(What’s Left of) Our Economy: The Big Messages Being Sent by a Jetsons-Like Invention

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Aeolus Robotics, automation, capital spending, Consumer Electronics Show, Democrats, domestic workers, economics, Fight for 15, Immigration, innovation, Jobs, minimum wage, offshoring, Open Borders, robots, Roomba, Rosey, technology, The Jetsons, Trade, Washington Post, {What's Left of) Our Economy

Along with the rest of the world, I just got another reminder that the future is arriving a lot faster than most of us expect. And that’s got especially big implications for related points I’ve long been making about U.S. immigration policy and efforts to boost the country’s minimum wage.

For many years, when I’ve spoken about immigration policy, I’ve used the following argument to explain the relationship between the mass immigration America has fostered for so long (including winking at illegal immigration) and the productivity gains and technological progress needed to ensure that living standards can improve in a sustainable (not bubbly) way:

“Does anyone remember Rosey, the robot maid on the 1960s TV cartoon show, ‘The Jetsons’? Did you ever wonder why, decades later, there’s still no Rosey – or anything better than a Roomba? A major reason has to be that, with so many legally and illegally present housekeepers and housekeeper candidates available, and willing to work so cheaply, there’s been little incentive to automate domestic work.”

It was my way of using pop culture to illustrate why a big spur to technological progress (and the higher productivity it tends to bring) for the United States in particular has been the scarce labor situation that’s existed for most of American history. With workers in chronically short supply, and therefore increasingly expensive to hire, U.S. businesses were constantly looking for labor saving devices that could cut their costs. And American inventors were terrific at seizing the opportunity and providing them.

In other words, the U.S. economy was behaving exactly the way the textbooks said it should. When labor became too costly, business stepped up its search for ways to substitute capital (which often meant) technology, for those overly dear workers. More recently, as labor has become more abundant (and therefore, all else equal, cheaper), this dynamic has often shifted into reverse.

Incidentally, mass immigration policies aren’t solely to blame. Offshoring-friendly international trade deals like the North American Free Trade Agreement (NAFTA), and similar trade policies (like coddling China’s trade predation) have also greatly expanded the amount of workers realistically available to American employers, especially in sectors like manufacturing. And it’s surely no coincidence that business spending on equipment and machines and the like (called capital spending) has been a notable weakness lately in the U.S. economy. (In fact, although many factories in China are automating rapidly – because of wage increases – this report makes clear that labor surpluses are still slowing its pace in some important Chinese manufacturing industries.)

What has this to do with Rosey? Simple. As this Washington Post piece from last week shows, she’s here – or just about here. For at the latest annual Consumer Electronics Show (one of the tech industry’s major events), a company called Aeolus Robotics unveiled a device that looks awfully similar. According to the Post reporter, this “child-sized” machine

“performed domestic duties such as mopping, picking up stuffed animals off the floor and moving furniture, and, perhaps most impressively, retrieving drinks from the fridge using an intricate-looking grabbing arm — all without human assistance.”

The robot – billed as “the first multi-functional robot that can act like a human being” – still doesn’t crack wise in a New York accent, like the cartoon Rosey. But how far off can that be?

Technology and labor costs hardly move in lockstep, and of course innovation results from many causes. But economic theory, anyway, is saying that my view on the cost and supply of domestic workers is becoming outdated. Common sense also suggests that if something like Rosey is just about here, then domestic workers aren’t as cheap and/or as abundant as I believed. So their wages may well have been rising strongly enough lately to create demand for an automated counterpart.

At the same time, the advent of “Rosey” (and how many other devices like “her” just over the horizon?) amounts to a frantically waving red flag about the wisdom of any immigration policy moves likely to increase the supply of poorly-skilled workers in the American economy – which is to say, any proposals supported by the national Democratic Party and the rest of the country’s Open Borders enthusiasts. Just what kind of work can they be expected to find? Indeed, the automation progress represented by “Rosey” signals that much of the existing workforce in the nation is going to be increasingly hard-pressed to secure or hang onto decent-paying jobs.

Similarly, although I believe there’s still a strong economic (and moral) case for a national minimum wage that tracks inflation, the seemingly impending dawn of the Age of Rosey raises big questions about the wisdom of the kinds of minimum wage jumps sought by the “Fight for 15” campaign and other activists.

“Rosey’s” appearance at the Consumer Electronics Show doesn’t mean that I’ve come down one way or the other in the vital debate taking place today over whether all this recent technological progress ultimately will be a net job killer or creator. But it seems clear as a bell that this tech wave is being completely ignored by the Open Borders and the Fight for 15 backers, and that Americans closest to the low end of the wage and income scale are likely to be among the biggest victims.

(What’s Left of) Our Economy: What Blue-Collar Pay Surge?

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benefits, blue-collar workers, Bureau of Labor Statistics, compensation, managers, minimum wage, professionals, salaries, The Economist, wages, White-collar workers, {What's Left of) Our Economy

That was some claim made by The Economist earlier this month about blue-collar wages in America: They “have begun to rocket. In the year to the third quarter, wage and salary growth for the likes of factory workers, builders and drivers easily outstripped that for professionals and managers.” Even better, these workers, whose pay stagnation has practically defined the so far weak U.S. economic recovery from the Great Recession, have been enjoying pace-setting compensation gains for the last five years, the magazine writes.

I’d be feeling awfully good about this development – except the article in question was a model of overly enthusiastic cheerleading. More specifically, it’s a great example of how failing to look at statistics in enough detail can produce seriously flawed pictures of the economy.

The heart of The Economist‘s case is this chart, which shows that overall compensation (wages, salaries, and benefits) for occupations that don’t involve managerial, executive, or high level administrative responsibilities, and that lie outside the professions, has been rising faster than compensation for occupations that do deal with these matters.

But even a glance should reveal a serious potential problem – the categories are awfully broad. In fact, they lump together lots of occupations that on their own seem awfully big. (To be sure, the source – the Bureau of Labor Statistics – uses these categories. But it presents narrower ones, too.] Further, the five-year period The Economist uses as its longest-run time frame is a period that’s economically meaningless. And in fact, disaggregating those occupational categories and using an economically meaningful long-term time frame (the duration of the current recovery) yields significantly different results.

For example, according to the chart, the big American compensation winner has been the “production, transportation, and material moving” cluster. Adjusted for inflation (which the magazine doesn’t do), here’s how its compensation (including for government workers in these occupations) has improved over the latest quarter year for which data are available, the latest year for which we have statistics, and since the recovery began:

2Q 2017-3Q 2017: +0.38 percent

3Q 2016-3Q2017: +1.06 percent

current recovery: +5.56 percent

This performance is indeed much better than the super-category covering white-collar workers – “management, professional, and related” workers:

2Q 2017-3Q 2017: -0.01 percent

3Q 2016-3Q 2017: +0.01 percent

current recovery: +2.86 percent

But look what happens when you separate production workers from the transportation and material moving workforce:

2Q 2017-3Q 2017: +0.49 percent

3Q 2016-3Q 2017: +0.79 percent

current recovery: +4.58 percent

The compensation gains are still better than those for the managers. But the gap is a good deal smaller.

Now let’s remove professional workers from the management cluster. The compensation increases for business and financial managers are:

2Q 2017-3Q 2017: -0.01 percent

3Q 2016-3Q 2017: +0.57 percent

current recovery: +4.48 percent

Except for the latest quarterly figure, they’re pretty comparable to the advances for the production workers.

Now let’s look at another blue-collar category – “office and administrative support.” Compensation increases for the relevant time frames are as follows:

2Q 2017-3Q 2017: -0.009 percent

3Q 2016-3Q 2017: +0.19 percent

current recovery: +4.63 percent

These increases over the short-term are actually somewhat weaker than for the business and financial managers. When it comes to “installation, maintenance, and repair,” the latest quarterly compensation gains were a bit better than those for the business and financial managers. But the latest yearly and recovery era increases for the installation category were worse than those for the business and financial managers.

2Q 2017-3Q 2017: +0.01 percent

3Q 2016-3Q 2017: +0.39 percent

current recovery: +4.40 percent

And we see the same kinds of numbers for the catch-all “service operations” category:

2Q17-3Q17: -0.01 percent

3Q16-3Q17: +0.38 percent

current recovery: +3.04 percent

So what’s really going on here is that compensation for some blue-collar workers has recently begun to rise faster than compensation for some white-collar workers, and that compensation for some white-collar workers continues to rise faster than compensation for some blue-collar workers. And let’s not forget how governments across the country have acted in the last few years to juice blue-collar pay – by raising the minimum wage. These actions, whatever their substantive merits or flaws, tell us nothing about underlying trends shaping the economy.

Yes, it’s hard to turn those observations into a catchy headline and an eye-opening story. But that’s why discerning readers have learned to distinguish journalism from clickbait.

Im-Politic: The Trump Voters Who Want Work, not Welfare

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coal country, Dante Chinni, Democrats, dignity of work, family leave, Im-Politics, Immigration, Jobs, Mainstream Media, minimum wage, Obama, Obamacare, The Wall Street Journal, Trade, Trump, wages, welfare

There’s no doubt that “Aha!” articles need to occupy a prominent place in journalism. This is especially true when they reveal important gaps between the claims of politicians and other major public figures on the one hand, and incontestable reality on the other.

At the same time, “Aha!” journalism can contain fatal flaws even when it’s superficially accurate. As illustrated by a Wall Street Journal article published yesterday, the problems can become serious when the Mainstream Media and others in America’s chattering classes try to figure out what’s going among those American voters who supported President-elect Trump.

Since I’m not a mind-reader, I of course can’t know reporter Dante Chinni’s exact motive in presenting the evidence that Trump voters look to be among the biggest losers if the president-elect keeps his campaign promise to repeal President Obama’s healthcare reforms. But it’s certainly got major – and legitimate – “Aha!” overtones. What could be easier to imagine than Democrats and other assorted liberals and progressives making political hay out of the idea that Mr. Trump will wind up shafting his own backers big-time. Indeed, that’s already begun.

Nonetheless, there’s a big part of this picture that pieces like this miss (regardless of how much or how little of Obamacare the next administration tries to keep). As the Journal article makes clear, Trump voters appear certain to take a painful Obamacare hit because so many live in parts of the country that have been devastated by trends like technological advance, offshoring-friendly trade deals, and the demise of the coal industry. Where lost jobs haven’t resulted, wages have fallen significantly. Of course, these setbacks go far toward explaining why they were Trump voters to begin with!

But there’s a clear implication at work here: that, in fact, those Trump voters should have backed Democratic presidential nominee, and Democratic or otherwise liberal members of Congress, because they’d have surely kept the very important benefit of adequate, free or much lower cost medical coverage.

This conclusion makes perfect sense from the standpoint of typically well heeled, thoroughly urbanized members of the nation’s media, political, and policy establishments. Business leaders who view themselves as progressives surely agree. But it makes no sense from the standpoint of economically pressed Trump voters – who as should now be screamingly obvious, live worlds apart from these elites.

For many of these folks remember the days when they didn’t need Obamacare to prop up their living standards or prevent their descent into near-poverty or outright destitution. They also remember the days when they were able to own a home by financing it responsibly, take a respectable vacation, buy a new car, provide for their children the college education they may have lacked, and retire securely – all without minimum wage hikes, without paid family leave, and without subsidized healthcare during their working lives, and without any of the other actual and prospective palliatives offered by the public sector, whether adequate or not.

In other words, they remember the days when they and/or their spouse held good-paying and reasonably secure jobs, and they reject the idea that any forms of welfare – even all added up together – amount to acceptable compensation. And they resent the dole especially vehemently if they believe, rightly or wrongly, that their livelihoods disappeared or turned into dead-end jobs because of entirely avoidable political decisions – especially on the trade and immigration fronts.

The point here is not that Obamacare and other government supports are bad or unnecessary. The point is that Trump voters (and of course many others) believe in “the dignity of work” – not in the formal Catholic sense, but in the informal, everyday sense. And they want to see more politicians taking this idea seriously, instead of giving it lip service.

(What’s Left of) Our Economy: The Wage Inflation Story is Getting More Complicated

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compensation, ECI, Employment Cost Index, inflation, Labor Department, minimum wage, pay, wages, {What's Left of) Our Economy

Last week more evidence came in concerning claims that America is undergoing or verging on a new round of dangerous wage inflation (or any wage inflation), and the government has just provided a special bonus! The good people at the Labor Department, which tracks these trends, recently informed me that it not only keeps figures on overall compensation (the Employment Cost Index, or ECI), but that it also adjusts these numbers for inflation. So it’s possible to get a better fix on whether pay is keeping up with or trailing price changes in the rest of the economy – and also on how U.S. compensation nowadays has been performing in historical perspective.

First, the pre-inflation results from the latest ECI – which covers the second quarter of this year. For all private sector workers (whose pay is set largely by market forces, not government decisions), wages, salaries, and benefits combined increased by 2.35 percent over the second quarter of 2015. That’s better than the 1.79 percent year-on-year rise for the first quarter, and than the 1.90 percent improvement registered between the second quarters of 2014 and 2015. In fact, it’s the best year-on-year gain during the current recovery.

The trouble is, the current recovery is still a low bar. Annual increases dwarfing that 2.35 percent were common beforehand, and going back to 2001 (when the ECI was created). In fact, during the seven years of expansion covered by these latest ECI data, employment costs have risen by 15.16 percent total. That’s still well behind the 21.71 percent total increase during the previous recovery – which lasted only six years, and which is not widely viewed as a Golden Age for employees.  

Further, we shouldn’t forget about the impact of the latest burst of state and local level minimum wage hikes. However overdue you think they are or aren’t, it’s important to recognize that they have nothing to do with the underlying strength or weakness of labor markets.

When you adjust for inflation, however, a more complicated story emerges. On the one hand, over the last two or so years, there’s definitely been some overall compensation acceleration. After going nowhere for most of the current recovery, the real ECI rose by 1.50 percent year-on-year in the fourth quarter of 2014, and by 2.70 percent in the first quarter of 2015 (when, to be sure, many of these minimum wage hikes kicked in).

Since then, although the annual rates of increase have slowed markedly, they’re still much better than during the recovery’s early phase. The big question they raise going forward is whether they can stay above one percent, especially since the economy’s growth is slowing markedly.

Over a longer period of time, the current recovery’s real ECI performance looks better historically speaking, but not by a wide margin. During its seven data years, overall compensation is up a total of 3.10 percent. The figure for the previous (six-year) expansion? 2.36 percent.

Moreover, during the 1980s expansion, which lasted slightly longer than seven years, the real ECI advanced by 4.25 percent. During the 1990s recovery, which ran just under a decade, the real ECI was up 7.61 percent. In other words, their annual average gains were both considerably better than those of the current expansion.  (The data for these previous expansions is found in a separate Labor Department report.)

So here’s one way to think about wage inflation: If your working memories or knowledge of the U.S. economy don’t go back past Y2K, you might legitimately be concerned. If you’re aware of the nation before this century, not nearly so much.

Im-Politic: New Survey Shows Surprising Areas of National Consensus

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abortion, American Values Survey, blacks, China, Democrats, Donald Trump, equal opportunity, family leave, Hispanics, illegal immigration, Im-Politic, Immigration, independents, inequality, Islam, minimum wage, multinational corporations, Muslims, offshoring, parental leave, police killings, polls, Public religious Research Institute, race relations, regulations, Republicans, same-sex marriage, Trade, whites

Just when you think you’re getting a handle on the American public’s mood in these raucous political and social times, along comes some polling data that rock your world. And I’m pleased to report that, in the case of the new American Values Survey published by the Public Religion Research Institute (PRII), the net results strike me as encouraging as they are surprising. Specifically, they indicate that the U.S. public is much less divided on many hot button social and cultural issues than politicians and the national media coverage have been indicating. In fact, the findings of this November survey suggest the gathering of a common sense consensus on these supposedly bitterly divisive matters.

The unexpected areas of agreement start with a subject close to the leading headline-maker of the day – Republican presidential front-runner Donald Trump’s call for a temporary ban on travel by all non-citizen Muslims into the United States. It’s too early for a poll on this specific proposal. But I found it instructive that, according to the PRII, Americans agree by a 56 percent to 41 percent margin that “the values of Islam are at odds with American values and way of life.” In 2011, only 47 percent agreed and 48 percent disagreed.

Moreover, although breaking the results down by political leanings produces differences, even 43 percent of Democrats share these suspicions of Islam. For Republican and independents, the figures are 76 percent and 57 percent, respectively.

The survey shows an even split on the question of whether immigrants “strengthen the country because of their hard work and talents” (47 percent agreed) or “constitute a burden on the U.S. because they take jobs, housing, and health care” (46 percent). But only last year, the “strengthen” option won out by 57 percent to 35 percent. The partisan gap is indeed wide, with 63 percent of Republicans holding such negative views of immigrants and 66 percent disagreeing. But 32 percent of Democrats were focused on immigrant-created economic burdens as well.

Even more suggestive of consensus on this issue, though, are the results for a slightly different question. Fully 45 percent of Democrats agreed that “illegal immigrants are at least somewhat responsible for America’s current economic woes” (as well as 70 percent of Republicans and 53 percent of independents). And check out the racial split: Majorities of white and black Americans (58 percent and 52 percent, respectively) told held illegal immigrants “at least somewhat responsible” for the nation’s economic troubles – along with 40 percent of Hispanic Americans. For good measure, so do 44 percent of the white and college-educated, who often benefit from low-wage illegal immigrant labor.

The PRII survey will scarcely comfort President Obama, Congress’ Republican leadership, or the multinational corporations who all support America’s current trade policies. Breakdowns were not provided, but 86 percent of Americans hold “corporations moving American jobs overseas…somewhat or very responsible for the present economic troubles facing the U.S.” That’s up from 74 percent in 2012. “China’s unfair trade practices” were cited by 73 percent. Not surprisingly, 72 percent of Americans believe the country is still in a recession, a figure that’s remained pretty steady 2012. Keep in mind that the current recovery began, at least technically, in mid-2009.

Large majorities also believed that “the current economic system is heavily tilted in favor of the wealthy” (79 percent); that lack of equal opportunity in America is a “big problem” (65 percent); and that “hard work is no guarantee of success” (64 percent – including 52 percent of Republicans).

And these majorities extended to numerous economic policies. Just over three-quarters of all Americans favor increasing the minimum wage to $10.10 per hour (including 60 percent of Republicans). Eighty five percent support paid sick leave and 82 percent back paid parental leave. And although no questions were asked about desired regulatory policy changes, 69 percent of respondents blamed “burdensome government regulations” for at least some of the nation’s economic predicament.

Signs of common ground were also evident on domestic social issues that are thought to be highly polarizing. For example, relatively few Democrats (36 percent) or Republicans (43 percent) considered abortion important to them “personally.” And the partisan split on same-sex marriage was smaller, and at lower levels of salience – 28 percent for Democrats and 29 percent for Republicans.

Big divides remained on numerous issues, to be sure – like confidence in the federal government, and a $15 minimum wage (lots of Republicans climb off that boat), and police treatment of minorities. Interestingly, in this vein, minority Americans are significantly more optimistic than whites that “America’s best days are ahead of us.”

But it’s hard to finish this latest American Values Survey feeling deeply pessimistic that the nation can’t overcome its differences and create that better future. In fact, one of my biggest reasons for hopefulness is the following finding: “Nearly two-thirds (66%) of the public agrees that, ‘everyday Americans understand what the government should do better than the so-called ‘experts.’ There is broad agreement across racial, generational, and partisan lines.”

Following Up: Trump Hit .500 on Trade at the Debate – Which Isn’t Nearly Good Enough

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Asia-Pacific, Associated Press, China, Donald Trump, Fox Business Debate, Japan, Mainstream Media, minimum wage, multinational companies, Obama, punditocracy, rules of origin, sourcing, TPP, Trade, Trans-Pacific Partnership, wages, {What's Left of) Our Economy

If you think a .500 batting average represents as good a performance in presidential debates as in baseball, then you’re going to be pretty pleased with Republican candidate Donald Trump’s performance on trade-related issues in the GOP Milwaukee main event last night. If you’re wondering how the Republican front-runner (co-front-runner?) could have gotten one answer so mind-bogglingly wrong, and one just as completely on target, chances are you’re more downbeat.

Of course, it also needs to be noted that apparently no one in the Mainstream Media knows enough about trade, and specifically about President Obama’s Pacific Rim trade deal, to have recognized the accuracy of Trump’s answer about China’s relation to the agreement. But in defense of the scribblers, they’re not competing for the authority to press policy buttons.

Trump’s wrong answer was his first (here’s a debate transcript), and although it came on a question concerning the minimum wage, not trade, it bears directly on America’s approach to the global economy. Explaining why he opposed government-mandated hikes in pay floors, Trump told the audience that with U.S. “taxes too high, wages too high, we’re not going to be able to compete against the world. I hate to say it, but we have to leave it the way it is. People have to go out, they have to work really hard and have to get into that upper stratum. But we can not do this if we are going to compete with the rest of the world. We just can’t do it.”

What was completely weird about this response was that, as with other critics, a main reason for Trump’s opposition to current U.S. trade policies is that they benefit offshoring interests at the expense of American workers by forcing the latter into a no-win competition with much more poorly paid foreign counterparts. Indeed, although Trump never mentioned “wages” explicitly in his new China trade paper, he did charge that the status quo approach exclusively serves the interests of “Wall Street insiders that want to move U.S. manufacturing and investment offshore.” And he asked how “American manufacturers, who must meet very high standards, [can] possibly compete with Chinese companies that care nothing about their workers or the environment?”

So Trump’s position that the minimum wage can’t be raised because of this (presumably unacceptable) low-wage foreign competition amounts to a version of blaming the victim.

And it would have been so easy for Trump to have had his policy cake and eaten it, too, on this front. He could have expressed sympathy with the idea of raising minimum wages – especially because of penny-wage foreign competition. And he could have gone on to insist that a better way to raise living standards was to fix the trade policies largely responsible. Trump did suggest that his tax policy reforms would get the job done by super-charging America’s growth and job-creation. But if so, why put so much emphasis on the need to overhaul trade policy?

By contrast, Trump’s critique of the Trans-Pacific Partnership (TPP) revealed genuine mastery of typical and major U.S. trade policy failings. As he contended (inter alia), “The TPP is horrible deal. It is a deal that is going to lead to nothing but trouble. It’s a deal that was designed for China to come in, as they always do, through the back door and totally take advantage of everyone.”

The commentariat seemed to agree that Trump had displayed his ignorance by claiming that China is one of the TPP signatories. That’s what one of Trump’s rivals, Kentucky Senator Rand Paul, claimed. So did the Associated Press.

But of course, that’s not what the candidate said. He said it was designed for China to participate covertly, not that China is one of the members. And anyone who’s read the TPP’s rule of origin provisions (here, here, and here) knows that this is exactly the case. The deal would extend duty-free treatment within the new integrated market to a long list of products that could be made largely outside the TPP zone. Indeed, many goods with levels of content from TPP signatories well under 50 percent would be so favored.

Nor did these TPP features appear in the deal by accident. They reflect the clear desire of U.S., Japanese, and other multinational companies from TPP signatory countries to enjoy maximum flexibility in sourcing their production, in order to secure the lowest cost levels. Not only does such sourcing leeway greatly water down the TPP’s potential benefits for the domestic economies of the signatory countries. But it flies completely in the face of promises by Mr. Obama and other backers of the deal that it would both contain the rise of Chinese economic power and influence globally and in the Asia-Pacific region specifically, and that it would create powerful incentives for China to clean up its economic act and become eligible for membership.

Trump remains the only Republican candidate to mount a serious and sustained challenge to today’s American trade policies. And as his China paper made clear, his diagnoses and prescriptions are every bit as substantive as those embodied in numerous bills introduced to overhaul Washington’s longstanding approach. But Trump’s crusade faces obstacles aplenty already – including the establishment-coddling media’s determination to keep branding him an ignoramus even when this accusation is wildly off base. He can’t afford to give them any real ammunition.

(What’s Left of) Our Economy: About Those “Jobs Americans Won’t Do”

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agriculture, automation, Bryan Caplan, Center for Immigration Studies, farm workers, illegal immigrants, illegal immigration, Immigration, Jobs, labor shortages, Mark Krikorian, Michael Dukakis, minimum wage, Open Borders, productivity, Ron Unz, technology, wages, {What's Left of) Our Economy

As “everybody knows,” one of the main reasons that the U.S. economy desperately needs a huge population of low-paid immigrants (whether legal or soon-to-be legalized) is that these workers do crucial jobs that the native-born population snubs. And with the immigration policy debate continually intensifying in this presidential campaign cycle, expect this claim to be trotted out again and again by champions of Open Borders-style approaches to the issue. (Here’s a good post indicating just how often it’s been made by major political and chattering class figures.)

What a surprise, then, to keep discovering evidence showing that the “jobs American won’t do” contention to be completely bogus.

As should be clear to anyone familiar with standard economic thinking, the idea underlying all such claims – of chronic labor shortages that can only be eased with big new influxes of foreign workers – is nonsensical theoretically. The reasons have to do with time-honored concepts of supply and demand. When they’re out of balance – which in this imperfect world happens all the time – actors in free markets adjust in several ways, all involving the price mechanism. Employers facing such labor market mismatches will either raise wages, in order to attract the workers they need, or they introduce labor-saving machines or other efficiency-enhancing improvements if the former option isn’t appealing. Of course, in the real world, responses are often some combination of these alternatives.

But whatever business’ choices, the implications for the economy as a whole are the same. “Jobs that Americans won’t do” will before too long be filled by better paid workers or by the proverbial robots.

Both options, moreover, contain ample potential to strengthen the economy to everyone’s benefit. The pluses of higher wages (up to a point, of course!) are self-evident. But although the labor-saving technology strategy sounds like a formula for mass unemployment, centuries of history teach that automation ultimately creates many more, and better, jobs than it displaces. (Will this record continue in an unfolding age of more and more sophisticated robots and artificial intelligence? I sure as heck don’t know. But that’s a medium-term challenge, not an imminent one.) Moreover, more use of machines is typically a sign that the economy is becoming more productive. And that’s as good as it sounds – including for wages and broader living standards.

There is an important caveat: Not all companies, or even whole industries, are capable of making these adjustments (whether they want to or whether they’re confident that immigrants will keep flooding to their rescue). But that doesn’t mean that labor shortages need to or should be dealt with by new government measures like opening borders even wider. Instead, it mean that these companies and industries have lousy, and even completely non-viable business models. Why should they be bailed out with immigration policy at the expense both of native-born workers and greater efficiency?

It’s true that theories can be and often are wrong. But not this one. Exhibit One has to do with technology. Immigrants both legal and not comprise a big share of America’s agricultural workforce, and the farm sector has long insisted that the depressed wages that result from immigrant-fueled labor surpluses are crucial to keeping food affordable. Further, they and their supporters argue, few native-born Americans would want to toil in the fields even if pay was raised.

As it turns out, however, meager wages ultimately were making workers harder and harder to find throughout the ag sector. And rather than close up shop – and let entire crops go unplanted, immense harvests rot on the vine, and widespread hunger to emerge – guess what American farmers have started to do? Yep. They’re spreading mechanization beyond the grains and other commodity crops for which its use has been commonplace for decades!  (Thanks, by the way, to Mark Krikorian of the Center for Immigration Studies for a recent tweet that first alerted me to this development.) 

In fact, thanks to ever more sophisticated robots and similar devices, they’re even mechanizing the picking of fruits and vegetables long considered to be too delicate to be handled by machines, like strawberries and blueberries. And it’s pretty reasonable to suppose that these machines will keep getting cheaper, better, and able to perform an ever wider range of tasks. .

Exhibit Two isn’t a real-world development yet. Instead, it’s a proposal that dramatically shows how higher wages could slash the nation’s supposed need for illegal immigrant labor. According to folks ranging from former Democratic presidential candidate Michael Dukakis to reform-minded California Republican multi-millionaire businessman Ron Unz, a healthy increase in the minimum wage would draw many legal U.S. residents back into the nation’s workforce and reduce the attractiveness of hiring illegals – many of whom are poorly educated and speak limited English. And of course, businesses that hired only legal residents would have no law enforcement worries. Even George Mason University economist Bryan Caplan, an unabashed supporter of completely Open Borders (seriously!) has acknowledged the “logic” of the proposal.

So the next time you hear the “jobs Americans won’t do” argument, you can be pretty sure that it’s coming from someone who just doesn’t know their basic economics, whose ideologically committed to completely unfettered immigration, or who has a big political or economic self-interest in importing poverty on a huge scale into the United States.

(What’s Left of) Our Economy: Gallup Survey Shows No Public Consensus on Boosting Recovery

Tags

2016 elections, balanced budget, budget deficits, economy, education, executive pay, Immigration, infrastructure, minimum wage, recovery, regulation, Social Security, spending, taxes, Trade, training, {What's Left of) Our Economy

I’m a strong believer the American people’s ability to understand policy clearly enough to govern themselves wisely, and an equally strong believer in viewing opinion polls skeptically. But some new Gallup findings on economic issues are so contradictory and confusing that it’s enough to make the most dedicated populist think twice.

You can see the full results here. (And Gallup says it will expand upon this exercise throughout the rest of this presidential cycle.) But here are some that are especially head-scratching:

> Of the 47 policy ideas presented to voters, only nine were judged likely to be “very effective” at improving the economy by half or more of respondents, and of these, four were so rated by 50 percent even. That’s no doubt in part a function of the large number of proposals (which would tend to fragment preferences – as we seem to be seeing for the Republican presidential field). But the diversity of popular responses strongly points to less comforting explanations.

> The only two proposals cracking the 60 percent “very effective” mark were “Ensuring that women receive equal pay for equal work” and “Improving job training for veterans.” Trailing close behind, at 58 percent, was “Giving small businesses easier access to loans to start or expand their businesses.” Nothing else exceeded 55 percent.

> The 50 percent neighborhood is where the fun really starts. Principally, budget deficit hawks will be heartened by roughly this level of enthusiasm for “Reducing federal government spending”; “Requiring a balanced budget”; and, arguably, “Reforming Social Security to ensure it remains solvent.”

> But spending doves will be just as pleased to see that roughly half of respondents saw great potential in “Spending more government money to improve U.S. schools and education”; “Providing free community college education for all Americans who want it”; and “Providing new federal government programs designed to increase manufacturing jobs.” Perhaps tipping the balance in the doves’ favor is the near-majority backing for increased public sector funding for pre-school education, more government loans for small businesses, and tax incentives to encourage business to train workers. These results also seem to signal fairly high public confidence that more educational opportunity is needed for spurring and spreading prosperity.  

> Some of the measures most prominently touted by politicians in both major parties haven’t lit raging fires under American voters, according to Gallup. “Increasing the minimum wage” was described as a “very effective” way to strengthen the economy by a solid but not spectacular 44 percent of respondents. Generating even less excitement were “Reducing income tax rates for all Americans” and “Reducing government regulations on small businesses,” which both came in at the 40 percent mark.

> However much Americans complain about the quality and quantity of their infrastructure, only 39 percent regard “Developing federal, state, and private partnerships to invest” in such systems as a great way to spur better economic performance. And for all the animus against Wall Street and the rest of Big Business, only 38 percent registered great confidence in “Setting a limit or ceiling on corporate executives’ salaries.”

> Immigration and trade issues were gauged by Gallup, too, but here the results look less reliable, thanks to some dubious wording choices. One possible reason: The polling firm received input on the entire survey from, among others, “economists, academics and economic and political observers” – groups where orthodox, establishmentarian views (of both liberal and conservative varieties) reign supreme.

> The immigration questions seemed unexceptional, and showed the public saw relatively little economic payoff from encouraging more immigration either by “high-skill” foreign nationals who graduate from American universities, by skilled workers generally, or by their low-skill counterparts. But respondents were never asked about the potential of limiting or reducing legal immigration flows, much less about cutting off illegal immigrants’ access to jobs and public benefits.

> Much more problematic were the trade questions, which gave respondents two choices: “Negotiating trade and economic agreements designed to enhance trade with other nations” and “Increasing tariffs and taxes in order to make it more expensive to import goods into the U.S. from overseas.” The former was seen as a very promising growth engine by 29 percent of respondents, the latter by 24 percent. But if you think about it, why should anyone intrinsically doubt the benefits of “enhancing trade,” especially if no drawbacks are listed? Conversely, including the word “tax” in the question suggesting trade barriers was bound to reduce this option’s popularity. What kinds of results would Gallup have gotten, for example, if its question mentioned something on the order of “Increasing tariffs to replace goods in our stores made by foreign workers with goods made by American workers”?

I’ll keep monitoring Gallup’s efforts on this score – and hope that the company does a better job framing the debate on the globalization-related hot button issues that seem to be generating an unusual number of political headlines.

By the way, it’s important to recognize that this survey doesn’t measure public backing for or opposition to these economic ideas. Instead, it measures how well the public believes these measures will or won’t improve the economy.  These questions are similar, but not identical.      

 

(What’s Left of) Our Economy: Why Obama-nomics Looks Like Importing the Workers and Exporting the Jobs

Tags

2016 elections, Africa, apparel, California, Congress, Democrats, garments, Immigration, imports, income inequality, Los Angeles, manufacturing, minimum wage, Obama, offshoring, Republicans, TPP, Trade, Trans-Pacific Partnership, Vietnam, Wall Street Journal, {What's Left of) Our Economy

This one is so easy that it feels like piling on to write it. But if you need any further evidence that President Obama’s approach to economic policy has dissolved into complete incoherence, look no further than the Wall Street Journal‘s new article on Los Angeles’ garment industry. And it offers some vital lessons for many of his fellow Democrats, too.

As the Journal has reported, Los Angeles will be raising its minimum wage to $15 per hour in phases over five years. In response, the city’s still considerable garment manufacturing industry, which employs huge numbers of the working poor, including many legal and illegal immigrants, is threatening to leave.

It’s certainly reasonable to counter that business owners will always squawk about any cost increases, and that Los Angeles’ proximity to a fashion market that requires lots of very quick order filling will remain a big competitive advantage for a sector that needs to keep up with rapidly changing fads. It’s also reasonable to challenge Los Angeles garment makers to preserve their profitability by increasing productivity – though if they achieve this goal with more automation, employment levels could suffer at least in the short run.

But let’s look at how Obama-nomics is affecting the situation. The president has been a leading champion for those minimum wage hikes. (Most other Democrats agree.) At the same time, he’s seeking a Trans-Pacific Partnership (TPP) trade agreement that will open the American apparel market even wider to exports from Vietnam in particular, where average hourly wages in the industry as of 2013 reportedly were 53 cents per hour, and where employers – including the government – don’t have to worry about workers’ rights. Mr. Obama also favors trade deals that will boost apparel imports from other very low-wage, regulation-free regions like sub-Saharan Africa. And even though most Congressional Democrats oppose the TPP, they’ve strongly supported the Africa deal.

From the broader standpoint of Los Angeles’ entire economy and its prospects, virtually the entire Democratic party favors enormously increased immigration (and eventual citizenship for most of the current illegal population). So the city faces the prospect of a big new influx of new low-wage, low-skill foreign arrivals on top of the influx it’s already experienced, and a big exodus of the best kinds of jobs such newcomers can reasonably hope to hold.  Further, given the president’s support for this import-the-workers-export-the-jobs combination, plus the strong possibility that Democrats will retain the White House in 2016, the same fate appears in store for much of the rest of the country, too.   

And here’s the icing on this cake – as Democrats seek to focus America’s attention on wide and rising income inequality, Los Angeles already stands as one of the most unequal cities in the country, and California as the most unequal state (indicating that it’s more than a Los Angeles issue).

Not that Republicans are significantly better on trade and immigration issues – especially their Washington and Congressional leaders. But at least they’re not also peddling the false hope of big minimum wage hikes on top of their offshoring-and cheap labor-friendly immigration stances.  BTW, back in the late-1990s, I put out a short item on this very problem emerging in California (but can’t find it anywhere on line).  Plus ca change, as they say. 

 

 

 

Im-Politic: Obama’s Dubious “Trust Me” Strategy on Iran and Trade

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2016 elections, big government, credibility, Im-Politic, infrastructure, Iran, minimum wage, nuclear deal, Obama, progressives, TPP, Trade

Two pieces of evidence do not a trend make, but when we’re talking about the Presidency of the United States, whose occupants usually choose their words with the greatest care even when they’re not as eloquent as Barack Obama, chances are something noteworthy is going on. So it’s more than a little troubling that the president has twice this month taken to defending a major, highly debatable policy with an argument that adds up to little more an unusually non-credible version of “Trust me.”

Not that trust doesn’t have its place in politics, but in the two cases I’m thinking of, Mr. Obama’s chops simply aren’t that impressive. His latest use of this tack concerns the Iran nuclear weapons deal. In an interview last week with Atlantic correspondent Jeffrey Goldberg, the president responded to critics of his strategy to deny Tehran The Bomb by declaring, “Look, 20 years from now, I’m still going to be around, God willing. If Iran has a nuclear weapon, it’s my name on this. I think it’s fair to say that in addition to our profound national-security interests, I have a personal interest in locking this down.”

You don’t need to be an Obama-hater to eye-roll this claim of ownership. After all, it’s not as if Mr. Obama entered office with immense foreign policy street cred – or with much foreign policy experience at all. And with a handful of exceptions like Leon Panetta (his former intelligence and Pentagon chief) and Robert M. Gates (who ran the Pentagon), his foreign policy advisors could fairly be dismissed as a “Team of Lightweights” if they were the subject of a Doris Kearns Goodwin history. Further, given the comfy retirements of recent masters of U.S. policy disaster ranging from former Fed chair Alan Greenspan to former Vice President Dick Cheney, it’s a safe bet that not only will the president live long and prosper in retirement whatever happens in the Middle East. He’ll also attract a legion of apologists to plead his case.

Mr. Obama has a stronger claim to credibility when he tries to reassure progressives that his trade agenda won’t harm working Americans or social, environmental, financial, and other regulations by citing his administration’s record – and his prior public service. Remarks like the following ring true: 

“If there was a trade agreement that undercut working families, I wouldn’t sign it.  The Chamber of Commerce didn’t elect me twice — working folks did.  I ran for office in the first place to expand the all-American idea of opportunity — no matter where you come from, what you look like, how you started out, who you love, you can make it if you try here in America.

“I don’t forget where I came from.  I don’t forget how I started.  I moved to Chicago in my early 20s with barely anything except a desire to make a difference.  I wanted to make sure my life attached itself to giving people a chance at opportunity — helping kids get a great education, helping parents who live in poverty get decent jobs that let them raise a family, help folks who work hard all day get health insurance so they don’t have to go to the emergency room when they get sick. So I became an organizer….” 

At the same time, precisely this type of combination of policies has “made sense” to broad swathes of American liberalism for literally decades. In fact, a hallmark of this movement during the early post-World War II decades (unions excepted of course) was (a) strong backing for trade liberalization and expansion; (b) equally strong backing for a greatly expanded role for government in propping up incomes and regulating business; and (c) robust (and needed) infrastructure building. Moreover, into the 21^st century, many Democrats, especially of the Clinton-ian persuasion, have felt completely confident that whatever harm is done to working class Americans by trade liberalization can be offset by better schools, yet more infrastructure building and other public investments and, increasingly, more aggressive income support along the lines of higher government-mandated minimum wages and more generous, family-oriented benefits.

Nonetheless, it’s also eminently arguable that precisely this combination of policies – and its belief that ever more public sector programs and requirements can indefinitely substitute for the loss of income-earning opportunities generated by market forces – ultimately keeps draining the productive life from the U.S. economy and hooking it on debt-fueled growth.

So far, though, a critical mass of Democrats so far is refusing to trust the president on trade issues – which is why it’s in such deep trouble in the House of Representatives, where the decisive vote on Mr. Obama’s trade agenda will be cast. And trust in the Obama Iran policies is hardly universal in his own party as well. Which suggests, encouragingly, that Americans are starting to demand that their leaders earn their trust – and that such healthy skepticism might even be applied to the upcoming presidential election.