Campaign News

09.23.2018

JACKSON HOLE, WY — Today, experts on our economy came together in Jackson Hole, Wyoming to talk about how market power keeps wages down and what the Federal Reserve can do to address it. Though Federal Reserve Chairman Jerome Powell said the reason for stagnant wages was “a puzzle.”

The panel, called “Putting the Puzzle Together: How Market Concentration Explains Slow Wage Growth and What the Fed Can Do About it” was organized by Fed Up. Panelists, including Roosevelt Institute Research Director and Fellow Marshall Steinbaum, Open Markets Institute Policy Counsel Sandeep Vaheesan, retail worker Nick Gallant, and labor studies and employment relations doctoral student Phela Townsend, discussed how an analysis of the role of market power in our economy would shift the Federal Reserve’s directive.

This year, the theme of the Federal Reserve’s economic symposium is “Changing Market Structure and Implications for Monetary Policy.” According to panelists, market consolidation means that the Fed needs to fundamentally shift the assumptions on which their monetary policy models rest.

Setting the scene for the panel, Fed Up Campaign Director Shawn Sebastian said, “The reason for stagnant wages is actually not a hard puzzle to solve. The data is right in front of us. The difficulty for the Fed is not in figuring out what the impact of increased market power is on wages -- consolidation keeps wages low by decreasing worker power. What’s hard for the Fed is giving up outdated frameworks from the 1980s that are not relevant to the economy today.”

Retail worker Nick Gallant spoke about his experience as a retail worker. He said:

“I can’t go to school because I have no control over my schedule and I need to work full time to pay rent and survive. I live on paycheck to paycheck and sometimes I don’t have enough money to buy bare necessities and I have to come up with creative ways to eat because desperate times call for desperate measures. If I left this job, I would simply be looking at another job like this. This is being a retail worker in America.”

Economic policy and labor experts added:

“When the economy grows, it doesn’t benefit everyone -- only major shareholders and CEOs,” said Marshall Steinbaum, Research Director and Fellow at the Roosevelt Institute. “Market power makes the economy grow less because companies don’t invest or hire workers. They pay out to the wealthiest stakeholders. And with fewer corporations dominating labor markets, they are able to keep wages down.”

“The economy is a construct of law and politics,” said Sandeep Vaheesan, Policy Counsel at the Open Markets Institute. “Our current predicament wasn’t inevitable -- it is the result of decades of prioritizing corporate and investor interests over those of working people. This is far from a puzzle. It’s straightforward decision making by those in power -- and these choices can be changed. In understanding the economy and making decisions on monetary and regulatory policy, the Fed needs to realize that markets just plain aren’t competitive but defined by employer power and worker weakness. They need models that reflect our economic reality.”

“This is not really new. As we look at the trajectory of what has happened in recent decades and what has happened to wages historically, we are really talking about how workers’ power has been weakened through the decline of unions and the erosion of other workers protections and rights. This has severely diminished workers’ ability to have a voice and a say over economic and other working conditions, or to find a job elsewhere with better conditions,” said Phela Townsend, doctoral student in Labor Studies and Employment Relations at the School of Management and Labor Relations at Rutgers-New Brunswick. “Unleashed corporate power, on top of weakened worker power, silences workers and keeps them from advocating for the wages that many of them need to survive.”

The panel comes the day before the Federal Reserve hosts a number of panels on the subject of market power. During the economic symposium, working people from across the country will host educational sessions and discuss how the Federal Reserve has ignored the needs of working people.

You can access a recording of the panel here.

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Media Contact: Lia Weintraub, lweintraub@populardemocracy.org

Omar had the backing of the bulk of the progressive and grassroots groups that weighed in on the race, including MoveOn; Justice Democrats; the statewide and Twin Cities chapters of Our Revolution, the group that was formed from the remnants of the 2016 Bernie Sanders campaign; and CPD Action, an arm of the Center for Popular Democracy.

Read the full article here.

Nearly 40 elected city officials from all corners of the U.S., including from metros bracing for Amazon HQ2 like Boston, Chicago, Denver, Los Angeles, Miami, New York City, and Washington, D.C., signed an open letter on Monday urging Seattle City Council to stay the course and criticizing Amazon’s tactics during the head tax debate.” “This is particularly concerning to us given Amazon’s approach to the competition for HQ2, in which the company has promoted a bidding war of jurisdictions competing with each other to offer greater incentive packages,” the letter read. “If Amazon were serious about its support for strong affordable housing solutions, it would fully back this tax proposal and chip in to help address Seattle’s homelessness crisis. By threatening Seattle over this tax, Amazon is sending a message to all of our cities: We play by our own rules.”

Read the full article here.

JACKSON HOLE, WYO. -- The world's economic elite gathered here for an annual symposium sponsored by the Federal Reserve Bank of Kansas City last week to debate the strategies central banks should employ to safeguard the global economy. We sat down with St. Louis Fed President James Bullard to chat about when he might be ready for a rate hike, the limits of his powers and why predicting the future is futile.

The transcript below has been edited for length and clarity.

Wonkblog: Let’s start with the question of the day: Which month looks good to you for a rate hike?

Bullard: Actually, I’m agnostic on this. Our new framework calls for one, and only one, and then we go on pause for a bit. It’s not critical to me exactly when we make that move, so we wouldn’t have to go at any particular meeting.

I do like to move on good news, so if we have good information, and we’re at a meeting, it might be a good opportunity to go ahead and make that move. But what’s different about what I’m saying is I’ve got a real flat interest rate path — much closer to the markets’ interest rate path. I don’t have this march upward of 200 or 250 basis points.

If only one more rate hike is really needed to get to the Fed’s neutral stance, why does it matter if you move in September, December or next year? You would be willing to wait until 2017?

Certainly, I just don’t feel that there’s any urgency when you’ve got the framework I’m talking about.

[The Federal Reserve is debating how to fight the next recession]

So explain your framework for us.

What we wanted to do is break down this idea that we’re really certain about where the economy is going in the medium- and long-run. What most models do is they have something called a steady state, which is really an average of all the variables in the past: You look at the unemployment rate, and you take the average unemployment rate. You look at interest rates and take the average past interest rate. You look at inflation, growth — you take averages of the past, and you call those your normal values.

As you go along, you expect all your variables to go back to their normal values. That’s what we’ve been doing. That’s the old framework. And what we’re saying is we don’t like that framework anymore because it suggests we have a lot more certainty about where the economy is going than we really do.

These averages of these variables from the past — they can sometimes be high and sometime be low. You can be in a configuration where these things are low, and then you can switch to another configuration when they’re high. Then they’re high for a while, and you switch back to low. What you have to do is make policy given whatever regime you’re in.

We think that the regime that is dominant right now is a slow-growth regime that is characterized by low productivity growth and very low real returns on short-term government debt around the world. We think these regimes are persistent. These things aren’t changing any time soon. And because of that, we just have to take them as given, for now anyway.

Given that in this framework, it’s difficult to tell when the regime is shifted, how do you know that you’re not setting monetary policy for a regime that’s already expired?

You’re gonna know when the regime switches. These very low real rates of return on government debt, if you look at the ex-post return on one-year Treasurys, it’s about -135 basis points right now. If that starts to go up rapidly, we’re gonna know and we’re going to take note of it. We’re gonna say, “Aha! Our regime has changed, and we’re going to have to change monetary policy accordingly.”

But for forecasting purposes, I wouldn’t say that I’m expecting that to happen all of a sudden. It’s been that way for at least the last three years, and if you look at real rates of return, they’ve declined for the last 30 years. It’s also very clear that we’re in a very low productivity environment.

It’s not that you go to sleep. You stay alert to the possibility that the regime can change in the future, and probably will change at some point in the future. It’s just not good to be predicting that it’s going to change.

Federal Reserve Chair Janet Yellen's speech here laid out the argument that the Fed is not out of ammunition to fight the next recession. Do you agree with that?

I loved the speech. She made the case that we still have quite a bit of bandwidth to handle problems if they arise in the next couple of years, and I very much agree with that. But at the same time, it’s always good to be studying other possibilities. I actually have papers on nominal GDP targeting, so I think that’s an interesting topic. It's probably not ready for prime time, but I’m a believer in research.

What led you to the support for this regime-based framework. Can you talk about the evolution of your thinking?

Maybe some frustration with the dot plot. We were saying we were going to have to raise rates fairly aggressively over the forecast horizon in order to keep the economy on track, and that wasn’t materializing. We had that forecast for several years, and it wasn’t really working. For that reason, I wanted to get a different way to think about what we were doing.

We’ve only moved once on the policy rate, and markets are saying maybe one more move this year. That would only be one move per year — that’s really not normalization. If you’re going to say it’s going to take 10 years to get back to a normal value, you’re really saying we’re not going back there. That’s way longer than any sort of business cycle than you can reasonably talk about.

How do you feel about the division between monetary and fiscal policy currently? Do you feel it’s time to pass the baton here?

I do think that. And I think the regime framework is good for laying that out for people. Part of the story is that the recession has been over for seven years. The unemployment rate has gone down below 5 percent. Inflation is low, but we don’t think it’s that low, and it’s kind of coming up to target.

So the cyclical dynamics are all done. The dust has settled, I guess is the way I would put it.

You might say the dust has settled, and I don’t like what I see. But for that, you can’t solve that with monetary policy. You’ve got to have things that are going to increase productivity in the economy. You’ve got to make the economy more efficient. New ideas, better technology, better diffusion of technology, better human capital, better skills match — I think it’s a lot of small things that you have to do right to get an economy humming. The story of let’s keep interest rates low and that will help us, that’s kind of over for now.

Related to that are the demonstrations by Fed Up and the Center for Popular Democracy that were held Thursday. Any additional thoughts on their point of view, that there’s still more that the Fed can do?

I love the people that come here. I think they’re a really great slice of the American workforce. It’s really nice that they’re willing to take time out of their lives to come out here and talk to us boring central bankers.

They want to talk about low nominal interest rates as solving difficult problems of how our labor markets operate and how our labor markets are unfair to many people. I would like them to think about the German labor market reforms that were done over the last decade. Germany had very high unemployment for a long time. It was an endemic problem, and then they did these reforms and got their unemployment rate cut in half — even though Europe went through a double-dip recession during that period.

It showed to me that there are ways to attack these problems, and I think we could do that in the U.S. I think they should refocus their efforts on the labor secretary, so we could get those kinds of reforms going. People aren’t even talking about that.

By Ylan Q. Mui

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