Three articles, one blog post.
First, Dean Baker points to this great Bloomberg article by former Fed regional bank pres Narayana Kocherlakota (NK) on how, since black unemployment typical runs 2x the overall rate, Fed policy is especially consequential for them (and other minorities). It’s really just the old adage that when the economy sniffles, less advantaged workers catch pneumonia, and–a key theme of my own work–less advantaged workers are disproportionately helped when the economy is strong. Full employment is especially important for blacks, as I’ll show again in a moment.
The piece points out that these relationships came up in the minutes from the recent Fed meeting, something that hasn’t happened much at all in the past. Some, and not a little, credit for that goes to the activist group Fed Up, which continues to have real impact on these critical debates.
One could certainly ask “what took them so long?” As NK’s figure shows, this 2x relationship persists through the long history of this data series. But it’s still progress.
Second, I wanted to link to a piece I recently did that ties a lot of NK’s insights together, adding the unemployment/wage dimension. I took that ~2x relation and mapped it onto a wage/unemployment elasticity for low-wage workers in the spirit of Val Wilson’s work.
Until recently, growth in this expansion has been a spectator sport for many disadvantaged workers. One way to help them is for the Fed to accommodate very low unemployment. That could conceivably trigger inflationary concerns, but based on how weak that correlation is these days, lower unemployment seems an extremely favorable trade-off to the low-wage workers who would benefit disproportionately in terms of faster wage growth.
But I also don’t want to forget the larger picture:
Of course, life is more complicated than these relatively simple connections imply. It will take a lot more than just the Fed holding off on interest-rate increases to generate true racial economic justice. Getting there will also require, as a basic starting point, both criminal justice reform and direct job creation in neighborhoods that have historically been left behind (even when the rest of the country is at full employment).
Third, speaking of that larger picture, here’s a little piece in today’s WaPo (print edition) that thinks about the structural forces driving inequality–taxes and transfers can help and are helping. But we need to do much more and think much bigger to deal with the power imbalances behind these inequities.
Finally, one reason productivity is so low is that investment is so low. And one reason investment is so low is that public companies would rather do stuff that boosts their near-term stock price–share buybacks and dividend payouts–than their long-term productivity. It’s a big, serious, long-term problem that relates to the structural shifts alluded to in my WaPo piece, not to mention the institutional forces that NK and I document.
In other words, Buddha was right: it’s all connected…