CONVERSABLE ECONOMIST:After Incarceration: How Many and Male Labor Force Participation

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Post: After Incarceration: How Many and Male Labor Force Participation
Link: http://conversableeconomist.blogspot.com/2017/10/after-incarceration-how-and-male-labor.html

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The Legal Workforce and Agricultural Guestworker Acts would push down wages and labor standards for Americans and immigrants alike [feedly]

The Legal Workforce and Agricultural Guestworker Acts would push down wages and labor standards for Americans and immigrants alike
http://www.epi.org/blog/legal-workforce-agricultural-guestworker-acts-push-down-wages/

From the perspective of immigration and the labor market, perhaps the two worst pieces of proposed legislation that we'll see all year will be considered and marked up in the House Judiciary Committee Committee starting today.

One of the bills is the Legal Workforce Act (H.R. 3711), proposed by Rep. Lamar Smith (R-TX); it would mandate that all U.S. employers use E-Verify, an electronic system used to check if new hires are authorized to be employed in the United States. For a number of reasons, E-Verify is not ready for prime time. First, E-Verify's accuracy rate is simply not good enough. Many authorized workers, including American citizens, would be erroneously flagged as unauthorized if all employers were required to use it. Moreover, Congress has not set up a procedure or process for workers improperly flagged as unauthorized to contest E-Verify findings. Job seekers—including many of the working poor with few resources—would have to visit Social Security Administration and/or Department of Homeland Security offices on their own time and at their own expense to correct an E-Verify error, or else face losing their jobs. And if they lose their job because of a government error, there is no meaningful recourse for them to get reinstated or sue for lost wages.

Furthermore, E-Verify should not be expanded nationwide until the 11 million unauthorized immigrants in the United States—including 8 million unauthorized immigrant workers—are legalized. While E-Verify might make sense someday as a policy option to deter future unauthorized migration, without making necessary improvements or coupling it with a broad legalization, it will do much more harm to low-wage workers than good. Many unauthorized immigrants will begin working off of formal payrolls, making it nearly impossible for them to contribute to payroll taxes and the social safety net, or to file successful compensation claims when they are injured on the job. Expanding E-Verify without legalizing the 8 million employed unauthorized immigrants would leave 5 percent of the labor market even more exploitable and vulnerable to retaliation based on immigration status than they already are, putting downward pressure on labor standards for U.S. workers who are employed alongside unauthorized immigrants.

E-Verify expansion was considered as part of comprehensive immigration reform in 2013, and shouldn't be considered again until Congress is ready to consider major reforms to it and couple it with legalization.

Because E-Verify will upset the business community by pushing millions of undocumented workers into the informal labor market, the E-Verify bill is being considered together in the House Judiciary Committee with a bill that would create a large new guestworker program to replace the undocumented workforce. The "Agricultural Guestworker Act" (AG Act), authored by Judiciary Chairman Rep. Goodlatte (R-VA), will create a new temporary worker program that will allow migrant workers to be employed on temporary, nonimmigrant visas—not just for seasonal jobs in agriculture, but also many year-round jobs that have provided a path to the middle class for millions, including in meat processing and food manufacturing. The AG Act would would create a new "H-2C" work visa program that would start at 450,000 new guestworkers per year, but the cap could increase depending on employer demand, and guestworkers could stay for longer than one year. As a result, Farmworker Justice estimates that as many as 2 million visas could be issued by the second year of the H-2C program's existence—equal to roughly 1.25 percent of the entire U.S. labor force. (That would be in addition to the 1 percent of the workforce that is already made up of guestworkers with limited workplace rights.)

This new program the bill would create won't give H-2C workers equal rights on par with U.S. workers. As part of the program, H-2C workers will be vastly underpaid for their work compared to U.S. workers. Employers will only be required to pay H-2C workers slightly above the minimum wage—115 percent of the minimum wage for most jobs or 150 percent for meat and poultry processing jobs—but the bill contains loopholes that would allow them to pay less. In the 21 states that use the federal minimum wage, 115 percent of the minimum wage means that most H-2Cs will get paid $8.34 per hour, which amounts to $334 per week and $17,347 per year if they work a full 40 hours per week. But H-2C workers have no guarantee that they'll work 40 hours per week, because Rep. Goodlatte included a provision only requiring employers to provide them with 20 hours of work per week. 20 hours of work per week at $8.34 per hour amounts to $167 per week and $8,674 per year.

In addition, hundreds of thousands, if not millions of H-2C workers—nearly all of whom will be earning wages that keep them well below the poverty line—will be required to pay for their own housing. Under the current H-2A guestworker program for temporary and seasonal jobs, guestworkers earn a higher wage than they would under the AG Act, and employers are required to provide housing, in part because migrant workers can't be expected to afford housing on the low wages they're paid (even at the higher wage rates in H-2A). It is nearly impossible for anyone in the United States to afford housing if they earn less than $9,000 per year. Rep. Goodlatte is either oblivious to what it costs to live in the United States or he simply doesn't care that many H-2C guestworker will have no choice but to be homeless.

To add insult to injury, Rep. Goodlatte's bill requires H-2C workers to pay for their own health insurance, but prohibits them from accessing subsidies available to the rest of the public under the Affordable Care Act. For some H-2C workers, their annual earnings won't even be enough to afford the health insurance they're required to purchase.

The AG Act is a bad idea for a number of other reasons too, including permitting employers to attest rather than prove that they couldn't find U.S. workers to fill positions, excluding the Department of Labor from any oversight role, prohibiting federal legal aid money from being used to represent H-2C workers, and prohibiting H-2C workers who suffered workplace abuses from filing lawsuits—instead requiring them to submit legal disputes to mandatory arbitration and for good measure, requiring them to pay half the arbitration costs.

It is obvious to any rational person that the AG Act is a recipe for importing poverty and instituting a new era of legalized slavery in the United States, all so that agricultural employers can save a few bucks on labor costs and have a captive workforce that has no option but to beg for the opportunity to earn a pittance for doing some of the most important and backbreaking work in the country.

The one-two punch of the Legal Workforce Act and the Agricultural Guestworker Act will do more to erode labor standards and push down wages for lesser-skilled workers—both Americans and immigrants—than any other immigration legislation in recent memory. The best way to raise wages through immigration law is to legalize the unauthorized immigrant population and create a more rational, flexible, and data-driven system that ties immigration levels to the needs of the economy—not employer desires for indentured workers.

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Intergenerational social mobility [feedly]

Intergenerational social mobility
http://understandingsociety.blogspot.com/2017/10/intergenerational-social-mobility.html

A crucial part of social cohesion is the prospect of social mobility across generations. A social order in which individuals are stuck in their social position as a result of the lack of social assets of their parents is one which lacks legitimacy for an important part of its population. (Here are a few earlier posts on social mobility in the United States; link, link.) This observation raises several crucial questions. How do we measure social mobility? What obstacles stand in the way of social mobility for some segments of a given population? And what mechanisms exist to increase the pace of social mobility for a given society?

Raj Chetty and his colleagues have profoundly changed the terrain for social scientists interested in these questions through a striking new approach. Their work is presented on the Equality of Mobility website (link). The map above shows that there are very sizable regional differences in social mobility rates, from the deep south to the plains states and upper midwest.

Of particular interest is the light their research sheds on the role that post-secondary education plays in social mobility. A summary of their findings is presented in an NBER research paper, "Mobility Report Cards: The Role of Colleges in Intergenerational Mobility" (link). Here is a statement of their approach:

We take a step toward answering these questions by using administrative data covering all college students from 1999-2013 to construct publicly available mobility report cards – statistics on students' earnings outcomes and their parents' incomes – for each college in America.1 We use de-identified data from federal income tax returns and the Department of Education to obtain information on college attendance, students' earnings in their early thirties, and their parents' household incomes.2 In our baseline analysis, we focus on children born between 1980 and 1982 – the oldest children whom we can reliably link to parents – and assign children to colleges based on the college they attend most between the ages of 19 and 22. We then show that our results are robust to a range of alternative specifications, such as measuring children's incomes at the household instead of individual level, using alternative definitions of college attendance, and adjusting for differences in local costs of living.

Their research involves linking federal tax returns for two generations of individuals in order to establish the relationship between the parents' income group and the child's income group after college. (The tax data are de-identified so that the privacy of the individuals is protected.) The Equality of Mobility website includes downloadable datasets for the report cards for several thousand post-secondary institutions.

A highlight of this analysis is the very substantial impact on social mobility created by regional public universities.

The colleges that have the highest bottom-to-top-quintile mobility rates – i.e., those that offer both high success rates and low-income access – are typically mid-tier public institutions. For instance, many campuses of the City University of New York (CUNY), certain California State colleges, and several campuses in the University of Texas system have mobility rates above 6%. Certain community colleges, such as Glendale Community College in Los Angeles, also have very high mobility rates; however, a number of other community colleges have very low mobility rates because they have low success rates. Elite private (Ivy-Plus) colleges have an average mobility rate of 2.2%, slightly above the national median: these colleges have the best outcomes but, as discussed above, also have very few students from low-income families. Flagship public institutions have fairly low mobility rates on average (1.7%), as many of them have relatively low rates of access. Mobility rates are not strongly correlated with differences in the distribution of college majors, endowments, instructional expenditures, or other institutional characteristics. This is because the characteristics that correlate positively with children's earnings outcomes (e.g., selectivity or expenditures) correlate negatively with access, leading to little or no correlation with mobility rates. The lack of observable predictors of mobility rates underscores the value of directly examining students' earnings outcomes by college as we do here, but leaves the question of understanding the production and selection technologies used by high-mobility-rate colleges open for future work. (3-4)

These are by and large the institutions that constitute the membership of the American Association of State Colleges and Universities (link). AASCU institutions are distinguished by the commitment that they commonly share to enhancing access for under-serviced members of society, and to contributing to social mobility in the regions and states that they serve. These values are expressed in the American Democracy Project (link). The evidence of the Chetty project appears to validate the achievement of that mission.

There are additional questions that one would like to be able to answer using the kinds of data that Chetty and his colleagues have considered. Central among these have to do with other measures of social mobility. The definition of social mobility in use here is transition from the bottom quintile of income to the top quintile of income in one generation. But it would be illuminating to consider less dramatic social movement as well -- for example, from the bottom quintile to the middle quintile.

This research underlines the critical importance of public higher education in the United States. We need to do a better job of supporting public universities so that the cost of higher education is not so heavily skewed towards tuition revenues. The benefits of public universities are certainly of value to the individual graduates and their families. But the increased social mobility enabled by many public universities also enhances democratic legitimacy at a time when many institutions are under attack.

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The Precariat: Why a Basic Income is Vital [feedly]

The Precariat: Why a Basic Income is Vital
https://workingclassstudies.wordpress.com/2017/10/23/the-precariat-why-a-basic-income-is-vital/

We are in the midst of a global transformation orchestrated by powerful financial interests espousing an ideology of market liberalisation, commodification, and privatisation. The global market system they advocate increases economic and social injustice, including widespread precarity. In the face of this transformation, how can we create new systems of regulation, distribution, and social protection to achieve a more just society?

Central to the transformation has been the owners' control of physical, financial, and intellectual property from which they overwhelmingly benefit. Unlike the post-war period when shares of income going to capital and labour were roughly stable, in today's globalised economy, the income distribution system has broken down irretrievably and the share of rentier capital – that is, income from rents, trusts, and subsidies rather than production or trade — has risen sharply.

This economic transformation has enormous implications for a growing class, the precariat. I define this group as a class because it has distinctive relations of production, relations of distribution, and relations to the state. And it is the precariat that will define the counter-movement in the global transformation.

The precariat faces a life of unstable, insecure labour. As we have seen with Uber, Task Rabbit, and other new non-traditional work structures, casualization has been extended by indirect labour relations in the 'concierge economy', while online crowd labour in platform capitalism and on-call contracts has spread. Within the next decade, a majority of transactions may be of this type, as labour brokers and apps become more ubiquitous. The old relations of production, built around direct employer-employee relationships, may become the exception.

Many commentators define the precariat simply on the basis of insecure labour, but this misses an important element: the precariat lacks an occupational identity. Further, these forms of precarious work involve increasing amounts of work-for-labour – think of the time an Uber driver puts in to maintaining a car — that is neither recognised statistically nor remunerated. In addition, many do jobs that require less education than they have.

The precariat is also defined by distinctive relations of distribution, in particular exploitation that undermines social income. Precarious workers rely mostly on money wages, which have been falling in real terms while becoming more volatile and unpredictable. They are also losing non-wage benefits, such as paid leave, medical leave, and occupational pensions, which provided labour-based security for old proletariat and, at this point, still do so for salaried workers. Statistics based on money income ignore these losses, and so they understate inequality.

To compound their insecurity, the precariat has lost rights-based state benefits, which increasingly require recipients to meet means tests. This results in a poverty trap, because moving from benefits to a low-wage job often brings only marginal income increases. And if someone loses a job, they don't begin receiving benefits immediately, creating what I call a precarity trap. The combination means that taking a short-term job brings a small extra income but also raises the prospect of losing income altogether for a while after the job ends.

Yet it is the precariat's distinctive relations to the state that are most crucial to understanding this growing class. Members of the precariat are losing rights of all kinds – civil, cultural, social, economic, and political. They are reduced to supplicants, without rights, obliged to be obsequious to gain income or benefits and dependent on bureaucrats to make discretionary judgements in their favour. This is humiliating, intensifying feelings of insecurity. These rights are also forms of social income, and their loss represents extra costs of living for the precariat. This, too, adds to inequality in ways that conventional income measures ignore.

The precariat has been hard hit by the collapse of the old income distribution system. It will be even harder hit by the advance of robotization, which will bring more people into the precariat. Robots may not cause mass unemployment, as many in Silicon Valley predict, but they will be disruptive. Wages will decline, and occupational structures will become more fragmented. The salariat will become part of a growing precariat of para-legals, para-medics, fractionals, and the like. The only people who will benefit are a few elites, whose incomes come from rents and investments.

At that point – and it is coming soon – economists and politicians will either have to accept yawning inequality and all the social and political risks that this entails or build a new income distribution system in which wages will play a smaller role. The base of a new system should be a basic income, funded by taxing the rentier income of the elites.

A basic income is a modest amount paid regularly to each individual legal resident (or 'citizen'). It is a non-withdrawable economic right, without behavioural conditions. This would have several beneficial effects, including acting as an incentive to work in more ecological ways, such as in reproductive or care work rather than in resource-depleting labour, and improving mental and physical health. To afford a basic income system, governments would tax income gained through financial, physical, and intellectual property. Taxes for the majority would not rise, and public services would not be adversely affected. In a basic income system, everybody shares in the collective wealth generated in the economy.

A basic income will be the anchor of the system, but it should also provide supplements for those who have extra costs of living, such as people with disabilities or parents of infants, and to assist those with below-average earning opportunities. The system will still include wages and insurance benefits, as well as income from normal profits from productive activity.

Sooner or later, basic income will be seen as the only sustainable course. That, in turn, will enhance social justice, freedom, and basic social and economic security.

Guy Standing

Guy Standing is a Professorial Research Associate, SOAS, University of London. He is the author of numerous books, most recently Basic Income: A Guide for the Open-Minded andThe Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay. He will discuss the books at a seminar in Columbia University on October 26, 2017.

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China vs. the Washington Consensus [feedly]

China vs. the Washington Consensus
https://www.project-syndicate.org/commentary/china-versus-washington-consensus-by-adair-turner-2017-10

China vs. the Washington Consensus

Oct 23, 2017 ADAIR TURNER

The 2008 financial crisis was a shock to faith in entirely free financial markets. But the neoliberal assumptions underlying the previously dominant "Washington Consensus" continue to inform much Western commentary on China's economy.

EDINBURGH – In 2013, Chinese President Xi Xinping heartened many Western economists by committing to a "decisive role" for the market within China's economy. Four years on, expectations of significant market-oriented reform have been dashed, and state influence over the economy has significantly increased. Yet the Chinese economy continues to grow rapidly and will likely continue to do so. If it does, longstanding assumptions about the optimal balance of state and market mechanisms in driving economic development will be severely challenged.

The 2008 financial crisis was a shock to faith in entirely free financial markets. But the neoliberal assumptions underlying the previously dominant "Washington Consensus" continue to inform much Western commentary on China's economy. Deeper financial market liberalization, it is argued, would better discipline the real economy and lead to more efficient capital allocation. Capital account liberalization would prevent wasteful investment in low-return domestic projects. And reducing the role of dominant state-owned enterprises (SOEs) would unleash innovation and economic dynamism.

But, as Joe Studwell of the China Economic Quarterly argues persuasively in his book How Asia Works, the original East Asian success stories – Japan and South Korea – got rich by ignoring most of this policy prescription. Finance was kept on a tight leash; credit was directed or guided to support specific government-defined industrial objectives; and domestic industry was nurtured behind tariff protection, while being forced to compete aggressively for overseas markets.

China is attempting to follow Japan and South Korea's path of rapid economic catch-up. But in some ways it faces a more difficult challenge, because its sheer size makes it essential to move away from a predominantly export-driven growth model at an earlier stage of development. To meet that challenge, it seeks to use a pragmatic mix of market incentives and state direction.

Private-sector entrepreneurship plays a vital role. Huge companies such as Tencent and Alibaba are second to none in innovative flair. Chinese bicycle-sharing apps are now being copied in advanced economies. And private companies play world-leading roles in renewable energy and electric vehicles. In part, China is a vibrant capitalist economy.

But huge state-driven infrastructure investment – in excellent subway systems and high-speed rail, for example – creates a powerful platform for modern economic growth within rapidly expanding and well-connected cities. And through the "Made in China 2025" program, China's leaders are seeking to use state-defined objectives to drive Chinese industry toward higher technology and value-added.



High-priority sectors such as robotics, aerospace, electric vehicles, and advanced medical equipment have been identified; targets for increased spending on research and development have been established; and leading state-owned companies will play a major role, alongside private companies. This is a far cry from the policy prescriptions of the Washington Consensus, but not from the policy mix deployed by South Korea during its period of explosive economic growth in the 1960s and 1970s.

After 2009, meanwhile, higher investment, funded by state banks, played a vital macroeconomic role, maintaining growth in the face of the global economic slowdown. And maintaining an only partly liberalized financial sector, which channels savings to investment at below-market rates, has made it easier to maintain the high investment essential to sustained rapid growth.

The advantages of this policy mix certainly come with significant risks. If the role of the SOEs is extended too far, the private sector will be squeezed out, and the Made in China initiative could easily result in misdirected investments.

Already, credit-fueled real-estate investment has undoubtedly resulted in massive overbuilding in some second- and third-tier cities, with properties held as speculative vehicles rather than to meet real housing needs. The very fact that the banking sector is tightly controlled has fostered dramatic growth in shadow banking activities, creating complex financial instruments and structures eerily reminiscent of those that helped create the 2008 crisis. And the huge increase in leverage – non-financial debt has grown from less than 150% of GDP in 2008 to more than 250% today – might well lead, as People's Bank Governor Zhou Xiaochuan has just warned, to a "Minsky moment" of evaporating confidence and severe financial stress.

Given these risks, any long-term growth prediction is uncertain, and a significant short-term slowdown may well occur. Indeed, with the 19th National Congress drawing to a close, the Chinese authorities may deliberately engineer a slowdown as part of a strategy to limit further leverage growth. Such a slowdown would have a major depressive impact on the global economy.

But the tools available to China to manage such a slowdown within a "hybrid socialist market economy," and thus to maintain strong medium-term growth, should not be underestimated. The very fact that most corporate debt is owed by state-owned enterprises to state-owned banks, with only limited links between the Chinese and overseas banking systems, will make it easier to implement a restructuring program for bad debt without provoking a self-reinforcing crisis. Likewise, as China's demographic profile causes the labor market to tighten sharply, rapidly rising real wages will make it easier to achieve strong growth in domestic demand without excessive credit creation.

So, whatever its short-term prospects, there is a good chance that China's economy will continue to grow toward middle- and then high-income levels, driven by a mixed market- and state-driven development model. If China had more comprehensively embraced the policy prescriptions implied by the Washington Consensus over the last ten or 20 years, its economic growth would have been considerably slower. The economic theories that underpinned those prescriptions must reckon with that fact – and with China's likely continued success.


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Teacher employment may have weathered recent storms, but schools are still short 327,000 public educators [feedly]

Teacher employment may have weathered recent storms, but schools are still short 327,000 public educators
http://www.epi.org/publication/teacher-employment-may-have-weathered-recent-storms-but-schools-are-still-short-327000-public-educators/

With the September employment data in hand, we can look at the number of teachers who are starting work or going back to school this year. The number of teachers and education staff fell dramatically during the Great Recession and has failed to get anywhere near its prerecession level, let alone the level that would be required to keep up with an expanding student population. In addition to losses from the Great Recession, the pursuit of austerity at all levels of government has meant that public education jobs are still 128,000 less than they were nine years ago.

The Teacher Gap

Over the last year, the number of teachers fell by 10,600. These losses are likely unaffected in September by the unusually stormy employment numbers because the deceleration in local public education jobs began a couple months prior. There were 6,300 fewer jobs between August 2016 and August 2017 and only 4,400 additional jobs between July 2016 and 2017—while employment in public education grew the previous year over the same period, rising 76,000 between July-September 2016 and July-September 2015. The recent slowdown in local education jobs is troubling on top of years of losses. Furthermore, if we include the number of jobs that should have been created just to keep up with enrollment, we are currently experiencing a 327,000 job shortfall in public education. The costs of a significant teacher gap are measurable: larger class sizes, fewer teacher aides, fewer extracurricular activities, and changes to the curricula. Shortsighted austerity measures at all levels of government hit children in today's classrooms. In order to get back to prerecession teacher levels, we need strong public investment in education that will help students and teachers alike

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Wages Are Growing: Contrary to What You Read in the Papers [feedly]

Wages Are Growing: Contrary to What You Read in the Papers
http://cepr.net/publications/op-eds-columns/wages-are-growing-contrary-to-what-you-read-in-the-papers

Wages Are Growing: Contrary to What You Read in the Papers

Dean Baker
Truthout, October 16, 2017

See article on original site

There is much to criticize about the US economy. There has been a massive upward redistribution of income over the last four decades. As a result, those at the top have gotten incredibly rich while the middle and bottom have seen almost nothing from the growth over this period.

The recent past has been even worse. Millions of people lost their homes in the collapse of the bubble, pushing the ownership rate to the lowest level in more than fifty years. For African Americans the ownership rate fell to the lowest level on record.

The Great Recession pushed the unemployment rate into the double digits, with the unemployment rate for African Americans exceeding 17 percent at its peak. The recovery has been long and slow. While the unemployment rate has finally fallen back to pre-recession levels, the employment rate for prime age workers (ages 25 to 54) is still 1.5 percentage points below pre-recession peaks and 3.0 percentage points below the peak reached in 2000. The weakness in the labor market led to a sharp falloff in real wages for those at the middle and bottom of the wage distribution.

But that was the past. In the last couple of years we actually have been seeing some reasonably good economic news. The tightening labor market has narrowed the gap between the unemployment rates for African Americans and Hispanics compared with whites. In 2014 the gap between the African American unemployment rate and the white rate was 6.0 percentage points. For the first nine months of the 2017 it has averaged 3.7 percentage points. For Hispanics the gap was 2.2 percentage points in 2014 compared with 1.3 percentages so far this year.

Tighter labor markets have also meant that wages are actually rising for those at the middle and bottom of the wage ladder. There had been essentially no change in average weekly earnings between 2008 and 2014 for the median worker. (Weekly earnings can rise both because of higher hourly wages and also more hours of work.) Wages had just kept even with prices over this six year period. For workers at the 25th percentile cutoff (25 percent of workers earn less), real wages had actually fallen by 3.0 percent over this period.

However things have turned around and are now moving in the right direction. Weekly earnings, adjusted for inflation, of the median worker have risen by roughly 5.0 percent since 2014. They have gone up about by almost 8.0 percent for workers at the 25th percentile of the wage distribution.

For African Americans weekly earnings for the median worker were still at their 2008 level as late as 2015. Earnings for workers at the 25th percentile were down by almost 4.0 percent. In the last two years earnings for median worker have risen by almost 5.0 percent, while they have risen by close to 9.0 percent for African Americans at the 25th percentile of the wage distribution. In the last three years, weekly earnings for the median Hispanic worker have risen by more than 10.0 percent.

This period of two or three good years does not come close to making up for the suffering of the Great Recession, much less the prior three decades of stagnate wages, but it is important to recognize that things are finally moving in the right direction. Workers are getting their share of the gains from growth and workers at the bottom are actually gaining ground at the expense of those at the top.

Getting this recent history right is important for two reasons. First, it means that the economy can deliver the goods for the bulk of the working population, if the unemployment gets low enough and the labor market tight enough. All the economy's problems will not be fixed by a low unemployment rate, but it does make a huge difference, especially for those at the middle and bottom of the income distribution.

The other reason we need to get this history right is that the progress of the last two years is threatened by the actions of the Federal Reserve Board in raising interest rates. The Federal Reserve Board has raised interest rates five times in the last two years. Its goal has been to slow the economy and reduce the pace of job creation. This limits workers' bargaining power and the risk of higher wages setting off an inflationary spiral.

While these rate hikes were arguably unnecessary, they were relatively modest given that the Fed was starting from a position of a zero interest rate. This could change if the Fed gets a new chair. The current chair, Janet Yellen, was the architect of this sequence of modest rate hikes. One person who is widely mentioned as a possible replacement is Kevin Warsh. Warsh is a former member of the Federal Reserve Board of Governors. In that position he repeatedly expressed concerns about inflation even as the economy was collapsing and the inflation rate was near zero.

If Yellen is not reappointed and Warsh is picked in his place, his imaginary fears of inflation may lead him to push the Fed to raise interest rates much further. If this happens, the period in which most workers are in a position to share in the gains from growth may quickly come to an end.

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