News

International Business Times: Job Growth Still Hasn't Translated Into Wage Gains

Cole Strangler of the International Business Times provides context for the Department of Labor's January employment report in his article, Job Growth Still Hasn't Translated Into Wage Gains. He describes real people's experiences with wage stagnation and illustrates the balance between business and labor.

"Standard economic theory holds that, at some point, sinking unemployment will translate into wage gains: When companies have a smaller pool of talent to choose from, they tend to offer more attractive salaries. By the same token, when workers have a sense of job security, they're more likely to ask for a raise.

This hasn't happened.

"I haven't run any empirical work on this, but I'd want to see the unemployment rate a lot closer to 5 percent, maybe even slightly below, before I would expect to see that we'd get significant wage pressure," said Richard McGahey, an economist at the New School and former economic policy adviser for Sen. Edward Kennedy.

Shrinking union density has boosted the share of profits going to bosses rather than workers, McGahey said."

Krugman Gets it Wrong on Internal Migration

Rick McGaheyby Rick McGahey, SCEPA Faculty Fellow

In today's New York Times, Paul Krugman confuses issues around internal population migration in the U.S. with issues of job creation and economic growth. He ends up in an unnecessary and defensive argument about whether low-wage and anti-regulation states like Texas are a superior economic model.

First, there just isn't that much net internal migration. The American Community Survey tells us that in 2012, net migration between New York State and Texas was 9,043 in favor of Texas (20,274 New Yorkers to Texas, but 11,231 Texans to New York State). That is less than one-half of one percent of the total population of New York State, hardly a big trend. In fact, researchers are trying to figure out why internal migration is declining, not rising—in 2011, Federal Reserve researchers noted that "by most measures, internal migration in the United States is at a thirty-year low." 

Second, outmigration and relocation is driven by a lot of things beyond relative taxation or regulation, including baby boomer retirements (oddly not mentioned in Krugman's column). If you just want to hold down migration, make New York a more attractive retirement location. Texas has had relatively strong job growth since the Great Recession, but analysts attribute much of that to natural gas and oil production, including virtually unregulated fracking. 

Krugman's column has produced a predictable set of online complaints about high taxes and repressive regulations in New York relative to the South. New York does need more housing density, although the region has many housing opportunities given our public transportation network. But Krugman's odd use of what in reality are vanishingly very small numbers on migration to Texas inadvertently contributes to a misguided narrative about how attractive Texas and other bottom-feeder states really are.

Heartfelt Condolences to the Family of Irene Schwartz

lilliesThe Schwartz Center for Economic Policy Analysis (SCEPA) at the New School for Social Research is deeply saddened by the death of Irene Schwartz, best friend and wife of Bernard Schwartz. Bernard and Irene paid special attention to The New School Economics Department's commitment to economic policy and social justice. Together they named a professorship and provided scholarships and other material support to our economics students and faculty. Bernard and Irene, compassionate for the plight of vulnerable elderly and for the aspiration of all workers to retire in dignity, also support SCEPA's Retirement Equity Laboratory.

We are grateful for Irene's love for Bernard that helped he and she be expansive and proactive in solving problems of injustice facing humanity. We send our deepest sympathies to her family and friends, especially to her husband, our mentor and friend Bernard Schwartz.

The Members of the Schwartz Center for Economic Policy Analysis at The New School for Social Research 

Thinking Beyond the Minimum Wage Fight

On June 23, 2014, SCEPA Director Teresa Ghilarducci appeared on MSNBC's UP with Steve Kornacki along with Neera Tanden from the Center for American Progress and Paul Sonn with the National Employment Law Project to discuss the bigger economic picture that necessitates raising the minimum wage. The panel discussed the facts that productivity gains have far eclipsed wage gains, that the federal minimum wage has been stagnant since 2009, and that the average hourly pay has declined over the past 12 months. The panel overwhelming agreed the best way to address these structural economic issues is through increased collective bargaining. A recent working paper by Teresa Ghilarducci and Joelle Saad-Lessler find two factors that significantly impact the likelihood of obtaining employer-offered benefits - time spent unemployed and union status. Therefore, attempts to raise wages must address the decline in workers' bargaining power and change the norms relating to benefits and wage provision. The City of Seattle has taken the largest step in addressing the wage gap by elevating their minimum wage to $15 an hour, while Massachusetts offers the highest state level minimum wage at $11 an hour. Teresa Ghilarducci ended the MSNBC panel with a summary of the advantages of unionization for both workers and employers.

A Conference to Honor Economics Professor Ed Nell

Professor Ed NellOn May 3rd, the Economics Department of The New School for Social Research honored Professor Edward J. Nell's 39 years of teaching with a conference celebrating his many contributions to the field of economics. Prior to his retirement in 2013, Nell served as the Malcolm B. Smith Professor of Economics since 1969. He published more than twenty books and wrote hundreds of articles for leading journals on macroeconomic theory, monetary analysis and finance, economic methodology and philosophy, and transformational growth and development.

Below is a sample of the working papers contributed to the conference by former students inspired by Professor Nell.

Willi Semmler: "A New Chapter"
Anna Shoysta: "Edward Nell as the Worldly Philosopher: Shaping the Minds of the Future Economists"
David Laibman: "Democratic Planning and Incentives – Coming to Grips with (Yet Another) Impossibility Theorem"
Louis-Phillippe Rochon: "The Monetary Circuit and the State"
Sergio Parrinello: "A Search for Distinctive Features of Demand-led Growth Models"

Beyond Broke: Why Closing the Racial Wealth Gap is a Priority for National Economic Security

Darrick HamiltonSCEPA economist, Darrick Hamilton recently coauthored the report, "Beyond Broke: Why Closing the Racial Wealth Gap is Priority for National Economic Security" with the Center for Global Policy Solutions, the Carolina Population Center at UNC, the Research Network for Racial and Ethnic Inequality at Duke University, and Milano Graduate School of International Affairs at The New School.  The report evaluates wealth disparities across racial and ethnic categories by providing an in-depth analysis of housing and liquid wealth.

The report finds that:
• Between 2005 and 2011, the median net worth of households of color remained near 2009 levels, reflecting a drop of 58 percent for Latinos, 48 percent for Asians, 45 percent for African Americans but only 21 percent for whites.

• For most African Americans and Latinos, checking accounts are their only liquid asset.

• African Americans (38 percent) and Latinos (35 percent) are over twice as likely as whites (13 percent) to hold no financial assets at all and to have no or negative net worth.

This analysis provides new insight into the close interplay between race and place as it relates to America's persistent wealth gap. To address these issues, the report calls for Congress and the Administration to ensure that future mortgage settlements include the collection of racial/ethnic, gender, geographical and other demographic data to ensure that relief programs are transparent, fair, and target the hardest-hit communities. The report also calls for the Federal Housing Finance Agency to allow Freddie Mac and Fannie Mae to perform principal reduction and loan modifications for distressed homeowners.

This report is part of the Closing the Racial Wealth Gap Initiative, which seeks to build awareness and support for efforts to address racial and ethnic wealth inequalities based on structural factors.

Just Say Yes- Bernard Schwartz Autobiography and Vision for America

Bernard L. Schwartz - an investor, a retired industrialist, a progressive public policy advocate and a philanthropist - recently published his autobiography, 'JUST SAY YES: What I've Learned About Life, Luck, and the Pursuit of Opportunity.'

JUST SAY YES is a story about a boy raised in Depression-era Brooklyn who grew up to become a giant in the aerospace business, a confidante of U.S. presidents, and a renowned international deal maker. From this lifetime of experience, Schwartz finds himself increasingly concerned about the future of the United States and its citizens due to the ever-increasing gap between the country's have's and have-not's. "Far too much emphasis is put on money and profit, instead of treating clients and customers as human beings. Our political leaders must also come back to the table, and start working together to improve the lives of all citizens." Without this effort, Schwartz fears that our glory days will remain behind us. As an "optimist by nature," Schwartz believes that American politics and business can change for the better.

Bernard L. Schwartz on his new book, 'Just Say Yes' - An Interview with Charlie Rose at the New-York Historical Society from Bernard L. Schwartz Center on Vimeo.

Financial Stress, Sovereign Debt and Economic Activity

The Journal of International Money and Finance, one of the top journals for international finance, published SCEPA economists Christian R. Proaño, Christian Schoder and Willi Semmler's working paper, 'Financial Stress, Sovereign Debt and Economic Activity in Industrialized Countries: Evidence from Dynamic Threshold Regressions.' This paper is an expansion on their policy note, 'The Role of Financial Stress in Debt and Recovery' which studied the change in the sovereign debt and its impact on economic growth. Their study discovered that national debt was insignificant in determining the level of economic growth a country experiences as long as the financial market was stable. National debt was only detrimental to countries if there were high levels of instability and risk in the financial market. These findings explain why austerity policies have failed to promote economic growth, because economic growth depends first on financial market stability, and is only an issue if financial markets are unstable.

Anwar Shaikh: Named an "Eminent Economist"

Anwar Shaikh'Eminent Economists in the World Today,' the sequel to 'Eminent Economists,' presents the ideas of influential economists of the last 50 years. SCEPA is proud to announce that Anwar Shaikh, economist and professor at The New School for Social Research, is included in this distinguished honor, which recognizes his work on the economic patterns of the developed world.

Shaikh has always held the belief that economics is a moral science and has dedicated his research to understanding inequality. His entry, "Order In and Through Disorder" is a brief autobiography that captures significant moments in his life that influenced his research. 

How Paul Ryan's Budget Fails

CNN logoSCEPA Faculty Fellow Rick McGahey's opinion piece on CNN.com today, "How Paul Ryan's Budget Fails," calls out the House-approved budget for using 'voodoo economics' to pose as 'balanced' while calling for tax cuts for millionaires.

In short, McGahey notes, the math fails, which leaves a budget meant more for political posturing than for the health of the nation's economy. 

"How can Ryan claim that his budget is balanced? By invoking what used to be called "voodoo economics" -- assuming budget cuts and unfair tax cuts will unleash economic growth and generate enough tax revenue.

Former Reagan administration economist Bruce Bartlett has criticized this approach as "just another way for Republicans to enact tax cuts and block tax increases. It is not about honest revenue-estimating; it's about using smoke and mirrors to institutionalize Republican ideology into the budget process."

Of course, Paul Ryan isn't stupid, so why the phony budget math and the return of voodoo economics? Because it serves his presidential ambitions."