Finding Signs of Economic Hope for 2022

The Pitch: Economic Update for January 6th, 2022

(The Pitch is a weekly economics newsletter written by Zach Silk. Sign up for free on Substack to receive a new issue in your inbox every Thursday.)

Friends,

Happy new year! Let’s begin 2022 with some unalloyed good economic news: On New Year’s Day, the minimum wage increased in 21 states and 35 local jurisdictions — and more than half of those minimum-wage increases were to $15 or more per hour. Our friends at the National Employment Law Project have determined that this year a record number of American states and jurisdictions will raise their minimum wage.

It’s clear that America is realizing how an economy really works: when workers have more money, they spend that money in local businesses, which have to hire more workers to meet increased demand. It’s ordinary Americans, not the wealthy few, who create jobs, and so the best way to boost the economy is to get more money in the hands of more people.

And the fastest way to get money in the hands of people is through their paychecks. Another heartening report from the Economic Policy Institute found that more than $3 billion in stolen wages was recovered for workers in the years between 2017 and 2020. Wage theft amounts to tens of billions of dollars stolen from workers’ paychecks every year through illegal underpayment, time clock manipulation, or endless other violations of labor laws.

This is money that those workers have already earned, and traditionally, employers have rarely suffered consequences for their theft. However, the Department of Labor and state attorneys general have stepped up their efforts to fight on behalf of workers, and while there’s a long way to go before rampant wage theft is under control, the balance of power is finally, for the first time in decades, tipping in favor of workers.

The Latest Economic News and Updates

2022 begins with the best labor market of our lifetimes

The Great Resignation continues: The Job Openings and Labor Turnover Survey found that more workers quit their jobs in November of last year than at any other month in American history. And though four and a half million workers walking off the job is a staggering figure, the fact is that 6.7 million workers were hired in November and layoffs were way down from the historical average, proving that it’s still a workers’ market. As economist Elise Gould points out, though, these numbers are pre-Omicron surge, so we might see some Covid-inspired fluctuations in the next few months’ of JOLTS numbers. This chart from the Washington Post illustrates why the labor market is favoring workers so intensely: Demand for labor is way up but plenty of workers are not reentering the workforce.

And Ben Casselman at the New York Times digs into the numbers and finds that most of this “turnover has been concentrated in hospitality and other low-wage sectors, where intense competition for employees has given workers the leverage to seek better pay.”

To those workers, I’d like to point out that at the very end of December, researchers issued a new paper finding that anywhere between 10 and 17 percent of workers are too pessimistic about how much they could earn elsewhere. The authors report that “misperceptions are particularly pronounced among workers in low-wage firms. If workers had correct beliefs, at least 10% of jobs, concentrated in low-wage firms, would not be viable at current wages.” So one in ten low-wage jobs are literally paying less than the market should be able to bear — but workers in those positions believe they are being paid what they’re worth. In other words, if you’re an American worker, you should be aiming higher right now.

The battle over pandemic-era benefits falls along partisan lines

You may recall that 26 Republican governors (and one Democrat — John Bel Edwards of Louisiana) ended the additional $300 pandemic unemployment payments approved by the federal government because they (falsely) argued that the checks were encouraging workers to stay at home. Now, those same leaders in five states are offering unemployment checks to workers who leave their jobs because they refuse to be vaccinated, with three more Republican-run states considering similar legislation. We live in an age where there are few serious repercussions for political hypocrisy, but any governor and legislator who opposed unemployment payments for those staying home to stay safe from the virus while also paying people to stay home and not get vaccinated has made perfectly clear that they are doing so strictly for partisan culture war reasons — not economic ones.

Speaking of the intersection of partisanship and economic policy, Ian Prassad Phillbrick at the New York Times yesterday explored why the Expanded Child Tax Credit isn’t polling better. The monthly payments of $300 per American child under the age of 6 and $250 per older child were released to great fanfare, and they likely helped keep local economies afloat during the Delta variant surge over the summer, but polling doesn’t indicate widespread support for two major reasons: Older Americans without children — in other words, the biggest group of likely voters — aren’t personally seeing any benefits from the credit, and so don’t support it; and many people have a longstanding prejudice against sending checks to “undeserving” families with non-working parents.

It’s a pretty depressing report, honestly, which shows that the neoliberal sentiment around government benefits isn’t dead yet: Many voting Americans would rather end a program because they suspect a tiny portion of people will abuse it than see broad, systemic economic growth for the vast majority of American families. The pandemic has inspired more people to understand that we all are a part of a larger interconnected economic system, but there’s still more work to be done to teach voters that we all do better when we all do better.

To that end, economist Kate Bahn tweeted about why work requirements for public assistance programs don’t make sense, with links to reports showing that support programs with no barriers reduce household poverty. Even though you might see an anecdotal claim or two of people abusing the system, you have to keep in mind that the CTC lifted some ten million American children out of poverty.

Corporate profits are climbing — and driving increased prices

Perhaps because last year saw the biggest Christmas retail sales period in history, and because disruption of gift-giving due to supply chain fears mostly failed to materialize, I haven’t noticed as much chatter about inflation in the media since 2022 began. In his excellent Substack, Matt Stoller digs into the numbers and he finds that 60 percent of the inflationary price increases we saw last year went directly to corporate profits.

Stoller finds that before the pandemic, “for every American man, woman and child in the U.S., corporate America used to make about $3,081, and today corporate America makes about $5,207. That’s an increase of $2,126 per person.” Rising prices are in large part due to corporations seeking profit in the moment, not from the actual cost of goods rising — an important point to remember the next time a politician tries to blame government investment in ordinary Americans for inflationary pressures.

For one particularly egregious example of how corporations are raking it in during the pandemic, USA Today notes that while both the Kroger chain of grocery stores and Walmart were selling Covid tests for $14 apiece before Christmas, Walmart this week raised prices on tests to $19.88 and Kroger’s prices skyrocketed to $23.99 per test. Businesses, it turns out, had an agreement with the Biden Administration to sell the tests at cost for 100 days, and that agreement ended this week.

It’s worth noting that the $10 in profit that Kroger now makes on every Covid test sold now could pay for more than half a day’s “hero pay” for a single employee at a Kroger store — a pandemic-era policy that Kroger fought tooth and nail last year, even going so far as closing stores in Seattle and California to protest the higher wages.

Real-Time Economic Analysis

Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunk Works; and follow us on Twitter and Facebook.

• On Civic Action Live this Friday at 10:30 am Seattle time, we’ll look at the skyrocketing numbers of employees quitting their jobs, and examine what it might mean for the year ahead in labor. We’ll also discuss the widespread minimum-wage increases happening in states and cities around the country, and we’ll discuss the economic policies that we need to keep America’s economy thriving in 2022.
• On the Pitchfork Economics podcast, Nick and Goldy talked with author Matthew Stewart about how the contours of income inequality in America have changed over the last several decades — specifically, how the bottom 90 percent of the economy has done dramatically worse, the wealth of the top 0.1 percent has drastically grown, and how the 9.9 percent in between those two groups has accumulated more than half of the wealth in the United States.
• In his Business Insider column, Paul expanded on Stewart’s argument to argue that that near-top 9.9 percent of the wealthiest Americans now lay sole claim to the economic stability and growth that the great American middle class used to enjoy, while the bottom 90 percent has lost all meaningful sense of stability and opportunity.
• And David Wessel also joined the podcast to highlight a little-known provision of the Trump Administration’s huge tax cuts called “opportunity zones,” which were supposedly established to encourage the free market to invest in underdeveloped American communities but which wound up becoming a huge capital gains tax break for the nation’s wealthiest individuals and corporations.

Closing Thoughts

Yesterday, the Biden Administration named three top contenders to sit on the board of the Federal Reserve: Sarah Bloom Raskin, Phillip Jefferson, and Lisa Cook. I hope it’s not too self-indulgent to boast for a moment that two of those three potential nominees have appeared on our Pitchfork Economics podcast. Raskin discussed how fiscal policy can help save the environment, and Cook explained the many ways that women have been systematically excluded from economic models, and why that omission hurts everyone.

I point this out not just because I’m proud of our Pitchfork Economics team for identifying some of the most important economic thinkers of our time, but also to point out that you can tell a lot about a president by the people that they nominate to key positions. And while the Biden Administration has recently been polling poorly on its stewardship of the economy, the smart, fresh thinkers that they have consistently nominated to economic leadership still continue to signal a bright economic future.

These aren’t your standard Ivy League safe bets — they’re at the forefront of economics, pushing hard to rethink our understanding of how the economy works, and therefore building an economy that works better for everyone. These nominees are also largely young, meaning they could help influence our nation’s economic thinking for decades to come. I find that it’s a good habit to begin a new year looking for signs of hope, and thinkers like Bloom Raskin and Cook make me hopeful for the future of the American middle class.

Be kind. Be brave. Mask up. Get vaccinated — and don’t forget your booster.

Zach