The NYT had an interesting piece noting the differences between the way Sears and other large employers of the last century treated their workers and the way Amazon treats its workers. The focus of the piece is a profit sharing plan which gave 10 percent of Sears before-tax profits to workers in the form of a retirement fund that purchased company stock.
While this plan did allow many employees to accumulate substantial assets to support themselves in retirement, it is worth noting that a similar commitment would not have the same impact for Amazon workers. Amazon made $3 billion in profit last year. Ten percent of this figure would be $300 million. If it divided this sum equally among its 500,000 employees, that would come to $600 each.
While this is not an altogether trivial sum, it is not likely to provide for a very generous retirement. It amounts to 2.0 percent of the annual earnings of a full-time worker getting $15 an hour.
The NYT had an interesting piece noting the differences between the way Sears and other large employers of the last century treated their workers and the way Amazon treats its workers. The focus of the piece is a profit sharing plan which gave 10 percent of Sears before-tax profits to workers in the form of a retirement fund that purchased company stock.
While this plan did allow many employees to accumulate substantial assets to support themselves in retirement, it is worth noting that a similar commitment would not have the same impact for Amazon workers. Amazon made $3 billion in profit last year. Ten percent of this figure would be $300 million. If it divided this sum equally among its 500,000 employees, that would come to $600 each.
While this is not an altogether trivial sum, it is not likely to provide for a very generous retirement. It amounts to 2.0 percent of the annual earnings of a full-time worker getting $15 an hour.
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Ernie Tedeschi has a very useful piece in the NYT Upshot section noting that wage growth is still far below its 1990s boom pace, even though unemployment is actually slightly lower. He notes that the slowdown is pretty much across the board, hitting all demographic groups and industries and occupations. This rules out stories that seek to explain this slowdown as a result of some group of workers lacking the right skills.
He notes three plausible stories that could explain weaker wage growth. One is that the labor market still does not look as tight as the late 1990s if we look at employment rates of prime-age workers (ages 25 to 54) instead of unemployment rates. This reflects people dropping out of the labor force who may still want to work.
The second is weaker productivity growth. Productivity increased at close to a 3.0 percent annual rate in the 1990s boom. In recent years, it has been just over 1.0 percent. It is worth noting that a tight labor market could itself lead to more productivity growth as employers feel more need to economize on labor. We did see strong productivity growth in the second quarter and are likely to see another strong quarter in the third quarter, but these numbers are erratic, so we can’t celebrate just yet.
The third point is the weakening of workers bargaining power, first and foremost from a decline in unionization rates. The fact that the national minimum wage has not been increased for almost a decade would also be a factor.
There is one other point on this topic that is worth mentioning. As Joe Gagnon has pointed out, if we look at acceleration rather than rates of growth, the current period does not look that different than the 1990s boom. In the 1990s, year-over-year wage growth bottomed out at 2.3 percent in 1993, they peaked at 4.3 percent in 1997 and at several subsequent points. This is an increase of 2.0 percentage points, as seen below.
Percentage Increase in Average Hourly Wage for Production and Non-Supervisory Workers
Source: Bureau of Labor Statistics.
By comparison, year-over-year wage growth bottomed out at 1.2 percent in 2012. It peaked at 2.9 percent in August, an increase of 1.7 percentage points. That is still less than the 2.0 percentage point increase in the rate of wage growth in the nineties boom, but not very much less.
It is also worth noting that the annualized rate of growth comparing the last three months (July, August, September) with the prior three months (April, May, June) is 3.3 percent. This measure is erratic, but I would be willing to bet on some modest acceleration, which will make the increase in wage growth in the current period almost identical to the rise in the 1990s. None of this should make workers feel great, there is still lots ground to make up from the Great Recession, but we may be moving in the right direction.
Ernie Tedeschi has a very useful piece in the NYT Upshot section noting that wage growth is still far below its 1990s boom pace, even though unemployment is actually slightly lower. He notes that the slowdown is pretty much across the board, hitting all demographic groups and industries and occupations. This rules out stories that seek to explain this slowdown as a result of some group of workers lacking the right skills.
He notes three plausible stories that could explain weaker wage growth. One is that the labor market still does not look as tight as the late 1990s if we look at employment rates of prime-age workers (ages 25 to 54) instead of unemployment rates. This reflects people dropping out of the labor force who may still want to work.
The second is weaker productivity growth. Productivity increased at close to a 3.0 percent annual rate in the 1990s boom. In recent years, it has been just over 1.0 percent. It is worth noting that a tight labor market could itself lead to more productivity growth as employers feel more need to economize on labor. We did see strong productivity growth in the second quarter and are likely to see another strong quarter in the third quarter, but these numbers are erratic, so we can’t celebrate just yet.
The third point is the weakening of workers bargaining power, first and foremost from a decline in unionization rates. The fact that the national minimum wage has not been increased for almost a decade would also be a factor.
There is one other point on this topic that is worth mentioning. As Joe Gagnon has pointed out, if we look at acceleration rather than rates of growth, the current period does not look that different than the 1990s boom. In the 1990s, year-over-year wage growth bottomed out at 2.3 percent in 1993, they peaked at 4.3 percent in 1997 and at several subsequent points. This is an increase of 2.0 percentage points, as seen below.
Percentage Increase in Average Hourly Wage for Production and Non-Supervisory Workers
Source: Bureau of Labor Statistics.
By comparison, year-over-year wage growth bottomed out at 1.2 percent in 2012. It peaked at 2.9 percent in August, an increase of 1.7 percentage points. That is still less than the 2.0 percentage point increase in the rate of wage growth in the nineties boom, but not very much less.
It is also worth noting that the annualized rate of growth comparing the last three months (July, August, September) with the prior three months (April, May, June) is 3.3 percent. This measure is erratic, but I would be willing to bet on some modest acceleration, which will make the increase in wage growth in the current period almost identical to the rise in the 1990s. None of this should make workers feel great, there is still lots ground to make up from the Great Recession, but we may be moving in the right direction.
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The reporting on Trump’s regulatory reform really fell down big time. The Trump administration has been boasting about $23 billion in savings over the indefinite future. As this Bloomberg article points out, this comes to $1.64 billion per year.
What this and other articles neglect to mention is that this is not net savings. This figure is the savings to the person subject to the regulation, for example, the homeowner who wants to dump their sewage on their neighbor’s lawn rather than putting in place a proper septic system or getting hooked up to the city sewage system. The savings to the homeowner are likely more than offset by the damage to their neighbor’s property.
The Trump administration has calculated savings that only look at the benefits to corporations in the position of the homeowner. It has not attempted to incorporate the costs of the harm done to others for example by having more polluted air or water.
It would also be useful to put the projected savings in some context since few people have a good idea of how much $1.64 billion annually means to the economy or their pocketbook. This figure is equal to a bit more than 0.005 percent of GDP or a bit more than $5 per person per year. It less than 0.5 percent of the additional money that patients must pay to drug companies each year because of government-granted patent monopolies and related protections.
The reporting on Trump’s regulatory reform really fell down big time. The Trump administration has been boasting about $23 billion in savings over the indefinite future. As this Bloomberg article points out, this comes to $1.64 billion per year.
What this and other articles neglect to mention is that this is not net savings. This figure is the savings to the person subject to the regulation, for example, the homeowner who wants to dump their sewage on their neighbor’s lawn rather than putting in place a proper septic system or getting hooked up to the city sewage system. The savings to the homeowner are likely more than offset by the damage to their neighbor’s property.
The Trump administration has calculated savings that only look at the benefits to corporations in the position of the homeowner. It has not attempted to incorporate the costs of the harm done to others for example by having more polluted air or water.
It would also be useful to put the projected savings in some context since few people have a good idea of how much $1.64 billion annually means to the economy or their pocketbook. This figure is equal to a bit more than 0.005 percent of GDP or a bit more than $5 per person per year. It less than 0.5 percent of the additional money that patients must pay to drug companies each year because of government-granted patent monopolies and related protections.
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For those who were wondering what the conflicting estimates of $300 million a year by Democratic gubernatorial candidate Stacey Abrams and $450 million a year by her Republican opponent, Brian Kemp, would mean for the people of Georgia, these figures might be helpful. The NYT article should have included something like this.
For those who were wondering what the conflicting estimates of $300 million a year by Democratic gubernatorial candidate Stacey Abrams and $450 million a year by her Republican opponent, Brian Kemp, would mean for the people of Georgia, these figures might be helpful. The NYT article should have included something like this.
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The NYT had a piece on how drug companies fear that if the Democrats retake the House, they may work together with Donald Trump to lower drug prices. At one point the piece tells readers;
“The Democrats’ proposal for the government to negotiate drug prices for millions of Medicare patients is their preferred solution. But it would also face the most opposition, from drug makers and Republicans who see it as a step toward price controls.”
It’s great we have NYT reporters who can read the minds of Republican members of Congress so that they can tell us they oppose negotiated drug prices because they “see it as a step toward price controls.” Those of who can’t read minds might have thought that Republicans in Congress oppose negotiated drug prices because it would lower the profits of the drug companies who contribute to their campaigns.
Since this piece discusses a number of mechanisms for containing drug prices, it also would have been worth mentioning a proposal that got the support of 17 Democratic senators (lead sponsors Bernie Sanders and Elizabeth Warren), which would replace government-granted patent monopolies as a mechanism for financing research with direct government funding. This would allow new drugs to be immediately sold at free market prices.
Of course, the drug companies would probably kill to prevent such legislation from passing since they are strongly opposed to a free market in prescription drugs.
The NYT had a piece on how drug companies fear that if the Democrats retake the House, they may work together with Donald Trump to lower drug prices. At one point the piece tells readers;
“The Democrats’ proposal for the government to negotiate drug prices for millions of Medicare patients is their preferred solution. But it would also face the most opposition, from drug makers and Republicans who see it as a step toward price controls.”
It’s great we have NYT reporters who can read the minds of Republican members of Congress so that they can tell us they oppose negotiated drug prices because they “see it as a step toward price controls.” Those of who can’t read minds might have thought that Republicans in Congress oppose negotiated drug prices because it would lower the profits of the drug companies who contribute to their campaigns.
Since this piece discusses a number of mechanisms for containing drug prices, it also would have been worth mentioning a proposal that got the support of 17 Democratic senators (lead sponsors Bernie Sanders and Elizabeth Warren), which would replace government-granted patent monopolies as a mechanism for financing research with direct government funding. This would allow new drugs to be immediately sold at free market prices.
Of course, the drug companies would probably kill to prevent such legislation from passing since they are strongly opposed to a free market in prescription drugs.
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We’re still in financial crisis mania, as the business press eagerly tries to tell us how little they learned from the last crisis by trying to identify the source of the next one. The NYT’s latest contribution to the effort is a piece on C.L.O.s, or collateralized loan obligations.
The piece tells us that these are like the C.D.O.s of the last decade, debt instruments in which banks bundled many loans of questionable quality and sold them off to unsuspecting buyers. It warns that banks have little incentive to ensure their quality, since they don’t hold a stake, and therefore there is a risk of large-scale defaults.
There are two big problems with the scare story here. First, the growth in these risky instruments is not quite what the piece might have readers believe. The piece includes a chart which shows the amount of junk bonds and C.L.O.s outstanding since 2014. While the point of the chart is to show that volume C.L.O.s has passed the volume of outstanding junk bond debt, a more serious analysis would combine the two together to get a gage of the amount of high-risk corporate debt in the economy.
This combined measure does not tell much of a story. Eyeballing the chart, we go from a combined total of roughly $1.95 trillion in 2014 to $2.5 trillion in the middle of 2018. Since this is a period in which the economy has grown by roughly 20 percent in nominal terms, this indicates only a modest rise in the ratio of risky corporate debt to GDP. This is not the sort of stuff that need keep us awake at night.
But the more important point is that the 2008 crisis was caused by the collapse of a bubble that was driving the economy. This was easy to see for people familiar with Econ 101. Residential construction hit a record share of GDP far above its average in prior decades. Housing wealth lead to a consumption boom, with savings rates hitting record lows.
What is the component of GDP that is driven by loans in C.L.O.s? Investment is at very modest levels as a share of GDP. It’s hard to envision it falling very much if this market tanked tomorrow. Suppose the holders of this debt took a huge hit, losing 50 percent of their investment. That would be a loss of $650 billion in wealth, bad news for them, but hardly close to enough to sink an economy with $90 trillion. In fact, the impact would likely be trivial in terms of overall GDP growth.
In other words, for the folks looking for the next crisis, you’ll have to do better.
We’re still in financial crisis mania, as the business press eagerly tries to tell us how little they learned from the last crisis by trying to identify the source of the next one. The NYT’s latest contribution to the effort is a piece on C.L.O.s, or collateralized loan obligations.
The piece tells us that these are like the C.D.O.s of the last decade, debt instruments in which banks bundled many loans of questionable quality and sold them off to unsuspecting buyers. It warns that banks have little incentive to ensure their quality, since they don’t hold a stake, and therefore there is a risk of large-scale defaults.
There are two big problems with the scare story here. First, the growth in these risky instruments is not quite what the piece might have readers believe. The piece includes a chart which shows the amount of junk bonds and C.L.O.s outstanding since 2014. While the point of the chart is to show that volume C.L.O.s has passed the volume of outstanding junk bond debt, a more serious analysis would combine the two together to get a gage of the amount of high-risk corporate debt in the economy.
This combined measure does not tell much of a story. Eyeballing the chart, we go from a combined total of roughly $1.95 trillion in 2014 to $2.5 trillion in the middle of 2018. Since this is a period in which the economy has grown by roughly 20 percent in nominal terms, this indicates only a modest rise in the ratio of risky corporate debt to GDP. This is not the sort of stuff that need keep us awake at night.
But the more important point is that the 2008 crisis was caused by the collapse of a bubble that was driving the economy. This was easy to see for people familiar with Econ 101. Residential construction hit a record share of GDP far above its average in prior decades. Housing wealth lead to a consumption boom, with savings rates hitting record lows.
What is the component of GDP that is driven by loans in C.L.O.s? Investment is at very modest levels as a share of GDP. It’s hard to envision it falling very much if this market tanked tomorrow. Suppose the holders of this debt took a huge hit, losing 50 percent of their investment. That would be a loss of $650 billion in wealth, bad news for them, but hardly close to enough to sink an economy with $90 trillion. In fact, the impact would likely be trivial in terms of overall GDP growth.
In other words, for the folks looking for the next crisis, you’ll have to do better.
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Yes, they are at it again. Expressing the usual journalistic need to waste words, the Post twice referred to trade deals that Donald Trump is attempting to negotiate as “free-trade” deals. While these deals are likely to reduce barriers in some areas (not for foreign physicians who want to practice in the US), they will almost certainly include longer and stronger patent and copyright protections.
We understand that the Post likes to see money going from the rest of us to Pfizer, Microsoft, and Disney, but that doesn’t make these forms of protectionism free trade. It would be nice if the paper could just give the facts and spare us the propaganda.
Yes, they are at it again. Expressing the usual journalistic need to waste words, the Post twice referred to trade deals that Donald Trump is attempting to negotiate as “free-trade” deals. While these deals are likely to reduce barriers in some areas (not for foreign physicians who want to practice in the US), they will almost certainly include longer and stronger patent and copyright protections.
We understand that the Post likes to see money going from the rest of us to Pfizer, Microsoft, and Disney, but that doesn’t make these forms of protectionism free trade. It would be nice if the paper could just give the facts and spare us the propaganda.
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There are a lot of people who are so stupid that they think foreign aid is a major part of the federal budget. Ever wonder why people could be so stupid?
Well, the NYT tells us at least part of the reason in a news article on a new agency established by Donald Trump to provide loans and loan guarantees as a way to help developing countries and extend US. influence. The article tells us that the bill that established the new agency, the United States International Development Finance Corporation [USIDFC], “gave it authority to provide $60 billion in loans, loan guarantees and insurance to companies willing to do business in developing nations.”
Okay, $60 billion is a lot of money, more than almost anyone other than Bill Gates and Jeff Bezos will see in a lifetime, but how much does it matter to our budget? My guess is that almost no NYT readers have a clue. Yeah, I know the NYT has a very well-educated readership, but very few of them have their heads in the federal budget.
To get a rough idea, we need to remember that this is $60 billion in loans and guarantees, it is not actual spending. And, it is a stock figure, it is a level of commitment, not an annual flow.
So let’s say that the subsidy component of the loan and guarantee averages 5 percent of the value. (That is probably high, it would mean for example that a loan that should carry a 10 percent interest rate would instead carry a 5 percent interest rate.) In this case, the subsidies coming from the USIDFC would be equal to $3 billion.
But again this is a stock figure. That would mean we hit this level of subsidy once the USIDFC has reached its $60 billion liability limit. Let’s say that takes five years, so the USIDFC is lending at its limits by 2023. At that point, the federal budget is projected to be $5.5 trillion.
This means that Trump’s new foreign aid program will be costing us a bit more than 0.05 percent of federal spending. Alternatively, we can put it at dollars per person and say that this program will be costing us a bit less than $9 per person.
This would have been useful information for the NYT to provide its readers. It would likely be very helpful the next time some right-wing politician wants to eliminate waste in the budget by cutting foreign aid.
There are a lot of people who are so stupid that they think foreign aid is a major part of the federal budget. Ever wonder why people could be so stupid?
Well, the NYT tells us at least part of the reason in a news article on a new agency established by Donald Trump to provide loans and loan guarantees as a way to help developing countries and extend US. influence. The article tells us that the bill that established the new agency, the United States International Development Finance Corporation [USIDFC], “gave it authority to provide $60 billion in loans, loan guarantees and insurance to companies willing to do business in developing nations.”
Okay, $60 billion is a lot of money, more than almost anyone other than Bill Gates and Jeff Bezos will see in a lifetime, but how much does it matter to our budget? My guess is that almost no NYT readers have a clue. Yeah, I know the NYT has a very well-educated readership, but very few of them have their heads in the federal budget.
To get a rough idea, we need to remember that this is $60 billion in loans and guarantees, it is not actual spending. And, it is a stock figure, it is a level of commitment, not an annual flow.
So let’s say that the subsidy component of the loan and guarantee averages 5 percent of the value. (That is probably high, it would mean for example that a loan that should carry a 10 percent interest rate would instead carry a 5 percent interest rate.) In this case, the subsidies coming from the USIDFC would be equal to $3 billion.
But again this is a stock figure. That would mean we hit this level of subsidy once the USIDFC has reached its $60 billion liability limit. Let’s say that takes five years, so the USIDFC is lending at its limits by 2023. At that point, the federal budget is projected to be $5.5 trillion.
This means that Trump’s new foreign aid program will be costing us a bit more than 0.05 percent of federal spending. Alternatively, we can put it at dollars per person and say that this program will be costing us a bit less than $9 per person.
This would have been useful information for the NYT to provide its readers. It would likely be very helpful the next time some right-wing politician wants to eliminate waste in the budget by cutting foreign aid.
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