Category: Law
The minimum wage and the Great Recession
I believe Card and Krueger will and should win Nobel Prizes, but their work is also not the last word on the minimum wage, especially during weak labor markets. Here is the most recent study, by Jeffrey Clemens:
I analyze recent federal minimum wage increases using the Current Population Survey. The relevant minimum wage increases were differentially binding across states, generating natural comparison groups. I first estimate a standard difference-in-differences model on samples restricted to relatively low-skilled individuals, as described by their ages and education levels. I also employ a triple-difference framework that utilizes continuous variation in the minimum wage’s bite across skill groups. In both frameworks, estimates are robust to adopting a range of alternative strategies, including matching on the size of states’ housing declines, to account for variation in the Great Recession’s severity across states. My baseline estimate is that this period’s full set of minimum wage increases reduced employment among individuals ages 16 to 30 with less than a high school education by 5.6 percentage points. This estimate accounts for 43 percent of the sustained, 13 percentage point decline in this skill group’s employment rate and a 0.49 percentage point decline in employment across the full population ages 16 to 64.
Do any of you see an ungated version? In any case I hope this receives the media attention it deserves. Will it?
How to fix restrictions on building
Stephen Smith, a well-known urban blogger, writes in the comments to Interfluidity:
Finally, I think you’re not giving us enough credit for thinking through the political challenges to urban land use deregulation. I’m well aware of the entrenched interests opposing it, and the most promising solution I’ve seen is to shift the level of governance upwards. Washington and Oregon have much stronger state-level planning laws than California, and permit about twice as much housing as a result, with much lower urban housing prices. Ontario also has strong provincial planning, and Toronto has a torrential housing stock growth rate and very low housing prices compared to similar US cities. And in Japan, the central government has a huge hand in land use regulation and localities are relatively powerless, and Japan is literally the market urbanist promised land, which a mind-blowing housing stock growth rate in Tokyo, to the point where their private railroads are profitable and one is able to undertake an incredible capital expansion project, practically without subsidies.
The pointer is from Reihan. And here is a story from my own northern Virginia: “The century-old congregation decided to sell its building, parking lot and grounds to the Arlington Partnership for Affordable Housing, which will tear down the stone structure and replace it with 173 affordable apartments.” Bravo.
*The Conflict Shoreline*, best non-fiction book of the year
For best non-fiction book of the year, a late entry swoops in to take first place! That’s right, I am going to select The Conflict Shoreline: Colonization as Climate Change in the Negev Desert, by Eyal Weizman and Fazal Sheikh.
This is an unusual book. It is only 85 pp. of text and about half of it is aerial photos and maps. It covers the history of the Negev desert, the Bedouin, Israeli policy toward the Bedouin, ecology, seed botany, and the roles of water policy and climate change, all in remarkably interesting and information-rich fashion, with a dose of Braudel and also Sebald in terms of method.
For one thing, it caused me to rethink what books as a whole should be. This is one cool book.
To make it stranger yet, this book is Weizman’s response to Sheikh’s The Erasure Trilogy, which is structured as a tour of the ruins of the 1948 conflict. That book is I believe from a Palestinian point of view, and described as a “visual poem.” I just ordered it; note that Sheikh is the photographer for The Conflict Shoreline and thus listed as a co-author.
Some will read The Conflict Shoreline as “anti-Israeli” in parts, but that is not the main point of the book or my endorsement of it. The book however does point out that Israeli policies toward the Bedouin often were prompted by a desire to remove large numbers of them from their previous Negev land and move them into the West Bank and Egypt. I had not known “The village of al-‘Araqib has been destroyed and rebuilt more than 70 times in the ongoing “Battle over the Negev””. The book ends with a two-page evidentiary aerial photo of that village, taken during 1945; other photos of it date as far back as 1918. This is all part of Weizman’s project of “reverse surveillance.”
It is a hard book to summarize, in part because it is so visual and so integrative, but here is one excerpt:
The Negev Desert is the largest and busiest training area for the Israeli Air Force and has one of the most cluttered airspaces in the world. The airspace is partitioned into a complex stratigraphy of layers, airboxes, and corridors dedicated to different military platforms: from bomber jets through helicopters to drones. This complex volume is an integral part of the architecture of the Negev.
And then it will move to a discussion of seed technology, or how Bedouin economic strategies have changed over the course of the twentieth century, and how these various topics fit together. Think of it also as a contribution to location theory and economic geography, but adding vertical space, manipulated topography, rainfall, and temperature to the relevant dimensions of the problem.
Too bad it costs $40.00. Recommended, nonetheless. Here is one review, here is another, the latter having especially good photos of the book’s photos.
Here is a good interview with Weizman, who among other things outlines his concept of Forensic Architecture.
Here is my earlier post on the best non-fiction books of 2015. And here is an earlier post the best books under one hundred pages.
Were the Civil War and abolition a surprise?
More than I had thought. And Lincoln really was the difference maker:
…prior to 1860, few political events seemed to affect slave prices, and even the Dred Scott decision had only a small and temporary effect. After Lincoln’s nomination for the presidency, slave prices fell, and they continued to fall once the war commenced. The overall decline in slave prices was large (more than one-third from their 1860 peak) and occurred prior to any battle losses by the South.
That is from the new AER piece by Calomiris and Pritchett. There is an ungated version here (pdf).
New results on the minimum wage and inequality
There is a new paper in American Economic Journal: Applied Economics by David H. Autor, Alan Manning, and Christopher L. Smith, here is the abstract:
We reassess the effect of minimum wages on US earnings inequality using additional decades of data and an IV strategy that addresses potential biases in prior work. We find that the minimum wage reduces inequality in the lower tail of the wage distribution, though by substantially less than previous estimates, suggesting that rising lower tail inequality after 1980 primarily reflects underlying wage structure changes rather than an unmasking of latent inequality. These wage effects extend to percentiles where the minimum is nominally nonbinding, implying spillovers. We are unable to reject that these spillovers are due to reporting artifacts, however.
Here are earlier, ungated versions of the paper. Overall my read of this is that many people are leaping in too quickly and making unsupported claims about how the minimum wage is connected to income inequality.
Death trends
One-way driving markets the polity that is Dutch
The government in the Netherlands has clarified that it is legal for driving instructors to offer lessons in return for sex, as long as the students are over the age of 18.
However, it is illegal to offer sex in return for lessons.
Transport minister Melanie Schultz van Haegen and Justice minister Ard van der Steur addressed the issue in response to a question tabled in parliament by Gert-Jan Segers of the socially conservative Christian Union party, noting that, although ‘undesirable’, offering driving lessons with sex as payment is not illegal.
There is more here, and for the pointer I thank Michael C.
The Omnibus spending bill on health care policy
Yuval Levin has a very good piece on this, here is one bit:
They’re [the Democrats] no longer offering themselves up as a sacrifice to protect every last bit of the law[Obamacare], as they have done at enormous political cost for the last five years. Now, they’re spending their capital to protect key constituencies (and therefore themselves), even at the cost of allowing the structure of Obamacare to become even more incoherent and unsustainable.
There is a less polemic but still true version of that sentence, if you are so inclined. Here is another bit:
…They’re thinking past Obamacare, like the Republicans are. Of course, Democrats have a different vision of what comes after Obamacare. Hillary Clinton has started articulating that vision here and there: It’s a move in the direction of the original Hillarycare from 1993, which would add on to elements of Obamacare stricter price controls and more federal micromanagement of the provision of care. (Scott Gottlieb considered what this might look like in National Affairs this summer.)
And this:
The omnibus bill contains a provision, identical to one in last year’s bill, which requires that risk-corridor payments in the Obamacare exchanges be budget neutral.
That will make Obamacare much more difficult to manage.
Furthermore, in the bill Congress restricts federal funding for CRISPR.
Here is a more general piece on the Omnibus. Overall I would say a lot of gridlock is gone, the Republicans have returned to being bigger spenders, and no one in town — once again — worries about the deficit. The sequester was a very temporary victory.
Genetic testing may be coming to your office
A handful of firms are offering employees free or subsidized tests for genetic markers associated with metabolism, weight gain and overeating, while companies such as Visa Inc., Slack Technologies Inc., Instacart Inc. recently began offering workers subsidized tests for genetic mutations linked to breast and ovarian cancer.
The programs provide employees with potentially life-saving information and offer counseling and coaching to prevent health problems down the road, benefits managers say.
Screening for genetic markers linked to obesity is the latest front in companies’ war on workers’ weight woes.
Obesity-related conditions such as Type 2 diabetes comprise a large share of overall health-care costs, estimated to run more than $12,000 a worker this year, according to a recent survey from Towers Watson and the National Business Group on Health.
Employers are hoping to help bend the cost curve—and make their workers healthier—by more aggressively targeting obesity and coaxing workers to lose weight.
Fortunately, none of that information ever will be used against the interests of workers, nor will any worker face pressure, explicit or implicit, to submit to such a test…
The story is here, here is another path in.
The FDA and Magical Thinking
Vox had a piece yesterday on the Cruz-Lee proposal to make it easier for U.S. patients to access drugs and devices already approved in other developed countries. The Vox piece had some howlers. Most notably this:
“There’s no evidence the FDA blocks innovation or makes innovation harder or makes it more costly,” said Kesselheim.
Frankly, that would be laughable were it not coming from a professor of medicine at Harvard Medical School. It costs well over a billion dollars to get the average new drug approved and much of that cost comes from FDA required clinical trials. Longer and larger clinical trials mean that the drugs that are eventually approved are safer. But longer trials also mean that good drugs are delayed. And the more expensive it is to produce new drugs the fewer new drugs will be produced. In short, longer and larger trials mean drug delay and drug loss.
We live in a world of tradeoffs. Let’s debate the tradeoffs. But let’s not engage in magical thinking where there are no tradeoffs and “no evidence” that the FDA makes drug development more costly.
A more subtle error was committed by the author who writes:
But it’s not clear that this legislation can solve the biggest problem here — the lack of promising treatments in the pipeline. In other words, a faster approval process can’t fix a dearth of innovation from labs themselves.
Many factors go into drug development that are outside the FDA’s purview. Nevertheless, faster drug approval can and does increase innovation. Approving drugs more quickly is equivalent to a decrease in the costs of research and development. Time is money. Reducing the cost of development increases the incentive to develop new drugs.
The Prescription Drug User Fee Act, for example, reduced drug approval times by about 10 months. Philipson et al. calculate that:
…the more rapid access of drugs on the market enabled by PDUFA saved the equivalent of 140,000 to 310,000 life years.
(PDUFA does not appear to have materially affected safety but Philipson et al. calculate that even under a worst case scenario the benefits of PDUFDA far exceeded the costs).
Moreover, Vernon et al. find that the reduction in approval time from PDUFA increased new drug development:
Controlling for other factors such as pharmaceutical profitability and cash flows, we estimate that a 10% decrease (increase) in FDA approval times leads to an increase (decrease) in R&D spending from between 1.4% and 2.0%. Combining this estimate with recent research on the link between PDUFA and FDA approval times…we calculate PDUFA may have incentivized an additional $10.8 billion to $15.4 billion in pharmaceutical R&D. Recent economic research has shown that the social rate of return on pharmaceutical R&D is very high; therefore, the social benefits of PDUFA (over and above the benefits of more rapid consumer access) are likely to be substantial.
Finally, return to the issue of reciprocity. Many of the critics of reciprocity respond with simple appeals to nationalism. We are the best! Rah, rah, rah! But if the critics were German or French they would argue that the EMA is superior to the FDA. Indeed, when I raise the issue of reciprocity with Europeans they respond in exactly the same way as Americans. How could anyone suggest that the EMA automatically approve drugs approved by the FDA! The horror.
The argument for reciprocity, however, isn’t that the FDA is uniquely bad or always worse than the EMA or vice-versa. The argument is that it’s wasteful to duplicate the lengthy approval process and that both agencies sometimes make mistakes. As a result, it’s simple common sense to let Americans avail themselves of drugs and devices approved in other developed countries.
Senators Cruz and Lee Introduce Reciprocity Bill
Senators Ted Cruz (R-Texas) and Mike Lee (R-Utah) have just introduced a bill that would implement an idea that I have long championed, making drugs, devices and biologics that are approved in other developed countries also approved for sale in the United States. Highlights of the “Reciprocity Ensures Streamlined Use of Lifesaving Treatments Act (S. 2388), or the RESULT Act,” include:
- Amending the Food, Drug and Cosmetic Act to allow for reciprocal approval of drugs, devices and biologics from foreign sponsors in certain trusted, developed countries including EU member countries, Israel, Australia, Canada and Japan.
- Encouraging the FDA to expeditiously review life-saving drug and device applications, this legislation would provide the FDA with a 30-day window to approve or deny a sponsor’s application….
- The HHS Secretary is instructed to approve a drug, device or biologic if the FDA confirms the product is:
- Lawfully approved for sale in one of the listed countries;
- Not a banned device by current FDA standards;
- There is a public health or unmet medical need for the product.
- If a promising application for a life-saving drug is declined Congress is granted the authority to disapprove of a denied application and override an FDA decision with a majority vote via a joint resolution.
In explaining why he introduced the bill Senator Cruz argued:
We continue to lose far too many of our loved ones to the “invisible graveyard,” as economist Alex Tabarrok has described: lives that could have been saved but for a bureaucratic barrier that rejects medical cures and innovation…The bill I am introducing takes the first step to reverse this trend. It provides for reciprocal drug approval, so that cures and medical devices that are already approved in other countries can more expeditiously come to the U.S.
Rhetoric so often fails to achieve what we wish to achieve
Mr. Obama also said, “It is our responsibility to reject religious tests on who we admit into this country.” But negative searches about Syrian refugees rose 60 percent. Searches asking how to help Syrian refugees dropped 35 percent. The president asked us to “not forget that freedom is more powerful than fear.” But searches for “kill Muslims” tripled during his speech.
There was one line, however, that did trigger the type of response Mr. Obama might have wanted. He said, “Muslim Americans are our friends and our neighbors, our co-workers, our sports heroes and yes, they are our men and women in uniform, who are willing to die in defense of our country.”
After this line, for the first time in more than a year, the top Googled noun after “Muslim” was not “terrorists,” “extremists” or “refugees.” It was “athletes,” followed by “soldiers.” And, in fact, “athletes” kept the top spot for a full day afterward.
That is from a fascinating new piece by Evan Soltas and Seth Stephens-Davidowitz.
China’s workforce could rise rather than fall
That is the subject of a new FT article by Steve Johnson. I’ve already covered this on MR, but here is a recap of some of Johnson’s points:
1. Official pension ages in urban areas are 50 for blue-collar women, 55 for white-collar women and 60 for men. Those could be raised by the government thereby boosting the labor force. For instance, in terms of actual practice, at age 60 only 55 of urban Chinese men are still in the labor force, and just one-third of urban Chinese women are still in the labor force.
2. Chinese pension policy penalizes late retirement and this easily could be changed.
As Johnson writes: “…if China adopted measures to retain older workers in the labor force, its working population would barely fall at all until at least the mid-2030s.”
With more women working, China in 2040 might have a labor force as large as it has today. If the retirement issue and the gender issue are both solved, China’s labor force in 2040 likely will be 10 percent higher than it is today.
So the common meme of “the Chinese labor force is about to start shrinking” doesn’t really have to be true. The Chinese economy has many problems, but I think this one is overrated. And we haven’t even talked yet about possible productivity increases.
A few takes on the Paris deal
Here is Brad Plumer. And Michael Levi at CFR. And CarbonBrief on the agreement. And Bjorn Lomborg.
Overall, it seems to set up a framework for future deals, without being so much of a deal itself. Here is an excerpt from Levi:
Rather than enforcing these through international law (which has proven to be toothless for climate) the Paris Agreement aims to mobilize political pressure. It does that mainly by mandating a set of transparency measures and a process for regularly and publicly reviewing each country’s progress (though much of the detail on each remains to be developed).
It also establishes a process under which each country is supposed to put forward stronger national emissions reduction plans every five years.
Let’s hope for the best…
What is the best theory for the rise in mass shootings?
Keep in mind that overall shootings and murders are down, way down. Yet here is Michael Rosenwald:
In 1975, someone walking up the street shooting people was such an alien idea that one of the officers who responded didn’t believe it and hadn’t been trained for it. The phrase “active shooter” had yet to enter the cultural lexicon. Now mass shootings are so common that the assailants draw inspiration from one another, and the degrees of separation between victims appear to be closing.
The 1966 U. Texas incident is seen as one turning point, Columbine in 1999 another. The timing doesn’t exactly coincide with a social media hypothesis, although social media likely play a big role in the echo chamber and copycat effects. Is there an increase in fame-seeking behavior of all kinds?
What other testable predictions can we come up with? The frequency of the attacks is accelerating, again while violent crime and murder are largely falling.