Blog postings by CEPR staff and updates on the latest briefings and activities at the Center for Economic and Policy Research.

House Budget Committee Chairman Paul Ryan drafted a response to the Congressional Budget Office's recent study on inequality. This piece pulls out all the usual tricks. Most notably it:

a) argues that we should be focused on growth rather than inequality, failing to note that the U.S. economy is doing poorly by this metric also;

b) challenges the data showing growing inequality by saying the government data are wrong;

c) tries to divert attention to Medicare and Social Security raising the banner of generational war; and

d) ignores all the ways in which deliberate government policy has been responsible for the upward redistribution of income over the last three decades.

Representative Ryan's first summary bullet point is:

"The question for policymakers is not how best to redistribute a shrinking economic pie.  The focus ought to be on increasing living standards, expanding the pie of economic opportunity, and promoting upward mobility for all."

That sounds great, except the last three decades have not only been a period of rising inequality, they also have been a period of slower growth. According to the Commerce Department, in the 32 years from 1947 to 1979, when most of the population shared the gains from growth, per capita income rose at average annual rate of 2.6 percent. In the 31 years from 1979 to 2010, when most of the gains have gone to the top, growth in per capita income has averaged just 1.8 percent.

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The birthplace of the Occupy Wall Street movement was raided and dismantled early Tuesday morning. At 1 a.m., NYPD in riot gear entered Zuccotti Park with an eviction notice in hand, telling protestors they needed to clear the park immediately but temporarily, for cleaning. The protestors resisted eviction, and close to 250 arrests were made (including reporters and a NYC Councilman). The camp’s belongings were seized, including the #OWS library. Unfortunately, most of the library’s possessions are missing or damaged.

Tuesday night, protestors were allowed back into the park after the clearing and cleaning of the grounds. However, few protestors returned. Occupying Zuccotti Park is now prohibited along with tents, generators, and large bags. With these new rules, there is no way Zuccotti Park can transform back into the mini-city of the 99 percent.

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Consumer prices fell 0.1 percent in October but rose at a 2.4 percent annualized rate over the last three months, according to the Bureau of Labor Statistics' latest reports on the consumer price, U.S. import/export price and producer price indexes. The rate of inflation in the Consumer Price Index has been at 2.1 percent over the last six months, compared with 5.1 percent in the six months ending in April. This is overwhelmingly attributed to falling energy prices, which have dropped at a 3.2 percent annualized rate compared with an increase of a 35.0 percent annualized rate over the prior six months.

There are few signs of inflation, with the rebound of the dollar amidst troubles in Europe, falling trade prices, and producer prices slackening at all stages of production. Even with the drop in energy prices, the real average hourly wage has lagged consumer prices at a 1.2 percent annualized rate over the last three months. Unless there is an increased demand for goods and services domestically and abroad, it's doubtful inflation will be an immediate problem for the economy.

For a more in-depth look, read the latest Prices Byte.

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As the New York City police chase out and arrest protesters at the Occupy Wall Street site, they are also giving the world a lesson in how free market economics ain't what it is cracked up to be. One of the side bars to this action is the disregard by the police for the personal property of the protesters, as they destroy or discard the sleeping bags, tents and various personal items of the protesters. (According to one account, this disregard applies to one of the protestor's dogs. That is not funny.)  

Of course the treatment of the property is a trivial issue compared to the larger one of whether people's right to protest is properly respected. However, it is worth comparing it to treatment of other property of little value.

What is the value of a copyrighted song that is downloaded without permission? It's pretty damn trivial. Yet law enforcement officers can be made to take this value very seriously. What explains the contrast between the disregard for the protesters' personal property and the government's great concern for enforcing the copyrights of corporations like Disney and Time Warner?

One could suspect that it has something to do with the fact that the latter are large corporations who have the ability to force the government act in their interests. But, that is just a guess. Of course if economists ever paid attention to things like efficiency, they would be appalled by the fact that we rely on such an incredibly inefficient system to finance the production of creative work. But economists rarely seemed concerned about efficiency when the implications might be negative for people with money.

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CLASP and EPI released new labor policy reports last week.

Center for Law and Social Policy

Big Ideas for Job Creation: Rethinking Work Opportunity - From Tax Credits to Subsidized Job Placements
Elizabeth Lower-Basch

Economic Policy Institute

The Myth of Early Retirement
Monique Morrissey

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Héctor Cordero-Guzmán has conducted a second round of his #OWS survey on, following up on his Oct. 5 study, which I discussed in an earlier post. Cordero-Guzmán fielded the second survey on the #OWS website Oct. 20-21, right after the movement’s one-month anniversary. How has the #OWS support base changed since the beginning of October? Let’s go to the numbers.

From round one to round two, #OWS supporters are older (see graph below). In round two, 32 percent of survey respondents are 45 or older, up from 12.6 percent in round one. While almost half of supporters (49.5%) are still in the 18-34 age group, Mike Konczal argues that the movement should not be dismissed because of its young support base. He points out a large proportion of young people are involved in the #OWS movement because they have the most to lose in the current economy.


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Last Sunday, Nicaraguan President Daniel Ortega was re-elected by a large margin. His party, the Sandinista National Liberation Front (FSLN), won an unprecedented majority in the National Assembly.  The major media, which are generally hostile to Ortega (and to most of the left governments in Latin America), mostly missed the main economic changes that might explain this result.  These include a significant reduction in poverty and inequality and a considerable increase in access to health care and education.

Given that the world economic downturn occurred right as Ortega’s government social and economic programs were taking effect, it is surprising that poverty decreased at the rate that it did during this period. The latest household survey, published in 2009 by the Nicaraguan National Institute of Information and Development (INIDE), showed that while poverty decreased by only 9 percent between 1993 and 2002 (an average annual improvement of 1% per year), this rate of improvement tripled after 2005, decreasing by 12 percent in the four-year period between 2005 and 2009 (an average annual improvement of about 3% per year).


There was an even more pronounced change in the levels of extreme poverty, which had declined at a slow pace between 1993 and 2002 and had risen alarmingly between 2002 and 2005. In the four years after 2005, extreme poverty witnessed an average annual decline of 4.0 percent, compared with a 4.4 average annual rate increase between 2002 and 2005.

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The Obama administration has staked out grounds in opposition to the financial speculation tax is being considered by the European Union and was recently proposed in Congress by Senator Tom Harkin and Representative Peter Defazio. There are three main arguments that have been given:

  1. It is not enforceable;
  2. That it will be passed on to ordinary investors; and
  3. That is will raise the cost of capital, thereby reducing output and employment.

Each of these can be quickly dismissed.

On the first point, financial transactions taxes actually exist in the world and raise considerable revenue. The U.K. has a 0.5 percent tax on stock trades and raised between 0.2-0.3 percent of GDP annually ($30 billion to $40 billion a year in the United States). There will be some flight to tax havens, but the extent of this flight will largely depend on the willingness of the United States government to counter it. There have been many questions raised by the competency of the Obama administration, but surely it could limit this route to evasion, if it chose. People are not running guns for Al Queda from the Cayman Islands.

As far as the second point, since most investors trade infrequently, the amount of the tax would be trivial -- considerably less than borkerage commissions and other fees charged by the financial institutions that manage 401(k)s and similar accounts. Furthermore, the response to a tax would be a decline in trading. Most research indicates that the decline in trading volume should roughly offset the increase in the cost per trade due to the tax. This means that for the typical investor they will be spending no more on their trades after the tax than before.

Finally the claims, based on dubious models, that the tax will lead to a substantial decline in GDP and jobs are just silly. The implication is that financial transactions costs have a large impact on productivity. The model implied that the 0.1 percent increase in the transactions costs for stock trades from the tax being considered by the EU would lead to a 1.76 percent decline in output.

Since transactions costs have fallen by around 5 times this amount over the last 30 years, this would mean that declining transactions account for about 8 percentage points of the increase in productivity growth over this period. This would be around 15 percent of the productivity growth over this period. If this was true then it is remarkable that none of the standard growth models includes financial transactions costs as an important contributing cost.

If this is true, then the U.S. should anticipate slower productivity growth in the years ahead, since there is little room for transactions costs to decline further, now that they getting close to zero. This claim would also mean that the U.K. could quickly see a a jump in its GDP of close to 9 percent if it got rid of its tax. (There was no notable jump when it reduced the tax from 1.0 to 0.5 back in 1986.)

In short, it highly unlikely that anyone really believes this claim about the impact of a financial speculation tax on growth and jobs. But hey, it's a good thing to say if you want to protect Wall Street.

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The political deadlock between President Obama and Congress makes it almost impossible for any further job creation bills to be approved before the next election. If Congress were willing, the best solution would be a large stimulus program. Since Congress is not willing, here are some policies that President Obama could pursue on his own to reduce unemployment.

1. Work sharing

This one should be a simple and non-partisan issue. As it stands now, workers who lose their job can get up to 99 weeks of unemployment benefits. These benefits are typically about half of their wages. However if they have their hours reduced, then they get nothing. This effectively makes it better for many workers to get laid off than to have their hours reduced.

Work sharing allows workers to use their unemployment insurance to partially offset a reduction in hours. For example, a worker who has his hours reduced by 20 percent would have 10 percent of his total wages made up by unemployment benefits.

There are already 23 states that have work-sharing programs. But many employers and workers don't know the programs exist, and the take up rate is low. President Obama could try to increase the take up rate by both promoting the program and encouraging the Labor Department to be flexible in enforcing the rules for Unemployment Insurance program, so that states can have the ability to be more flexible in their administration of the program. If just 5 percent of layoffs/dismissals can be prevented through work sharing, this would translate into 1.1 million additional jobs by the end of a year.

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"They have continuously sought to strip employees of the right to negotiate for better pay and safer working conditions."

That is one of the statements from the Declaration of the Occupation of New York City. Recent events have only proven it to be true.

The National Labor Relations Board (NLRB) is the government agency tasked with enforcing the provisions of the National Labor Relations Act, under which private-sector employees have the right to join together as a labor union. One of the major activities of the NLRB is to conduct union representation elections, in which workers vote on whether or not to form a union at their workplace. In June of this year, the NLRB proposed rules to reform procedures concerning these elections, so as to "reduce unnecessary litigation, streamline pre- and post-election procedures, and facilitate the use of electronic communications and document filing."

CEPR Co-Director Dean Baker testified at a public hearing about these proposed changes, along with about 60 other speakers. In his testimony, Dean highlighted the research of CEPR Senior Economist John Schmitt and Senior Research Associate Ben Zipperer, in which they found "that in the 2000s workers were illegally fired in over 1-in-4 (26 percent) of union election campaigns, up sharply from about 16 percent in the late 1990s." 

It is likely that fewer workers would be illegally fired for supporting efforts to organize their workplaces if these proposed rules were implemented and union elections happened more quickly than they do now. However, congressional Republicans, who have already kicked their attacks against the NLRB into high gear, have now also drafted legislation that would prevent these needed reforms from being made and would, in many cases, increase the amount of time from the filing of an election petition to the actual election.

It is times like these that I'm glad CEPR has a collection of accurate, independent research about the benefits of unions to workers. This year we've also begun to alert our blog readers to the latest research on labor market policy from other organizations. And, of course, we will continue to conduct research about unions and more general issues affecting workers, like our new paper about trends in unionization rates in 21 wealthy countries from 1960 to the present, by Domestic Intern Alexandra Mitukiewicz and Senior Economist John Schmitt. It will be released in the next few days - so keep an eye out. Add a comment

Two new reports were released this week, by CEPR and NELP.

Center for Economic and Policy Research

Maintaining and Improving Social Security for Poorly Compensated Workers
Shawn Fremstad

National Employment Law Project

Independent Contractor Misclassification Imposes Huge Costs on Workers and Federal and State Treasuries
Sarah Leberstein

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The economy generated just 80,000 jobs in October, according to the latest Bureau of Labor Statistics' employment report. The latest jobs numbers continue a pattern of weak job growth. While upward revisions for the prior two months brought the three-month average to 114,000 jobs, this is only slightly higher than the 90,000 necessary to keep pace with the growth of the labor force. With this pace, it would take more than 33 years to return to pre-recession employment rates. And there is zero evidence in the latest jobs report of anything to suggest a boost to the labor market is on the horizon.

The data in the household survey was slightly more encouraging. While the unemployment rate edged down to 9.0 percent, the employment-to-population ratio (EPOP) increased by 0.1 percentage points to 58.4 percent. This is up from a low of 58.1 percent in July. This is a turn in the right direction; although this figure is still just bringing the EPOP back to its May level. It is still 5.0 percentage points below the pre-recession peaks hit in 2006.

For more, check out the latest Jobs Byte.

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In a post yesterday, I wrote that the new poverty measure proposed by the Obama Administration—known as the Supplemental Poverty Measure (SPM)—likely increases the poverty rate by a modest amount compared with the official rate (less than 1 percent), while producing lower poverty rates in most (34) states. A story in today's New York Times by Jason DeParle and Sabrina Tavernise goes considerably further, saying that the "bleak portrait of poverty" painted by official poverty statistics "missed the mark" with the implication being that poverty is "less bleak" than official statistics suggest.

Oddly missing from the article is any clear mention of the fact that the Supplemental Poverty Measure actually paints a modestly "bleaker" portrait of poverty in 2009, a fact confirmed by Census officials in a media webinar this morning. In fact, as the table below shows, some 2.4 million more people lived in poverty in 2009 than under the official measure.

People in Poverty in 2009: Official vs. Obama SPM
  Number Percent
Official Poverty 44,029,000 14.50%
Obama Supplemental Poverty Measure 46,471,000 15.30%
Difference (Obama minus Official) 2,442,000 0.8
Source: Table 1 in Short, Census (2011)
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The unexpected Halloween storms were the first but certainly won't be the last winter storms to create uncomfortable conditions for the #OWS protesters. Will the cold weather freeze out the movement? Mother Nature may be unpredictable but the movement is looking towards the long-term. On the protestors are asking for winter donations, bundling up to survive future Nor’easters. To date, #OWS has collected almost half a million dollars in donations, allocating money carefully and democratically. Working groups approved by the #OWS general assembly are allowed to spend $100 a day for expenses such as materials to clean up Zuccotti Park, tents, and medical care. In the name of full transparency and disclosure, #OWS has posted their financial report, complete with the step-by-step process of allocating money, info on the #OWS bank account, and a balance sheet and income statement. The allocation process is monitored by the finance committee, made up of bookkeepers and entrepreneurs, and advised by CPAs. Within a matter of weeks, Zuccotti Park has turned into a democratic micro-economy.

While the movement is preparing to survive the winter season, the mainstream media has lost some interest. As seen in the graph below from a recent PEJ news coverage index report, last week’s coverage of #OWS is about half what it was back in mid-October (down to about 5% of weekly “newshole” coverage, compared to 10% just a few weeks ago). This week’s coverage is up slightly from last week’s, due to the controversial eviction of Occupy Oakland, during which an Iraq war veteran was wounded.

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On Friday, November 4, the Census Bureau is holding a webinar on the Obama Administration's proposed "supplemental" poverty measure. The webinar is in advance of the release of new research on the measure on Monday.

Media stories about the Obama measure have generally focused on the likelihood that it would produce a national poverty rate in recent years that is modestly higher than the outdated official poverty rate. Conservatives like Robert Rector and Robert Samuelson have seized on this to claim that the measure is part of a liberal plot "to promote income redistribution."

Alas, no. In fact, Obama's new poverty measure, like so many of the Administration's proposals, gives up too much to conservatives — without actually getting their support in return — and does too little to advance progressive priorities. For reasons I have detailed in a 2010 report and at a Brookings forum, it is at best a centrist compromise proposal that leans right, not a progressive initiative. While the Obama poverty measure is based on recommendations made by the National Academy of Sciences in 1995, those recommendations left a lot of wiggle room for policymakers, including on fundamental issues such as where to actually set the poverty threshold. However, on these issues, the Administration has consistently adopted a conservative reading of the NAS recommendations.

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The following highlights CEPR's latest research, publications, events and much more.

CEPR on the Financial Transaction Tax
CEPR Co-director Dean Baker was one of the first to call for the adoption of a Financial Transaction Tax, or FTT (also referred to as the financial speculation tax or FST). CEPR continued to arm allies in the fight for the FTT in October, updating its paper titled "The Facts and Myths About a Financial Speculation Tax." On Friday October 21st, CEPR co-sponsored a congressional briefing on the FTT with Senator Tom Harkin and Representative Peter DeFazio, who will soon introduce new FTT legislation. CEPR Co-director Dean Baker was part of a panel that includes John Fullerton, Former Managing Director, J.P. Morgan Co.; and Damon Silvers, Director of Policy and Special Counsel, AFL-CIO. Americans for Financial Reform, AFL-CIO and The Center for Media and Democracy were also co-sponsors.

Dean was quoted in this Christian Science Monitor article on the FTT. And he was mentioned at a press conference in the Vatican City. Professor Leonardo Becchetti (Second University of Rome and member of the Scientific Committee of Zero Zero Cinque) presented the Pontifical Council for Justice and Peace note "For a reform of the international financial system in the perspective of a public authority with a universal jurisdiction." Professor Becchetti referred to Dean’s blog post "Ken Rogoff Misses the Boat on Financial Speculation Taxes."

Dean will take part in a teach-in on the FTT at #OccupyDC this Saturday, October 29th at 2PM. The teach-in is part of a global march for the "Robin Hood Tax." CEPR Co-director Mark Weisbrot is scheduled to participate in a teach-in on Sunday, October 30th at 12:30PM. More information can be found here.

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Five new labor market research reports were released this week and last week – one report discusses paid sick days while the rest focus on unemployment in the U.S.

Center for American Progress

Creating Unemployment: How Congressional Budget Decisions Are Putting Americans out of Work and Increasing the Risk of a Second Recession
Scott Lilly


State of Young America
Joint Publication by Demos and Young Invincibles        

Employment Policy Research Network

Unemployment Insurance and Job Search in the Great Recession
Jesse Rothstein

Institute for Women’s Policy Research

Denver Paid Sick Days Would Promote Children’s School Success
Sarah Towne, Rhiana Gunn-Wright, Kevin Miller, Ph.D., and Barbara Gault, Ph.D.

National Employment Law Project

What Is Causing Record-High Teen Unemployment? Range of Economic Factors Drives High Teen Unemployment, But Minimum Wage Not One of Them
Anne Thompson

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Last week, a report was released examining the support for the #OWS movement. The report, “Mainstream Support for a Mainstream Movement” by Héctor R. Cordero-Guzmán Ph.D, analyzes data gathered from an anonymous survey posted October 5th on, concluding that those involved in the #OWS movement are representative of the 99 percent. To see how Cordero-Guzmán’s 99 percent compares with the U.S. 100 percent, I decided to compare the results with nationally representative data from the American Community Survey (ACS) and Current Population Survey (CPS).

The survey is not perfect. The results are conditional on visiting on October 5th – of the 350,346 visits to the website on the 5th, only 1,619 individuals completed the survey. However, despite this non-random design, Cordero-Guzmán is providing us with data that has been in short supply since the start of #OWS movement. There has been a lot of discussion on who is actually participating and supporting the protests, and thanks to this survey we have a first look at the make-up of the #OWS 99 percent.

According to the survey, there is great support for the movement, with little outright disapproval of #OWS (see the figure with responses to Question 3, below). By October 5th, early in the protest, a quarter of respondents had participated in the protests (see the figure for Question 4). Since then there has been growth in the movement, with demonstrations springing up in both U.S. and international cities, and greater participation.

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Strong investment, particularly in non-residential structures and equipment and software, boosted GDP growth in the third quarter, according to the latest Bureau of Economic Analysis' report on the Gross Domestic Product. Non-residential investment grew at a 16.3 percent annual rate, accounting for 1.54 percentage points of the 2.5 percent GDP growth in the quarter. Non-residential structures saw a 13.3 percent growth rate, while equipment and software investment rose at a 17.4 percent annual rate. Consumption growth was weak at 2.4 percent, but considerably better than the 0.7 percent rate reported for the second quarter. Growth for the quarter was depressed by a sharp decline in inventories. Final demand grew at a somewhat more respectable 3.6 percent rate.

The economy is settling into a pattern of sustained weak growth, which is grossly inadequate. Investment growth is likely to remain relatively healthy as equipment and software investment stays strong, while structure investment becomes at least a small positive in the growth data. Housing has bottomed and will likely be a small positive going forward. Consumption growth is likely to be in a 2-3 percent range. Consumers still have not fully adjusted to their loss of housing wealth (at 4.1 percent, the saving rate in the quarter was well below the 8 percent pre-bubble average), so consumption is likely to trail income growth. Given a backdrop of 9 percent unemployment, this growth rate is very disappointing. Unfortunately because many analysts have raised fears of a double-dip recession, some may view this growth rate as being good.

For more, read the latest GDP Byte.

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Faced with the prospect of cuts to the Defense Department's budget, the defense industry is pushing the story of the military spending fairy on members of Congress. They are telling them that these cuts will lead to the loss of more than 1 million jobs over the next decade.

Believers in the military spending fairy say things like "the government can't create jobs," but also think that military spending creates jobs. Under the military spending fairy story, if the government spends $1 billion dollars paying people to do research or to build items related to the civilian economy it is just a drag on the private economy; however if the same spending goes to military related purposes, then it creates jobs.

It's not clear exactly how the military fairy blesses projects to make them helpful to the economy rather than harmful. For example, the highways were built in the 50s ostensibly in part for defense purposes. They made it easier to move troops and military equipment around the country in the event of an attack. Government subsidized student loans were also originally dubbed as defense loans since they were ostensibly intended in part to produce more graduates in science and engineering who could help us compete with the Soviet Union in defense related technologies. 

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The Case-Shiller 20-City index in August rose by just 0.2 percent from its July level, with prices rising in 10 of the cities and declining in the other 10. Most of the changes in prices were modest. Washington, D.C., saw the largest gain, at 1.6 percent, while Atlanta saw the largest drop, at 2.4 percent. Cities in the Midwest — such as Cleveland, Chicago, Minneapolis and Detroit — have shown strong price growth over the last few months. Prices in Cleveland rose at a 10.4 percent annual rate between May and August. Prices in Chicago and Minneapolis rose at a 29.1 percent and 29.3 percent rate, respectively, and prices in Detroit rose at a 55.9 percent rate over this period.

Much of the movement continues to be focused on the bottom end of the market, which in most cities is again doing worse than more highly priced homes. Most of the story with bottom-tier homes over the last two and half years can be explained by the first-time buyers tax credit. Predictably, the credit had the largest effect on the bottom tier of the market both because this is where first-time buyers are concentrated and also because the credit would be a large share of the house price. A good example is Minneapolis, where prices of bottom-tier homes rose by 30.6 percent from a pre-tax-credit level to a tax credit peak in 2010. Since then, prices in the bottom end of the market have fallen by 26.4 percent. This means that anyone who took advantage of the credit to buy a bottom-tier house in the summer of 2010 is almost certainly underwater and has lost considerably more equity in their home than they received from the credit.

For more, check out the latest Housing Market Monitor.

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