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The Unhealthy “New Normal”

Running through a few extended bullet points on factors affecting wage growth, Megan McArdle comes to a very unsatisfying conclusion:

So this slow wage growth may simply be what the labor market now looks like. Earlier eras of tight labor markets produced big increases in wages, but those increases were matched by rising worker productivity. Today, employers striving for productivity may replace the worker altogether, either by outsourcing to a lower-wage country or by giving that job to a machine.

So the biggest mystery is not why U.S. wage growth seems stuck even as unemployment falls. The biggest mystery is how we’re going to adjust our economy, our culture and our politics to the new normal.

This isn’t all that new.  We’re going on years, maybe decades, of people pondering what economic system would distribute wealth when human labor becomes of less value.   Personally, I remain unpersuaded, in large part because this is another area that leads quickly to calls for increased government control and redistribution of wealth (which solidifies government’s role at the middle of our society).

As McArdle notes in different terms, one of the “problems” is that our quality of life continues to improve.  It may be that wages are stagnant only because our economic manipulation prevents prices from helpfully signaling what’s actually going on.  Your income gets you more quality of life, in other words, even if it isn’t captured in measures of inflation and wages.  Stagnant productivity could be an indicator of this.

To be simplistic, manipulation is preventing prices for various goods from going up or down as the market would prefer, which takes the pressure off workers to try to make more money, which takes the pressure off of employers to get more production out of their workforces, which dovetails with the stability of their prices.  Obviously, in this view, pressure is taken off of the drive toward productivity (related to McArdle’s mention of disability as a work alternative) and various goods are over- or under-priced relative to their actual value.

None of this is healthy, and we shouldn’t try to write it all off as a “new normal.”

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The Complexities of Tax Policy

I’ve always been skeptical when wonky types on my side of the ideological aisle start proclaiming one tax or another to be universally better than others.  Typically, among conservatives, that becomes a preference for consumption taxes, like the value-added tax (VAT).  What appeals to them (and me, honestly) about such a tax is that it applies taxes to consumption, meaning everybody who consumes something has to factor the value of government into the equation.

What may appeal to big-money donors is that it pushes the tax burden down the economic ladder.  Joseph Sternberg points that out in the context of Europe and, specifically, Germany:

Indirect taxes, such as the value-added tax on consumption and social-security taxes (disguised as “contributions”), are a different matter. The VAT disproportionately affects lower earners, who spend a higher proportion of their incomes. And social taxes tend to kick in at lower income levels than income taxes, and extract a higher and more uniform proportion of income.

A chart at the link shows that Germany’s tax burden, as a percentage of income, falls pretty evenly across the socio-economic landscape.  Take social security out, and essentially, the country has a VAT for lower-income households and an income tax for higher-income taxes.

I’m not sure that spreading the tax burden on paper ought to be the goal, though.  The cost of government is spread out in one way or another, even if we don’t capture the effect of, say, lower wages and lost jobs because wealthy job creators pass on the cost of government to their employees.

The really lost component is the effect that particular taxes have upon the economy, and that will depend greatly on the specific conditions of the local area… its culture, its industry mix, is geography, and so on.  Rhode Island, for example, could boost its economy with a low sales tax because none of the state is far from the reach of out-of-state consumers.

These questions get impossibly complex, though, and the best approach is probably to tax based on the legitimate claims of government, meaning a philosophical rationale for each tax, not an economic one. That way, the cost of government will be most accurately priced into the economy.

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When the “Affordable” Fashion Needs a Subsidy

Here’s a telling story, from Susan Cambell of WPRI:

Piette said the [electric] car was an affordable option because of rebates and tax credits. One of them he was banking on? A $2,500 rebate from Rhode Island’s DRIVE program. (DRIVE is short for Driving Rhode Island to Vehicle Electrification.)

“That $2,500 was going to help me put in a charging station at the house here,” Piette explained. “The car takes about 18 hours to charge on 110 [volts], but it takes four to five hours on the system I’d be putting in.”

Unfortunately, when Mr. Piette bought the car, he wasn’t aware that the funds for the subsidy had just dried up.  Now the car requires more than just an overnight-charge, and he apparently won’t spend his own money on what he was willing to force taxpayers to cover.

One wonders how pervasive this phenomenon will prove if ever our government finds it can’t continue to subsidize (by tax or by rate-payer mandate) everything from electric cars to home rooftop solar to offshore wind farms.  It may not seem like much in the grand scheme of the economy, but the $575,000 that went toward the program in which Piette missed his chance to participate would have gone to something else — something that the economy considered to be more important.

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A Flat Budget? The Horror, the Horror.

In an op-ed today, Gio Cicione observes that carrying over last year’s state budget — and nothing more — wouldn’t exactly be the end of the world:

Elsewhere in our great nation, state legislatures only meet every other year, and some go home after a couple months each year with no ill effect. Is it really so bad if ours goes home after six months of flailing? If anything, Rhode Island has suffered for most of its recent history from an over-abundance of well-intentioned but amazingly harmful legislative activity. (Remember 38 Studios? Of course you do.)

For context, we must keep in mind that carrying forward the old budget still sticks us with almost $9 billion of state spending. Without an increase, we still spend more per person than virtually every other state government in the country. (According to data from the National Association of State Budget Officers, no New England state spends more per capita and eight states nationally spent less than half of the $9,146 per person that Rhode Island spent in 2016.) We would still be giving $3.3 billion to fund education, $2.7 billion for health and social services, and yes, even that all-important $1.35 million to maintain our own Atomic Energy Commission.

But urgency is how news media sells stories and politicians sell “solutions.”  Moreover, government and its satellites don’t create wealth, so they have to make sure that their take keeps growing, and in a state with a long-stagnant economy, like Rhode Island, they can’t just rely on regular ol’ tolerance for inflation.

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A More-Scientific Approach to Dealing with Climate Change

The suspicious assumption of climate-change hysteria is that if the proclaimed science is accurate, then the policies of the hysterics obviously follow.  We should question whether an economic system that restricts rights and consolidates power would be the solution at a time when the world especially needs ingenuity and progress if we rightly avoid such a system when we aren’t in desperate need of innovation.  (The inference of alarmists’ attitude, of course, is that freedom and inalienable rights are luxuries with which we must dispense once they’ve proven their science.)

In an op-ed in yesterday’s Wall Street Journal, David Henderson and John Cochrane of the Hoover Institution suggest a different attitude:

… spread over a century, the costs of moving and adapting are not as imposing as they seem. Rotterdam’s dikes are expensive, but not prohibitively so. Most buildings are rebuilt about every 50 years. If we simply stopped building in flood-prone areas and started building on higher ground, even the costs of moving cities would be bearable. Migration is costly. But much of the world’s population moved from farms to cities in the 20th century. Allowing people to move to better climates in the 21st will be equally possible. Such investments in climate adaptation are small compared with the investments we will regularly make in houses, businesses, infrastructure and education.

And economics is the central question—unlike with other environmental problems such as chemical pollution. Carbon dioxide hurts nobody’s health. It’s good for plants. Climate change need not endanger anyone. If it did—and you do hear such claims—then living in hot Arizona rather than cool Maine, or living with Louisiana’s frequent floods, would be considered a health catastrophe today.

Some methods of conning people involve a manufactured sense of urgency to whisk the victim past the opportunity for reflection.  Henderson and Cochrane have it right:  “Strategic waiting is a rational response to a slow-moving, uncertain peril with fast-changing technology.”

Especially in sluggard Rhode Island, if time really is of the essence, we should stop binding our people with ideologically derived restrictions and allow dynamism to get us to a surer economic footing.

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In Pursuit of Happiness

Yesterday’s Newport Daily News had on its front page an AP article about research into how best to translate new money into happiness.  The sugar fix, so to speak, of a shopping spree doesn’t do it; rather, the key is to invest it in one’s own time:

“Money can buy happiness if you spend it right,” said University of British Columbia psychology professor Elizabeth Dunn, co-author of a study in Monday’s Proceedings of the National Academy of Sciences.

The right way is paying someone else to do the time-consuming drudge work that you don’t like, said study lead author Ashley Whillans at the Harvard Business School.  When people do that, they report feeling greater life satisfaction in general and happier that day.  But when they buy material objects, it tends not to bring people the happiness they expect, she said.

To some extent, this is just a description of how human economics work.  A person labors toward his or her own greater happiness and satisfaction, and that in large part entails leaving behind work that he or she is happy to hand off to somebody for whom the money is currently of greater need than the time or who enjoys the work or who has found a more-efficient way to accomplish it.

Such findings seem to me to suggest a benefit of the “gig economy,” in which people use technology to piece together methods of freelance.  Consider:

… if anything, the data suggested that people with less money were able to get a bigger happiness boost from time-saving purchases than those with more…

Yet, only 28 percent of the people surveyed spent money to save time, an average of $148 per month.

The small percentage may be a function of our consumer society, which constantly places objects for purchase before us, and we’re not adequately trained to figure out our own personal balance of time, money, and enjoyment.  More to the point, though, it’s just easier to buy something than to hire somebody.

That’s where the gig economy could fill a gap, if it became easy and familiar simply to hire others for one-off tasks quickly and easily, more people would do it… and be happier.

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Maine Tourism: Jobs Americans Will Do When Immigrants Aren’t Available

A few days ago, I noted that Maine’s waiters and waitresses had actually organized to fight against a minimum wage increase.  Now Jazz Shaw has spotted a story out of Maine that messes with another mainstream narrative.  Apparently, when the number of available immigrants for low-end work hits a ceiling, employers will find ways to make the positions into jobs that Americans will do:

The article describes some of the “creative ways to attract local labor” and they include things such as offering flexible hours and even… (gasp) higher wages. If your business is booming all summer to the degree that you can’t hire enough workers to meet the demand, then in a normal capitalist system the demand for labor would drive up the cost. Higher wages attract more and better workers… it’s really that simple. And if that enhanced compensation package is attracting more employees locally, why are you relying on the H-2B program to begin with?

The economic questions with immigration are not simplistic.  Fluid immigration is arguably a subsidy to employers; rigid immigration is arguably a subsidy to workers.  (Although, of course, a sense of fairness does seem to make the former argument more natural than the latter.)

As we work through these policies, though, deceptive rhetoric is kind of like a subsidy to those who dominate the media.  Ultimately, there’s no such thing as a “job Americans won’t do.”  There are just jobs that Americans won’t do for the compensation that employers want to pay.  Immigration policy, in this regard, should balance the needs of employers who can add to the economy if they have lower labor prices with an appropriate aversion to allowing global poverty to drive down salaries in the United States.

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Raimondo Ushers in Her Own Nightmare

Alright, it’s Saturday afternoon, and the sun has made an appearance, and I spent the day moving furniture, and I have to spend the evening helping out with a Bingo night, so cut me a little slack, here.  I couldn’t help but chuckle (Chortle?  Guffaw?) at this Ted Nesi tweet:

@GinaRaimondo said after Musk talk she’s less concerned on AI as civilizational threat + more on how many more jobs will soon be automated.

Well, gee, governor, you’d better get right on ushering in minimum wage increases and progressives’ mandatory paid time off legislation!  That’ll hold back the tide of automation for sure!

N.B.: If you didn’t catch the sarcasm in the previous paragraph, watch this:

And that’s before we get to the fact that one of Governor Raimondo’s corporate-crony taxpayer giveaways was to GE Digital, which forces Rhode Islanders to subsidize efforts to automate their jobs.

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Maine Waitstaff Reject Minimum Wage Increase

Caitlin Dewey recently reported in the Washington Post on an interesting turn of events in Maine.  A referendum increased the minimum wage for waitstaff, but then waiters and waitresses rallied to undo it:

James Dill, a college professor and the Democratic state senator from Maine’s 5th District, received hundreds of emails and phone calls from unhappy servers, he said. He initially voted for the ballot referendum because he supports a higher minimum wage. After the outcry, he signed onto a Republican measure to lower the tipped wage down again.

That measure passed the Senate by a vote of 23 to 12 on June 7, and the House on June 13. Governor LePage signed the bill into law last week, a spokesman for his office said, though the signing was not publicly announced for several days. It’s expected to go into effect in January 2018.

“I realize not everyone is in the same boat,” said Dill. “But the ones who called me were saying, ‘I make $20 to $25 per hour, I’ve bought a house with that income, I support my kids — it’s really important that you don’t mess with my tips.’”

Even with a subject as apparently narrow as the minimum wage for tipped restaurant worker, legislators can’t possibly know all of the consequences of changing policy.  Maybe the law works well for some and not for others; who ultimately has the right to decide between them?

The problem, I think, is that people too often rely on general impressions and anecdotes or, at best, broad statistical averages that don’t give a real sense of the lives people lead.  This is one area in which the market sets prices better than the government can, and in which legislators should accept reality and seek other ways to resolve circumstances they see as problems.

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Taxing the Rich Across the Country

Reading an Oklahoma editorial that cites public policy in Maine while I sit here in Rhode Island can’t help but make me wonder how it is we fail to learn with the entire nation — the entire world — as a real-time generator of examples and case studies:

Last year, voters in Maine approved a ballot measure that increased by 3 percentage points the income tax rate for those earning more than $200,000. This set Maine’s top income tax rate at 10.15 percent, second-highest in the country.

The tax increase, promoted by teachers unions, was a classic “soak the rich” proposal. The 41 percent rate increase was expected to impact only around 7,000 filers in Maine, and was expected to generate $157 million per year, which would be earmarked for schools.

Pause and think about a pair of aspects, here.  First, you’ve got the teachers unions using government literally to confiscate money from a targeted group of people and give it to themselves.  (The one step of separation that sends the money to the school districts makes no difference.)  To progressives, that’s called “representative democracy.”  If one side can manipulate political processes, their “representatives” will give it things taken from another side.

Second, following on that idea of taking from others, do a little quick math.  Taking $157 million from 7,000 people means taking $22,429 from each.  How is that not plain plunder?  Sure, maybe wealthy people can afford that hit, but robbing from rich people is still theft.  And what would make people think families wouldn’t seek some way to adjust their finances in order to prevent the taking of so much money?

It isn’t at all surprising that the Maine Revenue Services office reported no evidence of increased revenue a month ago.

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What It Means to Be 45th

In all the years I’ve been following Rhode Island’s standing on various national rankings, about the only substantive comeback from the forces of the status quo has been that we do okay when it comes to “quality of life.”  As I’ve pointed out, “quality of life” is only much use to those who can afford to enjoy it, and Rhode Island fails by that standard.  Great restaurants may impress an organization ranking states, but they’re utterly irrelevant to the family that can barely put food on the table.

So, now the buzz is that Rhode Island finally moved from dead last on CNBC’s “Top States for Business” ranking.  Here’s Ted Nesi on WPRI:

“Just one year ago the Ocean State finished dead last,” Cohn wrote. “The improvement is no accident. Every time we rank Rhode Island at or near the bottom, state officials take it to heart.”

The CNBC list and its methodology have plenty of critics, particularly on the left. But Rhode Island’s elected leaders have made clear over the years that they care a great deal about the state’s perennially poor showings on this list and other national business-climate rankings.

Exactly.  It’s been clear for years that state officials in Rhode Island are very concerned about the ranking, but not so much about what the ranking is actually telling us.  Consequently, they’ve sought policies to game the methodology, not to address the underlying problems — policies such as income and corporate income tax “reforms” that lowered rates on paper but wound up increasing the amount of tax collected.  Folks, you’re missing the point.

This is how Rhode Island produces an unemployment rate drop, but only because it’s driving people out of the labor force.

It’s also how we get a change that nobody’s talking about.  Our “quality of life,” according to CNBC, fell from 24th best in the country to 31st.  And observe that our state experienced this drop despite the fact that it includes such measures as health insurance coverage, at which we supposedly excel.

Our politicians may be improving our statistics, but they’re making our lives worse.

By capitulating to progressive-union pressure, and despite disingenuous claims that no broad-based taxes were imposed, Ocean Staters will once again bear increased burdens to pay for new taxes and regulations, more spending, and more union giveaways. Lawmakers chose to appease, rather than resist, the progressives’ job-killing, big-spending agenda.

Progressive Values Devalue Human Work

Message to General Assembly leadership: #JustStayHome! By kowtowing to pressure from the progressive-left, the provisions in the proposed 2018 budget, along with other crippling legislation, send a disturbing, but clear message to Rhode Islanders: hard work is valued less than unearned worker privileges. Rhode Islanders’ natural drive to engage in gainful and honest work and to invest in new ventures is corrupted by false promises that they can become part of a new “I got mine” special-interest crowd.

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Indirect Moral Corruption Driving Catholics Out of the North

Part of the cynical wisdom, up here in the Northeast, is that the Catholic Church has to support pro-immigration policy because it needs immigrants to keep its parishes going.  To the extent that this demographic pressure has any effect on what the Church actually does, a Catholic News Agency article about the Church’s growth in the South should suggest other policy positions that the Northern Church could promote:

The growth in part reflects the number of Catholics moving south from northern dioceses. Though this results in the closures of churches and schools in former Catholic strongholds, it is driving new expansion in the U.S. South.

I’ve half-joked that I’ve remained in Rhode Island out of missionary motivation, and only the jest part is political.  A region that is driving families apart and separating people from their homes presents real moral challenges.  In that regard, the Catholic Church — all churches — should acknowledge what the government plantation policies of Rhode Island are doing and impress upon believers their moral obligation to stay and to change things.

Working against poverty and injustice can’t be limited to standing up for those who are clearly oppressed, or else good works risk falling into vanity.  Vanishingly few people in contemporary America question the righteousness of helping those who immediately need help, but if we’re serious about helping those whom we can’t so easily see, whether because their problems are not so obvious or because their problems haven’t yet manifested, we have to take a broader view.

That means a society that draws people toward fulfilling lives of familial stability and self-motivated work.  And while the constituencies who see a Democrat vote as part of their cultural inheritance won’t like it, the policies on which we’re currently focused are clearly not serving that end.  The moral corruption of the government plantation is that ignoring the structural justice that brings stability and prosperity, but that requires a resilient and sometimes unpopular maturity, produces ample opportunities to display visible righteousness on behalf of those whom our ignorance has harmed.

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