If the minimum wage were $24 an hour and tied to worker productivity, a long-held trickle-down myth might actually come true.

Fair Wage Demonstration Hiring Washington DC
Activists participate in a “Wage Strike” demonstration in May in Washington, DC.

  • Paul Constant is a writer at Civic Ventures and cohost of the “Pitchfork Economics” podcast.
  • In his latest piece, he discusses the recent 12th anniversary of the last federal minimum wage raise to $7.25.
  • Constant says if the minimum wage were tied to increases in worker productivity, it’d currently be at $24 an hour.
  • See more stories on Insider’s business page.

Saturday, July 24, was the 12th anniversary of the last time the federal minimum wage increased, to $7.25 an hour. This is, by far, the longest the nation has gone without an increase to the federal minimum wage since the labor law was first instituted in 1938. While many states and cities have long since raised their minimum wage to more than double the federal standard, $7.25 is still the wage for hundreds of thousands of workers in 20 states around the country.

While the federal minimum wage has stayed frozen in time for the last dozen years, prices have continued to increase. Economist Ben Zipperer reports that anyone who is “paid the federal minimum of $7.25 today effectively earns 21% less than what their counterpart earned 12 years ago, after adjusting for inflation.”

At this point, the $7.25 minimum wage is a national embarrassment.

For decades, opponents claimed that raising the wage would kill jobs, close businesses, and move industries to states with a lower wage. But in cities like Seattle, where the minimum wage is now $16.69 per hour, those claims have been roundly disproven.

Study after study has shown that raising the wage doesn’t kill jobs, raise prices, or shutter businesses because when workers have more money, they spend that money in local businesses, which then hire more workers to meet the increased demand.(You can find links to all those studies in a piece I wrote back in February debunking the five most common minimum wage myths.) Raising the wage is a no-brainer, but our lawmakers haven’t found the political courage to act on it through years of Democratic and Republican leadership alike.

The one truly unanswered question that remains with the minimum wage is what standard should be used to determine the wage moving forward. A listener of the “Pitchfork Economics” podcast recently called in to ask why the minimum wage isn’t tied to cost of living, for instance. Such a policy would have prevented the 21% decline in real spending power that minimum-wage workers are confronting right now.

As the system currently stands, opponents of minimum-wage increases only have to stall the legislative process to erode the strength and importance of the law, as these past twelve years of Congressional inaction have proven. It would make sense to peg the minimum wage to some sort of metric so it increases annually without any intervention from lawmakers.

Many states and cities around the country do this. My home state of Washington, for instance, pegs the minimum wage to inflation, so in January of this year the statewide minimum wage automatically ticked up from $13.50 to $13.69.

You could also argue that the minimum wage should be tied directly to worker productivity.

Virtually every Econ 101 class teaches the trickle-down myth that workers are paid what they are worth, and locking the minimum wage into national productivity numbers would be a way to finally ensure that claim is true.

This is the figure that would do the most for American workers. As a recent Economic Policy Institute paper found, productivity has increased by over 72% from 1979 to 2019, while worker pay has only increased by 17%. The minimum wage largely rose in lockstep with American worker productivity gains for its first three decades. But had the minimum wage kept pace with productivity increases since 1968, the federal minimum wage would be more than $24 per hour right now, according to the Center for Economic and Policy Research.

If we have learned nothing else from this shameful freezing of the federal minimum wage, it should be that the minimum wage is more than a number. No American should put in 40 hours of work only to find themselves trapped below the poverty line. Tying the figure to some kind of metric – be it cost of living, inflation, productivity, median worker pay, or something else entirely – is the only way to prevent 12 straight years of losses from happening to the American worker ever again.

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A former deputy secretary of the Treasury thinks fiscal policy can be rewritten to combat the climate crisis – here’s how

FILE - In this Oct. 10, 2018, file photo, Amazon Prime boxes are loaded on a cart for delivery in New York. Amazon said Tuesday, June 23, 2020, that its carbon footprint rose 15% last year, even as it launched initiatives to reduce its harm on the environment. (AP Photo/Mark Lennihan, File)
Amazon said in June 202 that its carbon footprint rose 15% over the previous year, even as it launched initiatives to reduce its harm on the environment.

When we think of combating climate change, our minds tend to turn to green energy like solar or wind power. But the world of finance has a tremendous impact on the environment, and we’ll never be able to steer away from impending climate calamities until big business takes action.

Remarkably, Sarah Bloom Raskin says in the latest episode of “Pitchfork Economics,” financial firms have largely never even considered climate change in their financial plans and projections: “It just hasn’t been incorporated as a particular factor that is producing economic costs,” she said.

Given that experts predict climate change will cost the United States nearly two trillion dollars in GDP per year by the end of this century, this statement might sound absurd. But Raskin knows what she’s talking about: As the former deputy secretary of the US Department of the Treasury and a former governor of the Federal Reserve Board, she has spent her career closely observing the activities of banks, Wall Street firms, and other entities that shove billions of dollars around in any given workweek.

The good news is, big business is finally starting to acknowledge that climate change is happening.

As Germany faces biblical flooding and the United States is wracked from coast to coast with heat waves, droughts, and wildfires, the threat is now too real to ignore.

And now Raskin is a member of the Biden Administration’s Regenerative Crisis Response Committee, which is working to recommend a new suite of monetary and financial regulations to guide the United States to carbon neutrality by 2050. Raskin is tasked with helping to envision regulations that can be employed by the Federal Reserve, the SEC, the FDIC, and Fannie Mae and Freddie Mac, among other financial regulatory institutions, to address climate change.

Raskin is right now considering all of her options for how to create environmentally sound fiscal policy.

“Maybe what we want is to have a better understanding of what kind of carbon footprint a particular publicly traded company has – and what risk that carbon footprint might cause for them,” she said. The solution for that might be to call on the Securities Exchange Commission to require the company to release an environmental disclosure to shareholders, so “investors will then have a better ability to make decisions regarding where their capital goes and where they choose to invest.”

Raskin said “there’s quite a bit of momentum for” requiring environmental impact disclosures. And it’s not an unusual request to make: Publicly traded companies already have to provide hundreds of pages annually documenting potential risks that they face. A new requirement to reveal environmental risks falls well within these pre-existing guidelines.

The committee is also examining the concept of an environmental stress test for financial institutions.

“The stress test was a regulatory innovation used after the [2008] financial crisis to determine whether a regulated institution, particularly a bank, could withstand the shock of a particular magnitude, and what would happen to that bank if that shock was long-lasting,” Raskin explained.

If banks are unable to prove that they’d survive another Great Recession, for instance, they are barred from paying dividends out to shareholders until they can demonstrate that their foundations are more solid.

Raskin says European institutions are working to establish an adverse climate stress test for banks and other such institutions. If London suffered the extraordinary floods or long-term droughts that are plaguing other parts of the world, for example, would their banks be able to continue to serve their clients, or would a bailout be necessary?

Raskin and the rest of the committee is hard at work compiling a list of financial regulations and procedures for President Biden to take under consideration. And the best part is, because the policy would be delivered through existing financial regulatory structures, these financial regulations are unlikely to get held up in a partisan Congressional gridlock.

“I think it can all be done without new legislation,” Raskin said.

Policies like stress tests and disclosures already exist and are well-known to financial workers. And while “they haven’t been used to deal with this particular existential risk that confronts us,” Raskin explained, “they can be and they need to be.”

Now that the climate crisis has been proven, beyond a reasonable doubt, to be real, it’s time for Big Finance, with the help of smart regulators like Raskin to adapt and respond to this new reality.

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A new McKinsey study shows that inclusion isn’t just compatible with economic growth – it’s absolutely necessary

business owner using laptop in store
McKinsey’s new report unveils the high price of economic discrimination against minorities and women in the US.

  • Paul Constant is a writer at Civic Ventures and cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
  • In the latest episode, they spoke with JP Julien, head of McKinsey & Company’s Institute for Black Economic Mobility.
  • Julien says eliminating racial wealth disparities and unlocking women’s economic potential could add trillions to the US GDP.
  • See more stories on Insider’s business page.

Most Econ 101 classes teach that an economy is a zero sum game – that it’s impossible to win without some other economic actor losing at the same time, and that one group’s gains must result in another group’s losses. Not only is this trickle-down theory completely wrong, but it’s also dangerous: Nationalist leaders around the world have played on voters’ fears by threatening that the economic progress of immigrants and minorities under progressive leaders will result in losses for everyone else.

Those claims couldn’t be further from the truth. A growing body of evidence proves that inclusion and economic growth march hand in hand.

How inclusivity aids economic growth

On this week’s episode of “Pitchfork Economics,” JP Julien discusses a report that he co-wrote in his capacity as a leader of global management consulting firm McKinsey & Company’s Institute for Black Economic Mobility.

Julien says his paper, “The case for inclusive growth,” finds that economic “growth is actually at its best when it’s most inclusive.” When people from all races and backgrounds are “able to meaningfully engage and participate as workers, entrepreneurs, and consumers,” Julien explained, the economy “is stronger and more resilient.”

There’s already plenty of evidence for this in the American economy as it stands right now.

“We know that 40% of GDP growth between 1960 and 2010 can be almost directly tied to the greater participation of women and people of color in the labor force,” Julien explained. “The data speaks quite clearly that the more we get people to participate, the better outcomes we produce.”

Eliminating economic inequality could unlock trillions in annual GDP

The paper that Julien coauthored puts an eye-popping price tag on the economic discrimination against minorities and women in America. They found that “eliminating disparities in wealth between Black and white households and Hispanic and white households could result in the addition of $2 trillion to $3 trillion of incremental annual GDP to the US economy. Furthermore, unlocking women’s economic potential in the workforce over the coming years could add $2.1 trillion in GDP by 2025.”

It’s important to point out that the gains Julien is discussing are not zero-sum, winner-take-all numbers. Specifically, that 5 trillion dollars or so doesn’t come at the expense of the economic value of white men – it’s in addition to it. America’s economy is missing out on trillions of dollars of economic activity because whole populations of people have been systematically prohibited from fully participating as consumers, workers, and entrepreneurs.

Julien has been encouraged by the fact that over the past year “many Fortune 1000 companies are really leaning into the idea that being good corporate citizens actually creates opportunities.”

“We’ve done quite a bit of research on the benefits of more diverse boards and more diverse leadership teams,” Julien continued, “and they actually do financially outperform their peers.” The economic benefits of inclusion are becoming impossible to ignore, which is likely why “we’ve seen $66 billion from the Fortune 1000 in racial equity commitments between May and the end of last year.”

Why community participation is needed and ‘commitment’ isn’t enough

For centuries, our economy has been constructed around exclusionary policies, and simply making a commitment to inclusion isn’t enough to overcome those institutional barriers. Julien doesn’t believe this is a problem that can be overcome with a set of policies. He thinks it would be better for communities to “actually go through a focused process in which those that have been historically excluded are in the decision-making seat.”

It’s only by empowering excluded people to identify where they’ve been let down “and designing a set of strategies and investments that reflect both those needs and their strengths that we get to a set of outcomes that really work locally, because economic development is hyper-local,” Julien said. To tear down monolithic systems of inequity, it’s vital to begin by addressing the injustices in your own backyard.

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3 trends to expect from the post-pandemic economic boom, according to an expert

Edge Hudson yards reopening NYC coronavirus pandemic
Visitors at the reopening of the Edge Hudson Yards in New York City.

  • Paul Constant is a writer at Civic Ventures and cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
  • In the latest episode, they spoke with Economist reporter Callum Williams about the history of post-pandemic booms.
  • Williams says that historically, moments of crisis tend to be followed by periods of political unrest.
  • See more stories on Insider’s business page.

A Google Trends search shows use of the word “unprecedented” online spiked in December of 2016 and January 2017 – likely in response to the election and inauguration of Donald Trump. But every other spike in the use of “unprecedented” is completely dwarfed by its rise in March of 2021, when the coronavirus pandemic lockdowns began. Everyone seemed to agree: We live in unprecedented times.

But any historian will tell you that when it comes to human history, there’s no such thing as “unprecedented.” If you look hard enough, you’re sure to find precedents to virtually any situation. And by studying those precedents, you’re likely to find guidance on how to – and how not to – respond to your current situation.

In a recent Economist article, reporter Callum Williams examined the historical record to discover “What history tells you about post-pandemic booms.” Williams focused specifically on economic recovery from “massive non-financial disruption” – meaning he didn’t include purely financial crashes like the Great Recession of 2008. He kept his research targeted solely on economic activity following pandemics and wars.

In the latest episode of “Pitchfork Economics,” Williams joined hosts Nick Hanauer and David Goldstein to discuss three major themes he uncovered that he believes might inform America’s post-pandemic recovery.

1. Once the crisis has passed, people spend more money – but not on luxury goods and frivolous behavior.

According to the Kansas City Fed, the average American household savings as a percentage of disposable income increased at record rates during the pandemic, from a pre-pandemic low of 7.2% to “a record high of 33.7% in April 2020.” This makes sense: When people aren’t certain about what the short-term future will bring, they start saving every penny they can.

There’s plenty of precedent for this behavior. In his article, Williams wrote, “In the first half of the 1870s, during an outbreak of smallpox, Britain’s household-saving rate doubled. Japan’s saving rate more than doubled during the first world war. In 1919-20, as the Spanish flu raged, Americans stashed away more cash than in any subsequent year until the second world war.”

Once the crisis has passed, it might seem obvious that Americans will frivolously spend all that money they’ve saved, triggering a wild economic boom. But that’s not been the case in the past.

For instance, Williams quotes from a Goldman Sachs report that found American “consumers spent about 20% of their excess savings between 1946 and 1949” immediately following World War II. They were spending, Williams explains, but “they absolutely weren’t just going out and blowing it all on one massive night out or big holiday.”

So where did all that money go? It largely went to long-term investments – career changes, new business strategies, and entrepreneurship. Williams says this cycle is repeating itself in America right now.

“The rate of entrepreneurship among the population in the US was actually going down, for about 40 years,” Williams explained. “But then COVID came, and now it’s going back up again.” He calls the small-business boom “a pattern you see again and again” in post-crisis economies.

2. People seek out new solutions to old problems, reshaping the economy.

It’s much easier to take risks when you’ve confronted an existential threat. And businesses have often responded to society-shaking crises with a tremendous boom of automation.

Williams argues that the automation of telephone lines in the 1920s, which put thousands of young women who served as phone operators out of work, was a direct consequence of the Spanish Flu. “Others have drawn a link between the Black Death and Johannes Gutenberg’s printing press,” Williams wrote.

But despite the historical precedent, “there is as yet little hard evidence of a surge in automation because of COVID-19,” Williams continued. He says that even in Australia, which has essentially been living in a post-pandemic era for months, “there’s no evidence” that automation has sped up.

“For instance, there’s as many people doing manual data entry as there were before,” in Australia, he explained, “which is exactly the kind of job that you’d expect the robots to take over.”

But it’s likely that the kinds of jobs available in the economy will change. Some of the restaurant industry’s shift to takeout and delivery options will likely stick, and other careers in the hospitality and travel sectors are likely to evolve.

3. Great periods of political upheaval tend to follow moments of crisis.

Williams cites research that the International Monetary Fund has done into post-crisis civil unrest (PDF). After recent pandemics like SARS, Zika virus, and Ebola, the IMF found that “these pandemic events tend to accelerate or to increase” protests and other forms of civil unrest.

“The increase is particularly large in societies that are more unequal,” Williams added. (Before the pandemic began, the United States hit its worst levels of income inequality in over half a century.)

While the number of coronavirus infections is declining in the United States, we’re not necessarily done with the threat of upheaval. “One of the interesting findings in one of the IMF papers is that civil unrest tends to peak about two years after the pandemic’s end,” Williams said.

Of course, this isn’t a guarantee that the United States will go through more ugly scenes like the violence at the Capitol on January 6, 2021. But it is a profound warning about our nation’s future – a message in a bottle from our past.

Leaders should take these warnings seriously by ensuring a more equal society, so everyone can be included in the post-pandemic economic growth that history tells us is likely on the way. Broadly shared prosperity doesn’t necessarily guarantee a more peaceful society – but the copious historical precedent for the unprecedented times we’re bound to face shows that it definitely doesn’t hurt.

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You pay a higher percentage of your net worth in taxes than most billionaires do. This Danish millionaire wants that to change.

Danish entrepreneur Djaffar Shalchi.
Danish entrepreneur Djaffar Shalchi.

  • Paul Constant is a writer at Civic Ventures and cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
  • In the latest episode, they spoke with Danish entrepreneur Djaffar Shalchi about why taxing the wealthy benefits everyone.
  • “We don’t leave anybody behind in Denmark,” says Shalchi. “I don’t see people sleeping in the streets like I see in many other countries.”
  • See more stories on Insider’s business page.

Earlier this week, ProPublica published a stunning exclusive report documenting how billionaires like Elon Musk, Michael Bloomberg, and Jeff Bezos pay very little – sometimes even nothing – in income taxes.

Based on a cache of confidential IRS documents, the ProPublica report found that the nation’s 25 richest Americans “saw their worth rise a collective $401 billion from 2014 to 2018,” but in that same time they “paid a total of $13.6 billion in federal income taxes in those five years,” a total that “amounts to a true tax rate of only 3.4%.”

The fact is, you pay a much higher percentage of your net worth than billionaires do. And none of the findings in the ProPublica report are illegal – in fact, it’s how the system is supposed to work. Our broken tax policy has created some of the wealthiest corporations in the history of the world and helped to divert $50 trillion away from the paychecks of working Americans and toward a handful of wealthy people.

How raising taxes on the uber-rich would benefit the average American

If Elon Musk paid the same percentage in taxes as the average American, his day-to-day life wouldn’t change at all. He’d still be able to fly on his private jet to any of his homes whenever he chooses, terrestrial or otherwise. He’d vacation in the same spots, eat the same food, enjoy the same fame, and enjoy the same status that he enjoys right now.

But if all the Elon Musks who right now pay very little (or even nothing) in taxes were held to the same standards as average Americans, your life would improve in uncountable ways. The government could provide affordable childcare for every parent, allowing people more freedom to join the workforce. Our infrastructure could again be the envy of the world, rather than a slowly unfolding disaster movie. The social safety net would allow Americans the security to start small businesses, take bold career risks, and establish better lives for their children.

But greed is a hell of a drug, and many rich Americans fund anti-tax politicians and campaigns that ensure they pay as little as possible every April 15th. Only a few select “class traitors,” including Abigail Disney and Nick Hanauer, actively argue that rich Americans should be taxed more.

In the latest episode of Hanauer’s podcast, “Pitchfork Economics,” millionaire Danish entrepreneur Djaffar Shalchi discussed why he’s an advocate for wealth taxes.

“I was born in 1961 in Tehran, Iran,” Shalchi said. When he was eight, Shalchi’s mother brought him and his four siblings to Europe in the hopes of a better life. Soon, he says, they settled “in one of the most beautiful places on this planet: Copenhagen, where we have what we call the welfare system.”

Shalchi’s mother told her children that in Denmark, “you can do whatever you want to do,” because of the free education, social support benefits, and health care provided by that welfare system. He took his mother at her word, studying to become a building engineer and starting his own real estate development business. “We really have the American dream in Scandinavia,” Shalchi laughed.

The reality of ‘self-made’ millionaires

While Shalchi acknowledges that he “worked hard” to build his company into a global leader, he admits to scoffing when he hears rich people describe themselves as “self-made.”

“Nobody is self-made,” Shalchi said. “Everybody is directed by society, their friends, and so on.” The Danish welfare system provides the security for smart people like Shalchi to become wealthy.

As a millionaire many times over, Shalchi has a very high tax bill. “I pay more than 50%” of his annual earnings to Denmark in an average year, he admits, and depending on how good a year he’s had, “I can go as high as something like 70%.”

But while wealthy Americans love to complain about taxes, Shalchi knows that he gets great value in return for what he pays. In Denmark, “I don’t see people sleeping in the streets like I see in many other countries,” he said. “We don’t leave anybody behind in Denmark. Everybody can make a pretty decent living. And we have security, which is extremely important for everybody.”

Why high-tax Scandinavian countries rank high in happiness

When people don’t have to worry about basic health care, education, or where their next meal is coming from, life changes from a zero-sum game to something to be enjoyed.

“That’s why we are always among the top 10 in the world when happiness reports come out every year,” Shalchi said. High-tax Scandinavian countries are always competing with each other to top the UN’s annual Happiness Report, while America tends to stagnate in the mid-to-high teens.

So what kind of tax structure would we need to build a happier, more equitable America?

“If we raised taxes on all income to 45%, reinstated some reasonable corporate tax rates, and closed all the international loopholes,” Hanauer estimated, in conjunction with better wages and protections for ordinary workers, 90% of the worst problems that have plagued America over the last 40 years “would melt away.”

“By reinstating some corporate taxes and reinstating some taxes on wealthy people, you could absolutely pay for, for instance, the American Family Plan that the Biden administration is proposing,” Hanauer said. That would combat poverty, drastically reduce childcare costs, and make community college free for all.

Rather than spending ridiculous sums of money to be sheltered from extreme poverty, crime, and public health failures, the wealthiest Americans could simply pay the same in taxes as the average American family. Doing so, Hanauer says, would “improve the lived experience for every American,” including the ultra-rich.

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Noncompetes and no-poach agreements have destroyed opportunities for tens of millions of American workers. Here’s how one state attorney general fought back..

San Francisco cafe coronavirus
Baristas prepare take-out orders for customers at Henry’s House of Coffee in March 2021 in San Francisco.

  • Paul Constant is a writer at Civic Ventures and cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
  • In the latest episode, they spoke with Washington state Attorney General Bob Ferguson about noncompete agreements.
  • Ferguson says these agreements can seriously damage minimum-wage workers’ future job mobility.
  • See more stories on Insider’s business page.

If I asked you to name the job title of a worker who would be required to sign a noncompete agreement, you’d probably think of high-paying jobs – designers of new Apple products, for instance, or CEOs with access to corporate secrets. Noncompetes were designed for just that purpose: to protect a company’s proprietary information by limiting the ability of high-level employees to jump from one company to another in the same field for one or two years. Employees at an executive level are privy to inside information about a corporation that could be fatally damaging in the hands of a business rival, and so in theory noncompetes serve as a kind of cudgel against what could amount to corporate espionage.

In practice, most noncompetes aren’t being used to protect sensitive intellectual property at all

A 2019 study from the Economic Policy Institute found that “somewhere between 27.8% and 46.5% of private-sector workers are subject to noncompetes,” which means anywhere from 36 million to 60 million American workers have signed a noncompete agreement in their current job.

So what does that look like for the average American worker? Consider Mercury’s Coffee, a chain of eight coffee shops employing over 100 people in the greater Seattle area. For years, the chain demanded that its workers sign noncompete agreements preventing them from going to work at any other coffee shop within a 10-mile radius of any Mercury’s location up to a year and a half after leaving the company.

For a barista working part-time, that noncompete agreement would be financially disastrous. They’d have to either switch careers and build a whole new set of marketable skills, find employment far outside the Seattle area, or risk litigation from their former employees at Mercury’s.

In 2019, Washington state Attorney General Bob Ferguson’s office found that Mercury’s had, in fact, threatened legal action against at least two employees who violated the terms of the agreement: “Mercury’s filed suit against one of its former baristas, a store manager who made $17 per hour. The barista left Mercury’s to work for a competitor about one and a half miles from a Mercury’s location. Mercury’s threatened to sue another former employee who left to work at a nearby Starbucks.”

Low-wage workers including fast-food servers, baristas, and even janitors around the country are forced to sign noncompete agreements, even though they don’t have access to sensitive or secret information. So why are businesses demanding that their workers sign them?

Noncompetes hurt employees by restricting future job opportunities

The answer is in the name: Noncompete agreements help artificially stifle competition in the labor market, allowing employers to keep wages low by limiting workers’ employment options. They eliminate the only real leverage American employees have left – the threat that they can leave and find work somewhere else for better pay, benefits, and workplace standards.

A recent report from the Economic Policy Institute found that noncompetes were one of the major factors that over the past 40 years have shrunken the paychecks of the median American worker by roughly $10 per hour. And many of the same franchises that required new employees to sign noncompete agreements also had secret “no-poach agreements” that meant workers at one McDonald’s franchisee could not go to work at another McDonald’s franchise, further suppressing wages and slowing down the job market.

On the latest episode of “Pitchfork Economics,” Washington Attorney General Ferguson joined host Nick Hanauer to explain his fight against these pernicious practices.

“We started looking into these no-poach agreements,” Ferguson explained, “And when we did, my team came to the conclusion that they actually violated antitrust laws. It really is unlawful to restrict a worker’s ability to move from one job to another.”

Ferguson’s office requested franchise agreements from every corporation that had franchises in Washington state and found that nearly 300 companies had some form of a no-poach clause.

“Keep in mind, these are huge corporations, in many situations, and this impacted millions and millions of workers across the country,” Ferguson said.

“We sent them a letter saying, basically, you need to eliminate this no-poach provision, not just for your Washington franchisees, but nationwide. Otherwise, we’re going to file a lawsuit against you” Ferguson said. “And so eventually, over the course of about a year, all of them eliminated these no-poach agreements – not just in Washington, but across the country.” (Sandwich chain Jersey Mike’s was the sole holdout against Ferguson’s threat, but they eventually paid a $150,000 settlement and agreed to drop their no-poach clause after Ferguson sued the chain.)

Fighting against no-poach and noncompete agreements in state legislature

Thanks to Ferguson’s leadership on the issue, the Washington State Legislature passed a law in 2019 which voids noncompetes for employees who earn less than $100,000 annually.

Seven other states have similar laws on the books. But Ferguson notes that noncompetes are still legal in the vast majority of states. He urges people in those states to “talk to your local legislators” to take action on behalf of workers.

Ferguson says some companies are still trying to enforce their illegal no-poach agreements that limit worker mobility, too.

“If there’s no-poach agreements going on that you hear about, write to your attorney general,” Ferguson said. State attorneys general have “the power to shut those down exactly in the same way that I did. The roadmap is there, the work is done. These corporations will cave if an attorney general writes a letter saying, ‘you need to get rid of this, it’s unlawful.'”

But while the fight for worker mobility has largely taken place on the state level up until now, Ferguson sees some hope on the national level.

“The Biden administration has set a goal of eliminating or substantially narrowing these no-poach and noncompete clauses that have been so prevalent and pervasive throughout our economy,” Ferguson said.

For workers, that could result in a big raise as employers nationwide will once again have to compete to offer the best wages and benefits in order to attract good employees – you know, the way the labor market is actually supposed to work.

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Government partnership with big business created the internet and cell phones – an economist says it can deliver a new generation of innovations, too

paycom HR tech
  • Paul Constant is a writer at Civic Ventures and cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
  • In the latest episode, they spoke with economist Mariana Mazzucato on government’s role in the economy.
  • Mazzucato says collaboration between government and corporations can boost economic “outcomes as opposed to just output.”
  • See more stories on Insider’s business page.

When you trim away all the complications and high-minded theories, the single mission statement of an economy under capitalism is to grow. We say an economy is healthy when it’s adding jobs, productivity, and profits, and we say an economy is sick when it’s contracting, losing jobs, and failing to hit profitability markers.

But shouldn’t we expect more than aimless growth from an economy? Shouldn’t our economy reward growth in sectors that would benefit everyone – environmental science, say – and discourage growth in sectors that harm the public good, such as the privatization of our water supply?

How government influences the economy

Government is supposed to be a counterweight on the economy’s untapped growth. Regulations, tax credits, and other incentives are supposed to encourage beneficial growth and discourage the harm produced by unfettered capitalism. But over the last four decades, the government has largely abdicated itself from the regulatory role, giving companies free license to blindly pursue growth for growth’s sake.

In this week’s episode of “Pitchfork Economics,” economics professor Mariana Mazzucato discusses her new book “Mission Economy: A Moonshot Guide to Changing Capitalism.” Her goal with the book is, in the words of co-host David Goldstein, to encourage a new kind of economics that values “outcomes as opposed to just output.”

“For some years now, I’ve been working with policymakers globally, trying to convince them that we need to redesign policy away from fixing markets and towards creating and shaping markets,” Mazzucato said.

That would take the form, she explained, of governments creating “a list of big problems that we have” as a society, from “the future of mobility” to “solving key issues around the digital divide,” to “getting the plastic out of the ocean.” Lawmakers would then design a strategy to involve “as many different sectors as possible to collaborate and to innovate together to solve that problem.”

Government’s role, in this case, would be as a purchaser, as a backer of “grants and loans to galvanize as much bottom-up innovation and investment as possible to actually solve problems,” and as a director of “what I’ve been calling mission-oriented policy.”

It would direct and incentivize the best of corporate America to solve some of humanity’s biggest problems, putting the profit motive to work for the greater good.

The DARPA example

Mazzucato says in the United States we already have one perfect example of a government entity that encourages innovation in pursuit of a single goal: The Defense Advanced Research Projects Agency, or DARPA. Founded in the 1950s alongside NASA as during America’s race to the moon, she says, the government established in DARPA “a new design of public-private partnership.”

“There was lots of investment by companies like Honeywell, Motorola, and General Electric,” Mazzucato said, and in the quest to build spacefaring technologies, American companies built inventions that would eventually create the touchscreens, voice-activated artificial intelligence, camera phones, GPS, and driverless car tech. Basically, without the moonshot, we might still not have the necessary technologies to build smartphones today.

But those technologies were not the end goal for the “purpose-focused” organization. “For example, DARPA basically invented and funded what we today call the internet,” Mazzucato explained. “But no one in DARPA said, ‘Oh, we need the internet.’ They had a problem to solve, which was getting the satellites to communicate, and the internet was the solution to that.”

DARPA is singularly focused on defense issues, so Mazzucato is calling for an array of new ARPAs to address societal problems, which “are much harder than purely technological ones. They often require regulatory change, behavioral change, and political change,” she said.

Unleashing innovation

When governments set these huge, seemingly impossible goals for industry, they empower our sharpest minds to broaden their thinking and elevate their game to work in concert with others. Part of the reason this framework has been far more successful than traditional corporate structures in terms of unleashing innovation, Mazzucato explains, is that the thinkers are “explicitly told to be risk-taking, to welcome the uncertainty.”

The path to the Moon was littered with waste, dead ends, and spectacular failures. That was all part of the plan. Putting government in charge of the direction establishes “the idea of having real impact so that your successes matter,” Mazzucato said, but it’s also clear about “the admission that along the way you’re allowed to fail,” in a “process of trial and error and error and error.”

Economic growth for growth’s sake is simply not enough of a mission statement for a society to thrive. Mazzucato believes that government has a necessary goal to direct that growth toward a common good, so that we all – corporations, humans, and the planet as a whole – can benefit from the journey.

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Biden’s break from neoliberalism to invest in the middle class could create ‘the mother of all economic booms’ – an economic commentator explains why

Joe Biden
President Joe Biden delivers remarks about vaccinations, in the State Dining Room of the White House, Tuesday, April 6, 2021, in Washington.

On this week’s episode of “Pitchfork Economics,” Nick Hanauer and David Goldstein talk with Anusar Farooqui, who writes probing analytic essays about economic policy on Substack under the pseudonym Policy Tensor.

Farooqui researches and thinks deeply about some of the most complex systems shaping our world today, and he’s not afraid to take big swings on bold predictions. One such prediction in a recent essay, “The Making of the Mother of All Economic Booms,” caught Hanauer’s attention

In the piece, Hanauer says, Farooqui “argues that the Biden administration is making a really profound break with the last 45 years of neoliberalism, and that that break is going to create probably the biggest economic boom in collective memory, probably since the ’60s.”

If Farooqui is right, the consequences of that boom would be world-changing. Hanauer explained that it would “absolutely create the kind of broad-based growth and benefits that should both transform the economy and also potentially transform politics, which is an even more important achievement.”

The pandemic’s economic impact

Farooqui says that it’s now common knowledge that we’ve seen a slowdown in growth and an increase in income inequality in the decades since the broad global adoption of trickle-down economics as the dominant economic theory.

“What I think has happened, which is the main thesis in that essay,” he explained, “is that elites in the United States today, and technocrats in particular, have come to the conclusion that the only way to stop the political instability which was revealed in 2016 is to restore broad-based growth,” in the form of huge public investments in infrastructure, in support programs, and in policies that will broadly improve the lives of the American people.

“Public investment has been declining, and is really low by historical standards,” Farooqui said. So now, the Biden administration needs to show positive economic progress in a way that can be empirically proven. In other words, the Biden administration wants you to be able to see big improvements to the American middle class with your own eyes after the next infrastructure bills have passed – and before next year’s midterm elections.

Biden’s approach to the economy

The fact that President Biden, who was largely very mainstream throughout his career in the Senate, happens to be the messenger for this economic theory, Farooqui said, is “very pleasantly shocking, I must confess.”

So what has happened to the economy to bring Biden around to this idea of investing deeply in everyday Americans? Farooqui believes that the last 40 years of neoliberal constraints on the economy, in the form of deregulation and tax cuts, have basically hamstrung global economic growth by taking power away from the sectors of the economy that actually produces things.

“All of the great industrial firms are responsible for the mid-century productivity growth” of the 20th century, he said. That productivity was “responsible for the growth of the American working class and the achievement of middle class standards that was the envy of the world.”

But when neoliberalism took root, “the private equity firms went in and really created a market for corporate control.” With their newly unfettered financial might, the equity firms forced industrial companies to “disgorge their services to finance and to essentially move away from an investment in long-term productivity growth and towards the short-term model where you borrow money from the bond market and you do some [stock] buybacks or something.”

“Where bankers used to wait on the industrial firms’ CEOs,” Farooqui explained, “it was now the CEOs who were reporting to the financial analysts – and this relationship of power between Wall Street and industry is crucial to why dynamism vanished from the manufacturing sector.”

Rather than creating products and services that appealed to customers, the sole purpose of every large company became a devotion to increasing shareholder value, creating an “hourglass economy” in which “income growth stalls for the bulk of the population” while wealthy shareholders and CEOs increase their fortunes exponentially.

“So the sheer number of jobs disappear for high school graduates, and this is devastating for working class families,” Farooqui continued. “These depths of despair, beginning at the turn of the century, are a huge story, because those depths of despair are the single best predictor of the swing towards Trump in 2016 – it’s really the pain of working class America.”

Investing in the middle class

The primary argument against these big investments in the American middle class is that it might set off a “macroeconomic instability of some kind,” which has been “baked into people’s minds from the ’70s,” when inflation skyrocketed, Farooqui says.

But when you accept that “inflation is globalized” and not directly tied to the Federal Reserves’ decision to print more money, as Modern Monetary Theory argued, “you get to a place where you can be freed from the old rigidities that prevent a decisive action on the main challenges of the day.”

Does that mean that the tumultuous boom-and-bust economic cycle that we’ve seen over the past 40 years, in which most millennials have lived through three major economic crises, is the result of neoliberalism’s economic stagnation?

Or as Goldstein asked Farooqui, “are you implying we could have had an economic boom all along over the past 45 years? None of the dislocation, none of the inequality, none of the slow growth was necessary or unavoidable, had we not had this swing towards neoliberalism?”

“Absolutely,” Farooqui said. “I’m absolutely certain of that. For example, the Fed could have always run the economy really hot. That could have meant that low-skilled workers’ wages, middle-skilled workers’ wages, people with high school degrees – their wages would have grown at the same rate as college graduates’ salaries, and professional class salaries, which have exploded.”

Many pundits have predicted that we’re on the verge of a once-in-a-lifetime economic boom. But Farooqui’s claims take that idea one step further: He argues that we could potentially see a once-in-a-century realignment that wipes out the old thinking and sets the table for a new understanding of how the global economy works.

While many futurists love to make wild predictions of what the world will be like in a decade or two, the change the Farooqui is foretelling is right around the corner. We won’t have to wait very long to discover if he’s right or not.

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Bidenomics explained: Why building the economy from the middle out might be the most revolutionary concept in modern politics

Biden stimulus
President Joe Biden has taken an economic stance against neoliberal trickle-down ideals.

  • Paul Constant is a writer at Civic Ventures and cohost of the “Pitchfork Economics” podcast with Nick Hanauer and David Goldstein.
  • In this week’s column, Constant explains how President Biden has embraced the middle-out theory of economic growth.
  • The plan’s premise: Economic growth is stronger when the middle class is more stable and prosperous.
  • See more stories on Insider’s business page.

At the end of his time in office, Barack Obama famously compared the presidency to an ocean liner. “Sometimes the task of government is to make incremental improvements or try to steer the ocean liner two degrees north or south so that, ten years from now, suddenly we’re in a very different place than we were,” he told podcaster Marc Maron in a 2016 interview.

Obama was arguing against using the power of the presidency to affect change too rapidly. If you try to make a hairpin turn with a Carnival cruise ship, you’re going to kill a lot of people and destroy a very expensive boat. Instead, Obama believed in making small policy course corrections that would eventually result in enormous societal outcomes like a greener economy and a more inclusive society.

Obama’s ocean liner analogy was completely ignored by the Trump Administration, which veered all over the map and sometimes seemed to come up with policies on the fly. And true to the analogy, people did die when Trump exerted erratic control over the ship – recent analysis found that 40% of the United States’ COVID deaths were the result of Trump’s mismanagement of the pandemic.

Biden’s ocean liner

Before his inauguration, most people (myself included) would have predicted that President Joe Biden would subscribe to his former boss’s ocean-liner theory of governance – slowly moving government to a more equitable place through steady, incremental change. Those predictions turned out to be entirely wrong.

On March 31st, President Biden delivered an economic speech that represented a clean break from the dominant economic paradigm of the last 40 years. In the speech, Biden laid out an economic vision for America that was a clear refutation of the neoliberal trickle-down economics theory promoted by the Reagan Administration and accepted as truth by every following presidential administration – Democrat or Republican – up until this year.

While the trickle-down philosophy centers corporations and the wealthy as the job-creating, wealth-producing engines of the economy, Biden offered a new understanding of where American prosperity is created. In the speech announcing his infrastructure bills, The American Jobs Plan and the American Families Plan, Biden described an economy in which “we all will do better when we all do well. It’s time to build our economy from the bottom up and from the middle out,” he announced.

“Wall Street didn’t build this country,” Biden said. “You, the great middle class, built this country.” He declared that his infrastructure plan would “build a fair economy that gives everybody a chance to succeed-and it’s going to create the strongest, most resilient, innovative economy in the world.”

A clean break

The next day, Bloomberg’s Peter Coy recognized Biden’s speech as a clean break from the past. In his embrace of “middle out economics,” Biden, Coy wrote, “was siding with the populist, liberal wing of the [Democratic] party and implicitly distancing himself from the low-tax, pro-business wing associated with former Treasury secretaries Robert Rubin and Lawrence Summers, among others.”

In his column, Coy says “Pitchfork Economics” host Nick Hanauer coined the phrase “middle-out economics” with his coauthor Eric Liu in their 2011 book “The Gardens of Democracy.” “The Biden administration is the first administration in my lifetime to actually believe that the neoliberal framework is wrong and to advance a counter-narrative and new agenda,” Hanauer told Coy.

The trickle-down theory

Many of us are familiar with the arguments of neoliberal, trickle-down economics, because they’ve been unthinkingly repeated by politicians across the political spectrum since the early 1980s: If you raise wages, you get fewer jobs. If you raise taxes, you’ll kill business. If you create regulations, you’ll strangle economic growth.

American leaders have treated those statements as uncontested gospel. They slashed taxes, deregulated business, and kept wages low in order to push money up to the wealthiest Americans, and they’ve waited for all that money to come trickling down to ordinary Americans. Four decades later, we can officially declare the experiment to be a disastrous failure. Inequality is dangerously high – in fact, the richest Americans have hoarded 50 trillion dollars that used to go to the paychecks of ordinary Americans.

Middle-out economics

Clearly, it’s time for a big new idea, and President Biden is betting on middle-out economics to turn this economy around. But what’s at the heart of this bold new strategy? Earlier this month, Hanauer explained to Democracy Journal that middle-out economics is “centered around the simple idea that the economy is ultimately made out of people, and the better people do the better the economy does; the focus of policymaking therefore should not be on enriching the few, but on improving the lot of the many.”

Hanauer continued, “When you help the broad population – the middle – become secure and prosperous, you not only have much faster rates of overall economic growth, but also a much more stable and secure democracy.”

By calling for huge investments that directly improve the lives of a majority of Americans, Biden is effectively making a 180-degree turn from the economic policies of the half-dozen presidents who came before him. Some neoliberals argue that this change is too much, too fast. But Biden seems to be confidently following the trail that was blazed by the last president to cast austerity aside and invest in the American people – Franklin Delano Roosevelt.

Biden is arguing that America can’t survive the kind of economic inequality we’re living with today, and that drastic action is necessary to fix the economy before it’s too late. Obama’s ocean liner analogy, after all, conveniently forgets the lesson of history’s most famous ocean liner – the ridiculously luxurious cruise ship holding some of the world’s wealthiest people which stayed steadfast on its course in dangerous waters, only to meet a disastrous end. You know the one. You’ve probably even seen the movie they made about it.

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An Obama administration economist says the pandemic destroyed a long-held myth about unemployment

peter luger new york restuarant covid
People dine outside Peter Luger Steakhouse in New York City during a restricted reopening in September 2020.

Throughout the pandemic, Washington Post economics correspondent Heather Long has been providing indispensable context to the Department of Labor’s monthly unemployment announcements in thoughtful Twitter threads. As soon as lockdowns began last March, job losses skyrocketed to literally unprecedented levels, and Long’s analysis helped explain the reasons behind the numbers, what those tremendous job losses looked like for ordinary Americans, and why wealthy Americans weren’t suffering from the economic impact of COVID-19.

When the Labor Department announced on Friday, April 2 that the economy added some 916,000 jobs in March, Long rightly hailed that number as “the strongest gain in seven months” and a sign that “the economy [is picking] up steam.” In fact, job reports from January and February were revised up as well, indicating that the job market has been even stronger in 2021 than we initially realized.

Long leavened her enthusiasm by reminding us that “Overall the US has now gained back 13.7 million jobs – 62% – of the 22.2 million lost in the pandemic.”

That sounds like great news, but it’s simply not fast enough: We’d need another 13 months in a row of March’s gains to make up the job losses that the American economy incurred during the pandemic – and that’s not even taking into account all the jobs that would have been created over the last year had the pandemic never happened.

Job loss during the pandemic

Like all the economic impacts of the last year, those job losses were not spread evenly across the economy. White-collar jobs have largely jumped back to pre-pandemic levels, while other employment sectors – particularly leisure and hospitality – have failed to recover millions of jobs that existed in February of 2020.

Even though low-wage jobs are coming back in record numbers as more Americans get vaccinated, the fact remains that if you were poor before the pandemic began, you’re much more likely to be unemployed right now.

The economy is divided along other lines, too: The Chicago Tribune reports that the unemployment rate for “Black Americans improved slightly last month, but at 9.6% is still higher than all other race groups tracked and the national average of 6%.”

And, millions of women have been knocked out of the workforce by the pandemic, though their job losses in March finally slowed to equal the rate of male job losses.

This week, former Obama administration economic adviser Austan Goolsbee returned to the “Pitchfork Economics” podcast to discuss some of the lessons from the pandemic’s impact on unemployment.

Unemployment for low wage workers

Specifically, Goolsbee wanted to attack a long-standing trickle-down canard that the additional emergency unemployment benefits that the United States has paid out during the pandemic – to the tune of $600 per week at first, then $300 per week this year – would disincentivize low-wage workers from going back to work.

Pundits and politicians (including, perhaps most notably, West Virginia Democratic Senator Joe Manchin) argued that the economy would slow because while they were receiving large checks, low-wage workers wouldn’t see the need to return to work. But Goolsbee points out that in March, lower-wage jobs led the surge in employment numbers.

“Those are exactly the jobs that a group of people have been for almost a year saying we’re giving too much relief to – that their unemployment insurance is so high that no one will go back to work,” Goolsbee said. “And it’s just not true. Look at the data. It’s just not true. Those are the people going back to work in record numbers.”

Critics have “been saying that this would happen, literally, since we passed the CARES Act a year ago: ‘No one will go back to work if they are low enough income, because they will be paid more to not work than to work,'” Goolsbee added. “And multiple researchers went and showed that if you look at the generosity of unemployment, it’s not correlated with where jobs came back or didn’t come back.”

The argument against increased unemployment benefits “was nonsense and everyone should have understood it to be nonsense,” Goolsbee said. When Congress added $600 weekly payments to unemployment checks, “there were people who never made this much money in their life, who never made as much money working than they did on unemployment. And yet they’re going back to work,” he said.

The trickle-down myth

In other words, the pandemic has busted a trickle-down myth that has been spread by Democrats and Republicans alike since at least the 1990s – the pernicious argument that if a state or federal safety net is too generous, people will simply choose to stay at home and leech off the system.

This is the argument that politicians have invariably dragged out in order to make it harder and harder for people to file for unemployment, food stamps, and rental assistance. This kind of thinking contributed to crises at the beginning of the pandemic in states like Florida, where politicians had spent years decimating the very unemployment programs people needed to stay housed, fed, and safe during the pandemic.

The extended unemployment benefits, then, did exactly what they were supposed to do: They helped millions of Americans pay their bills when they were unable to find employment. They also helped those unemployed Americans spend money in their communities on groceries, supplies, and other necessities – and their continued consumer spending, in turn, likely saved millions of jobs and uncountable thousands of neighborhood businesses.

This is a momentous discovery which explodes a political truism that has gone unquestioned for decades, and it should factor into every conversation about the social safety net going forward. It’s yet another nail in the coffin of the popular trickle-down idea that the world is made up of industrious makers and lazy takers.

By getting money directly to the people who need it most, governments aren’t enabling a generation of moochers – they’re supercharging the economy by making sure people who are in temporary need of assistance are able to continue purchasing goods and services, thereby supporting and creating jobs.

These assistance programs aren’t charitable wastes of money, like critics argue – instead, they make good economic sense, improving the economy for everyone.

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