I see my friend Jason Furman is jumping into the debate on efforts by states like New York to develop workarounds for the limit on the state and local tax (SALT) deduction in the Republican tax plan. Jason reminds us that the beneficiaries of the workarounds (like New York’s plan to replace a portion of the state income tax with an employer-side payroll tax) are overwhelmingly higher-income taxpayers. This doesn’t bother me.
As I’ve pointed out before, limiting the SALT deduction is not about raising income taxes on high-income people. It is about raising taxes on high-income people in progressive states.
Suppose Congress proposed to raise the income tax rate by 2.0 percentage points on income above $100k and by 4 percentage points on income over $1 million. (These are roughly the numbers we are talking about given income tax rates in New York and California.) This is a perfectly reasonable plan since these are the people who have been the big gainers in the economy over the last four decades.
But suppose this tax increase only applied to people in New York, California, Connecticut, New Jersey, and a few other states with high tax rates, which also tend to vote Democratic in presidential elections. Are we all fine with this? Of course, if we tried to undo this selective tax increase with either legislation or some clever trick, then Jason would point out how regressive this reversal would be.
His calculations would be and are right, but I don’t give a damn. Making it more difficult for states to raise the taxes they need to support progressive social spending is bad policy. And it is especially bad policy in a context where we can expect little by way of progressive measures out of Washington any time soon.
This means if we want to see headway on quality affordable child care, free college, expanded health care coverage, it will come from states like New York and California. The Republicans quite explicitly wanted to make it more difficult for states to be able to pursue progressive policies, which is why they limited the SALT deduction. So no, I have no problems trying to reverse this cheap trick.
Since Jason raised the topic of corporate taxes, we do have an easy route to radically reduce the opportunity for tax evasion/avoidance and also the waste associated with tax accounting. Just require corporations to give us a non-voting equity stake equal to the desired tax rate. (If we want to tax corporations at a 25 percent rate, then we require corporations to give us non-voting shares equal to 25 percent of the total outstanding.)
The non-voting shares are treated just like other shares. If the company pays a $2 a share dividend to its voting shares, it also pays $2 for each of the government’s shares. If it buys back 10 percent of its shares at $100 a share, it buys back 10 percent of the government’s shares at $100 a share.
It’s fun, easy, and gets us the money we want out of the corporate sector. Now if we could just get some folks in Washington thinking seriously about corporate tax reform.
I see my friend Jason Furman is jumping into the debate on efforts by states like New York to develop workarounds for the limit on the state and local tax (SALT) deduction in the Republican tax plan. Jason reminds us that the beneficiaries of the workarounds (like New York’s plan to replace a portion of the state income tax with an employer-side payroll tax) are overwhelmingly higher-income taxpayers. This doesn’t bother me.
As I’ve pointed out before, limiting the SALT deduction is not about raising income taxes on high-income people. It is about raising taxes on high-income people in progressive states.
Suppose Congress proposed to raise the income tax rate by 2.0 percentage points on income above $100k and by 4 percentage points on income over $1 million. (These are roughly the numbers we are talking about given income tax rates in New York and California.) This is a perfectly reasonable plan since these are the people who have been the big gainers in the economy over the last four decades.
But suppose this tax increase only applied to people in New York, California, Connecticut, New Jersey, and a few other states with high tax rates, which also tend to vote Democratic in presidential elections. Are we all fine with this? Of course, if we tried to undo this selective tax increase with either legislation or some clever trick, then Jason would point out how regressive this reversal would be.
His calculations would be and are right, but I don’t give a damn. Making it more difficult for states to raise the taxes they need to support progressive social spending is bad policy. And it is especially bad policy in a context where we can expect little by way of progressive measures out of Washington any time soon.
This means if we want to see headway on quality affordable child care, free college, expanded health care coverage, it will come from states like New York and California. The Republicans quite explicitly wanted to make it more difficult for states to be able to pursue progressive policies, which is why they limited the SALT deduction. So no, I have no problems trying to reverse this cheap trick.
Since Jason raised the topic of corporate taxes, we do have an easy route to radically reduce the opportunity for tax evasion/avoidance and also the waste associated with tax accounting. Just require corporations to give us a non-voting equity stake equal to the desired tax rate. (If we want to tax corporations at a 25 percent rate, then we require corporations to give us non-voting shares equal to 25 percent of the total outstanding.)
The non-voting shares are treated just like other shares. If the company pays a $2 a share dividend to its voting shares, it also pays $2 for each of the government’s shares. If it buys back 10 percent of its shares at $100 a share, it buys back 10 percent of the government’s shares at $100 a share.
It’s fun, easy, and gets us the money we want out of the corporate sector. Now if we could just get some folks in Washington thinking seriously about corporate tax reform.
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Heather Long’s piece in the Washington Post telling readers, “Trump wants a $15 billion spending cut. That’s about 1 percent of the cost of his tax bill,” badly misled readers. The $1.5 trillion cost of the tax bill is a ten-year figure. The $15 billion in spending cuts are meant to hit in a single year. Presumably, Trump and his Republican allies will look for similar cuts in future years. This means that the cuts are 10 percent of the cost of the tax bill.
Of course, being larger doesn’t make them better since the cuts are focused on programs that benefit low- and moderate-income people. But if we’re keeping score, it is worth trying to be accurate.
It is also worth noting that neither Long nor any of her deficit hawk sources in this piece say a word about the implicit debt the government is creating for people through granting patent and copyright monopolies. Granting these monopolies is an alternative way to direct spending for the government to finance things like research and creative work.
The money committed as a result of these monopolies in the form of higher market prices is enormous. In the case of prescription drugs alone, it is likely more than $380 billion a year, or almost 2.0 percent of GDP. Adding in the cost of medical equipment, software, and other areas could well push the sum to more than $1 trillion a year, more than six times the cost of the Trump tax cuts.
Anyone who is really concerned about the liabilities that the government is creating for future taxpayers has to include the cost of these government granted monopolies. If they don’t factor in patent and copyright rights into their assessment of future burdens, they are either just trying to scare people to push a political agenda or very confused.
Heather Long’s piece in the Washington Post telling readers, “Trump wants a $15 billion spending cut. That’s about 1 percent of the cost of his tax bill,” badly misled readers. The $1.5 trillion cost of the tax bill is a ten-year figure. The $15 billion in spending cuts are meant to hit in a single year. Presumably, Trump and his Republican allies will look for similar cuts in future years. This means that the cuts are 10 percent of the cost of the tax bill.
Of course, being larger doesn’t make them better since the cuts are focused on programs that benefit low- and moderate-income people. But if we’re keeping score, it is worth trying to be accurate.
It is also worth noting that neither Long nor any of her deficit hawk sources in this piece say a word about the implicit debt the government is creating for people through granting patent and copyright monopolies. Granting these monopolies is an alternative way to direct spending for the government to finance things like research and creative work.
The money committed as a result of these monopolies in the form of higher market prices is enormous. In the case of prescription drugs alone, it is likely more than $380 billion a year, or almost 2.0 percent of GDP. Adding in the cost of medical equipment, software, and other areas could well push the sum to more than $1 trillion a year, more than six times the cost of the Trump tax cuts.
Anyone who is really concerned about the liabilities that the government is creating for future taxpayers has to include the cost of these government granted monopolies. If they don’t factor in patent and copyright rights into their assessment of future burdens, they are either just trying to scare people to push a political agenda or very confused.
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I generally agree with Paul Krugman’s columns, and this is the case with his piece today on Republican efforts to kill Obamacare. However, there is one point where I have to take issue. Krugman tells readers:
“G.O.P. sabotage disproportionately discourages young and healthy people from signing up, which, as one commentator put it, ‘drives up the cost for other folks within that market.'”
The problem with Krugman’s comment is the “young” part. The exchanges need healthy people, it doesn’t matter whether or not they are young. In fact, it is much better for the economics of the exchanges if the healthy people are older, they pay much higher premiums.
The best way to understand the point is to think of the premiums as a tax. Old-timers like myself (ages 55 to 64, the oldest pre-Medicare age cohort) pay premiums or taxes, that are three times as high as young people. While people in this oldest age grouping are on average in worse health and have higher costs than younger people, a very large minority have trivial medical costs, just like most young people.
The exchanges come out much more ahead with a healthy older person than a healthy young person since they pay three times as much in premiums and cost the system no more money. There is an issue that the pricing is skewed somewhat against the young (true actuarial risk should put the premium ratio around 3.5 to 1, rather than 3.0 to 1), but this is of relatively little consequence for the finances of the exchanges.
It’s not a big deal in the scheme of things, but the inclusion of “young” in this story can be misleading. The key to keeping the exchanges working is getting healthy people to sign up, full stop.
I generally agree with Paul Krugman’s columns, and this is the case with his piece today on Republican efforts to kill Obamacare. However, there is one point where I have to take issue. Krugman tells readers:
“G.O.P. sabotage disproportionately discourages young and healthy people from signing up, which, as one commentator put it, ‘drives up the cost for other folks within that market.'”
The problem with Krugman’s comment is the “young” part. The exchanges need healthy people, it doesn’t matter whether or not they are young. In fact, it is much better for the economics of the exchanges if the healthy people are older, they pay much higher premiums.
The best way to understand the point is to think of the premiums as a tax. Old-timers like myself (ages 55 to 64, the oldest pre-Medicare age cohort) pay premiums or taxes, that are three times as high as young people. While people in this oldest age grouping are on average in worse health and have higher costs than younger people, a very large minority have trivial medical costs, just like most young people.
The exchanges come out much more ahead with a healthy older person than a healthy young person since they pay three times as much in premiums and cost the system no more money. There is an issue that the pricing is skewed somewhat against the young (true actuarial risk should put the premium ratio around 3.5 to 1, rather than 3.0 to 1), but this is of relatively little consequence for the finances of the exchanges.
It’s not a big deal in the scheme of things, but the inclusion of “young” in this story can be misleading. The key to keeping the exchanges working is getting healthy people to sign up, full stop.
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Ben Casselman’s NYT piece on economist Tim Kane’s run for a congressional seat in Ohio called my attention to an economists’ poll that I had missed. The poll posed the following question to a group of elite economists:
“An important reason why many workers in Michigan and Ohio have lost jobs in recent years is because US presidential administrations over the past 30 years have not been tough enough in trade negotiations.”
Of the whole group, 64 percent either strongly disagreed or disagreed. Only 5 percent agreed. (The rest were uncertain or didn’t answer.)
This outcome is striking because standard trade models absolutely predict that some people will be losers from trade. The basic story is that workers in an sector where the U.S. has a comparative disadvantage will end up with lower pay as a result of removing trade barriers.
To make it concrete, suppose the auto industry is protected by a 20 percent tariff barrier and we make the tariff zero. The expected result is that we would have fewer workers employed in the auto industry. The workers who lose jobs in the industry will, in general, get lower pay in their new jobs, as will the workers who remain employed in the industry.
The argument for free trade is that the gains in aggregate will be larger than what these workers lose. In principle, the winners can redistribute to the losers and make everyone better off, but there is no dispute that the workers in the auto industry are made directly worse off by the removal of the tariff taken by itself.
What is striking is that there is considerable research by many economists, most notably a group led by MIT economist David Autor, showing that workers in Michigan and Ohio were badly hurt by the trade opening to China in the last decade. In effect, these economists were asked whether they thought autoworkers were hurt by the elimination of a tariff on imported autos after they had been shown evidence of large-scale job loss and wage declines in the sector.
The vast majority still said “no.”
Ben Casselman’s NYT piece on economist Tim Kane’s run for a congressional seat in Ohio called my attention to an economists’ poll that I had missed. The poll posed the following question to a group of elite economists:
“An important reason why many workers in Michigan and Ohio have lost jobs in recent years is because US presidential administrations over the past 30 years have not been tough enough in trade negotiations.”
Of the whole group, 64 percent either strongly disagreed or disagreed. Only 5 percent agreed. (The rest were uncertain or didn’t answer.)
This outcome is striking because standard trade models absolutely predict that some people will be losers from trade. The basic story is that workers in an sector where the U.S. has a comparative disadvantage will end up with lower pay as a result of removing trade barriers.
To make it concrete, suppose the auto industry is protected by a 20 percent tariff barrier and we make the tariff zero. The expected result is that we would have fewer workers employed in the auto industry. The workers who lose jobs in the industry will, in general, get lower pay in their new jobs, as will the workers who remain employed in the industry.
The argument for free trade is that the gains in aggregate will be larger than what these workers lose. In principle, the winners can redistribute to the losers and make everyone better off, but there is no dispute that the workers in the auto industry are made directly worse off by the removal of the tariff taken by itself.
What is striking is that there is considerable research by many economists, most notably a group led by MIT economist David Autor, showing that workers in Michigan and Ohio were badly hurt by the trade opening to China in the last decade. In effect, these economists were asked whether they thought autoworkers were hurt by the elimination of a tariff on imported autos after they had been shown evidence of large-scale job loss and wage declines in the sector.
The vast majority still said “no.”
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It looks like another case where we have a skills mismatch. In a NYT column criticizing Sean Hannity’s housing investments, Bill Sapotio tells us that the housing industry:
“[…]still needs some 200,000 workers, with some of that shortfall no doubt linked to current immigration policy, or the fear of it. The need is so great that the Home Depot Foundation is putting up $50 million to help train and hire skilled workers.”
The problem with this story is wages are not rising especially rapidly in construction. According to the Bureau of Labor Statistics, the average hourly pay of production and non-supervisory workers in the sector rose 3.9 percent. That’s not bad, but before the recession, they were rising over 4.0 percent annually and sometimes over 5.0 percent.
Average Hourly Wage in Construction: Production and Non-Supervisory Workers
Source: Bureau of Labor Statistics.
If there actually is a shortage of construction workers as this piece claims, then we seem to have more evidence of employers who lack the skills necessary to do their job. They apparently don’t understand that if you want to hire more workers, you have to offer higher pay.
It looks like another case where we have a skills mismatch. In a NYT column criticizing Sean Hannity’s housing investments, Bill Sapotio tells us that the housing industry:
“[…]still needs some 200,000 workers, with some of that shortfall no doubt linked to current immigration policy, or the fear of it. The need is so great that the Home Depot Foundation is putting up $50 million to help train and hire skilled workers.”
The problem with this story is wages are not rising especially rapidly in construction. According to the Bureau of Labor Statistics, the average hourly pay of production and non-supervisory workers in the sector rose 3.9 percent. That’s not bad, but before the recession, they were rising over 4.0 percent annually and sometimes over 5.0 percent.
Average Hourly Wage in Construction: Production and Non-Supervisory Workers
Source: Bureau of Labor Statistics.
If there actually is a shortage of construction workers as this piece claims, then we seem to have more evidence of employers who lack the skills necessary to do their job. They apparently don’t understand that if you want to hire more workers, you have to offer higher pay.
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That is what readers of its lead editorial must be wondering. The editorial criticized Trump’s trade policies, pointing out that the policies are creating uncertainties for businesses.
It then notes that Trump appears to view uncertainty as being a positive outcome:
“Last month, in fact, the president all but confessed that he sees uncertainty as a weapon against them in talks over revising the North American Free Trade Agreement. ‘We can negotiate forever,’ he said. ‘Because as long as we have this negotiation going, nobody is going to build billion-dollar plants in Mexico.'”
The editorial then responds:
“Oh no? Canada and Mexico can, and do, hedge against Mr. Trump’s unpredictability by pursuing closer economic ties with China and Europe.”
It is not clear what sort of economics the Post is using here. In standard trade models, the United States benefits when the economies of our trading partners are stronger. If greater integration between Canada and Mexico and China and Europe allow them to grow more rapidly, they will be better customers for US products. Also, insofar as greater integration leads to increased efficiencies for their producers, it means that we will be able to buy lower-priced imports, benefiting US consumers.
If the Post has an economic model whereby we are supposed to be scared because our trading partners are becoming more integrated, it should share it with its readers. (Maybe it will get a Nobel Prize in economics.) As it is, this just looks like a cheap scare tactic to advance its trade agenda.
That is what readers of its lead editorial must be wondering. The editorial criticized Trump’s trade policies, pointing out that the policies are creating uncertainties for businesses.
It then notes that Trump appears to view uncertainty as being a positive outcome:
“Last month, in fact, the president all but confessed that he sees uncertainty as a weapon against them in talks over revising the North American Free Trade Agreement. ‘We can negotiate forever,’ he said. ‘Because as long as we have this negotiation going, nobody is going to build billion-dollar plants in Mexico.'”
The editorial then responds:
“Oh no? Canada and Mexico can, and do, hedge against Mr. Trump’s unpredictability by pursuing closer economic ties with China and Europe.”
It is not clear what sort of economics the Post is using here. In standard trade models, the United States benefits when the economies of our trading partners are stronger. If greater integration between Canada and Mexico and China and Europe allow them to grow more rapidly, they will be better customers for US products. Also, insofar as greater integration leads to increased efficiencies for their producers, it means that we will be able to buy lower-priced imports, benefiting US consumers.
If the Post has an economic model whereby we are supposed to be scared because our trading partners are becoming more integrated, it should share it with its readers. (Maybe it will get a Nobel Prize in economics.) As it is, this just looks like a cheap scare tactic to advance its trade agenda.
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Amazon, which fueled its enormous growth with billions in taxpayer subsidies, is trying to push the line that it is actually good for small businesses. Gene Marks, a consultant who blogs for the Post’s business section, noted the company’s claim that it actually is good for small businesses.
The basis for the claim is that 1 million small businesses use Amazon’s network to sell their goods throughout the world. The company claims it has created 900,000 jobs based on these sales.
As Marks points out, Amazon’s claims are not necessarily accurate since it has also put many businesses out of business. To get an accurate assessment of its impact, it would be necessary to ask how many of the items sold by Amazon’s small business clients would have otherwise been purchased from small business brick and mortar stores if they were not sold through Amazon. (Actually, if the question is just Amazon, most of these items likely would have been sold through some other Internet vehicle if Amazon did not exist.)
The real issue is why any Internet retailer should enjoy an effective taxpayer subsidy by not having to collect the same sales taxes as its brick and mortar competitors. Amazon now collects sales tax in every state in which it sells, although not county or local sales taxes. (Apparently, Amazon’s staff is not smart enough to work a spreadsheet with more than 50 rows.) The fact that it did not collect taxes in most states through most of its existence was an enormous subsidy to the company.
Even now, Amazon is not collecting sales taxes for its small business affiliates. We can think of this as a situation in which Amazon is splitting the taxpayer subsidy with its affiliates. At this point, Amazon should be able to survive in the market without special subsidies from taxpayers. Given the amount of money involved, we can think of Jeff Bezos as collecting food stamps on super-steroids.
Amazon, which fueled its enormous growth with billions in taxpayer subsidies, is trying to push the line that it is actually good for small businesses. Gene Marks, a consultant who blogs for the Post’s business section, noted the company’s claim that it actually is good for small businesses.
The basis for the claim is that 1 million small businesses use Amazon’s network to sell their goods throughout the world. The company claims it has created 900,000 jobs based on these sales.
As Marks points out, Amazon’s claims are not necessarily accurate since it has also put many businesses out of business. To get an accurate assessment of its impact, it would be necessary to ask how many of the items sold by Amazon’s small business clients would have otherwise been purchased from small business brick and mortar stores if they were not sold through Amazon. (Actually, if the question is just Amazon, most of these items likely would have been sold through some other Internet vehicle if Amazon did not exist.)
The real issue is why any Internet retailer should enjoy an effective taxpayer subsidy by not having to collect the same sales taxes as its brick and mortar competitors. Amazon now collects sales tax in every state in which it sells, although not county or local sales taxes. (Apparently, Amazon’s staff is not smart enough to work a spreadsheet with more than 50 rows.) The fact that it did not collect taxes in most states through most of its existence was an enormous subsidy to the company.
Even now, Amazon is not collecting sales taxes for its small business affiliates. We can think of this as a situation in which Amazon is splitting the taxpayer subsidy with its affiliates. At this point, Amazon should be able to survive in the market without special subsidies from taxpayers. Given the amount of money involved, we can think of Jeff Bezos as collecting food stamps on super-steroids.
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Heather Long has a piece in the Washington Post detailing the demands that Donald Trump is making on China in exchange for not imposing tariffs. As she rightly points out, the list essentially amounts to asking China to remake its economy.
It would have been useful to point out how ridiculous this list of demands is, given the limited ability of the US to hurt China with tariffs. The US currently is importing a bit more than $500 billion a year from China. On an exchange rate basis, this comes to about 3.6 percent of its GDP.
Suppose that Trump tariffs cut this volume of imports in half, which would be a huge reduction. This would be a reduction in Chinese exports equal to 1.8 percent of its GDP. That would undoubtedly be somewhat of a hit to its economy, sort of like the hurricanes that hit the United States last summer.
From 2008 to 2011, China’s trade surplus fell by 7.3 percentage points of GDP. That’s a decline averaging 2.4 percentage points of GDP for three years. Its economy continued to grow at close to a 10.0 percent annual rate through this period. If we take Trump’s big tariff scenario, it will hit China less than one-quarter as hard as the 2008–2011 drop in its trade surplus. I’m sure that President Xi is shaking in his boots.
Apparently, Trump has no clue of how limited the U.S. ability to influence China’s economic policy is, or he doesn’t care and is just making his tariff threats for show. The one thing we can say with a high degree of certainty is that China is not going to fundamentally change the way it operates its economy because of Trump’s threats.
Long makes another point in this piece that is questionable. She claims:
“The belief in Washington for decades was that more trade with China would be a win-win, but Trump has forced both parties to rethink that conclusion. As John Pomfret, a longtime journalist in China, chronicles in his new book ‘The Beautiful Country and the Middle Kingdom: America and China, 1776 to the Present,’ the old thinking was that more trade would cause the Chinese to become more capitalist and democratic. That’s not what happened.”
It’s not clear that anyone in Washington actually “believed” that they would transform with China with more trade, although this is something that many people said. There were powerful corporations that stood to make lots of money from expanded trade with China. It was useful for them to have people say that this trade would advance democracy in China.
The people who argued that more trade would advance democracy in China were well-paid for their efforts. We have no way of knowing how many actually believed this view.
Addendum
I forgot to mention that Trump’s list of demands against China doesn’t include anything about its currency. After running around the country for a year and a half denouncing China as a “world class currency manipulator,” Trump doesn’t even include it on his dream list of changes he expects from China.
Oh well, no one ever said that Donald Trump was consistent, or had a clue.
Heather Long has a piece in the Washington Post detailing the demands that Donald Trump is making on China in exchange for not imposing tariffs. As she rightly points out, the list essentially amounts to asking China to remake its economy.
It would have been useful to point out how ridiculous this list of demands is, given the limited ability of the US to hurt China with tariffs. The US currently is importing a bit more than $500 billion a year from China. On an exchange rate basis, this comes to about 3.6 percent of its GDP.
Suppose that Trump tariffs cut this volume of imports in half, which would be a huge reduction. This would be a reduction in Chinese exports equal to 1.8 percent of its GDP. That would undoubtedly be somewhat of a hit to its economy, sort of like the hurricanes that hit the United States last summer.
From 2008 to 2011, China’s trade surplus fell by 7.3 percentage points of GDP. That’s a decline averaging 2.4 percentage points of GDP for three years. Its economy continued to grow at close to a 10.0 percent annual rate through this period. If we take Trump’s big tariff scenario, it will hit China less than one-quarter as hard as the 2008–2011 drop in its trade surplus. I’m sure that President Xi is shaking in his boots.
Apparently, Trump has no clue of how limited the U.S. ability to influence China’s economic policy is, or he doesn’t care and is just making his tariff threats for show. The one thing we can say with a high degree of certainty is that China is not going to fundamentally change the way it operates its economy because of Trump’s threats.
Long makes another point in this piece that is questionable. She claims:
“The belief in Washington for decades was that more trade with China would be a win-win, but Trump has forced both parties to rethink that conclusion. As John Pomfret, a longtime journalist in China, chronicles in his new book ‘The Beautiful Country and the Middle Kingdom: America and China, 1776 to the Present,’ the old thinking was that more trade would cause the Chinese to become more capitalist and democratic. That’s not what happened.”
It’s not clear that anyone in Washington actually “believed” that they would transform with China with more trade, although this is something that many people said. There were powerful corporations that stood to make lots of money from expanded trade with China. It was useful for them to have people say that this trade would advance democracy in China.
The people who argued that more trade would advance democracy in China were well-paid for their efforts. We have no way of knowing how many actually believed this view.
Addendum
I forgot to mention that Trump’s list of demands against China doesn’t include anything about its currency. After running around the country for a year and a half denouncing China as a “world class currency manipulator,” Trump doesn’t even include it on his dream list of changes he expects from China.
Oh well, no one ever said that Donald Trump was consistent, or had a clue.
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I know we are supposed to view the AI and robot folks as great gurus of the future, but at the moment they look like people who have great difficulty with simple arithmetic. We just got new numbers on productivity today and they were not very good, and they were especially not very good in manufacturing, the sector where we are supposed to have the greatest fear of job-killing robots. And, it’s not just the last quarter I’m talking about.
Productivity growth in manufacturing has averaged well under 1.0 percent annually for the last decade. In the Golden Age from 1947 to 1973, it averaged well over 3.0 percent. Here’s the picture for the last three decades from the good folks at the Bureau of Labor Statistics.
Manufacturing Productivity
Source: Bureau of Labor Statistics.
Of course, we could see a sharp uptick in the future, which I think would be a great thing. It would allow for rapid wage growth like we had back in the Golden Age.
Anyhow, if folks want to worry about the robots taking all the jobs, don’t let me bother you with data. While you’re at it, you may want to keep on the lookout for invading Martians.
I know we are supposed to view the AI and robot folks as great gurus of the future, but at the moment they look like people who have great difficulty with simple arithmetic. We just got new numbers on productivity today and they were not very good, and they were especially not very good in manufacturing, the sector where we are supposed to have the greatest fear of job-killing robots. And, it’s not just the last quarter I’m talking about.
Productivity growth in manufacturing has averaged well under 1.0 percent annually for the last decade. In the Golden Age from 1947 to 1973, it averaged well over 3.0 percent. Here’s the picture for the last three decades from the good folks at the Bureau of Labor Statistics.
Manufacturing Productivity
Source: Bureau of Labor Statistics.
Of course, we could see a sharp uptick in the future, which I think would be a great thing. It would allow for rapid wage growth like we had back in the Golden Age.
Anyhow, if folks want to worry about the robots taking all the jobs, don’t let me bother you with data. While you’re at it, you may want to keep on the lookout for invading Martians.
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