Damn the Dysfunction: Let’s Talk Policy Reform!

June 13th, 2014 at 9:57 am

We’re apparently more ideologically divided than ever, politics remain horribly gridlocked, there’s deep confusion about where the economy’s headed…so what better time to trot out an ambitious policy agenda?!

Obviously, there’s a selection bias in play, but everywhere I turn these days, people are asking me (and, I presume, others like me): what should we be doing to help the middle class, push back on inequality, and improve the quantity and quality of jobs?  In other words, interested parties are looking past the present (and the entrails of political shockers just down the road in VA’s seventh district) and thinking in terms of rolling good policy ideas out of the hangers, onto the tarmac, and lining them up before a very long runway.

I think that makes sense, and anyway, what’s the alternative?  Sit on your hands for the next how-ever-many years?

Here are a few slides from a recent presentation on diagnosing the inequality problem and prescribing policy solutions, largely under the framework of full employment.

The first few slides list a number of the factors widely viewed as behind the increase in inequality with two totally subjective grades.  The first number, e.g., 10 for globalization, is how heavily I weight the factor in explaining inequality’s growth on a scale of 1 to 10.  The second—low, medium, high—is how amenable I think the factor is to policy intervention, assuming functioning politics and decent policymakers.

It’s typical to cite globalization and technology, as I do, but the others—labor standards, financialization, even full employment—often fail to get mentioned, a huge oversight.  Given that technological change is an ongoing, secular force in the workplace and economy, I give it a lower weight, though who knows?  The “medium” for the entry in terms of it policy elasticity is born of the fact that I don’t think there’s much we can do to change the pace of innovation, though divesting in R&D obviously doesn’t help.  However, over the long-run a highly educated workforce is essential for developing and exploiting new technologies.

The last slide lists a set of ideas to promote full employment, ones familiar to OTEers as well as to those who’ve visited the website of CBPP’s full employment project.  Regarding smart fiscal policy, a CDSH is a “cyclical dove, structural hawk,” a view that no less than Treasury Sec’y Lew endorses here.  Budget deficits need to grow in bad times and fall only once a solid recovery is underway (austerions are cyclical hawks, prescribing deficit reduction in the face of weak demand).

OJT stands for “on-the-job training”—see the Holzer/Lerman paper on the full employment site.  The other stuff should be familiar and each one corresponds to a paper on the site.  The consideration of job quality as well as quantity is an important addition, and Ross Eisenbrey’s paper on the relevant policies in that space is very strong.  I summarize some of his key suggestions below.

It’s still early and I’m highly caffeinated so perhaps this is all delusional, but I’m telling you: I strongly suspect that many more people than you might think actually would like to see a functional, effective government sector pursue these policies.  They just don’t believe we’ve got such a sector, and, of course, they’re right.  For now.


[Summarizing some of the ideas to improve job quality from the Eisenbrey paper cited above:

Updating/increasing the salary threshold below which salaried workers are eligible for overtime pay.  This threshold—the so-called “salary test”—is not indexed to inflation, meaning the unless policy makers act, nominal earnings growth will increasingly exempt salaried workers from time-and-a-half pay, even when their occupational duties mean they should be non-exempt (there is a “duties test” but it is less reliably applied in practice than the salary threshold).  Simply adjusting the current threshold for inflation based on its nominal value back in the mid-1970s would more than double it from $455 to about $980 and likely provide OT eligibility to millions of workers.

Improve the enforcement of “wage and hour” rules.  Incidence of “wage theft” (not paying workers what they are contractually owed), misclassification (classifying regular employees as self-employed who are thus ineligible for minimum wages, overtime, and other established protections), non-payment of overtime, has led to significant wage losses for many lower-paid workers.

Level the playing field for union organizing.  Eisenbrey presents extensive evidence of both legal and structural changes that have tilted the balance against those interested in boosting the number and ability of workers to engage in collective bargaining, thus blocking an essential rebalancing of bargaining power.  Reversing this tilt requires allowing unions to organize sub-contracted workers, crackdowns (versus “wrist slaps”) on employers who illegally block organizing drives, reducing waiting periods between drives and elections, and providing union advocates the same access to potential members that employers currently enjoy.]

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5 comments in reply to "Damn the Dysfunction: Let’s Talk Policy Reform!"

  1. Per Kurowski says:

    Fight against risk-weighted capital requirements for banks that make it so much harder for medium and small businesses, entrepreneurs and start ups, those who are best placed to open the doors behind which the middle class, and the poor, can find jobs and future… to access bank credit in a fair way.


  2. Robert buttons says:

    Voters need to ask themselves if a more powerful, more effective government will more powerfully, more effectively serve the country or themselves and big donors. If you answer the question like I do, you realize the only option is to limit govt and rely on free markets.

  3. Smith says:

    Notes on the slides

    1. Globalization – Krugman argues that currency manipulation, specifically by China, is a bigger issue than promoting exports
    2. Technology – If every current job is lost to a robot, people can do anything they want and still get paid. There are a ton of non essential jobs already. Don’t blame robots for poorly distributed investment, unequal business opportunity, and unbalanced economic system.
    3. Labor Standards – As you know I agree on the importance of updating the FLSA, but don’t ignore recent changes limiting coverage in the 1990s and 2000s that need to be reversed. Specifically high wage tech jobs have a special exemption. Moreover, white collar is the new blue, extend protections to nearly everyone. The $15 Seattle minimum provides a good experiment for a new wage floor.
    4. Tax Changes marginal income rates need to be raised and become confiscatory at high incomes. It’s a conservative restoration of Eisenhower rates. Reform is a euphemism for cutting rates and broadening the base, after which the loopholes are restored. Shortfalls bring calls for less spending cutting programs for the 90%. Only high marginal rates can cut excessive income, it’s a mathematical fact (because you can cut the 1% ‘s income in half but you can’t double the 90%’s, the money isn’t there)
    Financialization – Krugman says make banking boring, which means people in the industry lose jobs and money.
    Full Employment – the tried and true method is temporary stimulus financed by debt
    Poverty – a big par of poverty seems to be zero or fewer earners/household
    Discrimination – the wage discrimination of female workforce comes partly from lack of child care and flexible hours, more data on wage differences would be helpful, but this factor is hidden and huge due relative size of the class (female)
    Family Structure see above, but education should not be left out
    Immigration – again, a bigger issue since immigrants both undocumented, and employer sponsored are not free labor. You have two systems free and unfree, which as we know can’t stand. The last bill mostly extends and enlarges the problem and should be scrapped for amnesty and unfettered and unencumbered entrance to labor market.

  4. jeff says:

    When the administration believes that charter schools are the key to any type of education reform, and charter schools are almost entirely non-union, how realistic does any union organizing seem ? The first step in any union movement would be to stop retreating, not dismantling one of the very few unionized sectors left. This may not be what liberals want to hear, but the entire inequality debate seems disingenuous when a bedrock middle class job is being destroyed with their support.

    The same year I was offered admittance to a STEM PhD program I was offered a $ 36,000 a year job at a charter school as a teacher. (+401 K, not defined benefit). These are the kind of wages charter schools are serving up for people who have PhD level credentials in non-education fields. Apparently Washington thinks they can build an education system and a middle class on that. What a joke.