- The richest are pulling ahead across racial groups, but inequality is worsening between middle-income and poor whites while it stays stable or declines slightly for other groups. That’s happening as whites at the very bottom of the income ladder see their earnings fall.
- Don’t take that as good news for minorities. Poor blacks still make a lot less than poor whites. In fact, blacks, Hispanics and American Indians cluster at the bottom end of the earnings scale.
- Income mobility decreased for all races and ethnic groups over the study period. Rich whites and Asians dominate the higher rungs, and they increasingly stay put. Blacks, Hispanics and American Indians may move within their own subgroups, but they’re just shuffling around on the bottom of the overall earnings ladder.
Free Trade’s Promise of Prosperity Comes With a Big Caveat
By: Jeanna Smialek | Aug 29 2017 at 10:48 AM | International Trade
(Bloomberg)—Economists are having a tough conversation about trade. For decades, they’ve advocated a free flow of goods and services, based on the Econ 101 idea that countries produce whatever they have a comparative advantage in creating, boosting overall welfare. But in the face of populist backlash and skyrocketing inequality, academics and policy makers are grappling with the reality that globalization has come with potentially destabilizing distributional consequences.
The topic took center stage at the weekend’s gathering of central banking’s top brass in Jackson Hole, Wyoming. This week’s economic research wrap includes important work on trade and earnings distributions. We start by looking at how trade impacts welfare, move on to mobility trends in the U.S., and finish with links to a few Jackson Hole presentations. In between, we summarize studies on job matching and the housing crisis. Check this column each week for new and interesting research from around the world.
How trade reshuffles the decks
Researchers are taking a stab at quantifying one of the hottest questions in economics right now: how much do winners win and losers lose in the case of a trade shock?
The welfare gap is big, BI Norwegian Business School’s Simon Galle, U.S. Census Bureau’s Moises Yi and University of California at Berkeley’s Andres Rodriguez-Clare find, looking at changes in manufacturing employment and average earnings across geographies and education levels. While China’s rise has increased average welfare in the U.S., a small group representing a little less than 7 percent of the population experienced losses as high as five times the average gain. Those effects were regionally concentrated in places like southern Appalachia.
Race and mobility
While we’re talking about distributional outcomes: this study is a big deal. Researchers use tax data for a massive U.S. population set over a long time span (2000 to 2014) to track trends in income mobility and inequality across a broad swath of race and ethnic groups. The main findings: