Sunday, April 26, 2015

Does America Have Less Economic Mobility? Part 2

From Scott Winship. 
"On January 12, 2012, Alan Krueger, then the chair of President Obama’s Council of Economic Advisors gave a speech at the Center for American Progress entitled, “The Rise and Consequences of Inequality in the United States.” The administration had attempted to show in December that rising inequality hurt upward mobility, but the rough modeling it conducted at the time to make its case failed to hold up. Krueger’s speech took a new tack—one that referenced the U.S.’s lower mobility as compared with other countries.

Modifying a chart that economist Miles Corak had produced earlier, Krueger plotted a number of countries as dots, arraying them along the dimensions of income inequality and intergenerational mobility. Following Corak, he displayed the straight line that ran most closely through the dots. This upward-sloping line—which Krueger dubbed the “Great Gatsby Curve”—indicated a positive relationship between inequality and immobility across countries; countries with more income inequality had more immobility (less mobility). Effectively arguing that this relationship was a causal one, he then plotted the current level of inequality in America on this chart and used the Great Gatsby Curve to predict a large increase in immobility in the United States arising because of increasing inequality.

In response to this argument, I issued a variety of criticisms. But it turns out that the biggest problem with the chart was one I neglected at the time, even though my earlier National Review essay had anticipated it: the Great Gatsby Curve was based on a comparison of income inequality levels to intergenerational elasticities (IGEs). As I discussed in Part 1 of this series, the IGE is a problematic measure of mobility. It indicates lower “mobility” when income inequality grows at a faster rate between generations. Countries with the same relative mobility (the same pattern of movement from bottom to middle, middle to top, and top to bottom) have different IGEs if they experience different inequality growth. Since inequality has grown more in the U.S. than in most other nations, its IGE shows worse “mobility,” and the same is true generally for countries with higher inequality growth.*

What no one realized at the time was that Corak’s own on-going research was demonstrating this problematic feature of the IGE. In a working paper with Bhashkar Mazumder and Matthew Lindquist, a version of which was publicly available** just three months after Corak and Krueger rolled out their Great Gatsby Curves, Corak found that when measures of relative mobility are used rather than the IGE, intergenerational mobility may be no lower in the United States than in Sweden, and only somewhat lower than in Canada. The higher rates of Canadian mobility reflect more downward mobility from the top rather than more upward mobility from the bottom.

The paper was published in the journal, Labour Economics, in October of last year. Its first key finding was that comparing IGEs across countries is potentially misleading unless data sources are of comparable reliability and the methods used are comparable. Corak, Lindquist, and Mazumder took great care to make the estimates from the three countries in their paper as comparable as they could. They found IGEs of 0.26 in Canada, 0.25 in Sweden, and 0.40 in the United States. In other words, the U.S. has the lowest mobility and Sweden the highest (barely beating out Canada). In Corak’s version of the Great Gatsby Curve, the estimates were 0.19 for Canada, 0.27 for Sweden, and 0.47 for the United States.

More important, however, is what the paper revealed about comparisons of relative mobility. In Part 1 of this series I described the “rank-rank slope,” a measure of relative mobility that gives the typical percentile difference in adulthood income between the poorest and the richest children. An equivalent measure used by Corak, Lindquist, and Mazumder is the Spearman rank correlation. This measure was 0.24 in Canada, 0.30 in Sweden, and 0.30 in the U.S.—very small differences given that this measure can range from -1.00 to 1.00. The authors indicate that part of the reason that the U.S. and Sweden have the same rank correlation is that the U.S. data include fewer years of earnings averaged together for fathers and sons. They estimate that if the Swedish data were comparable to the American data, its rank correlation would be 0.26. Even this is a small difference, though, and not substantively meaningful. 

Their paper examined additional measures of relative mobility that describe specific kinds of upward and downward mobility. For example, the share of sons starting out in the bottom fifth of father earnings that remains in the bottom fifth in adulthood is 31 percent in Canada, 32 percent in Sweden, and 32 percent in the United States. That is to say, upward mobility from the bottom is no worse in the U.S. than in Sweden or Canada. The share of sons starting out in the top fifth of father earnings that stays in the top fifth in adulthood is 33 percent in Canada, 40 percent in Sweden, and 38 percent in the U.S. Sweden looks a bit better than the U.S. when the sample is adjusted to correspond better to the U.S. data, but not by enough to alter the conclusion that there are minimal substantive differences between the two countries.

Remarkably, the findings of this paper have been largely ignored. The only references to the working paper’s findings of which I am aware were in a comprehensive review paper by Markus Jantti and Stephen Jenkins in November 2013 and in an essay I wrote with Donald Schneider in early 2014. Google Scholar indicates the published article has been cited twice. Corak, to my knowledge, has never cited the findings. In contrast, a Google web search indicates over 250 hits for “Great Gatsby Curve” in the past twelve months, 35 of them from Corak’s blog.

Corak has sought to distance himself from the emphasis I have placed on his paper and my interpretation that it is devastating for the argument that the Great Gatsby Curve tells about inequality hurting mobility. On his blog, in a post that suggested I may have the facts wrong and that I was letting my ideological priors affect my interpretation of evidence, he wrote,
I also want to go on the record and note that when he says my ‘most recent paper highlights serious problems [with the Great Gatsby Curve and my] previous research,’ it should be clear that this is Mr. Winship’s interpretation of my research, and not my understanding of my own research.
He also suggested I should reach out to him to get his views of his results. I have since done so, but after a brief (cordial) email exchange, we failed to connect. But honestly, when it comes to interpreting evidence, it does not really matter what the author of a paper believes. If he does not believe his results, he should not attempt to publish the paper. Otherwise, it is the scholar’s job to lay out all of the relevant evidence in such a way that misinterpretations of it are not possible. I have not mischaracterized the findings of the paper. It is true that I generally have not noted the caveats included in the paper by Corak and his coauthors that downplay their findings—and I should emphasize here that I know and admire Mazumder—but that is because I do not find the caveats compelling.

The authors argue that the IGE may be a better indicator of inequality of opportunity than relative mobility measures because it incorporates income inequality. For the reasons I gave in Part 1 of this series, I don’t believe that aligns with the way most Americans think about opportunity, and it begs the question of why income inequality per se is important. Regardless, the IGE is definitively not a good measure of relative mobility.

More substantively, Corak and his coauthors note that their U.S. estimates indicate more mobility than previous research, citing estimates from the 2006 paper by Jantti and his colleagues that I mentioned in Part 1 of this series—and to which I will return—as well as a study by my former colleagues in the Brookings Center on Children and Families for my former colleagues at the Pew Charitable Trusts. They note that both those studies use parental family income rather than father earnings in childhood. They found U.S. results more comparable to these earlier studies when they looked at combined parental earnings instead of fathers’ earnings.

The authors also cite research indicating that the administrative data they use to obtain their U.S. estimate may be worse than survey data at capturing low incomes accurately, implying that their estimate for the U.S. may be inferior to estimates based on survey data.

Let’s put these concerns to rest right now. First, as the authors note, they cannot estimate mobility for Sweden and Canada using combined parental income or earnings, so we have no way of knowing whether Sweden and Canada would have more mobility than the U.S. by this approach. Even if they did, that would not invalidate the paper’s finding that male earnings mobility is not substantively different across the three countries. Without any estimates of family income mobility in other countries, it is simply putting a thumb on the scale for the authors to discount their own findings on this basis.

More to the point, there are estimates of father-son earnings mobility in the United States against which to compare the Corak, Lindquist, and Mazumder estimates against. Using a survey called the Panel Study of Income Dynamics, Pew estimated that 31 percent of men who grew up in the bottom fifth of father earnings remained in the bottom fifth of earnings as adults. Corak and his coauthors estimated it was 32 percent. Their conjecture that the administrative data produce too-high upward mobility because they poorly measure incomes at the bottom is simply wrong.

Even the paper’s finding that Canada has more mobility than the United States—and than Sweden—should be viewed as provisional. One reason to be concerned with the Canadian estimate: in a 1999 paper with Andrew Heisz, Corak reports that about half of sons are excluded from the Canadian data used in the new paper because they did not file taxes, could not be matched to fathers who were tax filers, or both. This group includes many sons of immigrants and sons of single mothers, who are generally excluded from all analyses of father-son mobility. But even accounting for these men, that leaves a sizable fraction of sons out of the Canadian sample. To be included, sons had to file tax returns while living at home as adolescents. As Corak notes in the paper with Heisz, there are good reasons to think that the omitted sons are poorer than the sons in the sample. He conducted a crude test in the earlier paper of whether the omission biased his results and found that it did not, but I think most economists would characterize the test as not especially informative.

But nothing in the Corak, Linduist, and Mazumder paper suggests that U.S. and Swedish levels of mobility differ meaningfully from each other. That still leaves the 2006 paper by Jantti and his coauthors, which found that the U.S. had lower relative mobility—at least for sons starting out at the bottom—than Denmark, Norway, Sweden, Finland, and the U.K. I’ll explain why this paper’s conclusion is also incorrect and explore some additional research comparing the U.S. to other countries in my final installment.

*In fact, when combined with another feature of Corak’s and Krueger’s versions of the Great Gatsby Curve, a relationship between inequality and “mobility” was almost baked into the cake. That’s because the measure of inequality they used indicated inequality levels in adulthood rather than in childhood. If people in countries with higher inequality in adulthood tend to have experienced stronger inequality growth between childhood and adulthood, then a positive relationship between income inequality in adulthood and immobility is mathematically inevitable.

** The link is now dead and unavailable on archive.org, but was http://www.eale.nl/Conference2013/program/Parallel%20session%20A/add215310_konuoeQdIq.pdf. A later draft was also posted online but is available now only at archive.org: https://web.archive.org/web/20150401075918/http://www2.sofi.su.se/~mjl/docs/Cross_country_mobility_March_21_2014.pdf.  A copy of the earlier draft is in my possession.

Scott Winship is the Walter B. Wriston Fellow at the Manhattan Institute for Policy Research."

Brian Wesbury Challenges Stiglitz On Inequality & The Recession

See One Man Against the 1%: For the past 50 years, liberals have gotten almost exactly the policies they’ve wanted. So why are they still complaining? Excerpts:
"The reality, however, is that the financial crisis was not caused by inequality or by banks. It was caused when the government used Fannie Mae and Freddie Mac, under the banner of equality, to encourage subprime lending to promote homeownership. Then the government allowed a very strict mark-to-market accounting rule to be enforced, turning a fire into an inferno. The crisis would have never spun out of control if government had avoided overly strict mark-to-market accounting rules.

Mr. Stiglitz acknowledges that global inequality has narrowed in recent decades, but he says that “American inequality began its upswing 30 years ago, along with tax decreases for the rich and the easing of regulation on the financial sector.” He contrasts this with the decades after World War II, when the U.S. “grew at its fastest pace, and the country grew together.” But now, he says, “the American dream is a myth.” The 1% are sailing along, while the rest are drowning. Like advisers to FDR who believed the Soviet Union had found the secret to growth through central planning, Mr. Stiglitz holds up China as a role model, praising the country’s top-down economic management. Yet the truth is that embracing Western-style free markets and adopting technologies invented in the U.S.—not central planning—have lifted hundreds of millions of Chinese out of poverty.

A running theme of the book is that the American dream is dead because policy makers have failed to implement truly liberal policies. But for the past 50 years, liberals have gotten almost exactly what they wanted. Between 1950 and 1965, government spending outside of defense was just 7.8% of GDP. Liberals weren’t happy with that, so they proposed to make America a “Great Society” by creating the modern welfare state along with Medicare and Medicaid. After five decades of growth in these redistribution programs, nondefense government spending is now 16.8% of GDP. In other words: Core, prosperity-sharing government spending has more than doubled, while military spending has fallen from 9.5% of GDP to less than 3.5%.

Liberals have shaped the tax code to their preference as well. In 1979 the top 1% paid 14.2% of all federal taxes. In 2011 that share had risen to 24%. The lowest quintile paid just 0.6% of all federal taxes in 2011, down from 2.1% in 1979. Following the expiration of the temporary Bush tax cuts in 2012, and the new surcharges in ObamaCare, this dichotomy has widened.

Mr. Stiglitz constantly refers to income inequality without adjusting for taxes and transfers. But this is misleading. A 2014 Congressional Budget Office (CBO) study showed that the lowest quintile of income earners saw their market income grow just 16% between 1979 and 2011, while the highest quintile experienced a 77% increase. But after adjusting for taxes and transfers, the CBO found that the lowest quintile, which receives about a third of its income from transfers, saw an increase in income of 72%, while the top quintile had a gain of 87%. In other words, liberal policies of tax and redistribute have created a much more level playing field than liberals will admit.

Liberals are the like the dog that finally caught the car. Now what will they do? If Mr. Stiglitz is indicative, they will gripe about the wealthy, argue that their ideas of redistribution weren’t tried hard enough and blame self-interest for hampering real progress. Conservatives said that our current fiscal path would be bad for the economy; liberals insisted that it would be good. The fact that Mr. Stiglitz is still complaining would seem to be proof that liberals were wrong.

Mr. Wesbury is chief economist at First Trust Advisors LP in Wheaton, Ill."

Saturday, April 25, 2015

Did Reaganonomics Set Stage For Growth In The 1990s?

See The real lessons of Reaganomics, at least as I see them by James Pethokoukis of AEI.
"If you want to promote pro-market policies by citing the success of Reaganomics, don’t do it the wrong way. And the wrong way is suggesting that the Reagan tax cuts paid for themselves. They didn’t (although their deficit impact was smaller than a static analysis shows). And that’s true whether you look at (a) income tax revenue/GDP or (b) real GDP growth to real revenue in the 1970s vs. 1980s, or (c) academic research.

Nor should you suggest the Reagan tax cuts immediately ushered in a period of crazy-go-nuts hypergrowth. They didn’t. Real GDP growth in the 1980s was about the same as the 1970s. Nor was their a pickup in productivity.

But, but, but … the way to judge a huge change in public policy is over the long term. “Making changes to the tax system and regulatory policies of a mammoth economy like the U.S. is like turning the rudder slightly on a supertanker: The initial effects are small, but it leads to a big shift in course over time,” economist Michael Mandel wrote in a fantastic 2004 magazine piece on Reagan’s economic legacy. This is especially true of sweeping tax reform and how changes in tax rates affect “investment in schooling, occupational choice, and business creation and development,” as AEI’s Aparna Mathur, Sita Slavov, and Michael Strain explain in “Should the Top Marginal Income Tax Rate Be 73 Percent?”

Looking at the economic performance in the 1980s alone may not provide the best evidence for the success of Reagan’s pro-market policies — despite their help in transitioning out of the volatile, high-inflation 1970s — especially given the role of monetary policy during that decade and natural post-recession rebound. Adopting a longer perspective brings the realization, for instance, that after 1980 only countries adopting aggressive pro-market reforms gained on America, in terms of per capita GDP. Sorry, Old Europe. But this from Mandel seems even more important:
In a way that few have realized, Reagan’s economic legacy is inextricably interwoven with the Information Revolution that the IBM PC helped kick off. His message of competitive markets, entrepreneurial vigor, and minimal regulation found a willing audience in an era of rapid technological change, where innovation was opening new opportunities seemingly every day. Reagan’s first term saw the creation of such future giants as Sun Microsystems, Compaq Computer, Dell, and Cisco Systems (CSCO) — the greatest entrepreneurial burst of new companies since the early 20th century. … Taken together, the changes Reagan championed in the tax system fostered innovation and entrepreneurialism even as they encouraged the development of venture capital and investment in human capital. And Reagan’s willingness to push for more flexible labor markets and less regulation helped companies react faster to economic changes, including new technologies. As a result, the impact of the policies Reagan set out in the 1980s, which slowly worked their way through the economy, helped lay the groundwork for the Information Revolution of the 1990s.
Mandel points out (a) the 1981 cut in top rates “made it far more attractive for people to raise their incomes by getting more education or taking the risks of starting a company; (b) the 1986  tax reform was especially beneficial to “idea-based” firms such that  companies such as Oracle and Microsoft that saw big drops in their average tax rates.

That stuff aside, these stories make to me — not surprisingly —  intuitive sense. I certainly want to believe them. Of course, as Mandel also points, the “Reagan helped cause the 1990s tech and productivity boom” argument isn’t universally held. And you say rising inequality and wage stagnation, I say 50 million net new jobs and a 40% rise in real incomes. As liberal economist Jason Furman once wrote before becoming an Obama economic adviser, “[People] are substantially better off than they were 30 years ago.” And in a way that few, especially on the left, would have predicted in 1980.

At the same time, you still have to pay the bills today.  The US debt-GDP ratio is three times higher than when Reagan took office, and we are only now feeling the fiscal impact of all those retiring Baby Boomers. So smart tax reform should focus on boosting long-term productivity (and providing middle/working-class tax relief as Reagan did) while also making sure it doesn’t make the red ink flow even faster. Meanwhile, when presidential candidate Hillary Clinton talks about the roaring 1990s, Republicans shouldn’t be afraid to suggest the Gipper and an embrace of optimistic, entrepreneurial capitalism just may have had a key role to play in the Long Boom and America’s continuing global innovation dominance."

Minimum wage workers tend to be young, single, part-time workers with less than a high school diploma

From Mark Perry
"The Bureau of Labor Statistics just released its annual report on the “Characteristics of Minimum Wage Workers, 2014,” and here are some highlights:

Age. For workers ages 16 to 19 years old, only 15.3% made the minimum wage or less in 2014 (about 1 in every 6.5 workers in that age group) and almost 85% of those workers earned more than the federal minimum wage last year. For workers ages 25 and older, only 2.5% (1 in 40) earned the federal minimum wage or less last year. So even the vast majority of teenagers (more than 8 of every 10) earn more than the federal minimum wage.

Education. For workers with less than a high school diploma, 7.3% of those workers earned the minimum wage last year, compared to 3.5% (1 in 29) of high school graduates, 2.2% (1 in 45) of workers with an associate’s degree and fewer than 2% of workers (about 1 in 53) with a bachelor’s degree or higher who earned the minimum wage last year.

Marital Status. For never married workers, who tend to also be young, 6.7% of that cohort worked last year at the minimum wage, compared to only 1.9% (about 1 in 53) of married workers with a spouse present who worked at the minimum wage in 2014.

Hours Worked. Among full-time workers only 1.8% (1 in 56) earned the minimum wage or less, compared to 9.5% (1 in 11) of part-time workers.

Bottom Line: Four important factors that will help workers earn a wage above the federal minimum wage are: 1) age (experience), 2) education, 3) marital status and 4) hours worked. Only 1-in-40 workers age 25 and above make the minimum wage, only 1-in-45 workers with an associate’s degree or higher makes the minimum wage, only 1-in-53 married workers earns the minimum wage, and only 1-in-56 workers working full-time earns the minimum wage. The evidence seems clear that the minimum wage applies only to a very small group of young, inexperienced, single, part-time workers, with a lack of education. The path to higher wages includes staying in school, getting job experience, working full-time and getting married. Raising the minimum wage will make that path to higher wages more difficult, not easier, because it will price many younger, less-educated, less experienced workers out of the labor market — and will deny them the opportunity to work, gain experience, and gain the job skills they need that paves the path to higher wages."

Thursday, April 23, 2015

66% of the union members voted against a higher minimum wage (actors)

See Hollywood Loves Minimum Wage So Much, It Dodges It by LARRY ELDER. 
"Welcome to Hollywood, where dreams become real — and where logic, reason and Economics 101 become dreams.

Take the current battle over the minimum wage. In Los Angeles County, the minimum wage is $9 per hour.

Theater actors, however, can be paid as little as $7 a performance, and an actor can even work long rehearsal hours with no pay.

Three decades ago, L.A. County actors sued their union for an exception to union wages for theaters with 99 seats or fewer seats.

Why do these stage actors work for so little? They want to work. By working, they improve their skills, stay sharp and or perhaps have a chance to get spotted by an agent.

Some say simply having something to do is better than just sitting around and waiting for a casting agent to call.

Actors Equity, the national union, wants to change this. According to the New York Times: "The union, seizing a moment when organized labor is having some success pressuring low-wage employers to pay higher salaries, says many of this city's small theaters — which currently pay actors nothing for rehearsals, and stipends as low as $7 per (hour for) performances — should start paying California's minimum wage of $9 an hour."

But then a very Republican thing happened — 66% of the union members voted against a higher minimum wage.

Their rationale was simple: A higher minimum wage means fewer plays get performed. Fewer plays mean fewer opportunities for actors and therefore fewer opportunities to gain experience, stay in practice or get discovered.

But the union's national council ignored this advisory vote and ordered, with some exceptions, a $9 per hour minimum wage.

When it comes to their own lives, these actors understand the law of economics: Artificially raise the cost of a good — in this case the price of an actor in a stage play — and you reduce the demand for actors.

Last year, meanwhile, actor Kevin Spacey lobbied Maryland lawmakers to extend their tax credit program. He films his Netflix series, "House of Cards," in Maryland.

That state offers generous tax credits and relaxed union rules, so the Netflix series earned more money than would be the case if the show filmed in Hollywood.

In Maryland, a production company can claim a credit on its income taxes equivalent to 25% to 27% of the costs of their film or TV production. If the credit is larger than a company's tax liability, the company can receive a refund from the state."

It's kinder to push people into work than to park them on benefits

See Welfare reform and unemployment by Matt Ridley.
"My Times column on Britain's remarkable and unexpected plunge in unemployment and what lies behind it: 
Five years ago, almost nobody expected that inflation would vanish, as tomorrow’s figures are expected to show, or that unemployment would plummet, as Friday’s numbers will confirm. Whatever else you think about this government, there is no doubt it has presided over an astonishing boom in job creation like nowhere else in the developed world.

The milestones are impressive: an average of a thousand new jobs a day over five years; unemployment down by almost half a million in a year; a jobless rate half the eurozone’s; more jobs created than in the rest of Europe put together; more people in work, more women in work, more disabled people in work than ever; the highest percentage of the population in work since records began. All this while the public sector has been shedding 300 jobs a day.

In a speech in September 2010, Ed Balls accused George Osborne of “ripping away the foundations of growth and jobs” and said that “against all the evidence, both contemporary and historical, he argues the private sector will somehow rush to fill the void left by government and consumer spending, and become the driver of jobs and growth”. (Yup, Ed, it did.)

Is it too good to be true? I’ve talked to economists who think the statistics must be misleading. The Labour party says that the sanctioning of benefit seekers for the most trivial offences, such as turning up late for interviews, has driven hundreds of thousands out of the numbers, into dead-end apprenticeships, cruel zero-hours contracts or doomed self-employment.

In a sense, they are not wrong. The government’s reforms, pushed by Iain Duncan Smith, are indeed a crucial cause of the surprising surge in employment. The reforms have indeed used tough love to push people back into the workforce and off welfare. As long as they are no worse off, this is no bad thing. Given that welfare has treated people like children and conditioned them not to take responsibility for their lives, it is a good thing.

For example, early trials found that making unemployment claimants sign contracts in which they promise to look for work (which is now universal) frightened quite a few people off the system straight away — they had been working while claiming to be unemployed. Regular re-testing of those who claim sickness benefits has brought many fit people back into the labour force, while actually increasing benefits for some of those whose conditions have deteriorated. Paying work programme providers by results, so that if they get people back into employment they get a bonus, has worked.
And yes, the threat of sanctions if claimants do not treat unemployment benefit as a wage for the full-time job of looking for work has helped. The philosophy behind these reforms has not been about cuts, IDS insists, but about reconditioning people’s attitudes so they take responsibility for their choices. Little things can make a big difference: like not having rent paid for you, but having to budget for it from your housing benefit. Most benefits are paid fortnightly but most employers pay monthly, so going from welfare to a job often brings a budgeting crisis. Universal credit is paid monthly wherever possible.

To general surprise, the welfare reforms have proved to be among the most popular things this administration has done. Four in five trade union members think the £26,000 cap on benefits is a good idea, which is why the Conservatives are planning to push it down to £23,000 if re-elected. Polls suggest that a policy of limiting benefits to two children, so you could not get rehoused by having extra children, would be wildly popular, as would a manifesto promise to withhold benefits from immigrants till they have contributed taxes for four years.

Tory candidates out canvassing tell me they are finding that welfare reform, while horrifying the metropolitan elite, is most popular in the meanest streets — where people are well aware of neighbours who play the system. It is a staggering fact that when Labour was in power and while the economy was growing, the cost of welfare rose by 50 per cent in real terms, even as immigrants poured in to work here.

The latest figures also suggest that British people from inner-city estates are increasingly competing with immigrants for low-paid jobs. We now have the smallest number of households with nobody working and a record rise in the number of people who live in social housing who are working. That feeds through to healthier lives and less crime.

Universal credit, where it is being rolled out, has had an immediate impact in making people more likely to go to interviews and more likely to take jobs. Australian, New Zealand, Canadian, German and American teams are monitoring Britain’s welfare reforms with a view to emulating them.

Another international comparison is illuminating. Switzerland has 3 per cent unemployment, Spain 23 per cent. As James Bartholomew recounts in his book The Welfare of Nations, Swiss unemployment benefit is slightly more generous than Spain’s, at least initially, but to receive it you must prove every month you are actively looking for a job. Switzerland has one of the strongest such “search requirements”.

In Spain the requirement for the unemployed to seek work is much less onerous. It is up to a public agency to find jobs for you to consider and you don’t have to accept them if they are outside your line of work or based more than 19 miles away. It is possible to take long holidays abroad while receiving unemployment benefit. There are other differences. Switzerland has no minimum wage and makes it comparatively easy to fire people, both of which make employers keener to hire unskilled young people. In Spain, the cost of hiring somebody at a salary of 1,500 euros a month is about twice as much as the employee receives after tax and social security — three times as large a “wedge” as in Switzerland.

This government’s reforms have made us less like Spain and more like Switzerland. Nor are most of the jobs created in the past five years insecure, poorly paid and part-time. Since 2010, 60 per cent of the rise in employment has come from managerial and professional jobs. In any case, shoving people into some kind of work rather than parking them on welfare has to be better for their morale and their future.

Update: subsequent to my article, the latest unemployment figures showed continuing strong improvement in Britain's workforce statistics:
Employment up 248,000 on 3 months before
Unemployment down 76,000
Claimant count down 21,000
Number not in the workforce down 104,000
Weekly earning and vacancies both up"

Wednesday, April 22, 2015

How about a ‘Capitalism Day’ to balance ‘Earth Day’ to remind us of what’s behind environmental improvements

From Mark Perry.
"In a great editorial in 2009 (excerpts appear below), Investor’s Business Daily reminded us of the main, but unrecognized force that has driven the environmental improvements that have taken place since the first Earth Day in 1970 – capitalism, and the wealth generated by the free market. Schools all over America today will celebrate Earth Day, and students nationwide will get a heavy dose of the anti-market, pro-government message that motivates Earth Day. They’ll probably hear all about the evils of free market capitalism and its role in harming the environment, and learn that the only solutions to environmental issues are market-suppressing, heavy-handed government regulations. As Steven Landsburg observed, the messages about the environment delivered in most schools today inculcate the very dangerous substitution of biases for analysis.

To complement and offset the environmental hysteria promoted by Earth Day, IBD suggested an annual event called “Capitalism Day.” What a great idea, especially if Capitalism Day was given “equal time” in our schools nationwide to provide some academic balance for Earth Day, but whose time unfortunately will probably never come…….
Today’s airwaves, print media, cable news shows and Webosphere will be filled with nonsense about the scourge of capitalism, corporations and humanity. All of it will ignore the real truth. Buried beneath all the badgering and fear-mongering about lavish Western lifestyles is a reality that the stuck-on-green left won’t talk about and the average American isn’t aware of: The world, especially in developed nations, is a cleaner — and greener — place than it was when the environmental movement began.
We’re not saying the Earth, or even any part of it, is environmentally pristine. It’s not, it never has been and never will be. Yet there’s actually more positive news to celebrate than there are problems. Of the estimated 1 billion people who will observe Earth Day worldwide this year, few will know about the progress that has been made. Fewer still will know how it was made. The media, uninterested in looking at the real story, will simply credit the environmental movement for the improvements.
We won’t discount the movement’s contribution. Four decades ago, it helped show the world the value of global stewardship. But that movement is no longer interested in a cleaner world. Filled with extremists and anti-capitalist crusaders, its primary goals have changed. Topping the agenda of today’s environmentalist groups is the pulling down of market economies, the raising up of central planning for egalitarian goals, forced lifestyle changes and the vilification — in hopes of the elimination — of signs of wealth.
None of these advance the planet’s environmental health. But capitalism has. Through wealth generated by the free market, we have enough resources to move beyond the subsistence economies that damage the environment, enough disposable income to fund clean-up programs, enough wealth to scrub and polish industry. Only in advanced economies can the technology needed to recycle hazardous waste or to replace dirty coal-fired power plants with cleaner gas or nuclear plants be developed. That technology cannot be produced in centrally planned economies where the profit motive is squelched and lives are marshalled by the state.
There’s nothing wrong with setting aside a day to honor the Earth. In fairness, though, it should be complemented by Capitalism Day. It’s important that the world be reminded of what has driven the environmental improvements since Earth Day began in 1970."