What We Would Do If We Could Do What We Should Do

February 7th, 2014 at 4:00 pm

On the jobs front, that is.   Over at the NYT Economix blog.

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12 comments in reply to "What We Would Do If We Could Do What We Should Do"

  1. smith says:

    i would argue against giving wage subsidies for jobs, a direct form of corporate welfare. It gives an unfair competitive advantage to the fortunate employers receiving subsidies, 1/3 of the jobs would be created anyway, the other 2/3 are suspect (those gaming the system would not necessarily admit it). It drives wages down, creates an unprofitable business model distorting the market (or subsidy wouldn’t be needed). The government should instead either hire more workers for programs in need of expansion, or contract out projects for work needed, which includes infrastructure, research and development, and education. The way to create more jobs is to actually create more jobs. Subsidies are more like a privatization of public functions, and rely on private enterprise to dictate how public resources should be spent. Plain old New Deal like spending ensures public control over how and where our tax dollars are spent.

    • Fred Donaldson says:

      It’s no coincidence that the most rabid austerity lovers and tax cutters seem to love the Earned Income Tax Credit (which, oddly, you can’t use after age 65, even if you work and are not retired). If workers were supposed to live on some wages, they would be housed in cardboard boxes. In comes the government with subsidies so the wage slaves can make it through another cold night, ready for the workforce the next morning.

  2. Larry Signor says:

    “Plain old New Deal like spending…”. Means tested and proven to be effective. “Subsidies” are a big red target for conservatives. We don’t need to give the tea baggers (et.al.) any more spurious arguments. The recent CBO report is an example of their “mole hill” mentality.Good, secure jobs, not welfare(corporate of individual), should be the goal. Anything less is short selling to a psuedo-philosophy.

  3. Arnold Ruff says:

    We need to wake up to the truth! It’s EDUCATION stupid! With Education you save America and the middle class! See law suit against California in, Vergara v. California: Marching Toward a Dream Still Denied. By law firm Gibson Dunn with lead attorney’s Marcellus McRae and Theodore J. Boutrous Jr. Must read “Quality Education A Basic Civil Right” as printed in San Diego Union Tribune; page B7 on 02/07/2014.

    To save our youth for a better America and allow them to earn the American Dream which can only become a reality with an Educational Foundation! WARNING; Stop unions from protecting bad teachers and stop teachers from imparting their personal political philosophy by just following the curriculum period! Stop “One-Sided Education” and eliminate Brain-Washing! I have the proof!

  4. Perplexed says:

    “I’d like to see someone step forward and say they’re as tired as I am”

    But keep in mind that if you’re going to step forward, your solutions must fit into our (as in economists and their employer constituents) preconceived definitions of “allowable solutions” that won’t in any way alter the existing power structure. We must not allow equal protection under the law to enable “laborers” to pool the risk of being unemployed by giving them protections afforded to producers of ALL OTHER COMMODITIES and SERVICES under the 1914 Clayton Act as this might decrease the coercive power of employers vis-a- vis laborers, a change that cannot be allowed under any circumstances, regardless of its impact on employment and welfare.

    “… month after month of underwhelming jobs numbers as families struggle to get ahead.”

    The Clayton Act was signed in 1914, 100 years is hardly captured by the phrase “months and months.”

    “And even though the politics isn’t there, they’re going to fight for a big, good idea until it is.”

    And fight they will as we’ve already insured that the politics will never be there by excluding labor from the 1914 Clayton Act exceptions! What are the odds that a political coalition might form that would spread the risk of being unemployed across all laborers instead of concentrating the entire costs of an output gap on a politically powerless few through tyranny of the majority? Are they even measurable? Make sure your proposed solutions don’t alter in any way the ability of employers to coerce their employees with the threat of throwing them into the politically and economically powerless “unemployed class” without recourse. Also maker sure your solutions don’t attempt to alter any “employment at will” laws that empower employers to be able to do this without the recourse or responsibility that they would have with any other person or entity that they entered into a contract with for the provision of ANY OTHER products or service.

    “We need to hear the same thing on one of these (and some other) big ideas to increase employment.”

    But be sure to stay within the context of allowable solutions that economists and employers have outlined for you so the existing power structure remains intact! More people being employed would be a good thing as long as this power structure remains in place; some things just have to take priority of others!

    I had a client tell me once that he “wanted his company to make more money but he didn’t want to change anything they were doing.” Needless to say I told him there wasn’t much I could do for him; his company was liquidated four or five years later.

    “Even if these last few months of jobs numbers are revised upward or we return to the earlier trend, most forecasts don’t see full employment for at least three to four years, and most forecasts have been found to be consistently too rosy.”

    So if anyone has a solution to this that doesn’t alter the power structure that created it we’re all ears. Hopefully it will all work out somehow for those unemployed and coerced folks.

    Have a great day!

    • smith says:

      At-will employment has many beneficial effects for the labor market, chief among them, businesses are not afraid to add workers that they can’t later let go. They can take a chance on unconventional applicants, or moreover less than 100% fit. In France lack of at-will employment leads to reluctance to hire, leading to more unemployment and more use of shorter contract and temporary workers (based on my readings, haven’t live there).

      The problem of unshared risk borne by the unemployed can be partly solved by increasing unemployment benefits, even tying them to previous wages (for example 80% of previous wage). Something like that is already done in some European countries.

      Similarly, more programs can be instituted to assist the unemployed, even financial aid to improve credentials, or gain training in same or different fields. Obama recently announced and initiative to combat discrimination against long term unemployed.

      More public spending during high unemployment would be welcome, but I don’t see Obama emphasizing this, or making it the major theme of the midterm elections (actually any election ever).

      Stopping the high income earners (top 20% and 10%) from profiting from weak labor market would help. A tax on high income that is triggered by high unemployment in low income sectors, with dedicated revenue to create jobs or training programs would be most appropriate. Likewise raising corporate rates to fund these efforts while corporations enjoy record profits and sit on cash would be fair and efficient.

      Preventing workers from being exploited by calling them salaried and making them work hours over 40 for free would encourage employers to make new hires (as the 1938 and 1940 FLSA intended, I’ve cited this repeatedly) Likewise free internships that replace new workers.

      We continue to depress everyone’s wages by making entry into this country for employer based immigration dependent on their accepting the offer and avoiding deportation that comes with termination, leaving them no bargaining power or job mobility. Allow the same people in with no employer involvement and end a two tier system of native free labor and immigrant restricted (lower wage) labor (again I’ve previously cited but no one ever gets the nuance).

      Finally, no, even the very modest and within the existing system changes outlined above, nothing can happen unless the 1% controlling 20% of income fear something worse will be done unless changes are made.

      Since I already advocate 90% marginal rates for income over $2 million dollars (Eisenhower pre 1960 rates) as a reasonable measure, I would say lets offer the rich a choice. Institute this program effecting income or we shall try to pass measures that tax wealth. That will get their attention.

      • Perplexed says:

        “At-will employment has many beneficial effects for the labor market, chief among them, businesses are not afraid to add workers that they can’t later let go.”

        Yes, and most masters treated their slaves well because it was in the best interest of the master to do so. How do these myths with no evidence behind them come to be so readily accepted by what appear to be otherwise intelligent people? What employers will be “reluctant to hire” when they have customers lined up waiting for their products? Its not only a myth, its an illogical myth. Benefits for and empowerment of employers does not equate to benefits for the “labor market.” At will employment puts a huge “thumb on the scale” in favor of employers by removing contract law protections from laborers and subjecting them to the whims of employers. Combine this with restrictions to anti-trust protections and you produce an extremely coercive environment that ultimately undermines the power of labor to pool their risks of being unemployed and to negotiate with employers from a position of strength for what would otherwise be their share of productivity gains. This is the next civil rights issue (although as Dr. King quite accurately observed, it was a huge part of the last one as well.)

        -“The problem of unshared risk borne by the unemployed can be partly solved by increasing unemployment benefits…”

        This is known as “Loser Liberalism.” First avoid attacking head-on the source of the unequal power position (the Clayton Act in this case) and then come to the rescue of the victims with “help” that is that is less than 1/4 of what they would be otherwise be entitled to (they would get treble damages for their actual losses under the Clayton Act) under “equal protection of the laws” and then claim to be a hero for “fighting for the disadvantaged.” If I intentionally push you off the boat am I a hero now for throwing you a life preserver? Maybe the real heroes are the ones that prevent you from being pushed off in the first place.

        -“We continue to depress everyone’s wages by making entry into this country for employer based immigration…”

        What is the real overall impact of this? Can you quantify this in any meaningful way? How much in forgone wages does this actually result in? We do so much more to depress everyone’s wages by undermining the power of those providing labor, both economically and politically, that I would surmise that these immigration effects are miniscule in comparison.

        I wholeheartedly agree with you on the progressive tax rates issues but would suggest that allowing labor to compete on a level playing field (as in equal protection of the laws), abolishing government granted monopolies (replaced by some form of “prize” awards as suggested by Dean Baker & others) and elimination of government granted tax preferences (every expenditure of government in the budget and visible to all) would so reduce these “arbitrary and inequitable distribution of wealth and incomes”( -Keynes), that tax rates considerably lower than the 90% Eisenhower rates might generate nearly as much income. Eliminating the Clayton Act exemptions would immediately establish the political coalition needed to insure that the effect on American jobs would have the highest priority in any government decisions as all politicians would again be at the mercy of their constituents instead of their “funders” if they wished to remain in office for any length of time. If all workers were sharing in the costs of the output gap what do you suppose the chances would be that the government expenditures would be considerably higher than where they are now? The political implications of the Clayton Act restrictions are even more critical than the economic implications. Those working are considerably more fearful now, but think about what would happen if they were actually working shorter weeks and all taking home less income. What effect might that have on jobs programs and trade policy? How much of trade deficit do you suppose we’d be running then?

        • smith says:

          Addressing your points in reverse order:

          When it comes to work hours, I advocate eliminating the free hours that employers extract from exploited salaried workers, and that those workers not only be compensated for their time, but get time and a half for working overtime, as are all hourly paid factory workers under the 1938 and 1940 FLSA. I further advocate phasing in a 35 hour work week with no change in compensation for existing workers (work 35 hours plus 5 overtime if necessary, it’s just an accounting trick at first). This will reduce unemployment while also driving up wages.

          All workers are sharing in the costs of the output gap, they just don’t know it. The slack labor market depresses wage increases, yielding a .06% in real increases of the average hourly wage rate in 2013 as posted in this blog. Current wages stagnate instead of dropping due to downwardly nominal wage rigidities.

          According to Borjas, a major expert on immigration and labor (and textbook author)
          “…the immigrant influx that entered the country between 1980 and 2000 lowered the wage by 7.4 percent for high school dropouts, by 3.6 percent for college graduates, and by around 2 percent for both high school graduates and workers with some college.”
          But in contrast to me, he claims it’s a numbers game (amount of immigrants entering that depress wages) and not the conditions of employment that matter. However, that analysis is used to claim that numbers by themselves matter, without necessarily considering the impact of bargaining leverage. For opposing views that agree with you claiming miniscule impact, google David Card. Also the new proposed law would at least double high skills college graduate immigration and thus is backed by powerful business interests (anticipating huge payroll savings).

          I agree “Loser Liberalism” is for losers, which is why a favor restoring power to labor, instead of increasing redistribution and safety net spending.

          I disagree with you that curtailing at-will employment is the way to address the unequal employer employee relationship. Ironically labor unions, which the Clayton act protects, are the one source in America of disallowing termination without cause. That’s what the current debate about public school teacher’s tenure is about.

          Ways to give back labor power while retaining at-will employment? Promote full employment, curtail globalization, tax corporations and management so increased labor productivity doesn’t flow all to them. Increasing unemployment benefits as a high percentage of earnings, making national instead of state set, making the length more automatically extended, increasing training opportunities, increased monitoring to prevent fraud. In total, this would result in huge changes. The cost of this program would give incentive to all businesses to consider the societal cost of unemployment, because it would affect their own bottom line. It’s a market driven solution.

          Finally, no-at-will employment creates dysfunctional relationships, like people locked in to bad marriages without no-fault divorce, and would create a more master-slave environment of conflict and struggle than the fluid labor market we enjoy and suffer through now.

          Minor point, repealing Clayton would still not end at-will employment, but ask a labor lawyer for more authoritative source.

          • Perplexed says:

            ‘”All workers are sharing in the costs of the output gap, they just don’t know it.”

            And just how politically motivated do you think this non-knowledge makes them? The “coercion” and “fear” effects that stem from the threat of being thrown into the “shark tank” of unemployment far outweigh any financial cost they face. They could be protected against this by pooling their risks of being unemployed but they don’t know that either. They have employers and their hired gun economists to thank for that ignorance.

            -“According to Borjas, a major expert on immigration and labor (and textbook author)…”

            There are so many problems with this line of thinking and the erroneous conclusions you draw from it that is hard to know where to even start the de-bunking process. Furthermore, as tolerant as Jared is of these long posts I have to believe that there are some limits to even his extraordinary patience. So I’ll try to address your points in an “abreviated” version that I realize will likely result in more “confusion” and less “understanding” than might otherwise be the case, but who knows, I suppose its possible; so here goes:

            First, I’ll starting by pointing out that adding an eight-term regression equation to a political agenda does not change that agenda from a political agenda into “science.” While I admittedly just skimmed over the Borgas “study” and haven’t really analyzed the study itself in depth, I submit that if you take the Borjas study, import it into your word processor, and then replace the term “immigrants” with “white people” or “Protestant people,” or “Brown people” or “purple people” you won’t do much, if anything, to alter the results of the study and the “measurements” listed probably wouldn’t be altered by more than what is picked up in the error term anyway. This type of “science” will likely lead to (if it hasn’t already done so) the downfall of “economics” being considered as a “credible science” (a position that is very questionable that it has any longer anyway, at least among other “scientists,”). Economists have strayed so far from the “disciplines” that constrain actual scientists with these political agenda arguments that they themselves no longer have any conception of when they’re crossing the lines. They have “conferred” this power on themselves to do this at will and their “profession” has done nothing to stand in the way of it. I’m not a lawyer so I’m not sure how they avoid the laws requiring them to register as “lobbyists” and report accordingly. Don’t feel too bad for them though, remember, this was a “choice,” not something they were in any way compelled to do; they could have instead insisted on “scientific discipline” and “reigned in” “practitioners” that attempted to cloak these political agenda arguments as something based on actual “science.”

            At the root of it, the Borjas “study” can be summed up as “changes in supply affect prices in the opposite direction,” pretty “revolutionary” findings don’t you think? If you take it to its logical conclusions, you’ll find that these “scientific revelations” can be extrapolated to the larger population and demonstrate “scientifically” that: all else constant, increased population drives down wages! The “solution” then, logically, is to decrease the population so the few that remain can make more per hour (you know, the wage rate). (This is how U.S. doctors, lawyers, accountants and economics professors do it – check with Dean Baker) Really no need to discuss any other implications right? After all, doesn’t the “wage rate” offer a perfect surrogate for “welfare”? If the wage rate goes down, how can any good possibly come of it? If there are lots more people producing goods and services and spending more money in the economy there’s probably no “offsetting benefit” to consider right? If there are more productive people in the economy that can respond to sharp increases in the demand for goods and services there’s probably no benefit to that either right? The Country is not any “richer” due to that increased capacity is it? How could it be, the wage rate went down, right?

            Maybe the more important question that should be asked is: if the public can’t count on “economic science” to restrict itself to what can be considered sound, well grounded, “science,” should the public consider the prognostications of economic “scientists” at all? If there’s a 50/50 chance that any “economic” argument is really a political agenda rather than a sound “scientifically” based understanding of the implications of various actions, does the risk of using the information and suffering the consequences outweigh the possible gains from using something that has only a 50% chance of being a “true” understanding? Possibly what we really need is another “science” that can sort the “wheat from the chafe” so we can benefit from the wheat without being fooled by the chafe?

            When I say the immigration argument is “miniscule” and a “red herring,” I’m referring to the magnitude of the impact of these issues on all wages, prices, and their size relative to all factors generating inequality, not that the impact to workers in these markets are “insignificant” to them, they are, and many benefit from the lower prices that result, the increased productive capacity, and the increased spending in the economy. No doubt these “distribution injustices” should be remedied or at least mitigated. What I’m arguing, is that even if these effects were entirely eliminated, the impact of that of that on our wealth and income GINI coefficients would be minuscule and that focusing on this issue when attempting to address overall inequality is ultimately a distraction from the more important sources generating this inequality e.g. undermining the power of laborers through Clayton Act exceptions, exceptions from contract law protections like employment at will, interfering with and undermining of political coalitions by the Clayton Act exceptions, “legalized” monopoly profits, off-budget government welfare to businesses (aka tax expenditures), and corruption of the government that results from allowing any private money entering into the political sphere. “We the people” have the power to tax and spend pretty much any way we choose, there is no defensible reason whatsoever to sell political access for money. We can spend the same amount on political campaigns without any private money and tax whomever we choose to fund the expenditures. The voters can choose the distribution of funds to candidates and thereby help insure that the representatives they choose are representing them instead of whoever bought the rights to be represented by them out from under those entitled to that right to be fully represented. Borjas doesn’t give us the actual numbers he used (or percentages) of “total immigrants,” but provides a couple of “hints”: from the article:

            “The 10 million native-born workers without a high school degree face the most competition from
            immigrants, as do the eight million younger natives with only a high school education and 12 million
            younger college graduates.”

            He also tells us that:
            “By increasing the supply of labor between 1980 and 2000, immigration reduced the average annual
            earnings of native-born men by an estimated $1,700 or roughly 4 percent.”
            and that:

            “This study examines the
            economic impact of increases in the number of immigrant workers by their education level and experience
            in the work force, using Census data from 1960 through 2000. Statistical analysis shows that when
            immigration increases the supply of workers in a skill category, the earnings of native-born workers in that
            same category fall.”

            And, from the “Bush Proposal:

            “First, it would legalize the status of the approximately 10 million illegal aliens now present in the
            United States”

            Hard to say without the actual study but it appears that he’s talking about a 4% reduction in wages on average over the 30 million “natives” in competition with these “immigrant” workers. Keeping in mind that these are some of the lowest wage earners in the Country, what might this possible reduction in wages be as a percentage of total wages? How much of an effect would “fixing” this huge problem have on the wealth or income GINI coefficients? Would it even be detectable without very sophisticated instrumentation? Furthermore, remember that we’re talking about the high end of what’s possible by concentrating on this overwhelming problem. Borjas doesn’t explicitly state it, but appears that his “counterfactual” may have just assumed there was no impact whatsoever on the market for these jobs that might be driven by the presence of these (5 million?; 10 million?; 15 million; [can’t be more than 15 million as the highest immigrant participation rate approached 50%] immigrant workers and their families) from the equation? Did he just remove them from the “supply” of labor and assume they would continue spending at previous levels but now without any income? Surely Harvard would never let something like that “slip by” would they?

            -“I disagree with you that curtailing at-will employment is the way to address the unequal employer employee relationship. Ironically labor unions, which the Clayton act protects, are the one source in America of disallowing termination without cause. That’s what the current debate about public school teacher’s tenure is about.”

            Yes, there’s no doubt that this is how the Clayton Act exceptions were marketed, that they “protected unions” but, unfortunately, all employees ended up “buying the demo” and the real product turned out to so undercut their power in the marketplace that they have never really recovered; buyer beware as the saying goes. Fortunately they’re protected by Constitutional Rights to “Equal Treatment Under the Law” so that’s really saved them from their misguided purchase hasn’t it?

            Unemployment is “not a real thing” as my kids would put it. Its an artificial construct of employers and their hired-gun economists and attorneys. For thousands of years agrarian societies existed without even any conceptual understanding of the term. Imagine yourself trying to describe such a thing to a 16th century farmer, he’d think you had eaten some of the wrong mushrooms. Common sense would tell him that the obvious thing to do would be to divide up the work across all of the available workers and that having a bunch of people sitting around doing nothing while others did all of the work (and captured all of the benefits) was a ridiculous idea that no sane person would ever agree to. How far we’ve “progressed” from such primitive thinking right?

            -“Ways to give back labor power while retaining at-will employment?”

            Ways for you and I to be equal while I hold the pistol and you are unarmed. As long as I keep the gun and you stay unarmed I’m open to anything.

            -“Finally, no-at-will employment creates dysfunctional relationships…”
            Yes, relationships with contract law protections for both buyers and sellers. This equality under the law stuff is so dysfunctional to employers is hard to imagine they can possible contract for other products and services of any kind without a legalized position of advantage in the agreement.

            -” Minor point, repealing Clayton would still not end at-will employment…”

            No equal treatment under the law would. Repealing the Clayton Act would likely end involuntary unemployment as the victims of this tyranny would sue for treble damages and win. While there could be considerable displacement of economists that result, possibly they have some skills that could be used in helping to design how the alternatives would function in practice.

  5. Larry Signor says:

    Many Americans feel like they are being called “lazy” for very poor reasons. It is the last “kid picked syndrome”. As children, no one wanted to be that. As adults it plays into a scenario that is self-reinforcing and extremely destructive. Not only does unemployment remove income, it appropriates behaviors that would have been unthinkable to the unemployed. The numbers we casually toss out there, 8%, 6%, 13%…are millions of broken hearts, busted dreams and miserable people. The battle for more and better jobs is well worth fighting, no matter your political persuasion. We are not a lazy people, nor are we alchemists

  6. tyler says:

    The politics is there for a big payroll tax holiday. I don’t know why the Democrats don’t even try to get this passed.

    • smith says:

      The payroll tax is a dedicated tax to pay for Social Security. Any cut now has to be made up later. The obvious way is to raise the income limit that is taxed, currently $113,000. Rich people don’t want that. Double the maximum and people making just that amount $226,000, pay an extra 12.5% tax (less some increase in benefits later, and yes you include the employer contribution) and your tax bill just went up from around $50,000 ( around a 25% effective rate for the 95th percent highest income according to chart here
      http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=456 )
      $62,500 (12.5 percent times the newly taxed $113,000) So it hits the lower end of the upper class most, but the 1% have to greatly fear not just a doubling of the maximum but eliminating it. Also the principle of making the tax code once again more progressive is frightening to the rich.
      So there is the complicated reason.
      Cut leads to shortfall leads to new revenue needed leads to call for more progressive taxation leads to rich blocking cut.
      Also the social security system could not withstand such a large permanent cut, just a temporary measure while the economy recovers.