Edward Conard

Top Ten New York Times Bestselling Author

  • “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
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…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
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…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 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
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Friday, May 22, 2026

AI Summary. A dataset of technologies by country of origin shows roughly 60–70% attributed to U.S. origin in recent periods, even though the U.S. accounts for only 20–30% of global GDP. The authors argue GDP is a poor proxy for who drives future growth, since innovation appears more concentrated in America than economic activity.

Hemanth Asirvatham, Elliott Mokski, and Andrei Shleifer National Bureau of Economic Research
Date Posted:

Asirvatham, Mokski and Shleifer use GPT to assemble a 37,000-technology dataset. The lag from invention to wide adoption has collapsed tenfold — from ~50 years in the 19th century to ~5 today. Implication: AI may diffuse far faster than the computer did.

Is innovation more concentrated in America than economic output?

Core argument: The share of technologies attributed to U.S. origin rises to roughly 60–70% in recent periods, even though the United States accounts for only 20–30% of global GDP.

We observe the rising dominance of American innovation in the late 19th century, coinciding with the US becoming the leading economic power. However, unlike the GDP statistics, while America reached its peak percentage of global GDP in the early 20th century, its total dominance in innovation is a more recent phenomenon. In our dataset, the share of technologies attributed to U.S. origin rises to roughly 60-70% in recent periods, even though only 20 to 30% of global GDP has been American. This highlights how GDP today may be a poor proxy for who is driving GDP growth tomorrow: innovation appears much more concentrated in America than economic activity.

Takeaways by Macro Roundup® AI

  1. The share of technologies attributed to U.S. origin rises to roughly 60–70% in recent periods, even though the United States accounts for only 20–30% of global GDP.
  2. American innovation dominance is a more recent phenomenon than American economic dominance, since the U.S. share of global GDP peaked in the early 20th century while its total innovation dominance came later.
  3. GDP today may be a poor proxy for who drives GDP growth tomorrow, because innovation appears much more concentrated in America than economic activity.

Related Articles:

  • American Productivity Still Leads The World — US labor productivity per hour has grown 73% since 1990, versus 39% in the euro area and 55% in both Britain and Japan. America also invests more, with non-residential investment near 17% of GDP and R&D around 3.5%, and sees company churn of nearly 20% annually versus roughly 15% in Europe.
  • The American Economy Has Left Other Rich Countries In The Dust — The United States' share of combined G7 output has risen from about two-fifths in 1990 to roughly half, with output per person now about 40% above Western Europe and Canada and 60% above Japan — roughly double the 1990 gaps. Average wages in Mississippi exceed national averages in Britain, Canada, and Germany.
  • What Makes The US Truly Exceptional — Real GDP per head in other large high-income countries sits below the US level and has fallen further behind this century, with Germany at 84% of the US level (down from 92%) and the UK at 73% (down from 82%). Whether US pathologies such as higher inequality and lower life expectancy are a necessary price of that dynamism is unclear.

AI Summary. The U.S. government will award about $2bn to quantum-computing firms under the 2022 Chips and Science Act, taking a minority equity stake in each company. D-Wave said its entire $100m award would be an equity investment, with Rigetti and Infleqtion describing similar structures.

Amrith Ramkumar and Heather Somerville The Wall Street Journal
Date Posted:

Lutnick’s Commerce Department is awarding $2B in Chips Act grants to nine quantum firms and taking government equity in each. IBM gets $1B (plus $1B of its own); GlobalFoundries $375M for ~1%. D-Wave, Rigetti, and Infleqtion surged 30%+.

Is the government taking equity stakes in quantum-computing companies?

Core argument: The U.S. will award quantum-computing firms $2 billion funded by the 2022 Chips and Science Act, taking a minority equity stake in each company receiving money.

The funding for the quantum deals comes from the 2022 Chips and Science Act, which includes money for earlier-stage technology projects. Commerce Secretary Howard Lutnick has overhauled the office, asking semiconductor companies to increase their domestic investments and taking a nearly 10% stake in Intel, which has seen shares surge since the unusual deal. The government will receive a minority equity stake in each quantum company, adding to similar deals including the rare-earths magnet maker Vulcan Elements and the mining company MP Materials. D-Wave said that all of its $100 million award would be an equity investment. It recently had a market value of more than $7 billion. Rigetti and Infleqtion said their deals would have a similar structure.

Takeaways by Macro Roundup® AI

  1. The U.S. will award quantum-computing firms $2 billion funded by the 2022 Chips and Science Act, taking a minority equity stake in each company receiving money.
  2. D-Wave, recently valued at more than $7 billion, said its entire $100 million award would be an equity investment, and Rigetti and Infleqtion said their deals would have a similar structure.
  3. Commerce Secretary Howard Lutnick has overhauled the office, asking semiconductor companies to increase their domestic investments and taking a nearly 10% stake in Intel, whose shares have surged since the deal.

Related Articles:

  • New Advances Bring the Era of Quantum Computers Closer Than Ever — Estimates of the quantum computing power needed to run Shor's algorithm and break encryption have fallen from billions of qubits to a million, while existing machines have hundreds. Researchers have announced a design requiring only tens of thousands of qubits and an implementation of the algorithm 10x as efficient as the prior best.
  • An Old Problem Could Stop The U.S. From Leading On Quantum Computers — Many quantum computers depend on dilution refrigerators, produced by a few small firms in the US, Britain and Finland, and on critical minerals such as niobium, concentrated in Brazil, and tantalum, mined in Africa and mostly processed in China. China has announced mass production of a domestic dilution refrigerator and has been buying niobium mines.
  • Google Unveils Quantum Computing Breakthrough on Willow Chip — Google says its "Quantum Echoes" algorithm, run on its Willow quantum chip and detailed in a paper in Nature, is verifiable on other quantum computers and ran 13,000x faster than the world's best classical supercomputer. Google says the advance points to useful quantum applications in medicine and materials science within five years.

AI Summary. Long-term yields in the $50tn-plus market for Group of Seven government bonds reached a two-decade high, as investors demand compensation for the risk that higher inflation persists and central banks must raise interest rates to contain it. Pandemic-era inflation has not fully faded and government debts keep increasing.

Enda Curran, Mark Schroers, Ye Xie, and Jorgelina Do Rosario Bloomberg
Date Posted:

G7 long-term sovereign yields hit a two-decade high this week as the $50T developed-market sovereign bond complex prices in a second inflation regime. Investors expect central banks to hike to contain it; markets reckon the first move by a Warsh Fed will be up.

Are long-term government bond yields rising on persistent inflation fears?

Core argument: Long-term yields in the $50 trillion-plus market for Group of Seven sovereign bonds reached a two-decade high, unsettling the safest haven in world finance.

As all this damage mounts, it's starting to rattle the safest haven in world finance: the $50 trillion-plus market for Group of Seven sovereign bonds, where long-term yields hit a two-decade high this week. Put simply, investors are starting to worry, like they never quite did even at the post-Covid peak, that higher inflation is here to stay. They want compensation for that risk and expect central banks will have to raise interest rates to contain it. That's a conclusion based not just on the blow from the Mideast conflict but the environment it's landing in. Economies still haven't wrung all the pandemic inflation out of their system. Governments owe ever-increasing debts as they struggle to rein in spending that adds fuel to the fire.

Takeaways by Macro Roundup® AI

  1. Long-term yields in the $50 trillion-plus market for Group of Seven sovereign bonds reached a two-decade high, unsettling the safest haven in world finance.
  2. Investors are demanding compensation for the risk that higher inflation persists, worrying as they never quite did even at the post-Covid peak, and expect central banks will have to raise interest rates to contain it.
  3. The shift reflects not only the Mideast conflict but the environment it lands in, with economies yet to wring out all pandemic inflation and governments owing ever-increasing debts amid spending they struggle to rein in.

Related Articles:

  • What’s Moving Long-Term Interest Rates? — Increases in long-term US government bond yields have been driven almost entirely by real interest rates, as measured by inflation-protected yields, rather than by long-term inflation expectations. One explanation is a rising term premium, with investors demanding extra yield on long bonds if they expect greater inflation volatility or weaker diversification against stocks.
  • Global Economics Comment: Global Economic Impacts of the War in Iran — The main economic risk to major economies from the war in Iran is that higher energy prices lift inflation and slow growth, with oil near $80/bbl, up 14% since late February. Analysts project oil moderating to $76/bbl and then $65/bbl as the risk premium fades in a structurally oversupplied market.
  • War Cost Sinks Long-Term Government Bonds on Deficit Worries — Investor concern that the Iran war will raise government spending and widen budget deficits has triggered a selloff in long-term government bonds, pushing the 30-year US Treasury yield near 4.90% and lifting yields from the UK and Germany to Australia and Japan. A global borrowing wave could further pressure the $31tn US Treasury market.

AI Summary. Returns from new technologies flow to organizations able to implement them and redesign workflows, not to the technology itself; the $27bn US effort to digitize hospital records left physicians spending roughly half their day on records and about a quarter with patients. The Stanford AI Index 2026 finds single-digit AI agent deployment across nearly all business functions.

Luis Garicano and Jesús Saa-Requejo Silicon Continent
Date Posted:

Chinese model MiniMax M2.5 prices at $1.15/m output tokens vs. $25 for Claude Opus 4.6, as intense competition and lack of switching costs in AI models drive price compression, forcing labs to reinvest profits to maintain competitive positions.

Does AI value accrue to chipmakers rather than model developers?

Core argument: The U.S. spent $27 billion under the HITECH Act starting in 2009 to digitize hospital records, yet more than a decade later physicians spend roughly half their day completing those records and about a quarter with patients.

This has long been true in the adoption of new technologies. The path is difficult and slow, and the returns flow to those able to implement the technology. The United States spent twenty-seven billion dollars under the HITECH Act starting in 2009 to digitize hospital records. More than a decade later, physicians spend roughly half their day on completing those records and about a quarter with patients. The technology was available; the knowledge of how to use it was not. The Stanford AI Index 2026 finds AI agent deployment in the single digits as a share of activity across nearly all business functions, even after two years of saturation coverage. No frontier model fixes that. The result is that the implementation layer captures value through its organizational ability to take advantage of the new technology and redesign the workflows effectively.

Takeaways by Macro Roundup® AI

  1. The U.S. spent $27 billion under the HITECH Act starting in 2009 to digitize hospital records, yet more than a decade later physicians spend roughly half their day completing those records and about a quarter with patients.
  2. The Stanford AI Index 2026 finds AI agent deployment in the single digits as a share of activity across nearly all business functions, even after two years of saturation coverage.
  3. Value from new technology accrues to the implementation layer through organizational ability to exploit the technology and redesign workflows, and no frontier model substitutes for that knowledge.

Related Articles:

  • Geopolitics And The Geometry Of Global Trade: 2026 Update — Shipments of AI hardware rose almost 40%, accounting for about a third of global trade growth, drawing on supply chains running through Taiwan, South Korea, and parts of Southeast Asia. The US added roughly half of the world's new data center capacity, and its AI-related goods trade rose about 66%.
  • Attention (And Money) Is All You Need: Why Universities Are Struggling to Keep AI Talent — The annual compensation gap between top industry and academic artificial intelligence researchers widened from roughly $294,000 to $1.5m, coinciding with accelerating academic out-migration toward large incumbent technology firms. Researchers who move to industry cut paper production by about 63% while increasing patent filings nearly sixfold, consistent with a shift from open science toward proprietary innovation.
  • Everyone’s Looking For A Bubble. No One Sees The Stampede — A proprietary model estimates monthly artificial intelligence revenue grew roughly 18-fold in two years, from $772m to $13.8bn, with AI accounting for an estimated 23% of Google Cloud, 10% of Azure and 5% of Amazon Web Services. The model's ratio of investment to revenue fell from 6.1x to 4.7x, still historically high.

AI Summary. Chinese state-owned enterprises are advertising party-building and propaganda posts requiring Communist Party membership and political and theoretical grounding, with average pay of about Rmb110,000 ($16,200) a year, below the Rmb124,000 average for non-private employers. Such roles offer job security and benefits exceeding those in the private sector, appealing to graduates facing youth unemployment.

Joe Leahy and Daniel Gage-Brown Financial Times
Date Posted:

Elite Chinese universities (Peking, Renmin, Tsinghua) now offer “party building” courses (Mao through Xi) to give graduates a job edge as youth unemployment climbs. Party loyalty is a hireable credential. CCP cells number 5.25mn, with 30% inside state/private firms.

Are ideological credentials becoming a career advantage for Chinese graduates?

Core argument: Party-building roles in China pay an average Rmb110,000 ($16,200) a year according to job site Zhiyouji, below the Rmb124,000 average for non-private entities, but offer job security and generous benefits relative to the private sector.

Still for China's young graduates, who are grappling with rising youth unemployment, party building could lead to a stable, if not especially lucrative, income. A job posting on recruitment site Yingjiesheng for a "Party building and propaganda officer" at a Tianjin-based engineering state-owned enterprise demanded that applicants be CCP members with "good political literacy and theoretical grounding." According to job site Zhiyouji, the average annual salary for such a role is Rmb110,000 ($16,200), trending below the national average of Rmb124,000 for non-private entities. However, such roles offer job security and generous benefits compared with the private sector.

Takeaways by Macro Roundup® AI

  1. Party-building roles in China pay an average Rmb110,000 ($16,200) a year according to job site Zhiyouji, below the Rmb124,000 average for non-private entities, but offer job security and generous benefits relative to the private sector.
  2. A Tianjin-based state-owned engineering enterprise advertised a "Party building and propaganda officer" post on recruitment site Yingjiesheng requiring applicants to be CCP members with "good political literacy and theoretical grounding.".
  3. China's young graduates, contending with rising youth unemployment, are turning to party-building work for a stable if not especially lucrative income.

Related Articles:

  • China’s Youth Unemployment Hits New High As Fresh Graduates Flood Market — China's National Bureau of Statistics reported the jobless rate for 16-to-24-year-olds, excluding students, rose to 16.9% from 16.1%, while the rate for those aged 25 to 29 rose to 7.7% from 7.2%, and overall urban unemployment edged up to 5.4%. A record 12.7m students, about 4% more than the prior year, are expected to graduate.
  • China Says Hostile Foreign Forces Are Driving Its Youth to Slack Off — China's Ministry of State Security attributes youth disillusionment to ideological infiltration by foreign anti-China hostile forces, calling young people the primary targets of such efforts. Millions of young Chinese have embraced a "lying flat" mindset, rejecting pressure to overwork or leaving work entirely in an economy with limited well-paying jobs.
  • China Punishes ‘Excessively Pessimistic’ Social Media Users — China's internet regulator has launched a campaign to remove online content that incites "excessively pessimistic sentiment," panic, or defeatist ideas such as "hard work is useless." Authorities have punished bloggers who advocated working less, an influencer who said forgoing marriage and children made financial sense, and a commentator who said China's quality of life lags Western countries.

Tuesday, May 26, 2026

AI Summary. The University of Michigan's consumer sentiment index fell 5 points to 44.8, a record low and weaker than all economist projections in a Bloomberg survey. Consumers expect prices to rise 3.9% annually over the next five to 10 years, up from 3.5%, and 4.8% over the coming year.

María Paula Mijares Torres Bloomberg
Date Posted:
Is Database:
Database

The Michigan Consumer Sentiment Index hit a record low in May, falling ~10% month over month. Consumers foresee prices advancing 4.8% over the next year. Inflation and high gas prices have long been major causes of sentiment drops.

Are price expectations pushing consumer sentiment to a record low?

Core argument: The University of Michigan's final May consumer sentiment index fell 5 points from April to 44.8, a record low and weaker than every forecast in a Bloomberg survey of economists as well as the preliminary reading of 48.2.

The University of Michigan’s final May sentiment index decreased 5 points to 44.8 from April. The gauge was weaker than all projections in a Bloomberg survey of economists as well as the preliminary reading of 48.2. Consumers expect prices to rise an annualized 3.9% over the next five to 10 years, up from 3.5% in April and the highest in seven months. They also saw costs advancing 4.8% over the next year.

Takeaways by Macro Roundup® AI

  1. The University of Michigan's final May consumer sentiment index fell 5 points from April to 44.8, a record low and weaker than every forecast in a Bloomberg survey of economists as well as the preliminary reading of 48.2.
  2. Consumers expect prices to rise an annualized 3.9% over the next five to 10 years, up from 3.5% in April and the highest in seven months.
  3. Consumers expect costs to advance 4.8% over the next year, according to the University of Michigan's final May survey.

Related Articles:

  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
  • The Dangerous Brew That’s Rattling Bond Markets — U.S. inflation has remained above the Federal Reserve's 2% target since 2022 while government borrowing runs high and companies borrow heavily to fund AI build-out. Even so, the 30-year Treasury yield reached a 19-year high of 5.18% while the 10-year yield, at 4.67%, sat below its October 2023 level.
  • $50 Trillion Safe-Haven Debt Market Upended by Iran War Inflation — Long-term yields in the $50tn-plus market for Group of Seven government bonds reached a two-decade high, as investors demand compensation for the risk that higher inflation persists and central banks must raise interest rates to contain it. Pandemic-era inflation has not fully faded and government debts keep increasing.

AI Summary. US annual inflation of 3.8% outpaced average hourly earnings growth of 3.6%, leaving prices rising faster than pay for the first time in two years, while Eurozone workers face a fresh energy-driven setback. JPMorgan attributes the real wage decline to Middle East conflict and expects growth to resume if energy prices retreat.

Delphine Strauss and Claire Jones Financial Times
Date Posted:

Real wage growth in the US and Eurozone which have been slightly positive since 2024, downticked due to the rise in inflation. JPM’s Mike Feroli argues if the Strait of Hormuz reopens “I would expect real wages to start growing again.”

Are real wages shrinking as inflation outpaces pay in developed countries?

Core argument: US inflation rose to an annual 3.8% in April while average hourly earnings gained 3.6% over the year, leaving prices rising faster than earnings for the first time in two years.

US inflation jumped to an annual 3.8% in April, while average hourly earnings increased 3.6% over the year, meaning prices were rising faster than earnings for the first time in two years. In the Eurozone, the energy shock represents a fresh setback for workers who had only just clawed back the ground lost in the 2022 inflationary shock. Michael Feroli, chief US economist at JPMorgan, said the real wage shrinkage was “all about the Middle East conflict” so if the Strait of Hormuz reopens and energy prices retreat, “I would expect real wages to start growing again.”

Takeaways by Macro Roundup® AI

  1. US inflation rose to an annual 3.8% in April while average hourly earnings gained 3.6% over the year, leaving prices rising faster than earnings for the first time in two years.
  2. In the Eurozone, the energy shock is a fresh setback for workers who had only just recovered the ground lost in the 2022 inflationary shock.
  3. JPMorgan chief US economist Michael Feroli attributed the real wage shrinkage to the Middle East conflict and said he would expect real wages to grow again if the Strait of Hormuz reopens and energy prices retreat.

Related Articles:

  • The Cost of Money is Part of the Cost of Living: New Evidence on the Consumer Sentiment Anomaly — Variation in the University of Michigan consumer sentiment index that inflation and unemployment cannot explain is strongly correlated with growth in consumer borrowing costs, such as mortgage and car loan rates. The authors estimate that including interest payments and homeownership costs in the consumer price index would raise measured inflation from 3% to 9%.
  • $50 Trillion Safe-Haven Debt Market Upended by Iran War Inflation — Long-term yields in the $50tn-plus market for Group of Seven government bonds reached a two-decade high, as investors demand compensation for the risk that higher inflation persists and central banks must raise interest rates to contain it. Pandemic-era inflation has not fully faded and government debts keep increasing.
  • Are Government Bonds Safe in Times of War and Pandemic? — Government bonds severely underperform in wartime, in absolute terms and relative to equities, housing, and economic growth, unlike in financial crises when bonds tend to outperform stocks. The U.S. and U.K. reduced war-driven debt-to-GDP ratios without explicit default, using surprise inflation and financial repression that shifted fiscal burdens onto bondholders.

AI Summary. The equity risk premium—the gap between the S&P 500's earnings yield and the yield on 10-year US Treasury notes—has nearly disappeared and sits near multi-decade lows, leaving a rough gauge of expected stock returns only slightly above what safe government bonds offer. A global bond selloff driven by inflation fears has pushed Treasury yields higher.

Hannah Erin Lang and Sam Goldfarb Wall Street Journal
Date Posted:
Is Database:
Database

The gap btw the S&P 500’s earnings to price ratio and the 10-year Treasury yield is ~0, its lowest level since the dot-com bust. The WSJ interprets this as a measure of the equity risk premium, stressing soaring bond yields.

Is the extra return from stocks over bonds disappearing?

Core argument: The equity risk premium — the gap between the S&P 500's earnings yield and the 10-year Treasury note's yield — has nearly disappeared and is hovering among its lowest levels since the start of the millennium.

The equity risk premium, often defined as the gap between the S&P 500’s earnings yield—the profit companies generate relative to stock valuations, expressed as a percentage—and that of the 10-year Treasury note. In recent weeks, it has nearly disappeared and is hovering among its lowest levels since the start of the new millennium. In other words, a rough gauge of stocks’ expected returns is now only slightly higher than what ultrasafe government bonds will produce. The primary culprit: a global bond rout powered by inflation fears that has pushed Treasury yields higher.

Takeaways by Macro Roundup® AI

  1. The equity risk premium — the gap between the S&P 500's earnings yield and the 10-year Treasury note's yield — has nearly disappeared and is hovering among its lowest levels since the start of the millennium.
  2. A rough gauge of stocks' expected returns now sits only slightly above what ultrasafe government bonds will produce.
  3. A global bond rout powered by inflation fears has pushed Treasury yields higher, the primary cause of the shrinking equity risk premium.

Related Articles:

  • Bond Market Fright May End Cheap Funds Era — The yield on 30-year US Treasury bonds reached 5.19%, its first time at that level since 2007. The author argues that the suddenness of such a move in yields, rather than the level itself, could dislodge the financing that underpins stocks and pressure credit markets.
  • An AI IPO Impact Update: The AnthroPix Effect May Be $5-Trillion+ — A closed-end fund holding small private stakes in OpenAI, SpaceX, and Anthropic has more than doubled in under two weeks and trades at nearly triple its last reported net asset value. The author argues this reflects investor appetite for any exposure to pre-IPO artificial intelligence companies, which will pull money out of other assets.
  • One Hundred Years in the U.S. Stock Markets — Over a century, U.S. publicly traded stocks generated roughly $91tn in shareholder wealth enhancement, with returns strongly positively skewed and dominated by a relatively small number of high-performing firms. Because most possible outcomes fall below the mean in a skewed distribution, the authors argue financial planning should focus on median outcomes or the full distribution.

AI Summary. The measured corporate labor share fell from 63% in 1978 to 58% in 2017, but the authors estimate that tax-driven reclassification of wages as S corporation profit and the shift of high-labor-share firms into partnerships account for about 1.6 percentage points, roughly a third of the decline.

Owen Zidar And Eric Zwick The Everywhere Millionaire
Date Posted:
Is Database:
Database
Is Important:
Important

A third of the 9pp drop in labor’s share of corporate income btw 2000 and 2025 is due to tax policy changes that incentivized business migration to partnerships, relabeling some earnings of the top 1% as pass-through income, lowering reported wages.

Does tax-driven business reclassification explain part of the falling labor share?

Core argument: The corporate-sector labor share fell from 63% in 1978 and about 64% in 2000 to 58% in 2017 and 55% in 2025, a headline decline of 5 percentage points from 1978 to 2017.

The corporate-sector labor share was 63% in 1978, fluctuated modestly through the 1980s and 1990s, and still stood near 64% in 2000. Then it fell to 58% in 2017 and 55% in 2025. Change of label pulls down the measured labor share because the national accounts count S corporation profit as capital income. When we add these recharacterized wages back into the labor income bucket, then the corporate labor share in 2017 is about 0.9 percentage points higher. In addition, many firms have left the corporate sector and reorganized as partnerships. Partnership profit has grown from 13% of all business profit in 1980 to 35% today. These partnerships have labor shares more than 10 percentage points higher than the corporate firms left behind. As these high-labor-share businesses left, the corporate sector that remained looked more capital-heavy than it used to. When we treat the partnership activity that migrated out since 1986 as if it had stayed in corporate form, the 2017 labor share is another 0.7 percentage points higher. These two corrections together are worth about 1.6 percentage points. The headline decline from 1978 to 2017 was 5 points. Our adjusted decline is 3.4. Thus, the tax code accounts for roughly a third of the decline.

Takeaways by Macro Roundup® AI

  1. The corporate-sector labor share fell from 63% in 1978 and about 64% in 2000 to 58% in 2017 and 55% in 2025, a headline decline of 5 percentage points from 1978 to 2017.
  2. Adding back S corporation profit that reflects recharacterized wages raises the 2017 corporate labor share by about 0.9 percentage points, since the national accounts count such profit as capital income.
  3. Partnership profit rose from 13% of all business profit in 1980 to 35% today, and treating partnership activity that migrated out since 1986 as corporate adds another 0.7 percentage points, leaving an adjusted 1978–2017 decline of 3.4 points.

Related Articles:

  • What’s Missing in the Fed’s Data about Ultrarich Portfolios — The Federal Reserve's Distribution of Financial Accounts defines "private business" narrowly as proprietor's equity in noncorporate, nonfinancial businesses, excluding S-corporations, other private corporations, and private equity and hedge fund partnerships, which are lumped into "corporate equities." The Survey of Consumer Finances instead shows private business is roughly 45–50% of top 0.1% wealth.
  • The Rise of Pass-Throughs and the Decline of the Labor Share — The authors estimate that reallocating business activity to its pre-1986 organizational form accounts for one-third of the decline in the corporate sector labor share, which fell from 62.9% to 57.9% between 1978 and 2017. US tax reform encouraged firms to organize as pass-through entities, letting income be characterized as profits rather than labor payments.
  • Capitalists in the Twenty-First Century — Most income at the top of the US distribution is non-wage income, primarily profits from closely-held, mid-market firms in skill-intensive industries owned by working-age individuals. The authors find private business profit falls by three-quarters after an owner retires or dies prematurely, indicating most top earners are "working rich" deriving income from human capital.

AI Summary. The authors estimate that $0.7tn–$1.4tn of China's roughly $2.2tn manufacturing surplus is concentrated in low-skill sectors such as apparel and footwear, where low- and middle-income countries compete most directly. At China's current per capita GDP, its share of global value-added exports in apparel, leather, textiles and footwear is 27%, versus 8% for rich countries at a comparable stage.

Shoumitro Chatterjee and Arvind Subramanian Peterson Institute for International Economics
Date Posted:

China has broken the historical norm of growing economies ceding low-skilled manufacturing to poorer countries. “At today’s level of China’s per capita GDP, rich countries’ global export market share was 8% compared with 27% for China.”

How does China's manufacturing surplus affect low- and middle-income countries?

Core argument: Between $0.7 trillion and $1.4 trillion of China's roughly $2.2 trillion manufacturing surplus sits in low-skill-intensive sectors such as apparel and footwear, where low- and middle-income countries compete most directly.

[Little] attention has been paid to what China’s surplus means for low- and middle-income countries (LMICs). This neglect is striking because a large share of China’s manufacturing surplus—between $0.7 trillion and $1.4 trillion out of a total of about $2.2 trillion—is concentrated in low-skill-intensive sectors such as apparel and footwear, precisely where LMICs compete most directly [Figure 1 in gallery]. For LMICs, the China Squeeze operates through three channels. The first and perhaps the most important is competition in global export markets. In 1965, advanced economies accounted for about 60% of global value-added exports in four key low-skilled manufacturing sectors, i.e., apparel, leather, textiles, and footwear. Over time this share declined and began to be occupied first by the East Asian tigers and, beginning in the late 1990s, by China. Figure 6 plots tradability adjusted global value-added export market share in four canonical unskilled-labor activities with that of rich countries in development time. The result is striking. At today’s level of China’s per capita GDP, rich countries’ global export market share was 8% compared with 27% for China. This impact—hundreds of billions of dollars in foregone LMIC exports—has been felt most acutely in global markets but also in China’s imports in LMIC markets and low access to China’s markets as well.

Takeaways by Macro Roundup® AI

  1. Between $0.7 trillion and $1.4 trillion of China's roughly $2.2 trillion manufacturing surplus sits in low-skill-intensive sectors such as apparel and footwear, where low- and middle-income countries compete most directly.
  2. At China's current level of per capita GDP, China holds a 27% tradability-adjusted global value-added export market share in apparel, leather, textiles, and footwear, compared with 8% for rich countries at the same development stage.
  3. The China Squeeze on low- and middle-income countries operates through three channels: competition in global export markets, China's imports in LMIC markets, and limited access to China's own markets, with hundreds of billions of dollars in foregone LMIC exports.

Related Articles:

  • China Is Making Trade Impossible — Interviews with Chinese economists, technologists and business leaders yielded no clear answer to what products China would want to buy from the rest of the world in future, beyond commodities, luxury goods and higher education. The author argues China sees nothing it cannot eventually make better and cheaper itself, undermining trade as a two-way exchange.
  • Sticking with What Works: Raising GDP Forecast on China’s Manufacturing Push — Stronger Chinese growth driven by export-oriented manufacturing may not produce net positive spillovers: for every 1pp export-driven boost to China's GDP, other economies may see a 0.1–0.3pp drag, with high-tech producers such as Europe and Japan facing greater pressure. Cheaper Chinese goods continue to exert a disinflationary impulse.
  • China’s Next-Generation Industrial Policy — China's export growth is concentrated in upstream, higher-tech goods: exports of intermediate inputs rose 26% and capital goods 32% between 2021 and 2024, while consumption goods exports were broadly flat. This shift embeds China deeper in global production systems and aligns with its long-running import substitution strategy of localizing entire value chains.

AI Summary. China will allow workers to enroll in social insurance programmes in the cities where they are employed regardless of their official household registration, or hukou, and will refine mechanisms for transferring social insurance across regions. Census sample data put China's migrant population above 357m, a group historically locked out of public services where they work.

Meredith Chen South China Morning Post
Date Posted:

China’s internal migrant population of more than 357mm workers may benefit from reforms to the hukou system that would allow them to access social insurance in the cities where they work, potentially increasing labor mobility, allowing a national labor market.

Will migrant workers gain social insurance where they work?

Core argument: China's new policy lets workers enroll in social insurance programmes in the cities where they are employed regardless of their hukou registration, with census sample data putting the country's migrant population above 357 million.

Under the new policy, workers can enroll in social insurance programmes in the cities where they are employed, regardless of their official hometown registration, or hukou. Authorities will also refine the mechanisms for transferring and continuing social insurance relationships across regions, a long-standing challenge for a highly mobile workforce. It reflects China’s latest policy reform emphasis on achieving renhu fenli - or the “separation between place of residence and household registration”. According to census sample data released on Friday, China’s migrant population has surpassed 357 million. Historically, the hukou system locked migrant workers out of vital public services – like healthcare and public schooling – in the places where they lived and worked. In recent years, however, these rigid restrictions have been progressively relaxed.

Takeaways by Macro Roundup® AI

  1. China's new policy lets workers enroll in social insurance programmes in the cities where they are employed regardless of their hukou registration, with census sample data putting the country's migrant population above 357 million.
  2. Chinese authorities will refine mechanisms for transferring and continuing social insurance relationships across regions, a long-standing challenge for a highly mobile workforce.
  3. The hukou system historically locked migrant workers out of services such as healthcare and public schooling where they lived and worked, restrictions progressively relaxed amid China's emphasis on renhu fenli, the separation of residence from household registration.

Related Articles:

  • The ‘Invisible Wall’ Amplifying China’s Population Doom Loop — China's hukou household registration system restricts migrant workers' access to local services such as healthcare, education, and home purchases in major cities. While two-thirds of Chinese live in cities, only 48% hold urban residency rights, leaving roughly 250m people excluded from many urban benefits; rural disposable income is about $3,000 per capita versus over $7,000 in cities.
  • China’s Youth Unemployment Hits New High As Fresh Graduates Flood Market — China's National Bureau of Statistics reported the jobless rate for 16-to-24-year-olds, excluding students, rose to 16.9% from 16.1%, while the rate for those aged 25 to 29 rose to 7.7% from 7.2%, and overall urban unemployment edged up to 5.4%. A record 12.7m students, about 4% more than the prior year, are expected to graduate.
  • China Punishes ‘Excessively Pessimistic’ Social Media Users — China's internet regulator has launched a campaign to remove online content that incites "excessively pessimistic sentiment," panic, or defeatist ideas such as "hard work is useless." Authorities have punished bloggers who advocated working less, an influencer who said forgoing marriage and children made financial sense, and a commentator who said China's quality of life lags Western countries.