Tuesday, April 15, 2014

Obama uses statistical fraud to accuse dry cleaners of gender discrimination, just like his fraud about the 23% pay gap

See Obama uses statistical fraud to accuse dry cleaners of gender discrimination, just like his fraud about the 23% pay gap by Mark Perry of  "Carpe Diem."

"The extent of President Obama’s “revolting pay gap demagoguery” and willingness to spread “statistical frauds” about women’s issues to gain popularity with female voters apparently has no limits. Last week he accused America’s dry cleaners of engaging in systematic and unfair gender discrimination by charging women higher prices than men. Watch the video above as Obama, surrounded by women, says:
We’ll talk about dry cleaners next, right? [Watch all of the women shake their heads in agreement.] I don’t know why it cost more for Michelle’s blouse than my shirt. We got to make sure that America works for everybody.
Obama’s accusation that dry cleaners discriminate against their female customers is based on the same statistical fraud that he uses to attribute the entire 23% unadjusted gender pay gap to gender discrimination by falsely assuming that he’s comparing wages of men and women doing the exact same work. In the case of dry cleaners, Obama’s new statistical fraud is based on the faulty assumption that dry cleaners engage in gender-based discrimination by charging women more than men for having the exact same clothing item cleaned. 
Following Obama’s false claims of gender discrimination last Tuesday, the female Executive Director of the National Cleaners Association responded later the same day with this letter to Obama, here’s an excerpt:
Imagine my distress when during your remarks about Pay Fairness, you segued into a smear on the quintessential small business, the dry cleaner, by suggesting you should be targeting them for gender biased pricing. Mr. President, for dry cleaning services, gender pricing is a myth, and we can prove it with the math!
We hope that once you understand the math, you will follow up your national conversation about dry cleaners by publicly correcting the mistaken impression that the media has helped to foster among many Americans, including our First Family
As an industry, dry cleaners do not charge more for a woman’s shirt than a man’s shirt, they charge more for a hand ironed shirt than they do a machine pressed shirt. If you check your own dry cleaning bill, you’ll find that YOU pay more for the laundering and finishing of your hand ironed tuxedo shirt, than you do for the automated processing of your everyday traditional dress shirt! The price is in the math as calculated by the labor required not the gender of the client!
Simple math. Hand ironing takes more time and requires more skill, and therefore costs the cleaner more to produce. Because it costs more to produce, he charges more for the work.
Hopefully, now that you understand the terrible injustice that has been done to the nation’s dry cleaners, and have made the issue part of the national conversation, you will see how you were misled and take steps to undo the hurt and damage that has been inflicted on fair minded, hard working small businesses.

Nora P. Nealis
Executive Director
Bottom Line: Just like Obama’s wage gap demagoguery implies that companies like Ford Motor Company hire male engineers for $100,000 but then pay women with the same exact credentials and experience a salary of only $77,000, Obama accuses dry cleaners of charging women more than men to have the exact same shirt cleaned and pressed. In both cases (wages and dry cleaning), Obama’s engages in the politically-motivated statistical fraud of comparing apples to oranges, and then uses fraudulent conclusions to appeal to female voters: women are paid less than men for doing the exact same work, and women pay more than men for having the exact same item dry cleaned. Complete false conclusions in both cases."

Saturday, March 15, 2014

Piketty's Dodge on Inequality

By David Henderson of EconLog.
"New York Times economics columnist Eduardo Porter recently interviewed economist Thomas Piketty on his work on income and wealth inequality. Piketty, in case you haven't followed, has been documenting the increase in income and wealth inequality in the richer countries, including the United States.

Porter doesn't ask any questions about world inequality. My impression is that it has decreased as large countries like China and India have gotten wealthier. But, of course, their real incomes could be growing faster than Americans' real incomes and income inequality could still be increasing. Start with a per capita income of $2,000 that is growing at 8% per year in poorer countries and a per capita income of $30,000 that is growing at 1% per year in richer countries. One year hence, per capita income in the poor countries will be 8% higher, which is $160 more. One year hence, per capita income in the poorer countries will be $300 more, which is, obviously $140 more than $160. So the gap will have grown. It will take a number of years before the absolute gap falls.

By the way, there is one quick way to make sure that global inequality of income falls dramatically: for the richer countries to allow in an additional 50 to 100 million immigrants a year.

I would be interested in Piketty's take on both of the above. Apparently, Porter is not.

But I want to focus on the area on which Porter focuses: increasing inequality within a country, specifically the United States.

Porter asks a good question:

Might inequality in the United States be less damaging than it is in Europe because the very rich were not born into wealth, but earned their money by creating new products, services and technologies?
Porter was implicitly, I think, getting at an obvious point: that large rewards for innovation give incentives for innovation. The innovation will help hundreds of millions of people who will never be really wealthy: think of how you gain from a computer and a cell phone.

Here's how Piketty answers:
This is what the winners of the game like to claim. But for the losers this can be the worst of all worlds: They have a diminishing share of income and wealth, and at the same time they are depicted as undeserving.
Do you see what Piketty did? He didn't answer. Not only did he not answer what I think was Porter's implicit point--the large social value of the incentive to innovate--but also Piketty didn't even answer the narrow question asked: is inequality less damaging because many very rich people earned their money by innovating? What did Piketty do? He made it about what the "winners" "like" to claim, not about whether the claim is true. Had I been Porter, I would have followed with something like the following:

Regardless of what they would "like" to claim, is it true?
Piketty also conflates increasing inequality with "losing." Notice that he calls those with a diminishing share of income and wealth "losers" even though they may well be winners, but not as big winners as those with an increasing share of income and wealth."

BEHAVIOR, PATERNALISM, AND POLICY: Evaluating Consumer Financial Protection

Paper by Adam C. Smith and Todd Zywicki of the Mercatus Center at George Mason University. (Hat Tip: Cafe Hayek) Abstract:
"This paper examines the relationship between behavioral law and economics (BLE) as a policy prescription platform and its influence on the regulations emerging from the Consumer Financial Protection Bureau (CFPB). We show how these regulations are inconsistent with the intent and purpose of improving consumer choices. We further demonstrate that the selective modeling of behavioral bias in the BLE framework causes an overestimation of the ability of regulators, who in actuality use inefficient, heavy-handed rules based on little if any real empirical findings of “consumer irrationality.” Accordingly, the broader lesson on the misapplication of behavioral economics goes beyond the ill-considered policies emerging from the CFPB."

Thursday, March 13, 2014

Obama again decries the gender pay gap, even though women on his staff earn only 88 cents for every dollar earned by men

From Mark Perry of "Carpe Diem."

The Hill reported yesterday that:
President Obama will host women of Congress at the White House for a Wednesday meeting in the administration’s latest bid to focus attention on its economic policy priorities ahead of the midterm election.
The White House Council of Economic Advisers will release new data in conjunction with the meeting showing that women earn just 77 cents for every dollar earned by a man, and the wage gap increases for women of color.
In the 21st century, why aren’t women earning equal pay? So how can we close that pay gap?” White House senior adviser Valerie Jarrett asked CBS News on Wednesday.
The meeting will feature female Democrats from the House and Senate, along with the president and Jarrett. Obama, House Minority Leader Nancy Pelosi (D-Calif.) and Senate Budget Committee Chairwoman Patty Murray (D-Wash.) are expected to speak at the top of the meeting.
MP: If Obama is really serious about the gender pay gap, he should start by addressing the significant gender pay gap that exists in his own White House, where female staffers earn just 88 cents for every dollar earned by their male counterparts (see chart above). Specifically, according to a detailed analysis of salary data from the “2013 Annual Report to Congress on White House Staff,” the 229 female employees in the Obama White House are being paid a median annual salary of $65,000, compared to a median annual salary of nearly $74,000 for the 232 male White House staffers. Unless and until Obama addresses (and closes) the 12% gender pay gap in the White House, it will be very hard to take him and Valerie Jarret seriously when they discuss the gender pay gap and how to close it, without acknowledging or addressing the 12% gender pay gap at the White House."

Unions Suffer for Obamacare

From Megan McArdle. Excerpts:
"Notwithstanding my reservations about the quality of this report, unions actually do have three big problems with Obamacare. As the Official Blog Spouse has chronicled, Obamacare has made things hard for the multiemployer health plans that many unions offer:
The issue here is how the law deals with multiemployer health plans, which cover as many as 26 million Americans, and are especially popular with unions whose members frequently work irregular hours for multiple customers.

ObamaCare requires these plans to comply with a number of regulations that are likely to drive up costs, but it doesn’t allow employers who provide benefits through multiemployer plans access to subsidies or tax credits. The only way for many of those union members currently covered by multiemployer plans to get subsidies would be for the unions to stop offering those plans.
The first problem is that Obamacare regulations are already pushing up the cost of multiemployer insurance plans. Moreover, many of the regulations don’t really fit the plans -- for example, many multiemployer plans do not distinguish between single and family policies, offering everyone the same insurance at the same cost.

The second problem is that the 40 percent excise tax on especially expensive plans -- the so-called Cadillac tax -- is going to hit union plans especially hard. Unlike most people negotiating compensation, union negotiators make an explicit trade-off between wages and other benefits, and the benefit that they seem most attached to is generous health plans. Union plans are made more expensive still because union membership is heavily skewed toward older workers. They are thus very likely to get hit by the Cadillac tax, which takes effect in 2018.

And the third problem is that Obamacare undercuts one of the key benefits of being in a union. Take a low-wage service worker who is currently insured through her union's multiemployer plan. If she went to work for a nonunion shop, she could get a substantial wage hike, use part of it to buy a heavily subsidized exchange policy, and still be better off. As I heard one expert say, Obamacare turns health insurance from an organizing tool to a disorganizing tool."

Wednesday, March 12, 2014

500+ economists assert the irrefutable laws of demand and supply, and slam the minimum wage hike as a jobs killer

From Mark Perry of "Carpe Diem."


More than 500 economists, including three Nobel laureates (Vernon Smith, Eugene Fama and Ed Prescott, along with AEI scholars/fellows Andrew Biggs, Alex Brill, Bob Helms, Marvin Kosters, Tom Miller, Stan Veuger, and Ben Zycher) have signed this letter arguing that artificially raising the minimum wage to $10.10 per hour through a government mandate would have adverse effects on the employment opportunities for unskilled and low-skilled workers. The tragedy of this well-intentioned, but misguided legislation is that it would harm and disadvantage the very workers it is intended to help (see cartoons below from Henry Payne).

PayneMinWage minwage11

In voicing their collective objection to a government price control for entry-level workers, the 500+ economists asserted the Law of Demand and the Law of Supply, two fundamental and time-tested components of basic economy price theory, summarized graphically above. Following a 40% increase in the federal minimum wage from $7.25 to $10.10 per hour, we would expect two incontrovertible effects: a) the number of unskilled, low-skilled and entry-level workers hired by employers would decrease (a movement upward to the left from $7.25 per hour along the blue demand curve above), and b) the number of unskilled and low-skilled workers looking for entry-level jobs would increase (a movement upward to the right from $7.25 per hour) along the green supply curve above). In combination, those two perfectly predictable and unavoidable effects inevitably leads to an “excess supply of unskilled workers” in the graph above, which is just another term for “more unemployed unskilled workers,” and a higher jobless rate for those workers.

Bottom Line: No amount of wishful thinking or well-intentioned legislation will change the unavoidable outcome of reduced employment opportunities for entry-level workers in America illustrated graphically above. The 500+ economists who have signed the letter are in general agreement that economic reality and the laws of supply and demand are not optional, despite the arrogant attempts of economically-challenged politicians and progressives to circumvent or disregard the most basic economic theory, economic laws and economic logic."

Why Still No Real Jobs Takeoff?

From John Taylor.

For each month of this recovery, I’ve been tracking the change in the employment-to-population ratio and comparing it with the recovery from the previous deep recession in the 1980s.  Here is the latest update based on today’s release of February data:
emp-pop feb 2014
and here is a post from 2011 for comparison. It’s remarkable that there’s still no take-off and the percentage employed is still below what it was a bottom of the recession.


As would be expected after so many disappointing years, some are now seeing this as a secular issue of low labor force participation unrelated to the slow recovery from the recession. But research by Chris Erceg and Andy Levin, (Labor Force Participation and Monetary Policy in the Wake of the Great Recession) provides what they consider to be “compelling evidence that cyclical factors account for the bulk of the post-2007 decline in labor force participation.”  One convincing piece of evidence is their chart (see below) which shows the labor force participation rate (LFPR) projection by BLS and CBO before the downturn based on the demographics about which there have been no surprise.  The actual LFPR (63.0 percent as of today) is well below these projections.