China fact of the day
Bureaucratic politics is a politics of privilege. By 1956, the wages of the highest-ranking party and government personnel were set at 36.4 times those of the lowest rank. (By way of comparison, the highest wage in the “corrupt” Nationalist government in1946 was 14.5 times that of the lowest wage.)
That is from the new and important The World Turned Upside Down: A History of the Chinese Cultural Revolution, by Yang Jisheng, who himself participated in the Cultural Revolution.
Are disenchanted Iranians turning to other faiths?
The spiritual gap between Iran’s Shia ayatollahs and the people they rule is widening. The strictures of the theocracy and the doctrine of Shia supremacy alienate many. So growing numbers of Iranians seem to be leaving religion or experimenting with alternatives to Shiism. Christians, Zoroastrians and Bahais all report soaring interest. Leaders of other forms of Islam speak of popular revivals. “There’s a loyalty change,” says Yaser Mirdamadi, a Shia cleric in exile. “Iranians are turning to other religions because they no longer find satisfaction in the official faith.”
…The repression isn’t working. The state says over 99.5% of Iran’s 82m people are Muslim. But its numbers are not reliable. A poll of more than 50,000 Iranians (about 90% of whom live in Iran) conducted online by Gamaan, a Dutch research group, found a country in religious flux. About half of the respondents said they had lost or changed their religion. Less than a third identified as Shia. If these numbers are even close to correct, Iran is much more diverse than its official census shows.
Here is more from The Economist. Speculative, but interesting.
What should I ask Dana Gioia?
Dana is what I call one of the world’s information billionaires. For more specifics, here is part of his Wikipedia page:
Michael Dana Gioia (/ˈdʒɔɪ.ə/; born December 24, 1950) is an American poet and writer. He spent the first fifteen years of his career writing at night while working for General Foods Corporation. After his 1991 essay “Can Poetry Matter?” in The Atlantic generated international attention, Gioia quit business to pursue writing full-time. He served as the chairman of the National Endowment for the Arts (NEA) between 2003 and 2009. Gioia has published five books of poetry and three volumes of literary criticism as well as opera libretti, song cycles, translations, and over two dozen literary anthologies.
Gioia is the Judge Widney Professor of Poetry and Public Culture at the University of Southern California, where he teaches, as well as a Senior Fellow at the Trinity Forum. In December 2015 he became the California State Poet Laureate.
He is also well-known as a composer of opera libretti, and more recently as a spokesperson for the importance of Catholicism for culture. And he is brother of TedGioia, former CWT guest. And here is Dana’s home page.
I will be doing a Conversation with him — so what should I ask?
Saturday assorted links
1. Rap song about Janet Yellen.
2. Never too much talent? Should you be bullish on the Nets?
3. Toward a more libertarian pandemic?
5. B.1.1.7 not in decline. And that variant is exploding in Denmark.
6. Vaccines to take Israel back from the Ibex, photo gallery, recommended. And some verticality in a video version. Consider it “the Ibex salt-water paradox.”
7. Peter Huber tribute, he has passed away.
Money is good, at more margins than you might have thought
Past research has found that experienced well-being does not increase above incomes of $75,000/y. This finding has been the focus of substantial attention from researchers and the general public, yet is based on a dataset with a measure of experienced well-being that may or may not be indicative of actual emotional experience (retrospective, dichotomous reports). Here, over one million real-time reports of experienced well-being from a large US sample show evidence that experienced well-being rises linearly with log income, with an equally steep slope above $80,000 as below it. This suggests that higher incomes may still have potential to improve people’s day-to-day well-being, rather than having already reached a plateau for many people in wealthy countries.
That is from a new paper by Matthew A. Killingsworth. Via the excellent Kevin Lewis.
RCTs and the minimum wage
The paper I want to highlight in this post is “Price Floors and Employer Preferences” by John Horton. In this piece he conducts a randomized control trial on an online labor market, randomly assigning 4 different minimum wage levels ($0, $2, $3, and $4) to 160,000 job postings. This experimental design conveys several advantages over conventional empirical work. First, selection effects and biases based on the economic performance of the firms and the states/countries they are in are automatically controlled for by random assignment. Second, the online platform collects detailed measures on the pre-experiment attributes of all workers, the productivity of workers on the job, and the number of hours worked overall. These data are extremely important to analyzing the effects of the minimum wage but are not measured in the most popular empirical works on the topic. Finally, the computerized nature of the data leaves almost no room for measurement error.
…There are four main results: “(1) the wages of hired workers increases, (2) at a sufficiently high minimum wage, the probability of hiring goes down, (3) hours-worked decreases at much lower levels of the minimum wage, and (4) the size of the reductions in hours-worked can be parsimoniously explained in part by the substantial substitution of higher productivity workers for lower productivity workers.”
The significant reductions in hours worked come from two sources according to Horton’s analysis. First, firms are economizing on now more expensive labor; the labor demand curve slopes downward. Second, the substitution of higher productivity workers meant that jobs were completed faster, so the total hours worked went down. Both of these responses to the minimum wage hurt low productivity workers…
Interestingly, these results are consistent with finding little to no dis-employment effect in an observational study that only measures wages and headcounts (which is what the vast majority of the most popular studies do). This is because almost all of the effects of the minimum wage came from substitution of higher productivity for lower productivity ones, which wouldn’t show up in headcounts, and reduction in hours worked, which is not measured in most conventional data sets.
Here is the full short piece by Maxwell Tabarrok. File under “RCT gold standard for me but not for thee!”
Friday assorted links
It is a marathon, not a sprint
For all of its achievements, we still do not know if New Zealand will have ended up doing a good job against Covid-19:
New Zealand’s “go hard, go early” strategy to combat Covid-19 attracted global praise and eliminated local transmission of the virus. But the country’s slow rollout of vaccines is putting people at unnecessary risk and threatens to delay its economic recovery, critics warned.
Wellington plans to start vaccinating frontline workers in April and the general public from July under a cautious strategy that avoids the emergency authorisation of vaccines pursued by crisis-stricken nations such as the US and UK.
And note this:
There are at least 19 cases of the coronavirus variants first identified in the UK or South Africa in managed quarantine facilities in New Zealand for overseas arrivals, according to government data.
And this:
Mr Hipkins said there was “absolutely no complacency” in the government’s response.
Here is the full FT story.
The South Korean minimum wage hike
A controversial study on the effect of a radical rise in the legal minimum wage level came out Tuesday, pitting employers against employees in the midst of negotiations for the next year’s wage standard.
Researchers at the Korea Economic Research Institute analyzed in the study the impact of the 16.4 percent increase in the 2018 wage level on low-income workers to find that many low-paying jobs were erased, while those who were employed enjoyed higher pay. The institute is affiliated with the country’s top business lobby, the Federation of Korean Industries.
The minimum wage is updated on an annual basis, and the rate currently stands at 8,590 won ($7.10) per hour. In 2018, the rate rose 16.4 percent from 6,470 won a year earlier to 7,530 won, the steepest increase in 17 years.
The KERI report said the employment rate in 2018 for workers directed affected by the hike — those who were getting paid less than the 2018 legal wage in 2017 — was as much as 4.6 percentage points lower than other income groups.
Some 15.1 percent of this group were jobless in 2018.
The study calculated that between 27.4 percent and 30.5 percent of the unemployment cases were due to the higher wage level, which prompted employers to cut jobs.
Here is the article. I cannot find this study, it may well only be in Korean (addendum: here is the link in Korean), and I note it is connected to a business lobby. Still, I will take this opportunity to ask: what else do we know about the recent and radical South Korean wage hike?
Here are some general remarks at Wikipedia. And here is a relevant paper about minimum wage hikes in Hungary: small disemployment effects after four years, and most of the burden carried by consumers, which implies the monopsony model does not apply — in that model prices should fall!
And do read Brian Albrecht on the minimum wage.
Scott Alexander’s Substack
https://astralcodexten.substack.com
Via Andy.
That was then, this is now, now it’s now again
To see how much the sanitary and medical revolutions have changed the risks of global interaction, examine what kills Americans abroad these days: cardiovascular events including heart attacks account for 49 percent of all deaths, injuries for a further 25 percent, and infectious diseases other than pneumonia for just 1 percent…even travel to pathogen-rich environments has become far, far safer than it used to be: a study of 185 deaths of US Peace Corps volunteers, placed in some of the world’s least healthy countries, found that unintentional injuries and suicides were far more deadly than infection, accounting for more than 80 percent of deaths between them.
That is from Charles Kenny’s new and excellent The Plague Cycle: The Unending War Between Humanity and Infectious Disease, which was started well before Covid.
Thursday assorted links
Federal minimum wage of $15?
It’s a slam-dunk case that doubling the federal minimum wage — it’s been $7.25 since 2009 — would lead to significant declines in employment opportunities for workers with few skills or little experience. According to data from the Bureau of Labor Statistics for 2019 (before the pandemic), in 47 states, at least one-quarter of all workers earn less than $15 per hour. In 20 states, half of all workers earn less than $18 per hour, and in 30 states, the median hourly wage is less than $19.
These statistics show that $15 is a very high wage floor. For employers to keep all their workers would require raising the wages of a huge share of the national workforce. But the number of workers affected would be so large that this wouldn’t happen. Instead, the number of jobs in the low-wage workforce would shrink.
The nonpartisan Congressional Budget Office confirms this basic intuition, estimating that joblessness would increase by 1.3 million if the national hourly wage floor were hiked to $15 [TC: and that is pre-pandemic]. The CBO also concluded that this policy would reduce business income, raise consumer prices and reduce gross domestic product.
That is from Michael Strain at Bloomberg. I would add this. No matter what you think about the recent literature on the minimum wage, all economic theories imply that minimum wages should be decided at the state and local level, given the economic heterogeneity of the United States. That is the message that you as an economist should be carrying forward.
Do you think Puerto Rico should be a state? Should they have a $15 minimum wage too? Come on. Yes, it is easy enough to make an exception for them, and by the way the median manufacturing wage in Mississippi is below $15 as well. Rinse and repeat.
I am sorry to speak in such terms, but the reality is that an allied cabal of activists and left-wing economists have combined on social media to insist on a particular approach to minimum wage economics and to bully those who disagree.
Ask yourself a simple question: were any of them calling for a temporary two-year cut in the minimum wage for restaurants and small businesses during a devastating pandemic? If not, are they really carrying forward the banner of science?
“But not all those elasticities are the same…”
That has been one common response to my recent post asking people to be consistent across assumptions about elasticities. And that is true, those differing elasticities are not all exactly the same. Yet a few points remain relevant:
1. If you see the world as dynamic, full of entrepreneurship, and solving problems fairly rapidly and effectively, you should tend to think that a wide variety of elasticities will be high. Conversely, if you think we are all sluggish, overregulated, creatures of routine boobs, you will tend to see a wide variety of elasticities as being pretty low.
That doesn’t have to follow, but if you instead have your own Rube Goldberg approach, well let’s please hear about it in more detail.
2. The elasticities that “most people on Twitter want” are “long run labor demand inelastic” (minimum wage hike good!) and “short run industry supply curve elastic” (stimulus is good!). In other words, they want the short-run elasticity to be higher than the long-run elasticity. By insisting that not all elasticities are the same, they actually have made the problem more difficult for themselves.
3. Individual firm and aggregate supply curves of course can differ. To get the aggregate curve to be more dynamic and responsive than individual curves, typically you would invoke some notion of increasing returns. But a pandemic is exactly when increasing returns are least likely.
Plausibly there are increasing returns to greater vaccine use. But nominal stimulus? Nope. We are not living in a world of “my pet shop is doing so well I am going to spend money on your movie theater.” Apart from the high multiplier associated with public health improvements, we right now live in a world of bottlenecks and sectorally specific problems. Trying to get increasing returns on your side isn’t going to help, in fact it will work against you.
In sum, I am not saying there is no way you can get all of your elasticities to fit together in the preferred manner. After all, if nanotechnology works, alchemy may work too. I am just asking you to…show your work. And in the meantime be less moralizing and dogmatic. Perhaps you cannot in fact, right now, have all of the things you want.