EPI News

Rethinking economics

On April 8, EPI President Lawrence Mishel joined a group of prominent economists from around the world at Kings College, Cambridge in the U.K. for the launch of the Institute for New Economic Thinking, a nonprofit organization formed to challenge conventional thinking in economics.

The Institute, which was founded in New York City late last year with a $50 million pledge from investor and philanthropist George Soros, is headed by Robert Johnson, an EPI board member and former managing director of Soros Fund Management who also served as chief economist for the U.S. Senate Banking and Budget Committees. EPI board member Robert Kuttner also attended.

Adair Turner, chairman of the Financial Services Authority, which regulates the financial sector in the U.K., delivered an address at the conference that outlined some of the problems with the prevailing economic theory, and what he described as “a dominant conventional wisdom that markets were always rational and self-equilibrating.”

“We need a fundamental challenge to recent conventional wisdom,” Turner said.

Mishel said he concurs. “Flawed economic thinking brought us the economic squeeze on working families over the last 30 years as well as the catastrophic current worldwide recession, so we cannot replace the dominant conventional wisdom quickly enough.”

Enforcing minimum wage, overtime pay
Surveys show that a large portion of workers across a range of industries from retail to construction and homecare are often paid less than the minimum wage or are denied overtime pay. While workers have at times successfully sued employers such as Staples Inc. and Wal-Mart Stores Inc. for back pay, fear of losing their jobs too often stops them from complaining.

EPI Vice President Ross Eisenbrey has contributed to a new report, Just Pay: Improving Wage and Hour Enforcement at the United States Department of Labor, by the National Employment Law Project, which makes a series of recommendations for strengthening worker protections. Among its recommendations are ending an exemption that permits home healthcare workers to be paid less than minimum wage, and closing loopholes that unfairly disadvantage white-collar workers from collecting overtime pay.

EPI in the news
A Washington Post blog featured a Q&A with EPI’s Mishel, who explained why strong job and wage growth does not necessarily resume as soon as a recession is officially over. While recessions are officially considered to be over when the economy has shown a sustained resumption in growth, Mishel said that the average person will not necessarily see an improvement in his or her own life at that point. Mishel noted that, starting in the 1990s, recessions have taken on a different pattern in which productivity accelerates rather than decelerates. That means that the economy needs to grow very rapidly to create jobs. The growth seen today is still slow, he said.

Mishel also published an op-ed in USA Today, arguing that a rising stock market alone is no reason for celebration, given the millions of jobs that are still needed before a robust recovery can get underway. He said the country needs to create 100,000 jobs every month just to prevent the unemployment rate from moving higher, and will require about 300,000 new jobs per month to make a substantial dent in unemployment.

“By the end of 2012 – more than two years from now – there is a very real chance that unemployment could still be 8% or higher,” Mishel wrote. “To guard against this unacceptable outcome, Congress should pass job legislation, starting with a bill sponsored by Rep. George Miller (D-Calif.) that would create 1 million jobs in local communities around the country.”

Upcoming events
On Thursday evening, April 22, Robert Kuttner, EPI board member and co-editor of The American Prospect, will lead a conversation inspired by his new book, A Presidency in Peril, about the Obama presidency. The event, which is being hosted by EPI along with Demos, Public Citizen, The American Prospect, the Campaign for America’s Future, and Chelsea Green Publishing, will run from 5:30 to 7:30 pm at the offices of Public Citizen at 1600 20th St., NW in Washington, D.C.
The event is free but registration is required. Click here to attend.