Edward Conard

Top Ten New York Times Bestselling Author

  • “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 full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…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
  • “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
  • “…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
  • “…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
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, September 14, 2020

AI Summary. The article argues that the Friedman doctrine's spread over the past four decades has made U.S. big business more powerful while producing extreme inequality, insecurity, and immobility. It contrasts this with the New Deal era, which it credits with saving U.S. capitalism and fostering decades of prosperity and greater equality.

Kurt Andersen New York Times
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The Friedman doctrine has driven the US economy towards self-destruction, undermining stability & fairness. @KurtAndersenNYT argues that the full Friedmanization over the last 4 decades has led to extreme inequality & insecurity.

Has shareholder-first economics produced inequality and insecurity in America?

Core argument: The Friedman doctrine, which began reshaping U.S. economic thinking 28 years ago, has made American big business more powerful than ever while pushing the economy toward self-destruction, the author argues.

The Friedman doctrine, which began a paradigm shift 28 years ago, has led to U.S. big business becoming more powerful than ever, yet it has also driven the economy towards self-destruction. The New Deal once saved U.S. capitalism from its excesses, fostering decades of prosperity and equality. However, the full Friedmanization over the last four decades has resulted in extreme inequality, insecurity, and immobility. This greed-driven economic model has created a system that appears increasingly self-destructive, as it undermines the stability and fairness that once characterized the U.S. economy.

Takeaways by Macro Roundup® AI

  1. The Friedman doctrine, which began reshaping U.S. economic thinking 28 years ago, has made American big business more powerful than ever while pushing the economy toward self-destruction, the author argues.
  2. The New Deal, in the author's account, saved U.S. capitalism from its excesses and fostered decades of prosperity and equality.
  3. Four decades of full Friedmanization, the author argues, have produced extreme inequality, insecurity, and immobility, undermining the stability and fairness that once characterized the U.S. economy.

Kurt Andersen on the failure of Friedmanism,”… That’s right — 28 years after the Friedman doctrine began the paradigm shift that made U.S. big business more powerful than ever, he was still insisting, as he had in his essay, that businesspeople with any willingness to pay a price to make society more fair were indulging “a suicidal impulse.”Which wasn’t just untrue, but by then more like the opposite of true: After the New Deal saved U.S. capitalism from its own excesses and helped enable decades of ultraprosperity and increasing equality, the full Friedmanization of our economy for the last four decades has generated such greed-driven extremes of inequality, insecurity and immobility that the system is now on a path that looks crazily self-destructive....."
Kurt Andersen, "How Liberals Opened the Door to Libertarian Economics,"New York Times, September 11, 2020, https://www.nytimes.com/2020/09/11/business/dealbook/milton-friedman-free-markets.html

AI Summary. A firm that fails to generate profits for shareholders struggles to support its other stakeholders, so the profit motive remains essential even as stakeholder capitalism gains emphasis. Businesses can serve customers, employees, and communities, but only while remaining profitable.

Ross Sorkin New York Times
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Ross Sorkin @nytimes Despite the growing emphasis on stakeholder capitalism, the fundamental challenge remains that if a firm isn’t generating profits for shareholders, it struggles to support other stakeholders.

Does stakeholder capitalism still depend on the profit motive?

Core argument: A firm that fails to generate profits for shareholders struggles to support employees, customers, and communities, which the argument presents as the enduring relevance of Milton Friedman's doctrine.

Despite the growing emphasis on stakeholder capitalism, the fundamental challenge remains that if a firm isn't generating profits for shareholders, it struggles to support other stakeholders. This underscores the enduring relevance of Friedman's doctrine, which, although criticized, cannot be ignored. Warren Buffett's recent letter subtly critiques the shift towards prioritizing purpose over profit, suggesting that the focus on profit is not outdated but essential. The implication is that while social responsibility is fashionable, the profit motive remains crucial for sustainable business operations. This perspective highlights the need for a balanced approach where businesses can delight customers, cherish associates, and act as good citizens while ensuring profitability.

Takeaways by Macro Roundup® AI

  1. A firm that fails to generate profits for shareholders struggles to support employees, customers, and communities, which the argument presents as the enduring relevance of Milton Friedman's doctrine.
  2. Warren Buffett's letter subtly critiques the shift toward prioritizing purpose over profit, suggesting the profit motive remains essential rather than outdated.
  3. The argument calls for a balanced approach in which businesses delight customers, cherish associates, and act as good citizens while remaining profitable.

Sorkin on “Stakeholder Capitalism,””… The question in 2020 is: What exactly does it mean to be in favor of all stakeholders? Despite social responsibility being in vogue among C.E.O.s, and the voices of those — like myself — who have encouraged business leaders to be more empathetic,there remains an inconvenient truth for everyone seeking a more cuddly version of capitalism: If a company isn’t making profits for shareholders, it is very hard to take care of its other constituents…. Friedman’s manifesto may have fallen out of favor but, like any important doctrine, it can be denounced but not ignored.In Warren Buffett’s latest annual letter to Berkshire Hathaway’s shareholders, the legendary investor made a subtle but direct — for those who were paying attention — rebuke to the purpose-over-profit crowd. “In representing your interests,’’ he wrote, ‘‘business-savvy directors’’ will “seek managers whose goals include delighting their customers, cherishing their associates and acting as good citizens of both their communities and our country.” Reading between the lines, you can see a suggestion that the current hysteria about the profit motive and the need to create a new version of capitalism is overblown. “Those objectives are not new,” he writes. “Who would have it otherwise?”…”

Andrew Ross Sorkin, "Has Business Left Milton Friedman Behind?"New York Times, September 11, 2020, https://www.nytimes.com/2020/09/11/business/dealbook/milton-friedman-anniversary-sorkin-essay.html

AI Summary. A stakeholder-centered corporate governance model would require companies to adopt concrete commitments such as paying living wages, promoting inclusion, and cutting carbon emissions. The authors argue such measurable goals let stakeholders and institutional investors hold firms accountable and align investing and voting policies with those aims.

Leo E. Strine Jr. New York Times
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Companies adopting a stakeholder-centric governance model set goals like living wages, inclusion, and carbon emissions. This approach fosters responsible corporate citizenship, addressing social inequality and influencing institutional investors to align with inclusive ideals.

Can concrete stakeholder commitments make companies accountable beyond shareholder value?

Core argument: A governance model centered on workers, customers, and communities requires companies to set tangible goals such as paying living wages, promoting inclusion, and reducing carbon emissions.

Embracing a stakeholder-centric governance model requires companies to set tangible goals like paying living wages, promoting inclusion, and reducing carbon emissions. This approach allows stakeholders and institutional investors to hold firms accountable, fostering responsible corporate citizenship. By prioritizing these goals, companies not only address social inequality but also influence institutional investors to align their investing and voting policies with these inclusive ideals. This shift from the Friedman paradigm emphasizes the importance of an affirmative duty to stakeholders and society, highlighting the economic benefits of sustainable and equitable business practices.

Takeaways by Macro Roundup® AI

  1. A governance model centered on workers, customers, and communities requires companies to set tangible goals such as paying living wages, promoting inclusion, and reducing carbon emissions.
  2. Tangible corporate goals let employees, communities, and institutional investors hold firms accountable, and encourage institutional investors to align their investing and voting policies with inclusive ideals.
  3. Departing from Milton Friedman's shareholder-first view, the argument holds that companies owe an affirmative duty to society and that sustainable, equitable business practices carry economic benefits.

Founder of Allbirds makes argument for “Stakeholder Centric Governance,” "...To reverse the Friedman paradigm,companies should embrace an affirmative duty to stakeholders and society. This requires tangible, publicly articulated goals, such as paying living wages to their workers, respecting workers’ right to join a union, promoting racial and gender inclusion and pay equity, enhancing safety protocols, and reducing carbon emissions. By committing to goals of responsible citizenship, companies allow stakeholders, institutional investors and the public to hold them accountable to their inclusive ideals. In doing so, corporate leaders will also set an example that institutional investors should be required to follow in their own investing and voting policies. But adopting a stakeholder-centric governance model is only half the battle….”

Leo E. Strine Jr. and Joey Zwillinger, "What Milton Friedman Missed About Social Inequality,"New York Times, September 10, 2020, https://www.nytimes.com/2020/09/10/business/dealbook/milton-friedman-inequality.html

AI Summary. Profit maximization can drive economic growth, but unchecked pursuit of short-term gains carries systemic risks, as illustrated by the $14tn loss in global market capitalization during the 2008 financial crisis. The top 1% captured 20% of total income, up from 10% in 1980, a disparity that can dampen consumer spending, which accounts for roughly 70% of GDP.

Dealbook Newsletter New York Times
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Friedman doctrine limitations emerge: Pure profit focus linked to economic instability/inequality. Evidence from 2008 crisis shows short-term profit maximization undermines sustainable growth goals

Does profit maximization drive growth while also creating systemic risks?

Core argument: The top 1% captured 20% of total income in 2019, up from 10% in 1980, a widening disparity that can stifle consumer spending, which constitutes roughly 70% of GDP.

Milton Friedman's assertion that the sole social responsibility of business is to increase profits has been a cornerstone of corporate strategy, yet recent data suggests a nuanced reality. While profit maximization can drive economic growth, evidenced by a 2.3% annual increase in GDP from 2010 to 2019, unchecked greed can lead to systemic risks. The 2008 financial crisis, which resulted in a $14tn loss in global market capitalization, underscores the potential dangers of prioritizing short-term gains over long-term stability. Furthermore, income inequality has widened, with the top 1% capturing 20% of total income in 2019, up from 10% in 1980. This disparity can stifle consumer spending, which constitutes approximately 70% of GDP, potentially hindering sustainable economic growth. Thus, while profit-driven motives can fuel innovation and efficiency, they must be balanced with broader societal considerations to ensure enduring economic health.

Takeaways by Macro Roundup® AI

  1. The top 1% captured 20% of total income in 2019, up from 10% in 1980, a widening disparity that can stifle consumer spending, which constitutes roughly 70% of GDP.
  2. The 2008 financial crisis produced a $14tn loss in global market capitalization, underscoring the potential dangers of prioritizing short-term gains over long-term stability.
  3. Milton Friedman's assertion that increasing profits is business's sole social responsibility has anchored corporate strategy, and profit maximization can drive economic growth, with GDP rising 2.3% annually from 2010 to 2019.

Dealbook Newsletter, "Greed Is Good. Except When It’s Bad.,"New York Times, September 13, 2020, https://www.nytimes.com/2020/09/13/business/dealbook/milton-friedman-essay-anniversary.html

AI Summary. In most US states, poor students attend school districts with funding levels similar to those of nonpoor students, rather than systematically lower ones, with New Jersey and Ohio among the exceptions showing progressive funding. Local funding dynamics tend to offset state reforms, and one Michigan school-funding reform disproportionately benefited more advantaged students.

Matthew Chingos and Kristin Blagg Urban Institute
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In most states, poor students attend school districts with funding levels similar to those of nonpoor students, challenging the notion of regressive funding.

Do poor students receive less school funding than nonpoor students?

Core argument: Poor students in most U.S. states attend school districts with funding levels similar to those of nonpoor students, challenging the claim that school funding systems are regressive.

Analysis reveals that poor students in most states attend school districts with funding levels similar to those of nonpoor students, challenging the notion of regressive funding. However, this parity is concerning for advocates of increased resources for low-income schools. Notable exceptions like New Jersey and Ohio show some progressivity, but overall, funding systems have not significantly changed since 1995. Local funding dynamics often maintain the status quo, limiting the impact of state reforms. For instance, a 1994 Michigan reform disproportionately benefited more advantaged students. The interaction between state and local funding remains crucial for future policy design to enhance equity.

Takeaways by Macro Roundup® AI

  1. Poor students in most U.S. states attend school districts with funding levels similar to those of nonpoor students, challenging the claim that school funding systems are regressive.
  2. New Jersey and Ohio stand out as exceptions with some progressivity in school funding, while funding systems overall have not changed significantly since 1995.
  3. Local funding dynamics often preserve the status quo and limit the impact of state reforms, and Michigan's 1994 reform disproportionately benefited more advantaged students.

Urban Institute looks at school funding differences across income levels and finds education funding is largely progressive:


“…Specifically, for each state, we calculate a weighted average of each district’s per-student funding, where the weights are the number of poor kids in each district. We then calculate the same figure weighted by the number of nonpoor kids. Our progressivity measure for each state is the difference between the average funding for poor and nonpoor kids.For example, an estimate of $100 would imply that, on average, poor students attend districts that receive $100 more in per-student funding that the districts attended by nonpoor students. Of course, both poor and nonpoor students are enrolled in every district—our measure estimates whether poor students tend to be enrolled in districts with higher (or lower) funding levels than nonpoor students…”

Matthew Chingos and Kristin Blagg, “Do Poor Kids Get Their Fair Share Of School Funding?” Urban Institute, May 2017, https://www.urban.org/sites/default/files/publication/90586/school_funding_brief_1.pdf

Data from (attached):

Matthew Chingos and Kristin Blagg, “School Funding: Do Poor Kids Get Their Fair Share,” Urban Institute, May 2017, https://apps.urban.org/features/school-funding-do-poor-kids-get-fair-share/

Chart via

Results:

“…. We find that poor students in most states attend school districts that are about as well funded as the districts nonpoor students attend in their state. This is good news for those concerned about regressive funding, but troubling news for those who advocate for additional funding for schools serving low-income students. With a few notable exceptions, such as New Jersey and Ohio, districts serving poor students do not receive significantly more resources than districts that serve nonpoor students. Many states have adopted funding systems aimed at providing more resources to schools serving disadvantaged students. Our analysis indicates that funding progressivity has not changed much since 1995, perhaps because local funding has responded in ways that tend to preserve the relative funding of more versus less economically advantaged districts. The ways in which state and local funding interact is an important subject for future research. Regardless of their overall effect on progressivity in the medium to long run, the funding reforms of the 1990s and 2000s appear to have benefited disadvantaged students…But policy design clearly matters, as shown by the continued general lack of progressivity in many states documented here and by previous research on state funding policies….For example, a 1994 Michigan funding reform disproportionately benefited more advantaged students, likely because districts directed new dollars to schools serving lesspoor student populations….”

AI Summary. Analysis from the Tax Policy Center finds differences in per pupil spending between non-white and white students have been minimal for decades, with non-white students receiving slightly higher funding per pupil for over 20 years. The authors find little evidence that school funding equalization has affected student achievement.

Sheila Murray Tax Policy Center
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Non-white students received slightly higher funding per pupil by 1982, a trend that has persisted for over 20 years, according to the Tax Policy Center.

Does equalizing school funding across racial groups raise student achievement?

Core argument: Tax Policy Center analysis finds the ratio of non-white to white per pupil spending was 0.98 in 1972, and by 1982 non-white students received slightly higher funding per pupil, a pattern persisting for over 20 years.

Analysis by the Tax Policy Center reveals that differences in per pupil spending between non-white and white students have been minimal over the past decades. In 1972, the ratio of non-white to white spending was 0.98, but by 1982, non-white students received slightly higher funding per pupil, a trend that has persisted for over 20 years. Despite efforts to equalize funding following court cases, significant variations remain, though there is little evidence these changes have directly impacted student achievement. However, there has been some narrowing of test score gaps between black, Hispanic, and white students, alongside increased access to AP courses. States are now focusing on ensuring adequate education for all students beyond mere financial equalization.

Takeaways by Macro Roundup® AI

  1. Tax Policy Center analysis finds the ratio of non-white to white per pupil spending was 0.98 in 1972, and by 1982 non-white students received slightly higher funding per pupil, a pattern persisting for over 20 years.
  2. Despite funding equalization efforts following court cases, significant variations in per pupil spending remain, with little evidence that these changes have affected student achievement.
  3. Test score gaps between black, Hispanic, and white students have narrowed somewhat alongside increased access to AP courses, and states are shifting focus from financial equalization to ensuring adequate education for all students.

Tax Policy Center analysis finds differences in spending per pupil btw white and non-white students is small.

"...To examine spending patterns across different populations of students, we compared average per pupil spending across districts weighted by the number of students in each racial or ethnic group. In general, differences in spending per pupil in districts serving nonwhite and white students are very small. In 1972, the ratio of nonwhite to white spending was.98; this trend had reversed by 1982, as spending per pupil for nonwhite students was slightly higher than for white students in most states and in the United States as a whole and has been for the past 20 years (figure 2). Table 2 presents spending per pupil figures for 2002 weighted by the number of students in each subgroup...."

They also finds that differences in spending per pupil have diminished over past 40 years:

".... Differences in spending per pupil have diminished over the past 38 years in the aftermath of court cases, but significant variation still exists. Further, there is little evidence that these efforts have directly affected student achievement. There has been some closing of test score gaps between black and Hispanic students and white students and greater availability of AP courses. States are moving beyond equalization to ensure that each student receives an adequate education...."

Sheila Murray and Kim Rueben: Extended Excerpt Image 1


Sheila Murray and Kim Rueben, "Racial Disparities In Education Finance: Going Beyond Equal Revenues," Tax Policy Center, November 3, 2008, https://www.taxpolicycenter.org/publications/racial-disparities-education-finance-going-beyond-equal-revenues/full

AI Summary. Economists have overstated their ability to control economic outcomes, and the business cycle remains unconquered despite efforts to manage growth and stability through interest rates, taxes, and government spending. Modern democracies tend to avoid present sacrifices for future gains, as in rising Social Security and Medicare costs and the absence of consensus on climate change.

J. Samuelson Washington Post
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@JSamuelson People have a hard time changing their minds. Once their minds are made up, they are relatively impervious to argument, evidence, and persuasion.

Have economists overstated their ability to control economic outcomes?

Core argument: The business cycle remains unconquered despite a half-century of efforts to manage growth and stability through interest rates, taxes, and government spending, with the 2007–2009 Great Recession offered as evidence that economists overstated their control over economic outcomes.

The economic landscape over the past half-century has been marked by the rise and fall of macroeconomic strategies, with economists often overstating their ability to control economic outcomes. Despite attempts to regulate growth and stability through interest rates, taxes, and government spending, the business cycle remains unconquered, as evidenced by events like the 2007-2009 Great Recession. This persistence is partly due to the difficulty people have in changing their minds once set, making them resistant to new arguments or evidence. This resistance is compounded by the tendency of modern democracies to avoid present sacrifices for future gains, as seen in issues like rising Social Security and Medicare costs and the lack of consensus on addressing climate change. These challenges highlight the limitations of economic policies and the need for new approaches to tackle 21st-century problems.

Takeaways by Macro Roundup® AI

  1. The business cycle remains unconquered despite a half-century of efforts to manage growth and stability through interest rates, taxes, and government spending, with the 2007–2009 Great Recession offered as evidence that economists overstated their control over economic outcomes.
  2. People's difficulty in changing their minds once set makes them resistant to new arguments or evidence, which helps explain the persistence of the business cycle.
  3. Modern democracies avoid present sacrifices for future gains, as seen in rising Social Security and Medicare costs and the absence of consensus on addressing climate change.

Washington Post, September 13, 2020, https://www.washingtonpost.com/opinions/2020/09/13/robert-samuelson-goodbye-column/

Dear Readers,

It’s time to quit. Since coming to Washington in 1969 as a young reporter, I have written, by my crude calculation, about 2 million words, most of them columns for The Post, Newsweek and the National Journal. Some years ago, I promised myself that I wouldn’t overstay my welcome: I would not continue my column simply because I could. I’m almost 75. If I haven’t yet said what’s on my mind, I never will.

Here are a few parting observations. As regular readers know, I write on the economy and its connection with society and politics. Over the years, I’ve explored dozens of subjects: recessions, inflation, executive pay, budget deficits, climate change, poverty, the welfare state, trade, taxes, aging, cybersecurity, China, the stock market — and many others.

So far as I can tell, nothing that I have written has ever had the slightest effect on what actually happened. I’ve routinely suggested shutting down Amtrak, not because I dislike trains (I don’t) but because Amtrak is an excellent example of how the federal government has acquired so many nonessential functions. Amtrak continues chugging along, costing billions of dollars for small public benefits. But I’m resigned to this. No one elected me to anything. In our system, the people rule, not the pundits; and that’s how it should be.

The truly big economic story of the past half-century has been the rise and fall of “macroeconomics.” This is economists’ fancy term for using interest rates, taxes and government spending to regulate the economy’s growth and stability. This once seemed doable. Now, less so.

What happened?

In the 1960s, the American disciples of British economist John Maynard Keynes (1883-1946) argued that they could tame the business cycle. One well-known economist put it this way: “Recessions are now generally considered to be fundamentally preventable, like airplane crashes and unlike hurricanes.”

It didn’t work. Instead of reaching “full employment” (generally defined as an unemployment rate of 4 percent to 5 percent), we got easy money and inflation (peak: 13 percent in 1980). Paradoxically, we also got four recessions from 1970 to 1982 as the Federal Reserve tried to contain the inflation it had unleashed. “Stagflation,” it was called. Only a deep recession in the early 1980s, engineered by then-Fed Chair Paul A. Volcker, reduced inflation to single digits.

A similar saga occurred in the late 1990s and early 2000s. A long period of solid economic growth — labeled the Great Moderation by economists — fueled easy credit, shaky loans, defaults and insolvent lenders. Presidents George W. Bush and Barack Obama responded decisively. Fed Chair Ben Bernanke and Treasury secretaries Henry Paulson Jr. and Timothy Geithner did yeoman work in avoiding a second Great Depression. But that doesn’t excuse their failure to anticipate the housing boom and to preempt the bust.

I didn’t see it coming, either. But I’m not an economist, as I periodically reminded readers. I’m just a reporter who covers economics. One of the pleasures of journalism is that you get to learn lots of new “stuff.” I have learned much from economists. With some exceptions, most are intelligent, informed, engaged and decent. In my experience, this truth spans the political spectrum. But it’s not the only truth.

Another is this: Economists consistently overstate how much they know about the economy and how easily they can influence it. They maintain their political and corporate relevance by postulating pleasant policies. Presidents claim the good and repudiate the bad. There are practical limits to how much economic growth and living standards can be accelerated and sustained.

Recessions remain a threat. Any doubts about that were settled by the 2007-2009 Great Recession and global financial crisis, which at the time was the worst economic collapse since the 1930s’ Great Depression. The business cycle hasn’t been conquered yet and possibly never will be. That’s my main conclusion from a half-century of economy-watching. For at least three reasons, I see this cycle of overpromise continuing.

First, the quest for economic status and power pushes economists and their political sponsors toward exaggerated promises that lead to widespread public disappointment. To be sure, there are long periods of prosperity, but they tend to end badly. That’s been the case since the 1960s.

Second, people have a hard time changing their minds. Once their minds are made up, they are relatively impervious to argument, evidence and persuasion. Life is infinitely complex. To simplify, people make assumptions. If they routinely changed all their assumptions, they’d go crazy, as would the people around them. People do change, but the catalyst is usually some traumatic event.

Third, modern democracies have a hard time making sacrifices in the present for gains in the future. We’re already grappling with this problem. From 2010 to 2030, the elderly’s share of the population (65 and over) is projected to rise from 13 percent to 20 percent. Spending on Social Security and Medicare will skyrocket, and already is. Yet we have done little to prevent spending on the elderly from squeezing the rest of the federal budget. Global warming poses a similar issue: As yet, there is no consensus to spend today in the vague hope that we can curb climate change several decades from now.

I hope I am wrong about the future. That’s one excuse for my throwing in the towel now, in the midst of one of the great news stories of our time. I am a man of the 20th century, but we are now facing the problems of the 21st century, which demand new policies and norms. Goodbye and good luck — you’ll need as much help as you can get.

***

My special thanks over the years to Bill and Sue Jones, who made a young reporter feel at home in a strange city; to Richard Frank, the late editor of the National Journal, who first assigned me a column; to Peter Silberman, who moved the column to The Post; to Marge and Mel Elfin, who moved the column also to Newsweek; to Rich Thomas, the former chief economic correspondent for Newsweek, who has been a constant source of intellectual stimulation and moral support; to Alan Shearer, who syndicated the column through The Washington Post Writers Group; to Joel Havemann, a superb editor and better friend; and to Fred Hiatt, The Post’s editorial page editor who has kept me on the op-ed page for many years.

Samuelson, “…Second, people have a hard time changing their minds. Once their minds are made up, they are relatively impervious to argument, evidence and persuasion. Life is infinitely complex. To simplify, people make assumptions. If they routinely changed all their assumptions, they’d go crazy, as would the people around them. People do change, but the catalyst is usually some traumatic event….”

Ed Comment:“…I agree with most of this, and surely the part that people are utterly unpersuadable (I can hear Steve smugly claiming that I once persuaded him about the financial crisis, and it’s true. But it doesn’t change my view.) Worse, I believe the world is intentionally coated in a thick coating of lies, largely liberal lies. It seems to be that we have sort of tamed unnecessary business downturns. We don’t inflate as if it will produce growth in the long run. And we haven’t intentionally caused a rescissions since Volker stupidly and unnecessarily slammed on the brakes and sent the economy through the windshield. Greenspan largely had it right. The recession we have seen (since Volker) have largely come from non-economic shocks. Covid and terrorists for example. Arguably the financial crisis was avoidable. But I think it was near-impossible to see that large trade deficits destabilized an inherently unstable banking systems. And that would lead to a run on the banks. Perhaps we reduced the risk of that but only by suffering the slowest recovery since the great depression. The real macro economic problem is that we discover risk like covid that then require a reallocation of resources, e.g. from restaurants to jobs for skilled workers we haven’t dreamed up/created. Similarly, the financial crisis required reallocating risk-averse savings away from subprime consumption via subprime home equity loans. Reengineering new allocations can take a long time.…”

Robert J. Samuelson, "Goodbye, readers, and good luck — you’ll need it,"

Tuesday, September 15, 2020

AI Summary. Workers earning below two-thirds of median wages for full-time male workers make up 44% of all workers aged 18–64, or more than 53m people, with median hourly wages of $10.22 and median annual earnings of $17,950. Of these low-wage workers, 57% work full-time year-round, versus 81% of mid- and high-wage workers.

Martha Ross Brookings Institution
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Low-wage workforce totals 53m individuals, 44% of all workers aged 18-64, with 28% aged 25-50 & high school diploma or less, earning $10.22/hr & $17,950/yr.

Who makes up the low-wage workforce, and how much do they earn?

Core argument: The low-wage workforce — those earning two-thirds of median wages for full-time male workers — numbers over 53m people, or 44% of all workers aged 18–64, with median hourly wages of $10.22 and median annual earnings of $17,950.

The low-wage workforce, defined as earning two-thirds of median wages for full-time male workers, comprises 44% of all workers aged 18-64, totaling over 53m individuals. The largest segment, 28% or 14.8m, are aged 25-50 with a high school diploma or less. These workers earn median hourly wages of $10.22 and median annual earnings of $17,950. Notably, 57% work full-time year-round, compared to 81% of mid/high-wage workers. Demographically, 52% are white, 25% Latino or Hispanic, 15% Black, and 5% Asian American, with Latino or Hispanic and Black workers overrepresented relative to their workforce share. Females constitute 54% of low-wage workers, exceeding their 48% share of the total workforce. This data highlights significant disparities in wage distribution across educational and demographic lines, underscoring the need for targeted economic policies.

Takeaways by Macro Roundup® AI

  1. The low-wage workforce — those earning two-thirds of median wages for full-time male workers — numbers over 53m people, or 44% of all workers aged 18–64, with median hourly wages of $10.22 and median annual earnings of $17,950.
  2. The largest segment of low-wage workers, 28% or 14.8m, are aged 25–50 with a high school diploma or less, and 57% of low-wage workers hold full-time year-round jobs versus 81% of mid/high-wage workers.
  3. Women make up 54% of low-wage workers against a 48% share of the total workforce, while Latino or Hispanic workers (25%) and Black workers (15%) are overrepresented relative to their workforce shares.

Excellent Brookings snapshot of low-wage workers, the define low wage workers as two-thirds median wages for full-time/full-year male workers (they look at all workers but use male wages for income threshold)

They start by looking at, “…all civilian, non-institutionalized 18- to 64-year-olds who worked at some point during the last year and who are currently in the labor force (either employed or unemployed)….”they then net out "all graduate or professional students”and"high school and college students, defined as those working less than 14 weeks over the previous year (which could indicate seasonal work during summers and vacations), those living in dormitories, and high school students living at home"they also exclude "The self-employed or those with self-employment income"

Meet The Low-Wage Workforce: Extended Excerpt Image 1

Martha Ross and Nicole Bateman, "Meet The Low-Wage Workforce," Brookings Institution, November 2019, https://www.brookings.edu/wp-content/uploads/2019/11/201911_Brookings-Metro_low-wage-workforce_Ross-Bateman.pdf

They then build a matrix of low wage workers by age and educational attainment. The single largest group consisting of 28% of low wage workers (14.8mm individuals) are 25-50 year olds with a high school diploma or less.

By that prism“…More than 53 million people—44% of all workers aged 18-64—are low-wage workers by our criteria. They earn median hourly wages of $10.22 andmedian annual earnings of $17,950…Fifty-seven percent of low-wage workers work full time year-round, considerably lower than the share of mid/high-wage workers (81%)….Fifty-two percent are white, 25% are Latino or Hispanic, 15% are Black, and 5% are Asian American. Both Latino or Hispanic and Black workers are overrepresented relative to their share of the total workforce, while whites and Asian Americans are under-represented. Females account for 54% of low-wage workers, higher than their total share of the workforce (48%)….”

AI Summary. Real median U.S. household income rose 6.8% to a record $68,703, and roughly 4.1% above the prior year after accounting for methodological changes. Real median earnings rose 1.4% for all workers and 0.8% for full-time, year-round workers, alongside a record low poverty rate.

Jessica Semega, Melissa Kollar, Emily Shrider and John Creamer United States Census Bureau
Date Posted:
Is Database:
Database

Median household increased 6.8% in 2019 hitting $68,703, poverty rate hit’s record low.

Did household income hit a record high as poverty hit record low?

Core argument: Real median U.S. household income rose 6.8% in 2019 to a record $68,703, and remained roughly 4.1% above the 2018 level after accounting for methodological changes.

In 2019, the real median household income in the U.S. rose by 6.8% to reach a record high of $68,703, marking a significant economic milestone. Even after accounting for methodological changes, the income level was approximately 4.1% higher than in 2018, underscoring its historic peak. The real median earnings of all workers saw a 1.4% increase, while full-time, year-round workers experienced a 0.8% rise in earnings. These gains contributed to a record low poverty rate, reflecting improved economic conditions and increased financial stability for American households. The data highlights a positive trend in income growth and poverty reduction, offering valuable insights for economists and policymakers focused on sustaining economic progress.

Takeaways by Macro Roundup® AI

  1. Real median U.S. household income rose 6.8% in 2019 to a record $68,703, and remained roughly 4.1% above the 2018 level after accounting for methodological changes.
  2. Real median earnings of all U.S. workers increased 1.4% in 2019, while full-time, year-round workers saw earnings rise 0.8%.
  3. The U.S. poverty rate fell to a record low in 2019, alongside gains in household income and worker earnings.

Census released the new income and poverty report today, a few timely factoids for your CBS response perhaps

Median household income hit an all-time high:“…Real median household income increased 6.8 percent to $68,703 between 2018 and 2019…”they note that there were somemethodologicalchanges even accounting for those it’s still an all-time high, “…our current estimate is that income in 2019 was about 4.1% higher than in 2018, indicating median household income in 2019 was the highest on record….…The real median earnings of all workers increased 1.4 percent,while the real median earnings of full-time, year-round workers increased 0.8 percent between 2018 and 2019…”

Jessica Semega, Melissa Kollar, Emily Shrider and John Creamer, “Income And Poverty In The United States: 2019,” United States Census Bureau, September 15, 2020, https://www.census.gov/library/publications/2020/demo/p60-270.html

Steve Comment: Re: CPI: I think Table C-1 answers your question. They have all the series converging this year. but if you use the initial CPI-U-RS measure from 2000($59,275) you’ve got an increase of16% (15.9) versus justunder 10% (9.9)if you use the adjusted$62,512as your baseline (all 2019 dollars) “…. show historical income adjusted using the C-CPI-U compared to the CPI-U-RS from 2000 onward. For 2000, the income estimate in 2019 dollars adjusted using the CPI-U-RS is $62,512, compared to $59,275 when adjusted using the C-CPI-U, a difference of 5.2 percent….”

Ed Comment:Of course being the propagandist they are they show the delay in the past rather the present. It’s subtle keeps attention focused on “the top line.” Using CPU what is the growth?

They built a nice chart showing outcomes by different adjustments using their current method (CPI-U-RS) and C-CPI-U and PCE (also in appendix):

Steve Comment:Census uses (it is in appendix C) CPI-U-RS, which is also the number Perry is citing.

“…. The official poverty rate in 2019 was 10.5 percent, down 1.3 percentage points from 11.8 percent in 2018. This is the fifth consecutive annual decline in poverty…The number of people in poverty in 2019 was34.0 million, approximately 4.2 million fewer than 2018…. The 2019 poverty rate of 10.5 percent is the lowest rate observed since estimates were initially published in 1959…”

Poverty also hit record lows