The American Minimum Wage Would Be $24 an Hour Today If It Had Kept Pace With Productivity

A world where full-time minimum wage workers are earning $60,000 a year (at a $30 an hour wage) would be far different. A full-time minimum wage worker earns only $14,500 a year at a $7.25 an hour wage.

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President Biden has proposed raising the minimum wage to $15 an hour by 2025. This has led to the predictable cries of economic disaster from business organizations and right-wingers more generally.

The standard argument against raising the minimum wage is not supported by the evidence.

We now have considerable experience with state and local governments having substantial increases in their minimum wages. Several cities, including New York, San Francisco, and Seattle, already have a $15 an hour minimum wage. California’s statewide minimum wage is now at $14 an hour and is scheduled to hit $15 an hour for mid-size and large employers next year and all employers in 2023.

Dozens of economists have carefully analyzed these minimum wage hikes. To the surprise of many, including me, there is no evidence that these minimum wage increases have led to job loss. Instead, they have resulted in substantial improvements in living standards for millions of low-wage workers.

To be clear, this doesn’t mean that no businesses have reduced employment or possibly even gone out of business due to higher minimum wages. Small businesses are always struggling, and many close every day of the week. Any additional expense can be a burden, whether it is higher rent, the electric bill, or the minimum wage, but that is how the economy works.

We want to run the economy in a manner that ensures that workers can earn a decent living. We don’t have a responsibility to ensure that businesses can survive by paying their workers very low wages.

And again, the research indicates that when one business is cutting back employment or shutting its doors because of a minimum wage hike, another is opening or expanding employment. Economists have looked hard for evidence of job loss from these minimum wage hikes and have generally been unable to find it.

The federal minimum wage currently stands at $7.25 an hour.  It hasn’t been raised for 12 years, the longest period without a hike since the national minimum wage was first established in 1938. That translates into an annual income of $14,500 for a full-time worker. That’s not far above the poverty line for a single person and well below the poverty line of $21,720 for a family of three.

Economists often point out that If the minimum wage had simply kept pace with inflation since 1968, it would be over $12 an hour today and around $13.50 by 2025. The unemployment rate that year averaged 3.6 percent when the minimum wage was at its inflation adjusted peak value, so it did not seem to be causing unemployment then.

But this is an incredibly low bar. Setting the 1968 level as a benchmark would mean that minimum wage workers would be seeing no increase in their standard of living over a nearly 60-year period.

In the 30-year period — from when the minimum wage was established in 1938 to 1968 — the minimum wage rose in step with productivity. This meant that low-wage workers shared in the gains as the economy grew more productive and people were able to enjoy higher standards of living.

If the minimum wage had continued to rise in step with productivity growth, it would have been $24 an hour last year. By 2025 it would be close to $30 an hour, roughly twice the level that President Biden targets in his proposal. In that scenario, a full-time minimum wage worker would be earning $60,000 a year.

To be clear, raising the minimum wage to $30 an hour in 2025 would almost certainly lead to serious job loss. We have made many changes to the economy that have been designed to redistribute income upward, such as rules on patents and trade policy. Unless we reversed these policies, the economy would be unable to support a minimum wage anywhere near $30 an hour.

Nonetheless, the $30 an hour minimum wage can be a useful benchmark. It is what workers at the bottom would be earning in 2025 if we had kept the policies that we had in place over the three decades from 1938-1968.

In this context, a $15 minimum wage in 2025 can be recognized as a very modest target that will nonetheless provide enormous benefits for tens of millions of workers and their families. We really need to do it.  

Fraudulent Research on Minimum Wage Increases

A decent increase in the minimum wage would obviously decrease rates of poverty.

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President Biden’s proposal to raise the minimum wage to $15 an hour by 2025 is prompting a backlash from the usual suspects. As we hear the cries about how this will be the end of the world for small businesses and lead to massive unemployment, especially for young workers, minorities, and the less-educated, there are a few points worth keeping in mind.

While $15 an hour is a large increase from the current $7.25 an hour, this is because we’ve allowed so much time to pass since the last minimum wage hike. The 12 years since the last increase in the minimum wage is the longest period without a hike since the federal minimum wage was first established in 1938. Few workers are now earning the national minimum wage, both because of market conditions and because many states and cities now have considerably higher minimum wages.

If the minimum wage had just kept pace with prices since its peak value in 1968 it would be over $12 an hour today and around $13.50 by 2025. Keeping the minimum wage rising in step with prices is actually a very modest target. It means that low-wage workers are not sharing in the benefits of economic growth.
From 1938 to 1968 the minimum wage rose in step with productivity growth. This means that as the economy grew and the country became richer, workers at the bottom of the ladder shared in this growth. If the minimum wage had continued to keep pace with productivity growth it would have been over $24 an hour last year and would be close to $30 an hour in 2025.

There has been considerable research on the extent to which the minimum wage leads to job loss. Much recent research finds that even substantial increases in the minimum, such as the $15 an hour minimum wage that is already in place in Seattle, have no effect on employment.[1]

It is worth noting that even the research that finds the minimum wage reduces employment generally finds a relatively modest effect. A recent review article by prominent opponents of the minimum wage found that the median estimate of elasticity was -0.12 for affected workers. This estimate means, for example, that a 10 percent increase in the minimum wage would lead to a reduction in employment among affected workers (e.g. workers with less education or young workers) of 1.2 percent.

It is important to realize that even in this case we are not talking about 1.2 percent of affected workers going unemployed. Low-wage jobs turn over rapidly. For example, in a typical month before the pandemic hit, more than 6.0 percent of the workers in the hotel and restaurant industries lost or left their jobs. If we take the elasticity estimate of -0.12, it would mean that at a point in time we have 1.2 percent fewer people working in the sector as a result of a ten percent increase in the minimum wage.[2]

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A higher minimum wage also has positive societal effects. A recent review of the literature found that a 10 percent increase in the minimum wage would reduce the poverty rate by 5.3 percent. Another study found that a 50 cent increase in the minimum wage reduced the likelihood that formerly incarcerated people would return to prison within a year by 2.8 percent. The long-term effects of these and other benefits are likely to be quite large.

Finally, it is worth remembering that there is a lot of money on the side of those looking to stop minimum wage hikes. This can affect the research on the topic. While few researchers may deliberately cook their results to favor the fast-food industry, they know they can get funding for research that finds a higher minimum wage leads to job loss. There is much less money available for supporting research that finds no effect.

Probably the clearest case of such bias affecting research findings was a paper by David Neumark and William Wascher, two of the most prominent opponents of higher minimum wages. Neumark and Wascher analyzed data given to them by the Employment Policies Institute (a.k.a. “the evil EPI”), a lobbying group for the restaurant industry. They used this data to replicate a pathbreaking study by economists David Card and Alan Krueger, which found no job loss associated with a minimum wage hike in New Jersey.
Neumark and Wascher’s study found that there was in fact a significant loss of jobs in fast-food restaurants in New Jersey following the minimum wage hike. However, an analysis of the Neumark and Wascher data by John Schmitt found patterns that were not plausible. It was subsequently revealed that an owner of a number of fast-food restaurants in New Jersey and Pennsylvania (the control state) had submitted fake payroll data to the Employment Policy Institute to be used in the study. (There is no reason to believe that Neumark and Wascher realized they were working with fraudulent data.) If the faked data was removed from the analysis, the finding of minimum-wage induced job loss disappeared.

This story should be seen as a warning. Most researchers are honest and will accurately report what they find in their analysis. However, we should realize that there are some pretty big thumbs on the scale in the minimum wage battle, and those thumbs want to show that minimum wage hikes will cause job loss.

[1] A paper by John Schmitt explains why it could be the case that, contrary to the textbook story, a higher minimum wage may have no effect on employment.
[2] The actual story is a bit more complicated since typically these studies look at a specific type of worker, such as young people or workers with less education. It could be the case that employment in an industry has not changed, but we have seen older or more educated workers replacing younger and less-educated workers.

“The top 1% saw their wages soar by 160% since 1979, six times the increase of the bottom 90% of workers”

The economy has been rigged to redistribute income from most workers to the top percentile of people making the most money.

The rich aren’t just getting richer. They’re getting there faster than the rest of America’s workers.

During the last economic expansion, from 2009 to 2019, average yearly wages for the bottom 90% of workers rose 8.7% after adjusting for inflation, according to an analysis of Social Security Administration data by the liberal Economic Policy Institute (EPI). Meanwhile, pay for most of the top 10% rose 13.2% – while earnings for the top 1% jumped 20.4%.

“It’s a clear story of disempowerment of workers,” said Lawrence Mishel, co-author of the study and a distinguished fellow at EPI.

Executives at hedge funds and other top finance companies have benefited from outsized leaps in compensation, often tied to stock prices, while the vast majority of workers, including both blue- and white-collar workers, have seen their pay stagnate or climb slowly, Mishel said. He cited myriad reasons, including outdated overtime pay rules and the misclassification of many full-time employees as contractors.

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Over a longer time period, the gap between the highest-paid workers and other Americans is even starker. From 1979 to 2019, average pay increased 26% for the bottom 90%, 64.1% for most of the top 10%, 160.3% for the top 1%, and 345.2% for the top 0.1%, according to EPI.

As a result, the bottom 90% earned 69.8% of all wages in 1979, but that share fell to 60.9% last year. Meanwhile, the top 5% saw their share of total wages rise from 19.4% to 27.8%, while the top 1% nearly doubled their share, from 7.3% to 13.2%.

Instead of Only Taxing the Rich More, Change Pre-Tax Income Distribution So They Receive Less

Instead of just trying to tax the rich more, it would be better to prevent the distribution of income from being so unjust to begin with. Markets have been rigged in numerous ways to redistribute income upward to the wealthiest members of society.

Given the enormous increase in inequality over the last four decades, and the reduction in the progressivity of the tax code, it is reasonable to put forward plans to make the system more progressive. But, the bigger source of the rise in inequality has been a growth in the inequality of before-tax income, not the reduction in high–end tax rates. This suggests that it may be best to look at the factors that have led to the rise in inequality in market incomes, rather than just using progressive taxes to take back some of the gains of the very rich.

There have been many changes in rules and institutional structures that have allowed the rich to get so much richer. (This is the topic of the free book Rigged.) Just to take the most obvious — government-granted patent and copyright monopolies have been made longer and stronger over the last four decades. Many items that were not even patentable 40 years ago, such as life forms and business methods, now bring in tens or hundreds of billions of dollars to their owners.

If the importance of these monopolies for inequality is not clear, ask yourself how rich Bill Gates would be if there were no patents or copyrights on Microsoft software. (Anyone could copy Windows into a computer and not pay him a penny.) Many other billionaires get their fortune from copyrights in software and entertainment or patents in pharmaceuticals, medical equipment and other areas.

The government also has rules for corporate governance that allow CEOs to rip off the companies for which they work. CEO pay typically runs close to $20 million a year, even as returns to shareholders lag. It would be hard to argue that today’s CEOs, who get 200 to 300 times the pay of ordinary workers, are doing a better job for their companies than CEOs in the 1960s and 1970s who only got 20 to 30 times the pay of ordinary workers.

Another source of inequality is the financial sector. The government has aided these fortunes in many ways, most obviously with the bailout of the big banks a decade ago. It also has deliberately structured the industry in ways that facilitate massive fortunes in financial engineering.

There is no reason to design an economy in such a way as to ensure that most of the gains from growth flow upward. Unfortunately, that has largely been the direction of policy over the last four decades.

Investor John Bogle’s Legacy

Bogle steered many people away from the exploitation that is all too prevalent in the financial system by encouraging usage of index funds, and his legacy deserves praise for that.

Bogle’s great innovation was to minimize the cost of managing individual accounts. The key Vanguard asset is an index fund. It does minimal trading, it just tracks the market. Bogle argued, supported by much evidence, that the vast majority of investors are not going to beat the market. This means trading costs are simply a transfer to the folks running the account. Since most of us have people we would rather give money to than our stockbroker, we are better off just having an index fund.

And it does make a huge difference. Many of Vanguard’s index funds have costs of less than 0.1 percent annually. By contrast, many actively traded accounts will have fees and service charges in the range of 1–2 percent annually. This adds up over time. If you invested $1,000 that got a 6 percent nominal return, it would grow to $5,580 at Vanguard after 30 years. At a brokerage charging 1.0 percent in annua,l fees it would grow to $4,320. At a brokerage charging 2.0 percent annual fees, it would only grow to $3,240. And the gap is all money in the pockets of the financial industry.

While his low-cost index fund was a great innovation in finance, he did not personally get rich from it. He organized Vanguard as a cooperative. The people who invest with the company effectively own it.

The Failed Investments of Ivy League Schools and the Future of Hedge Funds

If the elite universities had simply invested in index funds that matched the stock market average instead of hedge funds, there would be much more money to grant to disadvantaged youth and to valuable research initiatives. Those universities have all that prestige and influence, and they even have a tax exempt status — and pound for pound they still did worse than a good average investor would have.

The New York Times highlighted the findings of a remarkable study last week. The study, by Markov Processes International, examined the 10-year returns of the endowments of the 8 Ivy League schools. The study found that all 8 endowments had lower returns than a simple mix of 60 percent stock index funds and 40 percent bonds. In some cases, the gap was substantial. Harvard set the mark with its annual returns lagging a simple 60-40 portfolio by more than 3.0 percentage points.

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And, just to be clear, the Markov comparison was overly generous to the universities. Their benchmark comparison of a portfolio of 60 percent stock and 40 percent bonds is in fact far safer than the alternative investments they hold. If they actually equalized risk, the comparison portfolio might be 80 percent or even 90 stock, making the Ivy league endowment returns look even worse.

The Ivy League schools are not the only big institutional investors who are turning to alternative investments. State and local pension funds also play this game in a big way. The beneficiaries are more often private equity partners, but the basic story is the same: people who make themselves very rich by playing financial games. And, as with the hedge fund folks and the Ivies, they do not provide the promised returns.

And, there is considerably more money at stake with public pension funds. The cumulative size of the Ivy League endowments is just under $140 billion. While this is hardly chump change, state and local government pension funds have more than $8 trillion in assets. Most of this money is not in alternative investments, but if just 10 percent were placed with private equity funds and other alternatives, it would come to $800 billion.

There is much to dislike about the behavior of these financial actors. They routinely play games with the tax code and bankruptcy law to increase returns. It is standard practice for private equity funds to leverage their companies as much as possible to take advantage of the deduction for interest on corporate income taxes.[1]

They also strip valuable assets, such as the real estate on which stores and restaurants sit, so that they can book a quick profit while leaving the companies they control more vulnerable to a business downturn. Bankruptcy is a common tool, which they use to get out of not only interest payments on debt (presumably lenders knew the risks they were taking), but also pension and health care obligations to workers, and payments to suppliers.

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In terms of inertia, people can point back to a period where the hedge funds did produce outsized returns, as did the private equity funds. People can think that the last decade or so is just an aberration, and that the good times will return.

While I can’t predict the future, there is a simple story that would imply the opposite. Both hedge funds and private equity funds prospered by finding seriously under-valued assets and then leveraging heavily to maximize their return. When there were few actors in the field, it was possible for some number of funds to make large returns this way. But now that there are many actors, with trillions of dollars to invest, seriously under-valued assets are few and far between.

This means that most hedge funds and private equity funds won’t be able to make outsized returns going forward. The high fees to the fund managers are a direct drain on returns that would otherwise more or less match the market average.

And just to be clear, we are talking about a 10-year period in which hedge funds have failed to match the market average. (It’s a similar story with private equity.) This is a long period, it’s not just a case of these funds having a bad year or two.

Excessive CEO Pay Takes Money Away from Other Workers

The op-ed provides a good analysis of the problem with the economic structures that allow CEOs to be excessively overpaid — the substantial amount of money that the CEOs are overpaid with could instead be going to other lower-level workers. Wages in the United States have hardly increased in decades for most American workers, and the CEO pocket money would make a significant difference in their lives.

The problem is the structure of corporate governance. The people who most immediately determine the CEO’s pay are the corporation’s board of directors. These directors have incredibly cushy jobs. They typically get paid several hundred thousand dollars a year for perhaps 150 hours of work.

Members of corporate boards largely owe their jobs to the CEOs and top management. They almost never get booted out by shareholders; the reelection rate for board members running with board support is over 99 percent.

In this context, board members have no incentive to ask questions like, “Could we get someone as good as our CEO for half the pay?” There is basically no downward pressure on CEO pay and every reason to boost pay. After all, if you were sitting on some huge pot of other people’s money, wouldn’t you want to pay your friends well?

Of course, the CEO pay comes at the expense of returns to shareholders, and these have not been very good in recent years in spite of the best efforts of Trump and the Republicans to help them with tax cuts and pro-business regulation. In the last two decades, stock returns have averaged less than 4.7 percent annually above the rate of inflation. By contrast, in the long Golden Age from 1947 to 1973, real stock returns averaged 8.2 percent.

With the bulk of stock being held by the richest people in the country, there is no reason to shed tears for stockholders, but the fact is they are being ripped off by CEOs and other top management. Given the choice, we should prefer the money ends up in the hands of shareholders rather than CEOs. After all, people below the top 1 percent do own stock in their 401(k)s, as do public and private pension funds. By contrast, every dollar in additional CEO pay is going to someone in the top 0.001 percent of the income distribution.

More important than the money going to the CEOs is the impact that their outlandish pay has on pay structures in the economy more generally. When the CEO is pocketing $20 to $30 million a year, other top executives are likely earning close to $10 million and even the third-tier managers might be topping $1 million.

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If a successful CEO of a large company was pocketing $2-3 million a year, instead of $20 to $30 million, the ripple effect on the pay of others near the top would leave much more money for everyone else. This gives us very good reason to worry about excessive CEO pay.

If the structure of corporate governance makes it too difficult for shareholders to collectively act to limit CEO pay, threatening them with a return to the pre-Trump 35 percent tax rate might give them enough incentive to get the job done. It has always been in the interests of shareholders to pay their CEOs as little as possible, just as they want to pay as little as possible to their other employees.

If shareholders pay a CEO $20 million more than needed to get someone to run the company, it has the same impact on the bottom line as paying $2,000 extra to 10,000 workers. No company deliberately overpays their frontline workers.

Good Immunotherapy is Amazing at Treating Cancer — And It’s Unnecessarily Expensive

Drugs are cheap to produce — it’s things like unjust government-granted patent monopolies that allow pharmaceutical companies to charge exorbitant prices that make drugs expensive.

To quote economist Dean Baker’s latest October 2018 paper:

“Many items that sell at high prices as a result of patent or copyright protection would be free or nearly free in the absence of these government granted monopolies. Perhaps the most notable example is prescription drugs where we will spend over $420 billion in 2018 in the United States for drugs that would almost certainly cost less than $105 billion in a free market. The difference is $315 billion annually or 1.6 percent of GDP. If we add in software, medical equipment, pesticides, fertilizer, and other areas where these protections account for a large percentage of the cost, the gap between protected prices and free market prices likely approaches $1 trillion annually, a sum that is more than 60 percent of after-tax corporate profits.”

On to the article though.

Last week, researchers James Allison and Tasuku Honjo were awarded this year’s Nobel Prize in medicine for their work on cancer immunotherapies, heralded by the Nobel committee as “seminal discoveries” that “constitute a landmark in our fight against cancer.”

Immunotherapies like those developed on the basis of Allison and Honjo’s work are indeed an important step towards a whole new way to treat cancer, as well as a host of other chronic diseases. However, this Nobel award should remind us that these innovative therapies are out of reach for so many patients in the United States due to the exorbitant prices drug companies charge for them.

Just weeks before the Nobel announcement, oncologist Ezekiel Emmanuel wrote in a Wall Street Journal essay, “We Can’t Afford the Drugs That Could Cure Cancer,” that “a cure for cancer has become possible, even probable” with immunotherapies, but that our health system cannot afford their price tag. Just after the Nobel announcement, Vox reporter Julia Belluz reminded us that “the average cost of cancer drugs today is four times the median household income” (emphasis added).

Immunotherapies constitute a part of the class of drugs called biologics (as opposed to chemical pharmaceuticals) that have shown very promising results in treating many previously intractable conditions, such as multiple sclerosis, asthma, chronic pain, and Crohn’s disease, due to their ability to more precisely target individual diseased cells. Therefore it’s no surprise that currently most of the top 10 best-selling drugs worldwide are biologics.

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If biologics really are the future of medicine, we must change the way prescription drugs are priced in the United States, or millions of patients will be left behind. One way to do that is to invest in public pharmaceuticals that can assure an adequate supply of and equitable access to essential medications.

Research Into How to Best Ask for a Pay Raise

This is relevant research in some respects, although it’s unclear how true all of it actually is. Timing is pretty important — employers probably have to be given an incentive, and subtle hints that a valuable employee may look for a job elsewhere with higher pay may make the difference.

To avoid the common fear of sounding greedy or obnoxious, don’t simply ask for more money. Instead say, “I would like to make $X. What would it take for me to get there?”

You might then elaborate with follow-up questions: Would it mean adding extra duties? Changing roles? Improving some aspect of the way I work now?

What’s brilliant about this approach is that it basically says, this isn’t about me and what I feel entitled to. It makes the conversation about the bargaining. And because you’re not asking a yes/no question, it immediately sets up the expectation that some deal will be struck, and we just need to find out what it is. (Sales people use this tactic when they ask, “What would it take for you to accept?”)

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Economists and psychologists have conducted multiple studies on pay negotiation tactics and human behavior. In 2014, psychologists at Columbia University found that naming a salary range with a high “floor” (i.e. the lowest amount you’ll accept) led to higher offers. In 2016, a Columbia Business School study said that cracking a joke about a ridiculous amount of money you’d like to make can “anchor” a conversation, and subtly influence the employer’s thought process so that they’re more likely to go high, too. If you know the job pays in the $60,000 range, ask for half a million. Ha, ha!

These ideas sound promising in theory, but they don’t address that initial obstacle— the fear that asking for what you want, however you go about it, will be off-putting. In this sense, Coffey’s non-scientific method feels more doable. It’s not manipulative, either. You’re asking how your employer values particular contributions for a given role, but you’re flagging your own agenda, too. Your ambition exists and you’ve declared it.

It applies equally well to men as to women, though its basic premise is in keeping with advice Sheryl Sandberg, COO of Facebook, shared at a forum last year about improving policies specifically to advance women’s economic opportunities. Sandberg said that although it shouldn’t be so, women generally are not treated the same way as men when they ask for money.

“If you are negotiating for a raise and you are a man, you can walk in and say ‘I deserve this.’ That will not backfire on you,” Sandberg said. “We know the data says it will backfire on a woman. So I think along with saying ‘I deserve this,’ [women should explain] that, you know, ‘This is important for [my] performance,’ and ‘This will make [me] more effective as a team member.’”

Sandberg said at the time that she hates to share this advice. Women shouldn’t have to adjust their behavior to accommodate a sexist structure. Men who happen to have less confidence than the average dude shouldn’t have to, either, of course, but they might feel more comfortable if they did. This compromise will get you further than not asking at all.

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Anyone considering a job offer should probably attempt to secure a higher starting salary, experts say, because it could work, and it likely will not tarnish your reputation or jeopardize your opportunity. Andréa Mallard, chief marketing officer of athleisure wear company Athleta, who also spoke at the Well + Good panel, told the young women in the crowd that they should never hesitate, because it’s an impressive move.

Whenever she has hired someone who asked for more money, she said, the pushback made her respect that person more, not less. And, if it’s possible, most employers want to hit that number that will make someone feel excited about the job.

Public Pension Fund Managers Have Lost Americans $600 Billion Over the Last Decade

Even as the stock market has boomed over the last decade, a new report finds that these foolish pension fund managers have managed to lose Americans at least $600 billion. This is an amount that’s about equal to $4200 per family.

The costs associated mean that there’s less money to be spent on public goods such as healthcare, libraries, and infrastructure. It would obviously have been much better if these public funds were simply put into low cost index funds (instead of hedge funds and private equity firms) that tried to match the market instead of beating it. (That’s usually a better course of action for most people anyway.) Reducing the pay going to those high-income fund managers would have been a clear economic gain for everyone else.

The financial industry though is mainly an intermediate resource, similar to the trucking industry. This means that unlike housing, education, and healthcare, it isn’t really valuable for its own sake. Similar to the trucking industry, which derives its value from its ability to transport goods efficiently, the financial industry derives its value to the general public by being as benevolently efficient at allocating capital as possible.

There is undeniable evidence that overall, the financial industry has become far less efficient and far more predatory for most people over the last four decades. There’s good reason to think that the financial sector is currently at least three to four times larger than it should be. Back in the 1970s, the industry accounted for about 0.5 percent of GDP, and it now accounts for about 2.3 percent of GDP. The draining difference — diverting money out of the pockets of average workers in wasteful or harmful ways — amounts to at least a few hundred billion dollars of space in the modern economy.

The parallel to this would be if the trucking industry was (all else equal) three to four times too large — there would be way more trucks than necessary to transport goods, there would be costs of heavier pollution and maintaining more salaries than necessary, and people employed as a part of the inefficient trucking industry could instead be working on something with more productive value. To prevent those two industries from becoming corrupted due to excess power, as few resources (labor, oversight, and capital) should be allocated towards them as possible.

The S&L crisis of the 1980s, the stock bubble of the 1990s, and the housing bubble of the 2000s are clear examples of the financial industry allocating capital in ways that are not only inefficient but destructive as well. All of those three events lead to severe economic recessions, with the worst being the housing bubble that caused the Great Recession and global economic turmoil. Comparing this to the two decades before the 1970s, when stronger New Deal financial regulation was in place and there were no serious crashes, there’s clearly a major difference in efficiency.

In sum, it’s clear that the financial system needs to be seriously reorganized around priorities different than making the wealthiest better off at the expense of everyone else. Even moderate measures such as implementing a relatively minor financial transaction tax, limiting the size of the now oligopolistic private banks, and expanding cooperative or public banking would be helpful. Until measures like those happen though, the damage will continue, and the world risks that damage eventually compiling yet again into another major disaster.

The Amazing Victory of Alexandria Ocasio-Cortez in New York’s Primary

In the U.S., elections at higher levels have long been mainly won by whichever side spends more money. This is another way of saying that the elections there are pretty much bought. The data on this is compelling — political scientist Thomas Ferguson has done extensive work (shown in his book Golden Rule) revealing that going back decades, the campaign that spent more money usually won the election.

So when a victory such as Alexandria Ocasio-Cortez (who didn’t have a SuperPAC) defeating the corporate-indentured incumbent Joseph Crowley happens, it’s significant. The progressive Ocasio-Cortez campaign was outspent by an estimated 16 to 1, yet it still managed to achieve a fairly strong victory.

About 75 percent of Americans want some form of campaign finance reform because of how obvious it is that political elections have been corrupted by too much money in politics. So while it’s very good that a candidate such as Ocasio-Cortez has shown the ability to win, if America had a fairer campaign finance system, it would be easier for a candidate such as her to do so. That’s something important to know for the future, so that more good candidates can be elected to positively reform America.

Campaign Finance Reform — 75% Approval

The dreaded extent of money in politics shows itself.

Amidst a widely-shared recognition that the country is effectively being run by powerful special interests, a new poll out Friday shows that more than 3 out of 4 Americans now support serious campaign finance reform as a way to mitigate the corrupting influence of money in the nation’s democracy.

The results of the extensive Pew Research Center survey, released Thursday, reveal Americans “see the country falling well short in living up to” democratic ideals and values, and believe core changes are needed in the political system.

Seventy-six percent say the government is run by a few big interests, a level unchanged since 2015. Just 21 percent say the government is run for the benefit of all.

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The new survey also shows widespread backing of campaign finance reform.

Over three-quarters of Americans—77 percent—say that there should be limits on the amount of money political candidates can spend on campaigns. There is strong support from both Democrats (85 percent) and Republicans (71 percent).

A majority of Americans—65 percent—say they believe new campaign finance laws would be effective in limiting the amount of money in political campaigns.