economics

Cross-posted at Reports from the Economic Front.

Many expected that the severity of the Great Recession, a recognition that prior expansion was largely based on unsustainable “bubbles,” and an anemic post-crisis recovery, would lead to serious discussion about the need to transform our economy.   Yet, it hasn’t happened.

One important reason is that not everyone has experienced the Great Recession and its aftermath the same. Jordan Weissmann, writing in the Atlantic, published a figure from the work of Edward Wolff. The charts shows the rise and fall of median and mean net worth among Americans: how much one owns (e.g., savings, investments, and property) minus how much one owes (e.g., credit card debt and outstanding loans).

Both the mean and the median are interesting because, while they’re both measures of central tendency, one is more sensitive to extremes than the other. The mean is the statistical average (literally, all the numbers added up and divided by the number of numbers), so it is influenced by very low and very high numbers.  The median, in contrast is, literally, the number in the middle of the sample of numbers.  So, if there are very high or low numbers, their status as outliers doesn’t shape the measure.

Back to the figure: as of 2010, median household net worth (dark purple) had fallen back to levels last seen in the early 1960s.  In contrast, mean household net worth (light purple) had only retreated to the 2000s.  This shows that a small number of outliers — the very, very rich — have weathered the Great Recession much better than the rest of us.

The great disparity between median and mean wealth declines is a reflection of the ability of those at the top of the wealth distribution to maintain most of their past gains.  And the lack of discussion about the need for change in our economic system is largely a reflection of the ability of those very same people to influence our political leaders and shape our policy choices.

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Martin Hart-Landsberg is a professor of Economics and Director of the Political Economy Program at Lewis and Clark College.  You can follow him at Reports from the Economic Front.

Cross-posted at Reports from the Economic Front.

One of the subthemes of current discussions about how best to reduce our national debt is that we must rein in out-of-control spending on federal safety net programs.   The reality is quite different.

The chart below shows spending trends in terms of GDP for the ten major needs-tested benefit programs that make-up our federal social safety net. The programs, in the order listed on the chart, are:

• The refundable portion of the health insurance tax credit enacted in the 2010 health care reform law
• Medicaid and the Children’s Health Insurance Program (CHIP)
• The Supplemental Nutrition Assistance Program (SNAP)
• Financial assistance for post-secondary students (Pell Grants)
• Compensatory Education Grants to school districts
• Assisted Housing
• The Earned Income Tax Credit (EITC)
• The Additional Child Tax Credit (ACTC)
• Supplemental Security Income (SSI)
• Family Support Payments

As Jared Bernstein explains:

…for all the popular wisdom that programs to help low-income people are swallowing the economy, the truth is that like so much else that plagues our fiscal future, it’s all about health care spending.  The figure shows that as a share of GDP, prior to the Great Recession, non-health care spending was cruising along at around 1.5% for decades.  It was Medicaid/CHIP (Medicaid expansion for kids) that did most of the growing.

The takeaway from this: we need a new health care system (think single payer).

Regardless, the recent explosion in the ratio of Medicare/CHIP spending to GDP is largely due to the severity of the Great Recession, not the generosity of the programs. The recession increased poverty and thus eligibility for the programs, thereby pushing up the numerator, while simultaneously lowering GDP, the denominator.   Moreover, spending on all non-health care safety net programs is on course to dramatically decline as a share of GDP. Even Medicare/Chip spending is projected to stabilize as a share of GDP.

These programs are essential given the poor performance of the economy, and in most cases poorly-funded. Cutting their budgets will not only deny people access to health care, housing, education, and food, it will also further weaken the economy, in both the short and long run.

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Martin Hart-Landsberg is a professor of Economics and Director of the Political Economy Program at Lewis and Clark College.  You can follow him at Reports from the Economic Front.

For the last week of December, we’re re-posting some of our favorite posts from 2012. Cross-posted at Pacific Standard and Global Policy TV.

The United States is unusual among developed countries in guaranteeing exactly zero weeks of paid time-off from work upon the birth or adoption of a child. Japan offers 14 weeks of paid job-protected leave, the U.K. offers 18, Denmark 28, Norway 52, and Sweden offers 68 (yes, that’s over a year of paid time-off to take care of a new child).

The U.S. does guarantee that new parents receive 12 weeks of non-paid leave, but only for parents who work in companies that employ 50 workers or more and who have worked there at least 12 months and accrued 1,250 hours or more in that time.  These rules translate to about 1/2 of women.  The other half are guaranteed nothing.

Companies, of course, can offer more lucrative benefits if they choose to, so some parents do get paid leave.  This makes the affordability of having children and the pleasure and ease with which one can do so a class privilege.  A new report by the U.S. Census Bureau documents this class inequality, using education as a measure.  If you look at the latest data on the far right (2006-2008), you’ll see that the chances of receiving paid leave is strongly correlated with level of education:

Looking across the entire graph, however, also reveals that this class inequality only emerged in the early 1970s and has been widening ever since.  This is another piece of data revealing the way that the gap between the rich and the poor has been widening.

Just to emphasize how perverse this is:

• People with more education, who on average have higher incomes, are often able to take paid time off; but less-economically advantaged parents are more likely to have to take that time unpaid.  During the post-birth period, then, the economic gap widens.

There’s more:

• Many less-advantaged parents can’t afford to take time off un-paid, so they keep working.  But even this widens the gap because their salary is lower than the salary the richer person continues to receive during their paid time off of work.  So the rich get paid more for staying home than the poor get for going to work.

We often use the minimizing word  “just” when  describing what stay-at-home parents do.  “What are you doing these days?” asks an old friend at a class reunion.  “Oh, just staying home and taking care of my kids,” a parent might say, as if raising kids is “doing nothing.”  We trivialize what parents do.  But, in fact, raising children is a valuable contribution to the nation.  We need a next generation to keep moving forward as a country.  Unfortunately the U.S. continues to treat having kids like a hobby (something its citizens choose to do for fun, and should pay for themselves).  Without state support for early parenting, being present in those precious early months is a class-based privilege, one that ultimately exacerbates the very class disadvantage that creates unequal access to the luxury of parenting in the first place.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

Cross-posted at Reports from the Economic Front.

The stock market looms large in our understanding of the economy.  The business news is often little more than a report on the movement of the market.  High school economics classes often introduce the study of the economy to students by encouraging them to pick and follow a favorite stock.  Managers of corporations are judged by how well their actions result in higher stock prices.

All this could easily lead one to think that the great majority of Americans are stockholders.  In fact, as the chart below shows, very few Americans own significant shares of stock and therefore directly benefit from the market’s rise.

It is easy to understand why the top earners are happy with this identification of the economy with the stock market.  It ensures that economic activity is largely organized and outcomes evaluated with their interests in mind.  What is not so easy to understand is why the great majority of working people continue to accept this identification.

Martin Hart-Landsberg is a professor of economics at Lewis and Clark College. You can follow him at Reports from the Economic Front.

The following two charts taken from a Center for Economic Policy and Research Center study by John Schmitt and Janelle Jones highlight the distressed nature of the U.S. labor market and the need for raising the minimum wage and strengthening union organizing.

Schmitt and Jones define low wage work as that work paying $10.00 an hour or less in 2011 dollars.  As the charts show, low wage workers are far more educated and older in 2011 than in 1979.

Education and experience are not sufficient to ensure a living wage.

Not surprisingly, growing numbers of low wage workers at Walmart and at chain fast food restaurants have begun engaging in direct action for higher wages and better working conditions.   They deserve our support.

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Martin Hart-Landsberg is a professor of Economics and Director of the Political Economy Program at Lewis and Clark College.  You can follow him at Reports from the Economic Front.

I was finishing up my dissertation in 2006.  The Great Recession was still two years away.  Nevertheless, there was talk about it being a tough job market for newly-minted sociologists and, like most everybody in my shoes, I was scared sh*tless about getting a job.

It’s obvious now that I was extremely lucky to get out of grad school when I did.  A few years later the American Sociological Association (ASA) would report that the number of jobs for new PhDs fell 40% from ’06/’07 to ’08/’09 (sociologists have a job “season” that straddles the New Year).

Neal Caren, a (gloriously employed) sociologist at UNC Chapel Hill, has been tracking the job market himself ever since.  His data, posted at Scatterplot, shows that the discipline has yet to recover from the Great Recession (if that’s the sole cause of the decline in job openings).  The yellow and green line represent the drop captured in the ASA report.  The purple line represents the devastating next year and the two blue-ish lines represent a slight recovery.

This year, however, the thick orange line, reveals that this year’s market is not signalling a recovery to the job market of my own debut.  It’s up 5% from last year, Caren explains,  15% from 2010, and “a whopping 73% from 2009.”  Extrapolating from the ASA data, we’re still down 33% from ’06/’07.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

In 2011 the U.S. birth rate dropped to the lowest ever recorded, according to preliminary data released by the National Center for Health Statistics and reported by Pew Social Trends:

The decline was led by foreign-born women, who’s birthrate dropped 14% between 2007 and 2010, compared to a 6% drop for U.S.-born women.

Considering the last two decades, birthrates for all racial/ethnic groups and both U.S.- and foreign-born women have been dropping, but the percent change is much larger among the foreign-born and all non-white groups.  The drop in the birthrate of foreign-born women is double that of U.S.-born and the drop in the birthrate of white women is often a fraction that of women of color.

It’s easy to forget that effective, reversible birth control was invented only about 50 years ago.  Birth control for married couples was illegal until 1965; legalization for single people would follow a few years later.  In the meantime, the second wave of feminism would give women the opportunity to enter well-paying, highly-regarded jobs, essentially giving women something rewarding to do other than/in addition to raise children.  The massive drop in the birthrate during the ’60s likely reflects these changes.

In addition to a drop in the number of children women are having, this data reflects a steady rise in the number of women deciding not to have children at all.  The decision to eschew parenting altogether is disproportionately high among highly educated women, suggesting that the there-are-now-other-things-in-life-to-do phenomenon might be at play.

Many European countries are facing less than replacement levels of fertility and scrambling to figure out what to do about it (the health of most economies in the developed world is predicated on population growth), the U.S. is likely not far behind.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.

There are six (progressive) tax brackets for income.  The tax rate paid by earners is bumped up each time they reach a bracket threshold.  The threshholds are determined by type of household.  Here’s a handy chart for 2012 from Wikipedia:

U.S. politicians are now debating how these tax rates should change and they often focus on the “marginal” or “top” tax rate.  That’s the one that applies to the highest tax bracket, right now at 35%.

Dylan Matthews at the WonkBlog notes that the squabbling has been mostly over a percentage point or two.  Small beans, he asserts.  To put this in perspective, he includes this graph of fluctuations in the top tax rates throughout history (click to enlarge):

The green line labeled “income” correlates to the chart above.  You can see that especially income, but also corporate and capital gains top tax rates, have been shockingly variable since 1910.  They were about 25% right before the Great Depression, raised to about 95% during World War II, dropped to about 70% in the ’60s, and have been on the decline ever since.

Matthews refers to a pair of economists, Nobel laureate Peter Diamond and Emmanuel Saez, who argue that the top tax rate should optimally be 73%.  Sociologist Jose Marichal, however, at ThickCulture, observes that tax policy has rarely been about what is optimal for society.  Instead, he writes:

What these wild shifts in tax policy suggest is that our determination of how much we should tax our wealthiest is not based on any pragmatic assessment of what would result in the best policy outcome, but is rather guided by foundational assumptions about what is fair.

Beliefs about what is fair are, of course, strongly influenced by cultural ideologies and group stereotypes.  Politicians both fall victim to their own biases and strategically invoke and create ideas and resentments.  We shouldn’t expect the current debate over how to change our tax code to be either rational or practical, then.  The debate will be political, but you already knew that.

Lisa Wade, PhD is an Associate Professor at Tulane University. She is the author of American Hookup, a book about college sexual culture; a textbook about gender; and a forthcoming introductory text: Terrible Magnificent Sociology. You can follow her on Twitter and Instagram.