“…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
“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
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
“…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
“Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
“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
“There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
“Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
“…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
Evidence on wages, earnings, household income, compensation, labor’s share, and living standards. Coverage examines productivity, inflation, taxes, benefits, firm performance, worker mobility, and differences across the income distribution.
AI Summary.US consumer prices rose 3.7% year over year in September, up from 3.4% in August and above economists' 3.6% forecast, with core prices excluding food and energy up 2.6%. Prices rose faster than average hourly earnings, which increased 3%, meaning many Americans' real incomes are falling.
Konrad PutzierWall Street Journal
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Inflation accelerated in September, rising to 3.7% annualized from August’s 3.4%. Real average hourly earnings fell .7% year over year.
Is inflation accelerating faster than wages, cutting real incomes?
Core argument: U.S. consumer prices rose 3.7% in September from a year earlier, the Labor Department said, up from August’s 3.4% and above the 3.6% expected by economists surveyed by The Wall Street Journal.
Consumer prices were up 3.7% in September from a year earlier, the Labor Department said Wednesday, hotter than August’s gain of 3.4%. That was above the 3.6% rise expected by economists surveyed by The Wall Street Journal. Core prices excluding food and energy rose 2.6%, above forecasts for a 2.5% increase. Month over month, core prices rose by 0.3%, surprising economists who had expected a 0.2% increase. High prices have been a political flashpoint for Americans, who have grown fed up with five years of inflation. Prices rose much faster in September than average hourly earnings, which increased 3% from a year earlier. That means many Americans are seeing their real incomes fall.
Takeaways by Macro Roundup® AI
U.S. consumer prices rose 3.7% in September from a year earlier, the Labor Department said, up from August’s 3.4% and above the 3.6% expected by economists surveyed by The Wall Street Journal.
Core prices excluding food and energy rose 2.6% year over year in September, above forecasts of 2.5%, and 0.3% month over month against expectations of 0.2%.
September prices rose much faster than average hourly earnings, which increased 3% from a year earlier, meaning many Americans are seeing real incomes fall.
Related Articles:
Do Voters Punish Inflation or Pay Cuts? Inflation and Real Wages in U.S. Elections— An analysis of U.S. counties estimates that where wages grew faster than prices, voters supported the incumbent party more, while counties with larger real wage losses than average shifted more toward the opposition. A one-standard-deviation larger real wage loss is associated with shifts of roughly 0.10 and 0.19 percentage points in vote share and margin.
Sticky Wage Norms and the Real Wage Cost of Unexpected Inflation— Firms set nominal wage increases by round-number rules—about 42% of increases below 6% fell within 0.01 percentage points of a whole or half number—and these rules rose only from about 2.7% to 3.5% as inflation peaked near 7%, contributing to falling real wages for job stayers.
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%.
AI Summary.Since 1982, real growth in the median U.S. wage has trailed growth at both the top and bottom of the wage distribution, with higher and lower percentiles outperforming the middle.
Cardiff Garcia and Ben GlasnerAgglomerations
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Garcia and Glasner document the striking observation that inequality across the wage distribution rose mainly during the long overall wage stagnations of 1982–1996 and 2001–2014. Wage growth was both faster and more broadly shared in 1996–2001 and 2014–2020.
Has median wage growth lagged both the top and bottom?
Core argument: Real growth of the median U.S. wage has trailed growth at both the higher and lower ends of the wage distribution since 1982.
Figure 4 zooms into the First Long Wage Stagnation from December 1982 to 1996: negative growth for the 10th percentile wage and hardly any growth for the three middle wage categories. Meanwhile the 90th percentile wage climbed away from all the others despite itself growing by less than 1% a year. Figure 5 shows the more recent Second Long Wage Stagnation. The median wage averaged just 0.36% growth per year. And because the growth of the 75th and 90th percentile firmly outpaced the growth of the others, wage inequality climbed sharply. From 2015 through the start of 2020, wages climbed all across the distribution, [while] the widening between the 90th percentile wage and the other wages slowed. The escape from wage stagnation once again arrived as the labor market continued tightening. In the late 1990s boom, the median wage climbed an annualized 2.6%. The eras in which the median wage climbed at the steepest angle were those in which all the other wages climbed with it. [Finally], real growth of the median wage has trailed behind the growth of the other wage categories since 1982.
Takeaways by Macro Roundup® AI
Real growth of the median U.S. wage has trailed growth at both the higher and lower ends of the wage distribution since 1982.
Figure 10 presents three wage ratios: the 90th percentile to the median, the 90th percentile to the 10th, and the median to the 10th.
Related Articles:
Baby Busts and Growth Booms: Demographic Change and the Macroeconomy— A 1pp lower birth rate 20 years earlier is associated with 22 log points higher output per worker 20 years later and 29 log points higher after 40 years, about 0.73pp faster annual growth. The authors find lower birth rates are also associated with more labor-saving patents, larger high-tech shares, and higher productivity growth.
The Pig In The Python: US Decennial Labor Flows And Economic Opportunity, 1910–2040— The surge of baby boomers, women, and immigrants entering the US labor force between 1960 and 1980 was difficult for the economy to absorb, and young workers' wages fell sharply after peaking in the early 1970s. The author argues those entrants kept occupying jobs and suppressing demand for new workers until retirement.
The Unexpected Compression: Competition at Work in the Low Wage Labor Market— Labor market tightness produced an unexpected compression in the US wage distribution, with disproportionate wage growth at the bottom reducing the college wage premium and reversing nearly 40% of the rise in 90-10 wage inequality since 1980. The authors attribute this in part to increased competition for low-wage workers.
AI Summary.Inflation-adjusted gross domestic product per person has grown at a 1.9% annual pace over the past 10 years, above the 1.7% of the 2010s and 0.8% of the 2000s and just below the 2.1% of the 1980s and 1990s. Avoiding prolonged recessions has supported household incomes and wages.
Justin FoxBloomberg
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Real median household income and real wages have risen since the mid-2010s, as real GDP per capita grew 1.9% annually over the past decade. Average real weekly earnings have grown since 2010, after falling substantially between 1973 and 1990.
Have incomes and output per person grown faster than in recent decades?
Core argument: U.S. per-capita GDP has grown at a 1.9% annual inflation-adjusted pace over the past 10 years, exceeding the 1.7% of the 2010s and 0.8% of the 2000s.
Some of the increase in both household incomes and wages can be chalked up to steady economic growth. Per-capita gross domestic product has risen at a 1.9% annual, inflation-adjusted pace over the past 10 years, which doesn’t sound like much but is better than in the 2010s (1.7%) and 2000s (0.8%) and only slightly below the 2.1% growth rate of the 1980s and 1990s and 2.2% of the 1970s.Avoiding recessions — and ensuring that the unusual pandemic-caused downturn in 2020 was short-lived — has done a lot for Americans’ incomes.
Takeaways by Macro Roundup® AI
U.S. per-capita GDP has grown at a 1.9% annual inflation-adjusted pace over the past 10 years, exceeding the 1.7% of the 2010s and 0.8% of the 2000s.
The 1.9% per-capita GDP growth rate of the past decade sits only slightly below the 2.1% pace of the 1980s and 1990s and the 2.2% pace of the 1970s.
Avoiding recessions and keeping the pandemic-caused 2020 downturn short-lived has done a lot for Americans’ incomes, with steady economic growth accounting for some of the rise in household incomes and wages.
Related Articles:
What Six Years of Inflation Mean for the Midterms— US consumer prices have risen almost 29% over the past six years, about 3x the pace of the prior six years, and on average prices have risen faster than wages over that period.
Income in the United States: 2025— Median U.S. household income rose 2.6% to $87,460, the highest level on record in data going back to 1967. Median income increased 3% for White households, 2.9% for non-Hispanic White households, and 4.8% for Black households, while changes for Asian and Hispanic households were not statistically significant.
US Focus: The Effect Of Soaring Profits— US nominal pre-tax corporate profits in the national accounts grew 23% over the past year, a pace not seen outside post-recession spikes since the mid-2000s. Wider margins were the key driver, as domestic profit growth far exceeded the 8% rise in corporate value added, pushing margins near all-time highs while the labor share hit new lows.
AI Summary.An analysis of federal aid recipients' tax-reported earnings finds the highest-earning bachelor's programs are concentrated at highly selective schools and in computer science, mathematics and electrical engineering. Nursing programs at several California schools produce graduates earning around $150,000 annually, placing them in the top 100 of nearly 25,000 programs analyzed.
Arfa Momin and Ron LieberNew York Times
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A HEA Group analysis of the earnings of 2018 and 2019 college graduates four years after graduation finds earnings are widely dispersed across schools in higher-earning fields such as computer science and economics and have a narrow dispersion in lower-earning fields such as English and drama.
Which college majors and schools produce the highest-earning graduates?
Core argument: HEA Group’s analysis of nearly 25,000 bachelor’s programs found computer science, mathematics and electrical engineering majors top the earnings list, with graduates of highly rejective schools including the Ivies, M.I.T., Stanford and U.C.L.A. dominating.
HEA Group tracked students who received federal financial aid and graduated during the 2017-18 and 2018-19 periods. The top of the earnings list is dominated by graduates of highly rejective schools — the Ivies and others, like M.I.T., Stanford and U.C.L.A. The majors that top the list are computer science, mathematics and electrical engineering. The income data come from whatever people reported on their federal tax returns. That means certain stock awards and other potential deferred compensation aren’t part of the totals. Nursing programs at a handful of California schools, including California State University, East Bay; San Francisco State University; and Samuel Merritt University, produce graduates earning around $150,000 annually, putting them in the top 100 out of the nearly 25,000 bachelor’s programs the HEA Group analyzed nationwide. They stick out amid quantitative and science majors from institutions like the California Institute of Technology and Cornell.
Takeaways by Macro Roundup® AI
HEA Group’s analysis of nearly 25,000 bachelor’s programs found computer science, mathematics and electrical engineering majors top the earnings list, with graduates of highly rejective schools including the Ivies, M.I.T., Stanford and U.C.L.A. dominating.
Nursing graduates of California State University, East Bay; San Francisco State University; and Samuel Merritt University earn around $150,000 annually, placing those programs in the top 100 amid quantitative and science majors from institutions like the California Institute of Technology and Cornell.
HEA Group tracked federal financial aid recipients who graduated during the 2017-18 and 2018-19 periods, using income reported on federal tax returns, which excludes certain stock awards and other potential deferred compensation.
Related Articles:
Do Adults Have the Skills They Need to Thrive in a Changing World?— An international assessment of adult skills describes numeracy proficiency levels ranging from counting objects and adding small whole numbers at the lowest level, to extracting information from tables and graphs and performing basic arithmetic with money and percentages at Level 1, up to analysing complex mathematical information and critically evaluating whether data support a claim at Level 5.
Have Humans Passed Peak Brain Power?— The share of Americans reporting they read a book in the past year has fallen below half, alongside declining performance in numeracy and problem-solving in most countries. The share of adults unable to use mathematical reasoning to evaluate the validity of statements averages 25% in high-income countries and 35% in the US.
Standardized Test Scores and Academic Performance at a Public University System— A study of a large public urban university system finds that high school grade point average is a far stronger predictor of student academic success than SAT scores, contrasting with analyses of highly selective colleges that found the SAT superior. Under-represented minority students were less likely to graduate within six years at every grade point average level.
AI Summary.Corporate profit margins, long regarded as one of the economy's most reliably mean-reverting series, have risen continuously so far this century. Measured through the national income accounts used in calculating GDP, profits now take a larger share of the economy than on the eve of the 1929 crash.
John AuthersBloomberg
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Since 2000, post-tax corporate profits as a share of GDP have trended upward across cyclical setbacks and are now near an all time high, above their 1929 level.
Have corporate profit margins stopped reverting to the mean?
Core argument: Corporate profits measured in the National Income and Product Accounts take a larger share of the U.S. economy than on the eve of the 1929 Great Crash.
Throughout the 20th century, profit margins were regarded as one of the purest mean-reverting series in the economy. So far this century, however, margins have done nothing but rise. Measured with the National Income and Product Accounts, part of the GDP calculation, profits are currently taking a bigger share of the economy even than on the eve of the Great Crash in 1929. The series comes with a lag, so we can assume the profit share on this basis is comfortably at a record by now.
Takeaways by Macro Roundup® AI
Corporate profits measured in the National Income and Product Accounts take a larger share of the U.S. economy than on the eve of the 1929 Great Crash.
Profit margins were regarded throughout the 20th century as one of the purest mean-reverting series in the economy, yet so far this century they have done nothing but rise.
The National Income and Product Accounts profits series comes with a lag, so the profit share on this basis can be assumed to be comfortably at a record.
Related Articles:
US Focus: The Effect Of Soaring Profits— US nominal pre-tax corporate profits in the national accounts grew 23% over the past year, a pace not seen outside post-recession spikes since the mid-2000s. Wider margins were the key driver, as domestic profit growth far exceeded the 8% rise in corporate value added, pushing margins near all-time highs while the labor share hit new lows.
The Post‑COVID Decline in the Labor Share— The share of US national income paid to workers fell 1.6 percentage points below its pre-pandemic level, reaching a post-war low. The authors find this decline stems mainly from changes within industries rather than shifts in activity across sectors, following cyclical patterns seen in earlier recessions.
Are US Corporate Profit Margins Too High?— US after-tax non-financial corporate profit margins remain elevated by historical standards, estimated at 7.6% versus a post-1949 high of 8.2%, while employee pay as a share of non-financial corporate gross value added has fallen from 66% to 56%. One argument holds that subdued demographic growth leads companies to prioritize maximizing margins over expanding capacity.
AI Summary.US consumer prices have risen almost 29% over the past six years, about 3x the pace of the prior six years, and on average prices have risen faster than wages over that period.
Owen Tucker-SmithWall Street Journal
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Inflation outpaced real year-over-year average hourly earnings growth in the 5 months through August.
Have prices risen faster than wages over the past six years?
Core argument: U.S. consumer prices, as measured by the consumer-price index, have risen almost 29% over the past six years, about three times the pace of the preceding six years.
Overall prices, as measured by the consumer-price index, have risen almost 29% in the past six years. During the six years before that, prices crept up at a third of that pace. Over the past six years, prices have, on average, risen faster than wages. The trend has been pronounced recently: In both July and August, inflation outpaced average hourly wage growth.
Takeaways by Macro Roundup® AI
U.S. consumer prices, as measured by the consumer-price index, have risen almost 29% over the past six years, about three times the pace of the preceding six years.
Prices have on average risen faster than wages over the past six years, with inflation outpacing average hourly wage growth in both July and August.
Related Articles:
Sticky Wage Norms and the Real Wage Cost of Unexpected Inflation— Firms set nominal wage increases by round-number rules—about 42% of increases below 6% fell within 0.01 percentage points of a whole or half number—and these rules rose only from about 2.7% to 3.5% as inflation peaked near 7%, contributing to falling real wages for job stayers.
Do Voters Punish Inflation or Pay Cuts? Inflation and Real Wages in U.S. Elections— An analysis of U.S. counties estimates that where wages grew faster than prices, voters supported the incumbent party more, while counties with larger real wage losses than average shifted more toward the opposition. A one-standard-deviation larger real wage loss is associated with shifts of roughly 0.10 and 0.19 percentage points in vote share and margin.
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%.
AI Summary.The authors estimate that more than half of the rise in the top 1% income share since 1985 — 5.8 of 10.5 percentage points — flowed through pass-through businesses, counting roughly 3m wealthy private business owners with average net worth near $25m running law firms, dealerships, and medical practices.
Torsten SløkApollo
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More than half the increase in the top 1% income share since 1985 flowed through pass-through businesses to ~ 3mm private business owners with a mean net worth of ~$25mm.
Did most of the top 1% income gain come from private businesses?
Core argument: Owen Zidar and Eric Zwick find that 5.8 of the 10.5 percentage-point rise in the U.S. top 1% income share since 1985 flowed through pass-through businesses, more than half of the increase.
The income that lifted America's top 1% did not come mainly from tech or Wall Street, according to Owen Zidar and Eric Zwick. More than half of the rise in the top 1% income share since 1985, 5.8 of 10.5 percentage points, flowed through pass-through businesses. Zidar and Zwick, counted roughly 3 million wealthy private business owners, with average net worth near $25 million, running law firms, car dealerships, medical practices, commercial contractors and regional restaurant chains, the kind of businesses that make their owners wealthy and well known in their own communities without ever making them nationally famous.
Takeaways by Macro Roundup® AI
Owen Zidar and Eric Zwick find that 5.8 of the 10.5 percentage-point rise in the U.S. top 1% income share since 1985 flowed through pass-through businesses, more than half of the increase.
Zidar and Zwick count roughly 3 million wealthy private business owners with average net worth near $25 million, running law firms, car dealerships, medical practices, commercial contractors and regional restaurant chains.
The income that lifted America’s top 1% did not come mainly from tech or Wall Street, according to Zidar and Zwick, but from businesses whose owners are well known locally without becoming nationally famous.
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.
They’re Rich but Not Famous—and They’re Suddenly Everywhere— An analysis of Federal Reserve data estimates about 430,000 U.S. households are worth $30m or more, including roughly 74,000 worth at least $100m, with growth in the number of very rich households outpacing overall population growth over recent decades. Nearly 72% of the top 0.1%'s wealth consists of corporate equities, mutual fund shares, and private businesses.
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.Wage gains have trailed inflation for five months, and consumer prices are 27% higher than at the start of 2021. The "misery index," the sum of the inflation and unemployment rates, stands at 7.5, up from 6.7 a year earlier.
David Uberti, Justin Lahart and Aaron ZitnerWall Street Journal
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Over the past five months, real wages as measured by average hourly earnings have declined. Okun’s “misery index” is now 7.5, just above its October 2024 level of 6.7.
Are wage gains falling behind rising consumer prices?
Core argument: Consumer prices are 27% higher than in January 2021, when Biden took office, and wage gains have failed to keep pace with inflation for five months.
For five months, wage gains haven’t kept pace with inflation and, especially with the sharp increase in gasoline prices over the past few weeks, they aren’t likely to keep up this month. University of Chicago Booth School of Business economist Christina Patterson said employees who achieve pay bumps often bear a burden. “You negotiate. You get an outside offer. You switch jobs. You threaten to leave,” she said. “All of those actions are costly. They disturb employer-employee relationships. You lose co-workers. You have to move.” Consumer prices are now 27% higher than they were in January 2021. One long-popular benchmark of economic conditions is the “misery index,” a simple summing up of the inflation and unemployment rate, it now stands at 7.5, higher than the 6.7 it was at in October 2024, just before Harris lost the presidency to Trump.
Takeaways by Macro Roundup® AI
Consumer prices are 27% higher than in January 2021, when Biden took office, and wage gains have failed to keep pace with inflation for five months.
The “misery index,” a summing of the inflation and unemployment rates devised by economist Arthur Okun, stands at 7.5, above the 6.7 recorded in October 2024 before Kamala Harris lost to Trump.
University of Chicago Booth School of Business economist Christina Patterson said workers who win pay bumps often bear a burden through negotiating, obtaining outside offers, switching jobs, or threatening to leave, actions that disturb employer-employee relationships and can require moving.
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%.
Sticky Wage Norms and the Real Wage Cost of Unexpected Inflation— Firms set nominal wage increases by round-number rules—about 42% of increases below 6% fell within 0.01 percentage points of a whole or half number—and these rules rose only from about 2.7% to 3.5% as inflation peaked near 7%, contributing to falling real wages for job stayers.
Do Voters Punish Inflation or Pay Cuts? Inflation and Real Wages in U.S. Elections— An analysis of U.S. counties estimates that where wages grew faster than prices, voters supported the incumbent party more, while counties with larger real wage losses than average shifted more toward the opposition. A one-standard-deviation larger real wage loss is associated with shifts of roughly 0.10 and 0.19 percentage points in vote share and margin.
