Category: Data Source

Payroll tax cuts and gross job flows

by  Alex Tabarrok in

In the comments section to my last post a number of people argued that in the current recession firms simply don't have the sales to support a larger workforce so a small reduction in labor costs from a payroll tax cut isn't going to increase employment appreciably.

The argument sounds plausible but the premise is wrong – in fact, lots of firms are selling and hiring.  In July, for example (the most recent data), firms hired over 4 million workers.  Yes, 4 million.  Even in declining sectors like construction there were 346,000 new hires in July alone.  In the 12 months preceding July, firms hired 51.3 million workers.  The problem of course is that during the same time there were 56.6 million job separations (quits, layoffs, retirements) for a net job loss of 5.3 million.

Even though we are still experiencing a daily net loss of jobs it's important to remember that there are about 200,000 hires every working day  Lots of firms are hiring.  In order to increase employment a payroll tax cut need not shift firms "from firing to hiring" it need only increase the hiring rate of those firms already hiring or on the margin of hiring.

The data is from the JOLTs survey which releases more data tomorrow.  The uber-source on job flows is Davis and Haltiwanger and their extensive work with co-authors.  For a good, non-technical, introduction to this and related topics I recommend, The Natural Survival of Work,

The McFarthest spot

by  Tyler Cowen in

Strange Maps reports:

Somewhere in South Dakota is the McFarthest Spot, the place in
the US geographically most removed from the nearest McD’s…If you
started out from this location, a few miles north of State Highway 20
(which runs latitudinally between Highways 73 in the west and 65 in the
east), you’d have to drive 145 miles to get your Big Mac (if you could
fly, however, it’d be only 107 miles).

They have a good map to go with it; I believe, by the way, that he means the continental U.S. and thus he is excluding Alaska.  I would have expected the Nevada desert to win out.

Recent results on inequality

by  Tyler Cowen in

This new paper is from Robert J. Gordon and it points to some very important results, rooftop results you might say:

The rise in American inequality has been exaggerated both in magnitude
and timing. Commentators lament the large gap between the growth rates
of real median household income and of private sector productivity.
This paper shows that a conceptually consistent measure of this growth
gap over 1979 to 2007 is only one-tenth of the conventional measure.
Further, the timing of the rise of inequality is often misunderstood.
By some measures inequality stopped growing after 2000 and by others
inequality has not grown since 1993. This cessation of inequality’s
secular rise in 2000 is evident from the growth of Census mean vs.
median income, and in the income share of the top one percent of the
income distribution. The income share of the 91st to 95th percentile
has not increased since 1983, and the income ratio of the 90th to 10th
percentile has barely increased since 1986. Further, despite a
transient decline in labor’s income share in 2000-06, by mid-2009
labor’s share had returned virtually to the same value as in 1983,
1991, and 2001.

Recent
contributions in the inequality literature have raised questions about
previous research on skill-biased technical change and the managerial
power of CEOs. Directly supporting our theme of prior exaggeration of
the rise of inequality is new research showing that price indexes for
the poor rise more slowly than for the rich, causing most empirical
measures of inequality to overstate the growth of real income of the
rich vs. the poor. Further, as much as two-thirds of the post-1980
increase in the college wage premium disappears when allowance is made
for the faster rise in the cost of living in cities where the college
educated congregate and for the lower quality of housing in those
cities. A continuing tendency for life expectancy to increase faster
among the rich than among the poor reflects the joint impact of
education on both economic and health outcomes, some of which are
driven by the behavioral choices of the less educated.

I don't yet see an ungated version.  If you go to pp.8-9, you'll see that since 2000 (not including the financial crisis), it is quite possible that inequality has been decreasing, not increasing.  That's exactly the period of time when complaints about inequality reached new heights.

Competition and Concentration in Health Insurance

by  Alex Tabarrok in

Many people have bandied about numbers suggesting that the market for health insurance is highly concentrated.  Here is the President:

Consumers do better when there is choice and competition. Unfortunately, in 34 states, 75% of the insurance market is controlled by five or fewer companies. In Alabama, almost 90% is controlled by just one company….

But these statistics only include people insured by "insurance companies" even though nationally just over half of all employees get their health insurance from a firm that self-insures.  In other words, as John Lott points out, over half of the market for insurance is being left out of these concentration statistics.

Since about half of employees are insured by a self-insurer, concentration statistics–as typically presented –should be cut roughly in half (precise numbers vary by state).  Firms that self-insure typically outsource benefits management and claim
administration to highly competitive third party administrators.  A key fact according to this paper (which is outdated although I wouldn't expect the basic finding to have changed) is that the populations served, the benefits paid and the premiums paid are about the same for firms that self-insure and firms that buy insurance from a health insurance company.  Thus, concentration among that part of the market served by health insurance firms appears to be well disciplined by the larger market for self-insurance.

Recent trends in top income shares

by  Tyler Cowen in

You may recall that some time ago Alan Reynolds (Reynolds responds here) challenged the results of Piketty and Saez on rising income inequality in the United States.  There has now been a systematic look at biases in the data, with the goal being to reconcile data from the Current Population Survey with IRS measurements.  Burkhauser, Feng, Jenkins and Larrimore report their results:

Although the vast majority of US research on trends in the inequality of family income is based on public-use March Current Population Survey (CPS) data, a new wave of research based on Internal Revenue Service (IRS) tax return data reports substantially higher levels of inequality and faster growing trends. We show that these apparently inconsistent estimates can largely be reconciled once one uses internal CPS data (which better captures the top of the income distribution than public-use CPS data) and defines the income distribution in the same way. Using internal CPS data for 1967–2006, we closely match the IRS data-based estimates of top income shares reported by Piketty and Saez (2003), with the exception of the share of the top 1 percent of the distribution during 1993–2000. Our results imply that, if inequality has increased substantially since 1993, the increase is confined to income changes for those in the top 1 percent of the distribution.

An ungated version is here.  As I read this paper, the Piketty and Saez result, with some modifications for 1993-2000, basically holds up.  It's also worth noting that recent increases in inequality do relate mostly to the top one percent.  That's all for pre-crash times, of course.

Africa fact of the day

by  Tyler Cowen in

About 10 percent of infants die in their first year of life in Africa
— still shockingly high, but considerably lower than the European
average less than 100 years ago, let alone 800 years past. And about
two thirds of Africans are literate — a level achieved in Spain only
in the 1920s.

Here is more.  The article makes additional interesting observations.

Too big to fail fact of the day

by  Tyler Cowen in

Large
banks with more than $100 billion in assets are borrowing at interest
rates 0.34 percentage points lower than the rest of the industry. Back
in 2007, that advantage was only 0.08 percentage points, according to
the FDIC. Such differences can cause huge variance in borrowing costs
given the massive amount of money that flows through banks.

Here is the article and I thank Ralph S. for the pointer.

China fact of the day

by  Tyler Cowen in

It is almost unheard of for ordinary Chinese citizens to volunteer to donate their organs after death. Only about 130 people have pledged to donate their organs since 2003, the newspaper stated, quoting Chen Zhonghua, a professor at Tongji Hospital’s Institute of Organ Transplantation in Shanghai.

Here is more; the story concerns the Chinese trying to move away from harvesting the organs of deceased prisoners.

Here's a good blog post on a new Chinese leisure activity.

Assorted Links

by  Alex Tabarrok in
  • Contrary to popular belief (e.g. here) there is only weak evidence that the implicit association test has good predictive ability.
  • The economics of being a Hefner Girlfriend.  One key sentence “In fact, Girlfriends were not allowed to become Playmates because Hef had found that they tended to flee the Mansion as soon as they collected their $25,000 Playmate cheque.”

The economies of scale of living together

by  Tyler Cowen in

Bruce Bartlett sends me a link to this interesting paper:

How large are the economies of scale of living together? And how do partners share their resources? The first question is usually answered by equivalence scales. Traditional estimation and application of equivalence scales assumes equal sharing of income within the household. This paper uses data on financial satisfaction to simultaneously estimate the sharing rule and the economy of scale parameter in a collective household model. The estimates indicate substantial scale economies of living together, especially for couples who have lived together for some time. On average, wives receive almost 50% of household resources, but there is heterogeneity with respect to the wives’ contribution to household income and the duration of the relationship.

The data are from Switzerland, in case you are wondering, not the United States.

China “facts” of the day

by  Tyler Cowen in

The reports have come in:

All but seven of the regions reported GDP growth rates above the
bureau’s first-half figure of 7.1 per cent. At the start of the year,
Beijing set 8 per cent as China’s growth target for the year.

…In recent years, provincial figures have suggested consistently the
world’s third-largest economy is bigger than Beijing’s published
estimate, but the discrepancy appears to have widened this year.

…The Global Times, controlled by the People’s Daily, the Communist party
mouthpiece, reported that the public reacted with “banter and sarcasm”
to NBS figures showing average urban wages in China rose 13 per cent in
the first half to $2,142.

It is noted that the state worked on the gdp numbers for a full fifteen days.  Yet not everyone is happy:

The criticism has prompted the NBS to launch a campaign last week,
entitled “Statistical Feelings: We have walked together – Celebrating
the 60th anniversary of the founding of New China,” to boost confidence
among statisticians.

The campaign has already produced works such
as: “I’m proud to be a brick in the statistical building of the
republic.” In another poem, a contributor writes: “I can rearrange the
stars in the sky because I have statistics.”