Gender Gap on Wages Is Slow to Close

First, there was the “mancession” that made the downturn much worse for men. Then, what my colleague Catherine Rampell has called the “he-recovery,” which has put more men than women back to work. What has remained consistent is that women remain on the wrong side of the wage gap.

Even with the same college and professional degrees, men earn more than women. And among so-called creative class workers like architects, teachers, artists, engineers, bankers and journalists, men earn much more than women, even though more women hold such jobs.

It’s similar at the bottom end of the scale. According to a report issued Thursday by the United States Government Accountability Office, a higher proportion of women finish high school than men, a milestone that is a minimum requirement for any job mobility. Women — especially younger women — are also completing bachelor’s degrees at higher rates than men. Yet they represent a higher proportion of low-wage workers, defined in the report as those who earn hourly wage rates that put them in the bottom 20 percent of the work force.

So although women make up 49 percent of the total work force, they represent 59 percent of low-wage workers. (That is down from 63 percent a decade ago.)

When women do not complete high school, they earn less than men who do not have a high school diploma. Undereducated women tend to congregate in occupations that pay less than those taken by men. Women are highly represented in health care and social assistance, for example, where their average wages are about $14 an hour. Men take jobs in construction, transportation or utilities, where their average wages are more than $19 an hour.

Yet such occupational variations cannot fully account for the wage gap. Neither can the fact that women are more likely to work part time than men.

Adjusted for factors that could affect pay, like age, race, education, number of children in the household and part-time status, women earn 86 cents for every $1 earned by men. That’s up from 81 cents in 2000.

But the study, based on an analysis of Labor Department data, could not determine whether other factors, like previous work experience or other choices made by women in the workplace, were keeping their wages from achieving closer parity, or whether there was still some other discriminatory effect.

Senator Robert P. Casey Jr., chairman of the Joint Economic Committee of Congress, which commissioned the G.A.O. report, said that he was surprised that despite higher levels of education, the gap between men’s and women’s pay hadn’t narrowed much more. “I would have said we would have seen more progress,” said Senator Casey, a Pennsylvania Democrat.

He said the findings made the need for Congressional action on job creation more acute. “Every week that goes by where you don’t have progress on those measures is obviously going to make the situation worse for everyone,” he said. “But low-wage workers are having some of the most difficult challenges, and those challenges just get more significant.”

Calculating Poverty

To preview how the Census Bureau’s new Supplemental Poverty Measure may change the portrait of poverty, The New York Times consulted multiple alternate measures that researchers have quietly published in recent years.

They included a 2009 version of the Supplemental Poverty Measure, as well as four of eight alternate measures the Census has published, incorporating recommendations from the National Academy of Sciences.

They also included studies from the University of Wisconsin and from officials in New York City, along with three state analyses by Sheila Zedlewski and colleagues at the Urban Institute.

While there are differences in the calculations, all go beyond the official measure by counting benefits like food stamps, work expenses, taxes, and the cost of living.

In addition, The Times did an in-depth analysis of one experimental data set (known as MSI-GA-CPI). It is the Census measure that comes closest to the new Supplemental Measure, while also providing a methodologically consistent look back at prerecession years.

That produced a number of interesting figures that our article length could not accommodate.

Among children, it showed poverty rates falling to 15 percent, from 22 percent, in the official count. That removes about 5.2 million children from poverty. That drop is broadly consistent with what the Urban Institute researchers found in Massachusetts, Illinois and Georgia — an average decline in child poverty of about 24 percent.

It also falls sharply for women ages 25 to 39 — many of them mothers. Many safety net programs, particularly the Earned Income Tax Credit, focus on families with children.

Among elderly, The Times’s examination of the Census data showed poverty rates rising to 13.8 percent, from 9 percent, by the official count. The 2009 Supplemental Poverty Measure and the Urban Institute studies found broadly similar climbs.

Some experts found this possibly portentous — a complication in the generally accepted story that poverty among the elderly has been on a long-term decline. Irwin Garfinkel of Columbia University said his own studies of alternate poverty measures showed that the figure had been climbing for a decade. “We’ve been slipping backwards and we didn’t know that before,’’ he said.

But others, including Bruce Meyer of the University of Chicago, cautioned that it could be a statistical anomaly. Many elderly people use retirement savings but do not report that money as income. And measures of consumption among the elderly, these experts say, have not shown a rising level of hardship.

In The Times analysis, poverty rates in rural America drop sharply, to 10.9 percent from 16.4 percent in the official count, most likely reflecting the lower cost of living. But they rise in metropolitan areas, to 14.9 percent from 13.9 percent. While poverty rises in the Northeast and West, it falls in the South and Midwest, by a total of about six million people.

The Times study found poverty dropping sharply among blacks, falling by 6.7 percentage points to 20.6 percent. Most other studies have also showed significant declines among blacks, which could reflect either that they receive relatively more benefits or live in relatively low-cost locations.

The Times study found poverty growing among Asians, as did all the others. It found poverty declining among Latinos, though by a much smaller amount than it declined among blacks. Some other studies have found Latino poverty rates rising. One possibility is that Asian and Latino immigrants have a harder time getting access to benefits. Another is that differences between the official and alternate studies reflect where people happen to live, perhaps disproportionately in high-cost areas.

What elements of the new measure lift people from poverty? The Times examined the characteristics of those Americans considered poor by the official count, but not poor by the alternate. About 70 percent lived in households that received food stamps a year. A third lived in households with housing subsidies and 19 percent lived in households that received the earned income tax credit.

A caveat: this data is not the same as what the Census Bureau will release on Monday, which among other things uses a different cost-of-living adjustment. But while the numbers may vary, the general trends are likely to remain the same.

Groupon prices IPO at $20 a share

Groupon’s highly anticipated initial public offering has been priced at $20 a share.

That leaves the Chicago company, which offers daily localized deals, valued at about $12.7 billion. The price is higher than the expected range of $16 to $18 a share.

Groupon sold 35 million shares in the offering. The stock will begin trading Friday on the Nasdaq Stock Market under the ticker symbol "GRPN."

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-- Tiffany Hsu

Photo: AP Photo / Charles Rex Arbogast

Senators want banks to simplify checking account fee disclosures

Emboldened by Bank of America's decision to abandon a proposed $5 monthly debit card fee, two senators on Thursday asked regulators to require banks to provide customers with a simple, one-page form listing all their checking account fees.

The goal is to give consumers a standardized, easy-to-understand disclosure form to make it easier to  compare fees charged by banks.

"When consumers are informed and can make choices, that's when the free market is at its best and strongest," said Sen. Dick Durbin (D-Ill.), who was joined by Sen. Jack Reed (D-R.I.) at a Capitol Hill news conference.

The two want banks to voluntarily adopt such a disclosure. But they also wrote to Raj Date, the acting head of the new Consumer Financial Protection Bureau, requesting that the agency act quickly to require banks and credit unions to post such a disclosure form on their websites.

Durbin and Reed touted a one-page disclosure form proposed by the Pew Charitable Trust. The form lists all basic checking account terms and conditions, including interest rate, ATM fees, overdraft penalties and account closing fees.

Susan Weinstock, director of the project, said the form was developed after analyzing 250 types of checking accounts last year.

"A hundred and eleven pages -- that's the median length of disclosure documents from the 10 largest banks in the United States," she said at the news conference. "These documents are not user-friendly, with highly technical and dense text."

Pew tested its form with consumers in Los Angeles, Philadelphia and Minneapolis. Two of the nation's three largest credit unions -- the Pentagon Federal Credit Union and the North Carolina State Employees' Credit Union -- have agreed to use the form to post fees on their websites, she said.

Durbin led the fight to enact new limits on the fees that banks charge to retailers to process debit card payments. BofA proposed its monthly debit card fee to offset money it expects to lose because of the limit, which took effect Oct. 1. Some other large banks were testing a fee as well.

Strong consumer backlash led the banks to abandon those plans. BofA, which triggered much of the ire, announced its decision Tuesday. 

Durbin, who had urged BofA customers to switch to other banks, said a simple checking account disclosure was the logical next step to empower consumers after they beat back the debit card fees.

Date, of the CFPB, said the agency would push in the coming months for more transparency on checking account fees.

"A checking account is a critical, valuable product for millions of Americans," he said Thursday. "But checking accounts and debit cards often come with unexpected costs and fees that can quickly add up. With upfront and easy-to-understand information, consumers can comparison shop for the best deal for them."

Date did not indicate whether he would push for a rule, which could take up to two years to enact, or seek a voluntary agreement by banks to adopt a simpler disclosure.

Richard Hunt, president of the Consumer Bankers Assn., said his members "support clear and easy to understand disclosures" and would work with the CFPB, as they have been doing recently on a new simplified mortgage disclosure form.

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-- Jim Puzzanghera in Washington

 Photo: Sen. Dick Durbin (D-Ill.). Credit: Associated Press.

Gold jumps as European Central Bank cuts interest rates

Gold broke out to a six-week high Thursday after the European Central Bank surprised markets by cutting interest rates.

For investors who believe that paper currencies are headed for further debasement by central banks, the move provided a good excuse to shovel money into precious metals as an alternative.

Near-term gold futures in New York rose $35.50, or 2.1%, to $1,764.20 an ounce, the highest closing price since Sept. 21.

Silver got a smaller lift, adding 56 cents to $34.49 an ounce. Silver had reached a five-week high of $35.29 last Friday.

The ECB, under new chief Mario Draghi, cut its benchmark short-term rate to 1.25% from 1.50%, in the first reduction since May 2009.

Draghi said the cut was justified because he believed the Eurozone economy was headed for a “mild recession.” Europe has been reeling from its debt crisis and from the austerity imposed by government spending cuts.

The euro currency initially slid after the surprise rate move, falling as low as $1.367 from $1.374 on Wednesday. But the euro rebounded after Greece’s prime minister reneged on his threat to hold a voter referendum on the terms of the country’s bailout by the rest of Europe. The euro was at $1.382 at about 1 p.m. PDT.

Draghi vowed the ECB would not accede to calls that it print massive amounts of new money to boost its purchases of sovereign bonds in Europe. But that didn't deter gold buyers.

Gold had rocketed in August, reaching a record closing high of $1,888.70 an ounce Aug. 22, as stock markets tumbled worldwide on fears that the Eurozone would implode.

But as stocks fell further in September, gold and silver too were slammed. Many analysts say the metals took a hit as some investors and traders sold whatever they could to raise cash amid continued market turmoil.

After bottoming at $1,595 on Sept. 26, gold has been fighting its way higher again. It’s now down 6.6% from its August peak but up 24% year to date -- on track for an 11th straight annual gain.

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-- Tom Petruno

Photo: Gold coins and bars. Credit: Mike Segar / Reuters

Rising gas prices will not affect holiday shopping, poll says

Despite high gas prices, shoppers still plan to spend this holiday season, according to a new poll.

More than half of those surveyed said they plan to shell out the same amount on gifts as they did last year and 8% said they plan to spend slightly more, according to a member poll conducted by the Automobile Club of Southern California, which released it Wednesday.

Still, rising gas prices weigh heavily in the back of consumers’ minds. Seventy percent of Southern California shoppers said that gas cost already has had a significant effect on their household budget.

Gas currently averages $3.82 a gallon in Southern California -– up from a steady $3.10 a gallon during the same period last year.

Months of bad economic news have shoppers concerned, but not the overly cautious that many retailers fear.  Only 16 percent of local consumers said they will spend less this year.  Most cited unemployment, rising housing costs and mounting bills as reasons they were tight-fisted with their money this holiday.

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Gas prices aren't falling fast enough to suit consumers

Gas below $3 a gallon in some places -- but not in California

-- Angel Jennings

Photo: Toke Fusi posts prices at a Shell station in Menlo Park, Calif. Credit: Paul Sakuma / Associated Press

Weekly jobless claims drop below 400,000

The number of people filing new claims for unemployment benefits dipped below 400,000 last week, a key move that indicates the job market is improving.

The 397,000 initial claims were down 9,000 from the previous week, the Labor Department said Thursday. The figure has hovered near 400,000 for several weeks. The average over the last month has been 404,500.

At the height of the Great Recession, in early 2009, weekly claims were above 600,000.

The new data come a day before the government will release the October unemployment report. Economists are expecting about 100,000 jobs were created last month, slow growth that is unlikely to significantly move the nation's 9.1% unemployment rate.

But the jobless claim figures Thursday were another sign of modest progress recently in the economic recovery. Last week, the government reported that the economy grew at a 2.5% annual rate from July through September.

The improved economic growth -- nearly double the pace in the second quarter -- was cited by the Federal Reserve on Wednesday as an indication that the recovery has begun to strengthen. Still, with the European debt crisis hanging over the global economy, the Fed downgraded its projections for growth through 2013.

The Fed said the unemployment rate would not drop below 9% this year and would remain high next year, within a range of 8.5% to 8.7%.

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At G-20 summit, Greece still the problem

Federal Reserve scales back projections of economy's growth

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 -- Jim Puzzanghera in Washington

Photo: Job seekers at a New York City career fair last month. Credit: Getty Images.

Corporate taxes: Many top U.S. firms paid none, report says

Many of the nation's most profitable companies are paying far less than the 35% corporate income tax rate, with dozens paying none at all, according to a new report.

Advocacy and research groups Citizens for Tax Justice and the Institute on Taxation and Economic Policy examined 280 companies and concluded that they paid an average 18.5% rate from 2008 through 2010 -- about half the official rate.

Companies lashed out at the findings.

GE accused the report of being “inaccurate and distorted” and said that it expects to pay a 30% overall tax rate this year. Verizon said the study was “union-orchestrated” as well as being “deceptive and politically motivated,” adding that the company paid out $1.8 billion in taxes over the three-year period.

But according to the study, only a quarter of companies paid close to 35% of their U.S. profits, while another quarter paid less than 10%.

The report also found that 78 paid zero -- or had a negative tax rate -- for at least one year due to nearly $223 billion in tax subsidies, 17% of which went to the financial services industry. Thirty companies went tax free for all three years, researchers found.

Wells Fargo alone took in nearly $18 billion in tax breaks over the last three years, followed by around $14 billion for AT&T and $12 billion for Verizon, researchers found.

Over the period, the tax rate of energy company Pepco Holdings averaged out to negative 57.6%, according to the report. General Electric’s was negative 45.3%.

The study, the 10th since 1984, culled from firms listed among the Fortune 500 who were profitable for each of the last three years.  Amid a backdrop of calls from Republican presidential candidates Herman Cain and Rick Perry to lower the existing corporate tax rate, report authors said their findings were not mean to be “anti-business.”

Corporations are also on the hook for state and local corporate income taxes as well as sales, property and payroll taxes, said Will McBride, an economist with the nonpartisan Tax Foundation research group. From 1994 through 2008, he said, corporations paid out more in taxes than they pulled in through after-tax profits for all but three years.

This week, the congressional Joint Committee on Taxation said that in order for the government to bring in a consistent amount of revenue, the corporate tax rate should drop no lower than 28%.

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-- Tiffany Hsu

Photo: Brian van der Brug / Los Angeles Times

Consumer Confidential: Apple battery fix, pet-food warning

Here's your thunder-road Thursday roundup of consumer news from around the Web:

-- Apple says a fix is in the works for its gadgets' battery woes. The company says there's a problem with its latest mobile operating system that is shortening the battery life of iPhones, iPads and iPods that use the software. A small number of customers have reported lower-than-expected battery life on devices running on the company's iOS 5 operating system. Apple says it's found bugs in the program and will release a software update to address them in a few weeks. The latest iPhone, the 4S, comes with iOS 5. Other devices that can be upgraded to run the software: the iPhone 3GS or 4, iPads and an iPod Touch released in September 2009 or later.

-- Some yucky but important tips: The Food and Drug Administration is warning pet owners that they can get sick from their loved one's food. The agency says it's increasing inspections of dry pet food and pet treats from distributors, wholesalers and retailers. There have been numerous recalls of pet food tainted by salmonella and other contaminants in recent years. While humans usually get salmonella poisoning by eating contaminated food, it's also possible to pick up the disease by handling contaminated pet food. In January 2006, at least 70 people were sickened by salmonella-tainted pet food from a Pennsylvania plant. Government officials say you should wash their hands after feeding your pet. Also, only purchase products (canned or bagged) with no visible signs of damage to the packaging, such as dents, tears or discolorations.

-- David Lazarus

Photo: Apple says a fix is on the way for a battery-sapping software glitch. Credit: Henrik Kettunen / Bloomberg

 

Jon Corzine caught up as MF Global inquiries escalate

Each morning this week has brought a new batch of revealing details about what brought down MF Global, the trading firm run by former U.S. senator and Goldman Sachs Chief Executive Jon Corzine.

Since the firm declared bankruptcy  Monday morning, we have learned the Commodity Futures Trading Commission and then the Federal Bureau of Investigation were investigating allegations of misused customer funds.

Today, it is the Securities and Exchange Commission that is reported to be opening a probe, according to the Wall Street Journal. The SEC is said to be looking at whether Corzine misled its investors as the company's share price was in freefall.

The case has raised questions about why regulators did not notice MF Global problems sooner. After all, critics say, MF Global was done in by the type of highly leveraged bets that regulators should have been very familiar with from the demise of Lehman Brothers and Bear Stearns in 2008.

Reuters reports today that Wall Street's industry funded regulator, the Financial Industry Regulatory Authority, started asking questions back in June, but that it was not enough to get MF Global to scale down its bets on the sovereign debt of struggling European nations. 

At a conference in San Francisco on Wednesday, the chief investment strategist at Schwabs, Liz Ann Sonders, said, "It may show that we don't have adults manning the regulatory store."

At the same conference, PIMCO bond guru Bill Gross said the bankruptcy was another sign that Wall Street had "lost its way."

"We need a banking system that is attractively and conservatively capitalized," Gross said.

The most scathing new criticism of the situation, though, may have come in the form of a fable about Corzine and MF Global, penned by Financial Times columnist John Gapper. Gapper imagines Corzine as an emperor with no clothes, or in this case, an emperor with Goldman clothes, in reference to his previous employment at Goldman Sachs:

    Some of the traders wondered if they should heed the emperor. He was oddly attired and his beard     was gray. Perhaps he is just reliving past glories, they thought to themselves. But the emperor     showed them the label sewn inside his worn-out suit. “Goldman,” they said admiringly. “They are the     finest of weavers. We were wrong to doubt him.”

    Shortly afterward, a messenger arrived from far-off lands with tales of great events. The grand     emperors of France and Germany had settled an argument and lent florins to the southern kingdoms     that had debased their currency. "We should load up," Emperor Corzine cried. “We must trade in     size. Here,” he told the treasurer. “Borrow 40 more bags of coins like this one. Wear my cloak and no one will refuse you."

Corzine himself is contending not only with embarrassment and investigations, but also with the prospect that his $12-million golden parachute may not launch, according to Fortune.

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-- Nathaniel Popper

twitter.com/nathanielpopper

Photo: File photo of MF Global CEO Jon Corzine. Credit: Rich Schultz / Associated Press

October retail sales up 3.4% at major chains, less than expected

The nation's retailers recorded a moderate increase in sales last month as consumers reined in their spending after splurging on back-to-school shopping and cautiously sized up the coming holiday season.

On Thursday, major chain stores reported a 3.4% sales increase in October compared with the same month a year earlier, according to Thomson Reuters' tally of 23 retailers. The results were below analysts' expectations.

"Some sectors cooled a little bit in October," said Michael McNamara, vice president of research and analysis at data service MasterCard Advisors SpendingPulse. Sales were hampered by unusually warm weather early in the month as well as by heavy snowstorms in the Northeast.

All told, about two-thirds of retailers reported sales that fell below expectations. The worse showing was by teen apparel chain West Seal Inc., based in Foothill Ranch, which posted a 9.7% decline. Struggling apparel giant Gap Inc., operator of the Gap, Banana Republic and Old Navy chains, saw sales drop 6%.

The discount sector had a relatively strong showing as cost-conscious shoppers sought bargains. Costco Wholesale Corp. posted a 9% gain. Cheap but trendy Target Corp. reported a 3.3% rise.

The percentage changes are based on sales at stores open at least a year, considered an important measure of a retailer's health because it excludes the effect of store openings and closings.

 

October is a slow time for merchants as they gear up for the holidays, so is not a good predictor of future consumer spending, analysts say. The National Retail Federation, a trade group, forecasts that sales will rise 2.8% in November and December compared with a year earlier.

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Last holiday season for paper savings bonds

Making their final appearance in Christmas stockings this season: paper U.S. savings bonds.

A popular and colorful gift for children, the securities will no longer be available at banks and other financial institutions or through mail-in orders after this year. Instead, starting in 2012, the Treasury Department will only offer Series EE or I bonds online through www.treasurydirect.gov.

The move to electronic versions is projected to save $70 million over five years in printing, storage and processing fees, the government said. Last year, about 4.7 million people bought 9.4 million savings bonds over the counter. 

The bond program originated during the Depression in 1935 as a way for the government to tamp down the federal debt. 

Officials have already phased out sales of paper bonds through traditional employee payroll plans. Current holders will still be able to redeem their bonds, and lost ones can be reissued.

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30-year mortgage rate drops to 4%, Freddie Mac says

Investor worries over the European debt crisis helped drive the average rate for a 30-year fixed home loan down to 4% this week, according to Freddie Mac.

The figure, down from 4.1% last week, was the second lowest in the 40 years Freddie has been conducting a weekly survey of the terms being offered by home lenders. The lowest average rate recorded was 3.94% four weeks ago.

Freddie Mac said lenders were offering 15-year loans, a popular choice for homeowners who are refinancing, at an average rate of 3.31%, down from 3.38% a week earlier. That rate was below 3.3% for three weeks in late September and early October.

To obtain the loans at the rates being offered this week, a borrower would have to pay upfront fees averaging 0.7% of the amount borrowed.

Worried about the possibility of defaults on European debt, investors rushed to buy U.S. Treasury securities early this week, driving down interest rates.

The low mortgage rates have created an opportunity for some homeowners who are current on their loans to trade them in for new mortgages, often lowering their interest costs dramatically.

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Construction spending and manufacturing growing — slightly

— E. Scott Reckard

Photo: Foreclosures like this one in Miami clog the market with homes. Credit: Joe Raedle / Getty Image

The European Debt Crisis and the G-20 Summit Meeting

Simon Johnson, the former chief economist at the International Monetary Fund, is the co-author of “13 Bankers.”

The April 2009 London summit meeting of the Group of 20 is widely regarded as a great success. The world’s largest economies agreed on an immediate coordinated approach to the global financial crisis then raging and promised to work together on banking reforms that would support growth. President Obama got high marks for his constructive engagement.

Today’s Economist

Perspectives from expert contributors.

The G-20 heads of government have met twice a year since then, and in Cannes this week they meet again. Could this meeting help stabilize the world economy? Can President Obama again play a leading role? The answer to both questions is likely to be no.

Perspectives from expert contributors.

In 2009, the primary problem was slumping economies in the United States and Western Europe. It was in the perceived individual interest of those economies to engage in some fiscal stimulus – and they were happy to present this as a joint approach. China was also willing to stimulate its economy, as its policy makers feared that slowing global trade would reduce Chinese exports. President Obama’s appeal for fiscal stimulus around the world was pushing on an open door.

Now the issue is quite different. We have a sovereign debt crisis within the euro zone, in which countries that have borrowed heavily are facing the prospect of restructuring their debts. The euro zone summit meeting last week established that Greek debt would fall by about half (relative to face value), although this does not clearly put Greece onto a sustainable debt path. Prime Minister Andreas Papandreou announced a plan on Monday for a referendum on the plan, a move with the potential to build political support for the needed reforms, and on Wednesday his cabinet offered its full support. But another outcome — if the government does not fall in the meantime, making the referendum plan moot — could be a Greek exit from the euro and a default on its debts in disorderly fashion, without any kind of international framework or outside financial support.

But the real issue is Italy, as it has been at least since the summer. The Europeans are only beginning to come to grips with the centrality of Italy in the European debt web – glance at Bill Marsh’s recent graphic to get the point. Italy has more than 1.9 trillion euros in debt outstanding; this is the third-largest bond market in the world. In the aftermath of the Greek referendum announcement, the yield on Italian debt rose above 6.1 percent. The standard view is that if this reaches 6.5 percent, Italy will need to seek assistance in the form of a backstop fund to guarantee there will be no default.

But the International Monetary Fund does not have enough resources available and the existing European Financial Stability Facility is also likely to be too small. People in the know talk of the need for more than two trillion euros in a “stabilization fund,” and while a lot of fuzzy math is involved in contemporary international financial rescues, the I.M.F. and the stability facility combined would be hard pressed to provide more than a third of that.

This might seem like a good time for a summit meeting – so the hat can be passed around among world leaders. And some people do hope that China can provide an enormous loan, either directly or working with the I.M.F. China, after all, has more than two trillion euros’ worth of reserves (not all in euros, of course; much of this is in dollars).

But it’s not clear China that wants to take the credit risk of lending directly – the Europeans might not repay, after all. And the United States is not keen to have China funnel such a large amount through the I.M.F.; this would undermine the traditional American predominance there. In today’s budgetary environment, there is no way that the United States can come up with anything like matching funds at a level that would make a difference – would you like to ask the House of Representatives for $100 billion right now to help keep Silvio Berlusconi in power?

And the heart of the problem is really European, not global. Specifically, the euro zone needs to address its underlying fiscal structure, which has become severely dysfunctional. It needs a proper fiscal union, with the right to tax and to issue debt – backed ultimately by the European Central Bank. And the ability of member governments to issue debt must be severely curtailed.

The United States faced a similar problem, long ago. The original Articles of Confederation proved inadequate, largely because there was no centralized fiscal authority. The Constitutional Convention convened in 1787 in large part because the United States had defaulted on its debts, incurred during the War of Independence – and there was no way forward without a new agreement among the original 13 states and greater fiscal powers (and more) for the federal government.

Europe needs the equivalent of a constitutional convention. But today’s financial markets move so much faster than 200 years ago, and the delay in Europe has already been excessive. The Europeans need to move fast. Will the Cannes summit meeting speed them up?

Growing Economies, Stagnant Wages

CATHERINE RAMPELL

Dollars to doughnuts.

In the midst of the Occupy protests, the income gains going to the top 1 percent have gotten a lot of attention. Another way to understand the economic frustrations of the Occupiers is to look at how much middle-class living standards have changed, and how much the overall economy has grown.

Dollars to doughnuts.

A new report from the Resolution Foundation, a British research organization that focuses on workers with low income, has done just that. The report covers 10 rich countries, and looks at the growth rate of median pay versus economic growth per capita from 2000 to the start of the Great Recession.

Here’s the key chart showing that ratio:

A higher ratio means that the pace of growth for median pay was close to the pace of growth for output per capita. A low ratio means that median pay grew much more slowly than did the economy as a whole.

Of the 10 countries analyzed, Finland showed the closest relationship between the living standards of the typical worker and improvements in the overall economy. The United States was on the lower end. From 2000 to 2007, median pay increased at a quarter of the pace of output per capita. In other words, the typical American worker did not share much in the country’s growing wealth even when the economy was good.

Still, the United States was not the worst of the bunch. In Canada, median pay didn’t grow at all between 2000 and 2007.

The moral of the story is that the United States isn’t the only country experiencing growing inequality. Most of the rest of the developed world is, too.

How Unemployment Benefits Became Twice as Generous

12:48 p.m. | Updated to revise reference to standard benefit period.

Casey B. Mulligan is an economics professor at the University of Chicago.

Government spending on unemployment insurance has soared, and it’s hard to imagine the program ever shrinking back to its prerecession size.

Today’s Economist

Perspectives from expert contributors.

Unemployment insurance is jointly administered and financed by the federal and state governments, offering money to people who have lost their jobs and have as yet been unable to find and start a new job. On average they receive about $300 a week until they start working again, they stop looking for work or their benefits are exhausted.

Perspectives from expert contributors.

Between 2006 and 2010, inflation-adjusted spending on unemployment compensation by federal, state and local governments more than tripled.

The program has been around for decades, but the most recent recession and continued economic weakness has created an especially large group of laid-off workers who, despite an extensive search, cannot find another job. More unemployed people equals more spending for the unemployment insurance program, so we expect the program to be spending a lot during a recession.

However, the unemployment program has also become more generous in recent years. Before the recession, an unemployed person in a state without high unemployment would often exhaust benefits after 26 weeks; that is, the program would stop paying after the 26th weekly benefit, even if the beneficiary was still without work.

The federal law in place before the recession included some local labor market “extended benefit” triggers that, based on the statewide unemployment rate, would automatically lengthen the maximum benefit period. These automatic triggers began to extend benefits around the nation in the middle of 2008.

About the same time, new “emergency unemployment compensation” legislation extended maximum benefit periods for the entire nation. The American Recovery and Reinvestment Act of February 2009 further extended these “emergency” periods to up to 99 weeks, and legislation later in 2009 and in 2010 permitted the 99-week maximum to continue. (Among other unemployment insurance expansions, the act also increased monthly benefit amounts and excluded from federal personal income taxation the first $2,400 of benefits received in 2009.)

The chart below shows the size of the “emergency” and extended-benefit expansions, by quarter, measured as a fraction of the entire unemployment insurance program. Essentially, no “emergency” and extended-benefit benefits were paid in 2007 or in the first half of 2008. “Emergency” and extended-benefit benefits immediately became about a quarter of all unemployment insurance benefits and beneficiaries and were a majority of all unemployment insurance benefits by the end of 2009 (the two measures are slightly different because they come from different data sources).

Because “emergency” and extended-benefit benefits are paid to people only when they have exhausted the normal benefits, the fraction shown in the chart is a measure of how much unemployment benefits are paid pursuant to unemployment insurance rule changes, as opposed to payments that occur merely because more people were losing their jobs.

If we assume, merely for simplicity, that the expansions had no effect on the number of people unemployed or on the length of time they were employed, then setting “emergency” and extended-benefit payments to zero as they were in 2007 would have cut total unemployment insurance benefit payments by the fraction shown in the chart. In this case, it appears that the unemployment insurance program is at least twice as generous as it was in 2007, thanks to the federal changes in benefit rules.

The unemployment insurance program is a good example of how federal government spending has grown and how tough it will be to bring it back to pre-recession levels. People are now used to having well more than one year’s unemployment benefits available to them, and politicians will have a lot of trouble asking them to make do with just 26 weeks.

This post has been revised to reflect the following correction:

Correction: November 2, 2011

An earlier version of this post misstated the typical benefit period. Before the recession, 26 weeks, not 13, had become the typical maximum for states to pay unemployment benefits.

Will Bernanke Take Aim at G.D.P.?

It’s a safe bet that the hottest topic in monetary policy is going to be raised when the Federal Reserve chairman, Ben S. Bernanke, takes questions from reporters Wednesday afternoon.

That would be nominal G.D.P. targeting, a concept lately endorsed elsewhere on this very Web site by the liberal economists Christina Romer and Paul Krugman (separately, and with very different degrees of enthusiasm) and long embraced by a diverse group of other economic thinkers.

It’s actually a pretty simple idea. The Fed has developed a policy of seeking to maintain inflation — the growth of prices and wages — at an annual rate of roughly 2 percent as the best way to meet its legal objectives of maintaining stable prices and maximizing employment. Proponents of G.D.P. targeting argue that the central bank instead should seek to maintain a steady rate of increase in the dollar value of the nation’s economic output, the nominal gross domestic product, an alternative measure that combines the rate of inflation and the rate of economic growth.

The Fed’s current policy, they argue, has failed to stimulate growth sufficiently, leaving more than 25 million Americans unable to find full-time work. A G.D.P. target, by contrast, would require the Fed to take more aggressive steps, like another round of asset purchases.

“It would work like this,” wrote Ms. Romer, a professor at the University of California, Berkeley, who was chairwoman of President Obama’s Council of Economic Advisers. “The Fed would start from some normal year — like 2007 — and say that nominal G.D.P. should have grown at 4 1/2 percent annually since then, and should keep growing at that pace. Because of the recession and the unusually low inflation in 2009 and 2010, nominal G.D.P. today is about 10 percent below that path. Adopting nominal G.D.P. targeting commits the Fed to eliminating this gap.”

As I wrote in Monday’s paper, this idea has garnered little apparent support inside the Fed.

One fundamental reason is that Mr. Bernanke and other Fed officials believe that the current system is working pretty well. Not well enough to heal the economy, of course, but in their view that is beyond the Fed’s power.

“My guess is that the current framework for monetary policy — with innovations, no doubt, to further improve the ability of central banks to communicate with the public — will remain the standard approach, as its benefits in terms of macroeconomic stabilization have been demonstrated,” Mr. Bernanke told a Boston audience in October.

The focus of that policy, which Mr. Bernanke described as “flexible inflation targeting,” is the Fed’s commitment to maintain inflation at about 2 percent a year. The Fed views the public belief that it will do so as perhaps its most valuable asset because it creates a stable environment for sustainable economic growth.

A switch to G.D.P. targeting would amount to a declaration of comfort with higher levels of inflation.

Many proponents regard this as the basic point of the proposal, arguing that the Fed has become overly fixated on the rate of inflation when it should be focused on the health of the economy, and that allowing — indeed, encouraging — a higher rate of inflation in the short term would help to stimulate growth.

Calling for a G.D.P. target rather than simply proposing an increase in the Fed’s inflation target, as some other economists have done, amounts in this sense to a marketing device, a piece of packaging.

“As far as I can see, the underlying economics is about expected inflation,” Mr. Krugman wrote in a mid-October blog post, “but stating the goal in terms of nominal G.D.P. may nonetheless be a good idea, largely as a selling point, since it (a) is easier to make the case that we’ve fallen far below where we should be and (b) doesn’t sound so scary and antisocial.”

So far, that sales pitch has failed to budge the Fed.