The minimum wage and migration decisions

This paper investigates the local labor supply effects of changes to the minimum wage by examining the response of low-skilled immigrants’ location decisions. Canonical models emphasize the importance of labor mobility when evaluating the employment effects of the minimum wage; yet few studies address this outcome directly. Low-skilled immigrant populations shift toward labor markets with stagnant minimum wages, and this result is robust to a number of alternative interpretations. This mobility provides behavior-based evidence in favor of a non-trivial negative employment effect of the minimum wage. Further, it reduces the estimated demand elasticity using teens; employment losses among native teens are substantially larger in states that have historically attracted few immigrant residents.

That is from a 2014 paper by Brian C. Cadena, and here is Jorge Pérez Pérez:

I find that areas in which the minimum wage increases receive fewer low-wage commuters. A 10 percent increase in the minimum wage reduces the inflow of low-wage commuters by about 3 percent.

And here is one bit from a research paper by Terra McKinnish:

Low wage workers responded by commuting out of states that increased their minimum wage.

Via the excellent Jonathan Meer, you don’t hear about this evidence as much as you should.

Bias against indigenous Americans?

We conducted a resume correspondence experiment to measure discrimination in hiring faced by Indigenous Peoples in the United States (Native Americans, Alaska Natives, and Native Hawaiians). We sent employers realistic 13,516 resumes for common jobs (retail sales, kitchen staff, server, janitor, and security) in 11 cities and compared callback rates. We signaled Indigenous status in one of four different ways. We almost never find any differences in callback rates, regardless of the context. These findings hold after numerous robustness checks, although our checks and discussions raise multiple concerns that are relevant to audit studies generally.

That is from Patrick Button and Brigham Walter in their new NBER Working Paper.

Viral Markets in Everything

The Persistence of Chaos is an Airgapped Samsung 10.2-Inch Blue Netbook (2008) that is running Windows XP SP3 and 6 pieces of malware that collectively caused some $95 billion in damages. One of the worms trapped on the computer, for example, is:

SoBig

SoBig was a worm and trojan that circulated through emails as viral spam. This piece of malware could copy files, email itself to others, and could damage computer software/hardware. This piece of malware caused $37B in damages and affected hundreds of thousands of PCs.

The terms of sale include the following:

The sale of malware for operational purposes is illegal in the United States. As a buyer you recognize that this work represents a potential security hazard. By submitting a bid you agree and acknowledge that you’re purchasing this work as a piece of art or for academic reasons, and have no intention of disseminating any malware. Upon the conclusion of this auction and before the artwork is shipped, the computer’s internet capabilities and available ports will be functionally disabled.

The current high bid is over $1,200,750.

Hat tip: Paul Kedrosky.

Yes there has been an American male culture collapse

During the last 50 years, the earnings of prime-age men in the United States have stagnated and dispersed across the education distribution. At the same time, the labor-force participation rates of men without a college education have steadily declined. While wage and participation trends are often linked for this population, we have argued that this connection cannot solely be the result of an inward labor demand shift across a stable and elastic labor supply curve. The uncompensated labor supply elasticities implied by the twin declines of wages and participation during the 1970s, 1980s, and 2000s appear too large to be plausible. Moreover, labor-force participation continued to decrease in the 1990s while wages were rising. While the increasing availability of disability benefits and the increase in the fraction of the population with prior incarceration exposure may help explain some of the participation decline, we doubt either factor can explain the bulk of the decline.

We have argued that more plausible explanations for the observed patterns involve feedbacks from male labor demand shocks, which often involve substantial job displacement, to worker adjustment frictions and to family structure. Marriage rates, and corresponding male labor supply incentives, have also fallen for reasons other than changing labor demand. Moreover, we have noted interactions between labor demand and disability benefit take-up, and between mass incarceration and family structure. These factors have all converged to reduce the feasibility and desirability of stable employment, leading affected men—who may not often be eligible for disability or other benefits—to participate sporadically in the labor market and depend primarily on family members for income support.

That is from the concluding remarks of Ariel J. Binder and John Bound, in the most recent Journal of Economic Perspectives.  I’ll just highlight one bit again, bolded by me:

At the same time, the labor-force participation rates of men without a college education have steadily declined. While wage and participation trends are often linked for this population, we have argued that this connection cannot solely be the result of an inward labor demand shift across a stable and elastic labor supply curve.

In case you missed it.

Why Are the Prices So D*MN High?

Why have some prices increased since 1950 by a factor of four while other prices have decreased by a factor of four? Technology is making so many goods and services much cheaper than in the past–that seems to be the normal situation–so why do some industries seem not only to be not progressing but actually retrogessing? As Scott Alexander put it, why are some industries so weird?

Those are the questions that motivated my latest piece, a short book with Eric Helland just released by the Mercatus Center titled, Why are the Prices so D*mn High?

In approaching this question I had some ideas in mind. I assumed that regulation, bloat and bureaucracy, monopoly power and the Baumol effect would each explain some of what is going on. After looking at this in depth, however, my conclusion is that it’s almost all Baumol effect. That conclusion radically changes one’s evaluation of price increases and decreases over the long run and it changes what, if anything, one might try to do to address such price changes.

Next week I will examine some of the evidence that pushes me towards this verdict. I’ll also take a closer look at the Baumol effect, which is mistakenly called the cost disease.

Let’s note here, however, what we need to explain. For the most part, we don’t see quick, big changes in prices that then level off. That in itself is interesting since policy tends to be discontinuous. We might expect a big regulation, for example, to cause a big increase in prices as industries adjust but then growth should return to normal. Instead, what we see and need to explain is slow, steady rising relative prices that happens over decades. Indeed, in some cases, such as education, prices have been increasing faster than average for more than a century! Puzzle over that over the long weekend. More next week!

Maciej Cegłowski on gdpr

The plain language of the GDPR is so plainly at odds with the business model of surveillance advertising that contorting the real-time ad brokerages into something resembling compliance has required acrobatics that have left essentially everybody unhappy.

The leading ad networks in the European Union have chosen to respond to the GDPR by stitching together a sort of Frankenstein’s monster of consent,a mechanism whereby a user wishing to visit, say, a weather forecast page 4 is first prompted to agree to share data with a consortium of 119 entities, including the aptly named “A Million Ads”network. The user can scroll through this list of intermediaries one by one, or give or withhold consent en bloc, but either way she must wait a further two minutes for the consent collection process to terminate before she is allowed to find out whether or it is going to rain.

This majestically baroque consent mechanism also hinders Europeans from using the privacy preserving features built into their web browsers, or from turning off invasive tracking technologies like third-party cookies,since the mechanism depends on their being present.

For the average EU citizen,therefore, the immediate effect of the GDPR has been to add friction to their internet browsing experience along the lines of the infamous 2011 EU Privacy Directive (“EU cookie law”) that added consent dialogs to nearly every site on the internet.

The GDPR roll out has also demonstrated to what extent the European ad market depends on Google, who has assumed the role of de facto technical regulatory authority due to its overwhelming market share. Google waited until the night before the regulation went into effect to announce its intentions, leaving ad networks scrambling.

It is significant that Google and Facebook also took advantage of the US-EU privacy shield to move 1.5billion non-EU user records out of EU jurisdiction to servers in the United States. Overall, the GDPR has significantly strengthened Facebook and Google at the expense of smaller players in the surveillance economy.

The data protection provisions of the GDPR, particularly the right to erase, imposed significant compliance costs on internet companies. In some cases,these compliance costs just show the legislation working as intended. Companies who were not keeping adequate track of personal data were forced to retrofit costly controls, and that date is now safer for it.

But in other cases, companies with a strong commitment to privacy also found themselves expending significant resources on retooling. Personally identifying information has a way of seeping into odd corners of computer systems (for example, users will sometimes accidentally paste their password into a search box), and tracking down all of these special cases can be challenging in a complex system.The requirements around erasure, particularly as they interact with backups, also impose a special burden, as most computer systems are designed with a bias to never losing data,rather than making it easy to expunge.

Here is the full Senate testimony, there are many interesting points in the piece.  I thank an MR reader for the pointer.

Shipping the good economists out?

How many of you even get that reference these days?  Here is the latest from DOA, from Liz Crampton at Politico:

The Agriculture Department is moving nearly all its researchers into the economic effects of climate change, trade policy and food stamps – subjects of controversial Trump administration initiatives – outside of Washington, part of what employees claim is a political crackdown on economists whose assessments have raised questions about the president’s policies.

Since last year, employees in the department’s Economic Research Service have awaited news of which members of their agency would be forced to relocate, after Agriculture Secretary Sonny Perdue stunned them by declaring he was moving most of the agency to a location outside the capital. The announcement sparked claims that Perdue was trying to pressure economists into leaving the agency rather than move their families.

On March 5, the department began notifying people who were allowed to stay in Washington, but didn’t provide a comprehensive list, only telling employees in person if they made the cut.

But current and former employees compiled one anyway, covering all 279 people on staff, 76 of whom are being allowed to stay in Washington…

A USDA spokesman declined to directly address the employees’ allegation of political bias, but provided a written statement from Perdue saying that the moves were not prompted by the work being done by ERS.

In general I am reluctant to post this kind of report, because I find it difficult to know what is truly going on here, so do read this with an open mind.  Still, it seemed newsworthy.

I thank John Chamberlin for the pointer.

*Range: Why Generalists Triumph in a Specialized World*

That is the new book by David Epstein, the author of the excellent The Sports Gene.  I sometimes say that generalists are the most specialized people of them all, so specialized they can’t in fact do anything.  Except make observations of that nature.  Excerpt:

In an impressively insightful image, Tetlock described the very best forecasters as foxes with dragonfly eyes.  Dragonfly eyes are composed of tens of thousands of lenses, each with a different perspective, which are then synthesized in the dragonfly’s brain.

I am not sure Epstein figures out what a generalist really is (and how does a generalist differ from a polymath, by the way?), but this book is the best place to start for thinking about the relevant issues.

State and local policy is the real immigration policy

That is the central claim of my latest Bloomberg column, here is one excerpt:

State and local governments are making immigration policy all the time, mostly for the worse, and often Democrats are more restrictionist than Republicans.

Obviously the law can deter potential illegal migrants from entering the U.S. But so can the high cost of living. Even though there are much higher wages in the U.S. than in its neighbors to the South, a lot of those higher wages are eaten up by much higher rents — especially if the immigrant moves to a major city, as is often the case. I once wrote a book based on fieldwork in rural Mexico, and I found that, for those who had migrated temporarily to the U.S., high rent was typically their biggest complaint. It therefore follows that policies which raise rents tend to discourage immigrants, particularly poorer immigrants.

And:

The minimum wage is another tool of anti-immigration policy, at least for less skilled immigrants. Say a city sets a minimum wage of $15 an hour. That means a potential migrant whose work is worth only $12 an hour won’t be able to get a legal job in that city. That will deter migration, both legal and illegal. Furthermore, a worker in, say, Honduras may not find it possible to improve his or her skills to be worth $15 an hour, at least not without arriving in the U.S.

Thursday assorted links

1. Negative emotional contagion in ravens.

2. “As it turns out, NBA players make only 40 percent of their shots between 8 and 9 feet from the rim, and that number drops to only 35 percent between 25 and 26 feet from the rim. When it comes to field-goal percentage on jump shots, the effect of shot distance is pretty minor.”  Link here.

3. Claims about Fortnite.

4. How making chocolate is like mixing cement (NYT).

5. Victor Shih’s public choice theory of Xi’s China.

6. “Goats are glamorous, and super popular on social media now…

America’s Cities Are Unlivable. Blame Wealthy Liberals

Farhad Manjoo writing in the New York Times brings the fire:

Then there is the refusal on the part of wealthy progressives to live by the values they profess to support at the national level. Creating dense, economically and socially diverse urban environments ought to be a paramount goal of progressivism. Cities are the standard geographical unit of the global economy. Dense urban areas are quite literally the “real America” — the cities are where two-thirds of Americans live, and they account for almost all national economic output. Urban areas are the most environmentally friendly way we know of housing lots of people. We can’t solve the climate crisis without vastly improving public transportation and increasing urban density. More than that, metropolises are good for the psyche and the soul; density fosters tolerance, diversity, creativity and progress.

Yet where progressives argue for openness and inclusion as a cudgel against President Trump, they abandon it on Nob Hill and in Beverly Hills. This explains the opposition to SB 50, which aimed to address the housing shortage in a very straightforward way: by building more housing. The bill would have erased single-family zoning in populous areas near transit locations. Areas zoned for homes housing a handful of people could have been redeveloped to include duplexes and apartment buildings that housed hundreds.

…Reading opposition to SB 50 and other efforts at increasing density, I’m struck by an unsettling thought: What Republicans want to do with I.C.E. and border walls, wealthy progressive Democrats are doing with zoning and Nimbyism. Preserving “local character,” maintaining “local control,” keeping housing scarce and inaccessible — the goals of both sides are really the same: to keep people out.

I applaud the fire, although it’s amusing to me that Manjoo treat this as big discovery (“I am struck by an unsettling thought.”). Look, this isn’t new! Progressives created zoning and other housing regulations to exclude people they didn’t like from “their” neighborhoods. Nor, by the way, is the desire to exclude limited to “wealthy” liberals (Manjoo surely knows this but is afraid of punching down). It’s also amusing that Steve Sailer has been making exactly the same point about hypocritical Malibu liberals for years, the only difference being that Manjoo wishes to shame liberals into giving up NIMBYism while Sailer wants to shame them into giving up national diversity. I call a pox on both their houses and support individual property rights at both the local and national levels.