Category: Political economy

Good News: Are You Better Off? (2)

tomkapostasy1 Comment

Ronald Reagan taunted Jimmy Carter with this question to voters in the 1980 debates. It helped him win.

Twelve years later, James Carville helped Democrats return from the political wilderness in 1992 with his advice to Bill Clinton that “it’s the economy, stupid”.

https://en.wikipedia.org/wiki/It%27s_the_economy,_stupid

Politicians have used various measures, from unemployment to inflation to the “misery index” to jobs created to productivity to the stock market, to promote their success and detract from their opponents.

I want to focus on one measure, the ratio of the number unemployed to the number of job openings, to highlight the strength of the American economy in the last dozen years.

https://www.bls.gov/charts/job-openings-and-labor-turnover/unemp-per-job-opening.htm

https://fred.stlouisfed.org/graph/?g=p9aA

George W. Bush: Jobless Recovery in the “aughts”

The Bush economy was widely criticized for its “jobless recovery” following the economically healthier Reagan and Clinton presidencies. The presidency started at close to 1 unemployed person per job opening. The recession pushed this up to 2.5x and then 3.0x. In labor market terms, this is a huge difference. At 1:1 or 1.5:1, unemployed workers expect to be re-employed quickly. At 3:1, some may enter the dark days of the “long-term unemployed”. After 3 years, the economy DID recover to 1.5:1, but it was unable to improve further. The “Great Recession” was a brutal job killer, pushing this measure of labor market tightness up four-fold, from 1.5X to more than 6X before its peak in the first half of 2010, as Obama and congress and the federal reserve bank wrestled with the situation.

Obama: Recovery and “New Territory”

Between April, 2010 and April, 2012, the economy cut this ratio in half, from 6x to 3x, a very solid performance. It took 3 years, until April, 2015, to complete the next 50% reduction, from 3x to the historically “very solid” 1.5X. The economy continued its growth for the next 2 years, but at a slower pace, reducing this ratio to 1.3X.

Trump: Even Better

The Trump economy continued to improve for the first 18 months of his term, reducing this ratio from 1.3X to 0.8X by September, 2018. This was a time of record low unemployment and economists recalculating their standard of “full employment”. While the economy continued to grow, the unemployment rate continued to decline and the stock market continued to climb, THIS measure had reached its minimum before the 2018 mid-term elections. It remained steady at the very positive level of 4 job seekers for every 5 jobs (0.8) for the next 17 months, until the pandemic disrupted everything. The ratio quickly shot up to 5X, not as high as the 6X that Obama faced, but very high. It quickly recovered to 1.4X by the end of Trump’s term. This was partly job recovery and partly fewer job seekers, but it was an amazing recovery in historic terms. Recall that 1.5X was “a good as it got” during George W. Bush’s presidency.

Biden: Even Better, Again !

In the first 6 months of the Biden presidency, this ratio dropped from 1.4X back down to the prior record level of 0.8X. Yes, by July, 2021, there were 5 jobs available for every 4 job seekers. This was as low as the ratio had previously fallen, even as the Trump economy piggybacked on the Obama economy and continued its extraordinary run. The ratio continued to fall in the next 6 months to 0.6X, an unheard-of level. 5 jobs for every 3 job seekers. It’s “no wonder” that voluntary job quits are at unprecedented levels. For, perhaps, the first time in American history, “everyone who wants to work, can find a job”. Whether you are right or left, Dem or Rep, this is “good news”. This is “great news”. Wages for the “bottom 20%” are rising in real terms. Income inequality is declining, a bit. The economy seems to be able to digest this new condition. And, the economy is not done growing, innovating, creating businesses, creating jobs, exporting, etc. About 2% of Americans are likely to be attracted back into the workforce in the next year or two, keeping the headline unemployment rate from going much below 4%, but pushing US real GDP growth to 4% in 2022 and close to 4% in 2023.

Summary

The “Great Recession” and the “once in a century pandemic” have been unable to disrupt the ongoing progress of the American economy and labor market. As a nation, IMHO, we have cultural and political challenges, but we “aught” to appreciate the power of the American economy to move forward.

Results of State Covid Strategies

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Many states have legislatures and governors from the same party and voted for this party in both the 2016 and 2020 presidential elections. These states have adopted quite different Covid management strategies. There are 14 solidly Democratic states and 21 solidly Republican states, leaving 15 states with some level of “mixed” political control and influence.

https://ballotpedia.org/Partisan_composition_of_state_legislatures

https://www.ncsl.org/research/about-state-legislatures/partisan-composition.aspx#

https://www.cnn.com/election/2020/results/president

https://www.politico.com/2016-election/results/map/president/

https://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_population

Fully Vaccinated, Age 18+

Democratic states average 80%, Republican states 66% and Mixed states 73%. The national average is 72%. Nevada (69%) is the only Blue state below 75%. Alabama, Wyoming and Mississippi have the lowest scores for the GOP at 59-60%. Florida has the highest rate at 75%. The split in world views is confirmed by this measure. The mixed group ranges from Louisiana and Georgia at 63% to Massachusetts (85%) and Vermont (86%).

https://covid.cdc.gov/covid-data-tracker/#vaccinations_vacc-total-admin-rate-pop18

Cumulative Death Rate / 100,000 Population

The overall death rate for the country is 256. The mixed states are similar at 265. The Democratic states average 221 deaths per 100K people. The Republican states average 282 deaths per 100K people. If the Republican states had the same rate as the Democratic states, they would have 59 fewer deaths per 100K people, for a cumulative total of 70,000. Economists use $10M as the value of a life in many cost-benefit calculations, so one measure of the difference is $700B.

California (196) and New York (227) drive the lower D result, but the Dems include higher fatality states such as Rhode Island (305) and New Jersey (344). The mixed states include some relatively high death rates in Michigan (315), Louisiana (329) and Arizona (350). The Republican group includes 3 states below the D average in Utah, Alaska and Nebraska, but 7 states at 300 or higher: Oklahoma, Indiana, West Virginia, Arkansas, Tennessee, Alabama and Mississippi.

https://covid.cdc.gov/covid-data-tracker/#cases_deathsper100k

As the median age for Covid deaths is 75, an argument could be made that the $10M economic value of a human life is too high in this analysis.

https://www.cdc.gov/nchs/nvss/vsrr/covid_weekly/index.htm#SexAndAge

Population density and the percentage of population aged 65+ did not have statistically material impacts on the pattern by political party control.

Which U.S. States Have the Oldest Populations?

https://www.census.gov/data/tables/time-series/dec/density-data-text.html

Nonfarm Employment Recovery: Nov 2021 vs. Feb 2020

Overall employment is within 2% of the February, 2020 peak for the country as a whole. The “mixed” states have recovered to within 2.3% of the peak. The Democratic states are only at 96.4% of the peak, while the Republican states, on average, are just below breakeven at 99.9%. If the D states had the same level of recovery, there would be 1.8M jobs added in the recovery to date. At the recent median $1,000 per week wage, this would generate $94 billion of income annually.

https://www.bls.gov/news.release/laus.t03.htm#

Click to access laus_03272020.pdf

Click to access tabled1_201502.pdf

https://view.officeapps.live.com/op/view.aspx?src=https%3A%2F%2Fwww.bls.gov%2Fsae%2Ftables%2Fannual-average%2Ftable-1-employees-on-nonfarm-payrolls-in-states-and-selected-areas-by-major-industry.xlsx&wdOrigin=BROWSELINK

I used the Feb 2015 to Feb 2020 period to generate a pre-Covid trend growth rate. This was 6.4% for the country, 5.4% for the mixed states, 7.0% for the D states and 6.7% for the R states. This indicates that the Republican faster recovery is not due to prior momentum. I used the 2020/2015 growth rate to create a solid estimate of the 2021/2020 recovery rate for each state (r = 0.63). It confirmed the 3%+ gap between the 2 parties was not due to prior trends. I also checked the percentage of 2019 employment in the leisure and hospitality sector, to see if this was driving the difference, but it did not have a material effect.

Mixed Political Control States

State% Vaccinated 18+Deaths/100KJob Recovery
AZ69350103
GA63304100
KS7025198
KY6628398
LA6332993
MD8221597
MA8531097
MI6731596
MN7720097
NH7715797
NC68192100
PA7530796
VT867893
VA8018698
WI7320597

Democratic Party States

State% Vaccinated 18+Deaths/100KJob Recovery
CA7919697
CO78187100
CT8627496
DE7625297
HA867988
IL7526396
ME8612696
NV6928397
NJ8334497
NM7929896
NY8422793
OR7714098
RI8730596
WA80136101

Republican States

State% Vaccinated 18+Deaths/100KJob Recovery
AL5934399
AK7013994
AR62314100
FL75296101
ID63241105
IN6430898
IA7126397
MS6036099
MO6427799
MT64278101
NE73184100
ND6527196
OH6627396
OK6630097
SC6529399
SD7129499
TN63322100
TX70264102
UT74125106
WV6531296
WY6027695

Good News: US Economy is 29 Times as Large as in 1900!

tomkapostasy2 Comments

Real (inflation adjusted) Gross Domestic Product (GDP), the value of all goods and services produced in the US reached $20.8 trillion in 2020, compared with only $0.7 trillion in 1900. This is a nearly 30-fold growth across 120 years.

YearReal $GDP (T)Added $GDPPercent
19000.7
19101.00.346%
19201.30.321%
19301.50.322%
19401.80.320%
19502.70.845%
19603.71.141%
19705.61.950%
19807.82.138%
199010.62.937%
200014.94.340%
201017.62.718%
202020.83.218%

It’s difficult to “digest” 20.8 trillion dollars. But, it is true that the US economy in 2020 was ten (10) times as large as it was in 1952, well into the post-war economic boom period. The population had more than doubled and the productivity of the economy had increased more than three-fold across this period.

The economy is 3 times as large as it was in 1975, when it was entering a challenging period of stagflation, foreign competition, high interest rates, energy shortages, environmental concerns and divided politics.

The economy is twice as large (in real terms) as it was in 1990.

The economy grew by an average of 42% per decade from 1940 through 2000. The last two decades have grown by 18% each, similar to the growth from 1910 through 1940.

However, the amount of growth, measured in real dollars, has continued at a very strong pace. The economy averaged growth of $2.8 trillion per decade from 1970 through 2020. That is roughly the size of the whole economy in 1950! The latest decade recorded a $3.2 trillion increase, larger than the output of the whole economy in 1950, and the second largest growth ever.

US Population

YearPopulation (M)Added (M)Percent
190076
1910921621%
19201061415%
19301231716%
194013297%
19501511914%
19601792819%
19702032413%
19802272312%
19902492210%
20002813313%
20103092710%
2020331237%

The US population has increased by 4.3 times since 1900, from 76 to 331 million people.

The population doubled from 1900 to 1950 and then doubled again since 1955.

The US added an average of 25 million new residents per decade from 1940 to 2020 (12%).

In the last 30 years, the US has added 85 million residents; the same number as its total population in 1905!

Despite many challenges in the last century, the US population has grown consistently and significantly.

Real $GDP Per Capita

YearReal $GDP/Capita$ AddedPercent
19009,300
191011,2001,90020%
192011,8006005%
193012,4006005%
194013,9001,50012%
195017,6003,70027%
196020,9003,30019%
197027,7006,80033%
198034,3006,60024%
199042,8008,50025%
200053,10010,30024%
201057,1004,0008%
202062,7005,60010%

Real (inflation-adjusted) output per person has grown 6.7 times since 1900!

It has doubled since 1975, tripled since 1960 and quadrupled since 1945. Yes, today’s economy produces four times as much, per person, as the supercharged Word War II winning “arsenal of democracy”. It produces twice as much per person as the 1975 economy which then appeared to plateau in the face of Japanese import competition.

From 1960 through 2020, the economy has added an average of $7,000 more output per American for each decade.

While improved output/productivity in the last 2 decades has not matched that of 1960-2000, it still added $9,600 of output per resident, more than the total output per resident in 1900. In the last 3 decades combined, the economy has added nearly $20,000 of output/income per person, an amount equal to the total output/income per person in the late 1950’s.

Sources

https://fred.stlouisfed.org/series/A939RX0Q048SBEA

https://ourworldindata.org/grapher/gdp-per-capita-maddison-2020

Click to access ECONI-2021-09-Pg2.pdf

https://en.wikipedia.org/wiki/Demographic_history_of_the_United_States

Moral Foundations Theory of Politics

tomkapostasy12 Comments

The Righteous Mind-Jonathan Haidt 2014

Political views are rationalizations of moral intuitions. They are demonstrably not the result of dispassionate analysis by individuals.

A small number of moral intuitions are broadly held across time and cultures and can be “explained” on the basis of evolutionary pressures on mankind.

The prevalence of the six logically defined and statistically confirmed dimensions differ markedly between liberal and conservative minded people in various cultures.

1. Care/Harm

Desire to protect children and weaker others from harm. Caring, kindness, gentleness, nurturance, compassion, feelings, empathy. Liberals and conservatives both show an interest in this dimension of morality. Liberals value this dimension most highly. Conservative men and libertarians, on average, show much less interest in this dimension.

2. Fairness/Reciprocity/Cheating

In a social setting, there is a need to rely upon others keeping their word, being honest, doing their share of work, etc. Justice, rights, cooperation, deception, trust. Liberals tend to interpret this in terms of equality. Equal rights, equal opportunity and equal results. Conservatives are closer to the evolutionary basis as seen in game theory / the prisoners dilemma / “tit for tat” winning strategy. They highly value proportionality, closely linking results to inputs or effort.

3. Liberty/Oppression

No one wants the “alpha dog” to take advantage of their position. Individual and group opposition to domination, tyranny, restrictions, bullies and cruelty. Liberals and conservatives both value this dimension in modern, western, secular, commercial societies. They define the oppressor differently, with liberals focusing on business and institutional sources of power and conservatives focusing on government and regulators. Libertarians value this dimension most highly. These first 3 sources of morality are more individual oriented, mediating the tensions between individuals and groups.

4. Group Loyalty

Clear commitment to the group. More than “limited liability”. Betrayal, in-group attachment, patriotism, nationalism, betrayal, self-sacrifice, us vs. them, tribe, religion, party, flag, clan, neighbors, family. Conservatives value this dimension very highly, with felt loyalties to several groups. Liberals value this dimension, but not nearly as highly; with a tendency to value the largest groups: nation, humanity, nature. The liberal focus on “diversity” and valuing others, outgroups and the “oppressed” is very different from the conservative worldview. Western, secular, commercial societies value this dimension less.

5. Authority/Respect

Larger groups require some degree of hierarchy. Leader and follower. This is a complement to the liberty/oppressor value. Respect for authority, leader, institution, rules, history. Safety, order, predictability. Obedience, deference, submission. Against subversion, revolution. This is the classic conservative value, supporting the known value/benefits of a given system against the potential value/risks of change. Modern, individualistic liberals tend to not value this dimension highly, instead choosing to “challenge authority”.

6. Purity/Sanctity

The sixth dimension differs from the first 5. It is not so clearly about managing the “individual to group” challenges. It focuses on the disgust/gag reflex to things or situations that are so threatening as to be beyond consideration. This takes place at both the practical and the abstract levels. Degradation, disgust, disease, infection, dirt, germs, contamination, carnality, body, sex. Piety, chastity, temperance, compliance, burning, cleanliness, food rules. Everyone has some sensitivity to this dimension, but conservatives have much higher concern. Research says that conservatives, on average, have a lower interest in new (unsafe, novel) activities or experiences. Moral values 4-6 retain higher priority outside of western, commercial, secular societies. Liberal references to purity may focus on things like the environment.

Basic References

Home
https://peterlevine.ws/?p=14220

https://www.online-psychology-degrees.org/study/jonathan-haidt-morality/

https://en.wikipedia.org/wiki/Moral_foundations_theory

https://www.wired.com/2012/10/the-psychology-of-liberals-and-conservatives/?gclid=Cj0KCQiAoY-PBhCNARIsABcz773DJzBnc5VoJf5iUksyynjWCWM-bcXuNVXNGat-dSIuvliFr7UOl9EaAh9zEALw_wcB

Applications

Haidt is a self-professed “liberal” who intuitively/instinctively rejected the “rational” morality theories he learned in graduate school in the 1980’s. During his early research on alternate approaches, he had the “aha” insights that 1) other cultures have very different moral values and that 2) moral/political views are intuitive and rationalized. He hoped/hopes that liberals can see that their more limited moral palate (3 items) is not the only one and that this difference between including or not including the other 3 bases is a huge insight, even if liberals choose to not value the other 3 dimensions. He analyzed national politics in each election cycle from 2000, highlighting the large advantage that Republican politicians have in monopolizing the 3 other dimensions. In 2016, he advised the Dems to fight against Trump on the “conservative” moral dimensions of loyalty (Putin?), authority/order (Trump chaos/revolution/policy changes), and purity (sex allegations) instead of policy positions or personal character.

How the Democrats Can Use Moral Foundations Theory Against Trump

Haidt collaborated with a CATO scholar to analyze the 2016 Democratic and Republican candidates for the presidency, analyzing their supporters in terms of the Moral Foundations Theory.

https://www.vox.com/2016/2/5/10918164/donald-trump-morality

https://www.cato.org/commentary/donald-trump-supporters-think-about-morality-differently-other-voters-heres-how

Research and Critics

The Wiki post has some references.

https://en.wikipedia.org/wiki/Moral_foundations_theory

The basic conclusions are supported, but all details are not. The 1 Care / 2 Fairness versus other dimensions emphasis between liberals and conservatives is supported. But, statistically, there may just be individual versus group moral foundations (2 dimensions versus 5-6).

https://digest.bps.org.uk/2021/03/15/do-liberals-and-conservatives-really-have-different-moral-foundations-differences-may-be-less-clear-cut-than-often-claimed/

Group? Which group? Small or large? In-group or out-group? Research is now focused on defining questions that clarify in-group versus out-group attraction and then, the difference between liberals versus conservatives, if any.

https://www.frontiersin.org/articles/10.3389/fpsyg.2021.579908/full

Academics have been busy working on the details. One criticism is that the 5 or 6 dimensions were defined in an ad hoc manner, rather than part of an overall theory of how man evolved. One group has stepped up to propose a theory that is solely based upon the various forms of cooperation, resulting in 7 dimensions.

What’s Wrong with Moral Foundations Theory, and How to get Moral Psychology Right

On the academic left, Haidt’s “moral equivalence” approach to the 3 modern, secular, liberal values and the 3 historic, religious, conservative values has been sharply criticized. An alternate view that highlights bias/bigotry, social dominance, right-wing authoritarianism, Schwartz Value Theory and Evolutionary/Coalitional Theory (ECT) has been proposed.

https://www.salon.com/2018/09/02/are-trump-supporters-evil-or-just-wrong-political-scientists-struggle-with-morality/

Summary

Haidt and his colleagues have defined 6 dimensions of moral thinking which underly modern political views that make sense based on evolution. The “west” could clearly learn something about the moral/political views of other societies that did not have the same historical evolution into a commercial/largely secular situation. Politicians could seek to more effectively target their messages to trigger all of these 6 values in their target audiences. Civic minded individuals could promote greater understanding of these insights to lessen the Manichaean “good versus evil” polarization we see in politics today.

Good News: US Economy Added 6 Million Jobs in 2021

tomkapostasy1 Comment

Today’s news releases show 6.0M jobs added during 2021 according to the household survey and 6.5M jobs added according to the employer survey. The ADP employer jobs survey released this week showed 6.2M jobs added. The employer reported number of open jobs increased from 6.8M to 10.6M this year. Hence the total filled plus open jobs increased by 10.6M, from 149.3M to 159.6M, a truly incredible expansion of the US economy’s production potential and demand for labor. This is 1M more filled plus open jobs than the December, 2019 peak of 158.6M. Employers are clearly struggling to work this backlog down from the 10-11M range back to the pre-pandemic 6-7M level. This provides the demand side for another 8-12 months’ worth of 500K filled jobs added per month.

The 3 underlying measures use different definitions and survey methods, but in the long-run they generally agree.

https://www.bls.gov/web/empsit/ces_cps_trends.htm#intro

The monthly changes are much less consistent. Much of the media highlighted that the employer survey data showed just 200K jobs added in December. The household survey indicated 600K jobs added, while ADP reported 900K jobs.

It’s best to look at all 3 measures to try to get a best estimate of the most recent changes. I see roughly 500K new jobs added each month from July through December. A flat number, not an increasing one. The first half of the year was probably adding a few more jobs each month, closer to 600K each.

https://adpemploymentreport.com/2021/December/NER/NER-December-2021.aspx

Look Past the “Spin”

https://www.foxbusiness.com/economy/biden-december-jobs-figure-unemployment-decline

https://www.dailymail.co.uk/news/article-10379015/US-employment-report-misses-expectations-Just-199-000-jobs-added-December.html

https://hannity.com/media-room/the-wrong-man-for-the-jobs-biden-misses-jobs-forecast-by-200000/

 https://www.realclearpolitics.com/2022/01/07/another_disastrous_jobs_report_lands_on_bidens_desk_560237.html

 

Good News: A Great Labor Market

tomkapostasy1 Comment

Layoffs

From 2000-2009, the dynamic US labor market laid off workers at a consistent 2M per year rate. This declined a bit to 1.8M per year in the next decade. After the pandemic, the economy quickly returned to this 1.8M per year rate from July to December, 2020.

It has dropped and remained at a 1.4M per year rate at the end of 2021, fully 30% lower than its normal level. Good news, indeed.

Unemployment Claims

Historically, the US economy generated 350,000 new unemployment claims each week. This measure declined slowly after the Great Recession, reaching a nice 300,000 level in 2014. It slowly declined to a record low of 205,000 in Feb, 2020. The disruption rate dropped back down to the very high but stable 800,000 level from Aug, 2020 through Apr, 2021. In the last 8 months the rate has dropped very quickly back down to the record low 200,000 level!

Cumulative individuals claiming unemployment benefits has historically varied with the business cycle. We can see the increase from 2M to 4M at the turn of the century. The “Great Recession” had a greater negative impact, driving this number from 2M – 4M – 7M. This number fell throughout the extended business cycle recovery period, breaching 2M in Feb, 2017 and reaching a low of 1.7M in Feb, 2020. The unemployed number reached a full order of magnitude higher at 23M during the pandemic, then dropping to 13M in Sep, 2020 and 4M in Mar, 2021 and 2M in Nov, 2021 and finally equaling the record low in December, 2021 at 1.7M. This is great news!

Unemployment Rate

The unemployment rate has reached 4.2% and will return to its historical low of 3.5% in the next 4-6 months.

https://tomkapostasy.com/2021/12/29/good-news-very-low-unemployment/

Minority Unemployment Rate

African-American unemployment was typically in the 8-10% range. It was driven down to the 5-6% level after the Great Recession during the extended business cycle expansion period. The rate is now below 7% and falling.

Hispanic American unemployment averaged 5-7% in the 2000’s. It spiked after the Great Recession to 13%, then slowly declined to 4.3%. It has since recovered to 5.2% and is dropping quickly.

Broadly Defined Unemployment

Broader definitions of unemployment show the same swift recovery from the pandemic situation.

Labor Force Participation

Labor force participation among the core 25-55 year age group reached an historic, and possibly unsustainable high of 83% in late 2019. It stayed around 81% at the end of 2020 and has since improved to 81.8%. This is one of the few labor market indicators that clearly shows that we have NOT “fully recovered”. There is 1% of the population waiting to be attracted back into the labor force.

https://tomkapostasy.com/2021/06/24/labor-force-participation-rates/

Quits Rate

The voluntary “quit” rate has doubled since the good side of the “Great Recession”. It is 50% higher than during the very favorable labor market of 2018-2020. Employees are confident that they can leave their current employer and find another position quickly.

https://tomkapostasy.com/2021/10/23/the-great-resignation-labor-markets-run-amuck/

Job Openings

This is the CRAZY positive labor market chart. Historically, we see 3-5M job openings. Expansion to 6M in 2016-17 as the post Great Recession recovery faced its “end”. But, the expansion continued even further, with 7M open positions available in 2018-20. The economy recovered to 6.8M open positions in Dec, 2020. This figure has since climbed to an incredible 11M open positions, more than double the historic norm.

This is truly a “good news” labor market!

Good News: Minimum Wage Continues to Increase

tomkapostasy1 Comment

States and cities have been increasing their minimum wages annually since before the pandemic struck in early 2020 and have set higher rates for 2022.

https://www.cnn.com/2021/12/31/politics/minimum-wage-increase-2022-15-dollars/index.html

https://www.paycor.com/resource-center/articles/minimum-wage-by-state/

Public Policy is More Favorable

Historically, corporations and supporters have highlighted the negative impacts of small/large and narrow/broad minimum wage increases (2019 example).

https://fee.org/articles/support-for-15-minimum-wage-plummets-when-americans-are-told-its-economic-impact/?gclid=Cj0KCQiAlMCOBhCZARIsANLid6ZmQXEJ_4xmXTiQ3n16kSGLLqLvgeS_hdpoSlXwUR_oD-_b9NK3AfcaAtBvEALw_wcB

Historically, economists generally emphasized the negative short-term and long-term impacts of significantly higher, broadly applied minimum wage increases. Studies in the 1990’s indicated that the negative effects of moderate minimum wage increases could be relatively small, so economists’ articles have been more balanced in the past 3 decades.

https://en.wikipedia.org/wiki/Minimum_wage

Some more liberal leaning economists have been actively suppporting minimum wage increases as the US minimum wage has continued to decline on a real, after inflation basis, US minimums have fallen compared with other developed countries and the US distribution of income has become more unequal and poverty rates have not fallen despite US economic progress.

Economists in support of a federal minimum wage of $15 by 2024

Some economists even point to the self-serving benefits of higher minimum wages for corporations, including greater productivity, innovation and retention.

Businesses can thrive with a higher minimum wage, and government can help

There does not appear to be widespread business or general public support for Biden’s across the board $15 per hour minimum wage proposal.

https://www.pbs.org/newshour/health/how-economists-see-bidens-15-wage-proposal

Biden has been able to increase minimum wages on government contracts.

https://news.bloomberglaw.com/daily-labor-report/biden-orders-15-minimum-wage-on-federal-contracts-by-march?context=article-related

But, large corporations are increasing their own minimum wages and trying to position themselves as supportive of “common sense” public policy changes that do not impact themselves very much. Some critics say that this is because large corporations can absorb higher minimum wages through their economies of scale and pricing power, while smaller businesses cannot and will go out of business, resulting in further growth of power for large businesses.

https://www.usatoday.com/story/opinion/2021/02/26/big-business-behind-push-for-15-minimum-wage-column/4545386001/

Surprisingly, recent survey research indicates that many small businesses also do not stridently oppose modest minimum wage increases.

https://www.verizon.com/business/small-business-essentials/resources/most-small-businesses-support-minimum-wage-hikes/

Corporate Minimum Wage Increases

Perhaps more importantly, large corporations in a variety of industries have voluntarily increased their minimum wages from the $12/hour to the $15/hour plus range in the last 2 years. (Out of self interest).

Banking

Bank of America to raise minimum wage to $25/hr by 2025
https://www.abc4.com/news/national/bank-becomes-latest-to-increase-minimum-hourly-pay-rate/

https://www.americanbanker.com/news/fifth-third-is-latest-bank-to-raise-its-minimum-wage

https://www.yahoo.com/now/wells-fargo-raises-minimum-wage-215921054.html

https://www.bizjournals.com/boston/news/2018/01/25/santander-to-raise-minimum-wage-to-15-per-hour.html

Health Care

CVS raising minimum wage to $15 next year

https://www.lexology.com/library/detail.aspx?g=cdb8465e-3eaf-45aa-8d9d-e7946210ba3a#:~:text=Walgreens%20is%20the%20latest%20retail,more%20workers%20with%20larger%20wages.

https://www.courant.com/business/hc-biz-cigna-tax-benefits-20180131-story.html

Fast Food

https://thehill.com/business-a-lobbying/business-a-lobbying/578847-starbucks-to-raise-us-minimum-wage-to-15-by-next?rl=1

Chipotle to raise prices after committing to pay employees more

https://www.businessinsider.com/mcdonalds-raises-minimum-wage-aims-average-15-per-hour-2021-5

https://www.restaurantdive.com/news/taco-bell-to-raise-average-minimum-wage-to-15-an-hour-by-2024/611490/

Various Industries

Southwest Airlines to up minimum wage to $15 per hour

https://qz.com/2060508/what-amazons-18-average-hourly-wage-means-for-other-employers/

https://www.masslive.com/business/2021/01/wayfair-sets-15-minimum-wage-for-all-us-workers.html

Minimum Wage For Walt Disney World Cast Members Raised to $15

Retailers

https://fox59.com/news/national-world/hobby-lobby-raises-minimum-wage-to-18-50-hr/

https://www.npr.org/2021/02/25/971338686/costco-to-raise-minimum-wage-to-16-an-hour-this-isnt-altruism

https://corporate.bestbuy.com/best-buy-provides-updates-on-evolution-of-employee-pay-and-sales-performance/

https://www.cnbc.com/2020/06/17/target-raises-minimum-wage-to-15-an-hour-months-before-its-deadline.html

https://www.npr.org/2021/02/25/971338686/costco-to-raise-minimum-wage-to-16-an-hour-this-isnt-altruism

https://www.cnbc.com/2021/09/14/sams-club-raises-minimum-wage-to-15-as-tight-labor-market-continues.html#:~:text=Sam%27s%20Club%20said%20Tuesday%20that,than%20its%20parent%20company%2C%20Walmart.

https://www.businessinsider.com/under-armour-minimum-wage-us-canadian-labor-shortage-2021-5

Summary

https://www.goodreads.com/quotes/25909-you-don-t-need-a-weatherman-to-know-which-way-the

Wages for less skilled and less experienced positions are increasing – dramatically – in the USA – in the last 5 years, especially since the pandemic reduced the supply of labor, and going forward. Larger companies have seen the costs of higher turnover and decided that they are going to offer relatively higher wages and find ways to generate enough economic value added to justify these marginal (incremental) investments. Politicians in left-leaning and centrist areas have pushed through higher minimum wages. Lower experience and lower skilled workers are able to take advantage of this situation. This is “good news” for these individuals. It is also “good news” for the economy because it has prompted firms to find ways to restructure work, processes, tools, technology, etc. to add more value from each employee.

Good News: Lawyers Have Less Power in the US.

tomkapostasy2 Comments

https://en.wikipedia.org/wiki/Let%27s_kill_all_the_lawyers

The US population has doubled from 1960-2020, so the share of new lawyers remains roughly at the same percentage, despite the greatly increased complexity of modern business, communications, intellectual property and society. This ratio is now way down from the 2000’s when it was unusually elevated.

Supply and demand drove lower salaries and higher unemployment after 2010.

https://abovethelaw.com/2021/08/law-schools-are-building-another-giant-lawyer-bubble-destined-to-burst-in-the-legal-job-market/

Starting salaries at major law firms have always been attractive to undergraduates. The distribution of starting salaries shows that the legal profession is divided between those in the top one-fourth and all of the rest. The median starting salary at $100K for 7 years of college education looks more like an engineer, pharmacist, actuary, data scientist, financial analyst or market researcher than a world changing persuader.

The percentage of US congress reps with a legal background has declined decade after decade.

Lawyers occupy 9% of CEO roles; far less than their MBA competitors.

Lawyer CEOs

https://hbr.org/2017/08/do-lawyers-make-better-ceos-than-mbas

https://mrlegal.ca/index.php/2020/11/26/lawyers-as-ceos/

In general, public opinion has less and less support for the “advocate” model of legal representation.

https://medium.com/indian-thoughts/devils-advocate-the-new-age-sophists-bf25c928eefdhttps:/

New lawyer debt is at a record high level ($150K). (page 27).

Click to access potlp2020.pdf

The legal profession remains 86% white, far removed from the American population distribution. (page 34).

Click to access potlp2020.pdf

Legal wage growth accelerated in the “oughts” and then rose by less than inflation in the teens (page 47).

Click to access potlp2020.pdf

The number of law school applicants dropped nearly in half from 2004 to 2015, from 101,000 to 54,000. (page 55).

Click to access potlp2020.pdf

Despite the great reduction in new law school entrants, the bar exam pass rate has declined from 80% to 70%. (page 80).

Click to access potlp2020.pdf

The highest skilled lawyers remain in high demand in the US, earning $120-180K for starting salaries. They are typically not “changing the world”. But, they are helping the owners of great wealth to maintain and improve their positions. As an accountant, engaged to measure and advise, I appreciate this value-added role in society.

Hey Joe, Hey Joe … Reverse the Trump Tariffs

tomkapostasy1 Comment

There are few policy choices that have 90-95% positive results compared with 5-10% negative results. Cutting international trade tariffs is one of those “rare birds”.

President Trump “delivered” on his 2016 campaign promises regarding trade deals. He unilaterally increased tariffs on imported aluminum, steel and manufactured goods from China and the rest of the world, including our trade and military allies. As with most “trade killers” (which used to be a minority Democratic party position), he claimed that this would save or restore American jobs. As usual, it had no measurable positive effect. He also claimed that this would lead to a renaissance in American manufacturing. Didn’t happen. He claimed that these actions would make America more self-sufficient in critical military and economic areas. Didn’t happen. Note pandemic issues. Finally, he claimed that these actions would form the basis for “new and improved” trade deals to replace the “awful” deals negotiated by Democrats and Republicans alike for 70 years in the post- WWII era. NAFTA 2 was concluded with minor changes. Small China commitments were obtained to buy things China wanted to buy. But, mostly the response was “HUGE” retaliatory tariffs from China and our allies.

https://en.wikipedia.org/wiki/Trump_tariffs

https://www.npr.org/2021/11/27/1054293073/whiskey-distilleries-europe-tariffs-lift

The “root cause” of the failed results in this situation, and in most other trade fights, is a logical / intellectual error. Proponents of trade restrictions believe that bilateral trade negotiations are a simple “win/lose” game. A real estate deal is a simple “win/lose” game. Bilateral trade deals are more complex. There are many winners and losers in both countries, some direct and some indirect. Higher tariffs or trade restrictions benefit the importing country’s manufacturers and their employees. However, these tariffs typically result in much higher prices for the importing country’s consumers, so the net effect for the importing country is negative. Unfortunately, bilateral trade deals or actions often don’t even help the importing country’s producers. Whatever country is “next most” competitive takes the place of the target country which has been made less competitive by the new tariffs. In the case where a country holds a large share of the global market, neither the “next best” country, nor the domestic producers benefit. The “target” country has such a strong competitive, cost, price advantage that even with added tariffs they are the preferred supplier. This is a very disappointing result for those who wish to take direct action to “save jobs”, but global markets truly matter.

Did Trump’s tariffs benefit American workers and national security?

Columnists, journalists and politicians say that Joe can’t reverse the tariffs for political reasons. The American voting public is too unsophisticated to understand complex trade logic. Given Trump’s framing of his actions, this will look like a capitulation to China. The progressive left doesn’t believe in “free” international trade, which undercuts worker’s pay and the environment. American “labor” is a required part of the Democratic Party coalition and opposes “free” trade. Consumers do not link tariffs to goods inflation. American business and agriculture are fully committed to the Republican Party, so will not repay beneficial actions.

https://www.cnbc.com/2021/11/30/removing-us-china-trade-tariffs-would-ease-inflation-jacob-lew.html

https://www.cnn.com/2021/10/03/politics/global-supply-chain-collapse-biden-tariffs/index.html

The American people elect leaders (of either party) to lead. Step up. The benefits of “free trade” are well known, well documented and supported by 90% of professional economists of both parties. Assign Kamala Harris, Pette Buttigieg and Jared Kushner (just kidding) to develop the communications plan for this policy decision.

The American People Benefit Directly: Taxes, Inflation and Jobs

Tariffs are simply taxes with a longer name. Exporters pay a small share, less than one-third of the total. Importing firms pay a slightly larger share, again less than one-third of the total. Consumers typically pay more than one-half of the tariffs in the form of higher prices. This is a tax, plain and simple. Estimates of the taxes paid by Americans for the Trump Tariffs range from $50-80B.

Tracking the Economic Impact of U.S. Tariffs and Retaliatory Actions

https://www.americanactionforum.org/research/the-total-cost-of-tariffs/

Tariffs provide importers with an excuse, reason, justification to increase prices. This is contributing to the current round of inflation at a level last seen in the 1980s. American consumers are paying $700 annually for these taxes.

https://www.cnn.com/2021/03/24/politics/china-tariffs-biden-policy/index.html

Tariffs are imposed to “save jobs”, but the “indirect” impact is usually larger than the “direct” impact. Domestic manufacturers who use imported products find their costs to be higher and some become uncompetitive. Domestic retailers who now sell more expensive products find their sales lower and reduce their work force accordingly. Target countries impose retaliatory tariffs on domestic export products. This is the main source of job losses. The Trump Tariffs are estimated to have cost Americans 250,000 jobs.

Tracking the Economic Impact of U.S. Tariffs and Retaliatory Actions

https://carnegieendowment.org/chinafinancialmarkets/83746

https://www.cnn.com/2021/03/24/politics/china-tariffs-biden-policy/index.html

Make American Businesses More Competitive Globally

American businesses pay one-fifth to one-third of the $80B of annual tariffs imposed. This drops straight to the bottom-line. Reduced profits result in reduced capital investments, R&D, product innovation and new markets.

Tariff administration has an overhead cost and it distracts supply chain, logistics and international trade staff from higher value added work.

Tariffs require profit-maximizing firms to accelerate their consideration of import sourcing and domestic production options. Some of this has a minor impact. Some of this activity displaces other higher value-added sourcing projects.

One estimate indicated that 8% of stock market value was destroyed by the Trump Tariffs.

https://www.forbes.com/sites/stuartanderson/2021/05/20/trumps-tariffs-were-much-more-damaging-than-thought/?sh=527605ba65bd

Sharply higher tariffs disrupt existing supply chain relationships and remove some sources as economically feasible sources. In a time of supply chain challenges, tariff make a bad situation even worse.

Farmers were most negatively impacted by the Trump Tariffs. Trump provided temporary subsidies to offset some of the pain, but farmers complained that they were seeing decades old trade lanes being permanently disrupted. Reduced tariffs and reduced retaliatory tariffs might restore these natural trade lanes.

https://www.npr.org/2021/11/27/1054293073/whiskey-distilleries-europe-tariffs-lift

Resume American Trade Leadership that Benefits America

Revert to the 70 year bipartisan American “free trade” strategy that delivered tremendous value for the US and the world. US exports tripled from 4% of GDP in 1955 to 12% in 2007 forward.

https://fred.stlouisfed.org/series/B020RE1Q156NBEA

Restore positive relationships with our historic trading partners.

Re-engage in leadership at the World Trade Organization (WTO) and regional agreements like the Asian Pacific Trade Agreement to establish beneficial trade rules for services and intellectual property.

Conclusion

Reversing the Trump Tariffs can create 250,000 jobs, reverse an $80B consumer tax increase, help American manufacturers and farmers to compete globally, improve supply chain performance, and help the U.S. to craft international trade deals that greatly benefit a country that mostly provides “world class” services.

Are You Better Off? Yes, Today, November, 2021.

tomkapostasy1 Comment

Ronald Reagan skewered Jimmy Carter with this taunt in the 1980 presidential debate. Joe Biden’s approval rating is falling quickly in recent months. US voters need to assess the true state of the US economy under Biden’s leadership after 2 years of a global pandemic, last seen in 1918.

Real Disposable Personal Income Per Capita

Real, inflation adjusted income per person continues to rise. In 2000, average income was just $33,000 per year. It rises quite significantly to $38,000 in booming 2007-10. It remains at this level through 2013. This is a 15% increase over 13 years, a little better than 1% per year. The economy adds another $6,000 in the next 7 years before the pandemic. That’s growth twice as fast, 2% per year during this boom time. Real income has grown another $2,000 to $47,000 in the last 2 years, 2% annually, after the pandemic. Very good news.

Employed Persons

US employment was typically 130M from 2000-2012. Great growth occurred from 2012 to 2020, reaching an unprecedented 152M. The pandemic dropped employment to 130M, an incredible 22M lower. Employment quickly rebounded about half-way to 142M during 2020. It has grown by another 6M in the last year. The employment growth from 2010-20 averaged 2M per year. The 2021 record is a very strong performance, reflecting a healthy economy that has robustly adapted to the challenges of a pandemic environment.

Unemployment Rate

Unemployment averaged about 5% during the first decade of the century, a generally good result compared with 20th century history. It doubled to 10% during the “Great Recession” and then slowly declined to 5% by 2015 and then even further, exceeding economists’ expectations, to 3% in 2018-2020. The pandemic rocketed it up to 15%, but it quickly recovered to 7%. It has since declined to less than 5%, which has historically been the typical definition of “full employment”.

Job Quits

From 2000-2008, about 2% of employees voluntarily left their positions in any given month. The quit rate dropped to 1.5% in the aftermath of the “Great Recession” (2010-13). It very slowly recovered to 2.2% during 2016-18. It increased a little bit to 2.3% in 2019-2020. It rebounded to 2.3% in 2020, and has since increased to an unprecedented 3%. This reflects a labor market where 50% more employees are making a voluntary choice to leave their current employer, apparently confident that they can find an equal or better position.

Job Openings

Job openings averaged 4M from 2000-2014. Openings fell to 3M in 2010-12 after the “Great Recession”. Job openings then grew to 6M in 2017-18 and further to 7M in 2019-20. Job openings quickly returned to 7M early in the pandemic and then began their climb to the current 11M level. Again, these are unprecedented levels, twice as many open jobs as in any time from 2000-15.

Unemployed Persons Per Job Opening

The 2006-7 baseline was 1.5 unemployed persons per open position. The “Great Recession” peak was 6 to 1, an incredibly different labor market, where many older people “retired”; new college graduates went to graduate school, accepted lower positions or remained unemployed; and mid-career professionals accepted positions at 20% lower salary levels. It took 5 years to return to the typical 1.5/1 ratio. This ratio declined a little bit further to 1/1 during 2017-2020 in a tight labor market. The ratio very quickly returned to the historical 1.5 baseline during 2020. It is now at an unprecedented 0.8/1 level. Fewer unemployed people than jobs, not 1.5 to 1, but 0.75/1, half as many potential applicants. This is the first “employees” labor market since the 1960’s.

Home Values

The US Home Price Index was set to 100 in 2000. It increased to 180 during 2005-7. It dropped back to 140 in 2010-13, indicating that part of the rise before “the Great Recession” was a bubble. Prices climbed steadily from 140 to 210 (50% increase) from 2013 to 2020. Despite the pandemic, house prices have continued their climb, exceeding 260, another 25% increase in the last 2 years.

Mortgage Interest Rates

Mortgage interest rates averaged 8% during the 1990’s. They averaged 7% in the 2000’s. They declined even further to 4% during the 2010’s. They fell even further to 3% in 2020-21. The interest cost to finance a house is at an all-time low.

Stock Market

The US stock market averaged 16,000 points from 2014-16. It increased by 50% to 24,000 in 2018, and then climbed to 26,000 and 28,000 before the 2020 pandemic crash. Despite the real financial costs of the pandemic, the market quickly rebounded to 25,000 in the middle of 2020. It has since continued its climb to 36,000, 20% above the pre-pandemic level.

In 1992 James Carville claimed that “it’s the economy, stupid”.

https://en.wikipedia.org/wiki/It%27s_the_economy,_stupid

If so, voters should provide some support to president Biden’s results. Real income is up 2% annually, a record level. Reduction in number of unemployed is 6M in 1 year, another record. Unemployment rate is at 4.6%, below historical “full employment” level. Voluntary quit rate is 50% higher than history, indicating tremendous worker confidence. Nearly twice as many job openings as the historical level, providing great options for job seekers to find their “best” opportunities. Mortgage interest rates remain at historical lows, supporting home purchases. House values have grown by another 25%. The stock market is 20% higher.

This is all at a time when the pandemic unfortunately continues to claim lives and greatly disrupt life and the economy. Overall, the recovery is proceeding at a rate far faster what anyone thought was possible during 2020.