The long-run implications of extending unemployment benefits in the United States for workers, firms, and the economy [feedly]

... automatic stabilizers would help

The long-run implications of extending unemployment benefits in the United States for workers, firms, and the economy
https://equitablegrowth.org/the-long-run-implications-of-extending-unemployment-benefits-in-the-united-states-for-workers-firms-and-the-economy/

At the outset of the coronavirus pandemic earlier this year, millions of U.S. workers lost their jobs. In March, the U.S. Congress took notice and decided that the 26 weeks of Unemployment Insurance typically provided by states were not enough for an employment crisis that would likely extend beyond 6 months. Through the new Pandemic Emergency Unemployment Compensation program, it provided people who lost jobs through no fault of their own with an additional 13 weeks of benefits.

Today, coronavirus cases counts are skyrocketing, hospitals are filling, businesses are closing, and long-term unemployment is surging. But some workers have already run out of benefits, and the PEUC program is set to expire on December 26, leaving 8.1 million workers without any income support through this emergency 13-week benefit extension.

The expiration of the Pandemic Emergency Unemployment Compensation program means devastation for workers and their families this December. But research released earlier this year by Adriana Kugler and Umberto Muratori at Georgetown University and Ammar Farooq at Uber Technologies Inc. shows that the effects of the PEUC expiration are likely to persist far into the future for workers whose benefits expire, and ripple through the U.S. economy to affect firms and workers searching for well-matched employment relationships.

The basic idea behind this research is intuitive. When people have resources to meet their basic needs while out of work, they can take the time they need to find the right job for them, rather than taking the first work opportunity that comes along. Workers benefit because they find jobs that pay more and meet their needs more broadly, and firms benefit because they recruit workers with the right skills for the job. While the idea makes sense, it hasn't been backed by much evidence in the U.S. context, in part because of data limitations.

This makes it particularly exciting that this research team was able to access data from the Longitudinal Employer Household Dynamics database, which matches administrative information about workers and their earnings with administrative information about their employers. Using these data, as well as information from the Current Population Survey and the natural experiment that occurred when different states offered different durations of unemployment benefits during the Great Recession of 2007–2009 and its aftermath, Farooq, Kugler, and Muratori take a close look at how job seekers and firms fare when the duration of unemployment benefits is extended. (See Figure 1.)

Figure 1

Farooq, Kugler, and Muratori find that the longer you have access to unemployment benefits, the higher paying the job that you eventually find is and the more your skills and training get put to use. (See Figures 2 and 3.) Access to the full extended emergency benefits during 2009, which increased benefits from 26 weeks to 79 weeks, increases re-employment wages by 2.6 percent and also increases the probability that a worker will be re-employed in a job that requires more education than their previous job by 11.7 percentage points.

Figure 2

Figure 3

The idea that workers match their talents with job openings that put their skills to use is not just good news for those workers. It matters for firms and the broader economy as well. Farooq, Kugler, and Muratori take advantage of their dataset, which allows them to follow individual workers over time and also to see the full workforce of the firms with which they eventually find re-employment. Using these features of the data, they find that higher-quality firms are better able to recruit workers that have the abilities they need. This creates a chain reaction that spreads through the U.S. economy. The authors describe it eloquently:

These results suggest that if a worker can receive UI benefits for a longer period, she will be able to find a job with an employer that is closer to her in terms of quality. This worker then is likely to leave another job open for someone else who is also likely to be better matched, and in turn that other worker can also leave vacant another job and relieve it to someone else, generating a chain reaction that makes many other workers, beyond the one receiving the UI extension, match better in the labor market.

In this manner, the benefits of extended unemployment benefits ripple past a worker's current situation to affect their future job prospects, the productivity of firms, and the experiences of workers across the economy.

Particularly striking is the fact that the positive effects of extended unemployment benefits are larger for workers who are members of groups that lack funds for a rainy day. Because of labor market discrimination, unequal access to education and training, caregiving obligations, and stagnating wage levels, members of demographic groups, including women, people of color, and less-educated workers, typically lack the private savings held by their counterparts who are members of more advantaged groups.

Indeed, this research finds that during the Great Recession and its aftermath, women, people of color, and low-educated workers improve their job matches when they have access to unemployment benefits even more than their counterparts who are members of wealthier demographic groups. The research team finds that a 53-week increase in UI benefits improves the job-match quality by 0.9 percent for White workers, but improved match quality even more for workers of color: The effect size for workers of color is 1.2 percent.

Similarly, Farooq, Kugler, and Muratori find that workers of color (along with women, less-educated workers, and young workers) see larger returns to increased weeks of benefits when it comes to wage levels. This supports the idea that the improved fit between workers and the jobs they find stems from workers' ability to spend more time searching for a job that is a good match, without sacrificing their basic needs in the short term.

Their findings also suggest that insufficient durations of unemployment benefits during moments of macroeconomic contraction exacerbate inequality in the U.S. labor market. This concern is magnified during today's coronavirus recession because the sectors of the U.S. economy that have been hardest hit are the same ones where women, people of color, and low-educated workers are overrepresented.

There is another reason that policymakers should be deeply concerned about the relationship between job matching and extended unemployment benefits during this crisis in particular. While this research speaks to job match in terms of workers' education levels and wages, we can guess that the extended time provided for job search also allows workers to find jobs that are better matches for them along other dimensions—schedule flexibility, location, and working conditions. During the current public health crisis, working conditions are of outsize importance. The ability to be choosy about the health and safety conditions of one's workplace is more likely to be the difference between life and death for a worker or a member of the worker's family than is typical outside of the context of a public health crisis.

So, what to do about the upcoming expiration of the PEUC program? There is the obvious short-term fix—extend the duration of PEUC benefits so that all workers who are unemployed through no fault of their own can receive unemployment benefits for the amount of time it takes to find a job that is a good match for their skills and their health.

And then, there is the bigger structural issue. It's clear from a macroeconomic perspective that the duration of unemployment benefits should extend automatically during moments of economic contraction. Indeed, a permanent program called the Extended Benefits program is designed to do just this. But the formulae we rely on (known as "triggers") to turn on Extended Benefits are broken, and we are repeatedly left in the situation we find ourselves in today: waiting on political horse trades to enact common sense, economically necessary policy decisions through one-off emergency benefit extensions.

So, to make unemployment compensation work for workers and for the economy as a whole in both the short- and long-term, policymakers should extend PEUC today, but they shouldn't stop there. They should also redesign Unemployment Insurance permanently with improved automatic stabilizers so that payment extensions trigger automatically when economic conditions warrant.

 -- via my feedly newsfeed

Wages for the top 1% skyrocketed 160% since 1979 while the share of wages for the bottom 90% shrunk: Time to remake wage pattern with economic policies that generate robust wage-growth for vast majority [feedly]

Wages for the top 1% skyrocketed 160% since 1979 while the share of wages for the bottom 90% shrunk: Time to remake wage pattern with economic policies that generate robust wage-growth for vast majority
https://www.epi.org/blog/wages-for-the-top-1-skyrocketed-160-since-1979-while-the-share-of-wages-for-the-bottom-90-shrunk-time-to-remake-wage-pattern-with-economic-policies-that-generate-robust-wage-growth-for-vast-majority/

Newly available wage data tell a familiar story: In every period since 1979, wages for the bottom 90% were continuously redistributed upward to the top 10% and frequently to the very highest 1.0% and 0.1%.

For last year, 2019, the data show a continuation, with annual wages rising fastest for those in the top 10% while those in the bottom 90% saw below-average wage growth.

This unceasing growth of wage inequality that undercuts wage growth for the bottom 90% reaffirms the need to place generating robust wage growth for the vast majority and rebuilding worker power at the center of economic policymaking.

A similar pattern as in 2019 prevailed over the entire 2007–2019 business cycle as wages were redistributed in two ways, up from the bottom 90% to the top 10% and within the top 10% from the top 1% to those in the remaining 9% of the top 10%. Still, the top 1% has done far better in the 2009–2019 recovery (wages rose 20.4%) than did those in the bottom 90% (wages rose only 8.7%).

As Figure A shows, the top 1% and the very tippy top, those in the top 0.1%, were the clear winners over the longer-term 1979–2019 period:

• The top 1.0% saw their wages grow by 160.3%; and
• wages for the top 0.1% grew more than twice as fast, up a spectacular 345.2%.
• In contrast, those in the bottom 90% had annual wages grow by 26.0% from 1979 to 2019.

This disparity in wage growth reflects a sharp long-term rise in the share of total wages earned by those in the top 1.0% and 0.1%.

These are the results of EPI's updated series on wages by earning group, which is developed from published Social Security Administration (SSA) data and updates the wage series from 1947–2004 originally published by Kopczuk, Saez and Song (2010). These data, unlike the usual source of our other wage analyses (the Current Population Survey), allow us to estimate wage trends for the top 1.0% and top 0.1% of earners, as well as those for the bottom 90% and other categories among the top 10% of earners. These wage data are not top-coded, meaning the underlying earnings reported are actual earnings and not "capped" or "top-coded" for confidentiality. These SSA wage data are W-2 earnings, which include realized stock options and vested stock awards.

Figure A

Over the longer term, since 1979, there was far faster wage growth at the top (highest 1.0%) and tippy top (upper 0.1%), signaling a major redistribution upward from the bottom 90%. As Figure A shows, the top 1.0% of earners are now paid 160.3% more than they were in 1979. Even more impressive is that those in the top 0.1% had more than double that wage growth, up 345.2% since 1979 (Table 1). In contrast, wages for the bottom 90% grew only 26.0% in that time. The other segments of the top 10% (those in the 90th–95th percentiles and 95th–99th percentiles) also had faster-than-average wage growth since 1979, up 51.8% and 75.1%, but nowhere near as fast as the wage growth at the top. Thus, wages have been redistributed upward since 1979 from the bottom 90% to the top 10% and within the top 10% to the top 1% and especially to the top 0.1%.

This pattern of upward wage distribution also prevailed over the recent recovery (since 2009): The bottom 90% experienced modest annual wage growth—reflecting growing annual hours as well as higher hourly wages—up 8.7% from 2009 to 2019. In contrast, the wages of the top 1.0% and top 0.1% grew, respectively, 20.4% and 30.3% in the last 10 years.

In the most recent year, however, wages grew fastest for the bottom 9% of the top 10% (up 4.2% for 90th–95th percentiles, up 2.2% for 95th–99th percentiles) and slower than average for the bottom 90% (up 1.7%) and the top 0.1% and top 1% (both up 1.0%).

One key characteristic of the Great Recession downturn was the big hit on the very highest earners, with the top 1% and top 0.1% seeing 15.6% and 26.1% declines over the two years from 2007 to 2009. Even by 2019 the top 0.1% had not recovered from this sharp fall at the start of the business cycle as the top 1% as a whole earned only 1.6% above their 2007 earnings. Thus, the business cycle from 2007 to 2019 was one in which wages were redistributed from the bottom 90% to the top 10% and within the top 10% from the top 1% to the remainder of the top 10% (the 90th–99th percentiles). The one constant wage dynamic in every period since 1979 has been that the wages for the bottom 90% are continuously redistributed upward.

It is worth noting that our series on the wage growth of the bottom 90% corresponds closely to the Social Security Administration's series on median annual earnings: Between 1991 and 2019 the real median annual wage grew 23.8%, very close to the 26.0% growth for the bottom 90%.

It is also noteworthy that the wage growth for the bottom 90% was almost entirely concentrated in the two periods of sustained low unemployment representing 11 of the 40 years: The bottom 90%'s wage growth in the 1995–2000 and 2013–2019 periods represented 90% of all the wage growth ($7,230 of $8,043) over the entire 1979–2019 period. The shift of wages away from the bottom 90% meant that their wages rose 26.0% rather than the 44.6% increase obtained on average over the 1979–2019 period, some 18.6 percentage points faster growth.

Table 1

These disparities in long-term wage growth reflect a major redistribution upward of wages since 1979, as noted earlier. The bottom 90% earned 69.8% of all earnings in 1979 but only 60.9% in 2019 (Table 2). In contrast, the top 1.0% nearly doubled its share of earnings from 7.3% in 1979 to 13.2% in 2019. The growth of wages for the top 0.1% is the major dynamic driving the top 1.0% earnings as the top 0.1% more than tripled its earnings share, from 1.6% in 1979 to 5.0% in 2019.

Table 2

The bottom 90% lost some ground over the recent business cycle, 2007–2019, as their wage share fell slightly, from 61.1% to 60.9%. The winners in the recent business cycle were not the top 1%, whose wage share fell from 14.1% to 13.2%. Rather, the upward redistribution of wages from the bottom 90% and the shift away from the top 1.0% in the recent business cycle accrued to the other high earners in the top 10%, those earning between the 90th and 95th percentiles (averaging $129,998 in 2019) and between the 95th and 99th percentiles (averaging $210,511 in 2019).

 -- via my feedly newsfeed

Jared Bernstein: November jobs report shows clear, virus-related slowing [feedly]

November jobs report shows clear, virus-related slowing
http://feedproxy.google.com/~r/JaredBernstein/~3/gmUZgBOOZlY/

Payrolls were up 245,000 last month, the slowest month for job gains since the jobs recovery began in April. The jobless rate fell from 6.9 to 6.7 percent, but this was due to a decline in labor market participation, not more jobs (in the households survey from which the unemployment rate is drawn, employment fell). Job changes in virus-affected sectors, like restaurants (down 17,000 jobs), suggest that the spiking virus caseload is hurting job growth. 

Overall, as the figure shows, payrolls remain 9.8 million jobs down from their pre-recession peak. If the pace of gains doesn't speed up from that of November, it would take about 3 years to get back to the pre-pandemic peak. But this is too low a bar because it doesn't factor in job growth that would have occurred had we remained on the earlier trend. Hitting that target at this rate would take 4 years (see figure below).

Source: BLS, my calculations

In other words, we'll need much faster job growth if we are to get back to full employment in a timely manner.

Private sector jobs grew more quickly last month, up 344,000. One reason for this difference was 93,000 fewer temporary federal hires for the 2020 Census. Another is the decline in local education jobs, down 21,000 in November and 688,000 since February, a function of both Covid-induced disruptions to public schools and struggling municipal budgets.

Other concerning indicators from today's report include:

–A sharp rise in long-term unemployment (jobless for at least 27 months), accompanied by a continuing shift from those unemployed due to temporary layoffs and those facing more lasting job searches. Since August, the number in long-term unemployment is up 2.3 million, the largest such increase on record.

–In-person service jobs, like those in the leisure and hospitality sector, are particularly at risk when the virus is spiking. After growing at a solid clip in recent months, restaurant jobs were down 17,400 in November. 

–The number of private-sector industries adding jobs in November fell sharply, from 71 to 59 percent.

This jobs report shows the clear impact of two intersecting forces: the spiking virus and the fading of earlier fiscal relief packages passed by the Congress. The former, as noted, is continuing to put firm, downward pressure on the pace of job creation. The latter means that fiscal support is fading well before the job market is up to the task of replacing lost labor incomes. 

Since the Federal Reserve is already doing what they can to keep the cost of credit very low, the missing piece is added fiscal support. As President-elect Biden said today, "If Congress and President Trump fail to act, by the end of December 12 million Americans will lose the unemployment benefits they rely on to keep food on the table and pay their bills."

The good news is that Congress is considering a new, bipartisan, $900 billion relief plan that would help avoid some of the suffering due to the ongoing health and economic crises. Today's jobs report provides a clear, unequivocal signal that this package, which is but a partial first step towards a robust, resilient recovery, needs to get quickly into the economy and into the lives of vulnerable families.

 -- via my feedly newsfeed

Re: Matthew Yglesias: The "racial wealth gap" is a class gap

Here's a piece by Adolph Reed on the Trouble with Disparity that takes on a similar topic. https://nonsite.org/the-trouble-with-disparity/

On Thu, Dec 3, 2020 at 3:18 PM John Case <jcase4218@gmail.com> wrote:

A provocative take on the class / identity question with respect to racism.

A provocative take on the class/identity question with respect to race. Send comments! The "racial wealth gap" is a class gap Rich people are very white, but most white people aren't rich Matthew Yglesias Dec 2

Good morning it's Wednesday!

And what a fine day to discuss an unfashionable leftist view of mine. The discussion "racial wealth gap" is a somewhat perverse way to think about the real issue: A relatively small minority of the American population controls a huge share of the wealth, and that small minority is disproportionately white.

You could, in principle, try to ameliorate the resulting racial wealth gap by making the wealthy elite more racially diverse — a strategy that would do nothing to help the vast majority of non-white people. Alternatively, you could try to narrow the gap between rich and non-rich people, which would help the majority of people of all races. The latter approach is better on both substance and politics. So much better that to an extent it raises the question of what's the point of talking about a "racial wealth gap" as opposed to simply a gap between the wealthy and the non-wealthy?

The wealth gap is about the wealthy

For his master's thesis, Kevin Carney took a detailed look at the evolution of the black/white wealth gap in the United States and among other things came away with this finding — if you lop off the richest quarter of white people, then suddenly Black and white wealth dynamics over time look very similar.

The infamous destruction of African-American wealth during the subprime mortgage crash, for example, also happened for the majority of white households. The reason the racial wealth gap grew during this period is that rich white people own a lot of shares of stock while everyone else's wealth is in their homes (if it exists at all).

Another way of looking at this is that while most white people are not members of the economic elite, the economic elite is a very white group of people.

With some help from Matt Bruenig of the People's Policy Project, I looked at the racial composition of the wealthy elite according to the Fed's Survey of Consumer Finances:

• If you look at the top 10 percent of Americans by wealth, only 2.2 percent of those Americans are Black.

• The top 5 percent of Americans by wealth are only 2 percent Black.

• The top 1 percent, is only 0.5 percent Black.

Bruenig cautions that when you look at tiny subgroups like the top one percent, you get into sample size issues since the Fed only surveys about 5000 families (he also did an article looking at the numbers from the older SCF that's worth your time). But it's plain as day if you look at the numbers that as you go from top ten to top five to four, three, two, one you get a less and less Black group of people while the white percentage goes up and up.

Now some level that "white people are richer than Black people" and "the rich are a very white group of people" are two different ways of saying the same thing.

But I do think the framings lead to someone different ideas. Talking about income rather than wealth, Valerie Wilson and William Rogers found that the black/white economic gap grew between 1979 and 2016 primarily because wage inequality overall grew (see also this discussion in The Grio). You could address that either by trying to create a more egalitarian wage structure or by trying to create a more diverse set of people earning very high salaries even while doing nothing to improve the average person's pay. Similarly, you could approach the wealth gap issue primarily as a lack of diversity among America's billionaire class.

Billionaires own a lot of white wealth

Rich white guys. It's a thing.

According to the Forbes 400 list (an imperfect metric but good enough for a ballpark estimate†), there are seven African-American billionaires who have a combined wealth of $13 billion. These people are all very rich, obviously. But there's a (white) guy named David Tepper who's not particularly famous and who Forbes says is worth $13 billion all on his own. And he's only 41st on the list!

And billionaires collectively own a lot of wealth. Forbes says their top 400 are worth $3.2 trillion, of which less than one percent is owned by Black people. In a statistical sense, this drives a considerable racial wealth gap.

Now on the other hand, it's not as if the typical white person is a billionaire. Mark Zuckerberg's vast fortune is not materially benefiting Jared Golden's constituents in northern Maine or Joe Manchin's constituents in West Virginia via some magical property of shared whiteness.

Now a right-wing opponent of redistribution might want to do some racecraft to convince tens of millions of working class white people that they participate in the wealthy of white billionaires. But it's often been people on the left perpetuating this idea! Simply redistributing resources from billionaires to the majority of the population would help most white people, and help most Black people, and would also narrow the racial wealth gap.

Diversity or equality?

Going back to Carney's research, he's talking about the top 25 percent of the white wealth distribution, which is a much bigger group than just billionaires. But you do see among the mass affluent some of this same impulse to say we need more diversity, rather than more equality. Take for example the town of Hingham in the suburbs of Boston which is getting its own YIMBY group.

Except according to the Boston Globe "the Hingham YIMBY group is not focused on promoting low-income housing, but is instead aimed at increasing the town's racial diversity."

Now one point YIMBYs normally make about towns like Hingham is that by excluding new housebuilding and zoning out low-income families, they tend to render themselves very white. Hingham YIMBY's solution to this is to market the town more heavily to prosperous African-American suburbanites in Greater Boston and encourage them to consider moving to Hingham. And mathematically, they are correct. Hingham is not a large place, so a pure marketing campaign to convince more rich Black people to move there could make it a diverse place.

But look at this land-use in Hingham! The town is home to two MBTA commuter rail stations. One of them abuts a golf course and some underdeveloped land:

The other just abuts a bunch of underdeveloped land:

If you allowed the construction of apartment buildings near those stations, you'd almost certainly improve the diversity of the town. But more to the point, you'd create the opportunity for a bunch of people to live in transit-oriented housing with convenient commuter rail access to the Boston labor market. And if Massachusetts as a whole opted to legalize housing near transit, they could do an enormous amount to grow the state's economy, raise living standards, and promote sustainable commuting patterns.

Convincing a few affluent Black families to move to Hingham, by contrast, isn't really going to achieve much of anything.

And that's the big picture here. Exclusion is bad for racial equity. But that doesn't mean the solution is to fiddle with the racial equity dial by importing some really rich black people. The solution is for the Bay State to embrace housing growth and adopt international best practices in commuter rail operation. That would create broad prosperity that lifts up the majority of the people in the state and, yes, by doing so, it would also improve racial equity.

By the same token, you could take a Hingham approach to the billionaire problem and say that we need to make the billionaire class more diverse. But while conjuring up four dozen additional Black billionaires would have a impact on our understanding of Black wealth, it would not actually accomplish anything to make life better for the overwhelming majority of Black people. What would do that is the exact same thing as what would make life better for most white people — broad steps to create a less lopsided distribution of economic resources.

Tractable solutions are not "reductionism"

Now please do not read me as saying that there is no racism in America or that class politics is the only thing. We have lots of evidence of racial discrimination in the labor market, in the housing market, in policing and elsewhere.

But the way to tackle those problems would be to tackle them.

For example, there's solid reason to believe that the relatively straightforward step of conducting more DOJ "pattern or practice" investigations of police discrimination would lead to both less discrimination and fewer murders. And there's probably a lot the Civil Rights Division could be doing with audits to crack down on housing and labor market discrimination.

But if you're concerned about the economic disparity between white people and Black people, what you really ought to be concerned with is the disparity between rich people and non-rich people. You obviously don't want to narrow the gap in an economically destructive way. But if you can find growth-friendly ways to redistribute resources, you mechanically improve the racial gap. And even better, you have a tractable political problem — most voters are white, but most voters are not rich. And white people are overrepresented in the Senate, but rich people are underrepresented. So if you try to build a politics around racial redistribution, you're just going to lose. But if you try to build a politics around economic redistribution you just might win.

None of this is remotely revolutionary; it's just long-held conventional wisdom about politics. But the internal dynamics of progressive spaces have shifted in a weird way. Everyone is sensitive to often valid complaints that they've slighted racial justice in the past. But instead of dropping their work to refocus on problems that really are distinctively racial, what's mostly happened is either an effort to give redistributionist ideas new (but less popular) racial framing or else Hingham-esque efforts to achieve a superficial veneer of equity. But the majority of people in all ethnic groups are similarly situated in economic terms, and far and away the best way to make progress on material conditions is to emphasize that rather than reify the whiteness of the billionaire class.

---

† Thomas Piketty has told me that in his view the Forbes 400 (and similar lists from Bloomberg and other media sources) undercount the wealth of old money heirs who own diverse assets rather than large, easy to spot, stakes in single companies. If he's right about that, the true super-rich class is even whiter than what Forbes says.

--

John Case
Harpers Ferry, WV

Enlighten Radio

Socialist Economics

Facebook

--

TED BOETTNER  I Senior Researcher

Ohio River Valley Institute

(c) 304 590 3454 @BoettnerTed

 

Biden’s Economic Team Suggests Focus on Workers and Income Equality [feedly]

Biden's pledges re labor seem to be coming true. Hope this teams wins its args within the new admin, and has a plan to overcome the certain 

GOP blockade

Biden's Economic Team Suggests Focus on Workers and Income Equality
https://www.nytimes.com/2020/11/30/business/biden-economics-yellen-labor.html

WASHINGTON — President-elect Joseph R. Biden Jr. formally announced his top economic advisers on Monday, choosing a team that is stocked with champions of organized labor and marginalized workers, signaling an early focus on efforts to speed and spread the gains of the recovery from the pandemic recession.

The selections build on a pledge Mr. Biden made to business groups two weeks ago, when he said labor unions would have "increased power" in his administration. They suggest that Mr. Biden's team will be focused initially on increased federal spending to reduce unemployment and an expanded safety net to cushion households that have continued to suffer as the coronavirus persists and the recovery slows.

In a sign that Mr. Biden plans to focus on spreading economic wealth, his transition team put issues of equality and worker empowerment at the forefront of its news release announcing the nominees, saying they would help create "an economy that gives every single person across America a fair shot and an equal chance to get ahead."

Mr. Biden's picks include Janet L. Yellen, the former Federal Reserve chair, as Treasury secretary; Cecilia Rouse of Princeton University, to head the White House Council of Economic Advisers; and Neera Tanden of the Center for American Progress think tank, to run the Office of Management and Budget. All three have focused on efforts to increase worker earnings and reduce racial and gender discrimination in the economy.

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Ms. Tanden said in February that rising income inequality was the consequence of "decades of conservative attacks on workers' right to organize" and that labor unions "are a powerful vehicle to move workers into the middle class and keep them there."

The two other nominees to Mr. Biden's Council of Economic Advisers, Jared Bernstein and Heather Boushey, are economists who have pushed for policies to advance workers and labor rights, and who advised Mr. Biden in his campaign as he built an agenda that featured several longstanding goals of organized labor, like raising the federal minimum wage and strengthening "Buy America" requirements in federal contracting.

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Ms. Boushey has also been a vocal advocate of policies to help working families, including providing up to 12 weeks of paid family and medical leave. In an interview last week, Ms. Boushey said such a policy was especially critical during the pandemic, "when lives are at stake."

William E. Spriggs, the chief economist for the A.F.L.-C.I.O. labor union, hailed the selections, saying in an email on Monday that "we have not had a C.E.A. as focused on the role of fiscal policy and full employment since President Johnson."

The team has embraced increased federal spending to help households and businesses during the pandemic, a position that was highlighted in an op-ed article that Ms. Tanden and Ms. Boushey wrote with two co-authors in March, urging policymakers to spend big even though it would require borrowing large sums of money.

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"Given the magnitude of the crisis," they wrote, "now is not the time for policymakers to worry about raising deficits and debt as they consider what steps to take."

Mr. Biden also named Adewale Adeyemo, a senior international economic adviser in the Obama administration, as deputy Treasury secretary.

The nominees, who require Senate confirmation, will be introduced on Tuesday. Another of Mr. Biden's picks, the former Obama adviser Brian Deese, has been tapped to lead the National Economic Council but was not included in Monday's announcement.

Mr. Biden's team includes several labor economists, including Ms. Yellen, who has been a longtime champion of workers and has at times suggested allowing the unemployment rate to run low for a longer period of time without worrying about inflation — an idea some economists thought imprudent but which has since become more widely accepted. While at the Fed, she balanced her preference for a strong labor market with inflation concerns and political constraints.

In the early 2000s, Ms. Yellen was instrumental in persuading the Fed's policy-setting committee to coalesce around targeting a 2 percent inflation rate instead of the zero inflation rate that Alan Greenspan, the Fed chair at the time, originally favored. The Fed raises rates to slow the economy and offset inflationary pressures, so targeting slightly higher inflation opened the door to longer periods of cheap borrowing that can lead to stronger economic demand and lower unemployment.

Image
Neera Tanden, nominated to run the Office of Management and Budget, has said that labor unions "are a powerful vehicle to move workers into the middle class and keep them there."Credit...Lexey Swall for The New York Times

As Fed chair from 2014 to 2018, Ms. Yellen favored a patient approach to policy-setting that weighed concerns that prices might heat up as joblessness dropped against a preference for pulling more workers into the labor market.

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In one wonky 2016 speech, she suggested that allowing the labor market to expand without raising interest rates might help to reverse damage by pulling people in from the sidelines and prompting others to look for better jobs. She was criticized for the remarks, and later backed away from such an approach in word if not in deed. She and her colleagues lifted interest rates to fend off inflation pressures, but did so at a very slow pace, prompting criticism. Those rate increases have since been viewed as too aggressive and faulted for prematurely snuffing out a more robust labor market expansion.

Ms. Yellen also walked a careful line when it came to issues like inequality. In one 2014 speech, she suggested that widening income and wealth inequality might be incompatible with American values — "among them the high value Americans have traditionally placed on equality of opportunity" — a remark Republicans criticized.

Much has changed since Ms. Yellen was at the Fed — in ways that could allow her to embrace some of her more labor-friendly instincts if she is confirmed to the Treasury. While the Treasury secretary's direct economic power is somewhat limited, the position holds significant sway as a fiscal policy adviser to Congress and the president, as well as oversight of tax policy through the Internal Revenue Service.

Inflation, once seen as a real and looming threat, has been low for more than a decade. Inequality, once labeled a political and liberal issue, is increasingly recognized as a real economic constraint by Democrats and Republicans alike.

Yet some progressive groups have raised concerns that Mr. Biden's team could pivot too quickly to try to reduce the federal budget deficit once the pandemic subsides, citing past comments by Ms. Yellen and Ms. Tanden.

Economists on the left have become increasingly comfortable with deficit spending, and Ms. Yellen has long favored government intervention as a way to get the economy going during times of trouble. But she has also said America's debt load is unsustainable, and has generally favored taxation as an offset to increased spending.

Mr. Biden, too, has expressed support for borrowing money to aid the current recovery, but sought to offset the cost of other economic proposals — like an infrastructure bill and actions to mitigate climate change — with tax increases on high earners and corporations.

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In a 2018 interview at the Charles Schwab Impact conference in Washington, Ms. Yellen said the U.S. debt path was "unsustainable" and offered a remedy: "If I had a magic wand, I would raise taxes and cut retirement spending." Last year, she described the need to overhaul the nation's social safety net programs as "root canal economics."

But Ms. Yellen has made clear that she does not see deficit reduction as a priority during the current crisis and that the federal government should spend what is necessary to weather the pandemic. In July, she testified before Congress with Ben S. Bernanke, another former Fed chair, and called for substantial federal support.

"With interest rates extremely low and likely to remain so for some time, we do not believe that concerns about the deficit and debt should prevent the Congress from responding robustly to this emergency," she said. "The top priorities at this time should be protecting our citizens from the pandemic and pursuing a stronger and equitable economic recovery."

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Janet L. Yellen, the Treasury secretary nominee, has called for significant federal economic support to weather the pandemic.Credit...Eric Thayer for The New York Times

Many Republicans, however, have once again begun warning about the deficit and citing mounting debt levels as a reason to avoid another large virus spending package.

Bridging those concerns will fall to both Ms. Yellen and Ms. Tanden, whose role as the White House budget director will put her in the center of fiscal fights with Congress.

Some liberal groups have raised concerns over Ms. Tanden's 2012 remarks to C-SPAN about potential cuts to safety-net programs as part of a long-term deal to reduce federal debt.

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In that interview with the network, Ms. Tanden said that the restructuring of Social Security, Medicare and Medicaid must be "on the table" in conversations about long-term deficit reduction and noted that the Center for American Progress had made such proposals.

But in 2017, as Republicans prepared to approve a $1.5 trillion tax cut, Ms. Tanden showed no desire to return to deficit reduction in a future administration. "The rule seems to be deficits only matter for Democratic presidents," she wrote on Twitter. "And that rule needs to die now. We should not have to clean up their mess."

Liberal senators, including Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio, cheered the selections of Mr. Biden's team, including Ms. Yellen and Ms. Tanden. Mr. Brown said on Twitter that Ms. Tanden was "smart, experienced, and qualified" and demanded that Senate Republicans confirm Mr. Biden's team.

Republicans did not unite in opposition, though when asked about Ms. Yellen, Senator Josh Hawley, Republican of Missouri, criticized her as being a "good example of the corporate liberals."

"She's somebody who clearly has done the bidding of the big multinational corporations," he said. "Her record on trade is astoundingly terrible."

Liberal economists welcomed the picks. "There are reasons to be hopeful," said Stephanie Kelton, a professor at Stony Brook University and the author of the book "The Deficit Myth," which makes a case that budget deficits are not inherently bad.

Ms. Kelton helped with economic agenda-setting during the Biden campaign as a task force member, and said the fact that people like Mr. Bernstein and Ms. Boushey were included among the economic thinkers was a reason to hope that progressive ideals would have a voice at the table. That said, Ms. Kelton said she remained wary that there would be continued attention to deficits and deficit reduction.

Jim Tankersley covers economic and tax policy. Over more than a decade covering politics and economics in Washington, he has written extensively about the stagnation of the American middle class and the decline of economic opportunity. @jimtankersley

Jeanna Smialek writes about the Federal Reserve and the economy. She previously covered economics at Bloomberg News, where she also wrote feature stories for Businessweek magazine. @jeannasmialek

Alan Rappeport is an economic policy reporter, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters in the era of President Trump. He previously worked for The Financial Times and The Economist. @arappeport


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Cancelling Plans for a Robo-Apocalyse? [feedly]

Cancelling Plans for a Robo-Apocalyse?
https://conversableeconomist.blogspot.com/2020/06/cancelling-plans-for-robo-apocalyse.html

We know from historical experience that it's common to hear prophesies about how new automation technologies will wipe out jobs (for examples, see here,  here, here, here, and here) We also know that that the past can be an imperfect guide to the future. Leslie Willcocks offers a number of reasons to believe that claims of future job loss may be overstated in "Robo-Apocalypse cancelled? Reframing the automation and future of work debate" (Journal of Information Technology, 35:4, pp. 286-302, freely available online at present). Specifically, Willcocks offers eight "qualifiers" as to why claims of job loss from robotics, automation, and artificial intelligence are not likely to be as large as often feared. Here are is qualifiers, with a few words of explanation:  

Qualifier 1 – job numbers versus tasks and activities. 

When you look more closely at estimates that one-third or one-half of jobs will be "automated," the evidence actually tends to show that one-third to one-half of jobs will be changed in the future by use of  technology. Maybe some of those jobs will disappear, but in many other cases, the job itself will evolve, as jobs tends to do over time. Of course, it's a lot less exciting to have a headline which says: "The information technology you use at your job is going to keep changing change in ways that affect what you do at work."

Qualifier 2 – job creation from automation

An overall view of the effects of automation on jobs also needs to take into account how, over time and in the present, automation has also led to the creation of many new jobs. Lest we forget, the US unemployment rate before the pandemic hit was under 4%, which certainly doesn't look like evidence that total jobs are being reduced. 

Qualifier 3 – is technology (ever) a fire-and-forget missile?

Technology tends to phase in slowly, often more slowly than enthusiasts may predict. Willcocks writes: "Our own research suggests that implementation challenges are very real in the context of automation, especially for large organizations with a legacy of information technology (IT) investments, infrastructure and outsourcing contracts. There are also cultural, structural and political legacies that will shape the speed of implementation, exploitation and reinvention. In particular, we found in the
2017–2019 period organizations running up against 'silo challenges' – in respect of technologies, data, processes, skill bases, culture, managerial mindsets and organizational structures – that slow adoption considerably."

Qualifier 4 – technology: born perfect? perfectible?

"Informed sources also point to the fact that the kind of AI we have today is narrow or weak AI, able to perform a specific kind of problem or task. Nearly all refer to the reality of the Moravec Paradox, that is, the easy things for a 5-year-old human are the hard things for a machine, and vice versa ..." 

Qualifier 5 – distinctive human strengths at work

"Manyika et al. (2017) developed a highly useful (though not exhaustive) framework of 18 human capabilities needed at work, and likely to be needed in the future. These divide into sensory perception, cognitive capabilities, natural language processing, social and emotional capabilities and physical capabilities. They found that automation could perform 7 capabilities at medium to high performance, but their modelling suggests that automation tools are nowhere near able to perform the other 11 capabilities (e.g. creativity, socio-emotional capabilities) to an above human level, and that it would be anything between 15 and 50 years before many tools could. Furthermore, humans tend to use a number of capabilities in specific workplace contexts, and machines are not, and will not be good any time soon, at combining capabilities, let alone being integrated to deal with complex real-life problems ... ... In sum, too little consideration is given to distinctive human qualities that are not easily codifiable or replaceable, especially in combination, and are likely to remain vital at work. Perhaps the direction of travel should be not for replicating human strengths but for automation to be focused on what humans cannot do, or do not want to do."

Qualifier 6 – ageing populations, demographics and automation

Birth-rates have been falling around the world, populations have been aging, and the size of the workforce in many countries is either not rising much or actually declining: "Declining birth
rates and ageing populations across the G20 may well see workforce growth decline to 0.3% a year, leaving a workforce too small to maintain current economic growth, let alone meet espoused aspirational targets." The global economic future in many countries, based on demography, looks more likely to involve labor shortages than labor surpluses. 

Qualifier 7 – automation, skills and productivity shortfalls

It may be that fears over the robo-apocalyse are not so much about the rising abilities of robots as about the shortages of skills from humans. Willcocks writes: "There is an irony here in that, while many studies are predicting large job losses as a result of automation, we are also seeing skills shortages reported across many sectors of the G20 countries. These shortages are not necessarily just in areas relating to designing, developing, supporting or working with emerging digital, robotic and automation
technologies. Demographic changes, plus skills mismatches and shortages, feed into productivity issues at macro and organizational levels. Therefore, it is increasingly likely that despite the lack of attention given to the issue by most studies, major economies over the next 20 years are going to experience large productivity shortfalls even to maintain their present economic growth rates, let alone achieve their espoused growth targets. Automation and its productivity contribution may turn out to be a coping,
rather than a massively displacing phenomenon."

Qualifier 8 – exponential increases in work to be done

Information technology isn't just about automating existing work. Among other changes, it brings with it an explosion of available data, which needs to be managed, examined, stored, protected against cybersecurity threats, integrated with regulatory and legal requirements, and more. Willcocks writes: 

Consider how many organizations are self-reportedly at breaking point despite work intensification, working smarter and the application of digital technologies to date. Then reflect on how the exponential data explosion, the rise in audit, regulation and  bureaucracy and the complex, unanticipated impacts of new technologies are already interacting, and increasing the amount of work to be done, and the time it takes to get around to doing productive work. I would propose a new Willcocks Law to capture some of what is happening,  namely 'work expands to fill the digital capacity available'. Far from the headlines, a huge if under-analysed work creation scheme may well be underway, to which automation will only be a part solution.

Taking these factors together, it is not at all obvious that artificial intelligence, information technology, and robots are going to reduce the number of jobs. Instead, it seems more plausible that they will reshape jobs, potentially both for better and for worse. 

This issue of the Journal of Information Technology includes a set of short comments on the Willcocks paper. I was especially struck by the comments by Kai Riemer and Sandra Peter  in "The robo-apocalypse plays out in the quality, not in the quantity of work" (pp. 310–315). They point out some possible negative consequences of information technology in the workplace. For example,  if the "easier" tasks are automated, then the remaining human work tasks may be more difficult and less rewarding, and it may be harder for new workers to leap up the learning curve and gain experience. Jobs may have more pressure from automated oversight, with a corresponding pressures for more intense work and reductions in personal autonomy and human interaction. Information technology may also make alternative labor market arrangements like "gig" work more common, in a way that creates a group of less-secure jobs.  

On the other side, Marleen Huysman comments in "Information systems research on artificial intelligence and work: A commentary on "Robo-Apocalypse cancelled? Reframing the automation and future of work debate" (pp. 307-309): "By developing hybrid AI, tools will become our new assistants, coaches and colleagues and thus will augment rather than automate work."

The connecting thread here is that there is little doubt that technology will affect the nature of future jobs. But instead of focusing on a robo-apocalypse of losses in the number of jobs, we would probably be better served by focusing on changes in the qualities of jobs, and in particular on improving skill levels in ways that will help more workers to treat these technologies as complements for their existing work, rather than as substitutes. 

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