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Manufacturing Employment Falls in August

After increasing for 12 consecutive months, manufacturing employment fell by 3,000 in August. The decline was all in manufacturing of durables, which lost 4,000 jobs. Employment in non-durable manufacturing rose by 1,000. The auto industry was the biggest loser, giving up 4,900 jobs after losing 3,500 jobs in July. The weakness also shows up in the index of hours, which dropped 0.3 percent for durable manufacturing in August.

Dean Baker / September 07, 2018

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Affordable Care Act

Medicare for All Battles

(This post originally appeared on my Patreon page.)

The Fact Check gang has been having a field day going after Bernie Sanders, Alexandria Ocasio-Cortez and other proponents of Medicare for All. The latest battle is over a study produced by the right-wing Mercatus which showed that a government-run health care program could reduce national health expenditures by $2 trillion over the course of a decade (roughly 0.8 percent of GDP).

Sanders and Ocasio-Cortez seized on this projection of savings coming out of a right-wing think tank as support for the greater efficiency of a universal Medicare program. Of course, this was not the point that the Mercatus folks intended people to get from their study. They highlighted the fact that their projections showed Medicare for All increasing costs to the federal government by $32.6 trillion over the first ten years of operation, with the amount equal to 10.7 percent of GDP in 2022 and rising to 12.7 percent of GDP in 2031.

The fact check crew definitely went overboard in attacking Sanders and Ocasio-Cortez for misrepresenting the study. One scenario in the study did, in fact, show that Medicare for All would reduce national health care expenditures by $2 trillion over the decade.

CEPR / September 05, 2018

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Milking Trump's Trade Dispute With Canada

The other 49 states have a massive trade deficit with Michigan in cars because of the terrible trade deals that our stupid trade negotiators signed with Michigan. Thankfully, Trump is going to impose a 25 percent tariff on cars from Michigan going into the other 49 states to set things right.

That is pretty much how we should understand Trump's complaint about the trade surplus that Canada has with the United States. (Yes, the United States actually runs a trade deficit with Canada, when properly measured, even including services.) Canada has a trade surplus for pretty much the same reason that Michigan has a trade surplus in cars. It has historically set itself up as a good place to manufacture goods.

Note that Canada's trick is not low-cost labor. Its workers get comparable wages to workers in the US and they enjoy considerably more labor rights than do workers here. That is the same story with Michigan's auto industry where workers are more likely to be unionized and get somewhat higher wages on average than workers in the other 49 states. (There can be currency issues with Canada, but we'll skip that for now.)

Suppose we did put 25 percent tariffs on cars going from Michigan to the other 49 states. Would that mean more jobs in the auto industry in the other 49 states?

The answer to that is not clear. To some extent, the auto manufacturers that have operations in Michigan may just keep their factories going and split the tariff with their customers. This will mean fewer Michigan cars will be sold in the other 49 states. Since Michigan cars include many parts from the other 49 states, that will mean fewer jobs in the auto industry in the other 49 states.

CEPR / September 02, 2018

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World Development Report Gets It Seriously Wrong on Inequality and Labor Markets

The World Bank’s annual World Development Report (WDR) is viewed as the Bank’s official statement on best practices in development policy. It is important both because it often serves as a basis for project loans and IMF programs, and also because it is viewed as an authoritative document by many people in policy positions throughout the world.

For this reason, it is disconcerting that the draft report gets some very big things wrong. First and foremost, the overview dismisses concerns over growing inequality by noting that the Gini coefficient in 37 of 41 developing countries stayed the same or fell over the years from 2007 to 2015 (page 7). This is a bizarre conclusion because this is the period of the worldwide financial crisis. Inequality, even in the United States, was little changed over this period, even though there has been a massive increase in inequality over the longer period dating back to the late 1970s. While the experience of the developing countries may differ in this respect from the experience of the United States and other wealthy countries, it is strange that the Bank would use this clearly atypical period as the basis for dismissing concerns about growing inequality.

The other major concern, which is perhaps more important since it provides the basis for many of the specific recommendations, is a misunderstanding of the nature of the labor market. The draft largely accepts the idea that traditional employer–employee relationships are becoming obsolete and effectively urges developing countries to accommodate their policy to this reality. That means weakening or eliminating a wide variety of labor market regulations, such as minimum wages and employment protection rules.

While there has been a large amount of hype in the media about the gig economy, with the idea that workers are increasingly just taking temporary work through web-based apps rather than traditional employment, the data do not support this assessment. This is seen most clearly in the United States where the Bureau of Labor Statistics recently released its Contingent Work Survey (CWS), the first one conducted since 2005.

The CWS showed that there had actually been a slight decrease in contingent employment as share of total employment between 2005 and 2017. Pure gig jobs, like driving an Uber, accounted for less than 1.0 percent of total employment.

CEPR / August 29, 2018