Wed. Dec 1st, 2021


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Every first Friday of the month I get a lot of television requests to talk about job numbers. There is the usual scramble about what they say about the Biden administration, the post-Covid recovery economy and the changing nature of labor markets. But what do these figures – or any of the other conventional data compiled by the US Bureau of Labor Statistics (BLS) and other statistical agencies – really tell us about our true well-being? And do they really give a misleading picture of our economy itself?

This is a lively question in Washington these days. A few months ago, I interviewed Heather Boushey, a member of Biden’s Board of Economic Advisers, who spoke about the administration’s efforts to rebalance what she described as the three legs of the economic chair – land, labor and capital. Consider this excerpt from our conversation below:

“Many of the criteria and criteria we use now are the ones we created almost a century ago. So the data we have now tells a story about the economy that I think is misleading in many ways. Take the gross domestic product, which since the late 1970s has increasingly not been a good indication of what is happening to the average American or the average American family. If you look at the period from the mid-20th century to the late 1970s, when GDP grew by 3 percent, then it was the case that most Americans saw their income grow by about 3 percent. So we were really a country growing together and GDP meant something. Since the 1970s, GDP has increasingly indicated what is happening at the very top [of the economic spectrum] in a strange way. Those in the bottom 80-90 percent of the income distribution experience income growth that is less than the average GDP growth. . . But those at the top may see 6 percent growth in their income. Because of inequality, that measure that we still report every quarter does not mean what it used to mean and it is confusing. This is not the experience of the vast majority of Americans. What we need to do is really disaggregate GDP. So when we get the numbers every quarter, we’ll see what it looks like over the revenue distribution. I do think to give those criteria much more insight. ”

Efforts to create more and better standards are now picking up, with academics at various institutions looking for a better way to measure growth and well-being. For example, last week I spoke to former Greek Economy Minister Dimitri Papadimitriou, who is now president of the Levy Economics Institute at Bard College. The institute has awarded a $ 300,000 federal contract by the BLS to study how households actually produce and spend in much greater detail than is currently being calculated.

The hope is that it can help policymakers better understand both consumption and inflation at a time when much input on these issues does not seem to match. An example: one area of ​​household consumption that is not tabulated in the data is women’s unpaid work. And yet, this is probably the largest share of household consumption as a whole, in the sense that it represents free childcare, chores, housekeeping, and so on. (Sorry guys, the statistics show that even awake men do much less housework than their female counterparts).

Since it is unpaid and not tracked, we have no idea what kind of spending is suppressed, or how much more free time women with paying jobs can have – to earn or care – if we had an idea of ​​what this criterion was. As Papadimitriou points out, by taking better account of such production, we can get a more accurate sense of consumer demand, which in turn can help fuel an increasingly controversial debate on things like inflation (the Bard team will make their money used to study it in detail).

Similarly, there is a gaping hole in our understanding of housing costs. When households are surveyed twice a month by the BLS about this, homeowners are asked to estimate their housing costs. But it distorts the real worldview of what those costs might be. Think about it, I live in a house I bought in 2007, with a lot of cash off, and it’s roughly doubled in value since then. The mortgage I pay for the amount of square footage I have is relatively low. At current market prices, I expect that if a tenant were to rent out this space, they would pay two to three times more than the equivalent of my mortgage. This, of course, skews our sense of inflation. (On that note, I’ll be exploring in a future column whether house prices might be the new bread price in the sense that it can become a gathering point for wealth inequality, and will divert some thoughts on what needs to be done about it.)

I’m glad the White House is starting to think about the way we understand, and do not understand, our economy, based on old or flawed criteria. There is definitely a wealth of work that needs to be done to understand the digital economy.

Just for fun, here’s one metric I think should exist: the dry blow index. As a regular hair salon visitor, I think you can get a feel for the development of the high-end service economy in any given city by the number of blow dryers that exist.

Ed, if you could come up with an eloquent measure, fun or serious, what would it be?

Recommended reading

Edward Luce responds

Rana, I think Heather Boushey is right. Our old economic standards are increasingly misleading. It has always struck me that total GDP growth is the most useful in terms of raw geopolitics – which economies outgrow others and therefore have more resources to put into arms research, etc. But in a time of labor market fragmentation and the hassle of doing a lot of work, the old standards are getting worse for measuring the economic health and mood of most people. Growing inequality makes averages increasingly misleading. That old joke that when Mark Zuckerberg walks into a bar, everyone is on average a billionaire, is replaced by the best of such analogies (at least in my book) – that the average American has 1.9 legs.

One of my favorite measures of the nature of the economy is airline loyalty card systems. The more ostentatious the return to a regular kite, the smaller the seats in basic economy. It strikes me as a microcosm of greater trends in the economy. Premium flyer clubs get weird names like the Aristocrats or Maharajas. When I fly with business these days, I half expect to be thanked for my service. The more obscure it becomes for those who turn left after boarding the plane, the more petty humiliations are handed out to those in the back of the bus. That said, at United Airlines, this is where my reward points are stored, no matter what class you fly, the food is almost equally mediocre. I do not hope the pandemic will be a pretext to smuggle in even lower standards.

Your feedback

And now a word from our Swampians. . .

In response to ‘Democrats have an Ivy League blind spot‘:

“Ed’s note provided a sobering and informative critique of elitism in the Democratic Party. Indeed, in the immediate aftermath of the Virginia race, liberal circles tried to attribute ‘dog whistle racism’ to Glenn Youngkin’s victory, and Democratic lawmakers refused to acknowledge their failure to pass President Joe Biden’s landmark legislation. feed was a contributing factor. The attempt to discipline the result does a disservice to understanding what their defeat in the state attributed. I’m sympathetic to Rana’s view that more needs to be done to reach rural voters, spend more time in often neglected state universities and military colleges. “If Democrats continue to hold a far-sighted view of their constituencies, there will be a long way to go to retain control of the House, Senate and presidency.” – Osiris Parikh, Beaverton, Oregon

We look forward to hearing from you. You can email the team to swampnotes@ft.com, contact Ed by edward.luce@ft.com and Rana on rana.foroohar@ft.com, and follow them on Twitter at @RanaForoohar and @EdwardGLuce. We may include an excerpt of your answer in the next newsletter

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