powerpoint...
TRANSCRIPT
1
What’s Gone Wrong?
• Runaway inequality
– State redistribution can’t keep up!
10
The Recovery Has Not Reduced Inequality Gini coefficient of disposable income in 2014 (or latest year), 2010 and 2007
0,20
0,25
0,30
0,35
0,40
0,45
0,50
2014 or latest year (↗) 2010 2007
Average Income (After taxes, including public
and private benefits; 2007 dollars)
12
16% 23% 25%
35%
59%
281%
0%
50%
100%
150%
200%
250%
300%
0-20% 20-40% 40-60% 60-80% 80-99% Top 1%
$-
$200.000
$400.000
$600.000
$800.000
$1.000.000
$1.200.000
$1.400.000
1979
2007
Percent Change
Source: Congressional Budget Office (CBO)
What’s Gone Wrong?
• Runaway inequality
– State redistribution can’t keep up!
• Stagnant or declining social mobility
– Linked to wealth inequality, educational
inequalities
Argentina
Australia
Brazil
Canada
Chile
China
Denmark
Finland
France
Germany
Italy
Japan
New Zealand
Norway
Pakistan
Peru
Singapore
Spain
Sweden
Switzerland
United Kingdom
United States
0,1
0,2
0,3
0,4
0,5
0,6
0,7
20 25 30 35 40 45 50 55
Immobility (male intergenerationl earnings elasticity)
Inequality (Gini coefficient)
Inequality and Immobility: Relationship between income inequality and economic immobility
(Miles Corak,”Inequality from Generation to Generation,” 2012.
15
Source: Corak, Journal of Economic Perspectives 2013.
1940
0
20
40
60
80
100
0 20 40 60 80 100
Parent Income Percentile (conditional on positive income)
Percent of Children Earning More than their Parents
By Parent Income Percentile P
ct.
of C
hild
ren E
arn
ing m
ore
than t
heir P
are
nts
1940
1950
0
20
40
60
80
100
0 20 40 60 80 100
Parent Income Percentile (conditional on positive income)
Percent of Children Earning More than their Parents
By Parent Income Percentile P
ct.
of C
hild
ren E
arn
ing m
ore
than t
heir P
are
nts
1940
1950
1960
0
20
40
60
80
100
0 20 40 60 80 100
Parent Income Percentile (conditional on positive income)
Percent of Children Earning More than their Parents
By Parent Income Percentile P
ct.
of C
hild
ren E
arn
ing m
ore
than t
heir P
are
nts
1940
1950
1960
1970
0
20
40
60
80
100
0 20 40 60 80 100
Parent Income Percentile (conditional on positive income)
Percent of Children Earning More than their Parents
By Parent Income Percentile P
ct.
of C
hild
ren E
arn
ing m
ore
than t
heir P
are
nts
1940
1950
1960
1970
1980
0
20
40
60
80
100
0 20 40 60 80 100
Parent Income Percentile (conditional on positive income)
Percent of Children Earning More than their Parents
By Parent Income Percentile P
ct.
of C
hild
ren E
arn
ing m
ore
than t
heir P
are
nts
Mean AM:50.0%
Mean AM:91.5% 1940 Empirical
1980 Empirical
0
20
40
60
80
100
0 20 40 60 80 100
Parent Income Percentile (conditional on positive income)
Counterfactual Rates of Absolute Mobility by Parent Income Percentile P
ct.
of C
hild
ren E
arn
ing m
ore
than t
heir P
are
nts
Mean AM:50.0%
Mean AM:61.9%
Mean AM:91.5% 1940 Empirical
1980 Empirical
0
20
40
60
80
100
0 20 40 60 80 100
Parent Income Percentile (conditional on positive income)
1940 GDP/family growth rate (2.5%), 1980 income shares
Counterfactual Rates of Absolute Mobility by Parent Income Percentile P
ct.
of C
hild
ren E
arn
ing m
ore
than t
heir P
are
nts
Mean AM:50.0%
Mean AM:61.9%
Mean AM:79.6%
Mean AM:91.5% 1940 Empirical
1980 Empirical
0
20
40
60
80
100
0 20 40 60 80 100
Parent Income Percentile (conditional on positive income)
1980 GDP/family growth rate (1.5%), 1940 income shares
1940 GDP/family growth rate (2.5%), 1980 income shares
Counterfactual Rates of Absolute Mobility by Parent Income Percentile
Pct.
of C
hild
ren E
arn
ing m
ore
than t
heir P
are
nts
What’s Gone Wrong?
• Runaway inequality
– State redistribution can’t keep up!
• Stagnant or declining social mobility
– Linked to wealth inequality, educational
inequalities
• Declining position/security of workers
– Capital more mobile than labor
– Decline of unions
What is to be done? • Cultivate cosmopolitan economic populism
(linking local and national)
• Political reform: money in politics, turnout,
middle-class organizations
• Predistribution
26
“Predistribution”
What is to be done? • Cultivate cosmopolitan economic populism
(linking local and national)
• Political reform: money in politics, turnout,
middle-class organizations
• Predistribution
– Union alternatives/wage-setting institutions
Percent of
those in
employment
who were
trade-union
members,
2001
What is to be done? • Cultivate cosmopolitan economic populism (linking local and
national)
• Political reform: money in politics, turnout, middle-class
organizations
• Predistribution
– Union alternatives/wage-setting institutions
– Public investment: infrastructure, R&D, higher ed, early childhood
education, retraining, etc.
– Corporate governance/finance
– “Getting the macroeconomy right”
• From Spiral of Silence to Virtuous Circle
What is to be done? • Cultivate cosmopolitan economic populism (linking
local and national)
• Political reform: money in politics, turnout, middle-class organizations
• Predistribution – Union alternatives/wage-setting institutions
– Public investment: infrastructure, R&D, higher ed, early childhood education, retraining, etc.
– Corporate governance/finance
– “Getting the macroeconomy right”
• From Spiral of Silence to Virtuous Circle
• Reasons for optimism – Changing face of affluent west
– Rise of knowledge economy
– Lots of money on the table
-Andy Grove, former CEO Intel, 2010
GROVE
“Our fundamental economic
beliefs, which we have elevated
from a conviction based on
observation to an unquestioned
truism, is that the free market is
the best of all economic
systems—the freer the better.
Our generation has seen the
decisive victory of free-market
principles over planned
economies. So we stick with this
belief, largely oblivious to
emerging evidence that while
free markets beat planned
economies, there may be room
for a modification that is even
better.”
Supplemental Slides
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1973 1977 1981 1985 1989 1993 1997 2001 2005 2009
Real Hourly
Productivity
Median Male Hourly
Compensation
Median Hourly
Compensation
Rising Productivity,
Stagnating Compensation (cumulative percent change since 1973)
Source: Economic Policy Institute
113%
180%
352%
480%
0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
500%
$0
$5.000.000
$10.000.000
$15.000.000
$20.000.000
$25.000.000
99.0 - 99.5 99.5 - 99.9 99.9 -
99.99
Top 0.01%
1979
2005
Percent Change
Average Income (After taxes, including public
and private benefits; 2005 dollars)
39 Source: CBO
50
60
70
80
90
100
1940 1950 1960 1970 1980
Mean Rates of Absolute Mobility by Cohort
Child's Birth Cohort
Pct.
of C
hild
ren E
arn
ing m
ore
than t
heir P
are
nts
Share of Population
Experiencing 25% or Greater
Decline in Available
Household Income
without an Adequate Financial
Safety Net, 1986-2010
14,3%
16,9%
18,8%
20.5%
0%
5%
10%
15%
20%
25% 1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
10
20
30
40
50
60
70
Un
ite
d S
tate
s
Ge
rma
ny
Au
stri
a
Fin
lan
d
Ita
ly
De
nm
ark
Sw
itze
rla
nd
Ne
w Z
ea
lan
d
Ca
na
da
Ice
lan
d
Au
stra
lia
Gre
ec
e
Sw
ed
en
No
rwa
y
Ne
the
rla
nd
s
Un
ite
d K
ing
do
m
Be
lgiu
m
Sp
ain
Fra
nc
e
Lu
xe
mb
ou
rg
Ire
lan
d
Jap
an
Ko
rea
Percentage of Population that has Attained Tertiary Education by Age Group (2012)
25-34 year olds 55-64 year olds
0
10
20
30
40
50
60
70
Un
ite
d S
tate
s
Ge
rma
ny
Au
stri
a
Fin
lan
d
Ita
ly
De
nm
ark
Sw
itze
rla
nd
Ne
w Z
ea
lan
d
Ca
na
da
Ice
lan
d
Au
stra
lia
Gre
ec
e
Sw
ed
en
No
rwa
y
Ne
the
rla
nd
s
Un
ite
d K
ing
do
m
Be
lgiu
m
Sp
ain
Fra
nc
e
Lu
xe
mb
ou
rg
Ire
lan
d
Jap
an
Ko
rea
Percentage of Population that has Attained Tertiary Education by Age Group (2012)
25-34 year olds 55-64 year olds
Polarization of Labor Income Annual average real labor income growth, 2010-2014, by group
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Mean (↗) Bottom 10% Top 10%
0.00
0.05
0.10
0.15
0.20
0.25
0.00
0.05
0.10
0.15
0.20
0.25
0.00
0.05
0.10
0.15
0.20
0.25
0.00
0.05
0.10
0.15
0.20
0.25
0.00
0.05
0.10
0.15
0.20
0.25
1985
1990
1995
2000
2005
2010
2015
1985
1990
1995
2000
2005
2010
2015
1985
1990
1995
2000
2005
2010
2015
AUS BEL CAN
CHE DEU DNK
ESP FIN FRA
GBR ITA NLD
NOR SWE USA
25+% arc drop, HH market income
25+% arc drop, HH disposable income
Sha
re e
xper
ienc
ing
25%
inco
me
drop
s
CNEF & SLID & CPS & ECHP & EU-SILC
0.00
0.05
0.10
0.15
0.20
0.25
0.00
0.05
0.10
0.15
0.20
0.25
0.00
0.05
0.10
0.15
0.20
0.25
0.00
0.05
0.10
0.15
0.20
0.25
0.00
0.05
0.10
0.15
0.20
0.25
1985
1990
1995
2000
2005
2010
2015
1985
1990
1995
2000
2005
2010
2015
1985
1990
1995
2000
2005
2010
2015
AUS BEL CAN
CHE DEU DNK
ESP FIN FRA
GBR ITA NLD
NOR SWE USA
25+% arc drop, HH market income
25+% arc drop, HH disposable income
Sha
re e
xper
ienc
ing
25%
inco
me
drop
s
CNEF & SLID & CPS & ECHP & EU-SILC