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


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
Date Posted:
Is Database:
Database

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

Wednesday, September 16, 2020

AI Summary. Surveys of wealthy Americans report that 77% grew up in poor or middle-class households, and a separate study found 82% of wealth was self-made rather than inherited.

Kirsten Fleming New York Post
Date Posted:
Is Database:
Database

@KirstenFleming US Trust study: 77% of wealthy respondents said they grew up poor or middle class, Fidelity study: 86% of wealth is self-made.

Is most wealth in America self-made rather than inherited?

Core argument: A US Trust study found 77% of wealthy individuals report growing up in poor or middle-class households.

Recent studies highlight the self-made nature of wealth among the affluent, with 77% of wealthy individuals reporting they grew up in poor or middle-class households, according to a US Trust study. This underscores a significant shift in wealth creation dynamics, as evidenced by a 2019 Fidelity study indicating that 82% of wealth is self-made. These findings suggest that economic mobility remains robust, with a majority of today's wealthy individuals having ascended from modest beginnings. This trend has implications for economic policy and wealth distribution, as it challenges traditional narratives about inherited wealth and emphasizes the role of entrepreneurship and innovation in wealth accumulation. The data also reflect broader macroeconomic trends where individual effort and opportunity play crucial roles in shaping financial success, potentially influencing future policy decisions aimed at fostering economic equality and opportunity.

Takeaways by Macro Roundup® AI

  1. A US Trust study found 77% of wealthy individuals report growing up in poor or middle-class households.
  2. A 2019 Fidelity study found 82% of wealth among the affluent is self-made rather than inherited.

Links to sources showing wealthier individuals earn their money “…. Risher, who grew up in a middle-class household while her husband was raised by a single mother who struggled financially. She said newly rich individuals like herself are relatively common, citing a US Trust study in which 77% of wealthy respondents said they grew up poor*and also a 2017 Fidelity study that found 86% of wealth is self-made**….”

Kirsten Fleming, "I’m a millionaire and it’s really hard being rich,"New York Post, September 14, 2020, https://nypost.com/2020/09/14/why-one-very-rich-woman-says-we-need-to-talk-about-money/

**That Fidelity Number is correct for 2017, in the most recent 2019 version (attached) 82% of wealthwas reported being self made (the 2017 report is no longer on their website)

*Note according to the U.S. Trust survey (attached) that “77% of wealthty respondents said they grew up poor” is a misquote of the survey thatfound 19% of respondents grew up poor, and 58% grew up middle class, for 77% grew up middle or lower class. In later versions of the report they apparently didn’t ask the same question so I stuck with 2016 version .

AI Summary. A U.S. Trust survey found that 77% of Americans with more than $3m in investable assets grew up in middle-class or poor households, including 20% who grew up poor, while 45% of millennial respondents came from wealthy families. Some 80% described their parents as firm disciplinarians who encouraged personal interests.

Bank Of America U.S. Trust Bank Of America Private Wealth Management
Date Posted:
Is Database:
Database

77% of wealthy Americans grew up middle class or poor, highlighting significant upward mobility. 20% grew up poor, while 45% of millennials came from wealthy families, indicating a generational shift in wealth origins.

Do most wealthy Americans come from middle-class or poor households?

Core argument: The 2016 U.S. Trust survey found 77% of Americans with more than $3m in investable assets grew up in middle class or poor households, and 20% of them grew up poor.

The 2016 U.S. Trust survey reveals that 77% of wealthy Americans, defined as those with >$3m in investable assets, grew up in middle class or poor households, highlighting significant upward mobility. Interestingly, 20% of these individuals grew up poor, underscoring the potential for economic advancement despite initial financial constraints. In contrast, 45% of millennial respondents came from wealthy families, indicating a generational shift in wealth origins. The survey also notes that many wealthy individuals were raised in strict yet supportive households, with 80% describing their parents as firm disciplinarians who encouraged personal interests. Key values emphasized in these families included academics (79%), financial discipline (68%), and work participation (63%), suggesting that these factors may contribute to financial success.

Takeaways by Macro Roundup® AI

  1. The 2016 U.S. Trust survey found 77% of Americans with more than $3m in investable assets grew up in middle class or poor households, and 20% of them grew up poor.
  2. Among millennial respondents to the 2016 U.S. Trust survey, 45% came from wealthy families, in contrast to the broader wealthy population's middle class and poor origins.
  3. In the 2016 U.S. Trust survey, 80% of wealthy respondents described their parents as firm disciplinarians who encouraged personal interests, and their families emphasized academics (79%), financial discipline (68%), and work participation (63%).

U.S Trust runs an annual survey of individuals with >$3mm of investable assets (N=684) of their respondents 77% grew up middle class or less, interesting of their millennials respondents 45% grew up wealthy these numbers are from the 2016 version of the report that was cited in NYPost“…Overall, today’s wealthy Americans come primarily from middle class backgrounds, although one in five grew up poor. However, Millennials contrast sharply with this profile, as nearly half (45%) come from wealthy families,offering this generation an accelerated start to wealth….”

Bank Of American, “2016 U.S. Trust Insights On Wealth And Worth,” U.S. Trust Bank Of America Private Wealth Management, 2016, http://doingmorethatmatters.com/wp-content/uploads/2016/09/US_Trust-Wealth-and-Worth-Study-2016.pdf

Characteristics of the households the wealthy grew up in, “…Many of the wealthy grew up in strict but supportive households. Eight in ten describe their parents as firm disciplinarians who also encouraged individual interests and talents. Nearly two-thirds say their parents were tolerant of their mistakes and failures. The three most important values stressed in these families were academics (79%),financial discipline (68%) and work participation (63%)….”

Some factoids from the report (# are from 2016)“..There are 2,023,518 households in the U.S. with $3 million or more, including 987,930 households with $3 million to $5 million, 716,611 households with $5 million to $10 million, and 318,978 households with more than $10 million in assets…”

AI Summary. A survey of 2,026 investors, including 1,102 with over $1m in investable assets excluding employer retirement plans and real estate, found that 82% of millionaires' wealth was self-earned or self-increased, while 18% was inherited or increased by others.

Fidelity Staff Fidelity Investments
Date Posted:
Is Database:
Database

According to @Fidelity, 82% of millionaires’ wealth is self-earned or increased, while only 18% is inherited or increased by others.

Is most millionaire wealth self-earned rather than inherited?

Core argument: The 11th Millionaire Outlook Study finds 82% of millionaires' wealth is self-earned or self-increased, while 18% is inherited or increased by others.

The 11th Millionaire Outlook Study reveals that 82% of millionaires' wealth is self-earned or increased, while only 18% is inherited or increased by others. This data, collected from a survey of 2,026 investors including 1,102 millionaires, highlights the significant role of personal financial acumen and investment strategies in wealth accumulation. Participants had over $1m in investable assets, excluding employer-sponsored retirement plans and real estate. The study underscores the importance of self-driven financial growth, as the majority of millionaires have built their wealth independently, reflecting broader economic trends where individual entrepreneurship and investment decisions are pivotal. This insight is crucial for economists and policymakers focusing on wealth distribution and economic mobility.

Takeaways by Macro Roundup® AI

  1. The 11th Millionaire Outlook Study finds 82% of millionaires' wealth is self-earned or self-increased, while 18% is inherited or increased by others.
  2. The 11th Millionaire Outlook Study surveyed 2,026 investors, including 1,102 millionaires, with investable assets over $1m excluding employer-sponsored retirement plans and real estate.
  3. The 11th Millionaire Outlook Study points to personal financial acumen and investment strategies as significant in wealth accumulation, with relevance for wealth distribution and economic mobility.

Fidelity’s Millionaire Outlook Study, the 2017 version cited in NY Post review had 88% of individuals saying their wealth was self made,in 2019 it was 82%.I’ve attached the current version here.

The participants have >$1mm in investable assets outside of employer sponsored retirement plans and real estate:“…The 2019 Fidelity Millionaire Outlook Study was conducted during the period August 6 through August 26, 2019. It surveyed a total of 2,026 investors, including 1,102 millionaires. The study was conducted via a 25-minute online survey, with the sample provided by Brookmark, a third-party firm not affiliated with Fidelity. Respondents were screened for a minimum level of investable assets (excluding retirement assets and primary residence), age, and income levels. Millionaires are defined as investors with over $1 million in investable assets outside employer-sponsored retirement plans and real estate.Millionaires-of-Tomorrow are defined as investors with $50,000 to $999,999 in investable assets outside employer-sponsored retirement plans or real estate. They include both Mass Affluent and Emerging Affluent Investors. Mass Affluent investors are aged 21-54 with Investable Assets of $250K to less than $1M OR aged 55+ with Investable Assets of $500K to less than $1M. Emerging Affluent investors are aged 21-49 with Investable Assets of $50K to less than $250K and household income of $100K or more…”

Fidelity, “11thMillionaire Outlook Study,” Fidelity Investments, December 2019, https://clearingcustody.fidelity.com/app/literature/item/9897298.html

AI Summary. The Federal Reserve's balance sheet has expanded by $1.6tn while banks' excess reserves have turned downward, breaking the pattern of the Great Financial Crisis when both rose together. The author argues this widening gap, which has historically tracked inflation, points to rising inflation that could reach 2% core personal consumption inflation.

Benjamin Della Rocca Council on Foreign Relations
Date Posted:
Is Database:
Database

The Fed’s balance sheet expansion by $1.6tn has diverged from historical patterns, with banks’ excess reserves turning sharply downward since June. This decoupling suggests a potential rise in inflation, reaching 2% Core PCE by Feb 2021.

Does a growing gap between Fed assets and reserves signal inflation?

Core argument: The Fed's balance sheet has expanded by $1.6tn while banks' excess reserves have turned sharply downward since June, diverging from the Great Financial Crisis pattern in which both rose in tandem.

Despite the Fed's balance sheet expansion by $1.6tn, banks' excess reserves have turned sharply downward since June, diverging from the historical pattern observed during the Great Financial Crisis when both rose in tandem. This decoupling suggests a potential rise in inflation, as the gap between the Fed's balance sheet and bank reserves, which has historically tracked inflation, reaches new highs. If the current trend persists, inflation could increase at a similar pace to the post-crisis era, potentially reaching 2% Core PCE [Personal Consumption Expenditures] by February 2021. This shift indicates that the Fed's quantitative easing (QE) may now contribute to upward inflationary pressures, contrasting with past outcomes where inflation remained flat despite balance sheet growth.

Takeaways by Macro Roundup® AI

  1. The Fed's balance sheet has expanded by $1.6tn while banks' excess reserves have turned sharply downward since June, diverging from the Great Financial Crisis pattern in which both rose in tandem.
  2. The gap between the Fed's balance sheet and bank reserves, which has historically tracked inflation, has reached new highs, which the author reads as pointing to a rise in inflation.
  3. Should the current trend persist, inflation could rise at a pace similar to the post-crisis era, reaching 2% Core PCE by February 2021, with quantitative easing contributing upward pressure rather than leaving inflation flat.

Interesting forecast by Ben Steil drawing a comparison btw the Fed’s balance sheet and banks excess reserves during financial crisis and today. “…Stockpile is exactly what the banks did during the so-called Great Financial Crisis, from 2009 to 2015. As the left-hand figure above shows, banks’ excess reserves rose in close tandem with the Fed’s balance sheet during these years. In consequence, inflation, despite fears that it would run wild, stayed flat. The left-hand figure also shows the same pattern emerging in March of this year, when the Fed restarted QE. The Fed’s balance sheet rose by $1.6 trillion, while bank excess reserves rose by $1.7 trillion….”

Benn Steil and Benjamin Della Rocca, "Why the Fed Bond Binge Will Boost Inflation," Council On Foreign Relations, September 16, 2020, https://www.cfr.org/blog/why-fed-bond-binge-will-boost-inflation-1

He suggests the decoupling of the two suggests core PCE could hit 2% early next year, “…More recent data, however, show a big change. Since June, as QE continued to balloon the Fed’s balance sheet, bank excess reserves have turned sharply downward. In consequence, as the right-hand figure shows, the gap between the Fed’s balance sheet and bank excess reserves, which had closely tracked inflation throughout the post-crisis era, has hit new highs. If this trend persists, inflation should head upward in tandem. When, then, can we expect inflation to hit the Fed’s Holy Grail of 2 percent? Well, we know that when our balance-sheet-to-reserves gap measure began rising in 2010 it took eight months for inflation to rise one percentage point from the time it subsequently bottomed out. If inflation should rebound at the same pace now, we are looking at 2 percent Core PCE inflation, the Fed’s preferred measure, in February 2021….”