Recent Studies: Those at the Top Continue to Reap the Benefits from Economic Growth

Dean Baker summarizes recent research on growing inequality:

“First, we got new data from the Federal Reserve Board and the Census Bureau, both of which showed that typical families are still seeing very little benefit from the recovery to date. The Fed released the 2013 Survey of Consumer Finance which showed median family wealth was still below the 2010 level in spite of the run-up in the stock market.

The Census Bureau released its annual data on income, poverty, and health insurance coverage. While there was some good news on the latter two, median income remained flat. The story in both the Fed and Census analysis remains the same; those at the top continue to get the bulk of the benefits from economic growth.”

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Wage and Employment Effects of Foreign STEM Workers

Via National Bureau of Economic Research Digest, October 2014

“Growth of foreign STEM workers by one percentage point of total employment increases growth in the wages of native college educated workers by 7 to8 percentage points.”

The effect of immigration on the wages and employment of native workers is a topic of perennial debate. According to Foreign STEM Workers and Native Wages and Employment in U.S. Cities (NBER Working Paper No. 20093), extending visas to more STEM workers increases the wages of native workers and does not affect the employment of other groups, although it does raise housing costs for college-educated workers.

“[A] rise in the growth of foreign STEM [workers] by one percentage point of total employment increases growth in the wages of native college educated workers by a statistically significant 7-8 percentage points,” write authors Giovanni Peri, Kevin Shih, and Chad Sparber. “The same change had a smaller but usually statistically significant effect on the wages of native non-college educated workers equal to 3-4 percentage points…. The increased cost in non-tradable services (housing) absorbed about half of the increase in the purchasing power of college educated wages.”

The study concentrates on foreign workers in order to determine whether the increase in STEM workers causes wages to rise or whether other factors are at work. The authors compare the share of foreign STEM workers in each of the 219 metropolitan areas in 1980 with changes starting in 1990, when the government initiated the H-1B visa program, the main channel of entry of foreign STEM workers. By doing so, the authors are able to isolate a supply-driven change in STEM workers that is likely exogenous to other factors that might affect wages, employment, and productivity across cities.

These foreign workers – unlike their innovations – did not spread evenly across the country. y were concentrated in certain cities in 1980, before the H-1B program, and the H-1B visa-holders tended to flow to those cities as well. This disparity among cities allows the authors to compare the local rise in wages, which boosts the wages even of native non-college graduates, although the effect is about half of what it is for native college graduates.

The authors also find that STEM workers have an effect on total factor productivity and skill-biased productivity: “…inflows of foreign STEM workers may explain between 30 and 50% of the aggregate productivity growth and 4 to 8% of the skill bias growth that took place in the U.S. between 1990 and 2010.”

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Charter School Performance is Unimpressive

A study at Stanford University last year found that only 25 percent of charter schools fare better than traditional schools in reading. In math, only 29 percent of charters do better. Nineteen percent of charters actually did worse in reading, while 31 percent were worse in math; the rest weren’t significantly different from traditional public schools.

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Another Major Loss for ALEC

Via National Journal

A large oil and natural-gas company is parting ways with the American Legislative Exchange Council.

Occidental Petroleum sent a letter Friday to an investment-management company indicating its intention to sever ties with ALEC, a conservative coalition of state legislators and major corporations that actively opposes environmental regulations.

Occidental joins Facebook, Google and Yahoo in this exit from ALEC.

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Temp Work At All Time High

Temp Work At An All Time High
Via National Employment Law Project

There are a record high 2.8 million temporary help jobs in today’s economy, making up 2 percent of total employment, according to a report released by the National Employment Law Project.

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The Close Connection Between the Rise in Incomes at the Very Top and Lower Real Wages for Everyone Else

Simon Wren-Lewis, an economics professor at Oxford University, writes:

…In the US the share of the 1% has increased from about 8% at the end of the 70s to nearly 20% today. If that has had no impact on aggregate GDP but is just a pure redistribution, this means that the average incomes of the 99% are 15% lower as a result. The equivalent 1% numbers for the UK are 6% and 13% (although as the graph shows, that 13% looks like a temporary downward blip from something above 15%), implying a 7.5% decline in the average income of the remaining 99%.

So there is a clear connection between the rise in incomes at the very top and lower real wages for everyone else. Arguments that try and suggest that any particular CEO’s pay increase does no one any harm may be appealing to a common pool type of logic, and are just as fallacious as arguments that some tax break does not leave anyone else worse off. It is an indication of the scale of the rise in incomes of the 1% over the last few decades that this has had a significant effect on the incomes of the remaining 99%.

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Economy to Grow Faster but Still Moderate over Next Few Years

CBO Expects Economic Growth to Pick Up in the Next Few Years
Via: Congressional Budget Office

The CBO released its updated budget and economic outlook. To get a quick overview of our new economic forecast, view The Economic Outlook for 2014 to 2024 in 15 Slides.

As described in both the report and slides, CBO anticipates that, under the assumption that current laws governing federal taxes and spending generally remain in place, the economy will grow slowly this year, on balance, and then at a faster but still moderate pace over the next few years. In the first half of this year, real (inflation-adjusted) gross domestic product (GDP) rose at an average annual rate of just 0.9 percent; but CBO expects a stronger second half, so for the year as a whole, the agency projects the rate of growth to be 1.5 percent, as measured by the change from the fourth quarter of 2013.

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Was the Deepwater Horizon Oil Spill an Economic Gain for Louisiana?

In a new study by Alby (2014) finds the Deepwater Horizon oil spill created a net increase in Louisiana employment and wages in coastal parishes, and oil-intensive parishes in particular. The same was not true for Gulf Coast Florida counties, especially those south of the Panhandle.

Abstract

In 2010, the Gulf Coast experienced the largest oil spill, the greatest mobilization of spill response resources, and the first Gulf-wide deepwater drilling moratorium in U.S. history. Taking advantage of the unexpected nature of the spill and drilling moratorium, I estimate the net effects of these events on Gulf Coast employment and wages. Despite predictions of major job losses in Louisiana — resulting from the spill and the drilling moratorium — I find that Louisiana coastal parishes, and oil-intensive parishes in particular, experienced a net increase in employment and wages. In contrast, Gulf Coast Florida counties, especially those south of the Panhandle, experienced a decline in employment. Analysis of accommodation industry employment and wage, business establishment count, sales tax, and commercial air arrival data likewise show positive economic activity impacts in the oil-intensive coastal parishes of Louisiana and reduced economic activity along the Non-Panhandle Florida Gulf Coast.

Reference

Aldy, Joseph E. (2014). The Labor Market Impacts of the 2010 Deepwater Horizon Oil Spill and Offshore Oil Drilling Moratorium. National Bureau of Economic Research. NBER Working Paper No. 20409.

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Who/what to blame for the Middle East crisis — some thoughts

Who/what to blame for the Middle East crisis — some thoughts:

• Centuries of secular, tribal warfare in all regions of the Middle East
• The Crusades
• Colonialism
• British Empire’s arbitrary country boundary lines, neglecting cultural, religious boundaries
• CIA black operations, installing dictators (i.e., Shah of Iran) 
• Failure of Palestinians to recognize United Nations’ establishment of Israel
• Reagan pulling out Marines in Lebanon after a terrorist attack killing 241 soldiers, signaling a weakness of US resolve
• G. H. Bush support of Osama bin Laden in Afghanistan’s war with the Soviet Union
• Surprisingly, the fall of the Soviet Union, allowing puppet dictators to run amuck 
• Clinton’s failure to get Osama bin Laden
• The media’s failure to ask the difficult questions justifying the Iraq war in 2003
• Congressional failure in 2003 to vet Bush’s justifications and plans for the war in Iraq 
• Bush/Cheney prevarication of intelligence to justify turning away from the hunt for Osama bin Laden (a righteous cause) to an ideological based regime change strategy in Iraq
• Bush’s failure to heed General Shinseki’s counsel for many more troops on the ground in Iraq to control the Iraq population once military operations were completed. 
• Bush/Cheney/Bremer de-Ba’athification policy, firing thousands of Iraq public bureaucrats, resulting in failed government services, chaos and turning many into insurgents
• Bush/Cheney/Bremer firing of Iraq Army, after military operations were completed, despite military advice to utilize them for control of the population. These unemployed soldiers became the heart of the insurgency and now many of the leaders of ISIS have their origins in the displaced Iraq army. 
• No peace plan.
• Bush/Obama failure to secure an agreement for an adequate number of US troops on the ground in Iraq after major troop withdrawal.
• Obama’s failure to hold Syria responsible once it crossed his red line on the use of chemical weapons
• Evil barbarians
• Failure of the leaders of three major religions – Christianity, Judaism and Islam – to provide leadership to mediate the use of religion to justify unjust causes.

I have undoubtedly forgotten something, but my point is this crisis has many causes.

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Facebook Joins Google in Cutting Ties with ALEC

In a major setback for the conservative organization ALEC, American Legislative Exchange Council, Facebook has joined Google in separating it’s ties with organization. This bring the total number of corporations separating ties with ALEC to 87.

ALEC has worked to undermine renewable energy progress in states and is known for its climate denial. According to Bloomberg Businessweek,

“ALEC pushes model state bills on issues ranging from supporting charter school expansion and right-to-work laws to inhibiting lawsuits over asbestos or drug-testing. The group claims more than 2,000 state legislators and almost 300 corporations or private foundations as members. Right now, Google is one of those members. After Schmidt’s comments, Google confirmed it would not be renewing its membership once it expires at the end of the year.

Saying that people on the wrong side of the climate change debate were “making the world a much worse place,” Schmidt told Rehm he’d concluded “we should not be aligned with such people—they’re just, they’re just literally lying.” In a statement, ALEC Chief Executive Officer Lisa Nelson said: “It is unfortunate to learn Google has ended its membership … as a result of public pressure from left-leaning individuals and organizations who intentionally confuse free-market policy perspectives for climate change denial.”

Update: Yahoo has just announced it is also separating ties with ALEC.

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