Comments Guidelines

All comments are pre-moderated. No spam, slurs, personal attacks, or foul language will be allowed.

Thursday, March 20, 2014

Real Wages Rise Slightly but Remain below Peak for 41st Straight Year

Remember the Economic Report of the President? If you've been reading this blog for at least a year, of course you do. It's where we get our annual data on real wages (and apparently some other stuff, too). The 2014 edition was released on March 10. As you may recall, I made my first post on the declining real wage trend through 2011 and was literally the first person to notice 2012's further slight decline.

The good news is that, in what is now Table B-15 rather than B-47, real wages advanced somewhat in 2013, from $294.31 per week (in 1982-84 dollars) to $295.51, an increase of 0.4%. Woo hoo!

The bad news, of course, is that this is still 13.5% off the peak real weekly wage of $341.73, achieved in 1972. One swallow doesn't make a spring, and all that.

Interestingly, last week Paul Krugman felt compelled to argue that real wages aren't going up all that fast, but so what if they did? He said that basically, this was something primarily only visible in the real hourly (my emphasis) wages of production and non-supervisory workers, which happens to be one of the components of Table B-15. However, he was reporting based on the Bureau of Labor Statistics' monthly reporting of this stat.

As he puts it, the folks he is criticizing are saying that "a dangerous acceleration in the pace of wage increases is already underway. Time to raise interest rates!" His response to them is fine as far as it goes, but he misses that even on the terrain of the supposedly most rapidly increasing measure, there is no there there.

Table A-2. Current and real (constant 1982-1984 dollars) earnings for production and nonsupervisory employees on private nonfarm payrolls, seasonally adjusted(1)

Feb.
2013
Dec.
2013
Jan.
2014(p)
Feb.
2014(p)
Real average hourly earnings(2)
$8.73 $8.81 $8.83 $8.86
Real average weekly earnings(2)
$294.96 $295.22 $295.69 $295.08
Consumer Price Index for Urban Wage Earners and Clerical Workers
229.180 230.919 231.233 231.344
Average hourly earnings
$20.00 $20.35 $20.41 $20.50
Average weekly hours
33.8 33.5 33.5 33.3
Average weekly earnings
$676.00 $681.73 $683.74 $682.65
OVER-THE-MONTH PERCENT CHANGE
Real average hourly earnings(2)
-0.3 -0.1 0.2 0.3
Real average weekly earnings(2)
0.2 -0.6 0.2 -0.2
Consumer Price Index for Urban Wage Earners and Clerical Workers
0.6 0.3 0.1 0.0
Average hourly earnings
0.3 0.2 0.3 0.4
Average weekly hours
0.6 -0.6 0.0 -0.6
Average weekly earnings
0.8 -0.3 0.3 -0.2
OVER-THE-YEAR PERCENT CHANGE
Real average hourly earnings(2)
0.1 0.8 0.8 1.5
Real average weekly earnings(2)
0.4 0.2 0.4 0.0
Consumer Price Index for Urban Wage Earners and Clerical Workers
1.9 1.5 1.6 0.9
Average hourly earnings
2.0 2.3 2.3 2.5
Average weekly hours
0.3 -0.6 -0.3 -1.5
Average weekly earnings
2.3 1.7 2.0 1.0
Source: Bureau of Labor Statistics (link above), footnotes omitted

First of all, we should remember that a couple months' trend is not really equal to a 41-year trend. That kind of error we'll leave to Reinhart and Rogoff.

Second, we can see the "scary" number: nominal hourly earnings increased from $20.00 in February 2013 to $20.50 in February 2014, or 2.5%.

Third, we know that we actually want to adjust that for inflation; hence we find that real hourly earnings went from $8.73 in February 2013 (1982-84 dollars) to $8.86 in February 2014, or just 1.5%,

Fourth, what Krugman appears to miss is that average weekly hours have fallen substantially since 1972. In fact, as the BLS table shows, they fell by half an hour, from 33.8 to 33.3 hours, from February 2013 to February 2014, or 1.5%.

You can see where this is going now: Real weekly earnings went up by 0. More precisely, 0.04%. And you'll note that the February 2014 figure is lower than the full-year 2013 level. So there is actually no increase to explain in the production/non-supervisory workers series.

But Krugman does hit the nail on the head: "What's so bad about rising wages?" And the answer, of course, is "Absolutely nothing." ("Say it again!")

Cross-posted at Angry Bear.

Saturday, March 15, 2014

RIP BartCop

I'm a little late on this, but I would be remiss if I did not mention the recent death of Terry Coppage, aka BartCop. Bart died March 5th at the age of 60, from complications of the flu, pneumonia, and leukemia.

Bart was one of the pioneers of the liberal blogosphere, starting out in February 1996 with an email newsletter that was converted to web pages by Marc Perkel. He gave much support to new bloggers, including luminaries like Digby and Atrios. Though I never knew him, I am in his debt as well. The affiliated site, Marty Pflugrath's BartCop Entertainment, was the first to permanently and prominently link to me.

In his final column, Bart requested financial help for his wife to help pay for his medical bills. You can send a PayPal payment to bartcop@bartcop.com. If you still use checks, you could send a contribution to bartcop.com, PO Box 54466, Tulsa, OK 74155.

Saturday, March 8, 2014

Hawaii Cuts Uninsured Population in Half

In case you haven't seen Charles Gaba's great website ACAsignups.net, you really need to see it. It is the best source available for tracking Obamacare enrollments, covering all categories of signups, including Medicaid, the federal and state exchanges, off-exchange signups, and estimated under-26ers.

One of the most notable achievements of Obamacare is in the President's birthplace, Hawaii, where the number of uninsured people has already fallen by more than half, despite having a horrible website for the state-run exchange. The biggest chunk of this is through Medicaid enrollments, both people newly eligible and those previously eligible who had not signed up ("woodworkers," people who've come out of the woodwork). Here are the totals:

Uninsured: 102,000
Medicaid: 48,000
Exchange: 4,661
Off-exchange: 4,000

Total newly insured: 56,661, or 55.6%.

Moreover, approximately 10,000 Hawaii residents are ineligible for Medicaid or ACA subsidies due to their immigration status, so the state is doing very well indeed.

For those of you who haven't seen it, below is Gaba's pride and joy, "The Graph." It's the best visual interpretation we have of how signups have proceeded since the rollout of Obamacare October 1. Note that we can expect a big last-minute rush over the final weeks of open enrollment, so we will see soon just how well the first year's signups have gone.

Cross-posted at Angry Bear.

Source: ACAsignups.net

The Graph










Tuesday, February 25, 2014

Surprise! Most Subsidies Go to Big Business

A new Good Jobs First study confirms what many of us have long suspected: Most subsidies go to big companies. For the first time, though, we have an estimate of just how much of this government largesse goes to the biggest firms: 75%. $110 billion, to put it in dollar terms. The Fortune 500 alone have received $63 billion of that.

This report is based on recently completed work on the Subsidy Tracker database, connecting data for parent and subsidiary companies. This revealed that 965 parent firms received that $110 billion, some 3/4 of the total amounts disclosed in the database. It also turns out that some firms you might not associate with a lot of subsidies actually receive them through subsidiaries with completely different names.

One example of this is Berkshire Hathaway, which in 310 separate subsidy deals has received over $1.06 billion. The subsidiaries receiving incentive packages, include the following: "Geico, NetJets, Nebraska Furniture Mart, General Re Corporation, Lubrizol Advanced Materials, and Webb Wheel Products."

16 other firms, led of course by Boeing, have also received more than $1 billion in total. Boeing's $13 billion total is followed by Alcoa at $5.6 billion, Intel with $3.9 billion, General Motors receiving $3.5 billion, and Ford totaling $2.5 billion(all figures in nominal dollars). An amazing 182 companies have received cumulative subsidies of over $100 million.

The 965 parent companies have, on average, 26 deals and a cumulative subsidy average of $102 million.

David Cay Johnston points out that Alcoa's subsidies account for 189 years' worth of profits based on the company's results for the last four years.This reinforces something I argued in Investment Incentives and the Global Competition for Capital, that while subsidies may only represent a small portion of a company's costs, they can make up a large portion of its profits (my example was Advanced Micro Devices, now Global Foundries).

Johnston concludes appropriately:
Taxpayers who want to understand the full dimension of their burdens should demand that Congress require and pay for detailed annual statistical reports showing every federal, state and local subsidy received by corporations, including the value of indirect subsidies like those perpetual rights of way to pipelines and other legal monopolies.
 Transparency remains the name of the game. As citizens become more aware of the huge costs that subsidies impose on us, the bigger a political issue it will become. This new report is another feather in the cap for Good Jobs First's promotion of transparency.

Wednesday, February 19, 2014

The CBO Whiffs on the Minimum Wage

The Congressional Budget Office has just issued a report on the minimum wage that is a real head-scratcher. Analyzing proposals to raise the minimum wage to $9.00 or $10.10 per hour, it concludes in the latter case that there would be 500,000 fewer jobs in the second half of 2016 than there would be under current law (100,000 fewer for $9.00/hr.).

Predictably, conservatives have seized on this number as proof that the minimum wage is a "job killer." Even liberal media, such as Talking Points Memo in this paragraph's link, seem to think that number is a big problem, going on to say, "It's not all bad, though, for one of the centerpieces of Democrats' middle-class agenda ahead of the November congressional elections," as if the CBO report were mostly bad news for Democrats.

There are two problems with these claims. First, the CBO's calculations undervalue the best research on the minimum wage. Second, even in the CBO's estimated world, low wage workers are much better off as a whole than under the current $7.25/hr. minimum wage.

As I've discussed before, a relatively crude cross-national comparison of rich countries' minimum wages and unemployment rates does nothing to suggest any job-killing is going on. But the CBO's estimation procedure has serious flaws. It begins (p. 6) with what it calls "conventional economic analysis," which is already a big mistake. Simple Econ 101 reasoning (when the price of something goes up, the quantity purchased goes down) has had only sketchy empirical support, something that has been especially clear from meta-analysis of minimum wage studies (ungated version of Doucouliagos and Stanley 2009 here).

The CBO, of course, has heard of these studies, but it remains with a non-transparent explanation of how it weighted different studies (p. 22), saying it gave the most weight to contiguous state comparison studies. The only thing is, according to Arindajit Dube, these are the studies least likely to find a negative employment effect. Thus, how CBO ends up with a baseline of job loss remains mystifying.

Okay, so 500,000 fewer jobs isn't entirely plausible then, but what if we accept for the moment that it is? As Jared Bernstein and Dean Baker point out, there are still far more winners (16.5 million direct, another 8 million indirect--the latter being workers just above $10.10 who would probably see raises) than losers (0.5 million among low-wage workers; the rest are people with high incomes) in this scenario. And as Baker emphasizes, "...we are not going to see 500,000 designated losers who are permanently unemployed as a result of this policy." Instead, what will happen is people will work 2% fewer hours at an hourly rate that is 39.3% higher.

The math is simple: 0.98 X 1.393 = 1.365. In other words, low-wage workers will see their income increase, on average 36.5%. And this is the worst-case scenario!

I've said it before, and I'll say it again: the minimum wage is a winner both economically and politically.

Cross-posted at Angry Bear.

Wednesday, February 12, 2014

Show Me the (Subsidy) Spreadsheets!

Good Jobs First's new report, Show Us the Subsidized Jobs, is its third assessment of state subsidy transparency, following up on reports published in 2007 and 2010. The good news is that transparency continues to spread: From 23 states in 2007 to 37 in 2010 to 47 plus the District of Columbia in 2014.* The bad news is that for most states, online transparency still has a long way to go.

Why is transparency important? As the reports says, without it, it
makes it impossible for the public to get at
even the most basic return on investment,
accountability or equity questions. Which
companies received subsidies (and what
kinds of companies)? Are they delivering
on job creation? How good are the new
jobs? Where will the jobs be located?
Reasonable people cannot have an
informed debate and policymakers cannot
watch the store without good job-subsidy
data.
Moreover, the cost of state (and local, much more poorly reported on) subsidies comes to some $70 billion a  year, according to my estimates. Moreover, there is a tremendous opportunity cost associated with this: While of course some jobs cost more and some cost less, at $50,000 per year in salary and benefits, that is enough money to hire 1.4 million state and local workers, more than have been laid off since the start of the recession.

Good Jobs First toughened its scoring system this year, making the raw numbers not directly comparable with previous reports. In particular, there is more emphasis on publishing outcome data such as jobs actually created, wage levels, etc. It is also important to note that the report only counts online transparency: If a state agency will give you some information on request, that's nice but won't improve a state's score. We live in a wired world, obviously, so transparency performance should conform to that.

On its 0-100 scale, the best performing states are:

1) Illinois 65
2) Michigan 58
3) North Carolina 48
4) Wisconsin 46
5) Vermont 43

Even these have a long way to go, especially on job outcomes. But they are doing far better than the 14 states with scores below 10 (including Arkansas' corrected score of 8). For example, Georgia, at 4 points, gets demerits because two of its major programs take down the reports a mere 30 days after they are posted.

Taking down data is a pet peeve of mine. Missouri, which ties for 14th for its reporting of state programs, also has quite good data online for local tax increment financing (TIF) subsidies, because the cities are required to file annual reports with the Missouri Department of Economic Development on a project-by-project basis. This requirement was given new teeth a few years ago, so the reports are now close to complete for recent TIF projects. Moreover, they have always been required to give both projected and actual job creation data (though not wage data). The reports provide the amount of the subsidy and the amount of the investment, allowing for the calculation of what the European Union calls "aid intensity," which is the ratio of the subsidy to the investment. This is an important measure, because one obvious reform that could be made for any subsidy program is to cap its aid intensity. Why should Electrolux get a 99% free new factory in Memphis?

However, Missouri TIF reporting has long been hampered by projects that are listed in one year's report disappearing in later reports. Moreover, all the old reports have been taken down by the state, making historical research (trends in aid intensity, anyone?) next to impossible. What I personally have by way of historical TIF data I obtained by hand transcribing information from the pdf format reports onto a spreadsheet. But obviously the state keeps these files somewhere, and Department of Economic Development officials in all probability have a master spreadsheet encompassing all project reports received. The ideal for research and democratic accountability purposes is simple: Show me the spreadsheets!



* The report says 46 states, but after its publication Arkansas belatedly identified two programs with online disclosure. This leaves only Delaware, Idaho, and Kansas as the only states with no online disclosure of their subsidy programs.

Cross-posted at Angry Bear.

Friday, January 31, 2014

Obamacare Roundup: Great enrollments for Wellpoint; "Bette from Spokane" debunked

Via Joan McCarter, we learn that Wellpoint, which runs a number of for-profit Blue Cross/Blue Shield insurance plans, reported on an investor's conference call that it expects to add over one million new policyholders this year and that its enrollments are much better than expectations. Of 500,000 enrolled so far, fully 80% of them came to the company via the exchanges. Of that amount, 2/3 were eligible to receive subsidies for their insurance premiums.

Of course, for those of us who support single payer, giving money to private insurers is a mixed blessing. We'd be better off without them, but under our current political situation, this is the best we will be able to do for the uninsured for a while. As McCarter points out, stories like this mean that Obamacare is going to be unrepealable soon, if it isn't already.

Meanwhile, if you could stomach listening to the first Republican response to President Obama's State of the Union address Tuesday, you heard Rep. Cathy McMorris Rodger (R-WA) tell the plight of a woman she called "Bette in Spokane," who supposedly had to pay "nearly $700 per month" more for her health insurance, after her insurance company canceled her old plan.

As with many other such stories, this one has collapsed under scrutiny. As the linked article shows, Bette Grenier had had a catastrophic plan canceled, and she only compared it to the price of a Gold-level policy her insurer suggested as a replacement. Not only were cheaper policies available, she told the paper she would not go on the state exchange to look for a policy, even though this would likely have saved her even more money compared to the one her insurance company offered. She told the paper she and her husband planned to go without insurance.

As Paul Krugman (who pointed me to the Spokane link) notes, there is a reason why catastrophic plans aren't allowed: "If you’re allowed to have insurance that barely covers anything, that’s almost the same as not participating at all." Which appears to be exactly what's happening in this case.

Cross-posted at Angry Bear.