Beat the Press is Dean Baker's commentary on economic reporting. Dean Baker is co-director of the Center for Economic and Policy Research (CEPR).
Paul Krugman told readers that intellectual types like him tend to vote for progressive taxes and other measures that benefit white working class people. This is only partly true.
People with college and advanced degrees tend to be strong supporters of recent trade deals [I'm including China's entry to the WTO] that have been a major factor in the loss of manufacturing jobs in the last quarter century, putting downward pressure on the pay of workers without college degrees. They also tend to support stronger and longer patent and copyright protections (partly in trade deals), which also redistribute income upward. (We will pay $430 billion for prescription drugs this year, which would cost 10 to 20 percent of this amount in a free market. The difference is equal to roughly five times annual spending on food stamps.)
Educated people also tended to support the deregulation of the financial sector, which has led to some of the largest fortunes in the country. They also overwhelmingly supported the 2008 bailout which threw a lifeline to the Wall Street banks at a time when the market was going to condemn them to the dustbin of history. (Sorry, the second Great Depression story as the alternative is nonsense — that would have required a decade of stupid policy, nothing about the financial collapse itself would have entailed a second Great Depression.)
His crew has also been at best lukewarm on defending unions. However, they don't seem to like free trade in professional services that would, for example, allow more foreign doctors to practice in the United States, bringing their pay in line with doctors in Europe and Canada. The lower pay for doctors alone could save us close to $100 billion a year in health care expenses.
None of this means that the plutocrats standing alongside Trump are somehow better for working class people. They have made it pretty clear that they intend to use his presidency to take everything they can from the rest of the country. But Krugman is engaging in some serious fanciful thinking if he thinks that intellectual types have in general been acting in the interests of the working class. (And, I suspect many do ridicule the behavior and lifestyles of the working class.)
Yes, all of this is talked about in my new book Rigged: How Globalization and the Rules of the Modern Economy Have Been Structured to Make the Rich Richer (it's free).Add a comment
In an article discussing the Trump administration's attitudes toward unions, the Washington Post misrepresented so-called right-to-work laws.
"Some union leaders are worried that a Trump administration would attempt to introduce a national right-to-work law — allowing any employee anywhere to exempt themselves from participating in a union — and block unions from deducting dues from paychecks."
Workers already have the option not to participate in a union. Workers cannot be compelled to join a union anywhere in the United States. They currently can be required to pay a representation fee in a workplace represented by a union. Under the law, a union is obligated to represent all the workers in a bargaining unit, whether or not they join the union. This means that all workers will benefit in the same way from the wages and benefits negotiated by the union. Also, the union is obligated to defend a worker in disciplinary matters or other individual issues even if they are not members of the union.
The issue is whether workers can be obligated to pay for this representation or have the option to get it for free. Twenty-six states now deny workers the right to negotiate contracts that require all workers to pay for the representation they get from a union. Apparently, some of those associated with Trump also want to prohibit workers from negotiating contracts under which the employer deducts union dues as a service to the union.
This is an issue about freedom of contract, where the government is limiting what sort of contracts unions can sign with an employer. It is not an issue about individual rights. Any worker who doesn't like unions has the option to work at a workplace where employees are not represented by a union. Just as an employer can impose conditions on workers (for example, wearing a silly uniform or requiring workers to address customers in a particular way), current law allows contracts under which workers set conditions on employment for their co-workers. Apparently, people associated with Trump want to take away this right.Add a comment
That would have been an appropriate headline for the NYT piece profiling Andrew Puzder, Donald Trump's pick to be head of the Labor Department. According to the piece, Puzder, who runs a restaurant chain:
"...strongly supports repealing the Affordable Care Act, which he maintains has helped create a 'restaurant recession' because rising premiums have left middle- and working-class people with less money to spend dining out."
In fact, restaurant spending and employment have risen rapidly since the key provisions of the Affordable Care Act (ACA) took effect in January of 2014 as shown in the figure below.
Source: Bureau of Labor Statistics.
Employment in restaurants in the most recent data is nearly 1 million higher than in December of 2013, the month before the health care exchanges created by the ACA began operating. Clearly Mr. Puzder is badly confused about business conditions in the restaurant sector. It would have been appropriate to point this fact out to readers, especially since it is very relevant to the job of the Labor Secretary.
Note: Thanks to Robert Salzberg for calling this to my attention.Add a comment
A NYT article that discussed Donald Trump's conflict-of-interest problem because of his business empire somehow couldn't find anyone who knew a way to do it without forcing him to risk selling it a large loss. Actually there are fun and easy way- to allow Donald Trump to quickly eliminate his conflict-of-interest problem without risking large losses. The article should have pointed out this fact to readers so they fully recognize how extraordinary Trump's behavior is in ignoring his conflict-of-interest problem.Add a comment
The NYT had a column by Nicholas Bagley and Austin Frakt noting the problem that in the current insurance market, all workers at a company get the same plan, regardless of their income. The price of the policy is a much larger share of a low-paid worker's wage than a high-paid worker's wage, implying a much larger effect on their after-health care insurance income.
As the column notes, a big part of this story is the high price of new medical technology. It is worth noting this high price is the result of government-granted patent monopolies. If the research were paid for up front by the government (it could be done by private companies under contract) the technology would be cheap in almost all cases. The differences between the cost of the most modern scanning equipment and an old-fashioned x-ray would be trivial and new drugs would be available at the same price as generics. In other words, this is to a large extent an avoidable problem, although one that cannot be easily addressed because of the power of the affected industries.Add a comment
Economists have been disappointed by the extraordinarily weak productivity growth of the last decade. Low productivity growth means that there is less room for improvements in living standards and more leisure.
Fortunately there may be an answer. Timothy Lee at Vox tells us that higher minimum wages are leading to more rapid automation. According to his piece, higher wages are pushing McDonald's around the country to experiment with touchscreen ordering. This will raise productivity at McDonald's and at other restaurants that adopt the technology.
While Lee for some reason views higher productivity as a bad thing, virtually all economists view productivity growth as the main determinant of living standards in the long-run. While productivity growth can displace workers, we know how to run macroeconomic policies (e.g. keep the Federal Reserve Board from raising interest rates and/or run larger budget deficits) to maintain full employment. So if Lee is right and higher wages are leading to more rapid productivity growth, this is great news.Add a comment
The NYT had an article presenting the comments of several people genuflecting over the lack of public support for current trade policy (wrongly referred to as "free trade"). The obvious reason for this lack of support, which is overlooked by those cited in the article, is that the intention and the outcome of trade policy has been to redistribute income upward.
The point of making it as easy as possible to move a factory to Mexico, and then import the output back to the United States, is to get access to low cost labor. The predicted and actual effect of this policy is to reduce the number of jobs available to manufacturing workers in the United States. This puts downward pressure on their wages, as fans of Econ 101 everywhere know. And, since manufacturing is a traditional source of high-wage employment for workers without college degrees, the loss of manufacturing jobs to Mexico and other developing countries puts downward pressure on the wages of non-college educated workers more generally.
For some reason, the NYT and other news outlets never point out that the "free traders" seem to have no problem with protectionist measures that benefit highly-educated professionals. For example, foreign doctors are prohibited from practicing medicine in the United States unless they complete a U.S. residency program. As a result, our doctors are paid twice as much as doctors in other wealthy countries (more than $250,000 a year on average, net of malpractice insurance and other expenses). This costs the country almost $100 billion a year in higher health care costs (@ $700 per family, per year).
We prohibit dentists from practicing in the United States unless they graduate from a U.S. dental school. (Since 2011, graduates of Canadian schools are also allowed to practice here.) These and other protectionist measures inflate the pay of highly educated professionals at great cost to the economy. However, these protectionist barriers never seem to be on the agenda of free traders.
(As many people have pointed out to me, if we simplified the rules so that more foreign professionals could practice in the United States we would get more professionals from developing countries. This could lead to a serious problem of "brain drain" as these countries lose their brightest and most educated people. As I have pointed out many times, we do know how to compensate for this flow of professionals. We could pay the countries from which these people came, so that they would be able to train two or three doctors or other professionals for every one that comes to the U.S. As I have also pointed out, we already get a substantial number of professionals from these countries and provide zero compensation, so it is striking that this concern only arises in the context of a proposal that jeopardizes the pay of high-end professionals.)
It is also important to note that stronger and longer patent and copyright and related protections have been a central part of recent trade deals. These protections are protectionism, the opposite of free trade. They are enormously costly and redistribute income upward. In the case of prescription drugs alone, patent and related protections raise the amount we pay for drugs by around $350 billion annually (@ $2,500 per family, per year) compared with the free market price. Patent monopolies do support research, but there are other more efficient mechanisms for financing research. (Get the full story in my book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. It's free.)
Anyhow, it is touching to see that elite types are discovering that much of the country is unhappy with policies that were designed to redistribute from them to elite-types. The question we all must ask is, "are our elites learning?"
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Harvard professor, textbook author, and occasional New York Times columnist Greg Mankiw told readers today that Donald Trump's economic team is wrong to worry about the trade deficit.
"The most important lesson about trade deficits is that they have a flip side. When the United States buys goods and services from other nations, the money Americans send abroad generally comes back in one way or another. One possibility is that foreigners use it to buy things we produce, and we have balanced trade. The other possibility, which is relevant when we have trade deficits, is that foreigners spend on capital assets in the United States, such as stocks, bonds and direct investments in plants, equipment and real estate." ...
"...in reality, trade deficits are not a threat to robust growth and full employment. The United States had a large trade deficit in 2009, when the unemployment rate reached 10 percent, but it had an even larger trade deficit in 2006, when the unemployment rate fell to 4.4 percent.
"Rather than reflecting the failure of American economic policy, the trade deficit may be better viewed as a sign of success. The relative vibrancy and safety of the American economy is why so many investors around the world want to move their assets here."
There are three points worth making here. First, purchases of financial assets, like stock and bonds, do not necessarily translate into greater output and employment. Mankiw may have missed it, but we had a long stretch of very high unemployment following the collapse of the housing bubble in 2008. The Fed purchased plenty of financial assets in this period, it had some effect on boosting output and employment, but did not come close to getting the economy back to full employment. (The assets don't care whether the Fed or foreigners purchase them, it has the same effect on output and employment.)
Second, much of the foreign purchases of U.S. assets were not because of the "vibrancy and safety" of the U.S. economy. Following the East Asian financial crisis in 1997 many developing countries felt that their central banks had to accumulate massive amounts of reserves to avoid ever facing the same situation as the countries of the region faced in 1997. (In other words, they didn't want to have a U.S.-directed I.M.F. bailout.)
This meant buying up massive amounts of dollars. That held down the value of their currencies, which in turn allowed these countries to run large trade surpluses. That reversed the textbook pattern where capital is supposed to flow from rich countries where it is plentiful to poor countries where it is scare. In the years since 1997, poor countries have been massive exporters of capital to rich countries.
The third point is that this trade deficit has created a large gap in demand, pretty much as Trump's economics team claims. In the late 1990s we filled this gap in demand with the demand generated by the stock bubble. When that bubble burst in 2000–2001, the ensuing recession gave us the longest period without job growth since the Great Depression.Add a comment
Traditional taxi companies are required to have their drivers undergo extensive background checks, including finger-print based checks. Apparently, Uber lacks the competence to deal with similar requirements to ensure the safety of their passengers. According to the Washington Post the company is prepared to pull out of the state of Maryland if it requires such checks.
It may well be that the Uber management lacks the competence to deal with the safety requirements that traditional taxi companies have adhered to for decades. If this is the case, then hopefully the top management will be replaced by a more competent group. Perhaps they will spend more of their resources managing the company and less on highly paid lobbyists like former Obama adviser David Plouffe.Add a comment
The answer may not be as simple as readers were led to believe in a NYT article on the topic. The article explains several ways in which tariffs can be counter-productive. As evidence that tariffs tend to be net job losers, the article cites a study by the Peterson Institute on tariffs that President Obama imposed on tires imported from China, ostensibly to counter dumping. The study concluded:
"Some 1,200 American tire-making jobs were preserved, but American consumers paid $1.1 billion extra for tires. That prompted households to cut spending at retailers, resulting in more than 2,500 net jobs lost."
There are several important assumptions that drive this calculation of net jobs lost.Add a comment
You need not be a fan of Donald Trump to say that trade has had a big impact on manufacturing jobs, you really just need to be someone in the reality-based community. Unfortunately, a lot of people who should, and probably do, know better are insisting that trade is not a big deal. The story is that we lost the jobs due to productivity growth, not trade.
There are three points worth making here. The first is a simple logical one, we have a trade deficit of around $500 billion a year, a bit less than 3.0 percent of GDP. This is basically all due to a deficit in manufactured goods (we have a surplus on services). Does anyone believe that the extra imports associated with the trade deficit are not associated with jobs? Can $500 billion worth of manufactured goods be produced without hiring people? (This matters much more in a context where we face secular stagnation, meaning there is not enough overall demand in the economy.)
The second point is that our trade deficit has not always been this large. Our deficits had been around 1.0 percent of GDP through most of the period from the late 1970s until the East Asian crisis in 1997. Following the crisis, the value of the dollar soared and the trade deficit did also. It eventually peaked at almost 6.0 percent of GDP in 2005–2006. (I should be giving the non-oil deficit, but I'm too lazy to look that up just now.)
Anyhow, this explosion in the trade deficit coincided with a sharp decline in manufacturing employment.
Jobs in Manufacturing
Source: Bureau of Labor Statistics.
As can be seen, manufacturing employment stayed close to 17.5 million from the early 1970s to 2000. We had plenty of productivity growth over these three decades, but little net change in manufacturing employment, in spite of cyclical ups and downs. It was declining as a share of total employment, which almost doubled over this period. Then, as the trade deficit explodes, we see manufacturing employment plummet. Note that most of the drop is before the Great Recession in 2008.
The final point is that much of the gains in productivity in the last two decades are illusory. Susan Houseman points out that the bulk of the reported gains in productivity growth are not in industries like autos and steel, but in the computer sector. So a pickup in productivity growth cannot explain the decline in manufacturing employment in most sectors.
I should also add that even the productivity growth we do see is in part due to the trade deficit. When jobs are lost due to import competition, it is generally going to be jobs in the least productive plants. By eliminating low productivity jobs, average productivity will rise even if no plant has actually increased its productivity.
Anyhow, we should not look to combat Donald Trump by following his tendency to ignore reality. Yes, trade has cost manufacturing workers jobs. We can propose different remedies (mine begin with getting the value of the dollar down against other currencies), but let's not deny what is true.Add a comment
Steve Rattner had a column on Donald Trump's deal to keep 1,000 jobs at the Carrier air conditioner factory in Indiana in the country. The column argues against imposing tariff barriers that would protect manufacturing workers, but ignores the protectionist barriers that inflate the wages of doctors and other highly paid professionals.
The United States prohibits foreign doctors, even those with top quality health care systems like Germany and Netherlands, from practicing in the United States unless they complete a U.S. residency program. It also prohibits foreign dentists from practicing in the United States unless they graduate from a U.S. dental school. (Since 2011, graduates of Canadian dental schools have also been allowed to practice here.)
As a result of these and other protectionist measures we pay far more for the services provided by these professionals. In the case of doctors, their average pay of more than $250,000 a year (net of malpractice insurance and other expenses) is twice the average of other wealthy countries. This costs the country close to $100 billion a year (@$700 per household) in higher health care costs.
There are enormous potential gains to the economy from removing the protectionist barriers in these high-end professionals. It would also be a huge step toward reducing inequality. Unfortunately, it seems that people like Rattner and other protectionists who write on trade for the NYT are not willing to consider free trade policies.Add a comment
This is an important point that would have been worth including in this NYT article on the growing risks in the subprime car loan market. The lack of oversight from the Consumer Financial Protection Bureau (CFPB) is likely a major reason that bad lending practices persist in this area.
Note: I corrected the title to make it more accurate. The loans themselves are covered by the CFPB, the arrangements and discussions by dealers explaining the terms of the loan are not. Thanks to Robert Salzberg for calling this to my attention.Add a comment
The NYT had a major article focused on a Chinese man who makes his living by exposing retailers for selling unauthorized versions of clothes, shoes, and other retail products. His income comes from the government, which rewards people who find unauthorized copies of products being sold in stores. The article repeatedly refers to these items as "counterfeit." This is inaccurate.
While all the items noted in the piece are in principle being sold without the consent of the named manufacturer, many would not qualify as "counterfeits." The difference is that in many cases, the buyer knows that they are not getting a product made by the named manufacturer. They are willing to buy the product anyhow because it comes with a substantial discount. In this case, the product is not actually a counterfeit, since the consumer knows what they are buying.
This is not just a semantic point. If the consumer is being deceived, they are an ally in cracking down on the practice. On the other hand, if consumers willingly buys a product, knowing that it is not actually the named brand, then they will resist efforts to crack down.
Clearly China's law in this area is designed to crack down on both actual counterfeits, in some cases raising serious safety issues, and also unauthorized copies that allow consumers to buy products at large discounts. It would have been helpful to be clear on this distinction so that readers would have a better idea of what is at stake.Add a comment
He may not have intended to say that Trump voters were driven by illusions, but that is effectively what he wrote. His column warned Democrats that they have to move right to get more political support:
"...some of the Trumpian (and pre-Trumpian) backlash against liberalism in white working-class communities was associated with welfare programs — disability rolls, food stamps, Medicaid — that seem to effectively underwrite worklessness at a time of social disarray. It would not require Democrats abandoning their commitment to the social safety net to foreground programs more directly linked to work and independence, and to acknowledge the problems of dependence and stagnation associated with no-strings-attached support."
Of course, fans of reality know that the number of people getting disability benefits has fallen somewhat as the economy recovered from the downturn. The combined number of people getting workers compensation or disability has actually been falling since 2000. So if Trump voters are upset about people using disability related programs to avoid working, they have less to complain about under the liberal Obama administration than under President Bush.
There has been an increase in the number of people getting food stamps under President Obama, but it seems unlikely that benefits averaging $125 a month per person are keeping too many people out of work. The same story applies to the Medicaid expansion.
As a practical matter, if the concern is about prime-age workers (ages 25 to 54) not working, then Trump voters should have been angry at the Bush conservatives, not President Obama. The employment-to-population ratio for prime-age workers fell by 4.4 percentage points while President Bush was in the White House. It has risen by 1.2 percentage points since President Obama took office.
So it seems that Trump voters are angry about something that does not exist in the world. Apparently, they have been misinformed by their news sources, including people like Douthat.Add a comment
Donald Trump is about to become president and immediately begin violating the constitution. The constitution explicitly prohibits the president from taking payments and gifts from foreign governments. (Can we stop using the term "emolument"? No one has used it for a hundred years. We want to be clear on what the constitution means.)
Donald Trump is right now and will continue to be taking payments and gifts from foreign governments in the form of benefits to his properties, unless he dumps the stuff. This is about as clear a violation of the constitutional provision imaginable, so why on earth do we have Andrew Ross Sorkin approvingly accepting Donald Trump's nonsense claim in his letter to Mr. Trump:
"You understand the conundrum. 'In theory, I don’t have to do anything' to distance yourself from your business holdings, you told journalists at The New York Times last week, 'but I would like to do something — I would like to try and formalize something.'"
This is wrong. Trump absolutely does have to do something. It's not a question of his being a nice guy. This is a constitutional provision. The constitution sets the rules on who can be president and how they conduct themselves. Just as it says the president must be at least 35 years old and must be a native born citizen, it also says the president can't take payments from foreign governments.
Perhaps even more incredible than Sorkin's misrepresentation of the constitution, his plan is just a bad joke.
"Voluntarily agree to hire what is known as a 'corporate monitor,' an independent overseer with unfettered access to your organizations who will provide regular reports to the public about any possible instances of conflicts."
Okay, let's get this one straight. Donald Trump can't keep himself from tweeting out loony claims about massive vote fraud in the middle of the night. He routinely makes personal attacks on his critics without any evidence. This guy is going to defer to a "corporate monitor" in his actions as president.
So when President Erdogan in Turkey gives favorable treatment to Trump's golf courses there, is the corporate monitor going to be able to know if this affects Donald Trump's decision to look the other way as he locks up all his political opponents? If Scotland decides to ban the wind turbines near his resort, will the corporate monitor know if this affects his attitude towards Scottish independence? And, as a practical matter, do we really believe that Trump would be constantly checking in with his corporate monitor anyhow?
Sorkin's proposal is a complete joke. If we give a damn about the constitution, Donald Trump has to sell off his empire and place his assets in a blind trust, just like every other president has done for the last half century. (I explain how he could do this here.) If he chooses not to do this, then Trump is constitutionally unable to be president, just as if he was born in Kenya. It's that simple.Add a comment
The NYT had an interesting piece on the hopes that West Virginians placed on the ability of Donald Trump to bring back jobs to the state. However, a comment on the loss of mining jobs under President Obama may have misled readers.
The piece noted:
"Coal has always been boom and bust; its decline began long before Mr. Obama took office. But in West Virginia alone, 12,000 coal industry jobs have been lost during his tenure."
While this is true, the start of the Obama administration was a temporary peak for the coal industry, as the sharp run-up in oil prices in the prior four years had substantially increased the demand for coal as shown in the figure below.
Coal Mining Jobs in West Virginia
Source: Bureau of Labor Statistics.
While there was a substantial loss of coal mining jobs during the Obama years, mostly due to the availability of low cost natural gas, the most recent employment levels are almost the same as they were in 2000.Add a comment
Hey, why should he be left out? He repeats the story about prime age (ages 25–54) men dropping out of the workforce. As noted here before, since 2000 there has been a comparable drop in employment rates for prime-age women. It is important to add in this respect that employment rates for women had been rising before 2000 and were almost universally expected to continue to rise. In other words, there is a simple story where the drop in both men and women's employment rates is due to a weak labor market, but hey that's too easy, let's see if we can blame the workers rather than the folks who make economic policy.
The other point where Samuelson is misleading is in citing the claim that government benefits, like disability payments, are a possible reason that men have been dropping out. While he notes that the Council of Economic Advisers (CEA) argued against this by noting that these benefits had not risen rapidly enough to explain the increase in the drop out rate, it also would have been worth noting the rest of the argument. The CEA also pointed out that the United States ranks near the bottom of OECD countries in the generosity of its benefits, but it also ranks near the bottom in labor force participation rates for prime-age workers. In other words, that doesn't sound like a very plausible explanation.Add a comment
In Washington, there are two sure ways to get rich: you can work as a corporate lobbyist or you can work with a Peter Peterson-funded organization and whine about government debt. The Peterson Foundation, along with its allies at the Washington Post and other media outlets, have long worked to fan irrational fears about government debt just as Donald Trump and other demagogues have fanned racism and xenophobia. One small positive of a Donald Trump presidency is that it may provide a teachable moment on the meaninglessness of such fears.
The NYT gives us an excellent lead in with this piece on the need to repair locks and dams on inland waterways. The piece tells us of Trump's plan to spend $1 trillion improving the country's infrastructure, then adds:
"To avoid raising taxes or increasing debt, his plan calls for much of the money to come from the private sector, with a proposed tax credit offered in return. ...
"Even with a tax credit, though, companies building roads or locks would want a return on their investment — most likely in the form of toll collection, said Mike Toohey, president of the Waterways Council, an advocacy group for the river shipping industry."
So let's look at how we are avoiding raising the debt in this story. First, the infrastructure is supported through a tax credit rather than direct spending. If we spent $1 trillion directly then this would add $1 trillion to the debt. We will then have to pay the interest on this debt as long as it is outstanding. (Currently, the real interest rate on government debt is nearly zero, since the inflation rate is almost as high as the long-term interest rate.)Add a comment
Suppose a candidate proposed ending the U.S. commitment to NATO. Based on this NYT article on Republican plans to privatize Medicare, the headline would probably tell readers that the candidate wanted to "change" U.S. involvement with NATO.
In fact, as readers of the article will discover, Republicans want to replace Medicare's commitment to provide seniors with insurance that covers most of their health care costs with a "a fixed government contribution for each beneficiary." After describing the system in this manner — virtually the textbook definition of "voucher," the article then told readers:
"For nearly six years, Speaker Paul D. Ryan has championed the new approach, denounced by Democrats as 'voucherizing' Medicare."
The use of quotation marks in this sentence is difficult to understand, since there seems little dispute that Speaker Ryan does in fact want to replace Medicare with a voucher, as this article had just explained. What is up for debate is whether it is desirable to replace Medicare with a voucher system, not whether the Republicans want to do it.Add a comment
In spite of all the stories about robots taking all the jobs, we still can't find any evidence in the productivity data. Productivity has averaged just 0.6 percent annually over the last six years, the slowest growth on record.
But now the Wall Street Journal alerts us to a new problem. It tells us that small businesses can't find enough workers in low-skilled occupations. If that sounds to you like the direct opposite of the job-killing robots story, then you're way ahead of many of the pundits who get paid big bucks to say smart things about the economy.
If the Wall Street Journal piece is right, then the jobs-killing robots story is wrong. Our economy is continuing to create large numbers of jobs for people with relatively few skills.
Of course, the labor shortage story is also more than a bit misleading. Capitalism prescribes a simple remedy for addressing labor shortages. It's called higher wages. The piece does assure us that higher wages is not the problem, but some arithmetic would be helpful here.
In one case it mentions a roofer who is now paying most of his workers over $20 an hour. While this is a better wage than most workers receive, roofing is a physically demanding and dangerous job. If the minimum wage had kept pace with productivity growth since the late 1960s (as it had in the prior three decades), it would be almost $19 an hour today, so crossing $20 an hour hardly seems like especially high pay in 2016. (It's equal to 0.008 percent of what Goldman Sachs pays its speakers.)
The other area where we are told there are shortages is farmworkers. Here the pay is $11 an hour, but we assured that this is not the problem, the problem is that workers who are U.S. citizens want to be paid in cash so they don't have to pay taxes.
It's certainly possible that many of the business owners who are complaining about a labor shortage would not be able to stay in business if they offered higher wages. But this is the way a market economy works. Businesses that can't afford to pay the prevailing wage go out of business and their workers go into areas where their labor can be more productively employed. This process is the reason that half of the country is no longer working in agriculture.
In short, the story of the job-killing robots seems like a myth that helps to employ highly educated people, while the problem of the labor shortage is one of business owners who don't understand how a market economy works.Add a comment