Category: Current Affairs
WalMart fact of the day
Wal-Mart has 1.3 million U.S. employees, and about 4,000 of them currently make either a state or federal minimum wage, Tovar said.
There is more here, via @ModeledBehavior., who points out that is about 0.3%, and Clive Crook.
The CBO report on the minimum wage
Spin it as you wish, we should not have a major party promoting, as a centerpiece initiative and for perceived electoral gain, a law that might put half a million vulnerable people out of work, and that during a slow labor market.
And the American people will never understand the ins and outs of the monopsony debate and the like. Overall, what kind of useful lesson is being taught here about the determinants of wages and prosperity?
I’m sorry people, but those are the bottom lines on this one.
Freer trade in European and Spanish health care services
Spanish patients, like all Europeans, will now be able now choose which EU country to seek treatment in. The Cabinet last week approved a decree that implements an EU directive on cross-border healthcare. Under the system, patients will advance the money for their treatment abroad, but can request a reimbursement from their own country.
The directive aims to go one step beyond the emergency treatment already covered by the European Health Card and let patients choose another member state for specific, non-emergency treatment.
Spain however has concerns:
The State Council, the government’s key advisory body, has this week warned the government that the measure may put a major strain on Spain’s resources. “Given that our country is a recipient country for tourists, it seems likely that this could lead to an increase in demand for healthcare,” the State Council report on the law change says, which could result in “longer waiting lists.”
Additionally, reimbursement will not necessarily cover the total amount charged by the foreign hospital; instead Spanish authorities will use the official rates of each regional health service. Spain does not have a common set of rates; rather, each regional government sets its own public tariffs.
It might over time lead to higher prices. Here are some other possible implications:
Spain’s private health system could be the main beneficiary of this new system…This is because “prestigious and renowned” private health centers could get added clients now that member states have to reimburse their citizens. Of course foreigners could choose the public health system, but it would mean long waiting lists under the same conditions as Spanish patients.
Medical fees at both public and private hospitals in Spain are lower than in many other European countries. “It could well be that for Scandinavia it is cheaper to send patients to Spain,” notes Rivero.
There is more here. There is plenty of further information here, but only very recently has this cross-border directive been moving to a scale where it might make a real difference. Spain for instance seems to be a country which is cheap enough, sunny enough, and reliable enough to draw significant business.
Swiss immigration controls are directed against those who are like the Swiss
There is in Switzerland the issue of low-skilled immigration. But arguably more problematic — from a Swiss point of view — is precisely the immigration which feels most Swiss, such as the professionals who come from Germany. Note that since the late 1990s Germans are the single largest group of immigrants coming to CH (pdf). The Swiss, of course, fear the European Union juggernaut as a mechanism for taking away their sovereignty. Having more Kosovars or more Sri Lankans in the country doesn’t strengthen the hand of the EU much. Those are not EU groups anyway, non-EU migration into Switzerland has been falling for a long time, and besides those groups can be excluded from mainstream Swiss society with relative ease, if need be. But German arrivals? Many would gladly see Switzerland join the EU and at the very least it feels like the decision is no longer under the control of the Swiss themselves. Furthermore they are not so different from German-speaking Swiss and they (sometimes) eat similar kinds of cheese. And because they are so often highly skilled, and can fit in so well, they cannot easily be excluded (pdf) from positions of influence in Swiss society.
In other words, sometimes it is the skilled arrivals the domestic citizenry wishes to limit in numbers. And you can see that the share of skilled immigrants has been increasing in Switzerland for years. Here are some recent percentages.
This study by Sandro Favre (pdf) shows that a major wage impact of EU migration into Switzerland has been to cut down high wages at the top of the Swiss wage distribution. So there is an economic motive too, and it is not the same story that is sometimes told about say southern California and Mexican competition with low-skilled American workers.
I, too, am a small country of sorts and I am glad I do not have thirty identical twins running around out there, competing against me or speaking on my behalf at meetings. I would wish to exile them to other planets.
Who or what can check or limit the ECB?
A loyal MR reader, with expertise in this area, writes to me:
But this suggests an interesting thought experiment (regardless of the legality of OMT): suppose an ECB central banker were to overstep her/his legal authority and in doing so created all sorts of cross-border obligations. Would we have to `undo’ this policy? How is this individual to be policed?
In the US, the Fed is accountable to Congress. If ever the Fed overstepped its mandate, in theory, Congress could pass laws, subpoena officials, etc. to reign them in. In the Eurozone, the ECB was created without political overseers. Neither the Commission nor the European Parliament can change the ECB’s mandate; only a treaty change can do that. So if the ECB oversteps its mandate, this is a much more serious issue than if the Fed misbehaves.
If treaty law, the ultimate form of legal pre-commitment in the EU, governing the ECB can simply be cast aside whenever it is time-inconsistent, how should EU nations approach future treaty negotiations? Ignoring the treaty law could be very detrimental for the long-run institutional evolution of the EU. Few economists are willing to publicly entertain this prospect.
The UAE will deliver some governmental services by drone
The United Arab Emirates says it plans to use unmanned aerial drones to deliver official documents and packages to its citizens as part of efforts to upgrade government services.
…Local engineer Abdulrahman Alserkal, who designed the project, said fingerprint and eye-recognition security systems would be used to protect the drones and their cargo.
Gergawi said the drones would be tested for durability and efficiency in Dubai for six months, before being introduced across the UAE within a year. Services would initially include delivery of identity cards, driving licenses and other permits.
There is more here, hat tip to the excellent Mark Thorson.
The Swiss vote for immigration curbs: how much immigration is possible without a backlash?
Here is the news:
A narrow majority of voters in Switzerland on Sunday approved proposals that would reintroduce restrictions on the number of foreigners who are allowed to live and work in the country, a move that could have far-reaching implications for Switzerland’s relations with the European Union.
You will note:
Switzerland, which is not part of the European Union, has one of the highest proportions of foreigners in Europe, accounting for about 27 percent of the country’s population of about eight million.
In my view immigration has gone well for Switzerland, both economically and culturally, and I am sorry to see this happen, even apart from the fact that it may cause a crisis in their relations with the European Union. That said, you can take 27% as a kind of benchmark for the limits of immigration in most or all of today’s wealthy countries. I believe that as you approach a number in that range, you get a backlash.
That number will be higher when there is a frontier or a shortage of labor. Those conditions do not generally hold in today’s wealthy countries. Adam Ozimek reproduces data on immigration as a flow and stock relative to citizens, and as a stock Switzerland was third highest in the world with Luxembourg at over 32% and Israel over 27%. I would say Israel does not count as their flows are largely a religious/ethnic unification from the former Soviet Union, in part with the purpose of protecting them against other potential population flows, to put it diplomatically.
The United States is 12th on the list with 12.1% foreign-born. Referring to the flow of immigrants, Adam notes:
Instead of 1 million immigrants a year, these numbers suggest we could be letting in as many as 3 million a year and we would still not rank in the top 5.
And there I think you have the relevant range for what a more liberal immigration policy would look like or could look like. I wonder by the way if for some reason small countries have an easier time swallowing high levels of migration, politically or culturally speaking, than do big countries. That’s counterintuitive, but it’s what Adam’s tables seem to be suggesting. (Is it because the small country is more culturally unified and thus somehow more secure?) If you look at the top twelve countries in terms of receiving a flow of immigrants, only Spain is significantly above the 20 million population mark, with countries such as Iceland, Ireland, and New Zealand prominent (and I suspect a more recent measurement would boot Spain off this list altogether). That would narrow the range of potential immigration increases even further for the United States.
One of my objections to the open borders idea is that I think it would be negative for sustainable, actually realized flows of immigration.
Addendum: Here is the distribution of voting across Switzerland, the Italian section was most anti-immigrant. Here is Rachman on why the Swiss should not be punished. Here is an excellent detailed analysis by Dennis MacShane. Overall I see this as a broader political earthquake which will spread throughout Europe.
Wolfgang Münchau worries about OMT
The German court left no doubt that the Bundesbank and other German institutions were bound by the constitution. They also made clear they were not letting go of this case. The ruling gives the distinct impression that the judges are referring the case not up to a higher court but down to a lower court…
So what would happen if the ECB wanted to trigger the scheme? Following this ruling, I am not sure the Bundesbank could participate. That would be an inconvenience, no more. I would also expect, though with less certainty, that the German government would torpedo OMT through a technical lever. The scheme requires potential beneficiaries first to apply for a conditional credit line from the European Stability Mechanism. This is where the governments come in: they have to approve any ESM programme by unanimity.
What if the government and parliament voted in favour of a credit line? You could count on an immediate legal challenge at the constitutional court. This is the point when the ruling will matter. The court would then either eat its words or trigger a crisis. It will not refer another case to the ECJ.
The FT piece is here. Developing…
Addendum: Here is commentary from Hans-Werner Sinn.
Why emerging markets should look within
That is the title of my latest New York Times column, here is one excerpt:
In recent weeks, Argentina, Turkey, Ukraine and Thailand have endured plunging currencies, capital flight and political disruptions in varying combinations. While they have all been affected by global economic tides, these nations are facing crises because of problems in their national governance. And if we look elsewhere around the world, we find that governance has been re-emerging as a major factor behind success or failure in many emerging nations.
It’s not that macroeconomic quandaries have gone away in all of those countries. There are still many such issues: how to deal with current account deficits, for example, or how to face the consequences of tighter monetary policy in the United States. But these concerns were foreseeable, and some countries have been meeting them, if imperfectly, while others are letting these problems push them over the precipice. In this context, good governance means directing political energies at strengthening the economy rather than trying to cement power and keep down the opposition.
This new world contrasts with two earlier waves of change. The first started in the 1990s, when a rising China bought and invested in raw materials at an unheard-of pace. That flow of purchasing power was so strong that it brought better times to other emerging nations, including many in South America and Africa, regardless of whether the individual countries had good governance in place.
The second major wave was the recent global recession, which damaged the commercial prospects of many nations. For instance, in the first quarter of 2009, the gross domestic product of Singapore fell at an annualized rate of 8.9 percent. That wasn’t because Singapore had bad economic policy, but because exports were hit by a global downturn beyond the country’s control.
The two waves have had such noticeable effects that we’ve become unaccustomed to evaluating political fundamentals in individual nations. But these waves, though not quite over, have slowed.
Some of the likely losers are Argentina, Thailand, Turkey, and Ukraine. Chile, Malaysia, and Mexico are likely to come out of the turmoil in OK shape, to cite some examples on the other side. As for China…?
Do read the whole thing.
The economic problems of Puerto Rico
Puerto Rico is now shrinking at a 6% annual pace, and that number is probably going to get worse before it gets better. The chances of the island’s economy actually growing at any point in the foreseeable future seem remote: indeed, the country has essentially been in one long and nasty continuous recession since 2006.
Puerto Rico has $70 billion in debt outstanding, all of it needing to be repaid with interest — and the simple fact is that there’s no way it’s going to be able to do that, if its economy continues to shrink and its most talented nationals continue to decamp for the mainland, where their prospects are much brighter. Labor mobility from Puerto Rico to the rest of the US, and particularly to Florida, has never been higher, while most of the migration in the other direction comes in the form of retirees, who are not exactly going to kick-start the economy. In fact, in terms of the labor force participation rate, they’re just going to make matters worse, on an island where only 1.2 million of the 3.4 million inhabitants are employed.
Ryan McCarthy adds more.
New estimates on ACA and employment
The Affordable Care Act will also reduce the number of fulltime workers by more than 2 million in coming years, congressional budget analysts said in the most detailed analysis of the law’s impact on jobs.
The CBO said the law’s impact on jobs would be mostly felt starting after 2016. The agency previously estimated that the economy would have 800,000 fewer jobs as a result of the law.
The impact is likely to be most felt, the CBO said, among low-wage workers. The agency said that most of the effect would come from Americans deciding not to seek work as a result of the ACA’s impact on the economy. Some workers may forgo employment, while others may reduce hours, for a equivalent of at least 2 million fulltime workers dropping out of the labor force.
That is from The Washington Post.
Addendum: Annie Lowrey adds comment.
Bernanke joins Brookings
The press release is here.
First monkeys with customized mutations born
The ultimate potential of precision gene-editing techniques is beginning to be realised. Today, researchers in China report the first monkeys engineered with targeted mutations, an achievement that could be a stepping stone to making more realistic research models of human diseases.
Xingxu Huang, a geneticist at the Model Animal Research Center of Nanjing University in China, and his colleagues successfully engineered twin cynomolgus monkeys (Macaca fascicularis) with two targeted mutations using the CRISPR/Cas9 system — a technology that has taken the field of genetic engineering by storm in the past year. Researchers have leveraged the technique to disrupt genes in mice and rats, but until now none had succeeded in primates.
The article is here. Now solve for the equilibrium, as they like to say…
For the pointer I thank @autismcrisis.
What is wrong with the Russian economy?
The Economist had a very good feature-long piece on that question this week, here is one good excerpt:
In today’s Russia, oil and gas account for 75% of all exports, compared with 67% in 1980. Although Russia no longer buys grain from America, as it did in the 1980s, 45% of what Russians buy today is imported. Walk around a department store in central Moscow, and it is hard to find anything that is produced locally. The state remains the single largest employer, while its corporations—controlling natural resources, infrastructure, banking and media—dominate the economy.
As Clifford Gaddy and Barry Ickes, two American economists, have argued, the highly inefficient industrial structure of the old Soviet economy, based on misallocation of both resources and people, remains intact. The oil rent reinforced and perpetuated it: it has bought political stability and the loyalty of the population, but has slowed down modernisation. Inevitably, the result is stagnation.
…The state is one of the chief obstacles to Russia’s modernisation. During the 2000s the number of bureaucrats almost doubled. A quarter of the workforce is employed in the public sector. The total number of people who depend on the state is between 35% and 40%, says Boris Grozovsky, a Russian economic observer. This, he says, points to the share of the electorate that benefits from the status quo. At election time municipal workers are bused in to show support for Mr Putin. Meanwhile, the main purpose of Russia’s civil service is to shuffle papers around and extract administrative revenue from firms and private citizens. The bureaucrats have little interest in fostering competition that might cost them their jobs.
The piece is interesting (and depressing) throughout.
One salvo in the fight against driverless cars
The group that stalked Anthony Levandowski, an engineer at Google X, the company’s clandestine research laboratory, calls itself the Counterforce, after a Thomas Pynchon novel. About a dozen members, all dressed in black, gathered outside the Berkeley house where Mr. Levandowski lives with his partner and two young children.
They unfurled a banner and handed out fliers detailing the engineer’s work on Google’s driverless car technology, Street View and Google Maps. The flier read: “Anthony Levandowski is building an unconscionable world of surveillance, control and automation. He is also your neighbor.”
This is still just a small and fragmented movement, as the article makes clear. I predict it will vanish, but I wouldn’t have predicted its existence in the first place.