A few links to click through to.

July 13th, 2017 at 9:05 am

First, there’s this WaPo piece on an important benefit of full employment: the closure of racial unemployment gaps. The piece links to a new Fed study that’s worth a close look. Nothing OTE’ers wouldn’t know given my emphasis on the disproportionate benefits of tight labor markets to less advantaged groups, but the Fed study provides a nice, deep dive into the issue. It’s important to remember that the survey data on which this work is based excludes the incarcerated, which is an increasingly big omission for minorities, especially blacks, over this period. In a sense, many labor market indicators for blacks are biased up as those with weaker labor force attachment are removed from the sample.

End of the day, though, if you said I could do two and only two things to help black workers, I’d pursue:
–full employment with direct job creation (with a training component)
–criminal justice reform.

If you relaxed the “two” restriction, I’d add the stuff Ben S and I talk about in our latest TAP piece.

Second, I think many OTEers would enjoy this symposium in the journal Democracy, curated and summarized by yours truly. As Dean Baker points out, and I agree, post-real macro is alive and well and doing all sorts of damage to policy, though as Furman and Friedman discuss, there’s room for hope in various corners of the profession. And yes, despite our efforts, it’s yet another a white-male fest, which is certainly part of the problem.

Back from China and ready to roll!

July 12th, 2017 at 8:10 am

IE, to roll over and catch up on sleep after long travel.

But glad to be back and looking forward to sharing some impressions and pics. A few preliminary thoughts (and one announcement about a cool upcoming event).

–Obviously, you can’t summarize China, or any other country, in a bullet point, but if I had to do so, I’d say: beautiful, crowded, hot, historical, and in a world of increasing homogeneity, still really unique.

–One of the biggest challenges, which I really enjoyed though it often led to frustration, is the language barrier. Google translator helps a lot (though see next bullet), but just going out to buy contact solution turned out to be an adventure, including people drawing maps that made as much sense to me as the Laffer Curve. I’m proud to say I learned about five words in Mandarin that could be reliably understood, after some initial laughter.

–The Great Firewall–the Chinese blockage of parts of the internet–is really unfortunate. Google, Twitter, much more are behind it, though VPNs, allowable for visitors, get around it. But it was a potent reminder of the extent of government control.

–Another eg of that last point: I read the China Daily everyday over there (good bit of free advice: always wake up in new places by reading their newspaper). It’s fascinatingly different from what we’re used to here. Basically, almost every column is scrubbed to be upbeat about what a great job the government is doing to deal with the challenges facing the country.

–And, in fact, there are many signs of precisely that. The bullet train system is a marvel and WAY past ours. We took many long, beautiful, fast, comfortable, reliable train rides through gorgeous country. The amount of resources they’re throwing at infrastructure is in-your-face obvious. Even small’ish towns–which means 3 million over there–have train stations that look like new airports here.

–At least in the cities and towns, i.e., all but the rural areas (though I think this goes on there too), they set the unemployment rate where they want it (very low) through direct job creation. Broadly speaking, able-bodied people have to work and most are given very low-level jobs like street cleaners. This means, btw, that you don’t see litter on the streets. Readers know I’ve been thinking about applying direct job creation over here to solve persistent pockets of unemployment, so I found this interesting, revealing, and generally positive.

–The people we met were great and often willing to try to help us. I already did so, but I plan to significantly ramp up my efforts to help confused, international tourists here. That said, there is less cultural stigma in China attached to intensely staring at and apparently commenting on strangers with big noses.

Ok, much more to come once I’m back among the living. Big bonus points for anyone who can identify where the photo below was taken.

Oh, about that cool event: on July 27-29, I’ll be participating in KentPresents, an ideas festival in Kent, CT. I’ll be on panels with Paul Krugman and many other stars of the field discussing health care, inequality, global econ, and more. If you’re around please show up and say “hi!”

 

That Seattle minimum wage study has some curious results.

June 26th, 2017 at 7:13 pm

[I’m outta town with very shaky internet access, but wanted to make a tiny bit of noise about this.]

I’m quoted in this story about a new paper on the Seattle minimum wage increase–it’s in the process of phasing up to $15/hr–as follows:

“The literature shows that moderate minimum wage increases seem to consistently have their intended effects, [but] you have to admit that the increases that we’re now contemplating go beyond moderate. That doesn’t mean, however, that you know what the outcome is going to be. You have to test it, you have to scrutinize it, which is why Seattle is a great test case.”

I still think that. But I also think something seems pretty “off” with the study, reviewed here by the WaPo.

–How could they get such job- and income-loss effects for low-wage workers in Seattle relative to their controls with such tiny wage effects? This is especially curious when considering the excellent point made by Schmitt and Zipperer, who critically review the Seattle study, that compared to Seattle’s relatively high wage base, $13/hr isn’t that far out of the usual range (be sure to read their critique).

–It seems extremely unlikely that increasing the min wg to $13 leads to job growth for those making >$19. I can’t think of any labor market logic to that.

–The Seattle economy is doing really well, with solid job and wage growth amidst very low unemployment. I’d think that if the increase threw such a large wrench into the low-wage labor market as this study suggests, we’d see it in the broader economic statistics.

When you have an outlier study–their negative results are huge multiples of past research—with such unusual “internals,” there may be something wrong. It could be the multi-establishment firms they left out, though if the increase is whacking smaller firms, that’s a problem too.

So I suspect their control cohort—the other parts of the state that are serving as a control—is non-independent of the Seattle increase. This new study from Allegretto et al doesn’t have the granular data available to the Seattle researchers but it uses what looks to me like a more credible control cohort and finds the Seattle increase to be having its intended effect.

Like I said, those of us who support out-of-sample min wg increases need to scrutinize the Seattle experience closely, and protect against confirmation bias. This time may actually be different. But you really don’t want to make that claim based on one extreme outlier study with some eyebrow-raising quirks.

Links: Recession risks; the really, really bad Senate GOP health plan; see ya later…

June 22nd, 2017 at 10:16 pm

A few links to check out, both over at WaPo.

First, no one knows when the next recession will hit though it’s closer now than when I started writing this sentence. But I’ve got two recessionary concerns: one, fiscal policy, both discretionary and automatic will be thoroughly insufficient due to the toxic mix of Congressional dysfunction and austerity; two, financial deregulation will raise the likelihood of another bubble.

Second, the Senate health care plan is worse than the House plan. Specifically, it’s pretty much the House plan but with much deeper Medicaid cuts over the long term.

Finally, I’m outta here, headed for the far-east for a few weeks, and I’m gonna do my best not to cast my gaze westward. You know what that means, right? It means that you, OTE’ers, have to keep the forces of economic darkness from gaining any ground in my absence. Be assured, I’ll hold you personally responsible if the sh__ goes south while I go east.

Best,
JB

Here’s an idea: let’s have Congress micromanage the Fed…what could go wrong?

June 19th, 2017 at 9:50 am

Over at WaPo. In preparing for something, I was reading the text of the Choice Act–that’s the financial deregulation bill the House recently passed (there’s a link in the piece). I knew the Act included some pretty invasive Fed oversight but when I actually read the legislation (Title X), the old jaw dropped. It writes down the ’93 version of the “Taylor rule” (read the piece for details), and makes the Fed have to jump through hoops if they use any discretion in its application.

My piece focuses on why such rigid rules-based policy making is a terrible idea, as it would undermine both the Fed’s analytic flexibility and their political independence. The latter is particularly toxic given the relative functionality of the Fed versus the Congress.

But there was one point I left out of the WaPo piece, which was already way too long.

What are House conservatives really up to here? Surely, they’ve not thought through the implications of insisting on the use of 0.5 as the coefficient on the slack variable in the rule. Much as you can interpret any hard-right legislation as motivated by shrinking gov’t to provide tax cuts for rich people, so can you interpret anything in the regulatory space as allowing firms to do whatever they want to maximize profits without concerns for negative externalities, like blowing up the economy.

That dynamic is clearly represented in the Choice Act in general, which is mostly about unwinding Dodd-Frank (as I note, it requires 60 votes in the Senate, so it may well be blocked, but the financial lobby is aggressive and deep-pocketed).

But the target of this Fed mishegas may be a bit more nuanced than that: conservatives have long been gunning to reduce the Fed’s dual mandate–full employment at stable prices–to a sole mandate of stable prices. After all, full employment gives workers more bargaining power, and higher inflation can erodes asset values. Note that the “reference rule” in Title X (see my piece) returns an Fed funds rate of over 3% right now, versus the 1% to which the Fed just raised.

Congressional conservatives want more Fed oversight so they can fight against “easy money,” any inflation at all, and the haunting specter of full employment.