More About Jared Bernstein

Jared Bernstein

Jared Bernstein joined the Center in May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team. Bernstein’s areas of expertise include federal and state economic and fiscal policies, income inequality and mobility, trends in employment and earnings, international comparisons, and the analysis of financial and housing markets. He is the author and coauthor of numerous books for both popular and academic audiences, including “Crunch: Why Do I Feel So Squeezed?” and nine editions of "The State of Working America." Bernstein has published extensively in various venues, including The New York Times, Washington Post, Financial Times, and Research in Economics and Statistics. He is an on-air commentator for the cable stations CNBC and MSNBC and hosts jaredbernsteinblog.com.

Full bio and recent public appearances | Research archive at CBPP.org


Updating Overtime Rules Would Help Millions of Workers

March 14, 2014 at 2:59 pm

My latest post for the New York Times Economix blog explains why and how the federal government should update its rules on overtime pay.  Here’s the opening:

Since the Fair Labor Standards Act of 1938, it has been established that if you’re an hourly paid worker and you work more than 40 hours per week, you should get overtime pay equal to time and a half, meaning 1.5 times your base wage.  For three-quarters of a century, that standard has both rewarded people with a wage premium for working overtime, and provided an important incentive for employers to hire extra workers if they want to avoid paying the overtime premium to their existing work force.

But the law did not stop there.  It recognized that certain salaried and white-collar workers should also benefit from overtime pay, as neither their relatively low salaries nor their duties at work should exempt them.  So the law created a salary threshold below which salaried workers must get overtime and a set of “duties test” to establish whether salaried workers earning above the threshold were truly engaged in exempt duties for most of their time at work, including supervisory, managerial and executive tasks.

Unfortunately, these parts of the overtime rules have eroded, meaning that millions of workers who should be eligible for overtime are not.  Fortunately, President Obama has proposed to update these rules, and double-fortunately, he does not need congressional approval to make this type of regulatory change.

See the whole piece here.

Why We Need a Stronger Minimum Wage

January 29, 2014 at 12:18 pm

Our last post noted that support for expanding the Earned Income Tax Credit (EITC) for childless workers — as President Obama recommended last night — is growing on both sides of the aisle.  Policymakers also should help low-wage workers by strengthening the minimum wage.

Today’s minimum wage is 22 percent below its late 1960s peak, after adjusting for inflation.  Raising it to the $10-an-hour range would help to offset some of the unfavorable trends facing low-wage workers, including stagnant or falling real wages, too little upward mobility, and inadequate bargaining power that leaves them solidly on the “have-not” side of the inequality divide.

The President last night announced an executive order to raise the minimum wage for workers on government contracts to $10.10, thereafter indexed to inflation.  That’s a good first step, as I explain here.

The increase is modeled on a proposal before Congress — the Fair Minimum Wage Act of 2013 (FMWA) — to raise the minimum wage from $7.25 to $10.10 in three annual increments and then index it to inflation.  If policymakers enact the FMWA soon, by 2016 the value of the minimum wage (adjusted for inflation) would be slightly above its late 1960s peak, as the graph shows.

The question of whether raising the minimum wage reduces employment for low-wage workers is one of the most extensively studied issues in empirical economics.  The weight of the evidence is that (1) for minimum wage levels in the range now being discussed, such impacts are small, and (2) minimum-wage increases of the size enacted in the past, and under the proposals now being discussed, are a net benefit to low-wage workers as a group.  Raising the minimum wage also would modestly lower poverty and help push back against rising inequality.

Some opponents of raising the minimum wage argue that it would primarily benefit teenagers working for extra money, but the large majority of those who would benefit are adults, most of them women.  Indeed, the average worker who would benefit brings home half of the family earnings.  This reflects the fact that the low-wage workforce has gotten older (and more educated) in recent decades.

In addition, though opponents often suggest that the EITC obviates the need for a minimum-wage increase, both a strong EITC and an adequate minimum wage are needed to ensure that work “pays” for those in low-wage jobs.  The two policies are complements, not alternatives.

To lift working families’ incomes to an adequate level through the minimum wage alone, policymakers would have to raise it far above its historical level — and to a level that could raise significant concern about the effect on jobs.

Similarly, if policymakers tried to do the job solely through refundable tax credits like the EITC, the cost to the government would be well beyond what they likely would countenance.  Also, low-income workers would get too large a share of their income once a year at tax time, rather than throughout the year in their paychecks.

Working together, however, a decent minimum wage and strong refundable credits can help low-wage workers make ends meet and ensure that those considering whether to work have a strong incentive to take a job.

Income Inequality at Historically High Levels, Census Data Show

September 12, 2012 at 5:21 pm

The shares of the nation’s income going to each of the bottom three fifths of households were the lowest on record last year, in data that go back to 1967, today’s Census Bureau report shows.  The share of income going to the top fifth was the highest on record (see graph).

The bottom 20 percent of households received just 3.2 percent of all household income in 2011, and the middle fifth of households received only 14.3 percent of the income.  But the top 20 percent of households got 51.1 percent of the income in the nation, and the top 5 percent of households garnered 22.3 percent.

In short, as more of the gains of economic growth have accumulated at the top, the shares of the national income going to the bottom and middle have fallen.

Although the economy grew last year, middle-income households continued to lose ground, and the losses were particularly large for working-age households.   It’s a stark reminder that when it comes to the living standards of middle- and low-income families, overall economic growth is necessary but not sufficient.

For these families to get ahead, the economy must not only expand but that expansion must reach more households, particularly those for whom growth has been largely a spectator sport.

Income Mobility Can’t Explain Away Evidence of Increased Inequality

November 29, 2011 at 8:29 am

Some policymakers, like House Budget Committee Chairman Paul Ryan, have tried to dismiss studies like this one from the Congressional Budget Office showing a large rise in income inequality in recent decades by arguing that these studies do not account for income mobility in America.

Here’s their argument:  the data we have showing rising inequality is based on successive “snapshots” of the income ladder over time, but people are not stuck on the same rung over many years; they move up and down the ladder.  Increased income inequality means the rungs of the ladder are further apart, but if there is enough movement up and down that income ladder, where people are in a particular year would tell us very little about where they were a few years earlier or where they will be a few years later.  If mobility has increased enough, the dramatic rise in income inequality over the past thirty years is not an obvious problem.

The problem is, there’s just no evidence that mobility is increasing, and quite solid evidence to the contrary.

A new paper by Federal Reserve economist Katharine Bradbury clearly documents a statistically significant decline in the rate of mobility.  The slowdown isn’t dramatic; Bradbury accurately labels it “slight.”  But it’s there.

This graph, based on Bradbury’s analysis, shows two measures of family income mobility over ten-year spans:  the share of families in the richest fifth who move down the income scale to the middle or lower fifths and the share of families in the poorest fifth who move up to the middle or higher.

The lines basically drift down starting in the late 1970s, meaning there’s less movement between the rungs on the income ladder.  Bradbury found that the downshift over time was statistically significant (see Table 5 of her paper).

The argument that mobility offsets higher inequality may sound plausible, but the facts don’t support it.

Inequality Growing, and Government Doing Less About It

October 27, 2011 at 10:45 am

The Congressional Budget Office has released a fascinating and disturbing analysis on the growth in income inequality among American households over the past few decades.

The key findings are:

  • Inequality increased significantly over this period (see graph).  Between 1979 and 2007, incomes grew by 275 percent for the wealthiest 1 percent of households, 37 percent for the middle 60 percent of households, and 18 percent for the poorest 20 percent of households.  These figures adjust for inflation and account for the impact of taxes and government transfer payments such as Social Security and unemployment benefits.
  • The share of the nation’s total income accruing to the middle 60 percent of households fell from around half in 1979 to a bit above 40 percent in 2007.  Virtually all of this decline (and the decline in the share of income held by the bottom 20 percent of households) is reflected in the increase for the top 1 percent, whose share of the nation’s total income more than doubled.

Income Gains at the Top Dwarfed Those of Low- and Middle-Income Households

The increase in inequality mostly reflects the growing share of market income — that is, income before accounting for taxes and transfer payments — going to higher-income Americans.  Because our tax and transfer system is progressive (e.g., higher-income households pay higher federal income taxes and transfers tend to benefit those with lower incomes), taxes and transfers reduce inequality at any given point in time.

But, given that market incomes have grown more unequal, a good question is whether changes to the tax and transfer system in recent decades have made it more effective in pushing back against this rising tide of inequality.  They haven’t.  In fact, the opposite has happened.  The CBO study finds:  “Between 1979 and 2007, the Gini index [a measure of income inequality] for market income increased by 23 percent … and the index for income measured after transfers and federal taxes increased by 33 percent.”

The reason is that both federal taxes and transfers, while still progressive, have become less so over time.  In a sense, the tides of inequality have been rising, while the levees to hold them back have been shrinking.