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Economic Growth

United States

The Culture of Overwork: A Uniquely American Phenomenon

Earlier this year, Heather Boushey and Bridget Ansel of the Washington Center for Equitable Growth released a report titled “Overworked America: The Economic Causes and Consequences of Long Work Hours.” For those who work excessively long hours at their jobs and don’t have time to read the full report, this blog post by the authors succinctly summarizes many of the paper’s key findings.

Boushey and Ansel show that, between 2011 and 2014, a large number of Americans worked beyond the typical 40-hour workweek. (In 2015, exactly 25 percent of the labor force worked 41 or more hours per week.) Moreover, long hours show up predominantly in occupations with significant wage disparities — most notably in legal, management, and finance occupations.

One point that isn’t discussed in the piece is the degree to which other developed countries — many of which, incidentally, have much lower income inequality than the U.S. — have been able to rid themselves of this problem. As productivity rises, countries have the option of improving workers’ well-being not through higher incomes, but rather through greater leisure time. And in general, most countries have opted for a bit of both. Annual incomes have continued rising, but working hours have declined as well.

CEPR and Nicolas Buffie / September 23, 2016

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NYT Calls Protectionist Pact "Free Trade," Joins Obama's Push for the TPP

The Trans-Pacific Partnership (TPP) has little to do with free trade. The trade barriers between the United States and the other countries are already very low, with few exceptions. In fact, the United States already has trade deals with six of the 11 countries in the TPP. The TPP is primarily about installing a corporate-friendly structure of regulation, as well as increasing protectionist barriers in the form of stronger and longer patent and copyright and related protections. (It doesn't matter if you and your friends like patent and copyright protection, they are still protectionism.)

President Obama is pulling out all the stops in pushing the TPP and it seems the NYT has decided to abandon journalistic principles to join this effort. It featured a confused article reporting that people in the United States favored trade, which randomly flipped back and forth between the terms "trade," "trade agreements," and "free trade." As everyone, except apparently the people who work for the NYT, knows these are not the same thing.

It is hard to believe that many people in the United States would be opposed to trade. Imports and exports combined are more than a quarter of GDP. Many of the products we now import, like coffee, would either not be available at all, or extremely expensive without trade. It's difficult to believe that many people in the United States would support autarky as an alternative to the current system.

If people are asked about "trade agreements," it is not clear what they think they are referring to. The United States has been involved in hundreds of trade agreements over the last seven decades. These agreements hugely reduced trade barriers between the U.S. and the rest of the world, leading to large increases in trade and large drops in price. Of course most of these benefits accrued before 1980, but it seems unlikely that many of the people polled on the topic would have a clear idea of the costs and benefits of the trade deals negotiated since World War II.

When it comes to the TPP, there is very little by way of free trade promotion in this deal. As noted, most barriers between the member countries are already low. This is why the non-partisan International Trade Commission (ITC) projected that the gains to GDP when the effect of the deal is mostly felt in 2032 will be just over 0.2 percent of GDP. This is just over a month of normal economic growth.

CEPR / September 22, 2016

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Big Numbers and Confusion on Infrastructure Spending

The NYT had an article discussing proposals by Hillary Clinton and Donald Trump to increase spending on infrastructure. The article likely left many readers confused.

First, it briefly described the two candidates' proposals:

"Mrs. Clinton has said that if she is elected president, her administration would seek to spend $250 billion over five years on repairing and improving the nation’s infrastructure — not just ports but roads, bridges, energy systems and high-speed broadband — and would put an additional $25 billion toward a national infrastructure bank to spur related business investments. Mr. Trump said he wanted to go even bigger, saying his administration would spend at least twice as much as Mrs. Clinton."

It is unlikely many readers have a very good idea of how much money $250 billion is over the next five years. This comes to $50 billion a year, which is a bit less than 1.2 percent of projected federal spending over this period, or roughly 0.25 percent of projected GDP. Donald Trump's proposal is presumably twice as much. (It is not clear exactly how the $25 billion infrastructure bank would work, so it's not easy to come up with a figure for the related spending.)

The piece also somewhat misrepresented the argument being put forward by former Treasury Secretary Larry Summers:

"Today, with maintenance lacking and interest rates low, a host of influential economists, including Lawrence H. Summers, who served as Treasury secretary under President Bill Clinton, argue that America’s need for better infrastructure is so great that it could increase its debt load and still come out ahead.

"In a telephone interview, Mr. Summers laid out his case: The federal government can borrow at something like 1.0 percent interest a year, and through enhanced productivity it would reap something like 3 percent a year in higher tax receipts."

There are two separate issues at stake. First, it is possible that additional spending on infrastructure will lead to an increase in GDP, but also require more taxes in the future. Suppose that if we spent an additional 0.25 percent of GDP on infrastructure over the next five years it would result in GDP being 0.1 percent larger in subsequent years (a very low rate of return) than would otherwise be the case.

CEPR / September 18, 2016