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U.S. workers have already been disempowered in the name of fighting inflation: Policymakers should not make it even worse by raising interest rates too aggressively

Earlier this year, debate over the inflation spike in 2021 polarized around the question of whether it was “transitory” or “persistent.” But it turns out that this was the wrong distinction.

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Earlier this year, debate over the inflation spike in 2021 polarized around the question of whether it was “transitory” or “persistent.” But it turns out that this was the wrong distinction. Instead, what should decide if the Federal Reserve is pushed into raising interest rates to cool off growth and tamp down inflation is whether this inflationary shock will be amplified or dampened in the labor market.

If it’s amplified, this means that wage increases will quickly follow price increases, as workers are able to protect their real (inflation-adjusted) wages from higher prices. Higher wage costs will in turn lead to firms raising prices again to protect their profit margins. This tit-for-tat escalation of wages and prices is what led policymakers to intervene decisively to cut short the famous inflation of the 1970s—sparked by a rise in oil prices but then amplified by these types of labor market dynamics.

If it’s dampened, then wage increases will lag price growth and workers will largely not be able to protect their real wages from the inflationary wave. This will reduce their wages but will also stem pressure for subsequent inflationary waves. The recent shock of price increases will hence be steadily smothered in the labor market, even if these price increases are relatively persistent.  

Exactly these dynamics are on the mind of policymakers. For example, U.S. Treasury Secretary Janet Yellen, when asked about inflation in recent testimony before Congress, responded: “What we don’t want to have develop is a wage-price spiral, in which inflation becomes its own self-reinforcing kind of phenomenon that would become chronic in the U.S. economy—something endemic.”

So far, there is little evidence that the labor market is amplifying inflation. The figure below looks at the recent acceleration in prices and wages across 110 industries. There is very little correlation to be seen. In sectors where inflation is high, like motor vehicle manufacturing, it’s generally not because wage growth is high. And in those sectors where labor scarcity has put upward pressure on wages, like hotels and other accommodations, it has not led to atypically fast price growth. In short, price inflation remains a problem coming from outside the labor market.

Figure A

We know more precisely just where inflation started—in global supply chain snarls and a huge reallocation of spending away from face-to-face services and towards durable goods. Both of these influences are clearly driven (or at least greatly exacerbated) by the COVID-19 pandemic. Both influences also show real hope of relenting in 2022. Vaccination rates are rising in key global manufacturing and shipping hubs and cargo costs, and other measures of supply chain snarling look to be easing (albeit modestly so far). Most importantly, a durable goods spree in one year will almost certainly not be followed by another (households don’t tend to replace their couch or a car every year).

Wherever it started, the most pressing question remains whether the COVID-19 inflationary shock gets boosted or tamped down by the U.S. labor market. Since the near real-time data above show little sign of the inflationary shock getting boosted by the labor market, it’s worth asking if a longer look back at historical data can tell us anything about this danger. The figures below show the association between upward pressure on prices stemming from non-labor costs (profits and intermediate inputs) and subsequent pressure on prices stemming from labor costs. Essentially, the figures show how much wages were able to rise to protect workers’ inflation-adjusted pay from past inflationary shocks, and how much wage pressure in turn kept inflationary momentum going.

Figure B
Figure B
Figure C
Figure C

The top panel shows this association between 1954–1988. Each percentage point of inflationary pressure applied by non-labor costs in one year was followed by about half as large an increase in labor costs in the following year—wages were indeed able to respond substantially to a price spike, and this amplified the initial upward move in prices. It was this backdrop that convinced policymakers that it was necessary to raise interest rates sharply to break the 1970s wage-price spiral.

The bottom panel shows this association between 1989–2019. It is essentially zero—workers’ wages did not respond in any systematic way to a price spike coming from non-labor costs. It’s not that workers wouldn’t like to be able to achieve higher wages in response to rising price pressures, but instead a number of developments—most driven by intentional policy decisions—have sapped workers’ bargaining power in the labor market for decades.

Of course, the flipside of disempowered workers unable to shield their wages from a price shock is empowered firms seeing profit margins rise. Higher prices mean somebody is collecting more income. Over the past year, it has been employers in sectors where supply has been impaired—shipping companies, oil producers, and food wholesalers, for example—who are collecting the extra revenue coming in through higher prices.

In a sense, then, it is our disempowered workforce—and their inability to achieve wage gains that hold them harmless in the face of price spikes coming from outside the labor market—that acts as a shock absorber from wage-price spirals forming.

To be clear, a disempowered workforce is not a good thing generally for the U.S. economy. This disempowerment has kept wage growth too slow for too many for decades, it has slowed economic growth generally, and it has been a prime contributor to the decade-long depression of economic activity after the 2008 crisis. It would be better for many reasons if workers had a lot more bargaining power. Of course, if they did have more bargaining power, then policymakers would have to respond more strongly to inflationary shocks, since those shocks could get amplified in the labor market.

But, when the issue at hand is how to make policy decisions today about inflation, we should be clear-eyed about the facts on the ground: worker disempowerment means we can—and should—be far more cautious about raising interest rates to slow inflation even in the face of a large and persistent initial price shock. The shock is far more likely to be smothered by the labor market even before interest rate hikes begin slowing the economy. This means the slower growth due to rate hikes will be overkill, and the overreaction to inflation will be worse than the actual malady.

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Lab, crab and robotic rehab

I was in Berkeley a couple of months back, helping TechCrunch get its proverbial ducks in a row before our first big climate event (coming in a few weeks,…

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I got previews of a number of projects I hope to share with you in the newsletter soon, but one that really caught my eye was FogROS, which was just announced as part of the latest ROS (robot operating system) rollout. Beyond a punny name that is simultaneously a reference to the cloud element (fog/cloud — not to mention the fact that the new department has killer views of San Francisco and frequent visitor, Karl) and problematic French cuisine, there’s some really compelling potential here.

I’ve been thinking about the potential impact of cloud-based processing quite a bit the last several years, independent of my writing about robots. Specifically, a number of companies (Microsoft, Amazon, Google) have been betting big on cloud gaming. What do you do when you’ve seemingly pushed a piece of hardware to its limit? If you’ve got low enough latency, you can harness remote servers to do the heavy lifting. It’s something that’s been tried for at least a decade, to varying effect.

Image Credits: ROS

Latency is, of course, a major factor in gaming, where being off by a millisecond can dramatically impact the experience. I’m not fully convinced that experience is where it ought to be quite yet, but it does seem the tech has graduated to a point where off-board processing makes practical sense for robotics. You can currently play a console game on a smartphone with one of those services, so surely we can produce smaller, lighter-weight and lower-cost robots that rely on a remote server to complete resource-intensive tasks like SLAM processing.

The initial application will focus on AWS, with plans to reach additional services like Google Cloud and Microsoft Azure. Watch this space. There are many reasons to be excited. Honestly, there’s a lot to be excited about in robotics generally right now. This was one of the more fun weeks in recent memory.

V Bionic's exoskeleton glove shown without its covering.

Image Credits: V Bionic

Let’s start with the ExoHeal robotic rehabilitation gloves. The device, created by Saudi Arabian V Bionic, nabbed this year’s Microsoft Imagine Cup. The early-stage team is part of a proud tradition of healthcare exoskeletons. In this case, it’s an attempt to rehab the hand following muscle and tendon injuries. Team leader Zain Samdani told TechCrunch:

Flexor linkage-driven movement gives us the flexibility to individually actuate different parts of each finger (phalanges) whilst keeping the device portable. We’re currently developing our production-ready prototype that utilizes a modular design to fit the hand sizes of different patients.

Image Credits: Walmart

This is the third week in a row Walmart gets a mention here. First it was funding for GreyOrange, which it partnered with in Canada. Last week we noted a big expansion of the retail giant’s deal with warehouse automation firm, Symbotic. Now it’s another big expansion of an existing deal — this time dealing with the company’s delivery ambitions.

Like Walmart’s work with robotics, drone delivery success has been…spotty, at best. Still, it’s apparently ready to put its money where its mouth is on this one, with a deal that brings DroneUp delivery to 34 sites across six U.S. states. Quoting myself here:

The retailer announced an investment in the 6-year-old startup late last year, following trial deliveries of COVID-19 testing kits. Early trials were conducted in Bentonville, Arkansas. This year, Arizona, Florida, Texas and DroneUp’s native Virginia are being added to the list. Once online, customers will be able to choose from tens of thousands of products, from Tylenol to hot dog buns, between the hours of 8 a.m. and 8 p.m.

Freigegeben für die Berichterstattung über das Unternehemn Wingcopter bis zum 25.01.2026. Mit Bitte um Urhebervermerk v.l.: Jonathan Hesselbarth, Tom Plümmer und Ansgar Kadura von Wingcopter GmbH. Image Credits: © Jonas Wresch / KfW

There are still more question marks around this stuff than anything, and I’ve long contended that drone delivery makes the most sense in remote and otherwise hard to reach areas. That’s why something like this Wingcopter deal is interesting. Over the next five years, the company plans to bring 12,000 of its fixed-wing UAVs to 49 countries across Sub-Saharan Africa. It will cover spots that have traditionally struggled with infrastructural issues that have made it difficult to deliver food and medical supplies through more traditional means.

“With the looming food crisis on the African continent triggered by the war in Ukraine, we see great potential and strong social impact that drone-delivery networks can bring to people in all the countries in Sub-Saharan Africa by getting food to where it is needed most,” CEO Tom Plümmer told TechCrunch. “Especially in remote areas with weak infrastructure and those areas that are additionally affected by droughts and other plagues, Wingcopter’s delivery drones will build an air bridge and provide food from the sky on a winch to exactly where it is needed.”

Legitimately exciting stuff, that.

Image Credits: Dyson

In more cautiously optimistic news, Dyson dropped some interesting news this week, announcing that it has been (and will continue) pumping a lot of money into robotic research. Part of the rollout includes refitting an aircraft hangar at Hullavington Airfield, a former RAF station in Chippenham, Wiltshire, England that the company purchased back in 2016.

Some numbers from the company:

Dyson is halfway through the largest engineering recruitment drive in its history. Two thousand people have joined the tech company this year, of which 50% are engineers, scientists, and coders. Dyson is supercharging its robotics ambitions, recruiting 250 robotics engineers across disciplines including computer vision, machine learning, sensors and mechatronics, and expects to hire 700 more in the robotics field over the next five years. The master plan: to create the UK’s largest, most advanced, robotics center at Hullavington Airfield and to bring the technology into our homes by the end of the decade.

The primary project highlighted is a robot arm with a number of attachments, including a vacuum and a human-like robot hand, which are designed to perform various household tasks. Dyson has some experience building robots, primarily through its vacuums, which rely on things like computer vision to autonomously navigate. Still, I say “cautiously optimistic,” because I’ve seen plenty of non-robotics companies showcase the technology as more of a vanity project. But I’m more than happy to have Dyson change my mind.

Image Credits: Hyundai

Hyundai, of course, has been quite aggressive in its own robotics dreams, including its 2020 acquisition of Boston Dynamics. The carmaker this week announced that part of its massive new $10 billion investment plans will include robotics, with a focus of actually bringing some of its far-out concepts to market.

Another week, another big round for logistics/fulfillment robotics, as Polish firm Nomagic raised $22 million to expand its offerings. The company’s primary offering is a pick and place arm that can move and sort small goods. Khosla Ventures and Almaz Capital led the round, which also featured European Investment Bank, Hoxton Ventures, Capnamic Ventures, DN Capital and Manta Ray.

Amazon Astro with periscope camera

The periscope camera pops out and extends telescopically, enabling Astro to look over obstacles and on counter tops. A very elegant design choice. Image Credits: Haje Kamps for TechCrunch

We finally got around to reviewing Amazon’s limited-edition home robot, Astro, and Haje’s feelings were…mixed:

It’s been fun to have Astro wandering about my apartment for a few days, and most of the time I seemed to use it as a roving boom box that also has Alexa capabilities. That’s cute, and all, but $1,000 would buy Alexa devices for every thinkable surface in my room and leave me with enough cash left over to cover the house in cameras. I simply continue to struggle with why Astro makes sense. But then, that’s true for any product that is trying to carve out a brand new product category.

A tiny robot crab scuttles across the frame. Image Credits: Northwestern University

And finally, a tiny robot crab from Northwestern University. The little guy can be controlled remotely using lasers and is small enough to sit on the side of a penny. “Our technology enables a variety of controlled motion modalities and can walk with an average speed of half its body length per second,” says lead researcher, Yonggang Huang. “This is very challenging to achieve at such small scales for terrestrial robots.”

Image Credits: Bryce Durbin/TechCrunch

Scuttle, don’t walk to subscribe to Actuator.

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Asymptomatic SARS-CoV-2 infections responsible for spreading of COVID-19 less than symptomatic infections

Based on studies published through July 2021, most SARS-CoV-2 infections were not persistently asymptomatic, and asymptomatic infections were less infectious…

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Based on studies published through July 2021, most SARS-CoV-2 infections were not persistently asymptomatic, and asymptomatic infections were less infectious than symptomatic infections. These are the conclusions of an update of a systematic review and meta-analysis publishing May 26th in the open access journal PLOS Medicine by Diana Buitrago-Garcia of the University of Bern, Switzerland, and colleagues.

Credit: Monstera, Pexels (CC0, https://creativecommons.org/publicdomain/zero/1.0/)

Based on studies published through July 2021, most SARS-CoV-2 infections were not persistently asymptomatic, and asymptomatic infections were less infectious than symptomatic infections. These are the conclusions of an update of a systematic review and meta-analysis publishing May 26th in the open access journal PLOS Medicine by Diana Buitrago-Garcia of the University of Bern, Switzerland, and colleagues.

Debate about the level and risks of asymptomatic SARS-CoV-2 infections continues, with much ongoing research. Studies that assess people at just one time point can overestimate the proportion of true asymptomatic infections because those who go on to later develop symptoms are incorrectly classified as asymptomatic rather than presymptomatic. However, other studies can underestimate asymptomatic infections with research designs that are more likely to include symptomatic participants.

The new paper was an update of a living (as in, regularly updated) systematic review first published in April 2020, which includes additional, more recent studies through July 2021. 130 studies were included, with data on 28,426 people with SARS-CoV-2 across 42 countries, including 11,923 people defined as having asymptomatic infection. Because of extreme variability between included studies, the meta-analysis did not calculate a single estimate for asymptomatic infection rate, but it did estimate the inter-quartile range to be that 14–50% of infections were asymptomatic. Additionally, the researchers found that the secondary attack rate—a measure of the risk of transmission of SARS-CoV-2 — was about two-thirds lower from people without symptoms than from those with symptoms (risk ratio 0.32, 95%CI 0.16–0.64).

“If both the proportion and transmissibility of asymptomatic infection are relatively low, people with asymptomatic SARS-CoV-2 infection should account for a smaller proportion of overall transmission than presymptomatic individuals,” the authors say, while also pointing out that “when SARS-CoV-2 community transmission levels are high, physical distancing measures and mask-wearing need to be sustained to prevent transmission from close contact with people with asymptomatic and presymptomatic infection.”

Coauthor Nicola Low adds, “The true proportion of asymptomatic SARS-CoV-2 infection is still not known, and it would be misleading to rely on a single number because the 130 studies that we reviewed were so different. People with truly asymptomatic infection are, however, less infectious than those with symptomatic infection.”

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In your coverage, please use this URL to provide access to the freely available paper in PLOS Medicine:

http://journals.plos.org/plosmedicine/article?id=10.1371/journal.pmed.1003987  

Citation: Buitrago-Garcia D, Ipekci AM, Heron L, Imeri H, Araujo-Chaveron L, Arevalo-Rodriguez I, et al. (2022) Occurrence and transmission potential of asymptomatic and presymptomatic SARS-CoV-2 infections: Update of a living systematic review and meta-analysis. PLoS Med 19(5): e1003987. https://doi.org/10.1371/journal.pmed.1003987

Author Countries: Switzerland, France, Spain, Argentina, United Kingdom, Sweden, United States, Colombia

Funding: This study was funded by the Swiss National Science Foundation http://www.snf.ch/en (NL: 320030_176233); the European Union Horizon 2020 research and innovation programme https://ec.europa.eu/programmes/horizon2020/en (NL: 101003688); the Swiss government excellence scholarship https://www.sbfi.admin.ch/sbfi/en/home/education/scholarships-and-grants/swiss-government-excellence-scholarships.html (DBG: 2019.0774) and the Swiss School of Public Health Global P3HS stipend https://ssphplus.ch/en/ (DBG). The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.


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Harsher COVID-19 restrictions associated with faster “pandemic fatigue”

Between November 2020 and May 2021, adherence to COVID-19 pandemic restrictions decreased in Italy, with the fastest decreases taking place during times…

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Between November 2020 and May 2021, adherence to COVID-19 pandemic restrictions decreased in Italy, with the fastest decreases taking place during times of the most stringent restrictions, according to a new study publishing May 26th in the open-access journal PLOS Digital Health by Laetitia Gauvin of ISI Foundation, Italy, and colleagues.

Credit: Ben Garratt, Unsplash (CC0, https://creativecommons.org/publicdomain/zero/1.0/)

Between November 2020 and May 2021, adherence to COVID-19 pandemic restrictions decreased in Italy, with the fastest decreases taking place during times of the most stringent restrictions, according to a new study publishing May 26th in the open-access journal PLOS Digital Health by Laetitia Gauvin of ISI Foundation, Italy, and colleagues.

Pandemic fatigue, the decreased motivation to adhere to social distancing measures and adopt health-protective behaviors, represents a significant concern for policymakers and health officials. In the time period spanning November 2020 to May 2021 in Italy, tiered restrictions were adopted to mitigate the spread of COVID-19, with regions declared red, orange, yellow or white depending on their health data. Restrictions ranged from a nighttime curfew in the yellow tier to general stay-at-home mandates in the red tier.

In the new study, the researchers used large-scale mobility data from Facebook and Google captured in all 20 Italian provinces in 2020 and 2021 to analyze the timing of pandemic fatigue. Facebook reports the change in a user’s number of movements over time, while Google data estimates the change in time spent at home.

People’s relative change in movements increased an average of 0.08% per day and their time spent outside the home increased by an average 0.04% per day, leading to a more than 15% increase in relative mobility over the entire seven-month study period. During times of red tier restrictions, individual mobility increased an additional 0.16% per day and time spent outside the home increased an additional 0.04% when compared to the average. This means that during every 2-week period spent in the red tier, there would be an additional average 3% increase in relative mobility.

The authors conclude that changes to pandemic restrictions are faster during periods characterized by the strictest levels of restrictions. However, they acknowledge that the data used are subject to bias since they include only Facebook and Google users who opted-in to location sharing. In addition, untangling the combined effects of vaccination and new pandemic variants on adherence to pandemic restrictions was not within the scope of the study and requires more work.  It is also important to note that the study did not investigate on the effectiveness of each tiered restriction against the spread of SARS-CoV-2.

Gauvin adds, “By analyzing mobile phone-derived mobility data in Italy, we investigated how adherence to COVID-19 restrictions changed over time, under different levels of increasing stringency. Our results show that adherence can be difficult to sustain over time and more so when the most stringent measures are enforced. Given that milder tiers have been proven to be effective in mitigating the spread of COVID-19, our study suggests policymakers should carefully consider the interplay between the efficacy of restrictions and their sustainability over time.”

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In your coverage, please use this URL to provide access to the freely available article in PLOS Digital Health: https://journals.plos.org/digitalhealth/article?id=10.1371/journal.pdig.0000035

Citation: Delussu F, Tizzoni M, Gauvin L (2022) Evidence of pandemic fatigue associated with stricter tiered COVID-19 restrictions. PLOS Digit Health 1(5): e0000035. https://doi.org/10.1371/journal.pdig.0000035

Author Countries: Italy

Funding: The study was partially supported by the Lagrange Project of the ISI Foundation funded by the CRT Foundation. The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.


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