The Washington Post had a piece on Montana Senator Max Baucus’s efforts to obstruct the approval of Korea trade pact unless the rules of exporting beef are changed. While the agreement is called a “free-trade” agreement, the article rightly avoids using this description. It simply uses the more neutral and concise term “trade” pact. It can be done.
The Washington Post had a piece on Montana Senator Max Baucus’s efforts to obstruct the approval of Korea trade pact unless the rules of exporting beef are changed. While the agreement is called a “free-trade” agreement, the article rightly avoids using this description. It simply uses the more neutral and concise term “trade” pact. It can be done.
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The Washington Post had a major front page article highlighting the argument that the reason that the country has high unemployment is that workers don’t have the skills needed for the jobs that are available. While it features comments from several employers, the only data that it presents to support this case is that the number of job openings reported by the Bureau of Labor Statistics is 900,000 higher than the low in the summer of 2009. The number of openings is still down by more than 1,000,000 from pre-recession levels. Furthermore, even if every last job opening were filled (an absurd situation, since there will always be some flux in the labor market), it would still leave almost 80 percent of the unemployed without jobs.
The anecdotal evidence from employers suggests that the problem is that people who run businesses don’t understand basic economics. It presents comments from one employer who complains that he can’t find workers for jobs that pay $15 an hour. This is not a very good wage. It would be difficult for someone to support themselves and their children on a job paying $15 an hour ($30,000 a year). If the company president understood economics, then he would raise wages enough so that the jobs were attractive to workers who have the necessary skills.
If the economy were actually suffering from a problem of structural unemployment, then we should be seeing substantial sectors of the economy, either by region or occupation, where wages are rising rapidly. We don’t see this. There is no major industry or occupational grouping where there is evidence of large pay increases. We should also see big increases in average weekly hours, as firms try to work their existing workforce harder due to the unavailability of additional workers. We don’t see this either.
In other words, the data provide essentially zero support for the claim that the economy’s problem is that workers don’t have the right skills for the available jobs. All the evidence supports the idea that the problem is simply we have not generated enough demand (i.e. the problem is with the people who design economic policy, not with the country’s workers).
Interestingly, in spite of the lack of evidence, we continue to see stories about how unemployment is structural. Rather than relying on evidence, these pieces invariably include anecdotes from employers who apparently don’t understand that if you can’t get the workers you need, then you must offer a higher wage.
The Washington Post had a major front page article highlighting the argument that the reason that the country has high unemployment is that workers don’t have the skills needed for the jobs that are available. While it features comments from several employers, the only data that it presents to support this case is that the number of job openings reported by the Bureau of Labor Statistics is 900,000 higher than the low in the summer of 2009. The number of openings is still down by more than 1,000,000 from pre-recession levels. Furthermore, even if every last job opening were filled (an absurd situation, since there will always be some flux in the labor market), it would still leave almost 80 percent of the unemployed without jobs.
The anecdotal evidence from employers suggests that the problem is that people who run businesses don’t understand basic economics. It presents comments from one employer who complains that he can’t find workers for jobs that pay $15 an hour. This is not a very good wage. It would be difficult for someone to support themselves and their children on a job paying $15 an hour ($30,000 a year). If the company president understood economics, then he would raise wages enough so that the jobs were attractive to workers who have the necessary skills.
If the economy were actually suffering from a problem of structural unemployment, then we should be seeing substantial sectors of the economy, either by region or occupation, where wages are rising rapidly. We don’t see this. There is no major industry or occupational grouping where there is evidence of large pay increases. We should also see big increases in average weekly hours, as firms try to work their existing workforce harder due to the unavailability of additional workers. We don’t see this either.
In other words, the data provide essentially zero support for the claim that the economy’s problem is that workers don’t have the right skills for the available jobs. All the evidence supports the idea that the problem is simply we have not generated enough demand (i.e. the problem is with the people who design economic policy, not with the country’s workers).
Interestingly, in spite of the lack of evidence, we continue to see stories about how unemployment is structural. Rather than relying on evidence, these pieces invariably include anecdotes from employers who apparently don’t understand that if you can’t get the workers you need, then you must offer a higher wage.
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The media touted the 17 percent increase in January car sales compared to the level reported for January 2010. It is not clear that this implies a very good month, since sales were quite weak in January of last year. The 800,000 level of sales estimated for January is a decline of 17.5 percent from 970,000 average monthly sales for the fourth quarter of 2010. If this sales rate continues through February and March then car sales will be a major drag on GDP growth for the quarter.
The media touted the 17 percent increase in January car sales compared to the level reported for January 2010. It is not clear that this implies a very good month, since sales were quite weak in January of last year. The 800,000 level of sales estimated for January is a decline of 17.5 percent from 970,000 average monthly sales for the fourth quarter of 2010. If this sales rate continues through February and March then car sales will be a major drag on GDP growth for the quarter.
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This is a point that would have been worth stating clearly in an article on efforts by many Republican governors to eliminate teacher tenure. In every jurisdiction that has tenure, teachers who are demonstrated to be incompetent can be removed from the classroom and fired. However administrators must take the time to document that a teacher is incompetent before they can be fired. Many school administrators choose not to bother with the effort to remove under-performing teachers.
This is a point that would have been worth stating clearly in an article on efforts by many Republican governors to eliminate teacher tenure. In every jurisdiction that has tenure, teachers who are demonstrated to be incompetent can be removed from the classroom and fired. However administrators must take the time to document that a teacher is incompetent before they can be fired. Many school administrators choose not to bother with the effort to remove under-performing teachers.
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Yeah, it’s a little known market that involves every household in the country and is valued at more than $16 trillion. According to some accounts, it had something to do with the recession.
It seems the media still don’t really know much about the market, otherwise we would have seen news articles on the Census Bureau’s report on vacancy rates for the 4th quarter. The report showed a substantial drop in vacancy rates from both the last quarter and the fourth quarter of 2009. While vacancy rates are still at historically high levels, this is the first clear decline from the peak vacancy rates reached in 2007. Under the theory that prices are affected by the balance of supply and demand, we should not expect to see house prices finally stabilize until the vacancy rate returns to a more normal level. This report suggests that the market is finally moving toward that point, although it still has far to go.
The report also includes data on homeownership, which showed a further decline. Homeownership rates are now below their 1998 level. On an age-adjusted basis (older people are more likely to be homeowners), the bulk of the increase in ownership rates since the 1990-91 recession has now been reversed.
This information about the state of the housing market and homeownership would have been worth some mention, especially since so many politicians seem to view homeownership as being of great importance.
Addendum: It seems that the Wall Street Journal has heard of the Census Bureau.
Yeah, it’s a little known market that involves every household in the country and is valued at more than $16 trillion. According to some accounts, it had something to do with the recession.
It seems the media still don’t really know much about the market, otherwise we would have seen news articles on the Census Bureau’s report on vacancy rates for the 4th quarter. The report showed a substantial drop in vacancy rates from both the last quarter and the fourth quarter of 2009. While vacancy rates are still at historically high levels, this is the first clear decline from the peak vacancy rates reached in 2007. Under the theory that prices are affected by the balance of supply and demand, we should not expect to see house prices finally stabilize until the vacancy rate returns to a more normal level. This report suggests that the market is finally moving toward that point, although it still has far to go.
The report also includes data on homeownership, which showed a further decline. Homeownership rates are now below their 1998 level. On an age-adjusted basis (older people are more likely to be homeowners), the bulk of the increase in ownership rates since the 1990-91 recession has now been reversed.
This information about the state of the housing market and homeownership would have been worth some mention, especially since so many politicians seem to view homeownership as being of great importance.
Addendum: It seems that the Wall Street Journal has heard of the Census Bureau.
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The NYT told readers that:
“A stronger euro blunts the effect of rising prices for oil and other commodities, which are traditionally priced in dollars.” Actually, it does not matter at all that the oil and other commodities are priced in dollars, the point is that the euro has gone up in value. If the euro were to rise in value against other currencies then people in the euro zone would pay fewer euros for their oil even if oil was priced in euros.
In this story, the dollar is simply the medium of exchange. Oil is not fixed in price in dollars, the price of oil is fluctuating in dollars and all other currencies. The only question that matters is the value of the euro relative to other currencies, it doesn’t matter which currency is the basis for the purchases.
The piece also includes the interesting comment that:
“German wages have not started rising to alarming levels yet, Mr. Chaney said, ‘this is something that is on the radar screen.’” It is likely that most people would not be alarmed by the plausible rate of growth for German wages in the near future. The people who would find such wage growth “alarming,” are likely a very small subset of NYT readers or people in Europe and the United States.
The NYT told readers that:
“A stronger euro blunts the effect of rising prices for oil and other commodities, which are traditionally priced in dollars.” Actually, it does not matter at all that the oil and other commodities are priced in dollars, the point is that the euro has gone up in value. If the euro were to rise in value against other currencies then people in the euro zone would pay fewer euros for their oil even if oil was priced in euros.
In this story, the dollar is simply the medium of exchange. Oil is not fixed in price in dollars, the price of oil is fluctuating in dollars and all other currencies. The only question that matters is the value of the euro relative to other currencies, it doesn’t matter which currency is the basis for the purchases.
The piece also includes the interesting comment that:
“German wages have not started rising to alarming levels yet, Mr. Chaney said, ‘this is something that is on the radar screen.’” It is likely that most people would not be alarmed by the plausible rate of growth for German wages in the near future. The people who would find such wage growth “alarming,” are likely a very small subset of NYT readers or people in Europe and the United States.
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A headline of an AP article (featured on Yahoo’s website) told readers that: “Social Security posting $600B deficit over 10 years.” Actually, the Social Security program is projected to run a surplus in every year of the next decade, adding more than $1.3 trillion to its trust fund, as people with access to the Social Security Trustees Report know.
A headline of an AP article (featured on Yahoo’s website) told readers that: “Social Security posting $600B deficit over 10 years.” Actually, the Social Security program is projected to run a surplus in every year of the next decade, adding more than $1.3 trillion to its trust fund, as people with access to the Social Security Trustees Report know.
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The NYT reports on how rising prices and wages in China are dampening demand for its exports. The article presents rising prices in China as an alternative mechanism to a revaluation of the yuan (devaluation of the dollar) for reducing the U.S. trade deficit with China.
While the assessment in the article is largely anecdotal, if it is correct then its suggest that those who advocated a higher yuan as a cure to the trade deficit were correct. The NYT and other media outlets had generally presented this as a debatable point. It would have been worth noting that those who argued that trade would not respond significantly to changes in relative prices appear to be wrong.
The NYT reports on how rising prices and wages in China are dampening demand for its exports. The article presents rising prices in China as an alternative mechanism to a revaluation of the yuan (devaluation of the dollar) for reducing the U.S. trade deficit with China.
While the assessment in the article is largely anecdotal, if it is correct then its suggest that those who advocated a higher yuan as a cure to the trade deficit were correct. The NYT and other media outlets had generally presented this as a debatable point. It would have been worth noting that those who argued that trade would not respond significantly to changes in relative prices appear to be wrong.
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That is pretty much what former Obama adviser Steven Rattner had to say in the Washington Post today. In his piece, Rattner told President Obama:
“don’t blame the talented economists who were advising you …. Creating jobs is a slow and frustrating process in the wake of a tough recession.”
Calling the president’s economic advisers “talented” is good for their self-esteem (we know how important that is), but in the real world, their talent as economists must be judged by their performance. Missing the biggest asset bubble in the history of the world (a credential shared by all of the president’s economic advisers) doesn’t speak well for them.
However even more important is their failure to generate jobs for the country’s workers following the bubble’s collapse, which has to be the top priority for economic policy. While job creation might be “hard” other countries have managed to do it. For example, Germany has managed to bring down its unemployment rate from 7.1 percent at the start of the downturn to 6.7 percent today. This was accomplished in spite of the fact that Germany actually had a steeper downturn than the United States.
Mr. Rattner’s piece suggests one of the key causes of the administration’s failure to generate jobs. Rattner highlights the more rapid productivity growth in the United States over the last decade than in other countries, in particular singling out Germany as country with slower growth.
While faster productivity growth is generally better than slower growth, this is not the case when an economy does not have full employment. In this context, faster productivity growth just leads to more unemployment. One of the key mechanisms that Germany has used to keep its unemployment rate down is work-sharing. This is a program where the government subsidizes firms for keeping workers on their payroll, but working fewer hours than normal.
An expected outcome of this program is lower productivity. The idea is that it is best to keep people employed, where they can still get most of their paycheck, continue to develop their skills, and maintain contacts with their fellow workers. The alternative of having them laid off would mean higher productivity in the short-term, but it could lead to millions of workers joining the long-term unemployed. It is very difficult for these workers to be subsequently re-employed, therefore leading to permanent losses to the economy. Of course a prolonged period of unemployment is also likely to be devastating to the unemployed workers and their families.
That is pretty much what former Obama adviser Steven Rattner had to say in the Washington Post today. In his piece, Rattner told President Obama:
“don’t blame the talented economists who were advising you …. Creating jobs is a slow and frustrating process in the wake of a tough recession.”
Calling the president’s economic advisers “talented” is good for their self-esteem (we know how important that is), but in the real world, their talent as economists must be judged by their performance. Missing the biggest asset bubble in the history of the world (a credential shared by all of the president’s economic advisers) doesn’t speak well for them.
However even more important is their failure to generate jobs for the country’s workers following the bubble’s collapse, which has to be the top priority for economic policy. While job creation might be “hard” other countries have managed to do it. For example, Germany has managed to bring down its unemployment rate from 7.1 percent at the start of the downturn to 6.7 percent today. This was accomplished in spite of the fact that Germany actually had a steeper downturn than the United States.
Mr. Rattner’s piece suggests one of the key causes of the administration’s failure to generate jobs. Rattner highlights the more rapid productivity growth in the United States over the last decade than in other countries, in particular singling out Germany as country with slower growth.
While faster productivity growth is generally better than slower growth, this is not the case when an economy does not have full employment. In this context, faster productivity growth just leads to more unemployment. One of the key mechanisms that Germany has used to keep its unemployment rate down is work-sharing. This is a program where the government subsidizes firms for keeping workers on their payroll, but working fewer hours than normal.
An expected outcome of this program is lower productivity. The idea is that it is best to keep people employed, where they can still get most of their paycheck, continue to develop their skills, and maintain contacts with their fellow workers. The alternative of having them laid off would mean higher productivity in the short-term, but it could lead to millions of workers joining the long-term unemployed. It is very difficult for these workers to be subsequently re-employed, therefore leading to permanent losses to the economy. Of course a prolonged period of unemployment is also likely to be devastating to the unemployed workers and their families.
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The NYT ran a piece on the difficulty of establishing a business in Greece. This discussion was set against the backdrop of Greece’s competitiveness problems and its budget problems.
It would have been worth mentioning in this context the enormous problem of tax evasion in Greece. The OECD has estimated that close to one third of Greece’s economy is underground and therefore not paying taxes. This level of tax evasion both reduces revenue to the government and also encourages cynicism towards the law more generally. If everyone knows that the wealthy do not pay the taxes they owe then it is difficult to argue that truckers, pharmacists or other protected groups should give up the state supports that limit competition and allow them to be better off than the population as a whole.
In this context one obvious reform that has not been included in Greece’s austerity packages is a tax amnesty. This could take the form of allowing people to pay several years of back taxes with little or no penalty over a 6 month or 1 year time horizon.
This allows the wealthy to vote with their feet as to whether they believe the country is serious about enforcing its tax code. If they believe that the law will actually be enforced in the future, then there will be a flood of revenue coming into the government. On the other hand, if they think that it will just be more business as usual, then little money will be collected. For this reason, a tax amnesty would have provided a great signal to both Greek society and the EU.
The article also includes the seemingly contradictory assertion that the laws sharply limit the number of lawyers and that Greece “is among the world’s leaders in lawyers per capita.” Of course it is possible that the extensive web of regulations in Greece leads to a larger than normal demand for lawyers.
The NYT ran a piece on the difficulty of establishing a business in Greece. This discussion was set against the backdrop of Greece’s competitiveness problems and its budget problems.
It would have been worth mentioning in this context the enormous problem of tax evasion in Greece. The OECD has estimated that close to one third of Greece’s economy is underground and therefore not paying taxes. This level of tax evasion both reduces revenue to the government and also encourages cynicism towards the law more generally. If everyone knows that the wealthy do not pay the taxes they owe then it is difficult to argue that truckers, pharmacists or other protected groups should give up the state supports that limit competition and allow them to be better off than the population as a whole.
In this context one obvious reform that has not been included in Greece’s austerity packages is a tax amnesty. This could take the form of allowing people to pay several years of back taxes with little or no penalty over a 6 month or 1 year time horizon.
This allows the wealthy to vote with their feet as to whether they believe the country is serious about enforcing its tax code. If they believe that the law will actually be enforced in the future, then there will be a flood of revenue coming into the government. On the other hand, if they think that it will just be more business as usual, then little money will be collected. For this reason, a tax amnesty would have provided a great signal to both Greek society and the EU.
The article also includes the seemingly contradictory assertion that the laws sharply limit the number of lawyers and that Greece “is among the world’s leaders in lawyers per capita.” Of course it is possible that the extensive web of regulations in Greece leads to a larger than normal demand for lawyers.
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