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.
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.
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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.
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.
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When the initiative to take the United Kingdom out of the European Union was being debated, many people, including many economists, predicted the country would be hit with a severe recession. It didn’t happen. The economy seems to be moving along fine, with no recession in sight, although the London real estate market is not looking very good. Of course the UK has not left the European Union yet, or even developed a plan to do so, but it is unlikely that many would want to place much money on that recession bet today.
Apparently, the conservative government has now abandoned its plans for further austerity and a balanced budget. It is expected to spend an additional $187 billion over the next five years (roughly 1.0 percent of GDP) to boost the economy and create jobs. According to the NYT, this spending is a direct response to concerns over the plight of working class people who voted for Brexit in large numbers.
This outcome is worth noting, because the boost to the economy from additional spending is likely to be larger than any drag on growth as a result of leaving the European Union. This would mean that the net effect of Brexit on growth would be positive. Of course the UK government could have abandoned its austerity path without Brexit, but probably would not have done so. Given the political context, working class voters who wanted to see more jobs and a stronger welfare state likely made the right vote by supporting Brexit. This doesn’t excuse the racist sentiments that motivated many Brexit supporters, but it is important to recognize the economic story here.
There is a deeper lesson in this story. The elites that derided Brexit were largely content with austerity policies that needlessly kept workers from getting jobs and also weakened the welfare state. Many were willing to push nonsense economic projections of recession in order to advance their political agenda. In this context, it is not surprising that large numbers of working class people would reject their argument that Brexit would be bad for the UK.
We see a similar situation in the United States where trade policies that are designed to redistribute income upward, like the Trans-Pacific Partnership, are foisted on the public by the leadership of both parties. As with Brexit, elite economists are prepared to make absurd predictions of economic disaster if this trade agenda is rejected. Under these circumstances, it is not surprising that large portions of the working class are not willing to go along with the elite’s agenda.
When the initiative to take the United Kingdom out of the European Union was being debated, many people, including many economists, predicted the country would be hit with a severe recession. It didn’t happen. The economy seems to be moving along fine, with no recession in sight, although the London real estate market is not looking very good. Of course the UK has not left the European Union yet, or even developed a plan to do so, but it is unlikely that many would want to place much money on that recession bet today.
Apparently, the conservative government has now abandoned its plans for further austerity and a balanced budget. It is expected to spend an additional $187 billion over the next five years (roughly 1.0 percent of GDP) to boost the economy and create jobs. According to the NYT, this spending is a direct response to concerns over the plight of working class people who voted for Brexit in large numbers.
This outcome is worth noting, because the boost to the economy from additional spending is likely to be larger than any drag on growth as a result of leaving the European Union. This would mean that the net effect of Brexit on growth would be positive. Of course the UK government could have abandoned its austerity path without Brexit, but probably would not have done so. Given the political context, working class voters who wanted to see more jobs and a stronger welfare state likely made the right vote by supporting Brexit. This doesn’t excuse the racist sentiments that motivated many Brexit supporters, but it is important to recognize the economic story here.
There is a deeper lesson in this story. The elites that derided Brexit were largely content with austerity policies that needlessly kept workers from getting jobs and also weakened the welfare state. Many were willing to push nonsense economic projections of recession in order to advance their political agenda. In this context, it is not surprising that large numbers of working class people would reject their argument that Brexit would be bad for the UK.
We see a similar situation in the United States where trade policies that are designed to redistribute income upward, like the Trans-Pacific Partnership, are foisted on the public by the leadership of both parties. As with Brexit, elite economists are prepared to make absurd predictions of economic disaster if this trade agenda is rejected. Under these circumstances, it is not surprising that large portions of the working class are not willing to go along with the elite’s agenda.
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The world would be a much better place if the folks who wrote on economic issues at the NYT had at least an intro econ level understanding of economics. But apparently that is too much to expect, so we find Thomas Friedman telling readers:
“The one area where I think Trump is going to have the hardest time delivering on his campaign promises is to create ‘millions’ of good-paying jobs by incentivizing and pressuring American companies to manufacture more in the U.S. He still talks about America as a manufacturing wasteland when, in fact, manufacturing remains the largest sector of the U.S. economy but employs far fewer workers.
“As the management consultant Warren Bennis famously observed: ‘The factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment.'”
While Trump will not be able to bring back the six million manufacturing jobs we have lost in the last two decades, it is certainly possible that he could bring back 1–2 million manufacturing jobs if he were to get the trade deficit closer to balance. That would be a big deal for lots of workers, especially if the workers who held these jobs were able to form unions to ensure decent wages and benefits.
In terms of the factory of the future, it may well be highly automated, but that is not the factories of today, which still employ more than 12 million workers. Contrary to what Friedman types continually tell people, the automation process is actually moving very slowly as productivity growth in manufacturing and the rest of the economy has slowed to a crawl.
Productivity in Manufacturing
Source: Bureau of Labor Statistics.
As the chart shows, productivity growth in manufacturing has averaged less than 0.5 percent annually over the last five years. The factory of the future may only have a person and a dog, as in Friedman’s story, just as the newspaper of the future may have only a computer program to write columns, but we are not at this future yet and not likely to be there soon.
The world would be a much better place if the folks who wrote on economic issues at the NYT had at least an intro econ level understanding of economics. But apparently that is too much to expect, so we find Thomas Friedman telling readers:
“The one area where I think Trump is going to have the hardest time delivering on his campaign promises is to create ‘millions’ of good-paying jobs by incentivizing and pressuring American companies to manufacture more in the U.S. He still talks about America as a manufacturing wasteland when, in fact, manufacturing remains the largest sector of the U.S. economy but employs far fewer workers.
“As the management consultant Warren Bennis famously observed: ‘The factory of the future will have only two employees, a man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment.'”
While Trump will not be able to bring back the six million manufacturing jobs we have lost in the last two decades, it is certainly possible that he could bring back 1–2 million manufacturing jobs if he were to get the trade deficit closer to balance. That would be a big deal for lots of workers, especially if the workers who held these jobs were able to form unions to ensure decent wages and benefits.
In terms of the factory of the future, it may well be highly automated, but that is not the factories of today, which still employ more than 12 million workers. Contrary to what Friedman types continually tell people, the automation process is actually moving very slowly as productivity growth in manufacturing and the rest of the economy has slowed to a crawl.
Productivity in Manufacturing
Source: Bureau of Labor Statistics.
As the chart shows, productivity growth in manufacturing has averaged less than 0.5 percent annually over the last five years. The factory of the future may only have a person and a dog, as in Friedman’s story, just as the newspaper of the future may have only a computer program to write columns, but we are not at this future yet and not likely to be there soon.
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The Republicans, including Donald Trump, have repeatedly complained that provisions of Dodd-Frank have cut off small business access to credit. David Greene picked up the charge in an interview with Barney Frank on Morning Edition. He repeatedly asked Frank if the Republican complaints about the law were correct.
While Frank responded by challenging Greene to name the provisions that were responsible for cutting off credit, there actually is a simpler response. Credit to small businesses has not been cut off, or at least if it has, small businesses don’t seem to have noticed. The monthly survey of small businesses conducted by the National Federation of Independent Business shows that they feel credit has almost never been more easily available.
In other words, the Republicans have made up a nonsense claim about the economy, and Greene has chosen to re-enforce rather than checking its validity.
The Republicans, including Donald Trump, have repeatedly complained that provisions of Dodd-Frank have cut off small business access to credit. David Greene picked up the charge in an interview with Barney Frank on Morning Edition. He repeatedly asked Frank if the Republican complaints about the law were correct.
While Frank responded by challenging Greene to name the provisions that were responsible for cutting off credit, there actually is a simpler response. Credit to small businesses has not been cut off, or at least if it has, small businesses don’t seem to have noticed. The monthly survey of small businesses conducted by the National Federation of Independent Business shows that they feel credit has almost never been more easily available.
In other words, the Republicans have made up a nonsense claim about the economy, and Greene has chosen to re-enforce rather than checking its validity.
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Many of us have been raising the issue that Donald Trump is apparently prepared to defy well-established precedent and continue to maintain his business empire even as he serves as president. For the last fifty years presidents have put their assets in a blind trust so that there would not be a question as to whether they were working to fatten their own pockets or for what they considered the good of the country. This also prevents the most blatant forms of bribery by those seeking to curry the president’s favor.
It is hard to see any reason that Donald Trump should not be held to the same rules. But some have made the argument that, given his extensive holdings, it would be almost impossible to sell them off in the two months remaining until he takes office. This means that he could not avoid the problem of making decisions that will have a direct impact on his business interests.
Actually it is not hard to find a way around this problem:
1) Donald Trump arranges to hire three auditors from an independent accounting firm. Each one does an independent assessment of Trump’s holdings and assigns it a value.
2) The middle assessment becomes a benchmark. Donald Trump buys an insurance policy that will guarantee him that he will get this amount of money when all assets are sold. If the total take is less than the benchmark, he collects on the insurance policy. Any money received in excess of the benchmark goes to a charity of Trump’s choosing (not the Trump Foundation).
3) All the proceeds from the sales are placed in a blind trust.
There you have it, three easy steps that Donald Trump could take if he wanted to end the conflicts of interest he now faces. It doesn’t seem likely that he will go this route on his own, the question is whether anyone (i.e. Republicans) will force him.
Many of us have been raising the issue that Donald Trump is apparently prepared to defy well-established precedent and continue to maintain his business empire even as he serves as president. For the last fifty years presidents have put their assets in a blind trust so that there would not be a question as to whether they were working to fatten their own pockets or for what they considered the good of the country. This also prevents the most blatant forms of bribery by those seeking to curry the president’s favor.
It is hard to see any reason that Donald Trump should not be held to the same rules. But some have made the argument that, given his extensive holdings, it would be almost impossible to sell them off in the two months remaining until he takes office. This means that he could not avoid the problem of making decisions that will have a direct impact on his business interests.
Actually it is not hard to find a way around this problem:
1) Donald Trump arranges to hire three auditors from an independent accounting firm. Each one does an independent assessment of Trump’s holdings and assigns it a value.
2) The middle assessment becomes a benchmark. Donald Trump buys an insurance policy that will guarantee him that he will get this amount of money when all assets are sold. If the total take is less than the benchmark, he collects on the insurance policy. Any money received in excess of the benchmark goes to a charity of Trump’s choosing (not the Trump Foundation).
3) All the proceeds from the sales are placed in a blind trust.
There you have it, three easy steps that Donald Trump could take if he wanted to end the conflicts of interest he now faces. It doesn’t seem likely that he will go this route on his own, the question is whether anyone (i.e. Republicans) will force him.
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There are sharp differences between the political parties in many areas, but one principle on which there has been a longstanding agreement is that the presidency should not be used as a marketing platform for the president’s personal business interests. Donald Trump seems determined to break with this principle.
The basic point is simple: when you enter the White House you put your assets into a blind trust. This way when the president makes decisions in various areas of foreign and domestic policy, he or she does not know whether they will personally profit from them. The idea is that we want the president to make decisions based on whether they are good for the country, not whether they will fatten their pocketbook.
Presidents of both parties dating back to Lyndon Johnson followed the practice of putting their assets into a blind trust. Richard Nixon did it, Gerald Ford did it, as did Jimmy Carter, Bill Clinton, and Barack Obama. Both President Bushes put their assets into a blind trust. And President Reagan put his assets into a blind trust.
None of these presidents had any problem with the idea that they should not be in a position to know whether their actions were directly helping or hurting them financially. Apparently, Donald Trump thinks he is different.
The potential for conflicts is very real and we are seeing it even now in the transition. Last weekend, Donald Trump met with Shinzo Abe, the prime minister of Japan. His daughter Ivanka sat in on the meeting. Japan is now debating whether to allow casino gambling. This is an area where Trump’s business enterprises could have considerable interest, since he has a stake in many casinos around the world.
Did legalized gambling come up at the meeting? Would Donald Trump be inclined to be more favorable towards Abe if they allowed him to open a casino in Japan? Would he not press an issue because he is worried that Abe could retaliate against his casino business?
The same would apply with every other foreign head of state. For example, Turkey has a president, Recep Erdogan, who is looking increasingly like a dictator. In response to a failed coup last summer, he has arrested a number of opposition leaders and purged universities and even high schools of teachers who are thought to be political opponents.
It turns out that Trump has a stake in a number of resorts in Turkey. Will this affect his attitude toward Erdogan?
These are the sorts of issues that will arise all the time with Trump in the White House. And, there are at least as many on the domestic side involving everything from tax reform to education policy.
Every other president was prepared to put aside their personal business interests when they entered the White House. It is a job requirement; it’s as simple as that. Anyone who cares about the integrity of the U.S. government and that the presidency not be used as a platform for personal enrichment should be demanding that Trump follow longstanding precedent by selling off his holdings and have them placed in a blind trust.
There are sharp differences between the political parties in many areas, but one principle on which there has been a longstanding agreement is that the presidency should not be used as a marketing platform for the president’s personal business interests. Donald Trump seems determined to break with this principle.
The basic point is simple: when you enter the White House you put your assets into a blind trust. This way when the president makes decisions in various areas of foreign and domestic policy, he or she does not know whether they will personally profit from them. The idea is that we want the president to make decisions based on whether they are good for the country, not whether they will fatten their pocketbook.
Presidents of both parties dating back to Lyndon Johnson followed the practice of putting their assets into a blind trust. Richard Nixon did it, Gerald Ford did it, as did Jimmy Carter, Bill Clinton, and Barack Obama. Both President Bushes put their assets into a blind trust. And President Reagan put his assets into a blind trust.
None of these presidents had any problem with the idea that they should not be in a position to know whether their actions were directly helping or hurting them financially. Apparently, Donald Trump thinks he is different.
The potential for conflicts is very real and we are seeing it even now in the transition. Last weekend, Donald Trump met with Shinzo Abe, the prime minister of Japan. His daughter Ivanka sat in on the meeting. Japan is now debating whether to allow casino gambling. This is an area where Trump’s business enterprises could have considerable interest, since he has a stake in many casinos around the world.
Did legalized gambling come up at the meeting? Would Donald Trump be inclined to be more favorable towards Abe if they allowed him to open a casino in Japan? Would he not press an issue because he is worried that Abe could retaliate against his casino business?
The same would apply with every other foreign head of state. For example, Turkey has a president, Recep Erdogan, who is looking increasingly like a dictator. In response to a failed coup last summer, he has arrested a number of opposition leaders and purged universities and even high schools of teachers who are thought to be political opponents.
It turns out that Trump has a stake in a number of resorts in Turkey. Will this affect his attitude toward Erdogan?
These are the sorts of issues that will arise all the time with Trump in the White House. And, there are at least as many on the domestic side involving everything from tax reform to education policy.
Every other president was prepared to put aside their personal business interests when they entered the White House. It is a job requirement; it’s as simple as that. Anyone who cares about the integrity of the U.S. government and that the presidency not be used as a platform for personal enrichment should be demanding that Trump follow longstanding precedent by selling off his holdings and have them placed in a blind trust.
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The NYT ran a major article warning that a Chinese led trade deal, involving a number of countries in East Asia and the Pacific region, was likely to move forward more quickly with the demise of the Trans-Pacific Partnership (TPP). This is reported as being an ominous outcome that should concern readers.
This is the opposite position that economists generally take toward efforts to reduce trade barriers. In most economic models, when some countries reduce their trade barriers and therefore increase economic growth, it also benefits countries who are not party to these trade deals.
This was the reason that the United States generally supported the process through which European countries came together, first in the common market and then in the European Union. The argument was that a more economically prosperous Europe would be a better customer for U.S. products and also a better competitor. In the latter role, Europe would provide economic gains to U.S. consumers as well by offering better and/or lower cost products.
It is interesting that the NYT and other proponents of the TPP are now prepared to turn standard economic logic on its head in order to push this pact. For those without a stake in promoting the TPP, the greater economic integration of the region should be viewed positively.
The NYT ran a major article warning that a Chinese led trade deal, involving a number of countries in East Asia and the Pacific region, was likely to move forward more quickly with the demise of the Trans-Pacific Partnership (TPP). This is reported as being an ominous outcome that should concern readers.
This is the opposite position that economists generally take toward efforts to reduce trade barriers. In most economic models, when some countries reduce their trade barriers and therefore increase economic growth, it also benefits countries who are not party to these trade deals.
This was the reason that the United States generally supported the process through which European countries came together, first in the common market and then in the European Union. The argument was that a more economically prosperous Europe would be a better customer for U.S. products and also a better competitor. In the latter role, Europe would provide economic gains to U.S. consumers as well by offering better and/or lower cost products.
It is interesting that the NYT and other proponents of the TPP are now prepared to turn standard economic logic on its head in order to push this pact. For those without a stake in promoting the TPP, the greater economic integration of the region should be viewed positively.
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