultimately benefiting the local economy without displacing native workers.

Takeaways by Macro Roundup® AI

  1. The influx of Puerto Rican migrants to Orlando after Hurricane Maria raised overall native employment by 0.8%, with construction employment up 4% and retail employment up nearly 1%.
  2. Construction, which absorbed most of the labor supply shock, saw native wages fall 2.5%, while retail wages rose 2.1% amid heightened consumer demand.
  3. Non-Hispanic and less-educated workers in Orlando gained employment and compensation in sectors such as retail and accommodations, with no displacement of native workers.

Giovanni Peri, Derek Rury and Justin Wiltshire, "The Economic Impact Of Migrants From Hurricane Maria," National Bureau Of Economic Research, August 2020, https://www.nber.org/papers/w27718

“…Using a synthetic control estimation strategy we examine the economic impact of a large inflow of people from Puerto Rico into Orlando in the aftermath of Hurricane Maria, which devastated Puerto Rico in September 2017. We find that aggregate employment in Orlando increased as a result of the inflow, as did employment in the construction and retail sectors. We also find positive overall employment effects on non-Hispanic and less-educated workers, as well as positive effects on compensation for those same subgroups in the retail sector. In the construction sector - which absorbed the preponderance of this migrant labor supply shock - we find that earnings for non-Hispanic and less-educated (workers likely to be natives) decreased by a modest amount. These results together suggest that, while migrant inflows may have small negative impacts on the earnings of likely-native workers in sectors directly exposed to the labor supply shock, employment and earnings of likely native workers in other sectors are positively impacted, possibly by increased local demand…..We aggregate the QCEW data by commuting zone, and implement a synthetic control estimation strategy to measure the impact of these migrant inflows on outcomes in Orlando. We find that overall employment in Orlando increased by 0.4 percent one year after the inflow began, and increased by 4 percent in the construction sector. We view this as evidence the local economy was able to absorb and productively use the additional labor supply brought by this large inflow of immigrants. We also find that, one year after the inflow began, retail-sector employment rose by nearly 1 percent and compensation per worker in the accommodations & food services sector grew by 1.4 percent, which we view as the result of employers responding to growth in local demand for consumer goods and services resulting from the consumption habits of these new arrivals. These results are broadly robust to a series of checks. We perform a secondary analysis with the QWI data, and find that when focusing on subgroups more likely to be native or less-educated, the migration event increased overall employment by 0.8 percent and increased earnings in the retail sector. We also see a decrease in earnings for native workers in the construction sector, which absorbed the majority of the labor supply shock.Our results admit a story in which this migration event yielded concurrent labor supply and consumer demand shocks on the local economy which received the migrants. Orlando’s construction sector, in particular, was exposed to the labor supply shock, while the retail and accommodation & food services portions of the Orlando economy were primarily exposed to the consumer demand shock. The new workers were fully absorbed by the local economy without displacing any native workers and without any overall negative effect on earnings, though there was some downward pressure on construction earnings for natives, specifically. However, native retail employment and earnings were both positively impacted, such that the overall effect on natives was to increase their employment without any clear impact on their earnings…”

New Peri contribution using the natural experiment provided by Hurricane Maria (2017) supports his tack on the Mariel Boatlift. Paper finds that Puerto Rican migration to Orlando driven by Hurricane Maria led to a slight increase (+0.8%) in aggregate native employment and no impact on aggregate wages, though with some small sectoral variation: native construction wages -2.5% (they note this sector absorbed the majority of the labor supply shock), native retail wages +2.1%

Ed Comment:Hard to believe that an increase in supply increases prices/wages all other things being equal relative the counterfactual. …which of course is the rub. Everything is not equal but they pretend it is.