Slate Money – "The Mind the Gap Edition" (April 7, 2018)

Episode Overview

This episode of Slate Money, hosted by Felix Salmon with co-hosts Anna Szymanski and special guest Emily Peck, is themed "Mind the Gap," named for the focus on disparities and gaps—especially the gender pay gap exposed in the UK, and economic gaps created by trade policy. The hosts tackle the week’s significant business and finance stories, with a deep dive into three main topics:

1. The volatility in global stock markets and the US-China trade war
2. The UK’s new gender pay gap disclosure law, focusing on the finance sector
3. New Zealand’s pioneering approach to inflation targeting and recent changes in their monetary policy

The tone is witty and candid, veering into both technical details and sharp, accessible analysis, perfect for listeners ranging from finance nerds to curious laypeople.

Key Discussion Points & Insights

1. US-China Trade Tensions and Market Volatility

[03:15 – 13:09]

• Market Movements: Emily summarizes the week’s wild swings in US stock markets, attributing these to President Trump's escalation of a trade dispute with China.
  • Quote, Emily: "He announced a total of $133 billion worth of tariffs ... and the markets went up and down accordingly because people are freaking out. But the tariffs haven't actually been implemented." [03:30]
• Soybeans as a Flashpoint: Anna highlights the significance of China threatening tariffs on US soybeans—major US export, especially impacting Trump's base states.
  • Quote, Anna: "If the Chinese were to actually move forward with this tariff on soybeans, it would really potentially hurt a lot of the states that are Trump country." [04:17]
• Uncertainty Over Outcomes: Anna notes that while the rhetoric is noisy, actual policy effects are delayed, making for an unusually extended period of uncertainty.
  • Quote, Anna: "...if you're talking about potentially upwards of half a year where there's so much uncertainty in the market ... that could then cause them to invest less, to spend less on Capex..." [05:10]
• Evaluation of Tariff Strategy: Emily and Anna criticize tariffs as ineffective in addressing the real concerns—theft of intellectual property, loss of manufacturing jobs, and Chinese industrial policy ("Made in China 2025").
  • Quote, Emily: "One of the things about this move on Trump's part is just how exceedingly dumb it seems ..." [06:06]
  • Quote, Anna: "What the Trump administration is doing just doesn't make a lot of sense ... these tariffs would not just be harmful for China, they would be really harmful for a lot of countries in Asia..." [09:00]
• US Policy Missed Opportunities: Withdrawal from TPP is cited as a key strategic blunder, missing the chance to form coalitions to pressure China more effectively.
  • Quote, Emily: "We pulled out of TPP and from what I understand, that would have given us real leverage to make China do things we wanted them to do." [09:41]
• Historical Parallels: Brief reference to George W. Bush's failed steel tariffs in 2002—200,000 jobs lost outside steel, more than existed within steel itself. [11:36]
• California Wine Anecdote: Felix humorously downplays threats to California wine exports, noting the US rarely exports wine in volume, least of all to China. [11:49 – 13:09]

2. The UK Gender Pay Gap Data and Big Bank Disparities

[13:11 – 24:49]

• UK’s New Law: Large companies must report gender pay gaps, revealing significant disparities—most pronounced in finance.
  • Quote, Emily: "The gap between women and men is like 56%. I mean, it's really ugly." [13:16]
• Cause: Glass Ceiling, Not (Just) Equal Pay: At places like Goldman Sachs, the issue is vertical segregation—few women at the top, more men in high-paying positions.
  • Quote, Emily: "It's not like Goldman is paying women and men with the same jobs different amounts ... Goldman is just very top heavy when it comes to men." [14:05]
  • Quote, Emily: "17% of the highest paid workers at Goldman are women...62% of the lowest paid are women." [14:33]
• Efforts and Resistance: Some banks emphasize improved recruitment, but Emily maintains these responses may be more about PR than substantive change.
  • Quote, Emily: "...if Goldman had other kinds of problems ... they would scramble and fix, fix what they needed to fix ..." [15:44]
  • Quote, Anna: "I'm going to disagree a little ... they've actually been doing a lot of very aggressive recruiting of women. ... But it's not as easy of a problem to fix as I think sometimes people think it is." [16:14]
• Broader Problem, Not Just Finance: Pay gaps are widespread across the UK economy.
  • Quote, Anna: "...It was only 250 companies I think that reported but have pay gaps and fairly significant pay gaps." [16:50]
• Structural and Cultural Issues: The main barriers are the pipeline to leadership, the motherhood penalty, discrimination, and subtle biases in hiring and promotion.
  • Quote, Emily: "The problem isn't the entry level. The problem is the top level ... Problems like sexual harassment, sexual discrimination, the motherhood penalty." [17:55]
  • Quote, Anna: "...the biggest issue I think is the motherhood issue ... and this is something that I do think companies can address, but it's not an easy thing to address ..." [18:35]
• Bias in Promotions: When a woman competes against two or three men for a job, statistics show she virtually never gets the job.
  • Quote, Felix: "...if you had ... races where there was one woman and two men, then the woman would get the job a third of the time. The fact is that the woman gets the job basically none of the time." [18:17]
• Discrimination Against Mothers: Emily shares an example of discrimination faced by women in unions, specifically in California’s longshore industry.
  • Quote, Emily: "[When] they get pregnant and have babies, they're not getting to the next level in the union ... Whereas ... a man, if he gets injured, he gets these, like, credit hours worked so he can still be on the same promotional trajectory. It's pure discrimination..." [20:17]
• Hope from Transparency: Annual disclosures may apply pressure for change, as seen with improvements to board diversity in the UK.
  • Quote, Felix: "...when UK companies started having to report on the gender makeup of their boards, the gender makeup ... became more diverse. And just through transparency ..." [23:23]

3. New Zealand’s Trailblazing on Inflation Targeting

[24:52 – 41:04]

• Monetary Policy Revolution: In 1989, New Zealand’s Reserve Bank became the first central bank to implement an explicit inflation target, later triggering a global trend.
  • Quote, Felix: "...the Reserve bank of New Zealand began using an official inflation target ... they said, 'No, we actually have something we're targeting. We want 0 to 2% inflation.' And it worked." [25:07]
• Success of Inflation Targeting: Inflation dropped from 7% to 2% and remained low, despite New Zealand’s vulnerability as a small, open economy.
  • Quote, Felix: "...even though the Reserve bank of New Zealand has much less control over the Kiwi economy ... hey, they managed to do it. This was kind of impressive." [25:59]
• Spread Across the World: After presenting their model at Jackson Hole, inflation targeting became the template for central banks globally, culminating in the European Central Bank’s design.
• Controversy and Evolution: Inflation targeting was initially contentious, requiring central banks to ignore exchange rates and, to some degree, unemployment.
  • Quote, Felix: "All of these things which central bankers really care about ... they have to basically explicitly ignore all that and just concentrate on inflation. And then the idea is if you get inflation right, then everything else will sort itself out." [28:50]
• New Policy Shift in New Zealand: The country is now moving away from strict inflation targeting, adding a dual mandate similar to the US—considering employment as well as inflation. This is partly seen as a response to populist political pressures and a desire for more flexibility ("optionality").
  • Quote, Anna: "...they are still going to have a inflation target. But that's not the only thing they're going to be considering, which is in the US we have a dual mandate ... And they're now looking for something similar." [29:39]
  • Quote, Felix: "...they want optionality. And this will give them a little bit more freedom, should they need it, to start supporting employment rather than simply caring about inflation." [33:57]
• Debate Over the 2% Target: Hosts discuss whether 2% is still the right target, with many now believing it's way too low given structural changes—technology, globalization, and the "neutral" interest rate may now be closer to zero.
  • Quote, Felix: "...everyone has kind of come to this consensus that the 2% number that New Zealand more or less just pulled out of a hat one morning in 1989 was too low. It would have been better if it was more like 4%. But now that everyone has agreed on 2%, it's almost impossible to get to 4% from 2%." [31:04]
• Nominal GDP Targeting?: Felix suggests New Zealand could've gone for nominal GDP targeting—a concept gaining traction among wonks as a superior alternative but still considered experimental.
  • Quote, Felix: "...shouldn't they have gone for nominal GDP targeting?" [36:05]
• Why It Matters Now: Central banks worldwide have consistently undershot inflation targets, with weak wage growth despite low unemployment, leading to discussions about new frameworks.
  • Quote, Anna: "...they're talking about either actually increasing the target ... bringing in some potential GDP targets ... if you've had a number of years where inflation's been below 2%, that means you could also have a number of years where it's above 2%." [38:17]

4. Numbers Round

[41:04 – 47:06]

A quick round of impactful numbers from each panelist:

• Emily: "60 million"
  The count of private sector (non-union) workers in the US with mandatory arbitration clauses, which especially affects women and people of color—limiting their legal recourse for workplace discrimination. [41:16]
• Felix: "16"
  Pew Research study defines "millennial" birth years as 1981-1996, surprisingly brief compared to past generations. [42:15]
• Anna: "3.1%"
  Percentage of Spotify shares floated in their first day after direct listing—very low and possibly distorting both price and liquidity. Discussion about implications for price discovery and indexation. [44:31]

Notable Quotes & Memorable Moments

• On the cadence of “Mind the Gap”:
  • Felix: "There's that long mind. Then the gap comes ..." [00:51]
• On soybeans as a trade war weapon:
  • Anna: "Terrifying. Including politicians in Iowa also terrified about the word soybeans." [04:03]
• On Larry Kudlow’s market reassurance:
  • Anna: "This is one sentence I never thought I'd say, which is that Larry Kudlow came out this week and calmed the markets ..." [04:35]
• On California wine:
  • Felix: "If you are reliant on exporting California wine to China, you have bigger problems than Chinese wine tariffs." [11:49]
• On the limits of equal recruitment:
  • Emily: "That's not the problem isn't the entry level. The problem is the top level ..." [17:55]
• On combating motherhood discrimination:
  • Emily: "...it's not just the policies. It' sit's discrimination. It's discrimination against. Against mothers in the workforce." [20:17]
• On targeting the right economic metric:
  • Felix: "...shouldn't they have gone for nominal GDP targeting?" [36:05]

Timestamps for Important Segments

• US-China Trade War and Market Responses: [03:15 – 13:09]
• UK Gender Pay Gap Reports, Banking & Barriers: [13:11 – 24:49]
• New Zealand’s Inflation Targeting & Central Banking: [24:52 – 41:04]
• Numbers Round (mandatory arbitration, generational definitions, Spotify float): [41:04 – 47:06]

Final Summary

This episode of Slate Money provides sharp, layered analysis of the week's business and finance news, focusing on gaps—in pay, economic opportunity, and global governance. The discussion ranges from Trump’s market-shaking trade moves to structural biases against women at top banks, and New Zealand’s surprising influence on global central banking. Witty, critical, and full of real-world implications, the conversation synthesizes news, underlying causes, and thoughtful speculation about where policies might head next.