Robert Samuelson was inspired by a graph in the new Economic Report of the President to tell readers that the real problem for the middle class is not inequality but rather productivity growth. His point is that if we had kept up the Golden Age (1943-1973) rates of productivity growth it would have mattered much more to middle income families living standards than the rise in inequality since 1980.

This is true in the sense of if I were six feet five inches, I would be taller than I am, but it's not clear what we should make of the point. We don't know how to have more rapid productivity growth (at least not Golden Age rates), so saying that we should want more rapid productivity growth is sort of like hoping for the second coming. As Samuelson notes, we do have policies that would likely improve growth, more spending on infrastructure, education, and research and development, but no one seriously thinks such policies would get us back to the golden age growth rates of 3.0 percent a year. (Samuelson includes tax reform on his list. While a cleaner tax code probably would boost growth, it's worth noting that tax rates were much higher and the tax code contained more loopholes in the golden age.)

As a practical matter we may not be able to boost productivity growth, but we can change the policies driving inequality. At the top of this list, if we maintain low levels of unemployment as we did in the late 1990s, then middle income and lower income wages will rise in step with productivity growth. This would require generating demand through fiscal policy and lower trade deficits from a lower valued dollar. It also means not having the Fed cut off growth with higher interest rates.

If we also structured labor laws so that it was possible for workers to organize unions, had a minimum wage that kept pace with productivity growth (as it did in the golden age), and didn't protect high-end professionals (e.g. doctors, dentists, and lawyers) from domestic and international competition, then it would be reasonable to expect middle class incomes to keep pace with the economy's productivity growth. If we can only sustain the 1.5 percent annual productivity growth of the slowdown years (1973-1995) this would still imply income gains of almost 60 percent over three decades. While it would of course be better to have golden age productivity growth, since we don't know how to get back such rapid growth, why not pursue the policies that we know will be effective in restoring middle class income growth?

A complaint from Haitian communities and supported by New York University’s Global Justice Clinic and Accountability Counsel has been rejected by the World Bank on technical grounds. The groups had asked for the Bank’s Inspection Panel to review whether assistance the Bank is providing to the Haitian government follows Bank guidelines relating to transparency and environmental safety.

Since 2013, the World Bank has provided technical assistance to the Haitian government in rewriting its mining laws, leading to a new mining law being drafted in 2014. Though Haiti has not seen large-scale commercial mining for decades, the government awarded multiple concessions in 2012 over opposition protests. In 2013, following a forum on mining sponsored by the World Bank, then Prime Minister Laurent Lamothe declared that to advance Haiti’s development, “we are counting heavily on the contribution of the mining sector.”

The Haitian communities’ complaint [PDF] states:

Complainants fear that, due to the government’s weak capacity and the law’s inadequacies, this increased investment in the mining sector will result in serious social and environmental harms, including contamination of vital waterways, impacts on the agriculture sector, and involuntary displacement of communities. Complainants are also concerned about the exclusion of Haitian people from the law reform process, particularly when contrasted with the reported regular participation of the private sector in drafting the new law. Further, Complainants fear that the government of Haiti lacks the capacity to regulate and monitor mining company activity.

In its response, the World Bank’s Inspection Panel says that it “has decided not to register the case.” The Panel acknowledged that the issues raised were “serious and legitimate,” and agreed that the new mining law could “have significant and considerable adverse environmental and social consequences.” However, because the World Bank support was provided through a technical assistance mechanism, “policies and procedures applicable to design, appraisal and implementation of a project, including the safeguard policies, were not applied to the Haiti Mining Dialogue.” The mechanism is not subject to the World Bank’s safeguard policies and therefore the Inspection Panel refused to hear the complaint.

I have a chapter on state-level labor-market regulations in a new ILR Press book edited by David Jacobs (Morgan State University) and Peggy Kahn (University of Michigan, Flint). The book is called Disunited States of America: Employment Relations Systems

Dean Baker
The Hankyoreh, February 18, 2015

Mark WeisbrotThe Huffington Post, February 17, 2015

Dean Baker
Al Jazeera America, February 17, 2015

Dean Baker
Truthout, February 16, 2015

A NYT piece on the release of new data showing Japan's economy grew at a 2.2 percent annual rate in the fourth quarter gave an excessively pessimistic view of Japan's economic performance under Prime Minister Shinzo Abe. The article tells readers:

"The economy did not grow at all in 2014, with two quarters of recession almost exactly canceling out two quarters of expansion, according to Monday’s report. Growth in the two years since Mr. Abe began his campaign has added up to a modest 1.6 percent, slightly less than the 1.8 rate recorded in 2012, the year before he took office."

As the article notes, the reason the economy did not grow in 2014 was because of a sharp increase in the sales tax that had been planned before Abe took office. While it says that the resulting downturn was a surprise to economists, this is exactly what standard economics would predict. The sales tax increase was clearly foolish policy (Abe has put off another hike that had been scheduled this year), but the economy clearly would have grown at a healthy pace in the absence of this rate hike.

It is also worth noting that Japan's employment to population ratio (EPOP) rose by 2.2 percentage points from the fourth quarter of 2012, when Abe came to power, to the fourth of 2014. By comparison, the EPOP in the United States has risen by 1.1 percentage point over the same period. News reports have been nearly ecstatic over the rate of job growth in the United States.

That would have an appropriate headline for a NYT article on the fact that many members of Congress may refuse to support fast-track trade authority without some rules on currency. At one point it refers to comments by Bruce Josten, a senior lobbyist at the U.S. Chamber of Commerce and supporter of fast-track, who argued that the administration could not effectively write rule on currency values:

"Would the Federal Reserve’s program of 'quantitative easing' — basically printing money to keep interest rates low — be an actionable offense under a strict currency regime? What about large government spending programs financed by international borrowing?"

It is difficult to believe that anyone involved in these negotiations would have difficulty distinguishing between policies explicitly focused on boosting the U.S. economy and policies that have the explicit purpose of lowering the value of the dollar. (If Mr. Josten is confused, quantitative easing is when the Fed buys U.S. government bonds. If the main purpose was to lower the value of the dollar the Fed would be buying the bonds of other countries.)

Fred Bergsten and Joe Gagnon, two prominent economist at the very pro-trade Peterson Institute for Economics have developed guidelines for defining currency manipulation that negotiators should be able to learn from if they are confused on the topic. As a practical matter, defining currency manipulation is almost certainly much simpler than many other topics covered in the Trans-Pacific Partnership (TPP), like defining "bio-similar" drugs so that patent protections can be extended to them or defining the types of regulatory takings that could be actionable under the investor-state dispute resolution tribunals established by the pact. (For example, can a company claim damages for a higher minimum wage?)

There are several other errors in the article. At one point it tells readers:

As regular readers know, the Washington Post editorial board has problems with economics. They were foremost among the Very Serious People who warned about financial crises and soaring interest rates if we didn't tame the deficit. They still regularly issue demands for what they consider fiscally responsible policies (e.g. cutting Social Security and Medicare).

Anyhow, today they used their lead editorial to wag their finger at supporters of the Affordable Care Act (ACA) for not acknowledging that it would lead many employers to cut workers' hours. The issue is a provision in the law (which has yet to be applied) that would require large employers to provide insurance for workers who work more than 30 hours per week or to face a fine.

The editorial noted a directive from Staples to its store managers to restrict part-time workers to less than 25 hours as evidence of this ACA effect. The piece then cited work by Ben Casselmen to support its "Iron Law No 1: Incentives influence behavior":

"In 2009, 9.7 percent of part-timers worked between 25 hours and 29 hours and 7.7 percent worked between 31 and 34 hours. In about mid-2013, just before the employer mandate’s original implementation date, the gap between those numbers began to widen, hitting 11.1 percent and 6.6 percent, respectively, by year’s end."

Are you impressed by that iron? Let's add some more details.