There has been a great deal of interest this year in the subject of income inequality – as evidenced by the fact that economist Thomas Piketty’s book, “Capital in the Twenty-First Century,” reached No. 1 on the non-fiction, best-seller list a few months ago. However, it isn’t an easy summer read, which is why I’m bringing you a very condensed version of a short synopsis that appeared a few days ago in a New York Times column by Nicholas Kristof.
Apparently, buying Picketty’s book is one thing, and getting very far into the 685-page tome is something else. An analysis of Kindle data by UW Madison mathematics professor Jordan Ellenberg suggests that Piketty’s best seller may also be this year’s most unread book. With that in mind, Kristof wrote his recent column, which he calls “An Idiot’s Guide to Inequality.”
I don’t want to discourage you from buying and reading Piketty’s book, but if it isn’t something you envision taking with you to the beach this summer, I encourage you to read Kristof’s “idiot’s guide,” which elaborates on these five points (that I have excerpted from his column):
- Economic inequality has worsened significantly in the United States and some other countries.
The minimum wage has lost about 11% of its purchasing power due to inflation since 2009, making it harder for low-paid workers to make ends meet. (In comparison, CEO compensation rose 46% between 2009 and 2013.)
Some states have increased their own minimum wages, rather than waiting for Congress to do it. Nineteen states have set their own minimum wage higher than the federal minimum wage, including our neighboring states of Illinois ($8.35) and Michigan ($7.40), where a Republican-controlled legislature recently approved a wage increase to $9.25 by 2018. In Minnesota, the minimum wage is scheduled to rise to $9.50 by 2016. In contrast, state lawmakers in Wisconsin have taken no action to increase the minimum wage.
It’s too bad that Wisconsin lawmakers have refused to raise the minimum wage, because such a move would have broad-based benefits for workers. Read more
Wisconsin isn’t the only state that has made deep tax cuts on the premise of boosting the economy, only to find out that the promised job growth has not materialized. Kansas and North Carolina also passed large tax cuts and have experienced disappointing job growth. As a result of the tax cuts, these states have fewer resources to support investments in public schools, higher education, and a healthy workforce – investments that have a proven track record for creating jobs.
In Wisconsin, lawmakers have passed a series of tax cuts that total nearly $2 billion over four years. Governor Walker and some legislators have said that these tax cuts will make Wisconsin a more attractive place to do business, but job growth in Wisconsin since the tax cuts took effect has been slower than the national average. Unlike the U.S., Wisconsin has not yet gained enough jobs to replace the ones wiped out by the recession. Read more
The term “border wars” has taken on a new meaning for many states and cities across the United States that have been engaged in the practice of job piracy. However, a number of areas in the country are shifting away from this practice of luring jobs over state borders after recognizing that it is inefficient and does little to fuel job growth. Wisconsin policymakers should learn from the experiences in those states and localities and from the remedial actions they are taking.
On July 9th Good Jobs First released a new report exploring the issue of job piracy, also called job poaching, which wastefully exhausts economic development subsidies without incentivizing new job creation. The report, “Ending Job Piracy, Building Regional Prosperity,” provides examples of failing models of job piracy, including the border war that has been raging between Missouri and Kansas.
Missouri legislators have gradually come to the realization that job piracy is a zero sum game that is wastefully exhausting the economic development resources of both states. Read more
Wisconsin continues to perform poorly in private sector job growth, according to new employment figures released today.
The number of private sector jobs in Wisconsin grew by 1.2% in 2013, compared to 2.1% nationally. The new jobs figures come from the Quarter Census of Employment and Wages, which this Milwaukee Journal Sentinel article calls “the most credible and comprehensive” figures available.
Wisconsin job growth has been slower than that in neighboring states, according to the Journal Sentinel:
“In the first three years of Walker’s term, the data show that Wisconsin ranked 35th of 50 states in the rate of private-sector job growth. That puts it behind the nearby states of Michigan (sixth of 50), which is bouncing back from a searing downturn in the auto industry; Indiana (15); Minnesota (20); Ohio (25); Iowa (28), and Illinois (33).”
State lawmakers have passed dozens of tax cuts since 2011, but that hasn’t spurred job growth. Read more
Wisconsin’s economic growth has lagged behind that of most other states, according to the Bureau of Economic Analysis. The new report issued last week provides inflation-adjusted statistics on gross domestic product (GDP) in every state for each of the years from 2010 through 2013.
The following graph illustrates that Wisconsin’s GDP growth of 4.5% over the last three years has been well below the national average of 6.1%. Wisconsin has also lagged behind the other states in upper Midwest, except for Illinois.
The second bar graph compares the annual growth since 2010 in Minnesota, Wisconsin, and for the U.S. as a whole. Some conservatives have argued that Wisconsin’s economy would grow more rapidly because our state has been cutting taxes and practicing austerity during a period when Minnesota raised taxes. The graph illustrates that Minnesota’s growth has been stronger for each of the last three years.
If Wisconsin’s economy had grown at the same rate as the national average over the three years since 2010, our state GDP would have been about $4 billion higher at the end of 2013. Read more
After more than six years from the start of the Great Recession, the U.S. at long last has more jobs than it did before the recession. For Wisconsin though, that achievement is likely to be a few months in the future.
As of April 2014, there are still 27,700 fewer jobs in Wisconsin than there were in January 2008, according to the Bureau of Labor Statistics. At the current rate of job growth, it means that Wisconsin won’t achieve pre-recession job levels until sometime this fall.
Once Wisconsin returns to pre-recession employment levels, additional jobs will need to be added to make up for the population growth that occurred during the recession. Wisconsin still needs to add more than 100,000 additional jobs just to keep up with growth in the working age population, according to the Center on Wisconsin Strategy.
Employment in Wisconsin may be nearing pre-recession levels, but the type of jobs has changed. Read more
A Few Cracks Begin to Show in GOP Opposition
In late April, shortly before a scheduled U.S. Senate vote on the matter, former Minnesota Gov. Tim Pawlenty (R) said Republicans should support increasing the minimum wage. Mitt Romney and former Pennsylvania GOP Sen. Rick Santorum have made similar comments – which seem to reflect a growing unease among some Republicans in opposing such a politically popular policy choice.
Republicans in Michigan may have been influenced by that sort of advice this week, when the GOP-controlled legislature approved a bill raising that state’s minimum wage to $9.25 per hour by 2018 (from the current level of $7.40). Once it reaches $9.25, the minimum will generally be adjusted annually for inflation, provided the unemployment rate is below 8.5%.
Political pragmatism seems to have played a significant role in the passage of the Michigan bill, which their GOP governor quickly signed, because its enactment is expected to weaken support for a November ballot initiative that would raise their minimum wage even more — to $10.10 an hour, with adjustments every year for inflation, and with a significant improvement to the lower minimum wage for tipped employees. Read more
Fast food workers in Wisconsin are part of a national strike to rally for higher wages. Strikes took place in Milwaukee, Madison, Wausau, and other Wisconsin cities. Workers are advocating for a wage floor of $15 an hour.
A bond rating agency has downgraded its rating of Kansas’ creditworthiness, citing revenue reductions from tax cuts and slow economic growth, among other factors. There is no indication that a downgrade for Wisconsin is in the works, but the downgrade of Kansas’ creditworthiness should give pause to Wisconsin lawmakers. Tax cuts haven’t done much to create jobs, in either Kansas or Wisconsin, and have led to unintended negative consequences.