“Clinton economist trusts government too much”

Being a reticent fellow myself, I enjoyed that Bloomberg-given headline.  That is for my latest column, on the recent book and ideas of Heather Boushey.  She wishes government to take a much larger hand in sick paid leave, parental leave, and care for the elderly, among other issues.  Here is one excerpt:

Most likely, there is a big difference between short-run and long-run effects. For instance, employers value the workers they have, and are reluctant to fire them when labor costs go up. A lot of “pro-worker” policies thus seem to be a kind of magical free lunch. Over time, however, as a generation of workers turns over and is replaced, mandatory benefits represent a real added cost, evaluated anew, and employers will respond accordingly. They will cut the paid dollar wage, cut other job benefits, require more hard work, automate more, or cut back on plans for growing the business. The downward-sloping demand curve is the best established empirical regularity in all of economics, and in this context that means some laborers — maybe most laborers — will pay a price for their new benefits, one way or another.

Note that if firms have better bargaining power than do workers, workers can in the short run claw some of that back through the law.  Yet that superior bargaining power simply will be reestablished one generation of workers later, albeit with jobs at a new higher-mandated-benefit, lower-something-else equilibrium.  Hardly anyone gets that.  And:

Boushey doesn’t estimate or indicate the expense of her proposed mandatory benefits, although she does suggest on page 1 that the cost would be “very small.” She is developing a new kind of supply-side economics, this time on the left, but like her right-wing counterparts she is running the risk of excess optimism about how much her suggested improvements will boost productivity in the system.

Give them cash I say, do read the whole thing.

Here is Heather Boushey’s new book from Harvard University Press, Finding Time: The Economics of Work-Life Conflict.  I disagree with it fundamentally, but still many of you will find it of considerable value.  She is also the chief economist for Hillary Clinton’s transition team, and I would trust her with nuclear weapons.


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