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Friday, September 16, 2011

Boeing in South Carolina: Huge Subsidies, and a Labor Dispute

Boeing's decision to add an assembly line for its new Dreamliner aircraft in South Carolina has touched off a firestorm of controversy. The first facility, on Boeing's home of Washington state, received the country's largest-ever package of state and local incentives, totaling $160 million a year for 20 years, a nominal value of $3.2 billion that I calculated to have a present value of just shy of $2 billion. The World Trade Organization (WTO) ruled in January that this subsidy violated the terms of the 1994 Agreement on Subsidies and Countervailing Measures, but that decision is now under appeal.

Meanwhile, South Carolina has given Boeing a package thought to be worth over $900 million  to open a new assembly line for the Dreamliner. The European Union will no doubt bring a complaint against this subsidy at the WTO and, in all likelihood, again will win.

The biggest battle over the South Carolina assembly line erupted when Boeing CEO Jim Albaugh said that the decision had been motivated by strikes at its facilities in Washington (, h/t Matt Yglesias). This was a no-no: the National Labor Relations Act protects workers who exercise their rights to form a union or to strike from retaliation by the company. One obvious reading of Albaugh's statement is that he was admitting that the company broke the law. Therefore, it is not surprising that the National Labor Relations Board (NLRB) filed a complaint against Boeing.

Whether the NLRB will win its case is less certain. How is it “retaliation” if no workers in Washington lose their job and 5,000 more union workers there get jobs? As labor law professor Jeffrey Hirsch explains, it comes down to intent: the NLRB will use the statements of Albaugh and other Boeing officials against them, while Boeing will argue that the decision was not motivated by retaliation, but was purely an economic decision. The first hearing in the case is scheduled for later this month, and then we will see what an administrative law judge rules.

In the meantime, though, Congressional Republicans have been in an uproar, with the House passing a bill yesterday that would prohibit the NLRB from ordering the relocation of workers. While this bill is unlikely to go anywhere in the Senate, it is interesting that Boeing itself has “remained on the sidelines,” as The Hill  put it yesterday.

Whatever the outcome of the labor dispute, it's clear that we have yet another example of a gigantic subsidy for a mobile company that can well afford to make the investment on its own. Regardless of whether the subsidies violate WTO rules (and I think they do), they take money from average taxpayers to give Boeing at a time when many states, including South Carolina, face severe deficits.

Wednesday, September 14, 2011

ACA Works for Young Adults as Planned; Percentage of Uninsured Hispanics also Falls

On Tuesday, the Census Bureau released its annual report on income, poverty, and health insurance for the year 2010. Based on surveys at approximately 100,000 addresses conducted primarily in March 2011, the Current Population Survey Annual Social and Economic Supplement found that the number of uninsured in the U.S. rose by 919,000, from 49.0 to 49.9 million (see Table 8). (Note that this reflects a downward revision in the estimate for uninsured in 2009.) There were two bright spots in the data, however, for young adults and Hispanics.

On September 23, 2010, one of the most significant early provisions of the Affordable Care Act (ACA) went into effect, allowing young adults to stay on their parents' insurance until they turned 26 years old. The Census Bureau report shows that this provision was used by a substantial number of people. Since this provision affected 19-25 year olds, the report broke out the data separately for this age group: 393,000 fewer of them were uninsured in 2010 than in 2009, with the percentage uninsured falling from 31.4% to 29.7%; both of these changes were statistically significant. This shows that the Affordable Care Act worked precisely as planned for young adults.

In addition, the percentage of uninsured Hispanics fell by a statistically significant 0.9 percentage points, from 31.6% to 30.7%, between 2009 and 2010. While the fall in the number uninsured was small (110,000) and statistically not significant, when combined with an increase in the Hispanic population of over 1 million, the percentage change was substantial. The report does not speculate on the reason more Hispanics were insured. Indeed, despite the fact that the poverty rate increased among Hispanics by 1.3 percentage points (Table 4), the number of Hispanics insured under every category of insurance, private and public, increased between 2009 and 2010. For example, almost 900,000 more Hispanics had insurance through their employers, even as non-Hispanic whites had a drop of 1.9 million receiving insurance through their employers (Table C-2).

Despite this improvement, Hispanics were by far the ethnic group most likely to suffer being uninsured. Their rate of 30.7% uninsured compares unfavorably with blacks (20.8%), Asians (18.1%), and non-Hispanic whites (11.7%).

Given the fact that the uninsurance rate among 19-25 year olds is still almost 30%, there would seem to be a good possibility that we will see even more improvement here after this fall's annual enrollment periods, thanks to the ACA.

Tuesday, September 13, 2011

Employment to Population Ratio a Better Predictor of Uninsurance than Unemployment Rate

Commenter David Littleboy at The Incidental Economist, where my unemployment/jobs post was linked, makes the good point that the employment to population ratio might be a better predictor of uninsurance than the unemployment rate. Over the period covered by the Gallup surveys I reference (2008-June 2011), the data bear him out. The employment/population ratio falls over the entire period, and the uninsured rate rises the whole period. Not only that, the employment/population ratio catches the big one-month rise in uninsurance between May and June found in Gallup's polling.

That said, he doesn't disagree that adding jobs is our best short-term method for insuring more people until the ACA's individual mandate comes into effect in 2014.

I've got no problems with finding the best possible measure for things we're interested in. And it gives me an idea for a better measure of states' employment performance since the recession began...

Sunday, September 11, 2011

Increase in Uninsured Rate Shows Need for Action on Jobs

“Gallup: Uninsured Have Increased Under Obama and Since Obamacare Was Enacted,” blares the headline at CNSnews and a number of other conservative sites that picked up the story (thanks to a non-blogger friend for pointing me to this). The implication is that Obama and the Affordable Care Act have failed, though the article is careful to point out that the mandate does not come into effect until 2014. Indeed, the article makes no claims to explaining why this happened.

As two Gallup surveys show, 14.8% of adults were uninsured in 2008, 16.2% in 2009, 16.4% in 2010, and 16.8% in the first half of 2011. In fact, the results in June had to have been dreadful, because Gallup's January-May polling only gave a 2011 figure of 16.6%, and June results pushed the figure to 16.8%.

Similar, but less quickly reported, numbers come from the Census Bureau. As reported by the Kaiser Family Foundation in September 2010, the uninsured rate for all Americans was 15.4% in 2008 and 16.7% in 2009. Since the percentage of children uninsured in both years was about 10%, this implies even higher uninsured rates for adults than Gallup found.

What were the causes of this increase? Using the Gallup data since it is more recent, fully 70% of the increase (1.4 of 2.0 points) came from 2008 to 2009, when the full-year unemployment rate rose from 5.8% to 9.3%, as mentioned in the Kaiser article. Yet unemployment peaked at 10.1% in October 2009 and is down to 9.1% in August 2011, so it isn't simply unemployment since the uninsured rate has continued to rise. The other main cause would appear to be reduced employer provision of health care, whether through plan suspension, unaffordability, or of course job loss. According to Gallup's data, the percentage of adults with employer-provided insurance declined from 49.2% in 2008 to 45.0% in January-May 2011.  The figure in 2010 was 45.8%, meaning that employer-based insurance fell even though there was no increase in unemployment.

Reversing this trend requires the full implementation of the Affordable Care Act, of course, but in the short run, these data underline the importance of job creation, since that is still by far the most common source of health insurance. Whether President Obama's jobs plan will pass is hard to gauge (though I think it's improbable), but without it, we are likely to see continuing increases in the number of uninsured. In addition, we should pay attention to Medicaid, which may cover fewer people due to state budget crises.