Comments on economics, mystery fiction, drama, and art.

Wednesday, December 07, 2016

Even the CEO of a major American corporation doesn't necessarily know what he's talking about

This is why we need a diligent news sector. 
AT&T Inc. Chief Executive Randall Stephenson also spoke positively of the economic benefits of a Trump presidency Tuesday....He expressed hope that “a more moderate approach to some of these regulations is in the making under a Trump administration.” Mr. Stephenson said the U.S. is the “highest tax country in the developed world” and that capital investment, as a percentage of gross domestic product, is at its lowest level since World War II.
 From a story in the Wall Street Journal, referenced here.

The reality is not very hard to discover; a quick look at the national income and product data at FRED will show you what reality is.  Or you can look at this hand little chart:


Yep.  Clearly GPDI in the range of 17% is less than at any itme since World War II.  If by World War II you mean the 1990s.

Friday, December 02, 2016

Willfully or not, this MSNBC piece distorts the BLS employment situation report and subtracts from the sum of human knowledge

So MSNBC has a post up with this headline:
What are 95 million Americans doing out of the labor force?


In which the reported proceeds to write this:

“…the nettlesome problem of too many people who find it's just easier to collect welfare and other transfer payments rather than go back to work…”

Let’s start with some reality checks: 

The unemployment rate is a measure of the percentage of people who are not employed, but who are actively seeking work. If you are not actively seeking work, you are not counted as unemployed. So, for example, my wife is not actively seeking work. She will probably never again actively seeking work. She should be counted as unemployed? Of the 60+ students in my two classes this semester, over 50 are not actively seeking work. They are attending college full time. They should be counted as unemployed? Most of those 95 million people are either retired or full time students.

 The real issues arise in three places. One is "discouraged workers," people who would like to work, but have quit looking because they are, well, discouraged by their prospects. There is an alternative unemployment rate, calculated and published every month by the Bureau of Labor Statistics that includes them.

 The second is people who are employed part time, but want full-time work. Think of them as partly employed, partly unemployed.  There is an alternative unemployment rate, calculated and published every month by the Bureau of Labor Statistics that includes them.

 

The third is people receiving disability benefits and not working. Now, this depends on whether you think that the disability system is "broken," that there are a whole lot of people receiving disability benefits who could be--and who ought to be--working. My own reaction to what I know about the disability system is that to get disability benefits, one really does have to be disabled. So I don't take this to be a big deal. (Others may disagree.)

  (You can find those alternative measures of unemployment here: http://www.bls.gov/news.release/empsit.t15.htm.)  U6, which is the broadest measure of underutilization of labor is down from 9.6% in November 2015 to 9.0% in November 2016.)  In fact, the number of people not in the labor force has increased  by less than 1% over the past year, while the relevant population has increased by nearly 2%.
 
Finally, the notion that millions of people can collect "welfare" (there is almost no cash assistance for people able to work any more) and the "other transfer payments"--SNAP (a/k/s Food Stamps), renter's assistance (woefully underfunded)--is all but laughable.

When crap like this winds up being widely disseminated, it reduces, rather than adding to, the stock of human knowledge.

Data on the percentage changes number of firms, employees, total payroll, and payroll per employee, by state, 2010-2014

A comment I read recently to a Facebook post commented on the large number of business failures that had occurred in California.  Now, the raw number of business failures is not exactly an interesting piece of information.  California had the largest number of firms in 2010 and in 2014 (690,000 and 725,000); it could easily have had the largest number of business failures and the smallest percentage of businesses that failed, simultaneously.  What is more interesting, I think, is to look at the data on the percentage changes in the number of businesses, in employment, and in payroll, by state.  Here. I’m using data for 2010 and 2014.1

First, for the US as a whole, the number of firms grew by 1,6% between 2010 and 2014, which is not a particularly exciting rate of growth.  Employment in these firms grew by 8.1%, which is about 2% per year, reasonable but not extraordinarily rapidly.  Total payroll grew by 20.2%, and payroll per employee by 11.9% (payroll per worker grew by about 2.7% per year, on average). 

For the most part, this is just a data dump.

Growth in the number of firms

Which states experienced the fastest (slowest) growth in the number of firms?

The five states with the fastest growth in the number of firms were (2010 rank in # of firms in parentheses)
North Dakota (48), +11.8% over the 4 years
Texas (4), +6.4%
Utah (33), 6.2%
Florida (3), 5.9%
California (1), 4.9%

Three of the fastest growing states were also in the top five states in number of firms in 2010.  Only one was a conspicuously small state.  (As already noted, the US average was 1.6%.)

The five states in which the number of firms contracted most rapidly (again, 2010 rank in parentheses)
New Mexico (38), -2.7%
Vermont (47), -2.7%
Mississippi (35), -2.9%
Alabama (26), -3.1%
West Virginia (42), -5.8%

All five of these stated ranked in the bottom half of the country in number of firms in 2010, and two were in the bottom 10.

Growth in Employment

The five fastest growing states in terms of employment were
North Dakota (48), +22.4%
Texas (4); 12.9%
Utah (33), 12.4%
Florida (3) 12.43%
Colorado (16), 11.6%

(California ranked 7th.  The US average was 8.1%.)

The slowest growth in employment also looks a lot like the slowest growth in the number of firms:
Maine(39), 2.4%
Alabama (26), 2.3%
New Mexico (38), 0.4%
Hew Hampshire (41), 0.1%
Vermont (47), -1.2%

(West Virginia had the 6th slowest growth in employment (2.6%).

Growth in Payroll

North Dakota certainly has had a very good few years:
North Dakota (48), 64.7%
Texas (4), 29.7%
Washington (13 ), 26.8%
Oklahoma (28), 26.2%
Utah (33), 26.0%

(Colorado ranked 6th and California ranked 7th.  Florida ranked 11th.  The US average was 11.2%.)

The five states with the slowest growth in payroll:
Alabama (26), 11.9%
New Hampshire (41), 11.2%
New Mexico (38), 10.8%
Connecticut (27), 9.9$
Vermont (47), 9.4%

West Virginia had the 9th slowest growth in payroll; Maine had the 6th slowest growth.)

Payroll per Worker

This measure has a greater representation of small states, and of places in which employment did not necessarily grow all that rapidly; 4 of the 5, though, have significant energy sectors.  But North Dakota once again leads the pack:
North Dakota (48), 7.7%
Washington (13), 3.9%
Montana (40), 3.8%
Wyoming (49), 3.6%
Oklahoma  (28), 3.6%

(California ranked 10th, Colorado 15th.  The US average was 2.7%.

------------------------------------------------

1. Data for 2010 can be found at http://www.census.gov/data/tables/2010/econ/susb/2010-susb-annual.html
Data for 2014 can be found at https://www.census.gov/data/tables/2014/econ/susb/2014-susb-annual.html

Monday, November 28, 2016

People and Places

At Vox Tim Lee has a useful, but incomplete, interview with Adam Ozimek, about migration from "dying" small towns to elsewhere.  I encourage you to read it, because it does make some useful points.  But it misses some other points that need to be emphasized.

When I was in graduate school (in economics) in West Virginia (studying, among other things, regional economics), the issue of the decline of small towns was a live topic for us.  It remains, for me, a topic of interest now that I am living (in retirement) in Indiana. 

Ozimek and Lee both begin with the very standard argument that people in economically declining towns (or regions) might be better off to move, and there is indeed a lot of outmigration--much of the population loss these places might experience is motivated precisely by the efforts people make to recover from the losses (of jobs, especially) in those declining places.  But the migration literature has also emphasized that migration is both costly and risky.  Those who move incur the costs of moving and of resettlement.  But they also incur social costs--the disruption of family and community ties, for example.  And migration is risky--migrants may not succeed in the places to which they move (indeed, back-migration is quite common).  All this is well known, and economists concerned with regional change have worried a lot about both the costs and the risks; it's not like these factors have been ignored.

Here, though, what I want to do is look at the declining small-to-medium sized cities and towns in Indiana.

In Indiana, there were, according to the 2010 Census, 64 cities or towns with populations between 10,000 and 50,000.  Of these, 24 more than doubled their populations between 1960 and 2010 (while the state population increased by about 40%.  Of these 24 cities and towns, 9 were within the Indianapolis metropolitan area and 8 were in northwest Indiana.  The other 7 were scattered around the state.  The "gaining" places in central Indiana grew by about 170,000 people; in northwest Indiana, they grew by about 134,000.  Overall, these 24 cities and towns gained about 442,000 in population between 1960 and 2010, an increase of about 125%.

Conversely, there were 11 cities and towns that lost population over the same time period.  Two of those--Michigan City and East Chicago--lost about 33,000 residents.  (But two large cities in northwest Indiana--Gary and Hammond--lost 129,000, about 45% of their combined 1960 populations.)  Overall, the declining cities and towns lost nearly 75,000 people between 1960 and 2010, a population loss of about 21%.

I want to look at the cities and towns that lost population, to see what, if anything we can learn from them.  I'll take that up in a subsequent post.

Friday, November 18, 2016

America and Immigrants

This provoked what follows:

I'm teaching US economic history this semester, and we've been talking a lot about immigration historically. But it means that I have had to look up some numbers, and here's one of them:

Between 1985 and 2014 (the most recent year for which I have data, the total number of people admitted to the US as permanent residents (these are all legal immigrants) amount to 36% of the increase in the population of the US between 1985 and 2014. (Note that this does not include any children of those legal immigrants; it obviously does not include any other immigrants--those on tourist or student visas, those who have entered the country in other ways).

Over 1/3 of out population growth in the last 30 years is directly attributable to legal immigration.

Now I look at this, and I look at what we know about the population and employment dynamics of the US economy, and I would say "Thank god for those immigrants" (if I believed in god). Because the percentage of the US population over age 65 (or 70, or 75, o8 80...) has risen, and will continue to rise, rapidly. And many of those immigrants are employed caring for people my age and older--in many cases, the parents or grandparents of people who so vocally condemn immigration in all its forms. Purely out of self interest, they (and I) should welcome those immigrants.

We've also talked about how immigrants--beginning with the Irish int he 1840s, and continuing with immigrants from eastern and southern Europe later in the nineteenth century, and immmigrants from Asia as well, were regarded as dangerous, or degraded, or not "really" human or good enough to be here. Now, the rhetoric is the same, but applied to a different group of people, people who are coming here for the same reasons--because this is a country where hope and opportunity have been beacons to people from countries where hope has been lost, and opportunity is, well, a dream.

So the anti-immigrant rhetoric and posturing--and policies--are a retreat from what truly did make America great--our welcoming of people who want to be here, who have over the last 200 years sacrificed to be here, and have made this a better, richer, more complex, and more interesting country.

Tuesday, November 15, 2016

Paul Ryan's Plan to Gut Medicare


Now that we have Republican majorities in both the House of Representatives and the Senate, and a Republican president-elect who seems likely to sign almost any domestic policy bill that Congress sends him, it’s worthwhile to look at what Paul Ryan wants to do with Medicare.  This (https://www.google.com/?gws_rd=ssl#q=paul+ryan%27s+plan+for+medicare) and this (https://www.washingtonpost.com/blogs/plum-line/wp/2016/11/15/paul-ryans-plan-to-phase-out-medicare-is-just-what-democrats-need/?utm_term=.82954beff9eb) are starting places.

More to the point, I thing, is this:  Medicare is explicitly an inter-generational social compact.  From the beginning, it has promised that if we support—by paying a Medicare tax as a part of our Social Security taxes—health care for our elders, the next generations will do the same for us.  And that is exactly how it has worked for 60 years.  My taxes paid to support Medicare benefits not only for my parents, but for everyone who became Medicare eligible between the mid-1970s and 2012.  People working today are paying Medicare taxes to support my health care (and those who will, I hope, follow after me).

What Paul Ryan proposes to do is to break that social compact.  He seeks to raise the age of eligibility to about 67, which will cause serious problems for people who have pre-existing chronic conditions, or who have worked for years in physically demanding jobs (coal mining, steel mills, nursing homes, and a multitude of others).  He seeks to make Medicare mostly into a private insurance scheme, run by for-profit insurance companies.  What I have been able to find does not make clear whether those policies will require coverage for pre-existing conditions, whether companies will be required to issue such policies.  It is clear, though, that participation by seniors will be voluntary.  So we run, once again, into the problem know as adverse selection.

Seniors with few (initial) health problems may have the option of not participating, leaving insurers with a less healthy, and probably an older, base of insured.  This will cause premiums to rise.  And the premium subsidies Ryan’s plan appears to offer are capped, and capped at a level well below what the premiums are likely to be.  Older, poorer, and sicker seniors will pay for this, with less access to health care, with a lower overall standard of living if they do buy private health insurance, and with almost a certainty of shorter lives.

If you are rich, no problem.  If you are not, this is a major problem.  It’s a big enough problem that I might be forced to join AARP—if that organization is opposing Ryan’s plan.

Monday, November 14, 2016

Worth reading.

I've been saying for years (nigh on to 45) when I have taught comparative advantage and the gains from (international) trade, that it is essential that we realize that "The US gains from international trade" is not the same as "Everyone in the US gains from international trade." (I occasionally drive by an empty lot on East Michigan Street in Indianapolis that used to be--and was, when I was in high ...school--the site of the largest television assembly plant in the world; it is now, and has been for years, a vacant lot. Not only has everything associated with making TVs gone away, there's a site that has to be more than 100 acres of urban land sitting empty.)

The US gains from international trade. But we have to use those gains so as to make sure that the economic activity that is displaced is *re*placed, and the people whose livelihood has been taken away, are assisted. What does that mean? It means thinking carefully about how we can develo/redevelop new economic activity--how can we create a climate (everywhere, if possible) in which new businesses can start up, and the successful ones flourish? How can we help people who might look at what happened to their last job, and who think they can create something? How can we help people whose skills (and experience) have lost some of their value develop new skills, or find new places to work? (Yes, relocation assistance.)

What we have done is say, "The US gains from international trade. But you guys--you women and men--whose jobs have gone, you women and men whose businesses have been rendered unprofitable--you are on your own."
 
We are a richer country, as a whole, because we have been willing to trade.
 
We need to be a country that makes sure that, insofar as possible, we all benefit from those gains.
And the political leadership of this country--Republican and Democratic--has failed here. (My own opinion is that the Democrats have at least tried to develop programs that work, but that's a different rant.)

Friday, November 11, 2016

Thoughts on the electoral college/popular vote discussion

You all do know that originally the "electors" in the electoral college were not elected by the voters in a state? They were selected by the state legislature in some cases and the governor in others. Each elector had two votes; the candidate receiving the largest number of votes was to be elected president & the candidate receiving the second largest number of votes, VP. In 1800, Jefferson & Burr tied (73 each) and the election was thrown into the House of Representatives. That only took 36 ballots to resolve. (It also resulted in an amendment to the constitution, which made the votes for president and vice-president separate. In 1824, four candidates received votes for president (Jackson, 99; JQ Adams, 81; William Crawford, 42; Henry Clay, 37). So we're back to the House--the second time, in 10 elections. This time, it only took 1 ballot, as Clay threw his support to Adams. In 1876, the vote in four states was contested, leaving the election in doubt. A "compromise" was reached, in which all 20 of the electoral votes (Florida, Louisiana, SC, and one elector from Oregon) to Hayes, with the payoff being the end of Reconstruction and the withdrawal of troops from the south. Oh, and in 1860, there was not a problem in the electoral college, because one party managed to run three candidates...
 
And, almost always (since we began counting popular votes--in 1824), the candidate with a plurality (usually a majority) of the popular vote won in the electoral college. The exceptions:
 
1824 Elected: Adams. Plurality: Jackson
1876 Elected: Hayes . Plurality: Tilden
1888 Elected: Harrison. Plurality: Cleveland
2000 Elected GW Bush. Plurality: Gore
2012 Elected Trump. Plurality H. Clinton

So switching would not, historically, have made much difference (although, in my opinion, four of those winners were not so good). And in all 5 cases, the popular vote was pretty close; it's not clear whether the results would have been different had the election been based on the popular vote--because campaign tactics would have changed.

Also, from the perspective of those who oppose the electoral college system, the current method essentially means that votes cast in a state only "matter" if your candidate wins the election. Which sort of leads to an obvious question: Why are electoral votes assigned on an all-or-nothing bais, except in two states? In 2000, for example, allocating the electoral college votes between Bush and Gore as a percentage of their popular votes in the states (rounding up if the allocated vote was, for example 6.51 and down if it were 6.49), Bush would still have won--with the same 271 EV total, but very differently distributed.

Note that if you allocate EV as a % of the popular vote, you give candidates a very strong incentive to compete in every state. "Writing off" a state will reduce your share of the EV in that state, but without a necessary gain in another state. 
 
(Personally, I think that the same thing applies if you just use the popular vote. Right now, Republicans tend to write off New York and California and Oregon and Washington instead of contesting them. Democrats tend to write off much of the south and plains states. If their vote totals in those states mattered, we might see truly national campaigns from both parties.)