March 12, 2019

March 12, 2019 (Prices Byte)

March 2019, Jake Johnston

Dean Baker
Truthout, March 11, 2019

Neil Irwin had a good piece discussing the slower job growth reported for February, along with more rapid wage growth. He argued that as a result of recent evidence of slowing growth (not so much from this jobs report) the Fed may be inclined to leave interest rates where they are, or possibly even lower them. However, the pick up in wage growth may lead the Fed to worry about inflation and therefore raise interest rates.

While Irwin notes the pick up is modest, so it's not obvious it will lead to higher inflation (also given the large shift from wages to profits in the Great Recession, higher wages could come out of the profit share rather than being passed on in higher prices), there is another important factor in the equation. Productivity growth, which directly reduces the cost of an hour of labor, increased to 1.8 percent last year. This is 0.5 percentage points above its trend rate since 2005. (It is still well below the 3.0 percent pace from 1995 to 2005 and from 1947 to 1973.)

Productivity data are notoriously erratic, so it is entirely possible that the 2018 pickup will turn out to be an aberration, but if faster growth is sustained, it would mean that the economy could support a more rapid pace of wage growth. There are some complicating index issues, but as a first approximation, if productivity growth is 1.8 percent, workers can have 3.8 percent nominal wage growth, and we could still keep at the Fed's 2.0 percent inflation target.

As some of us have argued, it is reasonable to expect that productivity growth will accelerate as the labor market tightens. The basic logic is that when labor gets scarce, employers have an incentive to try to use less of it. That means productivity growth.

There are three channels through which this can work. The first is a simple composition one. When labor becomes more expensive, the least productive jobs go unfilled. My favorite example is the midnight shift at a convenience store. The productivity of this worker has to be very low. (How many people come in to buy grocery items at 2:00 in the morning?) In a tight labor market, the convenience store closes at midnight and opens in the morning. By eliminating the least productive jobs, average productivity rises.

The second channel is that employers may be able to reorganize the workplace to do more with fewer workers. Even though our textbooks tell us that employers always have the optimal mix of labor and capital inputs and workplace organization, there are actually places where workers are not employed in the most efficient manner. The bosses may not care when workers are plentiful, but when the bad boss sees all his workers leaving for better jobs, he may think about trying to improve his workplace.

The latest round of layoffs at Buzzfeed, the Huffington Post, and other major news outlets has raised new questions about the future of the traditional model of advertising-supported journalism. While a small number of news outlets, like The New York Times, continue to thrive, few others seem to be profitable in the current environment.

This raises the prospect of a future in which there will be ever fewer reporters to keep the public informed and to scrutinize the actions of public officials and regulatory agencies. While we all recognize the inevitability of abuse and corruption with a regime that bans a free press, we will get the same outcome in a world where the market is structured in a way to make the operation of independent media difficult or impossible.

We can look to structure the market in a way that overcomes this problem. Specifically, we can have a modest individual tax credit ($100 to $200 per person) that can be used to finance journalism and other creative work.

The basic problem faced by news outlets, and other producers of creative work, is that the Internet has made it possible to transfer written material, as well as recorded music and video material, at near zero cost. This means that the condition loved by economists, with the price being equal to the marginal cost, implies that this material would be available for free. If users pay what it costs to deliver a news article, song, or movie over the web, they would pay nothing, leaving no money to support the workers who produced the material.  

This problem is not altogether new. The point of a copyright monopoly was to allow the creator of a creative work to charge a price that was well above the marginal cost of transferring material. However, the Internet makes this problem far more serious with the cost of transferring material falling to zero and copyright enforcement becoming ever more difficult. In this context, it makes sense to look to alternative mechanisms.

A tax credit for supporting creative work should not be seen as an altogether new concept. This can be viewed as a variation on the tax deduction for charitable contributions. Under this system, the government effectively subsidizes any charitable organization a taxpayer chooses to support.

In 1990, nearly three-quarters (74.0 percent) of prime-age women, ages 25 to 54, in the US participated in the labor force. Only the Nordic countries — Sweden, Norway, Denmark, and Finland — had substantially higher shares of women in the labor force, whi

March 8, 2019

March 8, 2019 (Jobs Byte)

Dean Baker
The Sacramento Bee, March 7, 2019
Tribune News Service (TNS), March 7, 2019

March 2019, Dean Baker

Today marks Equal Pay Day for Asian American and Pacific Islanders (AAPIs). In 2017, median earnings for Asian women in the United States — that is, those who identify themselves as “Asian alone” in the US Census Bureau’s American Community Survey and wor

Mark WeisbrotPÁGINA 12, 5 de marzo, 2019

Dean Baker
Truthout, March 4, 2019

On January 23, the United States recognized Juan Guaidó as president of Venezuela. As CEPR Co-Director Mark Weisbrot has pointed out in The Nation, this is not a merely diplomatic maneuver:

On January 23, the Trump administration announced that it was recognizing Juan Guaidó, currently head of the Venezuelan National Assembly, as “interim president” of the country. By doing so (together with politically allied countries), Washington basically imposed a trade embargo against Venezuela. This is because any revenue from oil sales to about three-quarters of Venezuela’s export markets?the United States and its allies?would no longer go to the government but to the “interim president.”

On Tuesday, the International Crisis Group’s Ivan Briscoe wrote in Foreign Affairs that around 90 percent of the Venezuelan population receives food aid from Maduro’s government, a crucial lifeline currently endangered by US policy:

The state now provides citizens with monthly boxes of subsidized rations that offer high-carb sustenance—pasta, rice, and flour—along with a few tins of tuna. According to a recent independent social survey, these boxes are now provided to more than seven million households, or around 90 percent of the population; a high-level government source estimates the cost at more than $400 million a month.

But the state’s food supply is now in peril. At the end of January, the United States sanctioned Venezuela’s state-run oil firm, PDVSA, which until then had been the Maduro government’s single largest source of hard currency. By freezing the proceeds on its purchases of Venezuelan oil, the United States hoped to starve the regime and convince factions within the government to abandon Maduro, making way for Guaidó and free elections.

In the Financial Times, noted Venezuelan economist Francisco Rodríguez wrote that humanitarian aid was inadequate to make up the shortfall resulting from Venezuela’s economic collapse: