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Brad DeLong's Grasping Reality 2019-10-07 14:55:00

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Sylvia Nasar (February 14, 1992): Economic Scene; Puzzling Poverty Of the 80's Boom https://www.nytimes.com/1992/02/14/business/economic-scene-puzzling-poverty-of-the-80-s-boom.html: "In at least one vital dimension, the 80's were totally unlike the 60's. The official poverty rate, which counts the number of people whose income falls short of some minimum level, did not come down as the economy rose. While poverty shrank by a quarter in those golden Kennedy-Johnson years, it was actually higher at the end of the Reagan boom than in 1979.... How come trickle-down economics did not work last time around, especially given that the unemployment rate fell by half, or more than five full percentage points, from 1983 to 1989? Some bright young labor economists—two at Harvard, one at

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Sylvia Nasar (February 14, 1992): Economic Scene; Puzzling Poverty Of the 80's Boom https://www.nytimes.com/1992/02/14/business/economic-scene-puzzling-poverty-of-the-80-s-boom.html: "In at least one vital dimension, the 80's were totally unlike the 60's. The official poverty rate, which counts the number of people whose income falls short of some minimum level, did not come down as the economy rose. While poverty shrank by a quarter in those golden Kennedy-Johnson years, it was actually higher at the end of the Reagan boom than in 1979.... How come trickle-down economics did not work last time around, especially given that the unemployment rate fell by half, or more than five full percentage points, from 1983 to 1989? Some bright young labor economists—two at Harvard, one at Princeton—have taken a look at a variety of explanations and offered some intriguing ones of their own.... David Cutler and Lawrence Katz point out in 'Macroeconomic Performance and the Disadvantaged'... the fact that... benefits are excluded is irrelevant to the 80's because such benefits did not grow much in that decade.... Perhaps poor people were living high and hiding more of their off-the-books income?... Mr. Katz and Mr. Cutler discover... 10 percent based on consumption as compared with 13 percent based on reported income in 1988.... But, even on this measure, poverty did not decline in the 80's.... Labor's share of the economic pie, about two-thirds, did not shrink an iota in the union-busting 80's.... A widening disparity between low-wage and high-wage workers is to blame.... Not only did jobs in manufacturing, where unskilled workers used to be able to earn premium pay, shrink as a share of total jobs, but within virtually every industry, demand for unskilled workers either slipped or grew more slowly than for workers with more to offer...

...The problem may reflect the much-talked-about computerization of the American workplace, argues Alan B. Krueger... [who] traces about one-third of the growing gap between the pay of high- and low-skilled workers to the mass invasion of the computer in the nation's shops, offices and factories during the 80's.... Those who tended to use computers, he finds, are white, female and well educated. But those who do not are disproportionately black, male and high-school dropouts. Women and blacks, of course, have higher poverty rates than average and earn less per hour...


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Bradford DeLong
J. Bradford DeLong is Professor of Economics at the University of California at Berkeley and a research associate at the National Bureau of Economic Research. He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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