Skip to content

Families need insurance for wages and for family responsibilities

[ This post is a summary of a presentation called "Public insurance to promote social mobility" that I made to the "Social Mobility Summit" held at the Brookings Institution in Washington DC on January 13th, 2014. It is intended for an American readership, and is also posted in an abridged form on the Brookings website. ]

Read more…

About these ads

The two (irreconcilable?) states of the Union

sotu_slide_audience

When President Obama approaches the podium to deliver his State of the Union address he will have two past presidents looking over his shoulders.

Lyndon B. Johnson who in 1964 declared a “War on Poverty”, and Ronald Reagan who in 1986 surrendered victory with the claim that “… poverty won the war. Poverty won in part because instead of helping the poor, government programs ruptured the bonds holding poor families together.”

President Obama will surely celebrate Johnson for initiating the War on Poverty fifty years ago this month, but to advance his agenda he will also stress that government programs are a force for the good.

Read more…

Employment in Canada is up by a million … but that is hardly enough

one-in-a-million

“Employment is up by one million since the recession ended.”

A statement like this may indeed be a big talking point when Statistics Canada releases the results of its monthly Labour Force Survey on Friday.

While a million more people at work sounds like a lot, the Canadian population has also increased by roughly the same amount with the result that the fraction of Canadians working has been pretty well unchanged for the last five years, and has yet to return to rates before the recession.

A million is a big number, but it’s not enough to signal a complete recovery from the recession.

Read more…

America’s children are the silent victims of the Great Recession

Children at risk a red and green water colour

The Great Recession has disrupted the lives of families and their children in an unprecedented way.

It has changed everyday life in some ways that can be measured by money, but in others that cannot, and at the extreme it has even led to a six-fold increase in the risk children will be physically abused.

Lost jobs, falling incomes, and foreclosures will likely compromise the capacity of children to become all that they can be, with the effects of the recession echoing not just across years, but also across generations.

Read more…

An American idea about the Canadian middle class

The suggestion that the middle class is stagnating, the linchpin of Justin Trudeau’s economic platform—to the extent it exists—is an idea shamelessly borrowed from the United States.

Shameless it may be, but it is, nonetheless, true.

Clearly there are some ways in which we are all better off not withstanding what President Obama tells the American public, and notwithstanding how closely Canadian political leaders listen to him.

In 1980, a cell phone was something carried in a brief case; and a Sony Walkman—you surely recall the portable cassette player the size of a thick paperback that strapped “conveniently” to your belt?—was the cutting edge musical accessory.

But shops filled with more variety, and more quality, make us and our kids better off only to a degree, and not only because the power to blow your ear drums out has increased exponentially.

In 1980 middle-income Canadian families reported a total of $57,000 on their tax returns, and 30 years later, … well exactly $57,000.

Read more…

Mr. Keynes and the Austrians: a battle over a suggested interpretation of unemployment

Arthur Cecil Pigou made lasting contributions to the science of economics, but for macro-economists of a certain generation he will always be considered a laughingstock.

Arthur C Pigou

Professor Pigou taught at Cambridge University during the first decades of the 1900s, and had the misfortune of making a cameo appearance in the opening chapters of what is arguably the most influential economics book of the 20th century, The General Theory of Employment, Interest, and Money, written with eloquence, and at times a very caustic pen, by his colleague at the same university, John Maynard Keynes (whose last name, by the way, sounds like “Canes”).

Pigou’s big mistake was to suggest that the unemployed themselves were to be blamed for their predicament. To Mr. Keynes, the notion that the persistently high unemployment rates of the Great Depression were in some sense voluntary was worthy of scorn and ridicule.

Read more…

Why should we care about inequality? Tim Harford nails it in this Financial Times column

Tim Harford nails it in an article called “How the wealthy keep themselves on top.

I set out two reasons why we might care about inequality: an unfair process or a harmful outcome. But what really should concern us is that the two reasons are not actually distinct after all. The harmful outcome and the unfair process feed each other. The more unequal a society becomes, the greater the incentive for the rich to pull up the ladder behind them.

The noted Financial Times columnist, and author of The Undercover Economist, does a great service to readers by pulling a major theme from the series of articles on inequality and the top 1% published in the summer 2013 issue of the Journal of Economic Perspectives.

First, he states that while the “idea that the fat cats simply stole everyone else’s cream is emotionally powerful; it is not entirely convincing.” Then he goes on to note that:

In a well-functioning market, people only earn high incomes if they create enough economic value to justify those incomes. But even if we could be convinced that this was true, we do not have to let the matter drop.

This is partly because the sums involved are immense.

We should care about inequality because of the outcomes. But also because outcomes influence process.

At the very top of the scale, plutocrats can shape the conversation by buying up newspapers and television channels or funding political campaigns. The merely prosperous scramble desperately to get their children into the right neighbourhood, nursery, school, university and internship – we know how big the gap has grown between winners and also-rans.

This is what sticks in the throat about the rise in inequality: the knowledge that the more unequal our societies become, the more we all become prisoners of that inequality. The well-off feel that they must strain to prevent their children from slipping down the income ladder. The poor see the best schools, colleges, even art clubs and ballet classes, disappearing behind a wall of fees or unaffordable housing.

This is exactly what I hoped would be the main message of my article “Income Inequality, Equality of Opportunity, and Intergenerational Mobility” in the Journal of Economic Perspectives symposium, and it is very satisfying to witness a talented journalist articulate these and related ideas with such clarity and precision!

The simple economics of the declining middle class — and the not so simple politics

ChristieFreelandPlutocrats

The middle class is declining, or is it?

The question has taken on increased resonance in Canada since two respected and informed journalists—Chrystia Freeland and Linda McQuaig—have decided to enter politics.

Ms. Freeland is the author of Plutocrats: The Rise of the New Global Super Rich and the Fall of Everyone Else, and Ms. McQuaig a co-author of The Trouble with Billionaires.

Income inequality is what they know, and presumably what they feel should be a matter of public policy.

If the middle class is not shrinking then the policy program these individuals have to offer, and by reflection some of the policies of the political parties they hope to represent—the traditionally centrist Liberal Party in Ms. Freeland’s case, and the social democratic New Democratic Party in the case of Ms. McQuaig—are brought into question.

linda_mcquaig.jpg.size.xxlarge.letterbox

And that is what a number of observers have already done, arguing that the facts show the Canadian middle class is not under threat, and that those who argue otherwise—like Ms. Freeland and Ms. McQuaig—are spending too much time looking at American trends.

So this is an economic fact with some political impact.

My look at the numbers focuses on both incomes (the total amount of money a family brings home) and on wage rates (the hourly rate of an individual’s pay).

The trend in incomes is disturbing, but all the more so when viewed in light of a polarizing pattern in wage rates. These trends should be a real concern for public policy, and in my view a focus on other countries, particularly the United States, is one important way to constructively inform that concern.

Read more…

Who’s Your Daddy? Some feedback from the top 1% on my New York Times article

Among the readers of an opinion piece I wrote in the New York Times on July 21st, Who’s Your Daddy? Job Opportunities for the children of the top 1 percent,  are two top 1 percenters who kindly took the time to email me their thoughts.

One of the goofiest most nonsensical things I have ever seen filled with
contradictions as you twist opposite conclusions to fit your thesis of
inequality. Just bizarre.

Sent from my iPad

My article was based on a soon to be published paper, Income Inequality, Equality of Opportunity, and Intergenerational Mobility , so I would hope that it has some logic to it.

The following comments are from another top 1 percenter who offers a more nuanced view on my logic, such as it is. Read more…

Income Inequality, Equality of Opportunity, and Intergenerational Mobility

The summer issue of the Journal of Economic Perspectives will feature a collection of articles on inequality and the top 1%, some of which are now being circulated by the authors.

The paper by Tony Atkinson and his coauthors, “The top 1 percent in international and historical perspective,” is available in this post, and “The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes,” by Josh Bivens and Lawerence Mishel, is available on the Economic Policy Institute website.

Greg Mankiw has also posted a copy of his paper, “Defending the One Percent“, on his blog.

My contribution to the collection is based on the notion that the inequality literature has paid little attention to the intergenerational consequences of increasing top income shares, and it can be read as a counterpoint to Mankiw’s piece, or at least to his claim that inequality of opportunity is not a reason to worry about the top 1%.

Here is the final draft: Income Inequality, Equality of Opportunity, and Intergenerational Mobility. But if you just want a quick read, an excerpt from the conclusion follows. Either way, feedback is—as always—welcomed.

[NOTE added December 10, 2013: the published version of this paper is available from the American Economics Association website for the Summer 2013 issue of the Journal of Economic Perspectives, as is the table of contents for the entire issue.]

Read more…

Follow

Get every new post delivered to your Inbox.

Join 2,342 other followers