November 16, 2014
A NYT editorial today rightly raised warning signals about weak economic growth in the United States and around the world. While the basic point is well-taken — tens of millions of people are being denied the opportunity to work or to get pay increases due to bad macroeconomic policy — the piece does get a few things wrong.
Most importantly it criticizes Japan’s Prime Minister Shintzo Abe for failing to carry though with his commitment to bring more women into the labor market. Actually, Japan has made enormous progress in this area according to the OECD. It reports that the employment to population (EPOP) ratio for prime age women (ages 25-54) went from 69.1 percent in 2012, when Abe took office, to 72.0 percent in the most recent quarter. By comparison, the EPOP for women in this age group in the United States is just 69.9 percent.
This is a very dramatic increase in a relatively short period of time. Undoubtedly Japan can and should go much farther. If barriers are removed, such an inadequate child care arrangements and work place discrimination, their EPOP would certainly go higher. (It’s in the high 70s for the Nordic countries.) Also, many women are still excluded from better paying jobs and full-time employment. It is nonetheless worth noting the impressive progress that has been made under Abe.
There are a couple of smaller points worth mentioning in this piece. It reports that the euro zone grew by just 0.2 percent in the third quarter. This is a quarterly rate of growth. While it is conventional in Europe to report growth at quarterly rates, the standard in the United States is to report growth in annual rates. The annual rate of growth in the third quarter in the euro zone was 0.6 percent. This doesn’t change the argument, but newspapers should be trying to convey information in ways that are understandable to readers. It is almost certainly the case that most readers thought the 0.2 percent figure referred to an annual rate.
Finally, the piece refers to the recovery from the “financial crisis.” While the financial crisis was lots of fun, the reason that the economy in the United States and elsewhere are still stumbling is that we had housing bubbles that collapsed. These bubbles had been driving growth. In the wake of their collapse there is no source of demand to replace the demand that had been generated by the bubble. This is really a very simple story.
Focusing on the financial crisis is a distraction and makes the problem appear far more complex than is actually the case. It’s a problem of insufficient demand, end of story.
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