Black Unemployment falls below 10%

                         Comments due by Sept.11, 2015

We know that the economic recovery’s effects have been unevenly felt. The recovery has been kind to those who invested in certain stocks or whose title begins with the word “chief.” It’s been less charitable to certain groups, like African-American workers, whose unemployment rates have lingered in the double-digits for most of the past eight years.

For the first time since 2007, the national unemployment rate for African-Americans dipped below 10% in the second quarter of 2015,  according to the Labor Department. Despite that improvement, at 9.5%, it’s still nearly twice the national average of 5.3%, and more than double the 4.6% rate for whites.

Overall, only 11 states had African-American unemployment rates below 10%, according to an analysis by Valerie Wilson, director of the Economic Policy Institute’s Program on Race, Ethnicity, and the Economy. Only eight states have seen unemployment rates for black workers fall below prerecession levels. In Alabama, the African-American unemployment rate is more than twice what it was prerecession: 10.9%, compared with less than 5% throughout 2007.

The nationwide average masks wide variations between states and between races. For example, Tennessee has the lowest unemployment rate for black workers, at 6.9%. But that’s about the same rate as the state with the highest unemployment rate for whites, West Virginia, where unemployment stood at around 7% for the quarter.

Similarly, the ratio of unemployment rates for black and white workers swings from the low end in Tennessee, where the black unemployment is 1.2 times that of whites, to a ratio of 5.1 in Washington, D.C. Dr. Wilson attributes the especially high rate of black unemployment to the District’s concentrated urban population, which she said is not entirely comparable to state populations.

Why the gap? Dr. Wilson points to education and work experience as two major factors. Twenty-two percent of blacks had completed four years of college in 2014, versus 32% of whites, according to the Census Bureau.

However, as researchers at the Center for Economic Policy Research have pointed out, that piece of paper is no hedge against unemployment. A 2014 analysis found that 12.4% of black college graduates aged 22 to 27 were unemployed, compared with 5.6% of all college graduates in the same age group.

So what else explains the gap? Unsurprisingly, discrimination appears to be at play. Using what are known as “audit surveys,” researchers have found that black job applicants are less likely to get called back for job interviews or hired, compared with white and Hispanic applicants with identical credentials. One well-known 2009 study byDevah Pager, Bruce Western and Bark Bonikowski used trios of actors, one black, one white, and one Hispanic, to apply for low-wage jobs like sales associate or waiter around New York City. The study found that blacks without a criminal record fared about as well as whites with a stated criminal record (i.e., who listed their parole officers as a reference).  “The findings suggest that a black applicant has to search twice as long as an equally qualified white applicant before receiving a callback or job offer from an employer,” the authors wrote.

William Spriggs, chief economist with the AFL-CIO and the former chair of Howard University’s economics department, points to the large variations by state as evidence that local labor market dynamics play a role, specifically, the informal flow of information about job opportunities within a racial group.

“Tennessee isn’t five steps ahead of South Carolina,” a state with 12.8% black unemployment, he said. “The labor market is highly segregated by race, in terms of information flows.”

Labor market cycles may also be a factor. A 2012 paper, “Who Suffers During Recessions?” by Hilary Hoynes, Douglas Miller and Jessamyn Schaller, found that “men, blacks, Hispanics, youth, and those with lower education levels experience more employment declines” relative to women, whites and the more educated, due the more highly cyclical nature of the industries in which they were concentrated, such as construction or manufacturing, which are particularly sensitive to economic booms and busts.

African-Americans took one of the hardest hits during the financial crisis, losing one-third of their aggregate household wealth between 2010 and 2013, a Pew Research Center analysis found. Even in a recovery, with so many still looking for work, it’s hard to envision how those families can begin to rebuild. A.L. Sussman (WSJ)

Economic Policy :US vs EU

 America has yet to achieve a full recovery from the effects of the 2008 financial crisis. Still, it seems fair to say that we’ve made up much, though by no means all, of the lost ground.

But you can’t say the same about the eurozone, where real G.D.P. per capita is still lower than it was in 2007, and 10 percent or more below where it was supposed to be by now. This is worse than Europe’s track record during the 1930s.

Why has Europe done so badly? In the past few weeks, I’ve seen a number of speeches and articles suggesting that the problem lies in the inadequacy of our economic models — that we need to rethink macroeconomic theory, which has failed to offer useful policy guidance in the crisis. But is this really the story? I’ve been revisiting economic policy debates since 2008, and what stands out from around 2010 onward is the huge divergence in thinking that emerged between the United States and Europe. In America, the White House and the Federal Reserve mainly stayed faithful to standard Keynesian economics. The Obama administration wasted a lot of time and effort pursuing a so-called Grand Bargain on the budget, but it continued to believe in the textbook proposition that deficit spending is actually a good thing in a depressed economy. Meanwhile, the Fed ignored ominous warnings that it was “debasing the dollar,” sticking with the view that its low-interest-rate policies wouldn’t cause inflation as long as unemployment remained high.No, it isn’t. It’s true that few economists predicted the crisis. The clean little secret of economics since then, however, is that basic textbook models, reflecting an approach to recessions and recoveries that would have seemed familiar to students half a century ago, have performed very well. The trouble is that policy makers in Europe decided to reject those basic models in favor of alternative approaches that were innovative, exciting and completely wrong.

In Europe, by contrast, policy makers were ready and eager to throw textbook economics out the window in favor of new approaches. The European Commission, headquartered here in Brussels, eagerly seized upon supposed evidence for “expansionary austerity,” rejecting the conventional case for deficit spending in favor of the claim that slashing spending in a depressed economy actually creates jobs, because it boosts confidence. Meanwhile, the European Central Bank took inflation warnings to heart and raised interest rates in 2011 even though unemployment was still very high.

But while European policy makers may have imagined that they were showing a praiseworthy openness to new economic ideas, the economists they chose to listen to were those telling them what they wanted to hear. They sought justifications for the harsh policies they were determined, for political and ideological reasons, to impose on debtor nations; they lionized economists, like Harvard’s Alberto Alesina, Carmen Reinhart, and Kenneth Rogoff, who seemed to offer that justification. As it turned out, however, all that exciting new research was deeply flawed, one way or another.

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And while new ideas were crashing and burning, that old-time economics was going from strength to strength. Some readers may recall that there was much scoffing at predictions from Keynesian economists, myself included, that interest rates would stay low despite huge budget deficits; that inflation would remain subdued despite huge bond purchases by the Fed; that sharp cuts in government spending, far from unleashing a confidence-driven boom in private spending, would cause private spending to fall further. But all these predictions came true.

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The point is that it’s wrong to claim, as many do, that policy failed because economic theory didn’t provide the guidance policy makers needed. In reality, theory provided excellent guidance, if only policy makers had been willing to listen. Unfortunately, they weren’t.

And they still aren’t. If you want to feel really depressed about Europe’s future, read the Op-Ed article by Wolfgang Schäuble, the German finance minister, that was published Wednesday by The Times. It’s a flat-out rejection of everything we know about macroeconomics, of all the insights that European experience these past five years confirms. In Mr. Schäuble’s world, austerity leads to confidence, confidence creates growth, and, if it’s not working for your country, it’s because you’re not doing it right.

But back to the question of new ideas and their role in policy. It’s hard to argue against new ideas in general. In recent years, however, innovative economic ideas, far from helping to provide a solution, have been part of the problem. We would have been far better off if we had stuck to that old-time macroeconomics, which is looking better than ever.(Paul Krugman NYT)

Behind the slow pace of wage growth

                                                                               Comments due by April 18, 2015

Despite continued progress in the labor market, wages have been rising slowly. In 2014, total nonfarm payroll employment rose by 3.1 million and the unemployment rate declined by 1.1 percentage points to 5.6 percent, indicating that the labor market was improving. Meanwhile, average hourly earnings and compensation per hour rose only by 1.8 percent and by 2.5 percent, respectively, a smaller increase than one might expect after 5 years of economic recovery. In this article, we look at some factors behind the slow pace of wage growth, including slow productivity growth and labor’s declining share of income.

One reason wages have been rising slowly is that prices have been rising slowly. Low inflation, however, does not explain the trend in wages completely. Even after subtracting the effect of inflation, wages have been rising slowly. In 2014, real average hourly earnings and real compensation per hour rose, respectively, by only 1.2 percent and 1.3 percent.

In fact, real wages have been rising slowly for several years. Measuring from the end of the Great Recession, real wages have barely risen—real compensation per hour has risen only by 0.5 percent, much less than at this point in past recoveries. The lack of strong wage growth has been one factor that has held down the growth of income, consumer spending, and the recovery.

Some temporary factors may explain, in part, weak real wage growth during the recovery. For instance, Daly and Hobijn (2015) suggest that many firms were not able to reduce wages during the Great Recession, so they compensated by not raising wages as fast during the recovery. This factor, however, became less and less important over time as the recovery continued to progress.

Another factor that may have held down wage growth during the recovery is a change in the composition of jobs and hours—a relative increase in  lower-paid jobs and hours may have depressed the average wage. Data, however, suggests that a change in the composition of occupations did not have a strong effect on the average wage: The employment cost index for total compensation—an index that tracks the cost of labor for a fixed composition of occupations—has risen by 11.5 percent during the recovery, which is similar to the growth in average hourly earnings and compensation per hour, which have risen, respectively, by 11.3 percent and by 11.5 percent. Also, Elvery and Vecchio (2015 , Table 2) find that the effect of the change in the mix of occupations on the change in the average wage between 2010 and 2013 was small (and actually positive). Similarly, Mancuso (2015) finds that shifts in industry composition do not explain much of the weakness in wage growth during the recovery.

Some longer-term changes in the economy have likely played a larger role in depressing real wage growth. The first is the slowdown of labor productivity in the last decade. Productivity growth in the nonfarm business sector has averaged only 1.46 percent since 2004 and 0.85 percent since 2010. As the growth of labor productivity is a key determinant of real wage growth in the long run, the slowdown of productivity has probably helped to depress wage growth.

Other long-term changes in the economy, including the evolution of the technology used to produce goods and services, increased globalization and trade openness, and developments in labor market institutions and policies, have caused labor’s share of income to decline at a faster pace since 2000 than in previous years, and in doing so they have likely held down real wage growth. After declining at an average rate of 0.1 percent per year from 1960 to 2000, the labor share has declined more rapidly since 2000, on average about 0.5 percent per year (see Jacobson and Occhino, 2012). In an accounting sense, the faster decline since 2000 has subtracted about 0.4 percentage points per year from average real wage growth relative to the period before 2000.

Going forward, wage growth will likely pick up in the short run, as inflation rises and labor market conditions strengthen further. In the longer run, whether average real wage growth remains lower than in the past will depend on whether trend productivity growth continues to be low and whether other fundamental economic forces cause further declines in the labor share of income.(The Big Picture)

EU Targets US Tech Giants.

                                                                   Comments due April 11, 2015.

The European antitrust investigation into Google appears to be heating up. More European countries are looking into Facebook’s privacy settings. And Apple, which already is under scrutiny for its low corporate tax arrangements in Ireland, is now facing potential antitrust questions from the European Commission about the company’s new music streaming service expected this year. The new developments offer the latest and perhaps clearest sign yet that American tech giants face intensifying scrutiny in Europe — pressure that could potentially curb their sizable profits in the region and affect how they operate around the world. It is unclear what exactly set off the recent flurry of moves. But many local lawmakers have long been wary of the dominance of American tech companies, and those politicians have become increasingly outspoken about how the companies have used their financial deep pockets and ability to innovate quickly to outmuscle European rivals. “It’s no wonder Europe is going after these companies,” said Luca Schiavoni, a regulatory analyst at the technology research company Ovum in London. “They are the biggest fish in the pond and have become very  powerful. That inevitably means regulators are going to get involved.” Europe’s willingness to police tech companies’ activities contrasts with a relatively hands­off approach favored by United States authorities, which have so far refrained from widespread antitrust lawsuits and privacy investigations into how tech companies use people’s online data. In recent years, however, American tech companies have become the central target for Europe’s antitrust officials. Advocates say this approach is aimed at limiting the dominance of a small number of companies, though industry executives say Europe is using the investigations to promote the region’s own tech companies, which often have been unable to compete with their United States rivals. On Thursday, Apple became the latest West Coast company to face this scrutiny after it was revealed that European competition officials had sent questionnaires to several music labels and rival music streaming companies, according to several people with direct knowledge of the interactions who spoke on the condition of anonymity. The questions are part of attempts by European authorities to gather evidence to decide whether an official antitrust investigation into Apple’s new music service will be needed, the people added. News of the questionnaires sent to music industry executives was earlier reported by The New York Post. An official investigation by the European Commission, the executive arm of the European Union, could lead to big fines against Apple and other restrictions on its activities if the company is found to have broken antitrust rules. In a previous antitrust case, for example, Microsoft agreed to pay fines totaling $1.8 billion for breaking European competition rules. The most recent concerns focus on whether Apple, a crucial partner for the music industry, may try to persuade labels to favor its new paid streaming service over those of rivals like Spotify, which have free tiers, according to one executive at a major label, who declined to speak publicly. Europe’s antitrust officials want to ensure that Apple’s new subscription service does not gain an unfair advantage over rivals like Spotify, the music executive added. Representatives of Apple, the European Commission, Spotify and the major record companies all declined to comment. Perhaps no company is in European regulators’ cross hairs more than Google, whose search engine holds roughly a 90 percent share of the region’s online search market. As part of its five­year antitrust investigation into whether Google used its dominant position to favor its own services over rivals, the European Commission has now asked several companies that had filed complaints against the search giant to make their confidential submissions public, according to several people with direct knowledge of the matter who spoke on the condition of anonymity. By asking several of these companies to make their submissions public, the European Commission can ask Google to respond to the companies’ claims and bring the case closer to resolution, according to several of the people. News of the requests to companies to make their submissions public was earlier reported by The Wall Street Journal. Officials and analysts warned, however, that it was still unclear whether the European Commission would file charges against Google. Yet by pushing ahead with their investigation, Europe’s antitrust officials have gone beyond efforts by the Federal Trade Commission, which is under renewed scrutiny over how it handled its own investigation into Google. A recently released internal report by the agency suggested that some officials had recommended that Google should have been sued for antitrust practices, though the F.T.C. decided in 2013 not to bring charges. If Google is found to have broken European antitrust rules, the financial penalties could be substantial. Officials have the power to fine Google up to 10 percent, or roughly $6.5 billion, of its most recent annual sales and to place restrictions on the company’s operations in Europe. A spokesman for Google declined to comment. “Everyone is very aware that this case has to come to some sort of conclusion,” said Mario Mariniello, a researcher at the think tank Bruegel in Brussels and a former antitrust official. “The pressure is rising. They will have 4/4/2015 Antitrust and Other Inquiries in Europe Target U.S. Tech Giants ­ NYTimes.com http://www.nytimes.com/2015/04/03/technology/europe­regulators­apple­google­facebook.html 4/5 to come to some sort of decision soon.” European lawmakers have also paid increasing attention to the tax activities of the likes of Apple, Facebook and Amazon, many of which have used complicated accounting structures to reduce their tax burdens across the region. In the last 12 months, countries like France and Britain have criticized companies like Google for not paying enough tax on their operations in those countries. And in a sign that European regulators’ interest in American tech companies has continued to expand despite industry efforts to appease local authorities, several European data protection regulators are now questioning how companies like Facebook and Google protect the online data of the region’s more than 500 million people. Many of the region’s data protection watchdogs are reviewing whether Facebook’s new privacy policy, which went into effect from Jan. 1, broke the region’s tough privacy rules, which offer people greater control of how companies can use their data than is currently offered in the United States. On Thursday, French, Italian and Spanish privacy officials said they had opened investigations into the social network’s privacy policies; similar inquiries have already been started by Dutch, Belgian and German officials. The regulators are asking whether Facebook gained sufficient approval from users when the company gained access to their online data. “We’re not afraid of scrutiny,” a Facebook representative said in a statement. “We have been responsive to local regulators and stand ready to respond to additional questions.” The move by regulators comes less than a week before the first hearing in a separate class­action lawsuit against Facebook in Austria, in which roughly 25,000 claimants are arguing that the social network misused their online data. In response, Facebook contends that it has complied with the region’s data protection rules. “This is just the beginning of our investigation,” said Mathias Moulin, deputy director of enforcement at the French data protection regulator, who is 4/4/2015 Antitrust and Other Inquiries in Europe Target U.S. Tech Giants ­ NYTimes.com http://www.nytimes.com/2015/04/03/technology/europe­regulators­apple­google­facebook.html 5/5 overseeing the watchdog’s review of the company’s activities. “Facebook affects millions of people across Europe. There are a lot of privacy issues to look at.”

Eurobounce

                                                  Comments due by April 4, 2015

A lot of the recent data coming in show a substantial acceleration in European growth. And you know what will be coming next: claims that this (a) vindicates austerity and (b) shows that there is no reason to worry about Japanification.

Time, then, for some prophylaxis.

First, on austerity: one of the truly amazing and depressing things about the whole fiscal policy debate is the apparent inability of large numbers of supposedly sophisticated commentators to appreciate the distinction between levels and rates of change. Maybe it would help to note that the US economy grew 10.8 percent — that’s right, 10.8 percent — in 1934, but nobody would claim that the Great Depression was over? Nah, it won’t help at all.

Still, for what it’s worth: think of Keynesian economics as asserting that

GDP = multiplier*government spending + other stuff

Then if we’re looking at growth

Change in GDP = multiplier*Change in government spending + change in other stuff

Now look at euro area fiscal policy, as estimated by the IMF:

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There was a major tightening after the Greek crisis struck and Germany reverted to type, but there hasn’t been much further tightening recently. So there’s nothing especially troubling about a return to growth.

What about Japanification? There seems to be a widespread misperception that Japan spent its lost decade in a continual downward spiral, with never an uptick. Not so. There was, in fact, a return to growth in the mid-1990s that lasted until contractionary fiscal policy and a banking crisis led to recession, and another period of growth under Koizumi that, however, wasn’t enough to get Japan out of deflation:

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You really don’t want to take a short-run rise in growth as a sign that secular stagnation is no longer a worry.

Right now, I’d argue that Europe is benefiting a lot from the weaker euro, which is coinciding with a de facto, if unacknowledged, pause in austerity. But the downdrafts — shrinking working-age population, a single currency in a distinctly non-optimum currency area, and the intellectual rigidity of too many policymakers — remain. (Paul Krugman)

Don't Buy That Suit Yet !!!

                                         Comments due by March 29, 2015    
After more than a year of clearance items, markdowns and other price promotions, retailers are finally saddling up and trying to break consumers' addiction to discounts.

But will shoppers call their bluff?

According to analysts' store checks, the deep discounts that have plagued the retail industry—and slashed companies' margins in their wake—have moderated over the past few weeks, the result of lean inventory levels and a more confident consumer.

Mario Anzuoni | Reuters

Pants for sale at an Urban Outfitters store in Pasadena, California March 6, 2015.

Still, promotions remain elevated—something experts don't expect to abate any time soon.

"The core underlying issue has not changed … in that there's an imbalance of supply and demand," said Craig Johnson, president of Customer Growth Partners. "We believe that this is going to be a promotional spring, just like it was a promotional holiday."

Don't expect a deal here

Retailers running the gamut of categories, including teen labelAmerican Eagle, women's specialty store Express and leather goods firms Coach and Kate Spade have all recently pulled back on their promotional strategies.

At American Eagle and Express, shoppers have continued making purchases despite a reduction in discounts, whereas Coach is preemptively pulling back on its promotional cadence in hopes of restoring its reputation as a must-have brand. Similarly, under the new leadership of CEO Brian Cornell, Target has focused more on the "expect more" aspect of its "expect more, pay less" strategy.

And strong demand for activewear, a category in which women's sales increased 8 percent last year, has allowed companies including Under Armour and Lululemon to maintain their premium pricing.

"The segments of apparel land where there's strong growth, you're not seeing [promotions]," Johnson said.

Retailers have also been less aggressive with their email blitzes. According to data from Experian Marketing, 52 percent of retailer mailings had offers in the subject line over the holiday season; that number fell to 44 percent in January, and dipped further to 37 percent in February.

That's not to say that things have leveled off across the mall. According to Sterne Agee analyst Ike Boruchow, who tracks promotions across 46 retailers and their websites, the first two weeks of March offered a smaller percentage of "more promotional" events compared to a year ago. Still, only 27 percent of the names tracked were regarded as "less promot

Boruchow noted increased discounting at Gap's namesake and Old Navy brands, as well as at Michael Kors. Other analysts cited deep promotions at Abercrombie & Fitch and Hollister, as well as Ann TaylorLoft.

"Despite the sequential improvement, the absolute level of discounting remains elevated," Boruchow wrote in a note to investors.

Shoppers, don't worry just yet

While promotions have eased over the past few weeks, consumers don't need to wave goodbye to the steep discounts they've grown accustomed to. Analysts point to delayed spring deliveries—a result of the backlog at the West Coast ports—and an earlier Easter as two potential catalysts for deals into April.

There are also several fundamental changes that will keep the sales rolling. For one, the popularity of off-price and fast-fashion stores will continue to put pressure on full-price stores. One example is Abercrombie & Fitch's A&F Essentials line, which took the price on basic T-shirts from $30 to around $15, Johnson said.

For another, despite some consolidation in the industry—including trimmed store fleets and recent bankruptcy filings from brands such as Delia's and Coldwater Creek—there are simply too many apparel stores out there, Johnson said.

That leads to a lot of sameness when hopping from store to store, Johnson said. Therefore, aside from retailers that offer differentiated merchandise or a limited quantity of items, shoppers are savvy enough to know that if they wait a few weeks, they can get the same thing at a lower price.

"Nobody ever buys stuff at full price when it first goes onto the floor early in the quarter … because they see the pattern month after month, year after year," Johnson said. (CNBC March 16, 2015)

Income Inequality, one more time.

                                      Comments due by March 15, 2015

TOKYO – Six months after Thomas Piketty's book Capital in the Twenty-First Century generated so much buzz in the United States and Europe, it has become a bestseller in Japan. But vast differences between Japan and its developed counterparts in the West, mean that, like so many other Western exports, Piketty's argument has taken on unique characteristics.

Piketty's main assertion is that the leading driver of increased inequality in the developed world is the accumulation of wealth by those who are already wealthy, driven by a rate of return on capital that consistently exceeds the rate of GDP growth. Japan, however, has lower levels of inequality than almost every other developed country. Indeed, though it has long been an industrial powerhouse, Japan is frequently called the world's most successful communist country.

Japan has a high income-tax rate for the rich (45%), and the inheritance tax rate recently was raised to 55%. This makes it difficult to accumulate capital over generations – a trend that Piketty cites as a significant driver of inequality.

As a result, Japan's richest families typically lose their wealth within three generations. This is driving a growing number of wealthy Japanese to move to Singapore or Australia, where inheritance taxes are lower. The familiarity of Japan, it seems, is no longer sufficient to compel the wealthy to endure the high taxes imposed upon them.

In this context, it is not surprising that Japan's “super-rich" remain a lot less wealthy than their counterparts in other countries. In the US, for example, the average income of the top one percent of households was $1,264,065 in 2012, according to the investment firm Sadoff Investment Research. In Japan, the top 1% of households earned about $240,000, on average (at 2012 exchange rates).

Yet Japanese remain sensitive to inequality, driving even the richest to avoid ostentatious displays of wealth. One simply does not see the profusion of mansions, yachts, and private jets typical of, say, Beverly Hills and Palm Beach.

For example, Haruka Nishimatsu, former President and CEO of Japan Airlines, attracted international attention a few years ago for his modest lifestyle. He relied on public transportation and ate lunch with employees in the company's cafeteria. By contrast, in China, the heads of national companies are well known for maintaining grandiose lifestyles.

We Japanese have a deeply ingrained stoicism, reflecting the Confucian notion that people do not lament poverty when others lament it equally. This willingness to accept a situation, however bad, as long as it affects everyone equally is what enabled Japan to endure two decades of deflation, without a public outcry over the authorities' repeated failure to redress it.

This national characteristic is not limited to individuals. The government, the central bank, the media, and companies wasted far too much time simply enduring deflation – time that they should have spent working actively to address it.

Japan finally has a government, led by Prime Minister Shinzo Abe, that is committed to ending deflation and reinvigorating economic growth, using a combination of expansionary monetary policy, active fiscal policy, and deregulation. Now in its third year, so-called “Abenomics" is showing some positive results. Share prices have risen by 220% since Abe came to power in December 2012. And corporate performance has improved – primarily in the export industries, which have benefited from a depreciated yen – with many companies posting their highest profits on record.

But Abenomics has yet to benefit everyone. In fact, there is a sense that Abe's policies are contributing to rising inequality. That is why Piketty's book appeals to so many Japanese.

For example, though the recent reduction in the corporate-tax rate was necessary to encourage economic growth and attract investment, it seems to many Japanese to be a questionable move at a time when the consumption-tax rate has been increased and measures to address deflation are pushing up prices. To address this problem, the companies that enjoy tax cuts should increase their employees' wages to keep pace with rising prices, instead of waiting for market forces to drive them up.

Herein lies the unique twist that Piketty's theory takes on in Japan: the disparity is not so much between the super-rich and everyone else, but between large corporations, which can retain earnings and accumulate capital, and the individuals who are being squeezed in the process.

(Project Syndicate)