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Article Artículo

Minimum Wage Wars: The Media Celebrate Job Loss

There has probably never been a National Bureau of Economic Research working paper that produced as much glee in the media as last week's report showing that Seattle's minimum wage law may have led to a net loss in wages for low wage workers. According to the analysis, there was a reduction in average hours worked among those in the low wage labor market that more than offset the gain in wages. The result was a net loss in wages for exactly the group of people the law was intended to benefit.

This finding was quickly picked up in every major news outlet. While some, notably the New York Times, reported the finding with appropriate cautions, others (e.g. here, here, here, here, and here) were nearly gleeful at the idea that workers in Seattle were losing their jobs. Most of the reporting ignored the fact that the same week a team of researchers from Berkeley produced an analysis using a very similar methodology that found no statistically significant impact on employment.

There are important differences in the studies. The Berkeley study follows much prior research and only looks at the restaurant industry, a major employer of low wage workers. The University of Washington NBER paper looked at all workers getting paid less than $19 an hour. It also had two additional quarters of data. However, the Washington study also excluded the roughly 40 percent of the workforce that worked at multi-site employers (think Starbucks and McDonald's).

In other words, it it not obvious that the Washington study is the "better" analysis. The Berkeley team has produced much of the cutting edge research on the minimum wage over the last fifteen years. I doubt that many of the reporters touting the Washington study would be able to explain why it is a better analysis of the impact of Seattle's minimum wage hikes.

CEPR / July 01, 2017

Article Artículo

Thomas Friedman Whines About His Lost TPP

Thomas Friedman, who is legendary for his boldly stated wrong assertions, got into the game again making absurd claims about the Trans-Pacific Partnership (TPP) and the great loss the U.S. suffers from it going down. Friedman tells readers:

"It was not only the largest free-trade agreement in history, it was the best ever for U.S. workers, closing loopholes Nafta had left open. TPP included restrictions on foreign state-owned enterprises that dumped subsidized products into our markets, intellectual property protections for rising U.S. technologies — like free access for all cloud computing services — but also anti-human-trafficking provisions that prohibited turning guest workers into slave labor, a ban on trafficking in endangered wildlife parts, a requirement that signatories permit their workers to form independent trade unions to collectively bargain and the elimination of all child labor practices — all to level the playing field with American workers."

This is of course wrong. First, and most importantly, all the provisions on items like human trafficking, child labor, and trading in endangered wildlife depended on action by the administration. In other words, if the TPP had been approved by Congress last year we would be dependent on the Trump administration to enforce these parts of the agreement. Even the most egregious violations could go completely unsanctioned, if the Trump administration opted not to press them. Given the past history with both Democratic and Republican administrations, this would be a very safe bet.

In contrast, the provisions on items like violations of the patent and copyright provisions or the investment rules can be directly enforced by the companies affected. The TPP created a special extra-judicial process, the investor-state dispute settlement system, which would determine if an investor's rights under the agreement had been violated.

CEPR / June 28, 2017

Article Artículo

Health and Social Programs

United States

Prescription Drug Spending is Consuming a Bigger Share of Wages

Prescription drugs are a large and growing share of national income. While it is generally recognized that drugs are expensive, many people are unaware of how large a share of their income goes to paying for drugs because much of it goes through third party payers, specifically insurance companies and the government.

The Centers for Medicare & Medicaid Services (CMS) produce projections of national expenditures on prescription drugs through 2025, along with historical estimates dating back to 1960. As shown below, prescription drug spending from 1960 to 1980 was equivalent to about one percent of total wage and salary income. In the years leading up to the passage of the Bayh-Dole act in 1980, wage income was rising faster than spending on prescription drugs. As a result, the share of wages spent on prescription drugs was actually falling, reaching a low in 1979 of 0.86%.

Prescription Drug Spending Relative to Wages

Dean Baker and Brian Dew / June 27, 2017