podesta_email_04577.txt

podesta-emails 1,302 words email

P17 D6 V16 D3 P22

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are of course related but are quite different. Let me "count the ways" that the two concepts differ: - They are definitionally different: Income insecurity reflects variability in income and spending. Recent studies have shown that, in any given month, individuals across the income spectrum can experience a decline in income or a spike in spending that materially exceeds the savings of a typical household (see the recent work done by Diana Farrell at the JPMC Institute which is cited below). According to recent Fed study, the average American house-hold could not finance a $400 shortfall without borrowing. And the data suggests that this is a widespread phenomenon in the US and not just a feature of poverty. Income insecurity is of course more relevant to people's with low incomes associated with inequality but it is an entirely different phenomenon. - They have different causes: Income insecurity results from the changing nature of work that was accelerated by the recession and which includes, most notably, the increase in independent contractors plus part-time workers and free-lancers. Up to 35MM workers are not permanently attached to a work-place (ie do not have a full-time job). Since their hours or projects can vary significantly from month to month, their income is unpredictable and volatile. And, since spending can also vary enormously from month to month (eg health care expenses, car repairs, tuition payments, etc), their income volatility and lack of savings creates enormous house-hold insecurity. You can probably recite the causes of income inequality as well as I can - globalization, out-sourcing, technology and quantitative easing are the most prominent. - Public policy responses are different: There can be some innovative public policy and private market responses to income insecurity. These include adjustments to unemployment insurance, workman's comp, OSHA, etc. as well as savings, insurance and credit products. Income inequality, in contrast, can be addressed by a very different set of public policy responses that are either very long term in nature (eg educational reform) or not politically attractive (eg redistribution via tax and spending policies). I suspect that income insecurity is considerably more descriptive of people's lives because it is how they experience their own personal economics - while inequality is more of an abstract concept with less day-to-day relevance to real people. The decline in steady jobs and the rise in independent/part-time/"gig" work is, in my view, the biggest change in the nature of work in the US since women enter the workforce at scale in the '70s and '80s. Politicians and policy-makers who focus on insecurity might tap into something which resonates with voters and which enables them to think creatively about policy responses. JPMC Institute Study: http://www.jpmorganchase.com/corporate/institute/document/54918-jpmc-institute-report-2015-aw5.pdf Glenn Hutchins > On Jul 8, 2015, at 12:06 AM, John Podesta <[email protected]> wrote: > > Glenn, > I'm being dense but agree that the issues are linked as Neera suggests. Your putting a lot of weight on the difference between income inequality and income insecurity but while i get the difference, I'm not getting why you think the latter is more descriptive of the actual economic experience and find it more politically salient? Can you explain for the dummies? > John >> On Jul 6, 2015 4:39 PM, "Neera Tanden" <[email protected]> wrote: >> Isn't stagnant wage (for the bottom 90%) part of the reason we have rising inequality? I guess I don't see these as two separate things. But, as you know, I've always seen rising inequality as more of a problem of declining fortunes for the middle class and people trying to get into it, than a problem of too many wealthy people. I would definitely take increasing fortunes for everyone rather than poor fortunes for everyone. >> >> -----Original Message----- >> From: Glenn Hutchins [mailto:[email protected]] >> Sent: Monday, July 6, 2015 4:33 PM >> To: Neera Tanden >> Cc: John D. Podesta >> Subject: Re: my latest presentation on the economy >> >> you have (characteristically) gone right to the heart of the most difficult problem. In response to your specific question, over that last 15 years, the capacity of labor to demand a greater share of profits from productivity gains have been overwhelmed by several factors: 1) globalized wage competition as incomes have slowly equilibrated around the world, 2) the increasing portion of our economy that is generated by service work (as opposed to good production) that is less susceptible to productivity improvement, 3) the use of technology to generate productivity gains (so that the benefits accrue to capital rather than labor), 4) the overhang on the labor market and wages from discouraged workers who dropped out and the long-term unemployed, 5) the replacement of lost middle wage jobs with lower wage jobs, and 6) more recently, the change in the nature of work itself which is now more part-time, project (or "gig") oriented and based on an independent contractor model. >> >> All of this had led to both stagnant wages and rising income insecurity - both of which are far more relevant than income inequality. I think some smart candidate for public office is going to figure this out and start talking about the modern economy in a way that resonates with workers' actual experience. >> >> The public policy response can be a re-tooling of the policies that touch on work - unemployment insurance, OSHA, worker's compensation, retirement savings etc - in a way that is relevant to the modern economy, refocusses the debate in an innovative way and proves that the candidate(s) understand the world in which the voters live. >> >> >> >> Glenn Hutchins >> >> >> > On Jul 6, 2015, at 4:08 PM, Neera Tanden <[email protected]> wrote: >> > >> > This is phenomenal. I have seen the discussion of declining productivity -- one question I have is why is it rational for workers to be more and more productive if they don't see gains from productivity in their paychecks? From an economically rationalist perspective, stagnant wages should inexorably lead to declined productivity, no? Is there an alternative view of why there's a decline in productivity? Our econ team said productivity increased 30% btwn 2000 and 2013, with no corresponding increase in wages. 30% for that time period is not great, but it's also not an historic low. >> > >> > Would love to understand why people would expect increasing productivity in the world we live in. >> > >> > -----Original Message----- >> > From: Glenn Hutchins [mailto:[email protected]] >> > Sent: Monday, July 6, 2015 3:38 PM >> > To: John D. Podesta; Neera Tanden >> > Subject: my latest presentation on the economy >> > >> > You have both expressed an interest in the past in my analysis of the global economy - so I have attached the latest version for your review. Take a look especially at pages 18-21 which detail why our labor markets are weak and how they have fundamentally changed since the Great Recession. To my mind, the big issue which the data highlights is income insecurity (rather than income inequality) to which there can be some targeted and innovative public policy responses. >> > >> > >> > Glenn Hutchins Macro Presentation.pdf