Are $18 Big Macs the price of falling inequality?

Posted on by Lone Candle

“If the burgeoning bargaining power of less-skilled workers comes at middle-class consumers’ expense in the short run, almost everyone stands to benefit from rising working-class wages in the long term.
Middle-class households can more easily afford servants in many developing countries than they can in the United States. Yet America’s middle class is nevertheless far wealthier than its counterparts in India or Pakistan. Even the privileged are generally better off in an economy with high levels of labor productivity than in one with a large pool of hyper-exploitable workers.

And there’s reason to believe that rising working-class wages are a key driver of productivity gains. When workers’ time is cheap, businesses have little incentive to develop labor-saving technologies or production methods. As wage bills rise, by contrast, innovation often becomes imperative.

Ironically, conservatives often cite this reality as an argument against increasing the minimum wage. Specifically, right-wing economists and commentators have often warned that raising the wage floor will cause employers to automate jobs away. Yet this is another way of saying that minimum wage hikes increase investment in productivity-enhancing technology (which is the ostensible aim of just about every Republican tax cut plan).

In any case, it is true that when wages rise at the bottom of the labor market, firms invest in labor-saving technology. In 2018, Grace Lordan and David Neumark demonstrated this empirically. Those economists reviewed 35 years of government census data, identified jobs that could be automated given existing technology, and found that after minimum wage increases were enacted, “the share of automatable employment held by low-skilled workers” declined. In other words, minimum wage hikes spurred capital investment and increased productivity by mechanizing tasks that did not require uniquely human skills.

The notion that high wages spur productivity gains is consistent with the American economy’s broader historical record. As Neil Irwin observed in 2018, productivity booms have tended to follow labor market booms, while deep recessions have given way to productivity slumps.

This relationship between wage gains and productivity can be witnessed within today’s food service industry. As Bloomberg’s Justin Fox notes, as restaurant wages jumped between 2020 and 2021, the sector’s output per worker hour soared by 21 percent.

In the short term, these productivity gains have not been sufficient to reduce restaurants’ operating costs and, thus, prices. But in the long term, when businesses increase the labor efficiency of their production processes, their wares tend to become more affordable.

A world of cheap burgers and high working-class wages is therefore possible. Middle-class consumers need not see the rising fortunes of less-skilled workers as a threat to their standard of living.

For the moment, though, there is a genuine tension between boosting compensation for America’s most vulnerable workers and minimizing the cost of labor-intensive services for the nation’s consumers. Precisely how liberals can best navigate this tension isn’t easy to say. At the very least, though, we should not encourage our fellow Americans to mistake the symptoms of rising worker power for those of a deepening economic crisis.”

https://www.vox.com/politics/2024/1/9/24027094/fast-food-prices-wages-mcdonalds

Why so many kids are still missing school

Posted on by Lone Candle

“Some of the latest absenteeism data reveals the staggering impact the pandemic has had on student attendance.
Before the pandemic, during the 2015–16 school year, an estimated 7.3 million students were deemed “chronically absent,” meaning they had missed at least three weeks of school in an academic year. (According to the US Department of Education, there were 50.33 million K-12 students that year.) After the pandemic, the number of absent students has almost doubled.

Chronic absenteeism increased in every state where data was made public, and in Washington, DC, between the last pre-pandemic school year, 2018–19, and the 2021–22 school year, according to data from Future Ed, an education think tank. Locations with the highest increases saw their rates more than double.”

…

“Experts point to deeper issues, some that have long troubled students and schools and others that are only now apparent in the aftermath of school shutdowns.

“When you see these high levels of chronic absence, it’s a reflection that the positive conditions of learning that are essential for motivating kids to show up to school have been eroded,” said Hedy Chang, the founder and executive director of Attendance Works, an organization that tracks attendance data and helps states address chronic absenteeism. “It’s a sign that kids aren’t feeling physically and emotionally healthy and safe. Belonging, connection, and support — in addition to the academic challenge and engagement and investments in student and adult well-being — are all so crucial to positive conditions for learning.”

Despite increased attention to the topic, chronic absenteeism is not exactly new — until recently, it was considered a “hidden educational crisis.”

“This has been an ongoing issue and it didn’t just all of a sudden appear because the pandemic arose. Folks have been trying to address this issue for years,” said Joshua Childs, an assistant professor at the University of Texas at Austin who studies absenteeism interventions in communities and states. “It’s historically mainly impacted students from disadvantaged communities and underserved populations.”

What’s new about chronic absenteeism is that it now affects students from a variety of demographic backgrounds, from those in the suburbs and rural areas to those in cities.”

…

“The root causes of chronic absenteeism are vast. Poverty, illness, and a lack of child care and social services remain contributors to poor attendance, and some communities continue to struggle with transportation challenges; the pandemic has brought on a youth mental health crisis that has caused students to miss school; parents have reframed how they think about illness, ready to keep their children home at the slightest signs of sickness.”

https://www.vox.com/2024/1/9/23904542/chronic-absenteeism-school-attendance

Do we really live in an “age of inequality”?

Posted on by Lone Candle

“Piketty, Saez, and Zucman estimate that the top 1 percent earned 9.1 percent of national income in 1960, rising dramatically to 15.1 percent by 2019. Auten and Splinter, by contrast, show a very small increase: 8.1 percent in 1960 to 8.8 in 2019. The share is now actually lower, they find, than it was in the mid-1960s.
Auten and Splinter reach similar conclusions about the top 10 and top 0.1 percent: per their estimates, the former grew from 29.2 to 29.7 percent from 1960 to 2019, the latter from 2.5 to 3 percent.

How can two research teams, both looking directly at US tax data, reach such different conclusions? It’s not that one group are craven “inequality deniers,” to borrow an ugly term that Piketty has slurred Auten and Splinter with, or that the other group is “thoroughly discredited,” as billionaire libertarian economist Cliff Asness has described Piketty, Saez, and Zucman. The disagreement is, at root, about how to deal with the limitations of tax data, by far the best source of information on who earns what in America.

Neither side has a monopoly on truth. On some issues, Auten and Splinter made judgment calls that seem more reasonable to me; on others, Piketty, Saez, and Zucman do; on still more, it’s wildly unclear which assumptions are most appropriate to make.”

…

“No one factor explains more than 1.6 points of this disagreement, and even those are offset by a couple of areas (like dealing with owner-occupied housing and Social Security) where Auten and Splinter make decisions that show a larger increase in the top 1 percent’s share than PSZ.”

…

“Both teams show that income inequality has increased in the US in the past half-century. While Auten and Splinter show at most modest increases in the top 1 percent’s share of income after taxes, they do find substantial increases before taxes. Moreover, that’s only one way to measure inequality. The most comprehensive measure is something called the Gini coefficient, which attempts to summarize the whole scale of inequality across the income spectrum, not just at the very top. An increase in the coefficient means that inequality has risen.
Before taxes and government safety net programs, Auten and Splinter estimate that the Gini coefficient for the US grew 25 percent since 1962 and 23 percent since 1979. After taxes and transfer programs, the increases are 10 percent since 1962 and 16 percent since 1979. More progressive tax and spending policy reversed some of the increase, but the increase is real and significant.

To give a sense of the scale here, the after-tax/transfer figure grew from 0.355 in 1979 to 0.417 in 2019, a 0.062 increase. If that number means nothing to you (it means nothing to me!) then consider that this increase is akin to the gap between the US and countries like Australia, Spain, and Switzerland today. That is, if this increase in inequality hadn’t happened, the US would be close to many other rich countries as opposed to the rather unequal outlier it is today.

You can also see signs of a general increase in inequality across some other measures. Take wealth, for instance. A recent rigorous attempt by economists Matt Smith, Owen Zidar, and Eric Zwick to track wealth inequality (that is, the gap in net worth, rather than income, between rich and poor) in the US over recent decades shows a pronounced increase”

https://www.vox.com/future-perfect/2024/1/11/23984135/inequality-auten-splinter-piketty-saez-zucman-tax-data

Who Decides Whether Trump Can Run, and What Sort of Evidence Suffices?

Posted on by Lone Candle

“”The mob was seeking to halt or overturn a core constitutional function at the seat of government, which can reasonably be described as an attempt to replace law with force,” Magliocca wrote. Furthermore, the criminal charges against some of the rioters indicated that they “intended to inflict bodily harm on members of Congress, which can be reasonably understood as a direct attack on the legislative branch itself and, more generally, the existing government.””

https://reason.com/2023/12/29/who-decides-whether-trump-can-run-and-what-sort-of-evidence-suffices/

What’s the insurrection clause? Here’s what it says.

Posted on by Lone Candle

“Here’s the full text:

“No person shall be a Senator or Representative in Congress, or elector of President and Vice-President, or hold any office, civil or military, under the United States, or under any State, who, having previously taken an oath, as a member of Congress, or as an officer of the United States, or as a member of any State legislature, or as an executive or judicial officer of any State, to support the Constitution of the United States, shall have engaged in insurrection or rebellion against the same, or given aid or comfort to the enemies thereof. But Congress may by a vote of two-thirds of each House, remove such disability.”

Quite a mouthful, right? Let’s simplify. Here’s a streamlined version of the clause with only the most relevant parts highlighted:

“No person shall … hold any office, civil or military, under the United States, … who, having previously taken an oath, … as an officer of the United States, … to support the Constitution of the United States, shall have engaged in insurrection or rebellion against the same …”

The justices are sure to delve into the precise meaning of those pivotal phrases. For example:

Was the Jan. 6, 2021, attack on the Capitol an “insurrection”? If not, the insurrection clause doesn’t apply.
Even if Jan. 6 was an insurrection, did Trump “engage” in it? If not, he is eligible to hold office again.
When Trump took his oath of office as president, did he take that oath as “officer of the United States”? If not, the disqualification provision does not apply to him.”

https://www.politico.com/live-updates/2024/02/08/trump-supreme-court/what-is-the-insurrection-clause-00140188