The Trump administration is considering a unilateral change to how the government measures poverty. If adopted, the change would reduce by millions the number of people eligible for Medicaid, parts of Medicare, SNAP, and other benefits over the next 10 ye

(This post first appeared on my Patreon site.)

A theme often repeated in the media is that Japan is suffering terribly because of its low birth rates and shrinking population. This has meant slow growth, labor shortages, and an enormous government debt.

Like many items that are now popular wisdom, the story is pretty much nonsense. Let’s start at the most basic measure, per capita GDP growth. Yeah, I said per capita GDP growth because insofar as we care about growth it is on a per person basis, not total growth. After all, Bangladesh has a GDP that is more than twice as large as Denmark’s, but would anyone in their right mind say that the people of Bangladesh enjoy a higher standard of living? (Denmark’s GDP is more than twelve times as high on a per capita basis.)

On a per capita basis, Japan’s economy has grown at an average annual rate of 1.4 percent since the collapse of its stock and real estate in 1990. That’s somewhat less than the 2.3 percent rate of the U.S. economy, but hardly seems like a disaster. By comparison, per capita growth has averaged just 0.8 percent annually since the collapse of the housing bubble in 2007 in the United States.

But per capita income is just the beginning of any story of comparative well-being. There are many other factors that are as important in determining people’s living standards. To take an obvious one that gets far too little attention, the length of the average work year has declined far more over this period in Japan than in the United States.

According to the OECD, the length of the average work year has declined by almost 16 percent between 1990 and 2017 (the last year for which data are available). By comparison, the length of the average work year in the United States has declined by less than 3 percent over this period. This is a really big deal in terms of peoples’ lives.

If we use a start point of a 40-hour workweek, for 50 weeks a year, a 16 percent reduction in hours would be equivalent to 8 weeks a year of additional vacation. Alternatively, it would mean a 6.4 hour reduction in the length of the average workweek, meaning that people would be working 33.6 hours a week rather than 40 hours. My guess is that most people in the United States would be very happy to see the same sort of reduction in work hours as in disaster Japan.

June 17, 2019, Eileen Appelbaum

Dean Baker
Truthout, June 17, 2019

The Affordable Care Act (ACA) led to increases in health insurance coverage and reductions in racial and ethnic disparities in coverage. With Fathers’ Day this weekend, it’s a good time to take a closer look at trends in coverage for fathers. In this post

June 12, 2019

June 12, 2019 (Prices Byte)

Jake Johnston
Ayibopost, 10 juin, 2019

Dean Baker
Truthout, June 10, 2019

Elizabeth Warren’s proposal to raise the value of the Chinese yuan and other currencies against the dollar is not getting good reviews in the media from economists. As can be expected, some of the arguments are pretty strange.

As the usually astute Noah Smith tells it in his Bloomberg piece, the problem with the trade deficit is:

“U.S. consumers are consistently living beyond their means, which seems unsustainable.”

The implication is that if the trade deficit were lower than we would be forced to cut back consumption. But the major problem the United States has faced over the last decade, according to many economists, is “secular stagnation,” which is an obscure way of saying, not enough demand.

Contrary to what Smith tells us, U.S. consumers are not living beyond their means, rather we actually need them to spend more money to bring the economy to full employment. To be more precise, we need them to spend more in the domestic economy, to increase demand here as opposed to in our trading partners. (We can also bring the economy to full employment by having the government spend more money on things like health care or a green new deal.)

Smith also disagrees with Warren’s mechanism for getting the dollar down, which involves a mixture of negotiations and threats of countervailing measures. The idea is that the biggest actor is China, who for some reason it is assumed would never agree to raise the value of its currency. CNN raises similar concerns. This view seems badly off the mark.

First, it is assumed in both pieces that China is no longer acting to deliberately keep down the value of the yuan against the dollar, even though most economists now concede that it deliberately depressed the value of its currency to maintain large trade surpluses in the last decade. (They did not acknowledge China’s currency management at the time.)

It is wrong to claim that China is not now acting to keep down the value of the yuan. While it is no longer buying large amounts of dollars and other currencies, it holds a stock of more than $3 trillion in reserves, which is well over $4 trillion if we add in its sovereign wealth fund.

This huge stock of foreign assets has the effect of depressing the value of the yuan against the dollar in the same way that the Fed’s holding of more than $3 trillion in assets helps to keep down interest rates. While few economists question that the Fed’s holding of assets leads to lower long-term rates than would otherwise be the case, they seem to deny that China’s holding of a large stock of foreign assets has similar effects in currency markets.

June 2019, CEPR

June 7, 2019 (Jobs Byte)