That would have been an appropriate headline for the NYT piece profiling Andrew Puzder, Donald Trump’s pick to be head of the Labor Department. According to the piece, Puzder, who runs a restaurant chain:
“…strongly supports repealing the Affordable Care Act, which he maintains has helped create a ‘restaurant recession’ because rising premiums have left middle- and working-class people with less money to spend dining out.”
In fact, restaurant spending and employment have risen rapidly since the key provisions of the Affordable Care Act (ACA) took effect in January of 2014 as shown in the figure below.
Source: Bureau of Labor Statistics.
Employment in restaurants in the most recent data is nearly 1 million higher than in December of 2013, the month before the health care exchanges created by the ACA began operating. Clearly Mr. Puzder is badly confused about business conditions in the restaurant sector. It would have been appropriate to point this fact out to readers, especially since it is very relevant to the job of the Labor Secretary.
Note: Thanks to Robert Salzberg for calling this to my attention.
That would have been an appropriate headline for the NYT piece profiling Andrew Puzder, Donald Trump’s pick to be head of the Labor Department. According to the piece, Puzder, who runs a restaurant chain:
“…strongly supports repealing the Affordable Care Act, which he maintains has helped create a ‘restaurant recession’ because rising premiums have left middle- and working-class people with less money to spend dining out.”
In fact, restaurant spending and employment have risen rapidly since the key provisions of the Affordable Care Act (ACA) took effect in January of 2014 as shown in the figure below.
Source: Bureau of Labor Statistics.
Employment in restaurants in the most recent data is nearly 1 million higher than in December of 2013, the month before the health care exchanges created by the ACA began operating. Clearly Mr. Puzder is badly confused about business conditions in the restaurant sector. It would have been appropriate to point this fact out to readers, especially since it is very relevant to the job of the Labor Secretary.
Note: Thanks to Robert Salzberg for calling this to my attention.
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The NYT had a column by Nicholas Bagley and Austin Frakt noting the problem that in the current insurance market, all workers at a company get the same plan, regardless of their income. The price of the policy is a much larger share of a low-paid worker’s wage than a high-paid worker’s wage, implying a much larger effect on their after-health care insurance income.
As the column notes, a big part of this story is the high price of new medical technology. It is worth noting this high price is the result of government-granted patent monopolies. If the research were paid for up front by the government (it could be done by private companies under contract) the technology would be cheap in almost all cases. The differences between the cost of the most modern scanning equipment and an old-fashioned x-ray would be trivial and new drugs would be available at the same price as generics. In other words, this is to a large extent an avoidable problem, although one that cannot be easily addressed because of the power of the affected industries.
The NYT had a column by Nicholas Bagley and Austin Frakt noting the problem that in the current insurance market, all workers at a company get the same plan, regardless of their income. The price of the policy is a much larger share of a low-paid worker’s wage than a high-paid worker’s wage, implying a much larger effect on their after-health care insurance income.
As the column notes, a big part of this story is the high price of new medical technology. It is worth noting this high price is the result of government-granted patent monopolies. If the research were paid for up front by the government (it could be done by private companies under contract) the technology would be cheap in almost all cases. The differences between the cost of the most modern scanning equipment and an old-fashioned x-ray would be trivial and new drugs would be available at the same price as generics. In other words, this is to a large extent an avoidable problem, although one that cannot be easily addressed because of the power of the affected industries.
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The NYT had an article presenting the comments of several people genuflecting over the lack of public support for current trade policy (wrongly referred to as “free trade”). The obvious reason for this lack of support, which is overlooked by those cited in the article, is that the intention and the outcome of trade policy has been to redistribute income upward.
The point of making it as easy as possible to move a factory to Mexico, and then import the output back to the United States, is to get access to low cost labor. The predicted and actual effect of this policy is to reduce the number of jobs available to manufacturing workers in the United States. This puts downward pressure on their wages, as fans of Econ 101 everywhere know. And, since manufacturing is a traditional source of high-wage employment for workers without college degrees, the loss of manufacturing jobs to Mexico and other developing countries puts downward pressure on the wages of non-college educated workers more generally.
For some reason, the NYT and other news outlets never point out that the “free traders” seem to have no problem with protectionist measures that benefit highly-educated professionals. For example, foreign doctors are prohibited from practicing medicine in the United States unless they complete a U.S. residency program. As a result, our doctors are paid twice as much as doctors in other wealthy countries (more than $250,000 a year on average, net of malpractice insurance and other expenses). This costs the country almost $100 billion a year in higher health care costs (@ $700 per family, per year).
We prohibit dentists from practicing in the United States unless they graduate from a U.S. dental school. (Since 2011, graduates of Canadian schools are also allowed to practice here.) These and other protectionist measures inflate the pay of highly educated professionals at great cost to the economy. However, these protectionist barriers never seem to be on the agenda of free traders.
(As many people have pointed out to me, if we simplified the rules so that more foreign professionals could practice in the United States we would get more professionals from developing countries. This could lead to a serious problem of “brain drain” as these countries lose their brightest and most educated people. As I have pointed out many times, we do know how to compensate for this flow of professionals. We could pay the countries from which these people came, so that they would be able to train two or three doctors or other professionals for every one that comes to the U.S. As I have also pointed out, we already get a substantial number of professionals from these countries and provide zero compensation, so it is striking that this concern only arises in the context of a proposal that jeopardizes the pay of high-end professionals.)
It is also important to note that stronger and longer patent and copyright and related protections have been a central part of recent trade deals. These protections are protectionism, the opposite of free trade. They are enormously costly and redistribute income upward. In the case of prescription drugs alone, patent and related protections raise the amount we pay for drugs by around $350 billion annually (@ $2,500 per family, per year) compared with the free market price. Patent monopolies do support research, but there are other more efficient mechanisms for financing research. (Get the full story in my book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. It’s free.)
Anyhow, it is touching to see that elite types are discovering that much of the country is unhappy with policies that were designed to redistribute from them to elite-types. The question we all must ask is, “are our elites learning?”
The NYT had an article presenting the comments of several people genuflecting over the lack of public support for current trade policy (wrongly referred to as “free trade”). The obvious reason for this lack of support, which is overlooked by those cited in the article, is that the intention and the outcome of trade policy has been to redistribute income upward.
The point of making it as easy as possible to move a factory to Mexico, and then import the output back to the United States, is to get access to low cost labor. The predicted and actual effect of this policy is to reduce the number of jobs available to manufacturing workers in the United States. This puts downward pressure on their wages, as fans of Econ 101 everywhere know. And, since manufacturing is a traditional source of high-wage employment for workers without college degrees, the loss of manufacturing jobs to Mexico and other developing countries puts downward pressure on the wages of non-college educated workers more generally.
For some reason, the NYT and other news outlets never point out that the “free traders” seem to have no problem with protectionist measures that benefit highly-educated professionals. For example, foreign doctors are prohibited from practicing medicine in the United States unless they complete a U.S. residency program. As a result, our doctors are paid twice as much as doctors in other wealthy countries (more than $250,000 a year on average, net of malpractice insurance and other expenses). This costs the country almost $100 billion a year in higher health care costs (@ $700 per family, per year).
We prohibit dentists from practicing in the United States unless they graduate from a U.S. dental school. (Since 2011, graduates of Canadian schools are also allowed to practice here.) These and other protectionist measures inflate the pay of highly educated professionals at great cost to the economy. However, these protectionist barriers never seem to be on the agenda of free traders.
(As many people have pointed out to me, if we simplified the rules so that more foreign professionals could practice in the United States we would get more professionals from developing countries. This could lead to a serious problem of “brain drain” as these countries lose their brightest and most educated people. As I have pointed out many times, we do know how to compensate for this flow of professionals. We could pay the countries from which these people came, so that they would be able to train two or three doctors or other professionals for every one that comes to the U.S. As I have also pointed out, we already get a substantial number of professionals from these countries and provide zero compensation, so it is striking that this concern only arises in the context of a proposal that jeopardizes the pay of high-end professionals.)
It is also important to note that stronger and longer patent and copyright and related protections have been a central part of recent trade deals. These protections are protectionism, the opposite of free trade. They are enormously costly and redistribute income upward. In the case of prescription drugs alone, patent and related protections raise the amount we pay for drugs by around $350 billion annually (@ $2,500 per family, per year) compared with the free market price. Patent monopolies do support research, but there are other more efficient mechanisms for financing research. (Get the full story in my book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. It’s free.)
Anyhow, it is touching to see that elite types are discovering that much of the country is unhappy with policies that were designed to redistribute from them to elite-types. The question we all must ask is, “are our elites learning?”
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Economists have been disappointed by the extraordinarily weak productivity growth of the last decade. Low productivity growth means that there is less room for improvements in living standards and more leisure.
Fortunately there may be an answer. Timothy Lee at Vox tells us that higher minimum wages are leading to more rapid automation. According to his piece, higher wages are pushing McDonald’s around the country to experiment with touchscreen ordering. This will raise productivity at McDonald’s and at other restaurants that adopt the technology.
While Lee for some reason views higher productivity as a bad thing, virtually all economists view productivity growth as the main determinant of living standards in the long-run. While productivity growth can displace workers, we know how to run macroeconomic policies (e.g. keep the Federal Reserve Board from raising interest rates and/or run larger budget deficits) to maintain full employment. So if Lee is right and higher wages are leading to more rapid productivity growth, this is great news.
Economists have been disappointed by the extraordinarily weak productivity growth of the last decade. Low productivity growth means that there is less room for improvements in living standards and more leisure.
Fortunately there may be an answer. Timothy Lee at Vox tells us that higher minimum wages are leading to more rapid automation. According to his piece, higher wages are pushing McDonald’s around the country to experiment with touchscreen ordering. This will raise productivity at McDonald’s and at other restaurants that adopt the technology.
While Lee for some reason views higher productivity as a bad thing, virtually all economists view productivity growth as the main determinant of living standards in the long-run. While productivity growth can displace workers, we know how to run macroeconomic policies (e.g. keep the Federal Reserve Board from raising interest rates and/or run larger budget deficits) to maintain full employment. So if Lee is right and higher wages are leading to more rapid productivity growth, this is great news.
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Traditional taxi companies are required to have their drivers undergo extensive background checks, including finger-print based checks. Apparently, Uber lacks the competence to deal with similar requirements to ensure the safety of their passengers. According to the Washington Post the company is prepared to pull out of the state of Maryland if it requires such checks.
It may well be that the Uber management lacks the competence to deal with the safety requirements that traditional taxi companies have adhered to for decades. If this is the case, then hopefully the top management will be replaced by a more competent group. Perhaps they will spend more of their resources managing the company and less on highly paid lobbyists like former Obama adviser David Plouffe.
Traditional taxi companies are required to have their drivers undergo extensive background checks, including finger-print based checks. Apparently, Uber lacks the competence to deal with similar requirements to ensure the safety of their passengers. According to the Washington Post the company is prepared to pull out of the state of Maryland if it requires such checks.
It may well be that the Uber management lacks the competence to deal with the safety requirements that traditional taxi companies have adhered to for decades. If this is the case, then hopefully the top management will be replaced by a more competent group. Perhaps they will spend more of their resources managing the company and less on highly paid lobbyists like former Obama adviser David Plouffe.
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Steve Rattner had a column on Donald Trump’s deal to keep 1,000 jobs at the Carrier air conditioner factory in Indiana in the country. The column argues against imposing tariff barriers that would protect manufacturing workers, but ignores the protectionist barriers that inflate the wages of doctors and other highly paid professionals.
The United States prohibits foreign doctors, even those with top quality health care systems like Germany and Netherlands, from practicing in the United States unless they complete a U.S. residency program. It also prohibits foreign dentists from practicing in the United States unless they graduate from a U.S. dental school. (Since 2011, graduates of Canadian dental schools have also been allowed to practice here.)
As a result of these and other protectionist measures we pay far more for the services provided by these professionals. In the case of doctors, their average pay of more than $250,000 a year (net of malpractice insurance and other expenses) is twice the average of other wealthy countries. This costs the country close to $100 billion a year (@$700 per household) in higher health care costs.
There are enormous potential gains to the economy from removing the protectionist barriers in these high-end professionals. It would also be a huge step toward reducing inequality. Unfortunately, it seems that people like Rattner and other protectionists who write on trade for the NYT are not willing to consider free trade policies.
Steve Rattner had a column on Donald Trump’s deal to keep 1,000 jobs at the Carrier air conditioner factory in Indiana in the country. The column argues against imposing tariff barriers that would protect manufacturing workers, but ignores the protectionist barriers that inflate the wages of doctors and other highly paid professionals.
The United States prohibits foreign doctors, even those with top quality health care systems like Germany and Netherlands, from practicing in the United States unless they complete a U.S. residency program. It also prohibits foreign dentists from practicing in the United States unless they graduate from a U.S. dental school. (Since 2011, graduates of Canadian dental schools have also been allowed to practice here.)
As a result of these and other protectionist measures we pay far more for the services provided by these professionals. In the case of doctors, their average pay of more than $250,000 a year (net of malpractice insurance and other expenses) is twice the average of other wealthy countries. This costs the country close to $100 billion a year (@$700 per household) in higher health care costs.
There are enormous potential gains to the economy from removing the protectionist barriers in these high-end professionals. It would also be a huge step toward reducing inequality. Unfortunately, it seems that people like Rattner and other protectionists who write on trade for the NYT are not willing to consider free trade policies.
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You need not be a fan of Donald Trump to say that trade has had a big impact on manufacturing jobs, you really just need to be someone in the reality-based community. Unfortunately, a lot of people who should, and probably do, know better are insisting that trade is not a big deal. The story is that we lost the jobs due to productivity growth, not trade.
There are three points worth making here. The first is a simple logical one, we have a trade deficit of around $500 billion a year, a bit less than 3.0 percent of GDP. This is basically all due to a deficit in manufactured goods (we have a surplus on services). Does anyone believe that the extra imports associated with the trade deficit are not associated with jobs? Can $500 billion worth of manufactured goods be produced without hiring people? (This matters much more in a context where we face secular stagnation, meaning there is not enough overall demand in the economy.)
The second point is that our trade deficit has not always been this large. Our deficits had been around 1.0 percent of GDP through most of the period from the late 1970s until the East Asian crisis in 1997. Following the crisis, the value of the dollar soared and the trade deficit did also. It eventually peaked at almost 6.0 percent of GDP in 2005–2006. (I should be giving the non-oil deficit, but I’m too lazy to look that up just now.)
Anyhow, this explosion in the trade deficit coincided with a sharp decline in manufacturing employment.
Jobs in Manufacturing
Source: Bureau of Labor Statistics.
As can be seen, manufacturing employment stayed close to 17.5 million from the early 1970s to 2000. We had plenty of productivity growth over these three decades, but little net change in manufacturing employment, in spite of cyclical ups and downs. It was declining as a share of total employment, which almost doubled over this period. Then, as the trade deficit explodes, we see manufacturing employment plummet. Note that most of the drop is before the Great Recession in 2008.
The final point is that much of the gains in productivity in the last two decades are illusory. Susan Houseman points out that the bulk of the reported gains in productivity growth are not in industries like autos and steel, but in the computer sector. So a pickup in productivity growth cannot explain the decline in manufacturing employment in most sectors.
I should also add that even the productivity growth we do see is in part due to the trade deficit. When jobs are lost due to import competition, it is generally going to be jobs in the least productive plants. By eliminating low productivity jobs, average productivity will rise even if no plant has actually increased its productivity.
Anyhow, we should not look to combat Donald Trump by following his tendency to ignore reality. Yes, trade has cost manufacturing workers jobs. We can propose different remedies (mine begin with getting the value of the dollar down against other currencies), but let’s not deny what is true.
You need not be a fan of Donald Trump to say that trade has had a big impact on manufacturing jobs, you really just need to be someone in the reality-based community. Unfortunately, a lot of people who should, and probably do, know better are insisting that trade is not a big deal. The story is that we lost the jobs due to productivity growth, not trade.
There are three points worth making here. The first is a simple logical one, we have a trade deficit of around $500 billion a year, a bit less than 3.0 percent of GDP. This is basically all due to a deficit in manufactured goods (we have a surplus on services). Does anyone believe that the extra imports associated with the trade deficit are not associated with jobs? Can $500 billion worth of manufactured goods be produced without hiring people? (This matters much more in a context where we face secular stagnation, meaning there is not enough overall demand in the economy.)
The second point is that our trade deficit has not always been this large. Our deficits had been around 1.0 percent of GDP through most of the period from the late 1970s until the East Asian crisis in 1997. Following the crisis, the value of the dollar soared and the trade deficit did also. It eventually peaked at almost 6.0 percent of GDP in 2005–2006. (I should be giving the non-oil deficit, but I’m too lazy to look that up just now.)
Anyhow, this explosion in the trade deficit coincided with a sharp decline in manufacturing employment.
Jobs in Manufacturing
Source: Bureau of Labor Statistics.
As can be seen, manufacturing employment stayed close to 17.5 million from the early 1970s to 2000. We had plenty of productivity growth over these three decades, but little net change in manufacturing employment, in spite of cyclical ups and downs. It was declining as a share of total employment, which almost doubled over this period. Then, as the trade deficit explodes, we see manufacturing employment plummet. Note that most of the drop is before the Great Recession in 2008.
The final point is that much of the gains in productivity in the last two decades are illusory. Susan Houseman points out that the bulk of the reported gains in productivity growth are not in industries like autos and steel, but in the computer sector. So a pickup in productivity growth cannot explain the decline in manufacturing employment in most sectors.
I should also add that even the productivity growth we do see is in part due to the trade deficit. When jobs are lost due to import competition, it is generally going to be jobs in the least productive plants. By eliminating low productivity jobs, average productivity will rise even if no plant has actually increased its productivity.
Anyhow, we should not look to combat Donald Trump by following his tendency to ignore reality. Yes, trade has cost manufacturing workers jobs. We can propose different remedies (mine begin with getting the value of the dollar down against other currencies), but let’s not deny what is true.
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The NYT had a major article focused on a Chinese man who makes his living by exposing retailers for selling unauthorized versions of clothes, shoes, and other retail products. His income comes from the government, which rewards people who find unauthorized copies of products being sold in stores. The article repeatedly refers to these items as “counterfeit.” This is inaccurate.
While all the items noted in the piece are in principle being sold without the consent of the named manufacturer, many would not qualify as “counterfeits.” The difference is that in many cases, the buyer knows that they are not getting a product made by the named manufacturer. They are willing to buy the product anyhow because it comes with a substantial discount. In this case, the product is not actually a counterfeit, since the consumer knows what they are buying.
This is not just a semantic point. If the consumer is being deceived, they are an ally in cracking down on the practice. On the other hand, if consumers willingly buys a product, knowing that it is not actually the named brand, then they will resist efforts to crack down.
Clearly China’s law in this area is designed to crack down on both actual counterfeits, in some cases raising serious safety issues, and also unauthorized copies that allow consumers to buy products at large discounts. It would have been helpful to be clear on this distinction so that readers would have a better idea of what is at stake.
The NYT had a major article focused on a Chinese man who makes his living by exposing retailers for selling unauthorized versions of clothes, shoes, and other retail products. His income comes from the government, which rewards people who find unauthorized copies of products being sold in stores. The article repeatedly refers to these items as “counterfeit.” This is inaccurate.
While all the items noted in the piece are in principle being sold without the consent of the named manufacturer, many would not qualify as “counterfeits.” The difference is that in many cases, the buyer knows that they are not getting a product made by the named manufacturer. They are willing to buy the product anyhow because it comes with a substantial discount. In this case, the product is not actually a counterfeit, since the consumer knows what they are buying.
This is not just a semantic point. If the consumer is being deceived, they are an ally in cracking down on the practice. On the other hand, if consumers willingly buys a product, knowing that it is not actually the named brand, then they will resist efforts to crack down.
Clearly China’s law in this area is designed to crack down on both actual counterfeits, in some cases raising serious safety issues, and also unauthorized copies that allow consumers to buy products at large discounts. It would have been helpful to be clear on this distinction so that readers would have a better idea of what is at stake.
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