November 18, 2015
Washington, D. C.



          The title of this session in today’s program is “Jobs, Growth, Wages, and Inequality: What’s the Agenda?” There are almost no more important economic issues for the economy in Washington as we close out 2015 and enter election year 2016 as growth and jobs, jobs and growth--the line of causation goes both ways—and inequality.
          The US, although growing anemically in real GDP over a number of years, has been creating jobs, over three million in 2014 and probably 2.25 million this year. The unemployment rate at 5 percent is perhaps near full employment, although, because of weak growth in the labor force, probably not nearly so. There’s a good deal of controversy in our profession about that and the so-called natural rate of unemployment for this episode. There’re still a lot of part-time workers who want to work full-time, discouraged workers and long-term employed. Americans are very uneasy about the path the country is on. Nominal wages are rising very slowly, two to 2.5 percent, far less than in most expansions that have lasted this long—we’re in the seventh year of the expansion, and at unemployment rates that are approaching full employment on some measures. Real wages and real income—that is, wages and income corrected for price inflation, which is very low, only two-tenths of a percent over the past year on the [consumption price deflator?]—real wages and real income are doing better, but still lagging. Corporate profits and margins are at record-high levels, with a demonstrated presence of growing relative inequality of income and wealth.
          Inequality is another big issue, with growing relative inequality an economic and societal issue. I think the reality of the data may be even more of note in a time of unprecedented easy monetary policy because of the asset price effects of the monetary policies that have been run in the major developed countries. Quantitative easing, until liftoff in December, on interest rates from zero to some low positive number— Short-term interest rates have been essentially zero, and long-term rates ultra low, and there has been quantitative easing over a bit ago, but nevertheless, easy monetary policy and the particular form of it practiced this time has special asset price effects that [favor] those who hold and own assets initially with the hope that the quantitative easing will work its way through the economy, and you then see the results, which in every country where it’s been applied have been very very long in coming, results nonetheless, the benefits to the job side. But is an inequality generator through what happens to asset prices and those who are most invested, own, and working in that world. In the US, UK, Japan, QE is working. We think it’s working, benefiting relatively the haves versus the have-nots, and contributing actually to growing inequality.
          What’s the agenda for dealing with these big issues? Can desirable growth in jobs happen on its own? What is the course of inequality, its effects, and the relative disparity that we see between labor income and capital earnings? Are these issues being addressed by the policy agenda in place, by the candidates so far for election 2016; and what should be the policy agenda?
          To comment on these issues and specific dimensions of the issues may be not necessarily explicitly answering these framework questions, but perhaps to some degree. We have Jamie Galbraith. He’s the Lloyd Bentsen Chair of Government at the LBJ School of Public Affairs, also the chair of EPS. His latest book, Inequality and Instability: A Study of the World Economy Before the Great Crisis. That’s Oxford Economic Press.
          Stephen Rose—this is the order of the commentators today—is research professor, George Washington Institute on Public Policy and has been research professor at the Georgetown Institute on Education and the Work Force.
          Heather Boushey is senior fellow at the Center for American Progress. She is executive director and chief economist at the Washington Center for Equitable Growth. She’s been an economist [on the] Joint Economic Committee at the Economic Policy Institute. She’s an expert on many things, particularly on the labor market. I particularly remember you, Heather, in some of the meetings, advisory meetings, that we had with the House Democratic leadership in the days of the Great Crisis, when I thought your particular suggestions and views were extraordinarily useful. It doesn’t mean the policymakers listened to us, right? We do our best, and give it our best shot, and then hope things fly well.
          And then we have also Teresa. Teresa, your last name is difficult for me. As I get older I have more trouble pronouncing names, but I know Teresa. She has been chair of the department of economics, The New School for Social Research in New York, and she has a distinguished career in public policy research and advising, and is the Irene and Bernard Schwartz chair at the New School for Social Research.
          Each commentator has six to eight minutes. I’m glad to tell you that you have more than five minutes; but when you see the five-minute sign, you know that six is approaching. And so, as time is short, we’re going to immediately, when they’re through, open it up to questions from the audience, and we’ll have a dialogue, hopefully for 10 or 15 minutes. Jamie.

          I’m going to defer to my colleagues first and take the cleanup position, if that’s all right.


          Hi. Thanks for being. Well I was told ten minutes, so I’ll talk a little quickly, but I don’t think I can do it all in six.
          I’m here today to provide a different view from the conventional wisdom about rising inequality in the sense that conventional wisdom is not always inequality up, but that median incomes and median earnings have stagnated. I will try to show that that’s not true.
          In the 1960s, inequality was the War on Poverty, stimulated, obviously, by My Michael Harrington’s book, The Other American. Today what it means is, if there is middle-class stagnation, then the negative impact of inequality could affect up to the bottom 75 percent of the population. Given the huge number of voters involved, concern about inequality should favor the Democrats, because Republicans are so tied to tax cuts for the rich, no minimum wage increases, less regulation, and in general, pro-business orientation. But Democratic victories have been scattered. We’ve won the presidential race twice; we’ve lost a lot of others. In the 2014 election, the mixed bag was nine Democrat Senate incumbents lost, but in four of those states ballot initiatives were passed by large margins to increase the state minimum wage. In these four states, one-third of those that voted for the minimum wage, voted for the Republican candidate.
          Progressives offer a variety of explanations for this; but I would argue there’s a simpler explanation. Accepted findings on middle-class stagnation are wrong, and that large swathes of the population don’t necessarily have an interest to support progressive policies. The four states that passed minimum wage while voting Democratic show a different pattern, one in which people can express their concerns about fairness, while at the same time think that a Republican can deal with a range of problems better than a Democrat.
          Let me go to our research a little quickly. There’s no doubt that inequality is high. In 1979, I produced a social stratification poster that’s now in its seventh edition, and I argued in ’79 that inequality was too high. It’s obviously higher today. But what I’m going to argue is that a smaller share of a bigger pie can be more pie. And if there [are] modest, real gains in standards of living, then the experience of inequality is much less politically obvious.
          Let’s turn to income. Piketty and his American collaborator Emmanuel Saez report that 91 percent of the inflation growth between 1979 and 2007 went to the top 10 percent. That means the bottom 90 percent got 9 percent, and that translated into only a 7 percent gain in real standards of living. By contrast, the Congressional Budget Office reports that real median income rose by 41 percent over those years, and that the bottom 90 percent received 47 percent of the growth, not 9; and that helps explain why it could go up as much as it did.
          In terms of the post-2007 period, in reports by [?], he’s painted a picture of inequality getting much worse, with virtually all the growth going to the top one percent; but this finding is very much based on cherry-picking years. Using his own date, between 2007 and 2009, with the onset of the financial [crisis?], the top one percent lost a third of their annual income. He only tracks it from the rebound, going from 2009 up; but they never even rebounded back to their 2007 position. So in his own data, basically if you start at 2007, the top one percent didn’t monopolize all of the gains; the top one percent was responsible for most of the losses.
          If we look at the CBO by contrast, which includes taxes and transfers, CBO shows the bottom 95 percent had only one percent loss of after-tax real income in the years after the recession because of tax reductions and transfer increases. So you have two reports on the post-recession: One, Piketty, wants to show that inequality always increases, and therefore he shows that Obama’s policies didn’t work; and the Republicans are running on this. Obama led to rising inequality in which virtually all of the gain went to the top one percent. And you have CBO that says that Obama’s policies did work and cushioned the impact on the bottom 95 percent.
          If we turn now to earnings and look at what’s happening there, a lot of time what’s happening is that compensation, which includes all earnings and benefits, have lagged behind productivity growth. Research by Josh Bevins and Larry Mishel [has] reported that median hourly compensation from 1973 to the present is only up a tad, and that they only received 12 percent of the available productivity gains. Dean Baker, a former EPI researcher, using the same [BEA/DEA?] data and using slightly different years, found that the median compensation was up 42 percent. The only difference between Baker and the EPI results was that Baker used one common price deflator and EPI used three different ones. It’s very important to see that [much?] of this stuff is in the technical details which obviously I can’t get into. In my own research I find that median income—median compensation—was up 38 percent since 1979, and that was 43 percent of available productivity growth. But that 38 percent gain was very unequally divided by gender; and that is, males only had a 13 percent gain from 1979 to 2013 in compensation, whereas females had a 73 percent gain—a long discussion what that means.
          Summing up my findings: I would argue that it’s not believable to say that all the population got none of the benefits of growth. If you look at Piketty and Saiz’s long-term data to the present, they find that the average income of the bottom 90 percent is 6 percent lower than it was in 1979 and below the 1968 level. They’re arguing that the bottom 90 percent, which includes a substantial portion of the upper-middle class, has gotten nothing for a very long time. In my data, I show that the top 10 percent grew in income—In CBO data, the top 10 percent grew by 138 percent, rather than the 41; and in earnings, the top 10 percent of compensation grew by 100 percent, rather than 38 percent.
          So what that means is that people’s view of the economy is very mixed. The vast majority of the people have a negative view on the general state economy. I should know that a lot of people tend to have negative views, and even in the 1990s, when the Clinton economy was going at a gangbusters rate, 40 percent had a negative of the economy; so that’s one in which people tend to see the downside. But they also have optimism about whether they’re going to improve in the future and in their faith in the American dreams. American people know that job security is not what it once used to be; but they do have these positive feelings, and they have lots of concerns; so it’s this mixed bag.
          In terms of going back to the income inequality issue, when asked by Pew in a general social survey, compared to how you live today, compare that to how your parents did at the same age, you find that 60 percent say that they live better; 24 percent said that they live the same, and 16 percent, worse; and that’s in the middle of the recession. Before that, it was slightly better numbers.
          Bernie Sanders’ twelve-point program encompasses what the progressives have been calling for for the last several decades. As he openly says, we want to be more like Denmark and Sweden. While many of these positions poll well separately, Americans have a gut antipathy to a large centralized state, and prefer low taxes and more individual consumption. Obviously the issue of race plays in, and many people think that it’s transfer payments to African Americans and other poor people that drive the government deficit; and that of course would be wrong in terms of social benefits because the largest recipients of social benefits are elderly white people.
          Going forward, until we can get more white Americans to have a different view of the validity of public spending and the need to pay taxes necessary to support these programs, it’s going to be very difficult to expand them much. When Congress can’t even agree on a gas tax increase for needed spending, it’s hard to see how expanding social policies enacted.
          So what I hope I’ve done is get away from dead-end argument that people are voting against their interests. It’s also consistent with the widespread view that Sanders in unelectable as president. That said, he did fill the anti-Hillary space, and he stretched the debate, even though few of his policies will be part of the final party platform. Clinton is likely to run on a set of progressive options; but they’re going to be more limited, revolving around access to higher education, expansion of family leave and health insurance, and more financial regulation. While they won’t be part of a political revolution, they’ll make life better for many low- and moderate-income Americans. Thank you.

          Terrific, thank you very much. Heather?

          Thank you, Allen. Thank you for that great introduction, and thank you, Jamie, for putting all this together. That was a wonderful opening [plenary?] today.
          I’m really happy to be able to follow you, Steve, because I’m going to, I think, disagree with everything; so this will be fun.
          So I actually want to start right where Steve ended. I’m going to switch up a little big my comments just to kind of rip up this little bit in my hopefully eight minutes.
          It’s hard to see how there’s room for new social policy to be enacted, you said that, and then also that the agenda moving forward, you put paid leave in this small agenda that Clinton is putting forth. And I would like to argue the exact opposite, that when we’re looking at the US economy and we’re trying to understand where this middle-class squeeze has been happening, what are the impacts of inequality on American families, and what’s happening around kitchen tables all across America, I would argue that --  I mean I […?] data issues, and I don’t want to get into all of those; we can in the Q and A—but one way that families have experienced this rising inequality is by trying to put in more hours, specifically more hours of women workers. So when you look at families, especially in the bottom and the middle, what you see is that the only reason that family income did not decline between 1979 and today is because of the added hours and rising wages of women. That, I think, is an enormously important source of stress and anxiety, both economic and social, that is happening all across this country. So when I think about inequality I’m not just thinking about wages or family income, just family income; we have to think about the time squeeze as well and how people actually experience this. And I think that economists for far too long have kind of separated these issues.
          So when we’re looking at this, we need to think about both the—now that I’ve messed up my notes, of course—now that I’ve started with Steve, let me go back to a couple of things I wanted—

          Yah, but you made a big point about the women which none of us males will forget.

          Thank you. So there we go.
          Well, so there’s a couple of points I wanted to make on this: First is that, while this experience of inequality looks different across the income distribution--families at the bottom, the very low end, have seen their incomes fall relative to 1979, families in the middle have seen their incomes rise a little bit, and families at the top have seen their incomes rise a lot—the common experience has been this middle-income squeeze. It used to be the case that most families had a full-time stay-at-home caregiver. That was true across the income distribution, and the higher up the earning scale you were, the more likely you were to do that with just—you had one breadwinner.
          Today that is a very different story. Most families don’t have that, but that’s true up and down the income spectrum. And of course families at the top are doing that with two breadwinners, while families at the bottom are typically doing it with one breadwinner, because they just have one adult, typically a single woman. So that’s how families experience this.
          On the other hand, there’s a lot of new research emerging that points to the economic importance for a macro economy of these added hours and talent of women and people of color—because we’ve seen both of these opening over the same time period into our economy. In my work with John Schmidt and Eileen Applebaum, we found that between ’79 and, I think, 2012—yah, 2012—the US GDP grew by 11 percent because of the added hours of women workers. I have in my little packet here a really nice report from the International Monetary Fund documenting that the increase in women’s labor force participation, if it were on par to that of men in the United States—it’s not—actually the gap isn’t that big, but if we were to close that gap—that would increase total output of the US economy by 5 percent, or about $800 billion. These are non-trivial numbers. Peter Klenow and his colleagues—he’s an economics professor at Stanford—have estimated that between 1960 and 2008, upwards of a fifth of US economic growth was because of the opening up of occupations to women and minorities.
          So these added hours and employment of women have been especially important to the macro economy. We don’t often think about that, and we haven’t actually thought a lot about the stress that it’s causing for families; so there’s two really important reasons to be thinking about this policy agenda. I would argue that a policy agenda that starts with addressing that is not small-bore, although you didn’t exactly use those words; but it’s not something on the margins; but that that actually needs to be front and center to our thinking about both our labor and social policy.
          And one of the most amazing things that has happened since I—I moved to Washington, D. C., in 2000 and started my job at the Economic Policy Institute, and I’ve been working on these issues since about 2005. And there has been a remarkable change in the landscape around this country in terms of the kinds of policies that address the gap, the time squeeze for families, that address work-life conflict all around this country. So while we talk a lot [in rooms?] about how it was so fantastic that we saw these ballot initiatives on the minimum wage, there were actually all of these ballot initiatives on paid sick days, and there are now 25 places in American where workers have the right to earn paid sick days. This has been an enormous new frontier for social policy that I think too often, it’s like, oh, we can’t do anything. No, actually we are making important change at the state and local level that needs to be recognized for what it is, which is a profoundly and fundamentally important labor and macro economic policy.
          We have three states in America that have introduced new universal social insurance schemes, universal social insurance schemes to cover paid family and medical leave--that is [sic], California, New Jersey, and Rhode Island; and you have seven states right now that are contemplating similar steps. It’s harder for those other states to do it because there’re five states that have these longstanding temporary disability insurance systems, so they had an infrastructure they could tap into—California, New Jersey, Rhode Island, New York, and Hawaii; but a lot of other states are trying to build on that success. These are important gaps that we have not filled in our broader social insurance. And on the labor standard side, you’ve seen enormous progress in communities all across the country on issues around predictable schedules, around hours and workplace flexibility that are the new vanguard of what’s happening in the labor space.
          So I think actually that there’s enormous room for optimism for a very important, profoundly important labor agenda and social insurance agenda for families that, if we coalesced around this, we’d bring together the challenges that are actually facing families in terms of the stress that we read about every day in the newspaper, too often, quite frankly, on the Style pages or [in] the women’s magazines. But these are the economic issues facing families around work-family conflict. But they also are enormously appealing to young people, because this is the workforce that they are moving into, and to working families. So I actually think that that could be an important way that we could both address some of the macro economic issues, improve economic growth, but also make significant traction on inequality and how it’s actually experienced in American families.

          I’m going to show you mostly pictures, but I do want to make my case first. This is a fantastic panel because we’re very well coordinated. I’m going to start where Heather left, is that one of the biggest challenges will be contestation over time, that time is the new inequality, that contestation around retirement time, the very length of life, retirement promises [are] very much coordinated with what’s happening with wage inequality and what’s happening with time inequality while we all are working.
          So first let me make my case: There’s been a sea change in the way we view Social Security in the last year-and-a-half, and it’s all been positive. Instead of continuing what we started in 1983 to [nix?] Social Security benefits and perhaps raise revenue to equalize a cut with raising revenues to stabilize the system—that’s for a lot people off the table. Many people say we have a retirement crisis; let’s just get more revenue into the Social Security system. I want to show you some numbers why making Social Security solvent now is very important for our project to save low and middle-class families.
          The second thing I want to point out is the macroeconomic implications of cutting benefits or eroding pensions and making 15 million more older workers who otherwise would be retired migrate into the labor force. Just as the baby boomers had an effect, a depressive effect, on wages throughout our [cohort?], we are, if we don’t do anything about it, we’ll continue that policy and have an influx in labor supply that we haven’t seen since the Great Migration of black workers from the South to the North. These are enormous numbers, and they really matter.
          If we also make people work longer, we have policies set in place that people who are dying sooner and who are sicker sooner, and who have jobs that are much more difficult, are going to be the ones that are working longer. Predictions from the Urban Institute, from Brookings, from my own calculations show that the wealthy have retirement. High-income people, they will still retire. They may work if they want, but it will always be by choice, and they have gotten all the gains.
          To bring women into the issue, you might be shocked to hear— And whenever I’m in Europe with demographers they come running up to ask me the question, What is it with you white women in America? White women have received less gains in mortality than any other group. The group since the 1940s that [has] gained the most in longevity has been white men. It has now been quite well known that we are growing mortality gap, sort of the most important sense of time that we could have. But take away their pensions, and we’re squeezing—I’ll show you—something that we should have celebrated, which was a great achievement in equality of retirement time.
          The last thing I want to show you is to bring these issues to the macro economic stabilization sphere. I’ve just published a paper that shows that Social Security and Medicare and disability insurance were more important automatic stabilizers in getting us out of the last recession than unemployment insurance. Progressive taxes, to be sure, are our biggest weapon for automatic stabilization; but Social Security, Medicare, and disability are underappreciated automatic stabilizers. Just one more reason to keep those programs strong.
          What is also not surprising is that 401-k’s and IRA’s, the financialization of retirement security, were destabilizers, meaning that if we did not have 401-k’s and IRA’s, and our retirement security had come from defined benefit plans, our unemployment rates would have been lower in the recession, and the employment rates would have been higher in the recovery.
          So those are my conclusions. Let me make the case:
          Despite what we are disputing about wage inequality, wage inequality has sucked up income from the Social Security system. The trustees in 1983 never expected that wage inequality would happen, and therefore the revenue into the system would be much less [than] what it was. Almost of the half of the deficits we’re seeing, much of it is coming from the fact that income has grown the most over the earnings taxable cap. The tax cap changes every year according to wage indexation. Right now it’s 118,500 a year, meaning earnings on top of that are not taxed for the Social Security system, they’re lost to the system. Medicare taxes all year long. No matter what income you are, you pay into Medicare. Social Security is capped. That has tremendous implications for the Social Security system, and so does actually the expense of health insurance; that, too, escapes payroll tax. You know this: Social Security does face a long-term insolvency. We can’t assume higher growth rates. I used to do that. Oh, let’s just say that the growth rate is going to be higher, and this solvency issue is overblown. I no longer believe that. The facts have changed my mind. The sooner we raise the FICA tax, the sooner we raise the taxed max, the better off we are. I don’t want to fight this in ten years; the pressure on benefit cuts will be too great. I really want to solve it now.
          If we don’t solve it now, and we just pay payable benefits, and things can change in 30 years to be sure, the income cuts would be much worse for middle- and low-income families. So for the sake of progressivity and to keep aggregate demand, we need to do something in the next couple of years, perhaps this next administration, to get more revenues into the Social Security system.
          So how do we do it? You know, eliminating the taxed max was a really good idea about 10 years ago, and has only become a better and better idea. As the income and wealth inequality has grown, the idea that we have to reform Social Security is no longer about just bringing up the poverty levels; it’s actually about sharing the surplus that has been created over the past 10 years and even after the recovery to shore up middle-class incomes and to keep aggregate demand there. It turns out, if you eliminate the taxable cap, but you still increase benefits for those at the very top, you can eliminate almost all the [in?]solvency. If you don’t increase benefits at the top, you just tax the incomes but cap the benefit accrual, then we can do all sorts of expansions of the Social Security system.
          But let me take the more conservative view: Give everybody a credit for the increased taxes that they’ll make, we still solve the system. This is a great slide. Those two slides were from Karen Smith at the Urban Institute—I want to give her credit. But here it shows that if we do that thing, everybody gains. There’s an increase of benefits for everything. And we’re going to need that aggregate demand as the share of the population who are elderly increases.
          What about increasing the FICA tax? Steve has told us that we have kept taxes low. There is a tax rate on earnings that may impede economic growth--I’m not ideological about it—but the United States is nowhere near those high tax rates. We’re still at 12.4 percent. We raise it by 54 percent, there’s no economic model that says that that will impede economic growth. Everybody will pay more taxes, the lifetime benefits will go down a bit. It’s a regressive tax, so we have to actually be mindful of what we do with the earned income tax credit, or my favorite, which is for another day, the refundable tax credit for retirement savings. But this shows the simplicity of solving the Social Security system. We raise the FICA tax, everybody pays, and we can go on to something more important.
          But this is going back to my colleagues on the panel and to you all in the audience: We’re here for more than just more and more data on wage inequality. We’re here to think much bigger about all the areas of inequality in our society. It isn’t just wage or wealth. Again, it’s about time. We have to increasingly pay attention to this retirement time squeeze and how unfair it is; the health gradient on work--people who are sicker are working longer; and we have to take care of this longevity gradient.
          Let me show you two new findings, and I really like these findings, so you get to see them. There’s a data set that asks people how old they are and what they’re doing--this is from the University of Michigan; and the work is described with all sorts of attributes you might be interested [in]: stooping and bending, heavy lifting, keen eyesight, intense concentration. Now the myth is that the machines have helped make [many] of our jobs easier, and that older people certainly don’t have to haul bricks anymore; they can work a little bit longer. It turns out that heavy lifting is going down for everybody, except older people are having to do more stooping and bending, [many] more jobs that require intense concentration and keen eyesight. The stooping and bending may be coming from the warehouse industry; there’s lots of work to show that these companies—Staples, Amazon—are targeting older workers to work in their warehouses. So this data needs to be strengthened, but there is evidence that the jobs that older workers are having now are actually more intense and more difficult to do.
          The other slide—and this is my favorite one—is that we achieved equality when we were grouchy about the other forms of inequality. We forgot to celebrate that with defined benefit plans, disability insurance, and Social Security, with a lot of variability of retirement ages and ages of collection, that the blue-collar workers, minorities, lower-educated people were able to retire at, like, 58, 59, 60. They had much shorter lives, but that actual retirement time was about equal. And we’re showing evidence now, if I just take workers, when they retire, when they die, who they are, that this is growing more unequal. It was a logical extension of our change in our pension system; but it really is a moral, an important issue, that all voters now are feeling, that the time squeeze on retirement is becoming more unfair. And it’s not people’s fault for not having financial literacy without saving enough by drinking too many lattes. People aren’t wrong; it’s the design of the system that’s wrong.
          So in conclusion, to reach back to Sarah Bloom Raskin’s celebration of our automatic stabilizers, I’d like to draw your attention to how social insurance, redistributive policies do help growth by stabilizing the economy. I’m going back to prove my statement in my first slide, is that in every way the Social Security, unemployment insurance, disability insurance, and even Medicare—there’s more use for Medicare in recessions—stabilize the economy. I think Jamie, as always, has given me a new research idea, and that is to map these expenditures into a matrix of job creation. Teaching isn’t affected here, but certainly the job creation and health care sector has [been]. Social Security benefits go to people in Detroit. What they spent their money on is something to be modeled. So thanks, Jamie.
          And in conclusion: We should do something now for Social Security, and benefit cuts should be off the table. We should celebrate trying to counter the inequality in mortality, and we should pay attention to the macroeconomic implications of our social insurance programs. Thank you.

          So we have Jamie, if you can wrap it up with brevity, then we’re going to have sufficient time for this quite provocative panel and Q&A from the audience, questions and discussion.

          Thanks. I’m going to begin by composing the difference more apparent than real between Rose and Boushey, and then to take up Teresa’s injunction to say a few words about some of the larger questions.
          I think it’s clear and agreed that the principal losses that were suffered in the wake of the great financial crisis were losses of security, losses of assets, losses of public services, losses in, let’s say, the quality of life and the quality of family life, and not so much losses of income. This is really something that is of extreme importance to realize; it’s not the same in other parts of the world.
          It does seem to me, taking a slightly longer time period, not that much longer, but if you go back to the period since the turn of the millennium, that we do face economic conditions that are fundamentally more challenging than was the case for the 30 or 40 years before that. That is to say, in particular, we’re in a period where resource prices have become volatile and financialized, which creates risks and instabilities, both from the up side and the down side. We’re increasingly under pressure to carbonize our economy, which is an important goal, but not a consumption good as such, and therefore something, a challenge to the use of resources. We are in an increasingly unstable global political and conflict environment, which may not affect us in this country directly, but does have significant economic consequences for the world economy as a whole. We’re in a world where technical change, which is something that Sarah Bloom Raskin emphasized, is labor-saving; it has consequences for the creation of jobs going forward, and that creates institutional challenges that we have to meet. And we have a world in which the financial sector has been fundamentally impaired by its own excessive concentration and the inadequacy of the response to the waves of financial fraud and malfeasance that had brought us the crisis in the first place.
          All of these things, but especially the last two, technology and finance, are—you might call them the structural insignia of rising inequality, […?] plutocracy of bankers, technologists, what used to be called war profiteers—if you remember, Richard Kaufman has a book by that title—and holders of resource and especially carbon rents, which is where the extreme concentration of wealth and income in our economy occurs.
          Still, against these forces, countervailing them, are arrayed a tattered but nevertheless still functioning alliance of stabilizing and equalizing institutions that were created for the most part in the 20th century in great waves, in the New Deal and the Great Society. And it’s important to recognize that these institutions still, to a very large extent, define who we are and why we are reasonably successful and resilient as a society. And they include social insurance and wage standards, environmental regulation, public investment, the forces that favor diplomacy, conflict resolution, peacekeeping, and the protection of human rights, full employment policy, job-creating institutions, including especially in the non-profit sectors, which give us a large share of our health care and education sectors, and financial regulation and the pressures which have been weak recently but could be strengthened to restructure, to bring about effective compliance, and to bring the financial sector in line with some larger conception of public purpose. And in this way, it seems to me, a practical, progressive agenda becomes clear not just as a set of shared social values, but as an economic strategy, something which has fundamentally been, I think, underemphasized in much of our discussion. That is to say, it is an economic strategy to protect and expand social insurance, to raise wage standards, and especially to make a substantial increase in the minimum wage, to restructure and bring under effective regulation, once again, the financial sector, to pursue environmental sustainability, to provide decent and product jobs in sectors that have social usefulness, and to restore peace and to maintain it.
          This is not the same thing as the mainstream postwar Keynesian formula, or self-described Keynesian formula, that’s still favored in large sectors of our discourse, including by figures as diverse, I think, as Paul Krugman and George Will, which was to use high growth as a kind of universal solvent, as an emollient, as a substitute for addressing the institutional and structural and equitable concerns that we now, I think, increasingly recognize are central to an economic strategy.
          We did this for quite a long period time. Institutions were much stronger. Labor unions were much stronger at the beginning of the postwar period, in 1950, than they were by the 1980s, even though there had been very substantial growth between those two periods of time; so that what was possible so long as all boats were rising becomes a secondary concern, but one which is only pursued in alliance with institutional questions when the rising of the tide is less rapid than it was before.
          This is all based, I think, on a fundamentally different role, conception, of the relationship between the state and the market, between the government and the private sector, than is held very generally by those who argue that the state is a burden on the market. In fact, what we recognize, I think, is that there is an indissoluble link between the regulatory mechanisms and the proper functioning of the private marketplace. This is not just an economic question; it’s true in every biological, physical, and social system. There are indispensible limits which make it possible for the system to function well. You don’t run your car with the radiator dry. You don’t run your nuclear reactor without a cooling system. You don’t get on an airplane unless you’re confident that the air traffic control tower is functioning. The right formula for your body temperature is not as high as possible; the right formula for blood pressure is not as high as you can make it. You see? These are essential biophysical principles, which is to say that every complex system needs to have its system for resource use and for efficient resource use; but it also needs to have a system for regulation to insure that things happen within the limits that are acceptable for sustainability. So the question is not, in economics, how fast can one grow, but how to achieve the best life for the most people for the longest time. And that just brings me right back to the point that Heather and Teresa just made, which is that, as we think about the life span, life cycle, of people in our society, it is extraordinarily important that we provide suitable means and sustainable means to maintain a decent and prosperous lifestyle over the entire period.
          And once you ask that question, or you frame that question clearly, then the agenda which I just outlined I think crystallizes. And the alternative, which was to largely ignore or deprecate the pursuit of specific objectives, or to treat them as alternatives to an economic strategy, becomes—essentially it fades away as a way of thinking. You realize that it’s only by doing these things in tandem, as part of a concerted and comprehensive strategy, that you can really hope to recover the sense of prosperity and security that ought to be our political and economic and social objective. Thank you.

          Very good. Terrific, panelists, terrific.
          We are open to questions from anyone in the audience. Please, if you have a specific person on the panel to ask the question of, please say that.

          I’m Mitzi Wertheim with the Naval Postgraduate School. I guess I want to raise two points and get anybody’s reaction: First of all, I think economists talk to economists, and they don’t tell the story for the general public. And I think that’s a real mistake. You need to—You can tell it to each other, but then put it in language that the rest of us can understand.
          Secondly, I think their terms are a real problem, like productivity. How do you increase the productivity of a teacher or a nurse? Productivity is fine if you’re talking about a machine, but not human, what I’m going to call human work. And that seems to be a metric that we use in saying how well we’re doing, we’re not being productive enough. You clearly end up with a limit to that.

          Uhhh, a couple of responses from the panel? Heather?

          I’d like to take the productivity question, because I think that productivity and services and productivity in health care and education, it’s a really important question. And it’s not just the number of students or the number of patients; it’s the quality. And we’ve spent far too little time actually thinking about how our institutions support a labor force that is enabled to create the kinds of quality outcomes, especially I think in health care and in education, that you would want to see, which is improving the productivity of that worker. The thinking about it in terms of not just, again, the number, but the quality; you want the most people who are made well, or people who stay healthy, or children who are achieving. That’s in our measures as well, but we don’t get at those in the way that we measure it in the national income account. So it’s a good question, but one that I think you’re seeing people increasingly thinking about, especially vis-à-vis these questions of time and how, if people are feeling strapped or stressed, that they aren’t able to perform those service functions as well.

          I’d just add to that that the national income accounts were created in the ‘30s and ‘40s largely for a very important, specific purpose, which was to help regulate the overall growth of demand; and particularly in the mobilization for the Second World War it was the control of inflation that was the key consideration. They were not created in order to measure the quality of outputs, particularly in the services sectors, and they don’t measure them at all. And therefore the notion of productivity is entirely—it’s ephemeral, it’s lost in discussing those sectors. And attempts to achieve an output measure which simply, for example, maximizes the student-teacher ratio, is obviously dysfunctional. It’s what the whole progress toward higher quality in education and services in general should be moving away from, not toward, as everybody who faces the education of their children as a decision knows.

          So let me comfort you some, and you heard some of it here, that productivity as economists use the term is based on GDP, domestic product. Many of us think GDP is not a very good measure of the economy as it stands today. And if productivity is derived [from a?] calculation using GDP, I for one, and I think Jamie kind of said this, I don’t really think productivity is all that meaningful.
          Now whether economists change how they use productivity in policy and otherwise is yet another issue; but there is some movement to rethink the measure.
          As for the communication challenge that you gave to us, I guess I will carry that comment with me everywhere I go, and challenge panelists like this to communicate in ways that you can understand. That is a problem of the profession. We are locked in with paradigms that we are trained to believe and support, and then we teach them. And we kind of have to enlarge our scope. I think of EPS as an organization that does that. We stretch the boundaries of rigid technical economics. And you really heard it from these incredibly, I would say, gifted panelists today.

          So here’s where you need to speed up your productivity in informing the public so we can understand it.

          Yah. Come to me and I’ll do that. Communication’s a big challenge in everything. Yes, the lady in the back. I’m biased. I pick on ladies first.

          I’d like to thank you very much. It was a very informative panel for me. I’m not an economist. But I came actually after hearing, joys of YouTube, Elizabeth Warren give a talk, the Jefferson Lecture, when she was still a bankruptcy professor at Harvard. And she’d gotten somebody in the government to run the statistics for her so that she could say, here’s what was the family income in 1970, and here’s what has eroded it by now. And it was health care, and so on and so forth. And it was absolutely fascinating because even having two incomes didn’t substitute. So 1971 income you could save money. By now, two incomes, you can’t. And it isn’t because people are spendthrifts, which I think is how we think of ourselves; it’s because of all of this transfer of costs, including, of course, the cost of college education. And I wonder if any of you are looking at that kind of thing, the transfer of costs.

          Do we have anyone in the panel? … Okay, it’s a research agenda item then. Thank you very much.

          I’m not a gentleman.

          Sorry. I thought you were—

          I’m Polly Cleveland of Columbia University SIPA and also a grandmother. It's good to hear so much concern for us elderly folks, but as a grandmother I am very much concerned that the growing inequality especially impacts the young. My children are up to their eyeballs in debt at unbelievable interest rates, and I would like to hear more about the impact of inequality on the young folks.

          Jamie? Inequality and younger America saddled with all that debt, which we know is huge. It’s another burden for—

          It’s really hard to know what the future’s going to be, and there are a lot of different scenarios. One scenario is that we’re in what’s sometimes called secular stagnation; so there’s a group of people that argue that. Larry Summers is part of that, a guy named Robert Gordon at the University of Chicago is the one that put forward that.

          He’s actually Northwestern.

          Excuse me, I’m sorry. It was in Chicago, the wrong university, thank you. You know, so if that’s the case, then this is going to be pretty problematic. Another school of thought is that the robots are coming, the robots are coming, and that 25 to 50 percent of workers are going to be displaced. I have a blog against that, it was published in Washington Monthly. If that’s the case, it’s going to be very unequal too. I mean, obviously there’s a middle path of kind of moving sideways in the past. If we look at the future as a reference to the past, in the past going into college debt was worthwhile and effective. That is, people with a BA earned a million dollars more over their career than people with high school only. What you majored in mattered. Over a third of people who got a BA got graduate degrees, so they got even more. So in the past it’s been a good deal, and it’s likely to be a good deal in the future unless we have one of these disaster scenarios. And so there’s problems, and obviously a lot of the Democrats are running on various version of making college more affordable. Some data on debt is that a lot of people who are delinquent in debt are those that used for-profit technical schools. We’ve got all these stories now about how they’ve been misused. So BS debt is unequal like everything else. It’s mostly not caused that much trouble for people over time, but there [are] higher levels of debt now. A third of people graduate with no debt, and a small percentage graduate with debt already [?] with BA alone. Most of the big debt is graduate debt in medical school and law school.

          So a few other things: I think that your two questions—I’m sorry, I didn’t get your name, but Pauline [sic], your questions are very much connected, right, because the time of life when people have families and they’re sort of dealing with the two-income trap, as Elizabeth Warren and her daughter wrote about in their fantastic book, are also when people tend to be younger and earlier on in their careers, when of course they’re earning less, they’ve made these huge investments sometimes and either have college degrees or just have debt and didn’t actually get that college degree; but it’s also when they’re trying to start families and are starting out on their own. They’re earning the lowest wages they will of their entire careers if they are lucky enough to have careers where their wages rise over time; and they’re low on the totem pole in terms of benefits. So they should be so lucky they’d even get a 401-k, let alone being able to accrue vacation or paid time off or any of those things that make it possible for them to get ahead.
          Too often we don’t connect the dots between how one generation is faring and the other. So I think my response to that question is to think about how some of the things that Teresa’s talked about in terms of the retirement security, how they profoundly affect people in their working years as well. So if we don’t solve that crisis, then—I don’t mean to personalize it—but if we don’t solve the retirement crisis, I’m looking at the risk that I’m going to have to pay for my own parents or have them move in with me, and I think there’s this generation that is also fearful or having to deal with that stress and anxiety about that. So making those connections, but making sure that we are creating good jobs for people at the bottom of the pecking order, which we haven’t spent enough time as a society focused on, is absolutely mission critical, because that’s when those young workers are getting their start. And today, that has been eroded remarkably, and the recession has only made those economic anxieties worse. That was a dark answer but—

          The only thing I would add to that is the question of wage standards in particular, and minimum wage is very important in balancing things out for younger workers.

          I have a political point: It’s really important not to pit the old against the young. It is absolutely a myth that societies that don’t care of their old are ones that want to improve the welfare of children. They actually go together. So don’t let anyone say the real issue is intergenerational inequality, when in fact it’s something much more.

          Now that, I think, and those who follow inequality more, it’s not really—It’s another dimension of inequality. Inequality of income was talked about, inequality of assets—it’s a very big contribution of Piketty and others. But inequality that’s enhanced or intensified by the presence of debt is yet another dimension of inequality that I think your question points out, and I think it’s a very big deal. Because the rich, the rich who have a lot of the assets, that means they have a preponderance of the wealth, not just a big share of the income, may have absolute levels of debt that are high; but they are collateralized by those assets. And the rich—I’m not a socialist; it may sound like it—but the rich will hire, because they have the money, the smartest people to minimize the cost and burden of the debt, and that will make the loop that we are stuck in in our society, which is so entrenched in the world on inequality, even more intense in a relative sense. So I think debt needs to be explored as part of the inequality.
          One more question—I think we have to go. Thank you very much.