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    Who Discriminates in Hiring? A New Study Can Tell.

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    Applications seemingly from Black candidates got fewer replies than those evidently from white candidates. The method could point to specific companies.Twenty years ago, Kalisha White performed an experiment. A Marquette University graduate who is Black, she suspected that her application for a job as executive team leader at a Target in Wisconsin was being ignored because of her race. So she sent in another one, with a name (Sarah Brucker) more likely to make the candidate appear white.Though the fake résumé was not quite as accomplished as Ms. White’s, the alter ego scored an interview. Target ultimately paid over half a million dollars to settle a class-action lawsuit brought by the Equal Employment Opportunity Commission on behalf of Ms. White and a handful of other Black job applicants.Now a variation on her strategy could help expose racial discrimination in employment across the corporate landscape.Economists at the University of California, Berkeley, and the University of Chicago this week unveiled a vast discrimination audit of some of the largest U.S. companies. Starting in late 2019, they sent 83,000 fake job applications for entry-level positions at 108 companies — most of them in the top 100 of the Fortune 500 list, and some of their subsidiaries.Their insights can provide valuable evidence about violations of Black workers’ civil rights.The researchers — Patrick Kline and Christopher Walters of Berkeley and Evan K. Rose of Chicago — are not ready to reveal the names of companies on their list. But they plan to, once they expose the data to more statistical tests. Labor lawyers, the E.E.O.C. and maybe the companies themselves could do a lot with this information. (Dr. Kline said they had briefed the U.S. Labor Department on the general findings.)In the study, applicants’ characteristics — like age, sexual orientation, or work and school experience — varied at random. Names, however, were chosen purposefully to ensure applications came in pairs: one with a more distinctive white name — Jake or Molly, say — and the other with a similar background but a more distinctive Black name, like DeShawn or Imani.What the researchers found would probably not surprise Ms. White: On average, applications from candidates with a “Black name” get fewer callbacks than similar applications bearing a “white name.”This aligns with a paper published by two economists from the University of Chicago a couple of years after Ms. White’s tussle with Target: Respondents to help-wanted ads in Boston and Chicago had much better luck if their name was Emily or Greg than if it was Lakisha or Jamal. (Marianne Bertrand, one of the authors, testified as an expert witness in the trial over Ms. White’s discrimination claim.)This experimental approach with paired applications, some economists argue, offers a closer representation of racial discrimination in the work force than studies that seek to relate employment and wage gaps to other characteristics — such as educational attainment and skill — and treat discrimination as a residual, or what’s left after other differences are accounted for.The Berkeley and Chicago researchers found that discrimination isn’t uniform across the corporate landscape. Some companies discriminate little, responding similarly to applications by Molly and Latifa. Others show a measurable bias.All told, for every 1,000 applications received, the researchers found, white candidates got about 250 responses, compared with about 230 for Black candidates. But among one-fifth of companies, the average gap grew to 50 callbacks. Even allowing that some patterns of discrimination could be random, rather than the result of racism, they concluded that 23 companies from their selection were “very likely to be engaged in systemic discrimination against Black applicants.”There are 13 companies in automotive retailing and services in the Fortune 500 list. Five are among the 10 most discriminatory companies on the researchers’ list. Of the companies very likely to discriminate based on race, according to the findings, eight are federal contractors, which are bound by particularly stringent anti-discrimination rules and could lose their government contracts as a consequence.“Discriminatory behavior is clustered in particular firms,” the researchers wrote. “The identity of many of these firms can be deduced with high confidence.”The researchers also identified some overall patterns. For starters, discriminating companies tend to be less profitable, a finding consistent with the proposition by Gary Becker, who first studied discrimination in the workplace in the 1950s, that it is costly for firms to discriminate against productive workers.The study found no strong link between discrimination and geography: Applications for jobs in the South fared no worse than anywhere else. Retailers and restaurants and bars discriminate more than average. And employers with more centralized personnel operations handling job applications tend to discriminate less, suggesting that uniform rules and procedures across a company can help reduce racial biases.An early precedent for the paper published this week is a 1978 study that sent pairs of fake applications with similar qualifications but different photos, showing a white or a Black applicant. Interestingly, that study found some evidence of “reverse” discrimination against white applicants.More fake-résumé studies have followed in recent years. One found that recent Black college graduates get fewer callbacks from potential employers than white candidates with identical resumes. Another found that prospective employers treat Black graduates from elite universities about the same as white graduates of less selective institutions.One study reported that when employers in New York and New Jersey were barred from asking about job candidates’ criminal records, callbacks to Black candidates dropped significantly, relative to white job seekers, suggesting employers assumed Black candidates were more likely to have a record.What makes the new research valuable is that it shows regulators, courts and labor lawyers how large-scale auditing of hiring practices offers a method to monitor and police bias. “Our findings demonstrate that it is possible to identify individual firms responsible for a substantial share of racial discrimination while maintaining a tight limit on the expected number of false positives encountered,” the researchers wrote.Individual companies might even use the findings to reform their hiring practices.Dr. Kline of Berkeley said Jenny R. Yang, a former chief commissioner of the E.E.O.C. and the current director of the Office of Federal Contract Compliance Programs, which has jurisdiction over federal contractors, had been apprised of the findings and had expressed interest in the researchers’ technique. (A representative of the agency declined to comment or to make Ms. Yang available.)Similar tests have been performed since the 1980s to detect discrimination in housing by real estate agents and rental property owners. Tests in which white and nonwhite people inquire about the availability of housing suggest discrimination remains rampant.Deploying this approach in the labor market has proved a bit tougher. Last year, the New York City Commission on Human Rights performed tests to detect employment discrimination — whether by race, gender, age or any other protected class — at 2,356 shops. Still, “employment is always harder than housing,” said Sapna Raj, deputy commissioner of the law enforcement bureau at the agency, which enforces anti-discrimination regulations.“This could give us a deeper understanding,” Ms. Raj said of the study by the Berkeley and Chicago researchers. “What we would do is evaluate the information and look proactively at ways to address it.”The commission, she noted, could not take action based on the kind of statistics in the new study on their own. “There are so many things you have to look at before you can determine that it is discrimination,” she argued. Still, she suggested, statistical analysis could alert her to which employers it makes sense to look at.And that could ultimately convince corporations that discrimination is costly. “This is actionable evidence of illegal behavior by huge firms,” Dr. Walters of Berkeley said on Twitter in connection with the study’s release. “Modern statistical methods have the potential to help detect and redress civil rights violations.” More

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    The Travel Industry’s Reckoning With Race and Inclusion

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    Tourists, particularly Black travelers, are paying close attention to how destinations and travel service providers approach diversity and equity after a year of social justice protests.Between the Covid-19 pandemic, which brought tourism to a near-complete halt for months on end, and last summer’s protests for social justice, the past year has been one of reckoning for the travel industry on issues of race and inclusivity.In the wake of George Floyd’s killing, everybody from hotel operators to luggage makers declared themselves allies of the protesters. At a time when few people were traveling, Instagram posts and pledges to diversify were easy to make. But now, as travel once again picks up, the question of how much travel has really changed has taken on new urgency.“From the very emergence of the Covid pandemic and especially in the wake of uprisings last summer, there’s a question about place,” said Paul Farber, the director of Monument Lab, a Pennsylvania-based public art and history studio that works with cities and states that want to examine, remove or add historic monuments. “What is the relationship of people and places? Where are sites of belonging? Where are sites where historic injustices may be physically or socially marked?”Monument Lab is one of several organizations, groups and individuals trying to change the way travelers of all colors understand America’s racially fraught history. Urging people to engage with history beyond museums and presentations from preservation societies is one approach.In turn, many travelers are paying close attention to whether companies are following through with their promises from last year. Black travelers, in particular, are doubling down on supporting Black-owned businesses. A survey released earlier this year by the consulting firm MMGY Global found that Black travelers, particularly those in the United States, Canada, Britain and Ireland, are keenly interested in how destinations and travel service providers approach diversity and have indicated that it has an influence on their travel decision-making.At Monument Lab, questions about belonging, inclusion and how history memorializes different people were coming up frequently over the past year, Mr. Farber said, particularly from travelers looking to learn about Confederate and other monuments while road tripping.In response, Monument Lab, which examines the meaning of monuments, created an activity guide called Field Trip, which allows people to pause on their trips to learn about specific monuments. On a worksheet, participants are prompted to question who created the monuments, why they were made and what they represent.The statue of Nathan Bedford Forrest, a slave trader, Confederate general and Ku Klux Klan leader, was removed from Health Sciences Park in Memphis, Tenn. in 2017. Like many other monuments in the United States, it had become a polarizing presence. Yalonda M. James/The Commercial Appeal, via Associated PressIn creating Field Trip, it became clear to Mr. Farber that there is a strong interest from travelers to learn about Black history. This sentiment is echoed by tour operators who offer Civil Rights and other social-justice-oriented tours like those focusing on the contributions of Black Americans, women and figures in the L.G.B.T.Q. community.“There are a lot of white people who for the first time have had a conversation about racial justice and maybe even heard the words ‘systemic racism’ for the first time,” said Rebecca Fisher, founder of Beyond the Bell Tours, a Philadelphia-based operator of social-justice-oriented tours that highlight marginalized communities, people and histories. “People heard the new words and now they want to learn. That doesn’t mean that it is backed up with results, but I am seeing a trend in interest.”On a tour with Beyond the Bell guests might, for example, participants hear about Philadelphia’s President’s House, but they’ll also hear about Ona Judge, an enslaved woman who escaped from George Washington’s home, and about the former president’s efforts to recapture her. One of the company’s most popular tours focuses on gay history in the city.Seeking Black-owned travel businessesBlack travelers, in particular, are increasingly looking for ways to show their support for Black-owned travel businesses.Even as the family road trip has made a comeback in the wake of the coronavirus, that sort of trip hasn’t been a source of unfettered freedom for generations of Black motorists because of Jim Crow laws enforcing racial segregation in America. And now, after a year in which protests of the police killings of Black people amplified the perils of skin color, Black travelers are seeking out Black travel agents, Black hoteliers and Black-owned short-term rentals in addition to organizing in groups dedicated to Black travelers.In fact, according to the international survey of nearly 4,000 Black leisure travelers by MMGY Global, 54 percent of American respondents said they were more likely to visit a destination if they saw Black representation in travel advertising. In Britain and Ireland, 42 percent echoed that sentiment, and in Canada that number was 40 percent.“Another highly influential factor in the decision-making process is whether the destination is perceived as safe for Black travelers,” the survey noted. “Seventy-one percent of U.S. and Canadian respondents felt safety was extremely or very influential to their decision.”In Facebook groups, Clubhouse chat rooms and across other social media platforms, Black travelers regularly ask one another for recommendations about where to travel, particularly about where others have been where they felt safe and welcome. While these questions are often about foreign destinations, in a year when Americans could largely only travel within the United States, inquiries increasingly arose about where travelers felt safe within the country.“I was just curious on some good and safe locations for a first time solo traveler here in the States,” one woman posted in a group specifically for Black women travelers in June.“Where’s a good ‘safe’ place to travel in the States?” asked another woman who was planning a 35th birthday trip with her sister.This type of community gathering, though now online, isn’t new. For decades, African American travelers have looked to one another for guidance on where to travel. The most referenced form was Victor Hugo Green’s Green Book, a guide for Black travelers that was published annually from 1936 to 1966.Last summer, facing an onslaught of messaging from travel companies saying that they supported the Black Lives Matter movement and would be committing to diversifying their ranks and finding other ways to be more inclusive, Kristin Braswell, the owner of CrushGlobal, a company that works with locals around the world to plan trips, decided to make the inclusion of Black businesses central to her work.As a Black woman with a passion for travel, she started making travel guides that focused on supporting Black businesses. Each guide, whether it be to national parks, beach towns or wine country, provides information on businesses owned by Black people as well as guidance about diversity in the area and more.“These road trips and initiatives that speak to people of color in general are important because we’ve been left out of travel narratives,” Ms. Braswell said. “If you’re going to be creating experiences where people are going out into the world, all people should be included in those experiences.”Ms. Braswell added that the bulk of her business comes from Black travelers. These travelers, she said, are looking for Black travel advisers who have the knowledge of places where they are welcomed and can help them plan their trips. Over the past year travelers across racial backgrounds have been increasingly asking for tours and experiences that include Black-owned businesses, she said.Across the country, as people protested against police brutality, travelers demanded to see more travelers who looked like them in advertising; they spoke out against tourism boards that hadn’t been inclusive in the past and formed organizations like the Black Travel Alliance, calling for more Black travel influencers, writers and photographers to be employed.The Alliance and others have been pushing for more Black travelers to be visible and included in the industry and in spaces of leisure travel.Going beyond museumsAt the same time, tour providers like Free Egunfemi Bangura, the founder of Untold RVA, a Richmond-based organization, are offering tours that center on the contributions of Black people. In a city such as Richmond, which was once a capital of the Confederacy, she said that means seeing the value of working outside the established system of preservation societies and museums that are typically run by white leadership.To Ms. Bangura and other activists, artists and tour operators, museums and traditional preservation societies are part of the culture of exclusion that has historically left Black people out and continues to present versions of history that focus on white narratives. Ms. Bangura’s tours take place on the streets of the city as a better way to understand the local history.At a time when state legislatures are pushing for and passing laws that limit what and how much students learn about the contributions of Black and other marginalized people to the country, Ms. Bangura and others said, tours that show their contributions are even more important.“There is a way to take these experiences out of the hands of the traditional preservation community, so you don’t have to go into the walls of a museum,” Ms. Bangura said, adding that another reason institutions like museums aren’t optimal is because some people aren’t keen to visit them. “But think of how often it is that after you come outside of a Black-owned coffee shop, you’re actually able to hear about some of the Black people in that neighborhood or people that fought for Black freedom.”Kalela Williams, the founder of Black History Maven, leads a tour in Philadelphia’s Seventh Ward.Whitney IngramAdditionally, although the tourism industry took a hit last year, outdoor activities continued to draw visitors, making outdoor tours like Ms. Bangura’s and Ms. Fisher’s of Beyond the Bell popular. Ms. Bangura said the style of her offerings makes them accessible for all travelers, especially those without access to smartphones for scanning QR codes or those unable to take part in headphone-aided tours.Among the several kinds of tours and experiences Ms. Bangura has created is Black Monument Avenue, a three-block interactive experience in Richmond’s majority-Black Highland Park neighborhood. Visitors can drive through and call a designated phone line with unique access codes to hear songs, poems and messages about each installation. Every August, she runs Gabriel Week, honoring Gabriel Prosser, an enslaved man who led a rebellion in the Richmond area in 1800.“I call him brother General Gabriel,” Ms. Bangura said, adding that in her work, she encourages “people to decolonize their history by making sure that history is being told from the language of the oppressed, not the language of the oppressor.”Walking tours, for those who go on them, also provide a visceral sense of history that differs from the experience of a museum. Even as the National Museum of African American History and Culture has attracted record numbers of visitors to Washington, D.C., tours like Ms. Bangura’s can provide a more local perspective and show visitors exactly where something significant happened.“We can find community in walking together, we can find community in exploring a neighborhood together, and we can find a sense of where we are, we can find a sense of where folks have been and we can find common ground,” said Kalela Williams, the founder of Black History Maven, a Philadelphia company that primarily offers walking tours of the city that focus on Black history.“It’s important to see where things were, how things were working in relation to one another,” she said. “You can see the proximity of folks’ houses and schools and churches. You can imagine how folks would have walked around and navigated and visited each other in a way that you might not in a museum.”THE WORLD IS REOPENING. LET’S GO, SAFELY. Follow New York Times Travel on Instagram, Twitter and Facebook. And sign up for our Travel Dispatch newsletter: Each week you’ll receive tips on traveling smarter, stories on hot destinations and access to photos from all over the world. More

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    The Car Market 'Is Insane': Dealers Can't Keep Up With Demand

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    Rick Ricart is expecting nearly 40 Kia Telluride sport utility vehicles to arrive at his family’s dealership near Columbus, Ohio, over the next three weeks. Most will be on his lot for just a few hours.“They’re all sold,” Mr. Ricart said. “Customers have either signed the papers or have a deposit on them. The market is insane right now.”In showrooms across the country, Americans are buying most makes and models almost as fast as they can be made or resold. The frenzy for new and used vehicles is being fed by two related forces: Automakers are struggling to increase production because of a shortage of computer chips caused in large part by the pandemic. And a strong economic recovery, low interest rates, high savings and government stimulus payments have boosted demand.The combination has left dealers and individuals struggling to get their hands on vehicles. Some dealers are calling and emailing former customers offering to buy back cars they sold a year or two earlier because demand for used vehicles is as strong as it is for new cars, if not stronger. Used car prices are up about 45 percent over the past year, according to government data published this week. New car and truck prices are up about 5 percent over the past year.Those price increases have fed a debate in Washington about whether President Biden’s policies, particularly the $1.9 trillion American Rescue Plan he signed in March, are responsible for the sharp rise in inflation. The government said this week that consumer prices across the economy rose 5.4 percent in the last year through June.Republican lawmakers have argued that the March legislation is overheating the economy and are citing the rise in prices to oppose additional government spending. But Biden administration officials have pointed out that temporary supply shortages are largely responsible for the surge in prices of cars and other goods.Government stimulus may have helped some consumers, but it is hard to say how much. Several large forces are at play.The chip shortage, for example, is affecting automakers all over the world and is not directly related to U.S. policies. Industry officials blame limited production capacity for semiconductors and pandemic-related disruptions in supply and demand for the shortage.To make the most of limited chip supplies, General Motors has temporarily done away with certain features in some models, like stop-start systems that automatically turn off engines when cars stop for, say, a traffic light. And the French carmaker Peugeot has replaced digital speedometers with analog ones in some cars.Rental car companies that sold off thousands of cars during the pandemic to survive are now in the market to buy cars and trucks. They want to take advantage of a summer travel boom that has driven up rental rates to several hundred dollars a day in some places.“The industry has had strikes and material shortages before that have left us short of inventory, but I’ve never seen anything like this,” said Mark Scarpelli, the owner of two Chevrolet dealerships near Chicago. “Never, never, never.”His dealerships normally have 600 to 700 cars in stock. Now, he has about 50. Once or twice a week, a truck arrives with five or 10 vehicles. The cars disappear quickly because of customer waiting lists, Mr. Scarpelli said.Industry executives said the last time demand and supply were this out of sync was most likely after the end of World War II, when U.S. auto plants returned to making cars after years of churning out tanks and planes.Dealers said virtually everything was selling, from luxury vehicles and sports cars that cost more than $100,000 to basic used cars that many parents buy for teenagers.Even though the unemployment rate is still higher than before the pandemic, many people have money to spend. Government payments have helped lots of people, but many Americans, kept from vacationing or eating out, saved money. Financing cars is also relatively cheap — at least for people with good credit. Some automakers like Toyota, which has been less affected by the chip shortage than others, are advertising zero-interest loans on some cars.Mr. Ricart’s family businesses include a custom shop that sells high-end, special-edition trucks and sports cars. “We had a $125,000 Shelby pickup, and I said, ‘Who’s going to buy that?’” he recalled. “The next day it was gone. There’s so much free cash in the market. People are paying full price, even for the most expensive vehicles we have.”Buyers often have to take vehicles that don’t meet their specifications, and move fast when they find one close enough.Gary Werle, a retiree in Lake Worth, Fla., recently traded in a 2017 Buick Encore for a 2021 version, drawn by its safety features such as blind-spot monitoring and automatic braking. “I’m 80, and I thought it would be good to have those,” he said.On Memorial Day, his dealer called, and Mr. Werle didn’t hesitate. “I was at a party and left to buy the car,” he said. “I’d heard about the shortages, so I wasn’t sure the car would be there the next day.”Dealers are selling fewer vehicles, but their profits are up a lot. That’s a huge change from the spring of 2020, when most dealerships shut down for roughly two months and they had to lay off workers to survive.“The strong demand from consumers paired with a lack of supply from the manufacturers has created a gusher of profits for dealers,” said Alan Haig, president of Haig Partners, an automotive consultant.Now, dealers typically dictate the price of new or used cars. New cars typically sell for the manufacturer’s suggested retail price or, in some cases, thousands of dollars more for models in very high demand. Haggling over used cars is a distant memory.“There’s not a lot of negotiating that goes on right now on price,” said Wes Lutz, owner of Extreme Dodge in Jackson, Mich.Some customers have balked at paying top dollar for new cars and have opted to make do with older vehicles. That has increased demand for parts and service, one of the most profitable businesses for car dealers. Many dealers have extended repair-shop hours. Mr. Ricart said he had some repair technicians putting in 10- or 12-hour days three or four days in a row before taking a few days off.Of course, the shortage of cars will end, but it isn’t clear when.As Covid-19 cases and deaths rose last spring, automakers shut down plants across North America from late March until mid-May. Since their plants were down and they expected sales to come back slowly, they ordered fewer semiconductors, the tiny brains that control engines, transmissions, touch screens, and many other components of modern cars and trucks.At the same time, consumers confined to their homes began buying laptops, smartphones and game consoles, which increased demand for chips from companies that make those devices. When automakers restarted their plants, fewer chips were available.Many automakers have had to idle plants for a week or two at a time in the first half of 2021. G.M., Ford Motor and others have also resorted to producing vehicles without certain components and holding them at plants until the required parts arrive. At one point, G.M. had about 20,000 nearly complete vehicles awaiting electronic components. It began shipping them in June.Ford has been hit harder than many other automakers because of a fire at one of its suppliers’ factories in Japan. At the end of June, Ford had about 162,000 vehicles at dealer lots, fewer than half the number it had just three months ago and roughly a quarter of the stock its dealers typically hold.This month, Ford is slowing production at several North American plants because of the chip shortage. The company said it planned to focus on completing vehicles.Mr. Ricart recently took a trip on his Harley-Davidson to Louisville, Ky., and got a look at the trucks and S.U.V.s at a Ford plant that are waiting to be finished. He said he had seen “thousands of trucks in fields with temporary fencing around them.”He said he hoped to get some of those trucks soon because Ricart Ford had only about 30 F-150 pickup trucks in stock. “We’re used to selling a couple hundred a month.” More

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    Inflation? Not in Japan. And That Could Hold a Warning for the U.S.

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    If the United States’ current bout of rising prices soon eases, its economy could fall back into the cycle of weak inflation that preceded the pandemic — a situation much like Japan’s.TOKYO — In the United States, everyone is talking about inflation. The country’s reopening from the coronavirus pandemic has unleashed pent-up demand for everything from raw materials like lumber to secondhand goods like used cars, pushing up prices at the fastest clip in over a decade.Japan, however, is having the opposite problem. Consumers are paying less for many goods, from Uniqlo parkas to steaming-hot bowls of ramen. While in the United States average prices have jumped by 5.4 percent in the past year, the Japanese economy has faced deflationary pressure, with prices dipping by 0.1 percent in May from the previous year.To some extent, the situation in Japan can be explained by its continued struggles with the coronavirus, which have kept shoppers at home. But deeper forces are also at play. Before the pandemic, prices outside the volatile energy and food sectors had barely budged for years, as Japan never came close to meeting its longtime goal of 2 percent inflation.It wasn’t for lack of trying. Over nearly a decade, Japanese policymakers have wielded nearly every trick in the economist’s playbook in an effort to coax prices higher. They have juiced the economy with cheap money, spent huge sums on fiscal stimulus like public works, and lowered interest rates to levels that made borrowing nearly free.But as Japan has learned the hard way, low inflation can be an economic quagmire. And that experience carries a warning for the United States if its current bout of inflation eases, as many economists expect, and its economy falls back into the cycle of weak inflation that preceded the pandemic.“Most economists, me included, are pretty confident that the Fed knows how to bring inflation down,” including by raising interest rates, said Joshua Hausman, an associate professor of public policy and economics at the University of Michigan who has studied Japan’s economy.However, “it’s much less clear, partly because of Japan’s experience, that we’re very good at bringing inflation up,” he added.For consumers, falling prices sound like a good thing. But from the perspective of most economists, they are a problem.Consumers are paying less for many goods, from Uniqlo parkas to steaming-hot bowls of ramen.Kazuhiro Nogi/Agence France-Presse — Getty ImagesInflation, they like to say, greases the economy’s gears. In small amounts, it increases corporate profits and wages, stimulating growth. It can also reduce the burden of debt, bringing down the relative costs of college loans and mortgages.Japan’s inability to lift inflation is “one of the biggest unsolved challenges in the profession,” said Mark Gertler, a professor of economics at New York University who has studied the issue.One popular explanation for the country’s trouble is that consumers’ expectations of low prices have become so entrenched that it’s basically impossible for companies to raise prices. Economists also point to weakening demand caused by Japan’s aging population, as well as globalization, with cheap, plentiful labor effectively keeping costs low for consumers in developed countries.The picture once looked very different. In the mid-1970s, Japan had some of the highest inflation rates in the world, approaching 25 percent.It wasn’t alone. Runaway prices set off by the 1970s oil crisis defined the era, including for a whole generation of economists who were groomed to believe that the most likely threat to financial stability was rapid inflation and that interest rates were the best tool to combat it.But by the early 1990s, Japan began experiencing a different issue. An economic bubble, fueled by a soaring stock market and rampant property speculation, burst. Prices began to fall.Japan attacked the problem with innovative policies, including using negative interest rates to encourage spending and injecting money into the economy through large-scale asset purchases, a policy known as quantitative easing.Shops and restaurants closed during a state of emergency in Osaka, Japan, in May. To some extent the situation in Japan can be explained by its continued struggles with the coronavirus.Carl Court/Getty ImagesIt seemed to do little good. Still, economists at the time saw Japan’s experience not as a warning to the world, but as an anomaly produced by bad policy choices and cultural quirks.That began to change with the financial crisis of 2008, when inflation rates around the world plummeted and other central banks adopted quantitative easing.The problem has been most notable in Europe, where inflation has averaged 1.2 percent since 2009, economic growth has been weak and some interest rates have been negative for years. During the same period, U.S. inflation averaged just below 2 percent. The Federal Reserve has kept its main interest rate at close to zero since March 2020.Some prominent economists viewed the low inflation as a sign that the U.S. and E.U. economies might be on the brink of so-called secular stagnation, a condition marked by low inflation, low interest rates and sluggish growth.They have worried that those trends will deepen as both economies begin to gray, potentially reducing demand and pushing up savings rates.In 2013, under newly elected Prime Minister Shinzo Abe, Japan began its most ambitious effort to tackle its weak economic growth and low inflation.The government embarked on a grand experiment of huge monetary and fiscal stimulus, buying enormous quantities of equities and lowering interest rates in hopes of encouraging borrowing and putting more money into the economy. As the supply of cash increased, the thinking went, its relative value would decline, effectively driving up prices. Flush with money, consumers and companies alike would spend more. Voilà, inflation.Former Prime Minister Shinzo Abe leaving his last cabinet meeting in Tokyo last year. Under Mr. Abe, Japan began an ambitious but unsuccessful effort to tackle its weak inflation.Kazuhiro Nogi/Agence France-Presse — Getty ImagesTo encourage spending, Japan adopted a policy, known as forward guidance, aimed at convincing people that prices would go up as it pledged to do everything in its power to achieve its inflation target of 2 percent.But the government’s efforts at persuasion fell short, so there was little urgency to spend, said Hiroshi Nakaso, a former deputy governor of the Bank of Japan and head of the Daiwa Institute of Research.Japan found itself in a vicious circle, said Takatoshi Ito, a professor of international and public affairs at Columbia University, who served on Japan’s Council on Economic and Fiscal Policy.Consumers came to expect “stable prices and zero inflation,” he said, adding that as a result, “companies are afraid of raising prices, because that would attract attention, and consumers may revolt.”The sluggish economy made companies reluctant to raise wages, he said, “and because real wages didn’t go up, probably consumption didn’t go up. So there was no increase for demand for products and services.”As inflation hardly moved, some economists wondered if Japan’s stimulus had been too conservative, even as it racked up one of the world’s largest debt burdens.Policymakers, citing a need to pay off the country’s debts and meet the growing costs of caring for an aging population, hedged against the spending by twice raising the country’s consumption tax, apparently weakening demand.A bus station in Tokyo. Economists point to Japan’s aging population as one reason for weakening demand.Charly Triballeau/Agence France-Presse — Getty ImagesIn the end, Mr. Abe’s experiment, known as Abenomics, may not have been as successful as hoped. But it has informed policymakers’ response to the pandemic, said Gene Park, a professor of political science at Loyola Marymount University in Los Angeles who studies Japan’s monetary policy.One takeaway, he said, is that governments could spend more than they had ever thought possible without setting off a rapid rise in inflation. Another is that they might have to spend considerably more than they had once considered necessary to stimulate growth.Japan “has given the U.S. more freedom to experiment with bolder measures,” Mr. Park said.During the pandemic, Japan, too, has tried to apply the lessons learned since 2013.The government has paid shops and restaurants to stay closed, handed out cash to every person in the country, and financed zero-interest loans for struggling businesses. Prices fell anyway. That was partly at the behest of the government itself, which recently pressured telecom companies to lower mobile phone fees it deemed too high. Most Japanese consumers are also still waiting to be vaccinated against the coronavirus, holding back economic activity.Even after the pandemic wanes, however, Japan’s inflation rates are likely to stay low, said Sayuri Shirai, an economics professor at Keio University in Tokyo and a former board member of the Bank of Japan.After all, the primary problem remains unchanged: No one is really sure why prices have stagnated.“The central bank probably doesn’t want to say that they cannot control inflation,” Ms. Shirai said. “Therefore, this issue has just been left without a clear discussion.” More

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    A Great Inflation Redux? Economists Point to Big Differences.

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    Prices climbed for years before the runaway inflation of the 1970s. Economists see parallels today, but the differences are just as important.The last time big government spending, supply chain shocks and rising wages threatened to keep inflation meaningfully higher, President Biden’s top economic adviser was in diapers.Jump forward half a century, and some aspects of 2021 look a little bit like a do-over of the late 1960s and the 1970s, which many economists think laid the groundwork for the breakaway inflation that took hold and lasted into the 1980s. At a time when prices have popped and debate rages over how quickly they will moderate, those comparisons have become a hot topic.Yet many inflation experts point out critical differences between this era and that one, from the decline of unionization to the ascent of globalization and shifting demographics, and say those discrepancies are part of the reason faster inflation is likely to be short-lived this time around. White House officials — including Brian Deese, Mr. Biden’s top economic adviser, who is 43 — say they expect price pressures to calm.“We’re looking at the implications of an economy that comes out of a policy-induced coma and comes roaring back,” Mr. Deese said at a recent event, explaining why prices have moved up.Inflation concerns may already be easing among investors. Yields on government debt rose earlier this year as investors demanded higher interest rates to compensate for the risk of higher inflation, among other factors. But yields have since fallen amid signs that the economic recovery is proceeding more slowly than initially expected.The main certainty that emerges from the debate is this: Like half a century ago, the American economy is being rocked by big and unusual changes that have hit all at once. But those trends make it hard for analysts to guess what will happen, since their tools use the past to predict the future — and there’s no historical precedent for reopening from a global pandemic. This won’t be 1969 or 1978 again, but what it will look like is difficult to foresee.“History doesn’t repeat itself,” said Rebecca L. Spang, a historian at Indiana University who has studied money and inflation. “Recognizing the complexity of any particular moment is something that economics, with its ahistorical models, is not very good at.”Monetary policy: Fine tuning, take two?The Federal Reserve entered the 1960s with the same two-part job that it has now: fostering stable inflation and maximum employment by keeping the economy growing at an even keel using its monetary policies, which influence how expensive it is to borrow money.Back then, the Fed was very focused on the employment part of its goal. The Employment Act of 1946 had instructed the government to dedicate itself to creating a strong job market. Years of weak price gains made runaway inflation seem like a distant risk, and a growing number of economists had come to believe that higher employment levels could be “bought” with slightly more inflation.Even when the then-Fed chair, William McChesney Martin, grew worried about price pressures in the mid-1960s, the institution was slow to move, because some of his colleagues hoped to drive unemployment down to 4 percent. When it did raise rates, it did so slowly — a situation that was exacerbated in the 1970s, when Mr. Martin’s successor, Arthur Burns, came under intense political pressure from the Nixon White House to keep easy-money policies in place.By the time the Fed began to fight inflation in earnest, it was too late. Some economists draw parallels between that era and now. The Fed last year renewed its focus on the labor market, calling full employment a “broad-based and inclusive” goal. And after years of tepid price gains, officials have signaled that they would be willing to accept periods of higher prices.Yet unlike in the 1960s, the Fed now has a clear framework for dealing with inflation. It no longer has a specific numeric goal for full employment — it looks for signs like faster wage growth. It has given no signal that it would again tolerate years and years of higher prices. “The Fed is very focused on keeping inflation relatively settled,” said Alan Detmeister, a former central bank economist who is now at the bank U.B.S. Plus, the White House now stresses the Fed’s separation from politics, and the Fed itself often talks about that “precious” independence.An Inflationary HistoryConsumer prices are rising quickly, but inflation is far from levels in the 1970s.

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    Annual percent change in Consumer Price Index
    Source: Bureau of Labor StatisticsBy The New York TimesFiscal policy: Expansive then and now.The current moment resembles the period that laid the groundwork for America’s Great Inflation in another way: a rapid increase in deficit-funded government spending.Back then, the culprit was the Vietnam War. President Lyndon Johnson began ramping up U.S. troop levels in the mid-1960s, and with public opposition to the war rising, he was reluctant to pay for it by raising taxes or cutting spending elsewhere in the budget. The result was what amounted to a jolt of fiscal stimulus at a time when the U.S. economy was already strong — a classic recipe for inflation.Today, the economy is growing quickly, and many companies have complained of difficulties in finding enough workers, suggesting that the United States might be closer to full employment than standard measures propose.“We’re not beyond full employment at this point, but a number of people are predicting that we will be, and there’s very little question that we are experiencing a big surge in demand,” said Alan Blinder, a Princeton economist and former Fed vice chairman.But there are obvious differences between the two periods. The 1960s saw historically low unemployment while the current economy is still missing millions of jobs. According to many standard measures, the recovery remains fragile enough that government spending should lead to faster job growth, not more inflation. Plus, fiscal stimulus will likely slow with time as pandemic-era programs such as enhanced unemployment benefits end. Supply shocks: Then it was oil, now it’s computer chips.In the 1960s, an overheating economy gradually pushed up prices, but it was in the 1970s when inflation really took off. Inflation jumped to 12 percent in late 1974, then moderated, and hit a peak of more than 14 percent in early 1980.The cumulative effects of that much inflation were eye-popping. In January 1970, $100 would have been able to buy as many goods and services as $280 could buy in January 1985. By comparison, $100 of purchases in 2005 would only have cost $135 by 2020.The immediate culprit, in both big 1970s spikes, was oil. The Arab oil embargo of 1973-74 and the Iranian revolution of 1979 both contributed to an oil slump, leading to price spikes and gas shortages, which in turn pushed up prices elsewhere in the economy. Shortages in commodities including lumber and agricultural goods also contributed.Oil prices are also rising now, jumping higher this week after talks between the Organization of the Petroleum Exporting Countries and its allies failed to reach a deal to ramp up production — but the situation is not as dire as the disruptions half a century ago. The economy is also facing snarls as it reopens and a dearth of computer chips is pushing up prices for video game systems and used cars. The Biden administration, much like the Nixon, Ford and Carter administrations, has been examining what it can do to ease the bottlenecks, including creating a task force to look into disruptions affecting construction, transportation, semiconductor production and agriculture.“It gave me a feeling of déjà vu, because that’s what we were doing in the ’70s — we were trying to get supply-side effects,” said Barry P. Bosworth, a senior fellow at the Brookings Institution who led the Council on Wage and Price Stability under President Jimmy Carter. The efforts failed to control overall inflation, he said.“It doesn’t work,” he said. “As a macro policy, you can’t go around trying to put your finger in the dike everywhere it pops up.”Wages: The trouble with spirals.The big price spikes in the 1960s and 1970s reversed once the underlying conditions that created them eased. But not all the way — in each case, the rate of inflation bottomed out a bit higher than the time before. Many economists believe that pattern had to do with human psychology: Workers and businesses had come to expect a higher rate of inflation, and had adapted their behavior accordingly, creating a self-sustaining cycle.Economists particularly highlight the role of wages. Businesses can cut prices just as easily as they can raise them, but cutting wages is harder. No worker wants to be told that a job that was worth $10 an hour yesterday is worth just $9.50 an hour today. And if workers expect prices to rise at 5 percent per year, they will want raises to keep up with inflation.Most economists believe that the forces driving the current surge in inflation will ease in the months ahead. The question is whether that will happen before expectations shift. Some surveys have found that consumers are already beginning to anticipate faster inflation to stick around, although that evidence is mixed. Wages, too, have continued rising as employers struggle to rehire workers, although it’s not yet clear that they are taking off.One reason that temporary price increases turned into permanent wage increases in the middle of the 20th century is that many union contracts had escalator clauses that tied wage gains directly to inflation. Those provisions effectively helped lock in price increases, feeding into the price spiral, said David Card, an economist at the University of California, Berkeley, who has studied the role of union contracts in inflation. Far fewer workers are members of unions today, and few contracts have inflation clauses, in part because they haven’t been necessary in a period of low inflation.Perhaps the largest difference of all? Time. In the 1960s, it took years of price spikes and policy failures for Americans to lose confidence that their leaders could keep inflation under control. “What happened by the ’70s took almost 10 years to develop,” Mr. Card said. “I don’t think it’s that feasible that it could happen that quickly.” More

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    Gas Price Increase Poses Challenge to U.S. Economy

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    Experts say a period of costlier fuel is likely to be brief. But if consumers start to assume otherwise, it could mean problems for Biden and the Fed.As the U.S. economy struggles to emerge from its pandemic-induced hibernation, consumers and businesses have encountered product shortages, hiring difficulties and often conflicting public health guidance, among other challenges.Now the recovery faces a more familiar foe: rising oil and gasoline prices.West Texas Intermediate, the U.S. oil-price benchmark, hit $76.98 a barrel on Tuesday, its highest level in six years, as OPEC, Russia and their allies again failed to agree on production increases. Prices moderated later in the day but remained nearly $10 a barrel higher than in mid-May.Reflecting the increase in crude prices, the average price of a gallon of regular gasoline in the United States has risen to $3.13, according to AAA, up from $3.05 a month ago. A year ago, as the coronavirus kept people home, gas cost just $2.18 a gallon on average. The auto club said on Tuesday that it expected prices to increase another 10 to 20 cents through the end of August.The price of a gallon of gas

    Note: Weekly prices through Monday. Data is not seasonally adjusted and includes all formulations of regular gasoline.Source: Energy Information AdministrationBy The New York TimesThe rapid run-up comes at a delicate moment for the U.S. economy, which was already experiencing the fastest inflation in years amid resurgent consumer activity and supply-chain bottlenecks. And it could cause a political headache for President Biden as he tries to convince the public that his policies are helping the country regain its footing.Asked about oil prices at a White House news conference on Tuesday, Jen Psaki, the press secretary, said the administration was monitoring the situation and had been in touch with officials from Saudi Arabia and other major producers. But she suggested that the president had limited control over gas prices.“There sometimes is a misunderstanding of what causes gas prices to increase,” Ms. Psaki said. “The supply availability of oil has a huge impact.”Indeed, energy experts said the recent jump in oil prices had more to do with global economic and geopolitical forces than with domestic policies. Global energy demand slumped when the pandemic hit last year, eventually leading the Organization of the Petroleum Exporting Countries and its allies to cut production to prevent a collapse in prices. Demand has begun to rebound as economic activity resumes, but production has not kept pace: OPEC Plus, the alliance of oil producers, on Monday called off a teleconference to discuss increasing output.The direct economic impact of higher oil prices will probably be substantially more modest than in past decades. Energy overall plays a smaller role in the economy because of improved efficiency and a shift away from manufacturing, and the rise of renewable energy means the United States is less reliant on oil in particular.In addition, the surge in domestic oil production in recent years means that rising oil prices are no longer an unambiguous negative for the U.S. economy: Higher prices are bad news for drivers and consumers, but good news for oil companies and their workers, and the vast network of equipment manufacturers and service providers that supply them. Joe Brusuelas, chief economist at the accounting firm RSM, said oil prices of $80 or even $100 a barrel didn’t concern him. Not until prices top $120 a barrel would he start to worry seriously about the economic impact, he said.“The world has changed,” Mr. Brusuelas said. “The risks aren’t what they once were.”Still, the costs of higher prices will not be felt equally. Poor and working-class Americans drive older, less efficient cars and trucks and spend more of their incomes on fuel.Higher oil prices are no longer an altogether bad thing for the U.S. economy, but they are a particular burden to poor and working-class Americans.Audra Melton for The New York TimesScott Hanson of Western Springs, Ill., said $40 was enough to fill up his gas tank last year, when he lost his job as an office manager because of the pandemic. Now Mr. Hanson is paying over $60 to fill his Dodge Charger, making trips to take his mother to her medical appointments more expensive. Gas in Illinois is averaging $3.36 a gallon, according to AAA.“It’s too much for too many people that lost their jobs or have low-paying jobs,” Mr. Hanson said. “Everything bad that could happen is happening all at once.”Gas prices also remain a potent and highly visible symbol of rising prices when many consumers — and some economists — are nervous about inflation. Consumer prices rose 5 percent in May from a year earlier, the biggest annual increase in more than a decade, and forecasters expect figures for June, which will be released next week, to show another significant increase.Policymakers at the Federal Reserve have said they expect the increase in inflation to be short-lived, and they are unlikely to change that view based on an increase in energy prices, which are often volatile even in normal times, said Jay Bryson, chief economist at Wells Fargo.But if rising oil prices lead consumers and businesses to believe that faster inflation will continue, that could be a harder problem for the Fed. Economic research suggests that prices of things that consumers buy often, such as food and gasoline, weigh particularly heavily on their expectations for inflation. With public opinion surveys showing increasing concern about inflation, rising oil prices increase the risk of a more lasting shift in expectations, said David Wilcox, a former Fed economist who is now a senior fellow at the Peterson Institute for International Economics in Washington.“I don’t expect the price of oil to be the last straw on the camel’s back, but it is another straw on a camel’s back that’s already carrying a fair amount of baggage,” Mr. Wilcox said. “There is a much greater risk today of an inflationary psychology taking hold than I would have said three to five years ago.”Republicans have seized on rising prices to criticize Mr. Biden’s energy policies, including his decision to cancel permits for the Keystone XL oil pipeline and his pause on selling new oil leases on federal lands, a move that a federal judge has blocked.“Bad policy is already creating conditions like higher gasoline prices that we haven’t seen in a very long time,” Senator John Barrasso, Republican of Wyoming, wrote in an opinion essay last week. (Energy experts say Mr. Biden’s policies have had no meaningful impact on oil prices.)Ms. Psaki noted that Mr. Biden had consistently opposed an increase in the federal gas tax, which some Republican senators and business groups had advocated to help fund spending on infrastructure. The deal Mr. Biden reached with a bipartisan group of senators last month did not include a gas tax increase.“Ensuring Americans don’t bear a burden at the pump continues to be a top priority for the administration writ large,” Ms. Psaki said. “That’s one of the core reasons why the president was opposed — vehemently opposed — to a gas tax and any tax on vehicle mileage, because he felt that would on the backs of Americans. And that was a bottom-line red line for him.”Domestic oil production is expected to rise in coming months as higher prices and rising demand lead companies to step up drilling. But any rebound is likely to be gradual. U.S. oil companies have been cautious about investing in new exploration and production over the last year, even as oil prices have roughly doubled from the first half of 2020, when the pandemic punctured demand. Company executives say they are focused on share buybacks and debt reduction as sales rise.The Energy Department predicts that production will average 11.1 million barrels a day this year and 11.8 million barrels a day in 2022, 400,000 barrels a day less than in 2019.Even without a surge in domestic oil production, many forecasters doubt that prices will continue to rise at their recent pace. OPEC members generally agree that production should increase; they just disagree about how much. And a new nuclear deal with Iran or a thawing of U.S.-Venezuela relations could bring a flood of new supplies. Iran alone could potentially add 2.5 million to three million barrels of oil daily on the global market, or roughly a 3 percent addition to supplies.At the same time, the spread of new coronavirus variants has led some countries to reimpose or tighten restrictions on activity, which could dampen demand for oil. Capital Economics, a forecasting firm, said on Tuesday that it expected oil prices to peak at about $80 a barrel before falling back as supply increases. But the firm said that a collapse in prices or a further spike both remained possible.Reporting was contributed by More

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    Ambassador Tai Outlined Biden’s Goal of Worker-Focused Trade Policy

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    The U.S. trade representative called for stronger worker protections in trade policy as the administration looks to curb the negative impact of globalization.Katherine Tai, the United States trade representative, emphasized in a speech on Thursday that America is focused on protecting workers through trade policy and that it would try to push trading partners to lift wages, allow collective bargaining and end forced labor practices.The speech, Ms. Tai’s first significant policy address, highlighted the Biden administration’s goal of re-empowering workers and minimizing the negative effects of globalization, which has encouraged companies to move jobs and factories offshore in search of cheaper labor and materials.Less clear is how the administration will, in practice, accomplish those goals.“For a very long time, our trade policies have been shaped by folks who are used to looking at the macro picture — big economic sectors,” Ms. Tai said in an interview ahead of the speech, which she delivered at an A.F.L.-C.I.O. town hall. “We’ve lost sight of the impact of these policies, the really real and direct impact they can have on regular people’s lives, and on our workers’ livelihoods.”Ms. Tai, who spoke from prepared remarks, portrayed the administration’s push as trying to correct for decades of trade policy that put company profits ahead of workers and helped erode worker power in the United States.“A worker-centered trade policy means addressing the damage that U.S. workers and industries have sustained from competing with trading partners that do not allow workers to exercise their internationally recognized labor rights,” she said. “This includes standing up against worker abuse and promoting and supporting those rights that move us toward dignified work and shared prosperity: the right to organize and to collectively bargain.”Ms. Tai emphasized that the United States is already enforcing worker protections in the new North American trade agreement and trying to curb forced labor in the fishing industry at the World Trade Organization.On Wednesday, the Biden administration made its second request in a month for Mexico to review whether workers at two separate auto facilities were being denied the collective bargaining rights that were agreed to under the terms of the United States-Mexico-Canada Agreement.“These enforcement actions matter,” Ms. Tai said in her speech, noting the aim is to “protect the rights of workers, particularly those in low-wage industries who are vulnerable to exploitation.”Last month, the administration submitted a proposal to the World Trade Organization aimed at curbing “harmful subsidies to fishing activities that may be associated with the use of forced labor, such as illegal, unreported, and unregulated fishing.”Still, it remains to be seen how — or whether — the United States will effectively push for stronger labor standards outside of North America. Ms. Tai’s speech did not say directly how the administration would try and encourage some of its biggest trading partners, like China, to adjust trade practices.Asked what the plans are for other continents, Ms. Tai said, “In every direction that we have opportunities to formulate trade policies, we see opportunities to bring this worker-centered spirit to our work.”When it comes to China, she suggested that the goal was to work with other countries that have economic structures similar to the United States’, pairing with allies to “put ourselves on stronger competitive footing, to compete for the industries of the future.” More

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    Senate Passes Bill to Bolster Competitiveness With China

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    The wide margin of support reflected a sense of urgency among lawmakers in both parties about shoring up the technological and industrial capacity of the United States to counter Beijing.WASHINGTON — The Senate overwhelmingly passed legislation on Tuesday that would pour nearly a quarter-trillion dollars over the next five years into scientific research and development to bolster competitiveness against China. More