Is the Labor Market About to Tip Us Into Recession? — ft. Kathryn Anne Edwards

Ed Elson and Scott Galloway are joined by Kathryn Anne Edwards to break down the cracks in the labor market and unpack whether more layoffs are on the horizon. They discuss how shifting immigration trends are reshaping the jobs market and why AI is only one factor behind the challenges young workers are facing. Kathryn Anne Edwards is a PhD economist and economic policy consultant. She writes a weekly column on the economy for Bloomberg and is the host of the Optimist Economy podcast. Get your tickets to the Prof G Markets tour Subscribe to the Prof G Markets Youtube Channel Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [email protected] Learn more about your ad choices. Visit podcastchoices.com/adchoices

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• 0:00Speaker 00

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• 1:29Scott Galloway?

  Today's number 13. That's the percentage of US adults who believe Bigfoot is real. Ed, what are they called Bigfoot in Europe?

• 1:36Ed Elson?

  I don't know.

• 1:37Scott Galloway?

  Big meter.

• 1:39Scott Galloway?

  People, some people have been complaining about how pornographic my jokes are, so I'm gonna, I'm gonna get them to beg for the dirty jokes, which is bad dad jokes.

• 1:47Ed Elson?

  I like that. I think that's a good idea.

• 1:49Scott Galloway?

  How does Bigfoot tell time?

• 1:50Ed Elson?

  How?

• 1:51Scott Galloway?

  He's got a Sasquatch.

• 1:55Speaker 07

  Markets are bigger than us. What you have here is a structural change in the world's distribution. Cash is trash. Stocks look pretty attractive. Something's going to break. Forget about it.

• 2:05Scott Galloway?

  Welcome to Prof G Markets. It's Dad minus the vulgarity.

• 2:11Scott Galloway?

  Ed, how are you?

• 2:12Ed Elson?

  I'm doing well. It's a beautiful day here in New York. It's finally spring here, so everyone's in a good mood. Everyone's feeling happy again. So am I. So I'm doing, I'm doing well.

• 2:22Scott Galloway?

  You're looking very fall. It's the spring. You need some quince.

• 2:25Ed Elson?

  It's funny you say that. This actually is quince, but I need some new, I need some new spring collection.

• 2:32Ed Elson?

  So yeah, I'm doing well. How are you doing? Where are you? How was spring break? Lots of questions.

• 2:36Scott Galloway?

  I am in Los Angeles. Spring break was great. I was in Florida, a ton of time with the boys, beautiful there. Love my place there. And then I went to Palm Springs to go to Coachella and now I'm in Los Angeles at my second home at the

• 2:53Scott Galloway?

  Beverly Hills Hotel where I just had a really fattening breakfast. And I'm talking to you and I'm waiting for my agent to come meet with me and have lunch. Jesus Christ, I'm a douchebag. Ask me about Coachella, Ed.

• 3:04Ed Elson?

  I was just going to ask you that. I did not know that you went to Coachella. How was Coachella?

• 3:09Scott Galloway?

  I've figured out the ultimate hack for Coachella. Every three years I go and I realize I'm too old and I hate going to the fucking festival and you walk for three hours and it's like crowded and someone bumps me and I get all bummed out. And so this year I did it exactly right. I would, I, my friend has a beautiful home there and I just hang out by the pool. And then I go and I get great Mexican food at some dive Mexican restaurant and I don't go to Coachella. And if David Byrne is playing, I go home and I take an edible and I listen to David Byrne, which is almost as good. And then I go to the after parties because I get invited to these fun after parties. But so I do Coachella, but I don't go to Coachella.

• 3:51Scott Galloway?

  Is that sad? Is that sad? Is it genius or is it sad?

• 3:54Ed Elson?

  No, it's not sad. Uh, it's not genius.

• 3:57Scott Galloway?

  I think it's a little genius. I think it's genius-ish.

• 3:59Ed Elson?

  Yeah. It's a little douchey.

• 4:01Scott Galloway?

  Well, have you met me?

• 4:04Scott Galloway?

  Yeah. And I go with a bunch of friends from LA and, and I meet up with them after at some like branded tequila party or Nylon magazine or there's something called Neon, which is a carnival, which I don't get. And I think I'm the only person there not an MDMA. But yeah, it's nice and I love Palm Springs. What did you do this weekend?

• 4:23Ed Elson?

  Uh, not very exciting. I worked pretty much all weekend. Um, it was actually one of my most.

• 4:29Scott Galloway?

  Oh, stop complaining, bitch.

• 4:35Scott Galloway?

  Wait, your boss, your very old boss is at Coachella and the 26-year-old is working all weekend. I like that. I think that's why I get to go to Coachella. Let's connect the dots here.

• 4:45Ed Elson?

  That's the idea. That's what we're doing here.

• 4:47Scott Galloway?

  What were you working on this weekend? What do we got going on?

• 4:49Ed Elson?

  Um, well, I was working on, uh, a presentation that I'm doing in a, in a couple of weeks, but that's actually sort of not really the headline news here because there's a very exciting update that we should talk about. And you might know what I'm talking about, and that is that we are officially going on tour and we are officially announcing it today. We are taking Prof G Markets live. We're going live in cities across the US at the end of May. We're hitting San Francisco, LA, Miami, Chicago, and of course, we're going to hit the hometown, New York. Uh, we hope you'll join us. You can go get your tickets at profgmarketstour.com. You can do that right now. I encourage you to do it. I hope to see you there. Scott, what do you make of taking this show on the road?

• 5:34Scott Galloway?

  Everybody's going to show up and want to set you up with their daughter. So it's going to be a bunch of baby boomer parents with 24-year-old daughters who like are fed up with dating in New York and complain. And they're like, I know how to do that. That's young Ed Elson must be rich. He's talking about the markets every day and he wears all these sweaters. I get the sense. And he went to Princeton. Hello, son-in-law. You're literally every mother's and every dad's dream.

• 5:59Ed Elson?

  That's going to be the crowd? Okay.

• 6:01Scott Galloway?

  I bet we sell out in the next 72 hours. I think that, uh, I can just feel it. You're, yeah, we'll see.

• 6:07Ed Elson?

  This is just an incredible promotion for our new show.

• 6:10Scott Galloway?

  Yeah. No, I'm not, I'm, I mean this sincerely. It's like, there's so much shit in our business I worry about. Yeah, I'm not worried about the property market store. I think that what cities are we going to be in?

• 6:21Ed Elson?

  I just want to point out, professor of brand strategy, this is just about the worst promotional monologue I've ever heard. I'm not worried about this one.

• 6:30Scott Galloway?

  Yeah, yeah, I'm not worried about this one. What cities are we doing?

• 6:35Ed Elson?

  The ones I just read, San Francisco, LA, Miami, Chicago and New York.

• 6:39Scott Galloway?

  Wow. Other than Chicago, I've lived in all those cities, I think. Which city are you most excited about, Ed?

• 6:46Ed Elson?

  I'm most excited about LA personally. I think that's going to be epic.

• 6:50Scott Galloway?

  Why's that?

• 6:51Ed Elson?

  LA is Hollywood. It's exciting. It's sexy. It's fun. I think that's going to be very fun. I'm not sure how I feel about San Francisco. Either they're going to love us there or it's going to be a bunch of tech bros and VCs who hate us. And they're going to throw tomatoes at us. So.

• 7:07Scott Galloway?

  Well, I think they hate you. I'm actually very popular in that community.

• 7:13Scott Galloway?

  Now, I'm a big supporter of the venture capital community and I, you know, I just think that guys who would fuck their sister for a nickel are kind of my heroes. Yeah, property market store, it's going to be amazing. There's going to be merchandise, dancing, girls and boys, magic tricks.

• 7:33Scott Galloway?

  It's going to be outstanding. Ed, what do we got on the docket today?

• 7:36Ed Elson?

  Excitement is palpable. We're talking to our friend Catherine Anne Edwards, labor economist.

• 7:42Scott Galloway?

  Oh, we love her.

• 7:42Ed Elson?

  So let's get into it.

• 7:47Ed Elson?

  Last week, Mark Zandi told us that the biggest risk to the economy right now is the labor market. In fact, when we asked him what he's watching most closely over the next six months, his answer was simple layoffs. Several forces are converging that could reshape employment in a meaningful way. First, AI is already starting to show up in the data, emerging as the top cited reason for planned layoffs last month. Second, the Trump administration is tightening immigration, which has historically been a key driver of growth for the US labor force. And then there is the added uncertainty of the war with Iran, which is already pushing inflation higher. Consumer prices rose. Three point three percent year over year in March. That is the biggest increase we've seen since 2024.

• 8:30Ed Elson?

  And if inflation continues to climb, the Fed may have to respond by raising rates, which would only add more strain. So with all eyes on the labor market, we thought it was a great time to bring in our resident labor market expert, Catherine Anne Edwards, PhD economist, economic policy consultant and columnist for Bloomberg News. Catherine, it's always good to see you. I'm going to jump right in here. When you look at the labor market right now, which appears to be weakening, and you can correct me if I'm wrong there. And when you look at the cracks that seem to be emerging, which stand out to you as the biggest? And which are you most concerned about right now?

• 9:12Kathryn Anne Edwards?

  Zandi, I think, hit the nail right on the head. Layoffs are the biggest concern. What we're seeing in the labor market is a slowdown of the gears. Right? If you think of the back of a watch and you turn it over and you see the gears rotating and the cogs hitting, that's how you should picture the labor market. If workers go from job to job to unemployment to job again. Mobility is everything for workers, the ability to move jobs, change jobs, get job offers. We have now three years of data showing just how much those gears have slowed. And it's not, it's something that we typically and historically see in the unemployment rate, but we're not seeing now. You can look at hiring, you can look at quits, you can look at the three months growth in wages.

• 9:56Kathryn Anne Edwards?

  They all point to a decline in labor market mobility. Layoffs would just dump enough workers into unemployment in a labor market that's already slowly churning, and it could lead to a terrible recession quite quickly.

• 10:13Ed Elson?

  How close to that scenario do we think that we are at this point? I mean, we had the March jobs report, which showed that we had actually plenty of jobs added, added 178,000.

• 10:26Ed Elson?

  But we also know that these numbers keep on getting revised down. And then you look at February, the previous month, which was like the total opposite story. We lost 133,000 jobs. So it's hard to tell how close we are to that point. And if we're actually approaching it, I mean, do you think that layoffs are about to come in this economy in a big way?

• 10:47Kathryn Anne Edwards?

  One data point, one jobs report does not make or break the labor market. What's more concerning for me is that the economy shed jobs in four months of last year. And in fact, we've been on track. Every other month since June, we've lost jobs. So let's see if I can do this on the fly. June, August, October, December, February, we lost jobs. That's, I mean, I don't know how to say this more plainly. That's not good. That's indications of an economy and a labor market that's slowing down. I mean, we're to say that we're, we cannot come closer to teetering on the edge as we've been over the last 12 months. And we haven't moved really in either direction.

• 11:30Kathryn Anne Edwards?

  But I think one figure that shows this in a really just truly striking way, easy enough to pull up, just the total number of jobs in the economy, payroll employment. Go back to 1939, I believe, when the statistics began. And you can see it's just a solid line going up. And then every so often, you have a little divot and a little divot. And every little divot is a recession. What makes the last five years so remarkable is it's the first time this, this measure of basic size of our labor market has shown a flat line. We've never just plateaued. You know, we get to the top and we fall. We get to the top and we fall. The idea that we would plateau for one to two years is, is absolutely historically

• 12:15Kathryn Anne Edwards?

  unprecedented, but that's what we're doing.

• 12:17Ed Elson?

  So what do we think is the cause of that? I mean, this also fits with what Mark Zandi was saying when we spoke with him last week, which is like, we're not seeing, you know, job loss yet, but basically we're seeing that a lot of businesses just aren't hiring people. It's just completely flat. And then we spoke with David Solomon, the CEO of Goldman Sachs, who I think pretty much speaks for the entire industry when he told us that the long-term projection for the business is to keep headcount flat, just don't hire and don't really fire either. Why do you think that that is happening right now? Like, what are some of the forces that might be contributing to this plateau effect that you describe?

• 13:00Kathryn Anne Edwards?

  Uncertainty in the economy and economic policy. Sometimes you don't have to look that hard for an explanation. Parsing the economy right now is so difficult because it has the administration has pursued what can only be described as relatively chaotic economic policy and to the extent that we know what it would do, it's destructive. We can only hit the economy so many times before it falls down. We've been watching it be punched over and over again. It's been resilient, more resilient than a lot of people expected it would be, but that doesn't mean that it's impervious to economic policy that's meant to cause harm. Policy like deportation, policy like gutting the federal government, policy like tariffs.

• 13:43Kathryn Anne Edwards?

  And now add to the mix, policy like Iran.

• 13:47Scott Galloway?

  We have a tendency to focus on this headline number of unemployment, but we don't spend enough time talking about which pockets of the job sector or which individuals are faring the best or the worst. I read that there's been a spike in unemployment among women in their late twenties and that the story there was the effects of Doge and the cutting of government jobs, which are disproportionately affecting young women. Can you give us a little bit more color on which types of people or sectors are faring the best and worst?

• 14:23Kathryn Anne Edwards?

  Health and education are doing great. Everybody else is doing some type of bad. Health and education jobs tend to be educated women, not necessarily highly educated women, but you know, at least a high school degree. You'll have lots of technical occupations, master's degrees, all the way up to doctors. That is the only sector of the economy that is showing consistent and reliable strength. Everybody else is on some form of decline, either holding steady or outright shedding jobs for the last 12 months. Now, men and women don't hold the same job and neither do people of different ages or different races. And so a lot of the pain in the economy is proxied through the type of job you are more likely to hold.

• 15:05Kathryn Anne Edwards?

  I saw a Bank of America report, I don't know if y'all had seen this, it was written up in the New York Times of just how Kind of ironically enough, beneficial the Biden administration was for men's employment, given that it had put so much money into manufacturing as opposed to 2025, the first year of the second Trump administration, manufacturing shed a pretty remarkable number of jobs. You see that pattern if you look hard enough at any job. So you're also going to see that, you know, middle aged, uh, black women in like the, the DC metro area were going to be hit hard by Doge versus, you know, younger graduates that have a doctorate are gonna in, are in health or education, you know, they'll do okay. Those patterns

• 15:50Kathryn Anne Edwards?

  hold for a lot of reasons. I was reading today that a, one of, a very prominent economist was saying that the, the answer to this puzzle of men's unemployment is to make certain jobs less feminine because they seem to be the ones that are growing for the future. It was an interesting note that kind of reflects what we all see, even if we can't describe that men and women don't hold the same jobs.

• 16:16Scott Galloway?

  Yeah, I remember reading that one of the best things for young men would be if we defeminize nursing because it's such a growing trade, high paying. Are there certain sectors you would argue where the growth is more beneficial to the economy than others? Because when I see that healthcare jobs are growing, I think of an aging population that quite frankly, isn't as productive and that ultimately we're all just going to pay for that. And, or does it result in productivity because foreigners come here for, or there's innovation that spills into the pharmaceutical sector? Are there certain sectors where unemployment or strong employment is not as good as if we had employment growth in other sectors?

• 16:56Kathryn Anne Edwards?

  I think I tend to prioritize growth that is both reflecting underlying economic activity as well as growth that is keeping the gears of a labor market moving. As much as I would have my preferences over the labor market, you know, the ultimate, the ultimate policy is not to mess with it too much, right? It does so much on its own. 170 million people have a job in this country across, they've got, you've got people who are basically 14 to 95 years old. They have every level of education possible in every state, in every locality, and they've all got jobs. Mostly, it's all working really well. I think what I don't like to see is

• 17:36Kathryn Anne Edwards?

  Maybe the better answer to the question is, I think the sickness we have in the labor market is not sector specific. The sickness that we're seeing growing and mounting evidence of long term is that we have employer concentration that's freezing mobility and dampening wages. Think of it a monopoly amongst employers. There's mounting evidence that this has been slowly occurring for decades. So my preference would be whichever sector has the most businesses, the less agglomeration, the most competition for workers, because that's what will be associated with lots of wage growth and mobility.

• 18:09Scott Galloway?

  I want to talk a little bit about AI. I know I'll put forward a thesis and you respond to it, that everybody's AI washing layoffs, that they blame AI because if you're a CEO, hasn't met his or her numbers, or you overhired during the pandemic, or just generally speaking, you're, the underlying fundamentals of your business are weak, you can say, I overhired, or the fundamentals of our business demand are weak, or you can say, we're using AI and we don't need all these people because I'm part of the Pepsi generation, and you should take my stock up because that will directly result in greater EBITDA and a higher stock price. I feel as if this sort of kitchen sinking or whitewashing of AI, and then everybody reports that AI is impacting the labor market.

• 18:51Scott Galloway?

  My thesis is that it's overstated, that, and by the way, that's not good, it just means the underlying economy isn't, isn't strong. But do you buy into this notion that, or this thesis, that AI is being used as sort of the boogeyman here to blame all layoffs on innovation around AI?

• 19:08Kathryn Anne Edwards?

  To a certain degree, yes. It's convenient and it's financially remunerative to corporations to say that they're laying off because of AI. It'd be one thing if there was no penalty, but it appears to be there might be a reward for saying that you're utilizing AI. I, you know, it's not the first time this has happened. The economy, we'd like to think that it's just numbers, but it's really so much narrative, as much as it is hard data. And the narrative around, you know, companies blaming something else for layoffs, I mean, that's tale as old as time, right? We, you know, it's not that we want to cut jobs, it's just that the minimum wage is too high. And therefore, we need to put, Avril, your retail staff on an iPad. It's not that we, you know, don't want to raise your pay. It's that healthcare, you know, Obamacare made it required and now it's too expensive.

• 19:52Kathryn Anne Edwards?

  I mean, if you go back, every decade has a new person to blame, a new story that shifts the blame from employer, or rather, corporate responsibility, onto some other factor in the economy where they say, you know, our hands are tied and this is a blameless way for me to make a decision I'd like to make anyway. Lots of candidates for that over time. You know, we'll never really know the degree to which it's happening. We can only look to see what the data tells us with clear eyes. Those eyes are hard to keep clear.

• 20:17Ed Elson?

  I think it's certainly possible that AI is being used as an excuse to lay off workers and lay off young people and that there are other reasons to lay them off. But at the same time, I feel like the more we lean on that argument, the more we rule out the possibility that actually, in a lot of cases, people are being laid off because of AI. And when I look at the data and when I look at the evidence that we have right now for unemployment among young people specifically, especially among college-educated young people, the people who are kind of in the prime position for these white-collar and often cases tech-focused jobs, the unemployment rate for those people is the highest it's been in a long time, outside of the pandemic at least in over a decade.

• 21:02Ed Elson?

  And I also was just reading some, an article from Bloomberg. It explained that the share of US job openings today, that our entry level has fallen from 70, it went for, it was around 80% and we're down below 75%. And so it makes me think that like, I mean, whether or not it's AI washing, it seems like young people are getting a little bit screwed in this labor market right now.

• 21:29Kathryn Anne Edwards?

  Yeah.

• 21:30Ed Elson?

  And so I'm not really sure what to do with that information.

• 21:35Kathryn Anne Edwards?

  So I think that what it comes down to is we don't know the degree or effectiveness to which AI has been adopted by firms, so we can't trace out its labor market consequences. So it leaves room for basically both of your scenarios, both that AI is starting to You know, crowd out certain positions that could be entry level. So it hasn't led to layoffs, but it's reducing hiring. And at the same time, it could also be a very, very convenient fall guy for otherwise corporate mismanagement during what are unprecedented economic times, coming out of a pandemic and going straight into inflation.

• 22:08Ed Elson?

  Meaning over hiring, just, just to be clear. You're saying they, they mismanage, they, they hired too many people and now they're trying to pull it back, right?

• 22:15Kathryn Anne Edwards?

  Yes, and it's, and it's leaning, I think both stories lean on what we think to be absolutely the case, which is that AI will replace jobs in the future. It will cause job loss to the extent that it'll also cause job creation. And we don't know what the pace of those two things will be, and we don't know how it plays out over time. We know, looking back to every other technological development that has hit the US labor market, it takes a long time for it to be absorbed into productivity. I mean, I could show you, you know, per worker productivity in the United States going back to the forties and you, if I, if I covered the X-axis, you'd never find the internet. You'd never find computers. You couldn't point and say that was when, that, that's the year that the internet became mainstream, or that's the year the personal computer sales took off.

• 23:00Kathryn Anne Edwards?

  You would never see it because it takes a long time for that productivity to be adopted. So it's, I think where we are right now is in a place where we don't have enough data points to parse out a story. And so we, we know what's going to happen. We don't know how it's going to happen or, or how quickly. That leaves room for both of these things. I mean, my, my instinct on this is that a lot of people are using AI on the job and that they've, you know, whether or not they told their employer, they've got ChatGPT or Claude going to help them work. You know, could be to impress the boss, could be to prevent, you know, them being the one that gets laid off when something occurs. But people using it on the job versus adoption at the firm level, that would see, that would

• 23:45Kathryn Anne Edwards?

  kind of be a clear cause and effect to layoffs. I don't think we've seen too much firm level adoption yet, which is what most economists would say, when the layoffs would really start to roll in. You know, this is the problem with new technology. It's just. It leaves a lot of room for guessing. I think what we can rest on are certainties and things that we know are happening. The economy is slowing down. The administration has destructive economic policy and we have longstanding weaknesses in our labor market that can be exploited by new technology and would absolutely cause harm without having to guess.

• 24:16Ed Elson?

  The point about, you know, it takes a long time for these things to settle in and only at that point can we look back at the data and be like, oh yeah, that's why this happened. That's why this, you know, the internet occurred and then that's why we saw these changes. But in order to do that, you have to like wait a really long time. If you want to base it purely on the data and, I mean, you have to look, both be backward looking and also over a period of like several years. And so for me, this is where I get a little frustrated with the conversation because it's like, oh, well, we don't have the data yet that companies are using AI. And I'm like, well, they're telling us that they're using AI. They're firing thousands of young employees at a time.

• 24:59Ed Elson?

  Whether or not it's literally like the AI is doing their jobs right now, I don't know. But what I do know is that there is an expectation incumbent on every large organization that if you're not laying off lots of people, if you're not reducing your workforce and you're not doing it in the name of AI, then you're getting something wrong. And that to me is significant in and of itself.

• 25:20Kathryn Anne Edwards?

  I take your point, but I'll put back to you, what do you need to know? Do you need to know exactly what AI is doing on the job and to workers to respond to weakness in the labor market? I mean, it's not as if the only thing standing between young workers and a job is what private employers are doing or say they are doing or will do with AI. We have a weak economy and a weak labor market with terrible social supports and almost no investment in people that don't have a job. I don't need to know what a company is doing to AI to know that our government does a terrible job in certain aspects of the labor market. So I, I think it's, your frustration is, is well deserved, but not necessarily well placed because there are solutions that don't have to come from just knowing more about

• 26:03Kathryn Anne Edwards?

  AI, but have to come from holding our policymakers accountable for economic mismanagement. AI is today's story, but there will be another one. Weakness is weakness in the labor market. We don't have great infrastructure for helping people who don't have a job. AI won't change that. It'll just make it look worse. So it's almost a, I could see it being so dissatisfying.

• 26:26Kathryn Anne Edwards?

  To have to deal with your story, Ed, but there is satisfaction if you go after the things you can change as opposed to the things you can't change or even see.

• 26:33Ed Elson?

  It seems that the idea that AI isn't that transformative is an excuse to not have to create policies that will help people. And I feel like this is a trend that we see in the labor market where it's like, someone like you or me would say, hey, there's a problem here. And then a lot of people will get together and find reasons as to why, no, that's actually not a problem. Everything's like, normal, everything's fine. And it gives us almost like an out to not address the underlying problem in the labor market. And so I guess my question for you is like, you know, as someone, an expert in this field, I mean, am I wrong in thinking that it seems like we need to create a policy here that

• 27:14Ed Elson?

  is forward looking and that is going to front run at least the possibility that thousands, perhaps millions of jobs are going to be wiped out because of this technology? Or is that maybe the wrong thing to focus on?

• 27:27Kathryn Anne Edwards?

  I think that it's the thing that people care about today, the thing that people are afraid of today. So, you know, we, the economy, we don't work for the economy, the economy works for us. If this is a thing that we think is coming that people are afraid of, we can respond to it. And I can, I can sit in like my big room full of books and be like, well, actually, Ed, people said the same thing in the 1920s. They did. America does not like unemployed people. But that's not, that doesn't mean that like, we have to do something to correct for the past and me point out that we've never had a great system for unemployment support. If people are scared about AI today, then let's act on AI today. It's gonna, it's gonna put you at the same place that it would have put

• 28:08Kathryn Anne Edwards?

  you about, you know, adoption of capital technology in manufacturing plants that reduce the number of manufacturing workers. It would be the same thing that would have said mechanization of agricultural labor. It's the same problem, but it's today. A lot of people are going to lose their job and they don't know what they'll do after. We have failed this moment before. We don't have to fail it this time. So I don't want to say that you're wrong. I think that I think that if this is the moment and that is the mood, then that's what we should act on. And it doesn't have to be the perfect diagnosis of labor market issues. It doesn't have to be that there's overwhelming evidence that AI's destruction is already clear.

• 28:51Kathryn Anne Edwards?

  If it's something that will make the American economy and labor market better, something that will assuage the fear of American workers, it's the right thing to do. The years will tell us just how right it was.

• 29:03Ed Elson?

  We'll be right back after the break. And if you're enjoying the show so far, send it to a friend and please follow us on YouTube, Spotify, or wherever you get your podcasts.

• 29:19Speaker 00

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• 30:53Ed Elson?

  We're back with Prof G Markets.

• 30:55Scott Galloway?

  My understanding is this is the first year since the Great Depression where we've had net negative immigration. More people have left the country than have come in. Does that result in fewer people fighting for the same number of jobs and an increase in wages? Or does that suppress demand because there's less economic growth? Talk a little bit about the fulcrum between, how does this change in net immigration impact employment and wages?

• 31:22Kathryn Anne Edwards?

  Yeah, let me start from the beginning.

• 31:28Kathryn Anne Edwards?

  Economy equals people. The size of your economy is really well predicted by the number of people in it. But people don't have the same level of productivity or relationship to the economy. You've got children, you've got old people. So really, the more workers you have, the bigger your economy is. And this is the basis for the economic returns for things like childcare, for things like paid family leave, that if you maintain a worker in the economy, you've made the economy larger. Immigrants are people. It's not as if the labor market discerns from them in the way that policymakers tend to when they're trying to drum up nativism. If it's a person doing a job, it's not as if the economy is like, nope, this is a separate person, or this is a different kind of worker.

• 32:12Kathryn Anne Edwards?

  It is a worker, they're doing a job, they add to the economy. Immigrants rarely come as children. And they rarely come as the elderly. Most immigrants come in the prime age of their working years to earn money here. And immigrants have given their age distribution a relatively high labor force participation rate. So when we lose immigrants, we're not necessarily losing any random person, we're losing people who are highly attached to the labor force, so we're losing workers. Which means, the way that you think about, say, how childcare would improve the economy is that it has a similar kind of through line for immigration, more workers equals bigger economy.

• 32:55Kathryn Anne Edwards?

  Lower the number of workers equals lower economy. What a lot of anti-immigrants will, policymakers and shills will say is that they're taking jobs. That rests on the notion that there are a fixed number of jobs in our economy and it's slotted to whoever's there. We're not communist. It doesn't work like that. We're a market-based economy. The market is a function of the people in it, not what the government dictates or how those jobs are allocated. So we said at the top of this that when you look at men and women's employment, they don't hold the same jobs. Immigrants and natives don't hold the same job either. So if I, you know, if I were to tell you my answer for male employment is I'm going

• 33:37Kathryn Anne Edwards?

  to fire half of nurses in the US and then men can take their jobs, you would just be looking at me jaw-dropped like, no, that would never work. You have to train those people, they'd have to get the right job, and they don't want those jobs anyway. They don't see it as a male job. But if I tell you that we deport immigrants and then Americans will take them, you know, we have such an underlying racism and nativism behind it that you'd fall for that argument, but you wouldn't fall for the male female one. But from the labor market's perspective, they're relatively similar. Not everyone wants the same job. If you deport someone from a job they're holding, it's not clear that just anyone can slot in. We have these patterns in the labor market because we're human beings. We're not cogs. We're not worker bots.

• 34:18Kathryn Anne Edwards?

  So I, the underlying economics is when you reduce the number of workers in our economy, you reduce our economy, full stop.

• 34:27Scott Galloway?

  Yeah, makes sense, right? Everyone talks about the importance of population growth. How has the spike in oil prices impacted the labor market? What have you seen happen so far? What do you expect to see?

• 34:39Kathryn Anne Edwards?

  I haven't seen much yet because I think everyone is hoping that it's quick and transitory.

• 34:46Kathryn Anne Edwards?

  You know, the official line from the Federal Reserve is that they look through, "things like this," where they're trying not to, gosh, I'm so bad at metaphors. Mistake the forest for the trees? Is that it?

• 34:59Ed Elson?

  I think so.

• 35:00Kathryn Anne Edwards?

  Yeah, okay, well, it's close enough. Y'all know what I mean. Right, you don't want to think that 3.3% inflation last month is a sign of underlying pressures to raise prices overall in the economy that need to be met with higher interest rates. We know where it's coming from. It's coming from the spike in oil. However, that can translate to overall price increases quite quickly. So it's a very tenuous balance. And the labor market, I haven't seen anything directly yet, but that doesn't mean it won't come. When you asked me earlier what I was looking at, I have this very odd fixation on surveys of manufacturers. Texas has one for the Texas Survey of Manufacturers, and then something like this shows up in

• 35:45Kathryn Anne Edwards?

  the beige book of the Fed. But the Texas Survey of Manufacturers, it's delightful reading. They're very plainspoken. It's a trait we have. But they'll say, like, "One more month of this," and it's completely broken me. Like, I've been through so much over the past two years, I simply can't do this anymore. I'd rather fold up shop than have to have business in these conditions. I mean, they're very plainspoken about just how much is on the line and how close they are to the edge. I just don't know how far you can push people. And once employers say, "This isn't worth, like, this isn't worth, almost not worth our time to stay in business when it's so risky and difficult," that's when you start to see big job loss on that end. But there are other ways. The high-energy prices can affect the labor market. That's just one that kind of is top of mind.

• 36:26Ed Elson?

  So it feels like, I mean, just to sort of plot out the big forces that are affecting the labor market right now, on the one hand, what seems to be propping it up is basically just healthcare. I mean, it sounds like that's literally what happened last year. We added nearly 700,000 healthcare jobs. And, I mean, for my understanding, the entire economy added actually less than that, which, I mean, to me, the takeaway is if healthcare didn't exist last year, then we would be losing jobs in America. Is that right?

• 36:59Kathryn Anne Edwards?

  Deep recession.

• 37:00Ed Elson?

  Deep recession. So you've got that force that's propping it up and you can either feel good about that or you can feel bad about it because it basically means that our population is aging and becoming increasingly sick. You've also got the immigration force, which is pushing things down. You've also got the uncertainty dynamic where businesses don't really know what Trump's going to do next, so it's pushing things down. And then you've also got potentially the AI dynamic where especially tech organizations, white collar organizations are looking for a reason to lay people off. Is it necessarily directly because of AI or is it the excuse? I don't know, but it's something to do with AI.

• 37:41Ed Elson?

  When you look at all of these big forces, which in your mind are the most important and having sort of the largest influence on the labor market in America right now?

• 37:53Kathryn Anne Edwards?

  From a numbers game alone, the relationship between overall job growth and health is probably the most worrying and I can add to your troubles. It's not just that it's an aging population and an elderly population. It's a horribly organized sector. I mean, I suppose maybe to answer your question a little after the fact, Scott, I don't necessarily like health jobs because it is such a bloated sector that's poorly organized and is not, I mean, it's not sustainable private markets, right? This is, it's propped up by government intervention 15 different ways, hundreds of billions of dollars. So it's, to me, I think it's its own kind of bubble in that we are reliant, like the

• 38:35Kathryn Anne Edwards?

  more we rely on healthcare sector for jobs, the less likely we really want to look under the hood and see how that sector is performing or organized or how reliant it is on public spending. So let me just add to your worries there, but yes, I think through numbers alone, the fact that we're only adding jobs from health is likely the biggest concern. The rest of them are all there. We don't know exactly how they're combining in the labor market to create weakness, but in some ways, we don't have to. The direction matters more than the data points. I know that it's putting downward pressure on the labor market to be deporting immigrants, in particular, workers. I don't know the exact number, and I mean, talk about data with a lag, that takes a

• 39:19Kathryn Anne Edwards?

  long time to figure out because of the relationship that unauthorized people have with paperwork and with federal surveys. But I mean, I know that it's downward. I don't know the exact degree, but the direction matters more.

• 39:31Ed Elson?

  When you think about policy, I mean, all of these things are the kinds of things that policymakers are supposed to be thinking about, especially when it comes to jobs, where it's literally people's livelihoods that are on the line. What is the right directionally, the correct kind of policy that would make for a better labor market where people are feeling better about the economy? And we know now that actually, consumer sentiment at least, is at its lowest level, I believe, ever. I think that was what we learned last week. Certainly, one of its lowest in a very, very long time. What should policymakers be doing to improve the situation and to make for a stronger and healthier labor market?

• 40:13Kathryn Anne Edwards?

  Top of the list, we need a new unemployment system. Our current system of unemployment was created in the Social Security Act of 1935. It's 53 separate state and territory programs. They don't coordinate benefits, they don't coordinate benefit size, benefit eligibility. They've got 53 aging computer systems that don't talk to each other, and they don't cover workers that are not in W-2 employment. The benefits themselves are incredibly meager, they don't go to the majority of the unemployed or replace even a majority of their wages, and it's very much a program that was designed around temporary seasonal layoffs in manufacturing in the 1930s.

• 40:52Kathryn Anne Edwards?

  It's well-funded to a certain degree relative to because it's a social insurance program, so it's funded by payroll taxes, so it never runs out of money the same way that, you know, if it were funded by the largesse of the federal government, it could very easily have been ended 15 years ago. But the federal government walked away from careful management of this program in the 70s, and we have suffered every recession because of it. So, a new dynamic unemployment system. I have like hours worth of ideas about it. I'll let you pick what you want to hear, but we could. I've always thought that the scariest thing about AI is losing your job. Well, I can't change AI, but I can change how you feel about job loss if there was a system of unemployment that you felt confident in.

• 41:37Ed Elson?

  Could we hear some of those ideas? I mean, not several hours.

• 41:40Kathryn Anne Edwards?

  Of course. I'm so glad you asked. So, yeah, problem one, it needs to be federal. You need to have a federal system that incorporates not just W-2 employees, but the self-employed, your contractors. Number two is that it needs to be triaged to look more like what we know unemployment to look like, which is a lot of people who are unemployed for a pretty short amount of time, some people that are unemployed for a longer amount of time but still get a job, and then the very long-term unemployed that need to get retrained or move into a different occupation. So you need to triage your unemployment system so that it looks like unemployment. Some people who lose their job to AI, they'll probably get a new job within one to two months.

• 42:25Kathryn Anne Edwards?

  Some people, it'll take six, they'll pivot a little bit, but they'll be fine. Other people, they'll never find a job in the career they were trained for again. Our unemployment system basically is hands over the eyes, hands over the ears, shaking its head, not recognizing that any of that nuance occurs. It absolutely could, just triage through them. There's also a lot of ways we could deliver benefits that would be smarter and more fitting to how people respond to unemployment. So, an idea that's been kicking around for such a long time, but no one wants to take initiative on is, it should be paid out as a lump sum.

• 42:58Kathryn Anne Edwards?

  Right now, it's a weekly benefit. You're eligible for a period of time, sometimes up to 26 weeks, longer in a recession. But 26 weeks of a fourth of your pay is really tough if you've got a mortgage, if you've got rent, if you've got a car payment, if you know a friend who has a job or says there's space in another city and you think you'll be able to get a job there. The weekly benefit is so paltry, it's enough to not lose everything, but it's also so little, you'll lose something. A lot of people think that you should be able to just get your four weeks or eight weeks of unemployment paid out as a check. And then if you need to move, if you need to pay for something, you empower more workers. I think the part that's scary for a lot of policymakers is that we're not a country

• 43:42Kathryn Anne Edwards?

  that easily gives power to workers. And this would empower them greatly.

• 43:47Ed Elson?

  I just have a thought on immigration. One of the things that you basically explained there is that if you're super anti-immigration, then you're kind of anti-growth. There is an economic argument to immigration. In the overall political conversation in America, my understanding is that people have kind of, certainly on the right, but on the left, have coalesced around this idea that Biden did not handle immigration correctly, that he let too many immigrants in, we saw too much immigration. And it's one of those things that I feel like most people in politics kind of agree on.

• 44:28Ed Elson?

  Trump got one thing right, and that is that he cracked down on immigration. What is your response to that argument? Is there not an argument as to why too much immigration is a bad thing for an economy? Or do people have it wrong?

• 44:46Kathryn Anne Edwards?

  My response is, policy person first, economist second, human third. So, policy person first, they're both failures. We need immigration reform.

• 44:56Kathryn Anne Edwards?

  We have let roughly, I think, six to eight million people into the country and told them to apply for legal status on this side of the border. And then we're mad it takes a long time when we don't have immigration reform or fund immigration courts. I mean, they're both two sides of failure, which is that we need to have immigration reform. That decides, one way or the other, we are there going to let immigrants in and make them fully incorporated into our economy and society, or we're going to keep them out. And both of them are doing it halfway. I appreciate both perspectives on some level, but it is absolutely ridiculous to say that there's any winning on any type of immigration policy if you are not reforming our broader system. And that keeps getting lost in this political fight of like, oh, let two people, too many people in, let not enough people

• 45:40Kathryn Anne Edwards?

  in. Y'all, our system is broken. It hasn't been reformed since I was about six months old. I'm 40, about to be 41. Like, we need to move here. This system is broken. So that'd be my policy response. My economic response would be the... Even the most ardent anti-immigrant economists would agree that immigrants increase the size of the economy. They'd say that immigrants' effect that is deleterious to the economy comes from wages, and that immigrants can suppress the wages of native-born workers. You know, this is kind of like losing jobs because of the minimum wage. It's not that the pressure isn't there,

• 46:24Kathryn Anne Edwards?

  it just hasn't showed up in a large degree in the data. Because if immigrants are growing the economy, they can have a downward pressure on wages, but not actually reduce wages. And so there's lots of case studies of high levels of immigration where people look, so what happened to low-wage workers in that locality? Did the rush of immigrants hurt their wages? Probably one of the most famous examples is the Mariel Boatlift, which sent, you know, a very large number of immigrants to Miami. And so what happened to the wage distribution in Miami? Well, the economy grew enough from those new immigrants that the wages of even low-wage workers still grew. But even the most ardent anti-immigrant economists would say they grow the economy. They would just say it's not worth it for

• 47:08Kathryn Anne Edwards?

  the effect on wages. People like me would say the wage effect is probably there, but small, and that's why we don't see it. Me, as a, as a human would say, we talk about immigrants, even in this framework, that they're not like us. Should we let them in? Should we not let them in? We are still approaching it as they are different from us on some fundamental level. And I think that that is a function of our broken immigration system, that we tend to knock them down a peg. You know, at the end of the day, these were people that showed up at the border desperate, saying that they were in danger if they stayed at home.

• 47:53Kathryn Anne Edwards?

  What is the answer to that question? That is something America has not decided, and it needs, it needs to decide, whether it slams the door in the face or not. But it, the way that we phrase it and talk about it seems to be a calculus that forgets that these were people struggling that we decided to help. I don't know if that should have an economic benefit. I don't know if it needs to. My human self would say, and my economist self would say like, oh yeah, of course, it does have an economic benefit. More people, get some workers, this is great. But I mean, as a human, like, do you need that? Do you need me to show you it's good for the economy for you to, you know, help someone in need? That's fine if you do, but at some point, codify that into immigration law.

• 48:33Ed Elson?

  It almost seems like the way people handle that question is they say, yeah, it's mean, and I don't really want to slam the door in the face, but, you know, it's, it's a, it's a trade-off, because there are all these negative consequences. But then you listen to someone like you explain how actually there are positive consequences. It's like, wait, what's the trade-off exactly? Like, why do we, why do we think that we have to do this? Because there's some reason? I mean, maybe it's, it seems like it always just goes back to cultural reasons, national reasons, nativist reasons. Maybe it's something about American culture. Perhaps a conversation for another time.

• 49:10Kathryn Anne Edwards?

  I think it's legitimately hard for people to understand that someone who doesn't look like them can be an American. And it was actually George W. Bush, when, when he was president, early in his first term, he said something, I don't remember the exact quote, but it's, it's roughly, "Americans have no race but creed." Right? We don't have one way that we look or that we have looked from the beginning, and that's very hard for people to handle. You prefer people that look like you. Everybody does. The degree you're willing to accept other ones. I mean, I could rattle off so many statistics about how much of our economy, innovation, small businesses, entrepreneurs, Fortune 500 companies that are run by or started by immigrants. If that makes a difference,

• 49:55Kathryn Anne Edwards?

  go out and find those statistics. I don't know if it has to. So I can answer the economics of immigration questions, but I always like to put in this caveat that I don't know if that's the only way we should evaluate these types of humanitarian cases.

• 50:09Ed Elson?

  We'll be right back. And for even more markets content, sign up for our newsletter at profitemarkets.com.

• 50:26Speaker 00

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• 50:56Speaker 01

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• 52:00Ed Elson?

  We're back with Prof G Markets.

• 52:02Scott Galloway?

  We're entering into political season, although it feels like it's 24 by seven now. And we have a lot of, a lot of people, you know, who claim they're not running for president, but they just happen to be coming out with books and willing to come on our podcast at any, at any time. So when you hear people who are lining up to run for president in 28, what narrative or points or policy descriptions are tells for you where you think this person gets the underlying economy and labor or doesn't?

• 52:34Kathryn Anne Edwards?

  The economy as told by politicians is such a weird warped place. It's really hard. It's really hard to discern. I mean, there are a couple of things that I like to hear. You know, I don't think that you should frame investments in workers as charity.

• 52:50Kathryn Anne Edwards?

  And the, the way that we would say, you know, 20 years ago, why should you have federal childcare, free federal childcare, you'd hear it as like to help those women. It will grow your economy. And I don't, I think that we have for so long pivoted that social programs that progressives, you know, are in favor of are somehow like a gift, like they're a bonus. Once the economy is strong enough, then we can help women and children as opposed to seeing directly as an economic investment. And I don't think it's radical to say this is an economic investment. Paid family leave is an economic investment. Paid sick days is an economic investment. There was a study of paid sick days that came out. I think the study itself is a few years old. It was looking at sick day expansions through

• 53:35Kathryn Anne Edwards?

  the 20 teens and it found that women without a college degree saw roughly, you know, nearly $3,000 more in earnings after they had paid sick days and they weren't. They weren't working, like, they weren't taking $3,000 worth of sick days. Having sick days made it easier for them to keep their job because you can still be fired for calling in sick in America. And the people who have to deal with sickness the most are mothers. So you make it hard for mothers to keep a steady job if you don't give them the protection to have paid sick days. You give paid sick days, they earn more money, but someone is still going to frame paid sick days as this is a charity for the poorest workers. It's not a charity for the poorest workers.

• 54:17Kathryn Anne Edwards?

  If it makes our labor market better and fair, it is an investment we need on behalf of all workers. I try to find language like that. It's thin on the ground, but I hope language will be like that. I should say, Scott, I'll come knock on your door. I have a book coming out in a year and a half, and I'll just say with certainty, I am not running for president. And I'll do, in the same interview, I'll talk about a book, and then I'll tell you I'm not running for president.

• 54:40Scott Galloway?

  Not yet. That's the first line of people running for president is, I am not running for president. We're spending $7 trillion on receipts of $5 trillion. If we are going to do anything resembling some sort of fiscal responsibility or fiscal sanity, how can we not go into recession? So I would just love to hear your thoughts on the fulcrum of the tension between some sanity around fiscal responsibility and the employment market. And also, I feel as if, and I want to get your, that's my first question, and I want to get your response to this. Jamie Dimon said that, when asked what a recession was, he said, something that happens every seven years.

• 55:23Scott Galloway?

  And I feel as if it's become so long since we had a real recession that we've decided it's unthinkable and unacceptable and not a natural part of the cycle. I mean, so, one, thoughts about some sort of attempt at deficit reduction and its impact on the labor market and the economy? And, two, Quite frankly, aren't we due for a recession? And would it be the worst thing in the world? Isn't it a natural part of the economy?

• 55:48Kathryn Anne Edwards?

  One, deficit debt. Yeah, we've had five tax cuts this century. Some of them were just over a trillion, some of them were pushing five. And you can't cut taxes and expect the debt to be better, or the deficit to be better. So it's the solution there is at least-

• 56:04Scott Galloway?

  And go to war at the same time.

• 56:05Kathryn Anne Edwards?

  Yeah, yeah. The solution is quite easy. I think what people get hung up on is, you know, what matters more is the direction that deficit and debts are going and not a one-year solution. Trying to extract two trillion extra dollars in a year, that would be tough. Definitely would hurt the economy. But putting us on a trajectory so that in 10 years, we're extracting $2 trillion extra, I don't think spells economic disaster. We have a very progressive income tax system. It does 95% of the work for us. All we have to do is not drop rates too much. People at the very top have seen their income grow at a breakneck pace, to the degree

• 56:48Kathryn Anne Edwards?

  that in the only dedicated progressive system that we have for collecting taxes, they pay a lot more. And all those stats they say about the top 1% or the top 10% pays X percent of taxes, and they're mostly all true. But what they're not telling you is how much of income they earn. And they're being punished in a progressive tax system because they've earned so much more money. We don't have to do much to the top tax rates, or even to the estate tax, or to the capital gains tax, or the step-up basis in the corporate tax. We don't have to do that much to start raising money relatively quickly and put us on a trajectory to deal with the debt. And all that matters is that we're going in the right direction. The biggest problem today isn't 1 trillion versus 2 trillion in deficits.

• 57:30Kathryn Anne Edwards?

  It is the direction we are going in, which is to collect less revenue than we should be. So I don't think it has to break the economy.

• 57:37Scott Galloway?

  But what do we need to do? You said, I mean, the narrative out there, especially on the left, is we're going to have to get, quote unquote, billionaires to pay their fair share, whatever fair share means. But you said the tax system is, or that we have a progressive tax structure. I would argue that at some point, taxes actually go down when you hit kind of the 0.1%. But- You said we don't need to. Well, what do we need to do if you believe that we need to reduce the deficit?

• 58:02Kathryn Anne Edwards?

  Sure. So, we need to restore some of the marginal rates for the top of the tax bracket and then reduce deductions. That doesn't even revolve major tax reform, just to reduce the amount of deductions that people get.

• 58:17Scott Galloway?

  RuPaul's.

• 58:17Kathryn Anne Edwards?

  Yeah, bring the tax rate up. And then, you know, people, this idea of a wealth tax, we have a wealth tax in the US. It's the estate tax. We don't tax wealth until you die. And we've cut that tax four times. So, I don't think we need a new tax on current wealth. I think that restoring the estate tax to even half of what it was in 1999, when we still had rich people in an economy, would generate an incredible amount of income because you would mainly be taxing like the Jeff Bezos juniors of the world. And they'd still get all their money. They just have to put a little bit of tax in on some of the money that they inherit. Those are very easy fixes in the sense that they don't hit that many people. But the reason why I say we have to do all of them is that people

• 59:02Kathryn Anne Edwards?

  at the top are incredibly good at shifting their taxes around. So, you have to, this is like left hand, right hand. This is putting Congress to its intellectual limit, but they have to know what the other one is doing. So, if you change the estate tax in the step up basis, you have to change the marginal tax rates at the top. And you just need to make sure that you do them so that they're coherent and they cohere with the capital gains and corporate income tax. So, you think of it as like, I think politicians like to jump after one part of like, let's have a wealth tax. You know, let's do this. But really, you need to come up with like a top 10% tax schema that doesn't look at just income, just death, just capital gains, or just corporate taxes, but all of them together.

• 59:45Kathryn Anne Edwards?

  But I don't think that that's that hard, I guess is my point. And they don't require a new wealth tax on billionaires in the process.

• 59:52Scott Galloway?

  And wealth taxes don't work. I mean, in the 16 countries that have implemented them, 13 have repealed them because people just moved to Brussels.

• 59:58Ed Elson?

  Well, that's going to be the argument to any step up in any form of the tax rate. Like, if you go capital gains, if you go estate tax, if you go any form of tax, it's like, well, I'm headed out.

• 1:00:08Kathryn Anne Edwards?

  Oh, let them go.

• 1:00:09Ed Elson?

  That's where I get, I run into trouble. It's like, that's what some people say, too.

• 1:00:14Scott Galloway?

  What I would offer up, and I think Catherine's going to agree with me. And AMT, you wouldn't even need to, it's not tax rates, it's tax code. If you take the highest tax rate and made it an AMT, that wealthy people of a certain amount had to pay an AMT of 30 or 40 percent. Lower the, lower the estate exemption to a million dollars, not 30 million, such a Jeff Bezos Jr. gets, you know, 44 billion, not 62 billion when they inherit the money. And then the most obvious one, and I'll lead this as a question, Catherine, is to close the tax gap by funding the IRS, such that the taxes that are owed actually get paid.

• 1:00:50Kathryn Anne Edwards?

  Oh, gosh, IRS funding is, it is, uh, okay, I have to calm down. I get very upset at how public servants are attacked when they're doing a job that Congress has told them to do, and then Congress attacks them for doing that job in the case of the IRS. So it's hard for me to speak about that with an even keel. What I will say is that audit data is really, really consistent, and that if you audit high-income households, you'll generate more tax dollars for a decade.

• 1:01:15Scott Galloway?

  You make money.

• 1:01:16Kathryn Anne Edwards?

  Well, I mean, it's not even that you make money, they're, they're educational.

• 1:01:20Scott Galloway?

  Well, just get them to pay what they owe.

• 1:01:22Kathryn Anne Edwards?

  But taxes are also complicated, and so they, they mess up on taxes, and if you're like, hey, you can't claim this, they'll, they won't claim it for the next 10 years. And so the impact that you have of audits is instructive to just how complicated our tax code has become, and how much more money we can get if people could just follow it. So I, I-

• 1:01:39Scott Galloway?

  Yeah, the tax gap.

• 1:01:40Kathryn Anne Edwards?

  Yeah. Um, AMTs, I think I'm opposed to on principle, just because I don't like adding complexity to our tax system. I think that it's the weakest component of it.

• 1:01:49Scott Galloway?

  Wouldn't that get rid of complexity? My sense is that complexity has been weaponized by the very wealthy, who figure out a way, there's five Fortune 100 companies that pay zero taxes because of loopholes that, through Citizens United, that these PACs manage to stuff into the tax code, whether it's writing off or fully expensing your private jet, or 1202 tax-free status for entrepreneurs. Wouldn't, wouldn't an elegant solution that would decomplexify it be an AMT?

• 1:02:15Kathryn Anne Edwards?

  I guess I would just not need the A part. I just, I would prefer if the tax code itself was elegant, as opposed to the minimum as an alternative. But that's a, I think you and I are at six of one for half dozen of another. I would just like the tax code to be good the first time, but achieve the same thing. So your second question, yes, Jamie Dimon said recessions are things that happen every seven years. I actually just wrote a newsletter about this, where I talk about how this is almost a problem with the way that economists gatekeep formal language. That we tend to put a weight on something when it becomes officially inflation or officially a recession. But that if you look at the labor market right now, I mean, it is a recession for the people who are unemployed, but economists have decided that there's not enough of them for it to be a recession, a recession. So I I'm with you.

• 1:03:00Kathryn Anne Edwards?

  We have not gone from sliding from expansion to decline, kind of slowly, hard to see in real time. We haven't done that since the end of 2007. I mean, we're out of practice to see it, but I I think that my problem with recessions is not that they don't, they're maybe not as big of a deal, or they don't have harm, because there is some momentum that goes behind saying that the economy is in recession, and it has its own negative consequences. I think I'm more concerned that the level of tolerance we're willing to have for suffering in the labor market has gotten rather high.

• 1:03:35Scott Galloway?

  I I just want to stick on this point. Seven hundred and fifty billion dollar tax gap. These are taxes that are owed, that aren't collected. And what I can tell you as someone who spends a lot of time around tax planning, the incentives are to be as aggressive as possible, because there's a general feeling amongst the wealthy that they don't have the resources to come for you. And the more complex your tax filing gets, the more resources they need, and the least likely, the less likely you are to be audited. And unfortunately, what I think AI is going to do is make sure that everybody with a W two that makes less than a quarter of a million dollars is going to be, is, quote unquote, going to pay their fair share. But as you go up and up the income ladder, and it gets more and more complex, and you

• 1:04:20Scott Galloway?

  need humans, I mean, the biggest tax, I think the biggest tax cut in history for the wealthy was neutering the IRS. And basically, there's, you know, there's no cop on the beat. If there's no cop on the beat, the incentives are to increase crime. Wouldn't the greatest, greatest increase in taxes just be to enforce the tax code?

• 1:04:38Kathryn Anne Edwards?

  Yeah, and I think people would get really upset if they knew just how much, how adherent W two workers are to their taxes owed relative. I mean, it's, it's not even that there's a tax gap and it's spread around. It's, it's really, if you have a wage and salary job, you pay taxes, like you are the sucker. But I think, to me, that gets at the broader point of. You know, there was a tax commission put together in the first Bush administration, maybe second Bush administration, second term of the second Bush administration. God, politics is so incestuous these days. In the second term of the second Bush administration, there was a tax commission put together of designed tax reform. And the very first word of their analysis was, "simple."

• 1:05:21Kathryn Anne Edwards?

  They thought that the tax code had gotten so complicated that everyone feels like they're being cheated. And that whatever way we move forward, it has to feel like people can understand the tax code so they don't feel like they're being cheated from it, top to bottom. So I like, you know, the idea of an alternative minimum functions the way that I would like the tax code to for everyone in it. If you look at every line item in the Consumer Price Index going back to 2000, the fastest growing price, bar none, is tax preparation services. That's a system-wide problem, not just a problem for people at the top. So we can, I guess, short-term, we have a deficit, we have a debt, we need to do something better.

• 1:06:02Kathryn Anne Edwards?

  There's a lot of low-hanging fruit for restoring basic things in our tax system. But in the long term, we can avoid, or at least delay, being in this situation again if we make the tax code fair for everybody. And what I worry about is, if we need to raise more money, which we absolutely do, then I don't want, there's a way to make people not feel sore about it. And the complexity leaves the hangover of soreness, of like, "Well, I still have to pay more, because they're going to do this, this, and this." And so some type of simplification. Right now, the answer to soreness is that we create a new deduction, or a new credit, or a new little bonus or reward for whatever person complains the most, like the Augusta credit, right?

• 1:06:45Kathryn Anne Edwards?

  You don't have to pay for renting, the income for renting out your home if it's just under two weeks, which is what the people from Augusta got for the Masters, so they don't have to pay income on the money they get when they rent out their houses for that, right? Like, we create these tiny little rewards for people who have loud kids. Oh, you've never heard the Augusta, the Augusta break?

• 1:07:02Scott Galloway?

  I have not. Is that, that just, could, could we have a wider tax break? I mean... Literally. So let me get this. If you're a member of Augusta, and you rent your house out, you don't have to declare that income?

• 1:07:15Kathryn Anne Edwards?

  If you rent out your house and earn money from renting out the house, here it is, the Augusta Rule, formerly Section 280A-G of the Internal Revenue Code, is that you can rent out your personal residence for up to 14 days per year without having to report that income or pay federal income taxes on it. It is a function of the lobbying efforts of the citizens of Augusta, Georgia, who would rent out their house during the Masters. So like, when I say complexity and unfairness, I mean that. Get rid of that. Get rid of that. And so it's, I like to think of the reform our economy needs as having like a day one and a year one solution.

• 1:07:58Kathryn Anne Edwards?

  Like, day one, there's a ton of things we can do for the tax code. Year one, we need to design comprehensive tax reform to make the tax system more fair. And the day one reforms, you can do and have them implemented within six months. The year one reforms, that's going to take multiple years. And almost any aspect of social policy, you can think about investments in children, investments in the labor market, regulation of the labor market, the tax system. There's day one things and there's year one things. And so, day one, let's raise more money. Year one, let's get rid of this Augusta and its ilk from the tax code.

• 1:08:29Scott Galloway?

  I just wonder if, rather than fighting the good people of Augusta, who have, you know, the congressmen and senators that represent them in the thousands of loopholes, that it might just be more elegant and more effective just to say, yeah, do all your loopholes, but if you're not paying at least 30 or 40%, that's what you pay.

• 1:08:48Ed Elson?

  I don't know. I think we need to go easy on the people of Augusta. They've had it tough. I mean, I think we need to be more lenient to them. Yeah.

• 1:08:55Scott Galloway?

  Yeah, you think, Ed? You think?

• 1:08:59Kathryn Anne Edwards?

  There's good policy there. Wait, was this a Masters joke? I don't follow golf. I know someone just won.

• 1:09:05Ed Elson?

  That's hard to argue with.

• 1:09:08Scott Galloway?

  Someone did win.

• 1:09:09Ed Elson?

  Rory McIlroy just run, but I'm, this is more of a joke about white people who play golf. I don't think they need that much more help right now.

• 1:09:17Scott Galloway?

  We're serious into identity politics here. We're falling victim to the same thing. And I think Catherine's just giving Bernie some talking points. Ed, last question.

• 1:09:25Ed Elson?

  We're actually out of time. I'd love to continue this for a long time and we always love having you Catherine, but I'm going to read you out.

• 1:09:30Scott Galloway?

  We love having Catherine on. Economist with a heart. We love this.

• 1:09:35Kathryn Anne Edwards?

  Oh, oh my God, I'm going to put that on a T-shirt.

• 1:09:38Scott Galloway?

  There you go. It's your bumper sticker when you do run for president after your books are bestseller.

• 1:09:42Ed Elson?

  It's gonna happen. I know it's gonna happen. Catherine Ann Edwards is a PhD economist and economic policy consultant. Her research focuses on the intersection of labor markets and public policy, including unemployment and unemployment insurance, recessions and recoveries, women's labor supply, poverty alleviation, retirement security and social security. Yeah, she's running for president. She has testified three times in front of Congress about economic policy. She writes a weekly column on the economy for Bloomberg and is the host of the Optimist Economy podcast. Catherine, always love having you. Thank you for your time.

• 1:10:12Scott Galloway?

  Thank you, Catherine.

• 1:10:13Kathryn Anne Edwards?

  Thanks, y'all.

• 1:10:16Ed Elson?

  This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carty. Our research team is Dan Shalan, Isabella Kinsel, Kristen O'Donoghue and Mia Silverio. Jake McPherson is our social producer. Drew Burrows is our technical director and Catherine Dillon is our executive producer. Thank you for listening to Prof you Markets from Prof you Media. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.