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
  • “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 comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “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
  • “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 fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…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 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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Tuesday, July 23, 2024

AI Summary. In randomized assignments of managers to worker groups, the authors estimate that good managers are roughly twice as valuable as good workers and score higher on tests of fluid intelligence and economic decision-making. The authors find that self-selected managers perform worse than randomly assigned ones.

Ben Weidmann, Joseph Vecci, Farah Said, et al. National Bureau of Economic Research
Date Posted:

An experiment using repeated random assignments of managers finds that good managers have twice the impact on team performance as good workers. Randomly assigned managers do better than self-nominated ones. @ProfDavidDeming @SoniaBhalotra @_farahsaid

How valuable are good managers, and what traits identify them?

Core argument: Good managers are roughly twice as valuable as good workers, consistent with studies of managerial performance in other settings.

We repeatedly randomly assign managers to different groups of workers who perform a Collaborative Production Task together, and in each case, we estimate the contribution of the manager to group performance after conditioning on workers’ skills. Over multiple random assignments, some managers consistently cause their teams to exceed predicted performance. Good managers are roughly twice as valuable as good workers, consistent with studies of managerial performance in other settings. Good managers have higher fluid intelligence and score higher on a test of economic decision-making skill. We also find that self-promoted managers perform worse than managers who are randomly assigned to the role. Finally, we show that good managers increase group performance by monitoring workers to avoid wasting time, by allocating workers to tasks that maximize their comparative advantage, and by motivating them to exert effort.

Takeaways by Macro Roundup® AI

  1. Good managers are roughly twice as valuable as good workers, consistent with studies of managerial performance in other settings.
  2. Across repeated random assignments of managers to worker groups, some managers consistently cause their teams to exceed performance predicted from workers' skills, and good managers have higher fluid intelligence and score higher on a test of economic decision-making skill.
  3. Self-promoted managers perform worse than randomly assigned managers, and good managers raise group performance by monitoring workers to avoid wasting time, allocating workers to tasks that maximize their comparative advantage, and motivating them to exert effort.

Related Articles:

  • Why Do Wages Grow Faster for Educated Workers? — College graduates sort into professional, non-routine occupations where wages rise much more with job tenure, and the author estimates this occupational sorting explains at least half of the life-cycle growth in the college wage premium. That premium is estimated at 22% at age 26, 49% at age 40, and 56% at age 60.
  • Multidimensional Human Capital and the Wage Structure — The wage return to cognitive skills has declined, from about 10% higher hourly wages per standard deviation of test score in the 1980s and early 1990s to 4.5% in the 2000s and early 2010s, while returns to a bachelor's degree rose. Social skill-intensive occupations grew as a share of US jobs, with faster real wage growth.
  • Diversifying Society’s Leaders? The Determinants and Causal Effects of Admission to Highly Selective Private Colleges — Children from top-1% families are more than 2x as likely as middle-class students with comparable SAT/ACT scores to attend an Ivy-Plus college, with two-thirds of the gap attributable to higher admissions rates. The authors attribute this advantage to legacy preferences, weight on non-academic credentials, and athlete recruitment.

AI Summary. The authors argue that by shifting its debt issuance toward shorter maturities, the US Treasury is managing financial conditions in a way that takes on core Federal Reserve functions, a practice they call "activist Treasury issuance." They estimate it has lowered 10-year yields by about 0.25 percentage points, comparable to a one-point cut in the Federal Reserve's policy rate.

Stephen Miran and Nouriel Roubini Hudson Bay Capital
Date Posted:

.@SteveMiran @Nouriel argue that a rotation in Treasury’s issuance policies from long-term debt to bills is the equivalent of a 100bps cut in the FFR and believe “activist Treasury issuance” is offsetting the Fed’s efforts to slow the economy.

Is Treasury's shift to shorter maturities taking over Fed functions?

Core argument: The authors calculate that "activist Treasury issuance" — Treasury's adjustment of its debt maturity profile — has reduced 10-year yields by roughly 0.25 percentage points, providing stimulus similar to a one-point cut in the Fed Funds rate.

By adjusting the maturity profile of its debt issuance, Treasury is dynamically managing financial conditions and through them, the economy, usurping core functions of the Federal Reserve. We dub this novel tool “activist Treasury issuance,” or ATI. ATI has been a major market driver over the past year and we expect it will continue to play a significant role in the years ahead. We calculate that ATI has reduced 10-year yields over the last year by roughly a quarter of a percent, providing similar stimulus as a one-point cut in the Fed Funds rate, the central bank’s primary policy tool. Combined with higher neutral rates, ATI implies the total stance of both monetary and issuance policy, considered together, is roughly neutral—in other words, ATI has interdicted the Fed’s attempt to restrain the economy, helping explain inflation persistence and upward nominal growth surprises over the past year.

Takeaways by Macro Roundup® AI

  1. The authors calculate that "activist Treasury issuance" — Treasury's adjustment of its debt maturity profile — has reduced 10-year yields by roughly 0.25 percentage points, providing stimulus similar to a one-point cut in the Fed Funds rate.
  2. The authors argue that activist Treasury issuance combined with higher neutral rates leaves the total stance of monetary and issuance policy roughly neutral, interdicting the Fed's attempt to restrain the economy and helping explain inflation persistence and upward nominal growth surprises.
  3. The authors describe activist Treasury issuance as a major market driver that usurps core functions of the Federal Reserve, and expect it to continue playing a significant role in the years ahead.

Related Articles:

  • One Weird Trick — A larger share of Treasury financing done through short-term bills rather than longer-dated coupon securities would likely ease upward pressure on long-term yields, though the effect may be modest. With the deficit estimated near $1.5t, shifting toward bills would let the Treasury hold coupon sizes steady or trim them, reducing near-term supply.
  • Rapid Increase in T-Bill Supply Is a Growing Risk — The supply of short-term US Treasury bills has risen by $2tn over 12 months, and bills have grown as a share of total debt outstanding. Absorbing this supply requires continued demand from banks, money market funds, and households, and falling appetite could push short-term rates higher and raise the risk of funding-market strains.
  • Resilience Redux in the US Treasury Market — The authors argue that large, persistent US federal deficits and limited dealer balance-sheet flexibility will cause outstanding Treasury debt to grow rapidly relative to the market's capacity to intermediate trades, absent significant changes in market structure. They contend broad central clearing, all-to-all trading, real-time post-trade reporting, capital-regulation changes, and transparent official purchase programs could strengthen market capacity and resilience.

AI Summary. US dollar policy has been non-interventionist since the mid-1990s, roughly 30 years, making the current administration's expressed preference for a weaker dollar a departure that has not been spelled out explicitly. The stated rationale is that a weaker dollar would make American exports cheaper and help rebuild domestic manufacturing employment.

Jens Nordvig and Chris Marsh Money: Inside and Out
Date Posted:

.@GeneralTheorist and @jnordvig note that the US dollar policy has been non-interventionist for the past 30 years, but a second Trump term may support a weaker dollar to boost US manufacturing competitiveness.

Would a weaker dollar boost US exports and manufacturing employment?

Core argument: US dollar policy has been non-interventionist for roughly 30 years since the mid-1990s, and Trump's stance departs from that approach, though it has not been spelled out explicitly.

US Dollar policy has been non-interventionist since the mid-1990s, or for about 30 years. Trump’s stance on the dollar is highly unusual, and a departure from the past US dollar policy noted above, although it is not a policy that is spelled out very explicitly. Take Trump’s comments to Bloomberg Businessweek, "We have a big currency problem because the depth of the currency now in terms of strong dollar/weak yen, weak yuan, is massive." But it is not only Trump. JD Vance has made similar noises about the need for a weaker dollar as a mechanism to boost manufacturing and exports, "‘Devaluing’ of course is a scary word, but what it really means is American exports become cheaper, and that’s important. Suppose you want to employ a lot of people in manufacturing. In that case, you need to make it easier for us to export and not just import what we need." For Trump-Vance a weak dollar is necessary to reverse the loss of manufacturing production to the rest of the world and reinvigorate the blue-collar American.

Takeaways by Macro Roundup® AI

  1. US dollar policy has been non-interventionist for roughly 30 years since the mid-1990s, and Trump's stance departs from that approach, though it has not been spelled out explicitly.
  2. Trump told Bloomberg Businessweek that the United States has "a big currency problem" because the depth of the currency in terms of a strong dollar and weak yen and yuan is "massive.".
  3. JD Vance has argued that devaluing the dollar would make American exports cheaper, tying that to employing more people in manufacturing rather than importing what the country needs.

Related Articles:

  • He Helped Trump Remake Global Trade. His Work Isn’t Done — A former U.S. trade representative argues that countries running chronic trade surpluses for decades are by definition protectionist, and backs a universal 10% tariff plus a higher tariff on China to push toward globally balanced trade over time. Alternatives include import certificates tied to exports and a charge on foreign investment in U.S. assets.
  • Local Currency Returns — U.S. foreign exchange policy has rested with the Treasury since the 1933 dollar devaluation, and a president could pursue depreciation through direct intervention using the Exchange Stabilization Fund or diplomatic talks with other countries. A weaker dollar eases global financial conditions but could prompt foreign investors holding large amounts of U.S. equities to sell to avoid currency losses.
  • Can Trade Intervention Lead to Freer Trade? — China accounts for over 31% of global manufacturing but under 13% of global consumption, while the United States accounts for under 17% of manufacturing and nearly 27% of consumption. The author argues persistent surpluses reflect household subsidies to producers, and that the US could counter them with tariffs or taxes on capital inflows.

AI Summary. Commercial bank loan growth has stabilized below pre-pandemic rates at 2.5% year over year, with higher interest rates reducing loan demand. Banks' holdings of Treasuries and agency mortgage-backed securities have gradually increased as loan growth slowed, activity likely contributing to improved Treasury market liquidity.

Joseph Wang Fed Guy Blog
Date Posted:

Lower demand for bank loans due to higher rates is contributing to improved Treasury market liquidity as banks deploy “excess” balance sheet capacity into Treasuries and repo lending.

Is slower bank loan growth improving Treasury market liquidity?

Core argument: Commercial bank loan growth has slowed to 2.5% year over year, below inflation and below pre-pandemic rates, after surging post-pandemic, as higher interest rates reduced loan demand.

Commercial bank loan growth surged post-pandemic, but has stabilized at growth rates below those prevailing pre-pandemic. The large increase in interest rates has been successful in reducing demand for bank loans, where growth is even below inflation at just 2.5% year over year. The stagnation in loan growth appears to have given more room for banks to allocate capital towards their trading activities, which is likely boosting Treasury market liquidity. Bank of America has explicitly noted that they prefer to deploy excess cash into loans, but would otherwise leave them in cash or Treasuries. In line with that view, aggregate bank Treasury and Agency MBS holdings have been gradually increasing as loan growth has slowed. JP Morgan reported a 20% year-over-year increase in trading assets, which they primarily attributed to an increase in repo financing. The increased bank activity in Treasuries is likely contributing to the improvement in Treasury market liquidity.

Takeaways by Macro Roundup® AI

  1. Commercial bank loan growth has slowed to 2.5% year over year, below inflation and below pre-pandemic rates, after surging post-pandemic, as higher interest rates reduced loan demand.
  2. Aggregate bank holdings of Treasuries and Agency mortgage-backed securities have gradually increased as loan growth slowed, consistent with Bank of America's stated preference to deploy excess cash into loans and otherwise hold cash or Treasuries.
  3. JP Morgan reported a 20% year-over-year increase in trading assets, primarily attributed to an increase in repo financing, activity that is likely contributing to improved Treasury market liquidity.

Related Articles:

  • Liquidity Deteriorating in Treasury Markets — A liquidity gauge for US government debt measures the average gap between quoted yields and values implied by fitted yield curves across Treasury notes and bonds with at least one year to maturity, and it indicates deteriorating liquidity. Small average yield errors signal favorable conditions, as mispricings are corrected quickly.
  • Resilience Redux in the US Treasury Market — The authors argue that large, persistent US federal deficits and limited dealer balance-sheet flexibility will cause outstanding Treasury debt to grow rapidly relative to the market's capacity to intermediate trades, absent significant changes in market structure. They contend broad central clearing, all-to-all trading, real-time post-trade reporting, capital-regulation changes, and transparent official purchase programs could strengthen market capacity and resilience.
  • How Has Treasury Market Liquidity Evolved in 2023? — Treasury market liquidity has tracked its historical relationship with interest rate volatility, indicating liquidity has not been unusually poor given the level of rate volatility, though the two-year note shows somewhat higher-than-expected price impact. The market's capacity to smoothly handle large trading flows remains a concern for policymakers and market participants.

AI Summary. Small cap stocks, large cap value versus growth, and non-US versus US stocks trade at their cheapest valuations in 20 years, reflecting weaker earnings growth than US large cap growth. Evidence from tech supports the view that firms stay private longer, with median time to initial public offering rising from about 8 years to about 12.

Michael Cembalest J.P. Morgan
Date Posted:

Small-cap stocks are at their cheapest level in decades. Michael Cembalest argues “If Trump raises tariffs and ratchets up antitrust enforcement of large-cap tech stocks, that could be a small cap relative value catalyst.”

Are small caps and value cheap because their earnings growth lagged?

Core argument: Median time-to-IPO for tech stocks rose from roughly 8 years before 2009 to roughly 12 years in 2021, after which IPO activity declined sharply in 2022 and 2023.

Since 2010, small cap has been one of the big three underperforming portfolio strategies alongside large cap value vs growth and non-US stocks vs the US. All three out of favor strategies are at their cheapest levels in 20 years, but for good reason: weaker earnings growth than US large cap growth. Some observers believe that underperformance of US small cap vs large cap is due to companies staying private for longer periods of time, after which they go public as mid or large companies instead of small cap. We find some evidence for this line of reasoning as it relates to tech stocks. Median time-to-IPO for tech stocks rose from ~8 years before 2009 to ~12 years in 2021, after which IPO activity declined sharply in 2022/2023.

Takeaways by Macro Roundup® AI

  1. Median time-to-IPO for tech stocks rose from roughly 8 years before 2009 to roughly 12 years in 2021, after which IPO activity declined sharply in 2022 and 2023.
  2. Small cap, large cap value versus growth, and non-US versus US stocks have been the three underperforming portfolio strategies since 2010, and all three sit at their cheapest levels in 20 years.
  3. The three out-of-favor strategies are cheap for a reason: weaker earnings growth than US large cap growth, with evidence that tech companies staying private longer and listing as mid or large caps partly explains small cap underperformance.

Related Articles:

  • The Quality of New Entrants — Declining quality in the US small-cap universe is attributed mainly to an influx of unprofitable new listings, which account for 57% of a 2,750-stock universe and are concentrated in biotech, financials, and health care. Companies exiting the universe have tended to be higher quality than those remaining.
  • The Transition to a Higher Cost of Capital — Bond yields near 4.5% sit below the 5.5% short-term interest rate, leaving little risk premium, and those yields have been enough to draw buyers back toward normal bond holdings. The author argues yields still need to rise to a sustainable cost of capital given structurally higher fiscal and inflationary spending.
  • Long-Term Shareholder Returns: Evidence From 64,000 Global Stocks — A study of about 64,000 global stocks estimates net global stock market wealth creation of $75.7tn, with returns highly concentrated: the top 159 firms (0.25%) account for half of net wealth creation and the top 1,526 (2.39%) account for all of it. Fewer than half of stocks beat one-month US Treasury bills, 42.6% of non-US and 44.8% of US stocks.

AI Summary. The U.S. foreign-born population reached a record 46.1mm, or 13.8% of the population, roughly 3x the 4.7% share in 1970 but below the record 14.8% in 1890. Mexico is the top country of birth at 23% of immigrants, and unauthorized immigrants numbered about 11mm, or 23% of the foreign-born population.

Mohamad Moslimani and Jeffrey Passel Pew Research Center
Date Posted:

A @pewresearch analysis finds that the US foreign-born population reached a record 46.1mm in 2022, or 13.8% of the population, still under the 1890 peak of 14.8%. 49% of immigrants are naturalized citizens, while 28% have permanent or temporary permits.

How large is the U.S. immigrant population and where from?

Core argument: The U.S. foreign-born population reached a record 46.1 million in 2022, or 13.8% of the population, roughly triple the 4.7% share in 1970 but below the record 14.8% recorded in 1890.

The U.S. foreign-born population reached a record 46.1 million in 2022. Growth accelerated after Congress made U.S. immigration laws more permissive in 1965. Immigrants today account for 13.8% of the U.S. population. This is a roughly threefold increase from 4.7% in 1970. However, the immigrant share of the population today remains below the record 14.8% in 1890. Mexico is the top country of birth for U.S. immigrants. In 2022, roughly 10.6 million immigrants living in the U.S. were born there, making up 23% of all U.S. immigrants. The next largest origin groups were those from India (6%), China (5%), the Philippines (4%) and El Salvador (3%). From 1990 to 2007, the unauthorized immigrant population more than tripled in size, from 3.5 million to a record high of 12.2 million. From there, the number slowly declined to about 10.2 million in 2019. In 2022, the number of unauthorized immigrants in the U.S. showed sustained growth for the first time since 2007, to 11mm. As of 2022: 49% were naturalized U.S. citizens, 24% were lawful permanent residents, 4% were legal temporary residents, and 23% were unauthorized immigrants.

Takeaways by Macro Roundup® AI

  1. The U.S. foreign-born population reached a record 46.1 million in 2022, or 13.8% of the population, roughly triple the 4.7% share in 1970 but below the record 14.8% recorded in 1890.
  2. Mexico is the top country of birth for U.S. immigrants, with about 10.6 million Mexican-born immigrants making up 23% of the total in 2022, ahead of India (6%), China (5%), the Philippines (4%) and El Salvador (3%).
  3. The unauthorized immigrant population more than tripled from 3.5 million in 1990 to a record 12.2 million in 2007, declined to about 10.2 million in 2019, then rose to 11 million in 2022.

Related Articles:

  • The Cost of Illegal Immigration — The US foreign-born population rose by 6.6mm to 51.6mm over a roughly three-year span, lifting immigrants to 15.6% of the population, above the prior records of 14.8% in 1890 and 14.7% in 1910. The authors estimate about 13.7mm illegal immigrants now live in the US, a net increase of 3.7mm.
  • The Demographic Outlook: 2024 to 2054 — The Congressional Budget Office projects the US population will grow from 342mm in 2024 to 383mm in 2054, an average 0.4% a year — less than half the 0.9% pace of the prior five decades. Immigration accounts for about 70% of growth over the next decade and for all population growth beginning in 2040.
  • Without Immigrants, US Working-Age Population Would Shrink — All net US employment growth since early 2020 has been among foreign-born workers, and without immigration the US working-age population would be shrinking — a pattern likely to persist for the rest of the decade. The jump in immigration appears to be enabling a soft landing that most economists had thought impossible.

AI Summary. 15m people moved to rich countries over three years, the biggest surge in modern history, with net migration exceeding 3m to America, 1.3m to Canada and about 700,000 to Britain. As immigration surged, output per person fell in Britain and Germany, partly because recent arrivals are on average less skilled than residents.

Economist Staff The Economist
Date Posted:

In the past 3 years, at least 15mm people moved to rich countries, including a net change of 3mm in the US and 1.3mm in Canada in 2023. The flood has driven down GDP per person in the UK, Germany, and Canada.

Does a surge in less-skilled immigration lower output per person?

Core argument: Some 15m people have moved to rich countries over the past three years, the biggest surge in modern history, including net migration of more than 3m to America, 1.3m to Canada and about 700,000 to Britain last year.

In the past three years 15m people have moved to rich countries, the biggest surge in modern history. Last year more than 3m people migrated to America on net, 1.3m went to Canada and about 700,000 turned up in Britain. The arrivals are from all over, including hundreds of thousands of Ukrainians fleeing war and also millions from India and sub-Saharan Africa. Now there are signs the boom may be coming to an end. Net migration to Canada has nearly halved from its recent peak, while in New Zealand it is falling sharply. A clampdown would benefit GDP per person—the yardstick by which economists usually assess living standards. As immigration surged in 2022 and 2023, GDP per person in Britain fell. It has tumbled in Germany. In Canada, it remains nearly 4% off its high in 2022. This has happened in part because the latest arrivals are on average less skilled than the resident population, meaning that they cannot command high salaries.

Takeaways by Macro Roundup® AI

  1. Some 15m people have moved to rich countries over the past three years, the biggest surge in modern history, including net migration of more than 3m to America, 1.3m to Canada and about 700,000 to Britain last year.
  2. Canada's GDP per person remains nearly 4% below its 2022 high, while GDP per person fell in Britain and tumbled in Germany as immigration surged in 2022 and 2023, in part because recent arrivals are on average less skilled than residents.
  3. Net migration to Canada has nearly halved from its recent peak and is falling sharply in New Zealand, signs the migration boom may be coming to an end.

Related Articles:

  • A “Heat Dome” of Immigration — Canada has adopted some of the most aggressive immigration policies in the OECD, adding 1.273m residents in a year to reach a population of 41m — proportionally equivalent to the US admitting more than 10m immigrants annually. Canadians are increasingly angry as housing prices soar, sprawl expands, and traffic worsens.
  • Exploring the Implications of Sub-Saharan Africa’s Demographic Explosion — Sub-Saharan Africa is projected to hold a quarter of the world's working-age population within a few decades and to surpass China's working-age population in roughly a decade. Even with modest productivity growth near 2%, the region's growth is estimated at 4.5–5.5%, raising its share of global output from about 3% while remaining small.
  • The Force Shaping Western Politics — The foreign-born share of the population has risen sharply since 1990 in nearly every large Western country. As mainstream politicians from the center-right to the left dismissed voters' concerns about immigration, many voters drifted toward extreme-right parties that promised to reduce it.

Wednesday, July 24, 2024

AI Summary. Using wage data from most U.S. McDonald's restaurants, the authors find that before the Covid-19 pandemic, differences in entry-level wages across states were strongly related to state minimum wages, with real wages rising only in the roughly half of states raising their minimums. The 2021 wage spike nearly eliminated those geographic differences and left the federal minimum wage near-irrelevant.

Orley Ashenfelter and Štěpán Jurajda National Bureau of Economic Research
Date Posted:
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Using cross-state data they collected on Big Macs earned Per Hour (BMPH) to compute likely wages in the absence of minimum wage laws, Orley Ashenfelter and Štěpán Jurajda find minimum wages had a much smaller influence post-pandemic than in 2016.

Did the pandemic wage spike erase minimum wages' influence on entry-level pay?

Core argument: Wage data from 70–80% of U.S. McDonald's restaurants over 2016–2023, covering counties holding 97% of the U.S. population, yield McWages as a measure of nominal entry-level labor costs and a Big Macs Per Hour index of their purchasing power.

We collect 2016 to 2023 wage rates from 70-80% of U.S. McDonald’s restaurants, covering U.S. counties with 97% of the U.S. population. McWages capture [nominal] labor costs in entry-level jobs, while the Big Macs (earned) Per Hour (BMPH) index measures the corresponding purchasing power of wages. Our latent McWage measure allows us to explore the structure and ‘bite’ of state minimum wages. We find that the Covid-19 pandemic resulted in a sharp break in the importance of minimum wages for low-skilled wage growth, as captured by McWages. Prior to the pandemic, cross-state wage differences were strongly related to minimum wages, as state minimum wage levels were rising in tandem with the state-specific latent McWage means. As a result, real wages of McDonald’s workers were growing only in the roughly half of U.S. states that were raising state minimum wages. The pandemic-induced wage spike of 2021 nearly eliminated these geographic minimum wage related differences in wage growth between 2016 and 2023, and led to near-irrelevance of the federal minimum wage. Finally, our estimates offer a new, consistent measure of the ‘bite’ of state minimum wages, one that suggests limited cross-state variation in the minimum wage ‘bite’ prior to the pandemic, and a declining ‘bite’ in most states since the pandemic.

Takeaways by Macro Roundup® AI

  1. Wage data from 70–80% of U.S. McDonald's restaurants over 2016–2023, covering counties holding 97% of the U.S. population, yield McWages as a measure of nominal entry-level labor costs and a Big Macs Per Hour index of their purchasing power.
  2. Before Covid-19, cross-state McWage differences were strongly related to state minimum wages, and real wages of McDonald's workers grew only in the roughly half of states that were raising their minimum wages.
  3. The pandemic-induced wage spike of 2021 nearly eliminated minimum-wage-related geographic differences in wage growth over 2016–2023 and led to near-irrelevance of the federal minimum wage, with the estimated 'bite' of state minimum wages declining in most states since.

Related Articles:

AI Summary. Wages net of housing costs were once substantially higher in high-density areas than low-density areas for workers both with and without college education, but over the past half-century that urban wage premium has persisted only for college-educated workers, not for those with a high school degree or less.

Stan Veuger Economic Innovation Group
Date Posted:
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In 2019, urban wages for workers with a high school degree or less failed to offset higher urban housing costs, reversing a long-term trend. @stanveuger suggests loosening restrictions on housing construction to “reignite the urban growth machine.”

Do less-educated workers still earn an urban wage premium after housing costs?

Core argument: In 1970, hourly wages net of housing costs were dramatically higher in high-density areas than in low-density areas for workers both with and without at least some college education, the pattern known as the urban wage premium.

The figure shows the evolution over the past half-century of hourly wages net of spending on housing. The figure consists of five snapshots, roughly a decade apart. Each snapshot shows the relationship between population density in 1970 and “net” hourly wages] for workers with and without (some) college education. [In the] snapshot for 1970, we observe what is often referred to as “the urban wage premium” - wages accounting for the cost of housing, were dramatically higher in high-density places than in low-density areas for workers with at least some college education and those without. The scale for the vertical axis is logarithmic: an increase from 2.5 to 2.8 corresponds to an increase of about 35% in dollar terms. As we move toward the present, this pattern gradually shifts. While college workers continue to earn a significant urban wage premium, even after housing is taken into account, that is not the case for those with a high school degree or less.

Takeaways by Macro Roundup® AI

  1. In 1970, hourly wages net of housing costs were dramatically higher in high-density areas than in low-density areas for workers both with and without at least some college education, the pattern known as the urban wage premium.
  2. Across five snapshots roughly a decade apart over the past half-century, the urban wage premium net of housing costs persists for college-educated workers but not for those with a high school degree or less.
  3. The figure plots net hourly wages on a logarithmic scale against 1970 population density, where a rise from 2.5 to 2.8 corresponds to an increase of about 35% in dollar terms.

Related Articles:

  • The Determinants Of Declining Internal Migration — A 10% increase in wages where people live is associated with 3.5% less migration, while a 10% increase in destination wages is associated with 7.8% more migration; a 10% rise in destination home prices is associated with 2.6% less migration. The authors find wage responses alone would have raised migration rates, but housing-related factors more than offset them.
  • Young Families Have Continued Leaving Big Cities Post-Pandemic — Large urban counties have continued to lose population of young children even as their overall population growth resumed, driven by immigration. Birth rates in large urban counties have declined twice as fast as in rural counties over the past decade, and the number of children under five fell in 58% of all US counties.
  • The Economics of Inequality in High-Wage Economies — Information technology created investment opportunities exceeding the supply of properly trained talent, while trade with low-wage economies, low-skilled immigration, trade deficits, and aging demographics eased constraints on low-skilled labor and risk-averse savings. The author argues this framework, rather than rising cronyism, explains high returns to success, slowing productivity growth, and low interest rates.

AI Summary. The slight decline in native-born labor force participation reflects the aging and retirement of the native-born population rather than immigration, a drop the Congressional Budget Office had projected before the pandemic and the immigration surge. Large gains in overall employment have come from working-age immigrants arriving in the US.

Paul Krugman New York Times
Date Posted:

Citing only a slight fall in native-born labor force participation that is consistent with aging, @paulkrugman argues there is little evidence that competition from immigrants is driving native workers out of the labor force.

Is aging, not immigration, behind falling native-born labor force participation?

Core argument: The share of native-born U.S. adults in the labor force has fallen slightly since 2019, a decline Congressional Budget Office projections published in January 2020 had already forecast as baby boomers retired, before either the pandemic or the immigration surge.

The share of native-born adults in the labor force — employed or unemployed — has fallen slightly since 2019. This was both predictable and predicted, not because of immigration but as a result of the aging of the native-born population. Congressional Budget Office projections published in January 2020 — when nobody knew that either the pandemic or the immigration surge were coming — had already forecast a decline in the labor force participation rate as baby boomers retired. The near stagnation of native-born employment isn’t a demand-side issue, in which people aren’t working because they can’t find jobs. It is instead a supply-side issue, in which people aren’t working because they’ve reached retirement age. We’ve been able to achieve large increases in overall employment only because working-age immigrants have been coming to America. If we didn’t have the immigrants, we wouldn’t have the jobs.

Takeaways by Macro Roundup® AI

  1. The share of native-born U.S. adults in the labor force has fallen slightly since 2019, a decline Congressional Budget Office projections published in January 2020 had already forecast as baby boomers retired, before either the pandemic or the immigration surge.
  2. The near stagnation of native-born employment reflects a supply-side issue, with people leaving work at retirement age, rather than an inability to find jobs.
  3. Large increases in overall U.S. employment have been possible only because working-age immigrants have been coming to America; without those immigrants, the jobs would not exist.

Related Articles:

  • Immigration’s Effect on US Wages and Employment Redux — The authors estimate that immigration to the US over 2000-2019 raised wages of natives with a high school degree or less by 1.7% to 2.6%, a period when that group's real wages fell by 5% to 6%. Effects on more-educated natives ranged from -0.5% to +0.7%, with an overall average effect of +0.5% to +0.8% that was not statistically significant.
  • Without Immigrants, US Working-Age Population Would Shrink — All net US employment growth since early 2020 has been among foreign-born workers, and without immigration the US working-age population would be shrinking — a pattern likely to persist for the rest of the decade. The jump in immigration appears to be enabling a soft landing that most economists had thought impossible.
  • New Immigration Estimates Help Make Sense Of The Pace Of Employment — The Congressional Budget Office estimates net immigration was 3.3m in 2023, versus the 1m it had projected, implying faster population and labor force growth than currently reported. The authors estimate this raised real economic growth by about 0.1 percentage point and, by lifting both production and demand, added little price or wage pressure.

AI Summary. Cuba's national statistics office reported that more than 1m Cubans — about 10% of the population — emigrated over two years, cutting the population from roughly 11.2m to 10.1m, a level similar to 1985. The office identified emigration as the main factor in the decline.

Nora Gamez Torres Miami Herald
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According to the head of Cuba’s national statistics office, at least 10% of Cuba’s population – over 1mm people – fled during 2022- 2023. According to US records, at least 645,122 Cubans claimed asylum between October 2021 and June 2024.

Has emigration cut Cuba's population by a tenth in two years?

Core argument: Cuba's National Statistics and Information Office reported that 1,011,269 Cubans emigrated between 2022 and 2023, about 10% of the island's population, amid a severe economic downturn and a government crackdown on dissent.

A stunning 10% of Cuba’s population — more than a million people — left the island between 2022 and 2023, the head of the country’s national statistics office said during a National Assembly session. The data confirmed reporting by the Miami Herald and Cuban independent media that sounded the alarm over the mass migration of Cubans amid a severe economic downturn and a government crackdown on dissent in recent years. According to the official figures made public for the first time, Cuba’s population went from 11,181,595 on Dec. 31, 2021, to 10,055,968 on December 2023. The emigration of 1,011,269 Cubans was the main factor contributing to a massive fall in Cuba’s population by the end of 2023, when the population stood at a number similar to what it was in 1985, said Juan Carlos Alfonso Fraga, the head of the National Statistics and Information Office.

Takeaways by Macro Roundup® AI

  1. Cuba's National Statistics and Information Office reported that 1,011,269 Cubans emigrated between 2022 and 2023, about 10% of the island's population, amid a severe economic downturn and a government crackdown on dissent.
  2. Cuba's population fell from 11,181,595 on Dec. 31, 2021, to 10,055,968 in December 2023, a level similar to 1985, with emigration the main factor, said statistics chief Juan Carlos Alfonso Fraga.
  3. The Cuban figures, made public for the first time, confirmed earlier reporting on mass Cuban migration by the Miami Herald and Cuban independent media.

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  • Exploring the Implications of Sub-Saharan Africa’s Demographic Explosion — Sub-Saharan Africa is projected to hold a quarter of the world's working-age population within a few decades and to surpass China's working-age population in roughly a decade. Even with modest productivity growth near 2%, the region's growth is estimated at 4.5–5.5%, raising its share of global output from about 3% while remaining small.
  • Border Crossings Aren’t What They Used To Be — U.S. Department of Homeland Security data suggest that in the year with the most border apprehensions on record, nearly 72% of border crossers were apprehended and more than 650,000 entered without inspection, for just over 2.3m total crossings — eighth-highest since 2000. Applying similar apprehension rates to later years suggests those totals, while high, were also not records.

AI Summary. High-income countries face aging populations and low fertility that the author argues make immigration necessary to support the elderly, with Spain's ratio of working-age people to the old projected to fall from 2.45 in 2020 to 1 by 2050. The author proposes temporary work contracts enforced through secure digital identities and steep penalties for employing unauthorized workers.

Martin Wolf Financial Times
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Martin Wolf argues the aging of rich countries with low fertility rates and the need for low-skilled in-person work will likely result in widespread “temporary contract work, without either family reunification or the possibility of citizenship.”

Can temporary work contracts resolve aging societies' need for immigration?

Core argument: In Spain, the ratio of working-age people to the old would fall from 2.45 in 2020 to 1 in 2050, part of an aging and low-fertility shift that would make support for the elderly unaffordable without immigration.

High-income countries may have to abandon today’s binary view of the options — either exclusion or a pathway to citizenship — in their own interests and those of developing countries. First, the combination of aging with low historic fertility will generate such large increases in the ratio of the old to those of working age that support for the former will become unaffordable without immigration. In Spain, for example, this ratio would collapse from 2.45 in 2020 to 1 in 2050. Second, many essential jobs are unskilled, but the workers have to be present. Care of the old is one example. Finally, none of this requires fundamental changes in attitudes towards immigrants in rich countries. But it would probably require the creation of secure digital identities for the various categories of legitimate residents. The penalties for employing people who do not possess such identities would be very high. If mass immigration remains unacceptable, but becomes essential, then something more acceptable must be found. The only likely solution is temporary contracts.

Takeaways by Macro Roundup® AI

  1. In Spain, the ratio of working-age people to the old would fall from 2.45 in 2020 to 1 in 2050, part of an aging and low-fertility shift that would make support for the elderly unaffordable without immigration.
  2. Many essential jobs, including care of the old, are unskilled yet require workers to be present.
  3. Temporary contracts are the only likely solution if mass immigration remains unacceptable but becomes essential, and would probably require secure digital identities for legitimate residents, with very high penalties for employing people who lack them.

Related Articles:

  • Without Immigrants, US Working-Age Population Would Shrink — All net US employment growth since early 2020 has been among foreign-born workers, and without immigration the US working-age population would be shrinking — a pattern likely to persist for the rest of the decade. The jump in immigration appears to be enabling a soft landing that most economists had thought impossible.
  • What The Data Says About Immigrants In The U.S. — The U.S. foreign-born population reached a record 46.1mm, or 13.8% of the population, roughly 3x the 4.7% share in 1970 but below the record 14.8% in 1890. Mexico is the top country of birth at 23% of immigrants, and unauthorized immigrants numbered about 11mm, or 23% of the foreign-born population.
  • The Demographic Outlook: 2024 to 2054 — The Congressional Budget Office projects the US population will grow from 342mm in 2024 to 383mm in 2054, an average 0.4% a year — less than half the 0.9% pace of the prior five decades. Immigration accounts for about 70% of growth over the next decade and for all population growth beginning in 2040.

AI Summary. Fuel regulations that abruptly cut sulfur dioxide emissions from international shipping by about 80% created an inadvertent geoengineering termination shock, and the authors estimate the resulting radiative forcing over the global ocean could double or more the rate of warming in the 2020s relative to the rate since 1980.

Tianle Yuan, Hua Song, Lazaros Oreopoulos, et al. Nature
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A 2020 mandate that reduced the emission of sulfur dioxide from international shipping by about 80% likely doubled the rate of global warming by reducing the amount of light being reflected back into space.

Does cutting shipping sulfur emissions accelerate global warming?

Core argument: The 2020 fuel regulations cut sulfur dioxide emissions from international shipping by about 80%, which the authors characterize as an inadvertent geoengineering termination shock with global impact.

In 2020, fuel regulations abruptly reduced the emission of sulfur dioxide from international shipping by about 80% and created an inadvertent geoengineering termination shock with global impact. Here we estimate the regulation leads to a radiative forcing of Wm−2 averaged over the global ocean. The amount of radiative forcing could lead to a doubling (or more) of the warming rate in the 2020s compared with the rate since 1980 with strong spatiotemporal heterogeneity. The warming effect is consistent with the recent observed strong warming in 2023 and expected to make the 2020s anomalously warm. The forcing is equivalent in magnitude to 80% of the measured increase in planetary heat uptake since 2020. The radiative forcing also has strong hemispheric contrast, which has important implications for precipitation pattern changes.

Takeaways by Macro Roundup® AI

  1. The 2020 fuel regulations cut sulfur dioxide emissions from international shipping by about 80%, which the authors characterize as an inadvertent geoengineering termination shock with global impact.
  2. The authors estimate the resulting radiative forcing over the global ocean could lead to a doubling or more of the warming rate in the 2020s relative to the rate since 1980, with strong spatiotemporal heterogeneity.
  3. The estimated forcing is equivalent in magnitude to 80% of the measured increase in planetary heat uptake since 2020 and is consistent with the strong warming observed in 2023.

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  • Heating Waters Force Change in Industries That Depend on the Ocean — Nearly half the world's oceans are experiencing a marine heatwave, defined as warmer than 90% of previous temperature observations for the same date. Beyond climate change and the El Niño/La Niña cycle, researchers are investigating whether rules cutting ships' sulfur particle pollution and water vapor from an underwater volcanic eruption are contributing, with the magnitude disputed.
  • What This Year’s ‘Astonishing’ Ocean Heat Means for the Planet — The planet's average sea surface temperature reached a record high and the ocean has stayed exceptionally warm, with North Atlantic readings running more than 2°F above typical levels and one buoy recording 101.1°F, possibly a world record. Scientists expect warm ocean conditions to continue as El Niño intensifies.

AI Summary. The world's oceans have absorbed 90% of excess heat and about a quarter of human-caused carbon dioxide emissions during the industrial era, and scientists are investigating what drove an anomalous rise in sea temperatures and whether seas will cool again. Researchers caution there is no guarantee oceans will keep absorbing heat at the same rate.

Attracta Mooney, Steven Bernard and Jana Tauschinski Financial Times
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Oceans have absorbed 90% of the heat from human-caused carbon dioxide emitted during the industrial era, but some scientists are concerned that oceans may be reaching their limits in protecting the planet against the worst extremes of climate change.

Will the oceans keep absorbing most of the world's excess heat?

Core argument: The world's oceans have absorbed 90% of excess heat and about a quarter of human-caused carbon dioxide emitted during the industrial era, heat that did not go into the land surface, atmosphere or ice caps.

Scientists are now trying to understand what has driven the rapid anomalous rise in sea temperatures, why that heat has lingered and whether the world’s seas will cool again. At the heart of these questions is a concern that the oceans may be reaching their limits in the vital role they play in protecting the planet against the worst extremes of climate change. They have absorbed 90% of excess heat and about a quarter of human-caused carbon dioxide emitted during the industrial era. “All that heat that’s going into the ocean is not going into the land surface or into the atmosphere, or into the ice caps,” says Michael Meredith, oceanographer and science leader at the British Antarctic Survey. “The ocean has been doing this huge climate favour for us for decades.” But he adds there is no guarantee it will continue doing so at the same rate. “If this does slow in future, the consequences will be like we saw in 2023 [the hottest year on record] but much more so.”

Takeaways by Macro Roundup® AI

  1. The world's oceans have absorbed 90% of excess heat and about a quarter of human-caused carbon dioxide emitted during the industrial era, heat that did not go into the land surface, atmosphere or ice caps.
  2. Scientists are investigating what drove the rapid anomalous rise in sea temperatures, why that heat has lingered and whether the seas will cool again, amid concern that the oceans may be reaching the limits of their protective role.

Related Articles:

  • Long-term Surface Impact of Hunga Tonga-Hunga Ha’apai-like Stratospheric Water Vapor Injection — A volcanic eruption that injected large amounts of water vapor — a strong greenhouse gas — into the stratosphere is estimated to have raised surface temperatures by more than 1.5°C across large regions for several years, while cooling some areas by close to 1°C. The authors suggest a possible link to tropical Pacific sea surface temperatures that warrants further investigation.
  • Heating Waters Force Change in Industries That Depend on the Ocean — Nearly half the world's oceans are experiencing a marine heatwave, defined as warmer than 90% of previous temperature observations for the same date. Beyond climate change and the El Niño/La Niña cycle, researchers are investigating whether rules cutting ships' sulfur particle pollution and water vapor from an underwater volcanic eruption are contributing, with the magnitude disputed.
  • What This Year’s ‘Astonishing’ Ocean Heat Means for the Planet — The planet's average sea surface temperature reached a record high and the ocean has stayed exceptionally warm, with North Atlantic readings running more than 2°F above typical levels and one buoy recording 101.1°F, possibly a world record. Scientists expect warm ocean conditions to continue as El Niño intensifies.