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Article Artículo

Workers

One Way to Counter Job Killing Robots: Stop the Federal Reserve Board from Raising Interest Rates

It is amazing that there is not an effort to have a mass deportation of economists. After all, almost the whole profession completely missed the housing bubble and the economic crisis that resulted from its collapse. They failed to see the weakness of the recovery and now they can't decide whether we will have too few workers or too few jobs. (This is known as the "which way is up?" problem in economics.)

Claire Cain Miller gave us a "too few jobs" story in her NYT column that asked how we can offset the impact of job killing robots. She discusses various ideas that will create jobs or generate incomes for the people displaced by robots.

It is worth noting that if we think the problem really is too few jobs, in effect, that productivity is soaring, then many other commonly discussed economic problems do not really exist. If we have too few jobs then we have no reason to worry about government budget deficits. The problem of government budget deficits (if there is one) is that excessive spending by the government is creating too much demand in an economy that is unable to supply enough goods and services.

Similarly, in the too few jobs story there is no reason to worry about the demographics of retiring baby boomers. That is a story of too few workers to care for a growing population of retirees. 

There is also no reason to worry about the burden of excessive regulations stifling growth. The too few jobs story is telling us that the robots are leading to mass displacement of workers in spite of whatever burden is created by regulations. The implication is that we would have even if fewer jobs if not for the burden of regulations (assuming that regulations actually do slow growth).

And of course, if the problem is the robots taking all the jobs there is no reason for the Federal Reserve Board to raise interest rates. The point of higher interest rates is slow the rate of job creation so that the labor market doesn't get too tight and cause inflation. If we are worried that robots are getting rid of all the jobs it doesn't make any sense for the Fed to deliberately make the problem worse by slowing the rate of job creation.

It would be nice if economists could either agree than we face a world of soaring productivity so that scarcity is not a problem or (as the data show) we face a world of weak productivity growth, so that we could face some problems of scarcity. Given the high average pay in the profession, it would be reasonable to think there could be some consensus or at least some clear thinking on the implications of each position.

CEPR / March 07, 2017

Article Artículo

Affordable Care Act

Republicans Look to Top 50 Million Uninsured

In the years before the Affordable Care Act (ACA) the uninsured population peaked at just over 50 million people. It fell sharply when the main provisions of the ACA took effect, falling to less than 28 million in recent quarters. However, in its effort to make America great again, the Republicans expect to raise the number of uninsured back above 50 million. Serious analysis of their plan shows that they have a good shot at meeting this goal.

While the Republicans are in principle keeping some of the provisions of the ACA that were responsible for lowering the number of uninsured, this effect will be temporary. In most cases, the situation for most people not covered by their employers will be the same or worse than before the ACA took effect.

For example, the plan leaves in place the expansion of Medicaid through 2020. This should be long enough so that most currently serving Republican governors will not have to deal with the effect of the elimination of this provision. After 2020 people benefiting from the expansion will be allowed to remain on Medicaid, but new people will not be added. Since people tend to shift on and off Medicaid (something rarely understood by reporters who cover the ACA), after two or three years the vast majority of the people who benefited from the expansion will no longer be getting Medicaid. By 2025, the impact of the expansion on the number of the uninsured will be trivial.

The plan also allows insurers to charge people with pre-existing conditions higher rates, if they allow their insurance to lapse. While the provision allowing people to avoid being penalized for pre-existing conditions, if they maintain continuous coverage, may appear to provide protection, in reality this is not likely to be the case. Before the ACA workers were allowed to keep employer based coverage for a substantial period of time after they left their employer under COBRA. The take up rate under this law was always low, primarily because most workers could not afford to keep their coverage once they left their jobs. This is likely to be the case when the Republican plan takes effect as well.

CEPR / March 07, 2017

Article Artículo

Tony Blair, Who Brought Us the War in Iraq, Lectures on the Evils of Populism

Tony Blair, the former Prime Minister of the United Kingdom, who is best known for lying his country into participating in the Iraq War, lectured NYT readers on the evils of populism. Once again he gets many key points wrong.

He criticizes the left for abandoning centrist politicians:

"One element has aligned with the right in revolt against globalization, but with business taking the place of migrants as the chief evil. They agree with the right-wing populists about elites, though for the left the elites are the wealthy, while for the right they’re the liberals."

Blair then tells us:

"The center needs to develop a new policy agenda that shows people they will get support to help them through the change that’s happening around them. At the heart of this has to be an alliance between those driving the technological revolution, in Silicon Valley and elsewhere, and those responsible for public policy in government. At present, there is a chasm of understanding between the two. There will inevitably continue to be a negative impact on jobs from artificial intelligence and big data, but the opportunities to change lives for the better through technology are enormous.

"Any new agenda has to focus on these opportunities for radical change in the way that government and services like health care serve people. This must include how we educate, skill and equip our work forces for the future; how we reform tax and welfare systems to encourage more fair distribution of wealth; and how we replenish our nations’ infrastructures and invest in the communities most harmed by trade and technology."

Blair obviously is unfamilair with the basic facts about the economy. For example, even workers with college degree have seen almost no growth in real wages in this century. And with a large dispersion of earnings among male college grads, the bottom quartile of grads don't really see any premium at all.

But more importantly, Blair is wrong when he treats globalization and technology as natural forces. The decision to put our manufacturing workers in direct competition with low paid workers in the developing world, while leaving doctors, dentists and other highly paid professionals largely protected, is a policy choice. It's predicted and actual effect is to put downward pressure on the wages of most of the workforce, while benefitting the small elite in the protected occupations.

CEPR / March 04, 2017