Fixating on the traditional aggregate measures of the economy’s health — GDP growth, the unemployment rate, or the inflation trade — ignores not only rising income and wealth inequality, but the fact the American Dream machine has been sputtering for at least two or three decades. Stanford’s Raj Chetty and his co-authorshave shownthat only half of Americans born in 1980 or later were out-earning their parents at the age of 30, compared to 90 percent of those born forty years before. No wonder so many Americans across the political spectrum have been so anxious or even angry, with racial resentment and political incivility on the rise.
Three broad narratives for fixing our American Dream machine, which admittedly won’t cure all problems, have been advanced by political leaders and researchers. The two that have received the most media attention are both either misleading or inadequate.
One narrative, pushed by President Trump and in more muted tones by some Democrats, blames increased and “unfair” trade for the decline of manufacturing jobs and stagnant or slow real-wage growth. Trump and many Republicans also wrongly blame illegal immigrants, who are working (if they can) at low wages doing jobs like cleaning dishes or mowing lawns that few American citizens want to do.
Carl Icahn, the billionaire businessman and investor, recently advised shareholders to reject Cigna’s proposed $67 billion acquisition of the pharmacy benefit manager (PBM) Express Scripts. He says that a reckoning is coming for PBMs and that the price grossly exaggerated their value as “over-earning middle men.”
In 2016, PBMs made $23 billion in gross profits – with most having never touched a drug. They don’t make them, they don’t distribute them and they don’t sell them. So what do PBMs do, and why is there so much misunderstanding about their value?
Because of the structure of PBMs, they create perverse incentives for drug makers to price drugs high. A flat fee structure, greater clarity of drug costs, and increased competition would help increase transparency, align incentives, and reduce costs for the pharmaceutical sector.
“Good morning, scholars!” principal-in-training Jackie Navar yells, kicking off the community meeting at Ogden Elementary School, part of the 78207 zip code on San Antonio’s struggling West Side.
Hundreds of children echo Navar’s salutations.
“What’s a college-ready word for ‘good’?” Navar asks the room. Hands shoot up into the air: “Amazing.” “Fantastic.” “Great.”
“Excellent. Here’s a new one for you — ‘phenomenal.’ Can we all say that together?”
At Ogden, each school day begins with breakfast followed by community meetings like this one. Preschoolers eat in their classrooms, kindergartners through third-graders in the cafeteria, fourth- and fifth-graders in the gym, and sixth-graders upstairs. Ninety-eight percent of Ogden’s 650 students qualify as economically disadvantaged, and every one receives a free school breakfast.
“The community meeting helps our scholars start the day with a positive mindset,” says Tim Saintsing, executive director of teaching and learning labs at Relay Graduate School of Education, which was brought in to run the school after years of poor performance. “It lets students and staff reflect on our core values and our sense of self as a school. It gives us a chance to celebrate our successes and discuss our challenges.”
Today, a first- and second-grade class are being honored with attendance awards. As a prize, the students get to sing their homeroom chants, and then, in what’s known as a “thunder clap,” the room simultaneously brings their hands together once — loudly — in their honor.
“Remember,” Navar yells across the cafeteria, “If you miss school, you…”
“Miss out!” the kids shout back in unison.
It’s a vastly different atmosphere from the Ogden Elementary of 2016.
In my view, Amazon’s wage hike has blown a gaping hole in the low-wage, low-productivity equilibrium that has bedeviled the US for the past 3 decades. Ecommerce fulfillment centers are using technology and big data to boost productivity in the distribution sector, while creating hundreds of thousands of paid jobs by drawing hours out of the unpaid household sector.
The big debate was over how much those jobs were being paid. Now Amazon has put those disputes to rest. $15/hour is within 10% of the median wage for production occupations in many states. For example, the median hourly wage for production occupations in Illinois is $16.19, according to the BLS, and $14.73 in Georgia.
This success story is going to be copied in other physical industries. Companies are going to be forced to invest in their workers and in new technology, or be squeezed by rising wages.
WASHINGTON—Despite dramatically improving academic achievement and performance in America’s urban areas, public charter schools have had difficulty expanding into the country’s more affluent suburban communities. A new report released today by the Progressive Policy Institute (PPI) investigates why.
Authored by PPI education analyst Emily Langhorne, the report analyzes the performance of existing suburban charter schools, explores how charter schools can benefit suburban students, and highlights why charter schools are struggling to expand into the suburbs.
“The spread of charter schools in suburban areas can create tremendous opportunities for families dissatisfied with the traditional neighborhood schools, whose children might do better in a system that offered a variety of educational models, specialized curriculum, and personalized learning,” writes Langhorne.
“In a thriving charter sector, one finds Montessori programs and other project-based models, dual-language immersion schools, schools that use computer-based learning in creative ways, competency-based schools, Waldorf schools, early college high schools, arts-focused schools, STEM schools, and more.”
However, three major factors are preventing schools like these from expanding into suburban areas, according to the report. These include: political barriers erected in states by teachers unions, who feel as though charters are in direct competition with local school districts; the overestimation of local public schools by suburbanites, despite evidence that suburban students are falling behind on international tests when compared to their socio-economic peers in other countries; and widespread charter school myths, misconceptions, and misinformation.
“Unfortunately, Americans overall—especially those who have been exposed to charters only through media coverage—still don’t understand how charter schools can benefit their communities because they don’t have a clear picture of what charter schools are,” Langhorne says. “Because of this lack of experience, upscale, suburban families have become susceptible to the well-trodden myths about the supposed dangers of public charters.”
For charter schools to take root in suburban areas, Langhorne argues, the narrative around them needs to change from one centered on creating options for low-income families to one that emphasizes creating innovative schools for all kids.
“The priorities of charter school parents in the suburbs are not the same as those in urban areas. For suburban parents, public charter schools aren’t usually a means to escape failing public schools; they’re an alternative to an education system that is not innovative, engaging, or specialized. Appealing to such parents means placing less emphasis on test scores and more on curriculum, less talk about failing schools and more about different learning models.”
“President Trump has called the new USMCA ‘the most important trade deal that we’ve ever made, by far.’ To the extent that the Administration is backing away from Trump’s earlier threats to blow up or emasculate NAFTA, that may be true. To the extent that the USMCA is largely an elaborate rebranding exercise, it seems that the Administration could have accomplished that—and usefully modernized NAFTA—without repeatedly threatening the very foundations of North American trade.
“At first glance, the USMCA hardly seems groundbreaking. It would modernize NAFTA by adding provisions derived from the Trans Pacific Partnership deal that the President abandoned, and would increase U.S. access to Canada’s dairy sector. But it’s far from clear whether its highly complex rules of origin for autos and other sectors would have the transformative economic effects that the Administration claims.
“It’s noteworthy that the new agreement doesn’t eliminate U.S. ‘national security’ tariffs on aluminum and steel from Canada or Mexico—or the retaliatory tariffs that those countries continue to impose on American manufacturers and farmers. And the Agreement’s reliance on the threat of ‘national security’ tariffs on Canadian and Mexican cars is a particular concern. As it reviews the new deal, Congress needs to push back against these and other abusive efforts by the Administration to restrict trade and hijack trade powers that are vested by the Constitution in Congress.”
On November 8, 2016, while the rest of the world anxiously awaited the outcome of the U.S. presidential election, a subset of voters with a keen interest in education had their eyes on Massachusetts. This was the day Bay Staters would vote on Ballot Question 2, a proposal to raise the state’s cap on public charter schools by up to 12 new schools per year.
Massachusetts is home to some of the highest performing charter schools in the country, with especially impressive gains at schools serving urban, low-income and minority students. In Boston, one of the eight districts in the state to have reached its cap on charter schools, students at charters learn the equivalent of an extra year of math and reading each year, when compared to their peers with similar demographics and past test scores at the city’s traditional public schools.1The local school district, Boston Public Schools (BPS), enrolls about 53,000 students in a city of about 77,000 students. Currently, public charters enroll only about 10,000 students, but there are more than 32,000 children on waitlists for these schools.
Amazon justannouncedthat it would raise the minimum hourly wage for all of its US workers to $15 per hour, including workers employed by temp agencies. This is good news for Amazon’s workers, obviously. But it’s also a sign that we’ve moved into a new era, where technology is driving rising real wages for everyone, not just the well-educated.
Ecommerce is proving to be a positive force for labor. For 30 years, retail workers struggled with a horrible status quo that suppressed any growth in retail wages and forced workers of color into the lowest paying retailing jobs. Between 1987 and 2017, real hourly earnings for production and nonsupervisory workers in retail went up a grand total of 2%.
Amazon and other ecommerce sellers have decisively disrupted that horrible status quo, and created hundreds of thousands of better paying jobs. Even before the Amazon wage hike, PPIresearchfound that ecommerce fulfillment centers typically pay 30% more than brick-and-mortar retail in the same area. Labor share in warehousing rose from 75.8% in 2007 to 83.2% in 2017, coinciding with the rapid growth of ecommerce fulfillment centers. Amazon’s latest move will only push the labor share up further.
These higher wages don’t make Amazon a philanthropic organization, anymore than Henry Ford was being benevolent when he boosted wages for workers in his factories in 1914. Ford needed to pay more to attract a competent workforce because his introduction of the assembly line boosted productivity, lowered prices, made cars affordable to the masses, and created an auto boom and an insatiable demand for skilled workers.
In the same way, Amazon and other ecommerce firms are using technology to transform the previously expensive process of getting products from manufacturers into the hands of consumers—what we call the“Internet of Goods.” These technological improvements have created benefits for both consumers and workers. For example, BLS data shows that real margins in the electronic shopping industry (NAICS 4541)—defined as prices received by retailers less their acquisition price of goods—have fallen by 13% since 2007. That means consumers are gaining from lower prices.
Progressives need to embrace innovation. It’s the only road to the best future for everyone.
The Progressive Policy Institute (PPI) has previously opposed arbitrary, redundant, and costly regulations, and proposed the Regulatory Improvement Commission to eliminate them. Regulation plays a vital role in refereeing market competition, protecting public health and safety, and keeping powerful economic actors honest. But regulations must be more nimble and adaptable to catalyze growth in a fast-changing world.
For people skeptical that regulation inhibits innovation and productivity growth, here’s an example of a wrong-headed proposed rule that would put Washington in the business of micromanaging employment in the freight rail sector.
When the Rail Safety Improvement Act was passed following the 2008 Chatsworth train collision, it mandated freight railroads implement Positive Train Control (PTC). PTC is a nationwide system of newly developed technologies that constantly processes thousands of variables to avert human error, including train collisions and derailments. Its implementation came at a hefty price to the railroads, estimated to cost more than $10 billion by completion.
One of the benefits of PTC was that it would enable railroads to move from two-person to one-person crews at some point down the road, boosting productivity with no loss of safety.
However, lawmakers now appear eager to flip course as fears of automation and job loss loom large in public policy conversations. Earlier this year, the Safe Freight Act was introduced in the Senate, a companion bill to a bipartisan House proposal unveiled in 2017. The legislation would mandate the crew size of freight trains to include both a locomotive engineer and a train conductor. While the legislation will not pass before midterms, it is likely to be reintroduced next Congress.
These proposals would deny freight rail the productivity gains of the digital age despite the widespread embrace of automation for passenger vehicles and commercial trucks on highways. Labor productivity for rail transportation has risen only a modest 16 percent over the last decade, about the same as the lagging pace of productivity growth across the entire U.S. economy. Meanwhile, as shown in Figure 1, the price of railroad transportation has risen 77 percent since 2000, far outpacing inflation. Allowing the freight rail industry to digitize would jumpstart productivity growth and cut distribution costs for the energy, manufacturing, and construction sectors they serve.
What’s more, there is no evidence to suggest that one-person crews are less safe than two-person crews. Single-person crews are commonly used in other countries and the FRA acknowledges the “evidence…indicates that safety record of these foreign operations are acceptable.” In the U.S., crew sizes have steadily been reduced from the five-person crews of the 1970s to the current two-person crews, with accident rates falling more than 80 percent during that time. And passenger trains have safely used single-person crews for decades.
Railroad investment and technological advances have played a critical role in realizing safety gains over the last decade. Since 2008, freight railroads have spent $245.3 billion on capital expenditures like infrastructure and equipment. Ultrasound, ground-penetrating radar, smart sensors, analytics software, and data sharing have enabled railroads to proactively identify and fix track and equipment issues. As a result, railroad accidents are at a historic low, according to data from the FRA. As shown in the figure below, the total train accident rate dropped 42 percent from 2007 to 2017. Track-caused accidents have dropped 51 percent. And accidents caused by human error are down 41 percent.
The implementation of PTC promises to further drop accident rates. According to forecasts from the Federal Highway Administration, total U.S. freight shipments will rise from 17.7 billion tons in 2016 to 24.2 billion tons in 2040, a 37 percent increase. Imposing crew size mandates on the freight rail industry would inefficiently divert resources from investing in safety, cutting costs for consumers, and improving and expanding America’s rail infrastructure. Rather, it would unnecessarily increase labor costs in the safest era ever of rail travel.
The U.S. Supreme Court is planning to decide this month whether it will hear a case that has started a seismic shift in how local governments look to fund their efforts to address pollution and other public health risks. This case, which deals with removing lead paint from homes, may not dominate national headlines the way nominations do, but it has been the source of intense debate in the legal and business communities for nearly two decades. In short, can local governments make businesses pay for the clean-up of downstream hazards associated with their products even when the companies did not cause the harms?
This case, submitted to the Supreme Court by Sherwin Williams and ConAgra, as well as others like it, are challenging for progressives. On one hand, the allure for environmentalists and social activists of dealing with a hazard without relying on government appropriations is understandable. But, subjecting someone to liability without fault or causation – which do not exist in these cases – violates the core progressive legal philosophy of standing up for one’s constitutional rights. To be clear, companies in these cases lawfully made and sold non-defective products. The lawsuits are solely over downstream hazards that often occurred years after the products were sold.
Over the past 15 years, the fastest improvement in urban public education has come from cities that have embraced charter schools’ formula for success — autonomy, choice, diversity of school designs, and real accountability for performance. To compete, many districts have recently tried to spur charterlike innovation and increase student achievement by granting their school leaders more autonomy.
Our recent analysis of state exam scores from 2015 and 2016 in Boston, Memphis, Denver, and Los Angeles showed that public charter schools outperformed both traditional public and in-district autonomous schools on standardized tests in three of the four cities studied. In the one exception, Memphis, the district concentrated its best principals and teachers in, and provided extra funding and support to, its autonomous iZone schools.
However, when the political landscape makes chartering difficult, in-district autonomous models may be the second-best option. Districts can increase the success of these schools if they heed these nine lessons learned by the four cities in our study.
Donald Trump promised that America would start “winning big on trade.” Trump vowed to keep “special interests” from rigging U.S. trade, pledged trade decisions would “benefit American workers and families,” and promised to confront trade violations by China.
For the former Apprentice host, winning means that Trump picks the winners, tilting the scales for his favored trade interests. He’s imposed tariffs on washers and dryers, steel and aluminum and is pursuing 25-percent “national security” duties on imported cars.
Trump’s new taxes on $200 billion in imports from China, which led to the inevitable retaliatory tariffs of $60 billion on U.S. exports, are the latest in a series of impulsive choices that have turned a vital investigation of China’s technology theft into an out-of-control tariff war.
Trump’s trade edicts have helped some companies and workers. But many more Americans — and America as a whole — are losing under Trump’s trade policies.
This report provides an update to our 2016 paper on Colombia’s App Economy. We find 87,900 App Economy jobs in Colombia, up from 83,100 two years ago. We compare Colombia’s App Economy performance to other Latin American countries, estimate the relative size of the iOS and Android ecosystems, and give some examples of companies that are hiring App Economy workers.
It’s official: House Republicans are campaigning on a pledge to increase the federal budget deficit. It was just 10 months ago that they enacted a package of ostensibly temporary tax cuts that is projected to increase deficits by roughly$2 trillionover the next decade. This week, they offered a series of proposals dubbed “Tax Reform 2.0” to expand upon and make permanent the first tax cut’s expiring provisions. Although the package is unlikely to become law in this Congress, this legislation sends a clear message to voters about the GOP’s main objective if they retain control after the midterm elections: more deficit-financed tax cuts.
The Joint Committee on Taxation estimates that the new tax cut package will add another$657 billionto budget deficits between 2019-2028. This score, however, understates the true cost of the legislation because of the time period analyzed. The original tax cuts are largely in place through 2025, so most of the new package’s costs don’t begin to materialize until 2026. The upshot is that although the $657 billion is technically a 10-year cost estimate, 96 percent of that cost is concentrated in just the last three years.
What would the true cost of “Tax Reform 2.0” be? The Tax Policy Centerestimatesit could cost nearly $4 trillion over the next 20 years – and that’s on top of the $2 trillion cost of the original tax-cut law. Over half of these additional tax cuts wouldgo to benefit the richest tenth of Americans. The tax cut isn’t just larger for wealthy Americans in dollars – they would also see their after-tax incomes rise by over two percent, while Americans in the bottom half of the income distribution would only see their incomes rise by less than one percent.
And how does the GOP plan to pay for the enormous costs of their regressive tax proposals? They don’t. It was recently reported that when former National Economic Council Director Gary Cohn asked President Trump how he would finance the administration’s budget deficits, Trump proposed to“just run the presses — print money.” Congressional Republicans haven’t offered a serious alternative.
As PPInoted earlier this year, a deficit-financed tax cut is really no tax cut at all. Households that received a tax cut of less than $1,610 in 2018 are likely to lose more in the long-run than they will gain from those tax cuts, including most lower- and middle-income households. Perhaps it should be no surprise that these tax cutsare incredibly unpopularamong non-Republicans.
When Republicans won their House majority in 2010, theycampaigned against deficitsand the implicit tax it imposes on future generations. Eight years later, as those same Republicansprepare to lose their majority, they’ve cravenly embraced the very things they were supposedly elected to oppose.
WASHINGTON—As the Federal Trade Commission (FTC) kicks off public hearings today on economic concentration and competition, the Progressive Policy Institute (PPI) weighs in with a new e-book by economist and antitrust lawyer, Robert Litan, one of America’s leading authorities on antitrust law and competition policy.
In A Scalpel, Not an Axe: Updating Antitrust and Data Laws to Spur Competition and Innovation, Litan takes a deep dive into the growing debate here and abroad about the market power of big U.S. companies, especially in the tech sector. The emergence of “tech-lash,” he says, highlights some valid public concerns, but none rise to the level of justifying the drastic solutions peddled by “antitrust populists:” breaking up the big tech firms or regulating them as public utilities.
Instead, Litan offers a measured policy response to economic concentration. “While there is a temptation to turn to radical solutions to fix our problems – with growing income inequality and our newfound worries about a loss of privacy – major departures from existing policies, especially toward some of the most successful private sector firms and the major economic and social benefits they have generated, also risk unintended costly consequences with uncertain benefits,” he writes.
“Bob Litan’s timely new ebook establishes a new benchmark for rigorous and systematic thinking about the impact of America’s dominant tech platforms on competition and inequality,” said PPI President Will Marshall. ” It illuminates the real problems progressives should tackle and offers pragmatic remedies that won’t jeopardize America’s crucial lead in high-tech innovation.”
Among his key findings, Litan concludes that while tech platforms on balance have not harmed economy-wide innovation, there is evidence that the strength of competition throughout the economy has lessened somewhat. There is also evidence that the rise of the tech platforms and concentrated employer markets across multiple sectors at the local level are contributing to wage inequality.
Anti-trust policy, however, isn’t the right lever for dealing with these concerns, Litan maintains. Other targeted policies, outside antitrust, would improve the state of competition in America, including lifting unnecessary occupational licensing requirements, an end to “no poaching” agreements, and a return to freer trade, which disciplines pricing by U.S. companies.
“There is yet no sound legal or policy basis for to break technology platform firms up for antitrust or other reasons. The law justifiably requires severe and/or sustained anticompetitive conduct as a precondition for court-ordered breakups,” he writes.
Noting the trend toward mergers between firms with dominant positions in different markets, the book proposes tightening the statutory test for mergers and establishing a rebuttable presumption against mergers where the acquiring firm has a dominant position in its market and has the ability to effectively enter any market in which the acquired firm competes.
Nonetheless, the growth of these firms has generated significant non-antitrust concerns about data security and privacy. Litan recommends updating data laws to protect privacy and security by requiring all firms, not just those in tech, to provide plain English explanations of what data the firms collect about consumers and how it is used, the ability to opt out of having their information shared with third parties, and the full disclosure of funding for political ads. He argues that federal law should also require all large data warehouses – a term that would require further definition in an authorized rulemaking – to adopt reasonable measures to ensure data security.
A Scalpel, Not an Axe also warns that the strongest regulations tech’s critics demand may also pose a threat to competition. “In all that they do to regulate the tech industry more intensely, policymakers must be aware that additional data-related regulation is likely to favor large incumbent tech firms relative to smaller competitors and new entrants. Regulatory compliance is a fixed cost, and larger firms can take advantage of their economies of scale to comply,” Litan writes.
Americans justifiably have long taken great pride in the unmatched ability of the U.S. economy to enable entrepreneurs to launch and grow highly innovative companies that drive growth and advance living standards. Bold entrepreneurs and the companies they founded brought us modern communications, airplanes, automobiles, computer software and hardware, and electricity and other forms of energy to power them all.
These innovations and others have constantly reshaped and remade our economy – displacing less efficient technologies and ways of doing business in a process of “creative destruction” that economist Joseph Schumpeter, many decades ago, singled out as the most important feature of capitalist economies.
The most innovative and valuable companies of our time are the leading “technology platform” companies: Amazon, Apple, Facebook and Google – a group New York University Professor Scott Galloway simply labels “The Four.” Except for Apple, none of these companies existed before 1990. That they have eclipsed in the public mind – in such a relatively short amount of time – such other tech giants as Microsoft, Oracle, Cisco and Intel is a testament to the remarkable acumen of the founders and leaders of The Four, their highly skilled workforces, and to the economy and society that have enabled them to flourish.
