Event slides.

1. President Obama’s Economic Record and the
Challenges Ahead
Jason Furman
Chairman, Council of Economic Advisers
Resolution Foundation
London, United Kingdom
November 17, 2016

2. Table of Contents
1
1. The Recent Good…
2. …But the Longer-Term Bad
3. Effects of Selected Obama Administration Policies
4. The Worldwide Productivity Growth Slowdown
5. The Especially Large Increase in U.S. Inequality
6. The Unique U.S. Challenge of Labor Force Participation
7. Next Steps for U.S. Policy

3. Table of Contents
2
1. The Recent Good…
2. …But the Longer-Term Bad
3. Effects of Selected Obama Administration Policies
4. The Worldwide Productivity Growth Slowdown
5. The Especially Large Increase in U.S. Inequality
6. The Unique U.S. Challenge of Labor Force Participation
7. Next Steps for U.S. Policy

4. U.S. Recovery Comparatively Strong
3
Note: Population data for euro area and United Kingdom are quarterly interpolations of annual data.
Source: National sources via Haver Analytics; CEA calculations.
Euro Area
United States
Japan
2016:Q3
United
Kingdom
90
92
94
96
98
100
102
104
106
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Real Gross Domestic Product per Capita
Index (Pre-Crisis Peak = 100)

5. U.S. Unemployment Rate Has Consistently Fallen Below Expectations
4
Note: Annual forecasts are current as of March of the stated year. Shading denotes recession.
Source: Blue Chip Economic Indicators; Bureau of Labor Statistics, Current Population Survey.
4
5
6
7
8
9
10
11
2008 2010 2012 2014 2016 2018 2020
Unemployment Rate and Consensus Forecasts
2012 Forecast
2013 Forecast
2014 Forecast
2011 Forecast
2010 Forecast
Percent of Labor Force
2015 Forecast

6. Since the End of 2012, Real Wages Have Grown Nearly 20 Times Faster
than Between 1980 and 2007
5
Note: Shading denotes recession.
Source: Bureau of Labor Statistics; CEA calculations.
17.50
18.00
18.50
19.00
19.50
20.00
20.50
21.00
21.50
22.00
1980 1985 1990 1995 2000 2005 2010 2015
Real Hourly Earnings for Private Production and
Nonsupervisory Employees, 1980-2016
2015 Dollars
1980-2007 Pace:
+0.1% Per Year
Pace Since
End of 2012:
+1.4% Per
Year
Oct-16

7. Real Wages Have Grown Faster Over the Current Business Cycle Than
in Any Cycle Since the Early 1970s
6
Note: Wages for private production and nonsupervisory workers.
Source: National Bureau of Economic Research; Bureau of Labor Statistics, Real Earnings; CEA calculations.
-1.4
-2.1
-0.2
0.5
0.3
0.9
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
Start Date
End Date
Nov-1973
Jan-1980
Jan-1980
Jul-1981
Jul-1981
Jul-1990
Jul-1990
Mar-2001
Mar-2001
Dec-2007
Dec-2007
Oct-2016
Percent Change, Annual Rate
Real Hourly Wage Growth Over Business Cycles
(Cycle Peak to Cycle Peak)

8. In 2015, Income Increased for Households Across Distribution, With
Largest Gains at Bottom and Middle
7Source: Census Bureau; CEA calculations.
7.9
6.3
5.5
5.2 5.4
4.1
2.9
0
1
2
3
4
5
6
7
8
9
10th 20th 40th 50th
(Median)
60th 80th 90th
Growth in Real Household Income by Percentile, 2014-2015
Percent

9. Table of Contents
8
1. The Recent Good…
2. …But the Longer-Term Bad
3. Effects of Selected Obama Administration Policies
4. The Worldwide Productivity Growth Slowdown
5. The Especially Large Increase in U.S. Inequality
6. The Unique U.S. Challenge of Labor Force Participation
7. Next Steps for U.S. Policy

10. Middle-Class Income Growth Has Slowed in Recent Decades
9
Note: Income levels from the Census Bureau are deflated with the CPI-U-RS price index, and income levels from the Congressional Budget Office (CBO) are deflated with the personal
consumption expenditures price index. CBO median income is extended before 1979 and after 2013 with the growth rate of Census median household income.
Source: World Wealth and Income Database; Census Bureau; Congressional Budget Office; CEA calculations.
1948-1973 1973-2015
Median Family Income
(Census Bureau)
3.0% 0.4%
Median Household Income with Benefits
(CBO, adj. for household size)
N/A 0.5%
Median Household Income with Gov't
Transfers/Taxes
(CBO, adj. for household size)
N/A 1.0%
Annual Real Middle-Class Income Growth

11. Drivers of Income Growth: Productivity, Inequality, and Participation
10Source: Bureau of Labor Statistics, Productivity and Costs; World Wealth and Income Database; Bureau of Labor Statistics, Current Population Survey; CEA calculations.
1948-1973 1973-2015
Income Shares
Top 1 Percent 11% → 8% 8% → 18%
Bottom 90 Percent 66% → 68% 68% → 52%
Labor Force Participation Rate
Men, 16 and Older 87% → 79% 79% → 69%
Women, 16 and Older 33% → 45% 45% → 57%
Determinants of Middle-Class Income Growth
Labor Productivity Growth (Annual Average) 2.8% 1.8%

12. Some Thought Experiments
11
Note: These thought experiments are intended to demonstrate the importance of these three factors for middle-class incomes. They do not consider second-order effects or interactive effects.
The first thought experiment assumes that an increase in productivity is associated with an equal increase in the Census Bureau’s mean household income. The second thought experiment uses
the Census Bureau’s mean income of the middle quintile as a proxy for median income. The third thought experiment assumes that newly-participating women will have the same average
earnings as today’s working women. The first and third thought experiments assume that income gains are distributed proportionally such that mean and median incomes grow at the same
rate. Dollar gains are calculated off a base of the Census Bureau’s median household income in 2013. The fourth thought experiment compounds the effects of the first three.
Source: World Top Incomes Database; Census Bureau; Congressional Budget Office; Bureau of Labor Statistics, Current Population Survey; Bureau of Economic Analysis; CEA calculations.
Thought Experiment Factor Base Period
Percentage Impact
on 2015 Average
Income
Income Gain to
2015 Typical
Household
Productivity
Total Factor Productivity
Growth
1948-1973 65% $37,000
Inequality
Share of Income Earned
by Middle 20%
1973 19% $10,000
Participation
Female Labor Force
Participation Rate
1948-1995 6% $4,000
Combined Impact All of the Above 108% $61,000
Counterfactual Scenarios for Productivity, Equality, and Participation

13. Table of Contents
12
1. The Recent Good…
2. …But the Longer-Term Bad
3. Effects of Selected Obama Administration Policies
4. The Worldwide Productivity Growth Slowdown
5. The Especially Large Increase in U.S. Inequality
6. The Unique U.S. Challenge of Labor Force Participation
7. Next Steps for U.S. Policy

14. Fiscal Response to the Great Recession Was Larger and More Sustained
Than Just the Recovery Act
13
0
1
2
3
4
5
6
7
8
2009 2010 2011 2012
Recovery Act Subsequent Fiscal Measures Automatic Stabilizers
Program Year
Fiscal Expansion as a Percentage of GDP in Each Program Year,
United States
Percent
Source: Congressional Budget Office (2014); Bureau of Economic Analysis, National Income and Product Accounts; CEA calculations.

15. Fiscal Situation Has Improved, But Debt-to-GDP Ratio Still Rising
14Source: Office of Management and Budget.
9.8
8.7 8.5
6.8
4.1
2.8 2.5
3.2
0
2
4
6
8
10
12
2009 2010 2011 2012 2013 2014 2015 2016
Federal Budget Deficit
Percent of Fiscal Year GDP
2017
Continuation of
Current Policies
2011
Continuation of
Current Policies
0
30
60
90
120
150
180
2000 2005 2010 2015 2020 2025 2030 2035 2040
Comparison of Publicly Held Debt
Percent of GDP

16. The Affordable Care Act Has Driven the Uninsured Rate
Below 10 Percent For the First Time Ever
15
Source: CEA analysis of NHIS and supplemental data described in CEA (2014)
Note: Data are annual back to 1989 and generally bi-annual before that. Estimates for 2016 reflect only the first quarter.
0
5
10
15
20
25
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Share of Population Without Health Insurance
Percent
ACA 1st Open
Enrollment
Creation of
Medicare &
Medicaid
2016
Q1

17. 5.2
4.1
4.4
2.4
1.1
-0.6
-2
-1
0
1
2
3
4
5
6
7
Private Insurance Medicare
2000-2007
2007-2010
2010-2014
Growth in Real Per-Enrollee Spending by Payer
Average annual percent growth
Health Care Spending Per Enrollee Has Grown
Exceptionally Slowly in Both the Public and Private Sectors
16
Source: Centers for Medicare and Medicaid Services; Bureau of Economic Analysis; CEA calculations.
Note: Medicare spending growth for the 2000-2007 period has been adjusted to remove the effect of the creation of Medicare Part D.

18. Higher State and Local Minimum Wages Have Driven Bottom-End
Wage Growth
17
Note: Bars show percent changes from 2012:Q2 to 2016:Q2 using not-seasonally-adjusted average weekly earnings; the category of States that have increased minimum wages since 2013
excludes those that only index their minimum wage to inflation.
Source: Bureau of Labor Statistics, Current Employment Statistics; CEA calculations.
0
3
6
9
12
15
18
Earnings Growth Job Growth
States that have raised the minimum wage since 2013
Have not raised the minimum wage since 2013
Earnings and Job Growth in Leisure & Hospitality Since the
President's 2013 Call to Raise the Minimum Wage
Percent Change, 2012:Q2–2016:Q2

19. Historic Investments in Higher Education
18Source: College Board (2015).
Total Pell
Expenditures
(left axis)
Number of
Recipients
(right axis)
0
1
2
3
4
5
6
7
8
9
10
0
5
10
15
20
25
30
35
40
45
50
1980 1984 1988 1992 1996 2000 2004 2008 2012
Pell Expenditures Over Time
Billions of 2014 Dollars Millions of Recipients

20. A Historic Reduction in Income Inequality
19Source: Department of the Treasury, Office of Tax Analysis.
-15
-10
-5
0
5
10
15
20
Change in After-Tax Income by Income Percentile:
Changes in Tax Policy Since 2009
and ACA Coverage Provisions, 2017
Percent Change in After-Tax Income

21. The Financial Sector is More Resilient, With Higher
Minimum Capital Ratios for Banks
20
Note: Includes data for banks and bank holding companies (BHCs).
Source: Federal Reserve Bank of New York.
Less than
$50bn Assets
$50-500bn
Assets
Greater than
$500bn Assets
2016:Q2
4
6
8
10
12
14
2001 2003 2005 2007 2009 2011 2013 2015
Tier 1 Common Equity Ratios by Bank Size
Percent of Risk-Weighted Assets

22. Table of Contents
21
1. The Recent Good…
2. …But the Longer-Term Bad
3. Effects of Selected Obama Administration Policies
4. The Worldwide Productivity Growth Slowdown
5. The Especially Large Increase in U.S. Inequality
6. The Unique U.S. Challenge of Labor Force Participation
7. Next Steps for U.S. Policy

23. Average Annual Productivity Growth Has Slowed
in All of the G-7 Economies
22Source: Conference Board, Total Economy Database; CEA calculations.
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
United
States
Canada Japan Germany France United
Kingdom
Italy
1995-2005 2005-2015
Labor Productivity Growth, G-7 Countries
Percent, Annual Rate

24. Table of Contents
23
1. The Recent Good…
2. …But the Longer-Term Bad
3. Effects of Selected Obama Administration Policies
4. The Worldwide Productivity Growth Slowdown
5. The Especially Large Increase in U.S. Inequality
6. The Unique U.S. Challenge of Labor Force Participation
7. Next Steps for U.S. Policy

25. The United States Has Seen Faster Growth and Higher Levels of Income
Inequality Than Other Major Advanced Economies
24Source: World Wealth and Income Database.
2015
4
6
8
10
12
14
16
18
20
1975 1980 1985 1990 1995 2000 2005 2010 2015
United States United Kingdom
Canada France
Italy Japan
Germany
Share of Income Earned by Top 1 Percent, 1975-2015
Percent

26. Competitive Explanation: Increased Demand for Skills
25
Note: Ratio of median annual earnings of full-time, full-year workers over age 25 with a bachelor’s degree only to median annual earnings of full-time, full-year workers over age 25 with a high
school degree only. Prior to 1992, bachelor’s degree is defined as four years of college.
Source: Bureau of Labor Statistics, Current Population Survey (Annual Social and Economic Supplement); CEA calculations.
2015
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1975 1980 1985 1990 1995 2000 2005 2010 2015
College Earnings Premium, 1975-2015
Earnings Ratio

27. Competitive Explanation: Slowdown in the Growth
of the Supply of Skills
26Source: Calculations by Claudia Goldin and Lawrence Katz.
1982
6
7
8
9
10
11
12
13
14
15
16
17
1875 1890 1905 1920 1935 1950 1965 1980
Mean Years of Schooling at Age 30, U.S. Native-Born,
by Year of Birth, 1876-1982
Mean Years of Schooling Completed
Year of Birth
1876-1951
Trend
1951-1982
Trend

28. Noncompetitive Explanation: Worker Bargaining Power
Has Been Reduced
27
Note: Total employment from 1901 to 1947 is derived from estimates in Weir (1992). For 1948 to 2015, employment data are annual averages from the monthly Current Population Survey.
Minimum wage adjusted for inflation using the CPI-U-RS.
Source: Troy and Sheflin (1985); Bureau of Labor Statistics, Current Population Survey; Weir (1992); World Wealth and Income Database; Department of Labor; Bureau of Labor Statistics,
Consumer Prices; CEA calculations.
2015
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
1960 1970 1980 1990 2000 2010
Real Value of the Federal Minimum Wage, 1960–2015
2015 Dollars
Troy and
Sheflin (1985) CPS:
Membership
0
10
20
30
40
50
60
70
80
1915 1925 1935 1945 1955 1965 1975 1985 1995 2005 2015
Union Membership as a Share of Total Employment and
Bottom 90 Percent Income Share, 1915-2015
Percent
Bottom 90 Percent Share of Income
2015

29. Noncompetitive Explanation: Increasing Dispersion in Returns to
Invested Capital Across Firms
28
Note: The return on invested capital definition is based on Koller, Goedhart, and Wessels (2015), and the data presented here are updated and augmented versions of the figures presented in
Chapter 6 of that volume. The McKinsey data includes McKinsey analysis of Standard & Poor’s data and exclude financial firms from the analysis because of the practical complexities of
computing returns on invested capital for such firms.
Source: Koller, Goedhart, and Wessels (2015); McKinsey & Company; Furman and Orszag (2015).
Median
90th
Percentile
2014
75th
Percentile
25th Percentile
0
20
40
60
80
100
120
1965 1975 1985 1995 2005 2015
Return on Invested Capital Excluding Goodwill,
U.S. Publicly-Traded Nonfinancial Firms
Percent

30. Table of Contents
29
1. The Recent Good…
2. …But the Longer-Term Bad
3. Effects of Selected Obama Administration Policies
4. The Worldwide Productivity Growth Slowdown
5. The Especially Large Increase in U.S. Inequality
6. The Unique U.S. Challenge of Labor Force Participation
7. Next Steps for U.S. Policy

31. A Troubling Trend: Declining Prime-Age Labor Force Participation
30Source: Bureau of Labor Statistics, Current Population Survey; CEA calculations.
86
88
90
92
94
96
98
100
1948 1958 1968 1978 1988 1998 2008
Percent
1948-2007
Trend
Oct-16
Prime-Age Male Labor Force Participation Rate
30
40
50
60
70
80
90
100
1948 1958 1968 1978 1988 1998 2008
Percent
1948-2007
Trend
2000-2007
Trend
Oct-16
Prime-Age Female Labor Force Participation Rate

32. Declining Prime-Age Male Participation Has Been Concentrated Among
Men with Less Educational Attainment
31Source: Bureau of Labor Statistics, Current Population Survey (Annual Social and Economic Supplement); CEA calculations.
High School or Less Some College
Bachelor's or Higher
2016
80
82
84
86
88
90
92
94
96
98
100
1964 1974 1984 1994 2004 2014
Prime-Age Male Labor Force Participation Rate
by Educational Attainment, 1964-2016
Percent

33. Recent U.S. Experience Diverges from the United Kingdom
32
United Kingdom
United States
60
61
62
63
64
65
66
67
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Labor Force Participation, 2007-2016
Percent, Centered Three-Month Moving Average
Aug-16
Sep-16
Source: U.S. Bureau of Labor Statistics, Current Population Survey; U.K. Office of National Statistics, Labour Force Survey.

34. Despite Flexible Labor Markets, the United States Ranks Towards the Bottom
of the OECD in the Share of Prime-Age Men and Women in the Labor Force
33Source: Organisation for Economic Co-operation and Development.
70
75
80
85
90
95
100
Switzerland
Japan
CzechRepublic
Mexico
Luxembourg
Iceland
SlovakRepublic
Sweden
Greece
Slovenia
Spain
Germany
France
Estonia
NewZealand
Netherlands
Hungary
Chile
UnitedKingdom
Portugal
Austria
Korea
Canada
Denmark
Poland
Turkey
Australia
Belgium
Ireland
Finland
Norway
UnitedStates
Italy
Israel
2015 1990
Prime-Age Male Labor Force Participation Rate
Percent of Population
30
40
50
60
70
80
90
100
Slovenia
Sweden
Iceland
Portugal
Switzerland
Austria
Norway
Finland
Denmark
Estonia
France
Germany
Netherlands
Spain
Canada
CzechRepublic
Luxembourg
SlovakRepublic
Belgium
UnitedKingdom
Hungary
Poland
NewZealand
Israel
Greece
Australia
Japan
UnitedStates
Ireland
Chile
Italy
Korea
Mexico
Turkey
2015 1990
Prime-Age Female Labor Force Participation Rate
Percent of Population

35. U.S. Labor Market Has High Flexibility But Low Supportiveness
According to OECD’s Going for Growth Indicators
34
Source: Organisation for Economic Co-operation and Development, Going for Growth 2016; CEA calculations.
Percentile Rank (100 =
Most Flexible/Most
Supportive)
Measures of Labor Market Flexibility
Overall Labor Market Regulation (2014) 100
Employment Protection for Regular Employment (2013) 100
Minimum Cost of Labor (2014) 96
Coverage of Collective Bargaining Agreements (2013) 94
Measures of Institutional Labor Market Support
Expenditure on Active Labor Market Policies per Unemployed (2013) 6
Net Childcare Costs, Couples (2012) 10
Implicit Tax on Returning to Work, Second Earner (2012) 10
OECD Going for Growth Indicators

36. Table of Contents
35
1. The Recent Good…
2. …But the Longer-Term Bad
3. Effects of Selected Obama Administration Policies
4. The Worldwide Productivity Growth Slowdown
5. The Especially Large Increase in U.S. Inequality
6. The Unique U.S. Challenge of Labor Force Participation
7. Next Steps for U.S. Policy

37. Selected Policies for Inclusive, Sustainable Growth
36
Productivity
• Investing in infrastructure, research, and education
• Expanding trade and immigration
• Reforming the business tax code
Inequality and Participation
• Raising the minimum wage and expanding collective bargaining
• Reducing concentration of market power and rent-seeking via competition policy
• Deepening “connective tissue” in labor markets and expanding workplace flexibility
• Reforming the criminal justice system
Sustainability
• Continuing to implement Wall Street Reform
• Improving automatic stabilizers and making more active use of fiscal policy
• Reducing the long-run deficit with a combination of reforms to entitlements and
increased revenue
• Addressing climate change

38. President Obama’s Economic Record and the
Challenges Ahead
Jason Furman
Chairman, Council of Economic Advisers
Resolution Foundation
London, United Kingdom
November 17, 2016