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March 8, 2013

Latest Posts from Economist's View

Latest Posts from Economist's View

Posted: 18 Feb 2013 12:34 AM PST
Raising the minimum wage is the right thing to do:
Raise That Wage, by Paul Krugman, Commentary, NY Times: President Obama laid out a number of good ideas in his State of the Union address. Unfortunately, almost all of them would require spending money — and given Republican control of the House of Representatives, it's hard to imagine that happening.
One major proposal, however, wouldn't involve budget outlays: the president's call for a rise in the minimum wage ... with subsequent increases in line with inflation. The question we need to ask is: Would this be good policy? And the answer, perhaps surprisingly, is a clear yes. ...
First of all,... increases in the minimum wage have consistently fallen behind inflation, so that in real terms the minimum wage is substantially lower than it was in the 1960s. Meanwhile, worker productivity has doubled. Isn't it time for a raise?
Now, you might argue that even if the current minimum wage seems low, raising it would cost jobs. But there's evidence on that question... And while there are dissenters, as there always are, the great preponderance of the evidence from these natural experiments points to little if any negative effect of minimum wage increases on employment. ...
Finally, it's important to understand how the minimum wage interacts with other policies aimed at helping lower-paid workers, in particular the earned-income tax credit.... The tax credit ... is also good policy. But it has a well-known defect: Some of its benefits end up flowing not to workers but to employers, in the form of lower wages. And guess what? An increase in the minimum wage helps correct this defect. It turns out that the tax credit and the minimum wage aren't competing policies, they're complementary policies that work best in tandem.
So Mr. Obama's wage proposal is good economics. It's also good politics: a wage increase is supported by an overwhelming majority of voters.... Yet G.O.P. leaders in Congress are opposed to any rise. Why? They say that they're concerned about the people who might lose their jobs, never mind the evidence that this won't actually happen. But this isn't credible.
For today's Republican leaders clearly feel disdain for low-wage workers...: "takers," members of the contemptible 47 percent who, as Mitt Romney said to nods of approval, won't take responsibility for their own lives. ...
The good news is that not many Americans share that disdain; just about everyone except Republican men believes that the lowest-paid workers deserve a raise. And they're right. We should raise the minimum wage, now.
Posted: 18 Feb 2013 12:03 AM PST
Posted: 17 Feb 2013 11:46 AM PST
Harvard's Ricardo Hausmann is interviewed in the MIT Technology Review:
You Must Make the New Machines, by Antonio Regalado: ...Why has the number of American manufacturing jobs been decreasing so quickly?
The fundamental reason is that productivity in manufacturing has been rising rapidly and demand for manufactured products has been growing more slowly. To supply the stuff that people want requires fewer jobs.
And then, manufacturing is becoming feasible in more parts of the world. There is more competition, including from countries with much lower wages. As they emulate American production, they take market share.
What's the best manufacturing strategy for the U.S. in that situation?
It's certainly not playing defense and trying to save jobs. The U.S. has very, very high wages compared to other countries. Yet it also has a comparative advantage, which is deep knowledge, high R&D intensity, and the best science and technology base in the world.
The step that makes the most sense for the U.S. is to become the producer of the machinery that will power the next global manufacturing revolution. That is where the most complex and sophisticated products are, and that is the work that can pay higher wages.
What kind of revolution are you talking about?
My guess is that developments around information technology, 3-D printing, and networks will allow for a redesign of manufacturing. The world will be massively investing in it. The U.S. is well positioned to be the source of those machines. It can only be rivaled by Germany and Japan. ...
The U.S. ... should look to ... pharmaceuticals, chemicals, and machinery. It's very hard to get into those. Very few countries are in that game. ...
If you look broadly at the U.S...., the country is super-competitive at agriculture and the industries that support it, like farm machinery, agrochemicals, and genetically modified seeds. It is strong in aerospace with Boeing, GE, Northrop Grumman, and Pratt & Whitney. It is a leader in pharmaceuticals and medical equipment, and it is the clear leader in information technology and the Internet. New industries often arise from the combination of capabilities...
How well is the U.S. doing in staying competitive?
For a while now, the U.S. has been much less focused on being competitive than most other places are. Americans have the feeling they are born to win, and if they don't, someone else is cheating. The U.S. has many self-inflicted wounds. It has an infrastructure that's increasingly lousy and a corporate tax rate higher than most countries'. But the most important [problem] is immigration policy. It's been a real disaster by preventing the attraction and retention of the high-skilled people who come here to study and then don't stay.
Posted: 17 Feb 2013 10:48 AM PST
Jared Bernstein:
Why the Budget Hawks Should Retract Their Talons, by Jared Bernstein: The WaPo has another in a series of editorials warning against any complacency in our efforts to stabilize the debt. ... I disagree–here's my view of the economics of the issue, which I think they have wrong...
But there's another very important reason why the WaPo's view is both dangerous and naive right now: the current Congress simply can't be trusted to achieve deficit savings in a way that's compatible with either growth or smart governance.
There are too many policy makers today who are driven by deep ideological opposition to government to approach this in a thoughtful way. To the contrary, they're heavily invested in staying in deficit-freak-out mode so as to slash and burn social insurance, to push balanced budget amendments that would both rob the federal government of counter-cyclical policy and force massive sequesters, and to argue for spending caps that have no reference to the nation's needs going forward. Arguments like the one in the WaPo simply throw fuel on their fire. ...
At such a time, with such dangerous, dysfunctional ideologues in power, we're much better off with the modest goal of debt stabilization over the 10 year budget window (and, in fact, the spending cuts we've legislated already go too far...), a point that is only amplified by the recent slowing of health care costs, as this too provides us with a bit more breathing room in terms of thoughtfully addressing future budget pressures.
It's just not smart at all to foment emergency–especially when there is none–without a lot more thought about who's on the squad that's supposed to respond to the problems for which you're ringing the alarm bells. ...
We have the time to get this right, but Congress does have trouble on this issue and it's understandable that people -- who have been misled about the degree of immediate danger from the debt -- would look for a way to force progress on the long-term debt issue. But creating fake emergencies that force bad decisions, many of which will likely need to be undone later with all of the same political difficulty and controversy, is not the way to get this done. (I don't object so much to the ideology or the passion with which some people express their views, it's the means to this end that bother me. If people want a smaller government they have that right, let them make an honest argument and we'll go from there. But the "honest argument" part is far, far from being satisfied, and the press has played into the ability of the zealots to lead this charge based on false pretenses.)

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