Category: Data Source
Thoughts about labor markets
Today, the number of layoffs and discharges is very low — in fact, layoffs are at their lowest level since the Labor Department began collecting this data in 2000. Today’s problem instead is the very slow pace of job creation.
Yet unemployment remains high. File under “increasing polarization of labor market outcomes.”
Here is Steve Pearlstein channeling A. Michael Spence:
…what ails the U.S. economy is primarily a structural problem, not a cyclical one that can be effectively dealt with through the magic of short-term Keynesian stimulus.
Or let’s consider David Leonhardt’s very good piece on the labor market:
Lawrence Katz, a Harvard labor economist, calls the full [labor market] picture “genuinely puzzling.”
That is Larry Katz, who was chief economist at the Department of Labor under Clinton and who is arguably the most knowledgeable labor economist in the world. Larry Katz, who is renowned for how many literatures he holds at his fingertips. (Here are some papers by Larry Katz, including a good, short piece on unemployment in the great recession.) Larry Katz, who wrote the most effective critique of the Lilien “sectoral shift” hypothesis. Larry Katz, force of nature.
I am not asking you to agree with Spence or Katz, only to keep them in mind. What is striking about the current generation of popular Keynesian models is how little effort they make to integrate cyclical and structural phenomena. This is very much like some of the original Keynesian models of the 1930s, but it is an out of date approach and it will lead to excess optimism about the ability of fiscal stimulus to set things right.
America tornado fact of the day
“People are 10 times more likely to die in a mobile home than if the same tornado hit a regular home,” says book co-author Kevin Simmons, an economist at Austin College in Sherman, Texas.
Simmons says mobile homes constitute only 7% of the USA’s housing stock, but his research found that 43% of all tornado deaths are to people in mobile homes, which can be no match for a tornado’s violent winds, clocked as high as 300 mph.
Here is more, and the data are taken from this new book by Simmons and Daniel Sutter, on the economics of tornadoes, the book’s home page is here.
*The Way it Worked*
The author is Gordon C. Bjork and the subtitle is Structural Change and the Slowdown of U.S. Economic Growth. I recommend this not-so-well known book, first published in 1999, very highly. Among its other merits, it traces how much of the productivity slowdown results from the switch of the U.S. economy into lower-growing sectors. Excerpt:
Thus, if the 1950s structure of relative output levels and employment were combined with the intra-sector growth rates of the decade ending in 1990, the aggregate intra-sector growth rate would have been 19 percent as opposed to the 13.2 percent it actually was in the decade ending 1990. If the slow-growth decade of the 1980s had had the same output structure as the high-growth 1950s, it would have had higher growth rates than the high-growth 1950s. Conversely, if the 1990 structure had been in effect in the 1950s, the intra-sectoral growth rate for the decade would have been only 11 percent, rather than its actual 17 percent. These two examples of the effect of output structure on average growth rates illustrate the importance of structural change in determining aggregate rates of growth in per worker output by changing the relative size of sectors.
The male median wage picture is worse than we had thought
David Leonhardt has the scoop, here is an excerpt from the quoted Michael Greenstone:
The red line is the usual picture of median earnings for full-time men. The problem with this line is that the percentage of men working over time has been declining over time. This attrition or dropping out of the labor force is not random, though, as the decline in full-time work it is disproportionately concentrated among low-skill men. This means that the red line is being propped up by the fact that it is increasingly comprised of higher skilled men.
One sensible correction for this is to calculate the median wage for all men (not just the full-time workers). This is the blue line in the below graph.
Why is this important? The full-time sample (red line) suggests that median wages have been stagnant since 1969. The blue line or full sample of men (which accounts for reduced labor force participation) suggests that median wages have declined by 32% or $15,000 (in constant dollars). [emphasis added by TC]
Canadian data on income stagnation
The median earnings of full-time Canadian workers increased by just $53 annually — that's right, $53 annually — between 1980 and 2005.
Here is more, or here. This is one reason why I do not adhere to some of the progressive or "class struggle" explanations of relative stagnation in median income growth. Canada is not ruled by the so-called Republican Right.
There is another reason I don't buy the redistributive theory: here is a chart on The Great Stagnation of Capital.
The "class struggle" hypothesis makes at least some sense for 2001-2004, when measured productivity is high but the gains do not accure to the median. It does not make sense for the last forty years as a whole, or for the international evidence across countries.
David Leonhardt on the state pension shortfall
This is exactly right:
But 8 percent [equity returns] still seems like an aggressive assumption for state and local governments to be making.
If state and local governments instead assumed a future return of 7 percent, their funding gap would nearly double, to $1.3 trillion, according to Alicia Munnell and her colleagues at the Boston College retirement center. If they assumed a 6 percent return, the funding gap grows to $1.8 trillion.
Even if you believe – as I do – that government workers are not grossly overpaid, you can see that states and local governments have not set aside nearly enough money for their employees’ retirement.
Here are related comments from Ezra Klein, though I see less agreement than he does. Here is Baker, writing on social security privatization (see point seven), claiming we can expect rates of return on the stock market of four to five percent, not the seven to eight percent in the municipal context.
Globalization and the Expanding Moral Circle
In 1869 the Irish historian William Lecky (1838-1903) wrote that moral progress is about extending the moral circle.
At one time the benevolent affections embrace merely the family, soon the circle expanding includes first a class, then a nation, then a coalition of nations, then all humanity…
What is the effect of globalization on the moral circle? Does trade melt barriers and expand the moral circle or does globalization make "the other" a more salient division allowing politicians to demonize and control through xenophobia?
Two pieces of evidence, one anecdotal the other experimental, suggests that globalization expands the moral circle. The anecdotal evidence is the cover story of this month's Wired titled "1 Million Workers. 90 Million iPhones. 17 Suicides. This is where your gadgets come from? Should you care?"
Now from a rational point of view this is absurd. Put aside that the suicide rate is higher among American college students than Chinese workers at Foxconn, even odder is that the writer cares about 17 suicides but not say the million plus deaths in China due to lung disease. But no one said that the moral circle grows for rational reasons. In this case, the writer, Joel Johnson, found that the purchase of the cell phone extended his moral circle to workers who assembled the phone half a world away:
I was burdened by what felt like an outsize provision of guilt–an existential buyer’s remorse for civilization itself. I am here because I want to know: Did my iPhone kill 17 people?
What about the experimental evidence? In an excellent paper, Buchan et al. discuss results from a public good dilemma game that they ran on thousands of people in six countries around the world: Iran, South Africa, Argentina, Russia, Italy and the United States.
In each country the players could contribute to themselves, to a local group or to a world group. Local contributions were doubled and world contributions were tripled such that the world-group maximizing strategy would be for all contributions to go to the world account, the local-group maximizing strategy would be for all contributions to go to the local account and (as usual) the dominant strategy was to contribute to self only. (Local contributions also paid more to self than did contributions to the world account).
The authors find two strong effects. First, the rate of donation to the world account increased significantly with the extent of a country's globalization, as measured by a globalization index. Second, within countries the rate of donation to the world acount increased with an individual's globalization index (based on measures such as whether the individual worked for an international firm, watched foreign movies, called people abroad etc.) Thus, globalization increases the potential for global cooperation.
The authors conclude:
…not only is living in a more globalized country associated with more cooperation at the world level, but the same relationship holds as the degree of individual global connectedness increases as well. The cosmopolitan hypothesis receives clear support from our experiments.
… our findings suggest that humans' basic “tribal social instincts” may be highly malleable to the influence of the processes of connectedness embedded in globalization.
Genetic Factors and the Religious Life
It's getting late but for the record you can find a good study of genetics and religion in Do Genetic Factors Influence Religious Life? Findings from a Behavior Genetic Analysis of Twin Siblings. PSYDIR offers a good summary:
It's a fairly standard twin study. They took a sample of around 600 identical and non-identical twins from the National Survey of Midlife Development in the United States (MIDUS), and looked at a number of religious characteristics.
Basically, their analysis allows them to tease out the variations that are shared by identical twins but not by non-identical ones (genetic factors), by non-identical twins (family factors or shared environment), and that differed even among non-identical twins. This last factor was put down to the effects of external environment (i.e. things that happen in you life that aren't shared by your twin).
I've put the results in the graph. First off, look at childhood religiosity. The biggest factor is your family, and not your genetics. It's not until adulthood that the effects of genetics really start to shine through. No surprises there!
The 'salience', or importance of religion in your life is about one-quarter defined by genetics, as is your spirituality. The most important factor here, however, is the external environment. You get similar results for religious attendance.
When you get to more personal beliefs, the patterns start to shift. There are three factors that are about 40% driven by genetics, with your family upbringing having hardly any effect. These factors are: how often you turn to religion for guidance, whether or not you take the bible literally, and whether people should stick to one faith, or experiment with others (exclusivist beliefs).
It is true that there are tricky statistical issues with twin research and it is certainly possible that results like these will be overturned in the future. If that happens, however, it will be because of better twin/adoption and direct genetic studies. The type of evidence that Tyler cites is simply not capable of answering the fundamental questions that are being asked by this type of research. It is also true that these results are conditional on an environment, that is a time and place. (But that is the relevant measure for parenting today.)
I would also note that if you think the statistics get the numbers wrong you also have to deal with the fact that the patterns make sense. Parents have the biggest influence on childhood religiosity, non-shared environment has the biggest influence on attendance, genetics has the biggest influence on being "born-again." (Even the word suggests nature.) Bryan's book reviews a number of studies like this which are broadly similar.
What is the state employee union wage premium?
How much does collective bargaining matter? On Twitter, Will Wilkinson asks for data. I find this web site specifying the average Virginia state employee to be earning $50,298. Rortybomb says that for Wisconsin the comparable number is $48,267.
Yet Wisconsin had collective bargaining for state employees and Virginia does not. Of course this comparison is a gross one and it is not holding constant the composition of each work force, seniority, cost of living differences, and it also does not seem to pick up possible differences in benefits. Furthermore it does not consider the 48 other states. Yet, crude as this one-to-one comparison may be, it is more empirically sophisticated than most (all?) other discussions I have seen.
This David Blanchflower and Alex Bryson paper (see pp.9-10), using 1980s data, finds a union wage premium, for state employees, of 14.5 percent, with the premium being strongest for unskilled workers, as is the case in the private sector as well. (NB: I am not sure if they are adjusting for differential benefits but I think not.) Alan Krueger tells us that the union/non-union wage gap is smaller in the public sector than in the private sector ("overwhelming evidence").
I'm not pushing any particular answer, I'd just like to put the question on the table. What else do you all know?
Addendum: from Adam Ozimek: "The regression coefficients on page 8 of the report show that the union wage premium is between 15% to 16%, while the public sector wage discount is around 11%, meaning unionized public sector employees are paid 4% to 5% wage premium." Adam also provides further references and discussion.
Libya fact of the day
How do most people split the rent?
I receive this question from readers fairly often, but I don't usually have much of an answer, or for that matter much experience (when I roomed with Daniel Klein, he and I split the rent evenly). Now there is an interesting study. There are 42 datapoints and definitely some selection bias, but it's better than anything else I've seen. It examines for instance whether people first pick rooms and then set the prices, or first set the prices and then pick the rooms, or draw from a hat. It measures which factors most affect the rent splitting, with "No door" and "Private shower" coming in first and second respectively. The factor of importance for an apartment with the biggest standard deviation is size of the common area. In the survey, personal space is what people are willing to pay the most extra for. Opinions about the importance of windows have a high variance.
Here is their rent calculator, based on the above study.
Budget sentences to ponder
The regression coefficient of -0.07 suggests that in countries where revenues as a share of GDP were 10 percentage points lower in 1979, health care spending increased as a share of GDP by 0.7 less in the next 30 years. This association is consistent with the hypothesis that high tax rates limit the further growth of public contributions to health spending because of the much larger economic costs…and because of political pressures against high tax rates, a result also found in a cross-country study…
That is from the scary paper by Katherine Baicker and Jonathan Skinner, "Health Care Spending Growth and the Future of U.S. Taxes." (Can anyone find an ungated copy? Can we all say a hail to James M. Buchanan?)
As for today's announced budget, Kevin Drum serves up some relevant remarks.
The Pharaoh and the Commanding Heights
The Egyptian military is, for now, looking like a force for democratization. It should not be forgotten, however, that the military is an oligarchy which controls huge swaths of the Egyptian economy.
SFChronicle: It owns companies that sell everything from fire extinguishers and medical equipment to laptops, televisions, sewing machines, refrigerators, pots and pans, butane gas bottles, bottled water and olive oil.
Its holdings include vast tracts of land, including the Sharm el-Sheikh resort, where ex-President Hosni Mubarak now resides in one of his seaside palaces. Bread from its bakeries has helped head off food riots.
Another source of the military's untold wealth is its hold on one of this densely populated country's most precious commodities: public land, which is increasingly being converted into gated communities and resorts. The military has other advantages: it does not pay taxes and does not have to deal with the bureaucratic red tape that strangles the private sector.
…The revenue streams from its various holdings help the military maintain the lifestyle its officers have grown accustomed to, including an extensive network of luxurious social clubs as well as comfortable retirements – all of which helps ensure officer loyalty.
Not surprisingly, the military has opposed privatization and economic liberalization. The Egyptian military currently commands a great deal of respect in Egypt but what happens when a nascent democracy tries to reform an entrenched oligarchy?
What conservatives want (don’t want)
This is from a poll of self-identified conservative Republicans:
When we asked last month about their thoughts on the best way to reduce the deficit, here’s how they replied:
†¢ 56 percent said cut spending across the board
†¢ 27 percent said cut spending from all government budgets except the military
†¢ 10 percent said pass a balanced budget amendment
†¢ 3 percent said cut taxes
†¢ 3 percent said fix Social Security and Medicare so they don’t pay out more than they take in
That was pretty revealing. Social Security and Medicare will drive our long-term structural deficits and crush our economy along the way. But even though the issue is getting some play in the media, it doesn’t seem to be getting through to the grassroots.
There is more at the link. You might think that the desire for across the board spending cuts is picking up the fiscal conservatism, but the follow-up questions don't show a great desire to limit Social Security or Medicare. Only thirty-five percent of the recipients favor both raising the retirement age for benefits and also means-testing.
You may recall that fiscal conservative Paul Ryan didn't mention Social Security or Medicare in his response to Obama's State of the Union address.
Addendum: Here is a related poll.
The history of U.S. productivity, in a nutshell
There have been some recent confusions in the comments about the historical record on productivity. The excellent Alexander J. Field sets it straight, after noting that TFP (Total Factor Productivity) growth in the interwar years was remarkably strong:
…TFP persisted at high although more modest rates during the golden age (1948-73). But then it ground to an almost complete halt between 1973 and 1995. Output per hour continued to rise, albeit much more slowly, but this was almost entirely attributable to physical capital deepening. Data are now available for the entire century, and it is no longer possible to interpret the high rate of TFP advance during the interwar years that prompted the Abramowitz/Solow generalization [TC: the generalization was about knowledge-based progress] as a defining characteristic of the century as a whole.
In this context, think of TFP as the growth due to new ideas, rather than just throwing capital or labor at a problem or production process. Here is a related Field paper. It's also wrong to think of the post-WWII period as the peak of progress, rather as Field shows high TFP growth starts post Civil War and the time after WWII is somewhat slower than many previous decades. The early 19th century, by the way, was not so splendid for TFP.
The critical responses to The Great Stagnation prefer to attack median income measures and in general they are reluctant to talk about total factor productivity. Yet we are pointed very much toward the same conclusion. My first post on TGS also considered these issues and you will find some relevant Charles Jones papers here.