Congressional leadership is corrupt

From Tyler Cowen.

"Using transaction-level data on US congressional stock trades, we find that lawmakers who later ascend to leadership positions perform similarly to matched peers beforehand but outperform them by 47 percentage points annually after ascension. Leaders’ superior performance arises through two mechanisms. The political influence channel is reflected in higher returns when their party controls the chamber, sales of stocks preceding regulatory actions, and purchase of stocks whose firms receiving more government contracts and favorable party support on bills. The corporate access channel is reflected in stock trades that predict subsequent corporate news and greater returns on donor-owned or home-state firms.

That is from a new NBER working paper by Shang-Jin Wei and Yifan Zhou.  Of course Alex T. has been on this issue for a long time now."

The Truth About Those ‘High Minimum Wage’ Countries

Headline wages in Finland and Australia exempt millions of workers, and the loopholes tell us a lot about labor market realities

By David Hebert of AIER.

"When debating raising minimum wages, proponents will often point to Australia and Finland as examples that contradict the warnings from (typically American) economists. On the surface, this seems like a fair point. After all, from our American perspective, things in Australia seem fine (other than the fact that even the trees are trying to kill you) and Finland has been romanticized as a triumph of progressive politics “done right.”  But before minimum wage proponents declare victory, we should read the fine print.

Looking beyond the simple story of “higher minimum wages” and into the underlying structures of these countries’ respective economies reveals a web of exemptions, alternative employment structures, and differing educational emphases. Mandated high minimum wages with built-in escape hatches and exemptions large enough to drive a truck through are not really “minimums.”

The Land of Oz

Australia loves to mention that they have one of the world’s highest minimum wages, at $24.95 per hour (the equivalent of about $16.16 in USD). This headline-grabbing figure only tells part of the story, however, as there are exemptions to this depending on an employee’s age, industry, and myriad other conditions.  Helpfully, the Australian government has put together a Pay and Conditions Tool to help figure this all out.  As a rough approximation, a person who is 17 years old can roughly count on a minimum wage equal to about 60 percent of the “adult” pay rate, giving them an effective minimum wage of $14.42 ($9.34 USD) and $17.04 on their 18th birthday ($11.04 USD).  

But what about workers with a disability?  The Department of Social Services will determine how much a disabled worker will be paid based on the nature of their disability. Under the Supported Wage System, “a special workplace arrangement can be made for employers to pay wages to a person with disability based on how productive they are in their job. Under [this system] an employee’s work capacity is assessed to find out their rate of pay… For example, someone with an assessed work capacity of 70 percent is entitled to 70 percent of the relevant pay rate in their award or registered agreement.” 

In other words, the Australian minimum wage that Americans have heard so much about only applies to people without disabilities who are at least 21 years old, and even then, only sometimes. But this still doesn’t scratch the surface of the employment situation in Australia. Most of the jobs where the minimum wage actually applies are in industries such as restaurant and retail, where the work is so highly standardized that there are no real, appreciable productivity gains year over year.  Are we really to believe that a 21-year-old waitress carries plates or restocks inventory 44 percent better than her 18-year-old counterpart? 

As a result of the age-based pay scale, Australian workers in these industries are laid off at a disproportionately higher rate as they approach their 21st birthday, though effects can be seen at every birthday up until the worker turns 21.

Employers defend this system with a simple story: young workers lack experience and are therefore less productive because they’re still learning. They need training, which costs money, and are consequently paid less to “pay for” the training they receive on the job.

It’s a nice story and one that comports with much of what Americans might experience, too. The truth is that many young workers in Australia have already completed pre-employment training, earning certificates and such, before they even start work. And in the sectors where the junior minimum wages are most common, the work is highly standardized, such that there isn’t much productivity gained between 18 and 21.

That said, there are legitimate programs where younger workers earn lower wages than their older counterparts.  Australia’s apprenticeship program is incredibly robust. A first-year electrician earns around 60 percent of the wages of a qualified tradesperson because they are genuinely learning and getting demonstrably better each year thanks to the supervision and training they receive from their more senior coworkers. Wages in these settings increase not because of age, but because competence grows, and by the time the worker has completed their training, they earn full rates and have a valuable qualification they can take with them elsewhere, not to mention an all-important line on their resume attesting to their productivity.

Finnish Wage Floors

Unlike America and Australia, Finland actually does not have a formal, statutory minimum wage.  Instead, they use collective bargaining agreements, which cover somewhere around 90 percent of workers. Like Australia, however, they also have exemptions for workers who are “training” or in “apprentice programs.” The difference is that in Finland, the training programs last for a specific amount of time irrespective of the employee’s birthday. They’re based on skill, not age.

Finland also boasts a remarkable vocational and education training program (VET) that “provides students with knowledge and skills necessary in further studies and promotes employment.”  According to their own figures, around half of the students who complete their basic education in Finland matriculate on to VET rather than “general upper secondary education.” In other words, at around the age of 16, roughly half of the students decide to go into vocational training rather than continue on to what Americans commonly refer to as “college.”

While Finnish students are enrolled in the VET, they can work for pay at the agreed-upon rates covered by the collective bargaining agreement through formal apprenticeship programs.  According to the European Centre for the Development of Vocational Training, about 26 percent of VET students are enrolled in such a program. The remaining 74 percent, however, are either in the classroom or are engaged in “training agreements,” some of which allow the student to be unpaid while being formally employed. Others are informal, handshake agreements “under the table” whereby the student is not an employee and thus receives no wages.

Thus, what Finland has is a high, collectively agreed-upon wage floor. But they do this by pushing most of the vocational training into the (unpaid) education system. The high wage floor exists, but workers don’t get to stand on it until they’ve completed their training, formal and sanctioned or otherwise.

Reforms in America

The next time someone tells you about Finland’s wonderful labor market or Australia’s high minimum wage (or any other country, for that matter), ask about the fine print. When you look at these issues more closely, the surface-level claims of minimum wage proponents simply do not hold water.

Still, as the US continues to wrestle with reforms to our education system, we can learn from these countries’ experiences. Finland in particular, with its curricular focus on career preparation instead of rote memorization of obscure knowledge (when was the last time any of you, dear readers, used your knowledge of trigonometry?), provides an important example where lessons for reform can be learned.  

We should carefully guard against the headline-grabbing claim that Australia and Finland have high minimum wages. We should especially reject the idea that this somehow proves that raising the minimum wage does not always lead to trade-offs."

Chicago Is the Latest Example of How Public School Spending Doesn't Prioritize Students

Misused pandemic funds, luxury travel, and declining achievement reveal a crisis of priorities—one only school choice can fix.

By Gregory Lyakhov of Reason.

"Public school districts have a responsibility to educate students, safeguard taxpayer money, and provide families with opportunities for success. However, Chicago Public Schools (CPS) has become a national example of how a school system collapses under mismanagement, political patronage, and an absence of accountability.

A report from the Chicago Board of Education's Office of Inspector General uncovered $23.6 million in misused spending—specifically, spending on lavish and often unapproved travel: $1,000-a-night hotel rooms, airport limos, luxury suites, and "professional development" trips that doubled as vacations. One teacher stretched a four-day seminar into a weeklong Hawaiian resort stay costing $4,700.

A principal booked a Las Vegas Strip suite for an anniversary celebration and extended the trip without authorization. In another incident, 24 employees from one school spent $50,000 to attend a Las Vegas conference. More than $142,000 was spent on overseas trips to South Africa, Finland, Estonia, and Egypt—complete with hot-air balloon rides and game-park safaris.

The abuses skyrocketed further when federal pandemic funds loosened district budgets. Of the $23.6 million, $14.5 million was spent in 2023 and 2024 alone. These dollars were intended to address severe learning loss after the Chicago Teachers Union forced schools to remain closed for 78 weeks during the pandemic. Instead of supporting students' academic recovery, millions became a travel fund.

That level of waste is why students like me need school choice. When a district spends public money this irresponsibly while failing to educate its students, families deserve the freedom to go elsewhere.

Meanwhile, only two in five CPS students read at grade level, and barely one in four meets math expectations. In some neighborhoods, proficiency falls into the single digits. Nearly 45 percent of students—and more than half of high schoolers—are chronically absent. These figures reflect a district that has walked away from its obligation to prepare young people for the workforce, higher education, and civic life.

Chronic absenteeism and low achievement correlate closely with higher rates of youth crime. Chicago's public-safety challenges cannot be separated from the fact that tens of thousands of teenagers are disconnected from school. No city with these levels of absenteeism and academic collapse can expect improvements in long-term safety.

This pattern of misused funds and misplaced priorities is not limited to Chicago. New York lawmakers continue to steer resources away from academics and toward politically acceptable initiatives. 

In New York's 2025 "People's Budget," Democrats—including Mayor-elect Zohran Mamdani, who was serving in the Assembly at the time—proposed an $8 million initiative to "increase teacher diversity" through new recruitment and training programs. Yet New York City's teaching workforce is already about 42 percent black, nearly double the city's black population share of roughly 22 percent.

The same budget allocates $250,000 for "racial and cultural inclusivity" initiatives, $3 million for an Adirondack exhibit on African American history, and over $350,000 for statewide conventions for "underrepresented" educators.

Meanwhile, NYC public schools serve 154,000 homeless students, and nearly half of the students statewide cannot meet basic reading benchmarks. New York spends more than $39,000 per pupil—the highest amount in the country—yet academic outcomes continue to fall.

If the problem were money, New York would be leading the nation. But this is a crisis of priorities.

Charter schools offer a proven alternative that disrupts the cycle of low achievement and disengagement. Unlike traditional public schools, charter schools provide students with 30 percent to 50 percent more instructional time. This extra time correlates directly with stronger academic performance and higher rates of student engagement.

A study found that entering a North Carolina charter school in ninth grade was associated with a roughly 30 percent reduction in a student's likelihood of committing a crime compared with students in traditional public schools. Research from Milwaukee's voucher program found that students in choice programs were significantly less likely to commit crimes as young adults.

School choice gives students in failing districts an exit ramp. Programs in Florida, Arizona, and North Carolina show that scholarship and charter systems can coexist with public schools and often improve them through competition.

Chicago's waste, New York's misplaced priorities, and the falling academic performance nationwide all point to the same conclusion: Families—not bureaucracies—should decide where and how children are educated."

Apartment rents drop further, with vacancies at record high

By Diana Olick of CNBC. 

• The national median rent for apartments fell 1% in November from October, and now stands at $1,367, according to Apartment List.
• The national multifamily vacancy rate was 7.2% in November, a record high.
• The historic surge in multifamily construction over the past few years is now pulling back, but a good supply of new units is still coming online at a time of much weaker demand.

 

The Billionaire Who Made California Unaffordable

For years, Tom Steyer has used his money to push awful policies on the state. Now, he wants to run it.

By Allysia Finley. Excerpts:

"He and his wealthy liberal friends are also in large part to blame. They’ve pushed destructive climate, tax and regulatory policies that have made the state uninhabitable for most businesses and for people who live paycheck to paycheck."

"In 2010 Mr. Steyer used his hedge-fund fortune . . . to bankroll opposition to a ballot measure (Prop. 23) that would have repealed the state’s climate law AB32, which established a cap-and-tax program and standards for low-carbon fuel and renewable electricity. Prop. 23 failed in no small part thanks to Mr. Steyer’s moneybags."

"Mr. Steyer now laments in his launch video that “we have the second highest electricity rates in the country.”"

"The state’s climate policies that he campaigned for drove energy prices into the stratosphere."

"California’s electricity rates are now about 80% higher than the national average, compared with 25% in 2010. Californians pay about $1.40 more for a gallon of gasoline than the national average, up from a $0.30 premium 15 years ago."

"the state has lost about 30,000 [manufacturing jobs] since 2010, while the U.S. has added roughly 1.2 million." 

 "In 2012 Mr. Steyer championed a ballot initiative that ensured that businesses that fled California could no longer hide from the Sacramento tax man. The referendum requires companies to pay the state’s 8.84% corporate tax based on their share of sales in the state. If 20% of a company’s sales come from California, it has to pay California tax on 20% of its profits."

"The state’s average weekly wages have increased 20.8% since January 2020, compared with 28.6% nationwide." 

Get the Government Out of the GLP-1 Market

Its involvement often leads to distortions and perverse incentives

Letter to The WSJ. 

"Dr. Gilberto de Lima Lopes Jr. is right that the market for medications is imperfect, but it is often government that is the culprit (“The Free Market Alone Won’t Cut GLP-1 Prices,” Letters, Nov. 21).

Oncology, his speciality, is the canonical example of government distortion. In Medicare, cancer medications are often reimbursed through the Part B program. Providers get a percentage of the sales price for administering each drug, so it’s hardly surprising that they tend to prefer expensive treatments. This incentive doesn’t exist in Medicare Advantage, where private plans are responsible for reimbursement and thus more likely to deliver cheaper alternatives.

Other, less-regulated disease areas show better market responses. While prices fall most dramatically with the entry of generics after patent expiration, competition among branded drugs can also push prices lower. We saw this occur for hepatitis C treatments. Meanwhile, we have never seen a market like the one that is developing for antiobesity medications. More than 124 drugs were in clinical trials last year. About 40 million Americans already have used an injectable GLP-1 for weight loss. A cheaper pill is expected soon.

The race for market share is leaving pharmacy benefit managers on the sidelines. Drug companies are discounting to customers purchasing directly, and they’ve made similar agreements with big retailers like Costco. The deal the Trump administration struck with Novo Nordisk and Eli Lilly to sell GLP-1s through a new direct-to-consumer platform, TrumpRx, will result in prices 74% lower than previous list prices.

Price transparency is crucial. Ironically, because insurers were reluctant to cover these high-demand drugs, patients demanded more transparency. This helped drive prices lower. USC Schaeffer research shows better access can provide social returns greater than the S&P 500’s performance this century.

These aren’t artificial or government-forced pricing decisions that harm innovation. On the contrary, suppliers are reacting to an unparalleled opportunity and consumers are profiting. That’s what happens in a competitive market.

Dana P. Goldman

University of Southern California" 

Boosting Demand Won’t Fix Affordability

Washington helps buyers. It should focus on producers.

By David Hebert. He is a senior research fellow with the American Institute for Economic Research. Excerpts:

"The law expanded insurance coverage to millions through subsidies and mandates, dramatically increasing demand for healthcare. However, the ACA did remarkably little to increase the supply."

"healthcare employment has grown at roughly 2% each year both before and after the ACA was passed."

"Freddie Mac estimated that in the fourth quarter of 2020 the U.S. was short 3.8 million housing units."

"The Brookings Institution used the same methodology and estimated the shortage in 2023 to be 4.9 million units."

"For healthcare, this means reforming licensing to increase the number of medical practitioners. It also means reducing the regulatory burdens that make opening clinics difficult." 

Everyone Is Talking About the ‘Affordability Crisis.’ It Can’t Be Solved.

Trump and Mamdani both campaigned on affordability, but the issue is amorphous and poorly defined

By Greg Ip. Excerpts:

"Like the climate crisis or the crisis of democratic legitimacy, the affordability crisis has become an umbrella term for countless loosely connected phenomena."

"Like those other crises, this one defies definition and thus resolution."

"Inflation reached 9% in mid-2022 but was down to 3% in September."

"Real personal income was up 2.3% in the year through August, and real hourly wages climbed 0.8% in the year through September, both in line with the 19-year average."

"Because there is always something going up in price or someone whose incomes are suffering, affordability is an especially potent issue"

"There is nothing any elected official can do to “solve” the affordability crisis reliably."

"For prices merely to stop rising for a year (i.e., an inflation rate of zero), would probably require a deep recession."

"Housing affordability is now slightly below its pre-2008 average, according to the National Association of Realtors, so room for improvement is limited."

"New York isn’t expensive because of public transit. When the fare rises to $3 in January, it will have climbed an average of 1.7% annually over the past decade, below the city’s inflation rate."

"New York rents have gone up a lot recently, while they have stabilized or fallen in other cities thanks to a surge of supply." 

U.S. trade with Canada & Mexico has increased while the U.S. has grown faster

See How to Save Trump’s USMCA: The trade deal with Mexico and Canada works well, but there are problems to fix by Mary Anastasia O’Grady. Excerpts:

"The Business Roundtable, a group of over 200 CEOs, noted that “trade with Canada and Mexico supports 13 million American jobs today.” Since July 2020, “Canada and Mexico have invested $775 billion in the United States and there has been a 50 percent increase in two-way trade, totaling $1.9 trillion in goods and services.” The group pointed out that “all three countries have experienced steady economic growth, but the United States has grown faster than Canada and Mexico.”"

"U.S. producers “export more made-in-America manufactured goods to our North American neighbors than they do to the next 12 largest export markets combined, and the two countries purchase one-third of all U.S. agricultural exports."

"the National Association of Manufacturers called the USMCA “the most pro-U.S. manufacturing trade agreement in history.”"

"Mexico may be the worst offender. The U.S. is its largest export market, but it doesn’t play by the USMCA rules. In energy it discriminates against investors to favor state-owned companies like Pemex and the Federal Electricity Commission. As the American Petroleum Institute told the U.S. trade representative in its comments, Mexico has “violated its commitments in the USMCA persistently and with impunity.” One goal of the USMCA is to raise North American competitiveness worldwide, and to get there the continent needs an integrated energy market."

"trade with the neighbors is making us richer." 

Individuals in more unequal areas do not report lower subjective well-being

See No meta-analytical effect of economic inequality on well-being or mental health by Nicolas Sommet, Adrien A. Fillon, Ocyna Rudmann, Alfredo Rossi Saldanha Cunha & Annahita Ehsan. From Nature.

"Abstract

Exposure to economic inequality is widely thought to erode subjective well-being and mental health^1,2,3,4,5, which carries important societal implications^6,7,8,9,10. However, existing studies face reproducibility issues^11,12,13, and theory suggests that inequality only affects individuals in disadvantaged contexts^14,15,16. Here we present a meta-analysis of 168 studies using multilevel data (11,389,871 participants from 38,335 geographical units) identified across 10 bibliographical databases (2000–2022). Contrary to popular narratives, random-effects models showed that individuals in more unequal areas do not report lower subjective well-being (standardized odds ratio (OR_+0.05) = 0.979, 95% confidence interval = 0.951–1.008). Moreover, although inequality initially seemed to undermine mental health, the publication-bias-corrected association was null (OR_+0.05 = 1.019; 0.990–1.049)¹⁷. Meta-analytical effects were smaller than the smallest effect of interest, and specification curve analyses confirmed these results across ≈95% of 768 alternative models¹⁸. When assessing study quality and certainty of evidence using ROBINS-E and GRADE criteria, ROBINS-E rated 80% of studies at high risk of bias, and GRADE assigned greater certainty to the null effects than to the negative effects. Meta-regressions revealed that the adverse association between inequality and mental health was confined to low-income samples. Moreover, machine-learning analyses¹⁹ indicated that the association with well-being was negative in high-inflation contexts but positive in low-inflation contexts. These moderation effects were replicated using Gallup World Poll data (up to 2 million participants). These findings challenge the view that economic inequality universally harms psychological health and can inform public health policy."

The Soviet men who controlled the country weren’t always so keen on encouraging or even maintaining radical egalitarianism

See The World’s Greatest Feminist Experiment Was Not Where You’d Think: In “Motherland,” the journalist Julia Ioffe charts the Russian campaign to emancipate women — and the country’s failure to live up to that promise by Jennifer Szalai. Excerpt:

"But as “Motherland” also shows, the Soviet men who controlled the country weren’t always so keen on encouraging or even maintaining radical egalitarianism. And when they were intent on so-called equality, it was often to punish women because of their connection to men who happened to run afoul of the Kremlin. In Kazakhstan, the Akmolinsk Camp for Wives of Traitors to the Motherland was just one node in the sprawling network of the Gulag. Children born in captivity were sent to an orphanage where they were sometimes so neglected that they didn’t learn how to speak. One mother compared the sounds such children made to “the muted moans of pigeons.”

Having children, it turned out, would be a consistent obsession of the Soviet regime. Abortion was legalized, then outlawed, then legalized again. Stalin introduced a tax on childlessness. After the demographic disaster of World War II, the new superpower needed an expanding population. Ioffe notes that Stalin’s strategy for development relied mostly on “vast human sacrifice.” Men would make the big political decisions, while women would make more babies: “They would give up their sons for the country, pretend their children were heroes rather than cannon fodder, and when those sons fell in battle, they would have more.”

Alongside this official history, Ioffe traces a private one. One of her great-grandmothers survived a pogrom. Another, the pediatrician, was forced by the secret police to work at a military hospital during World War II. The women in her family would eventually learn that their stellar professional achievements did not mean a break from domestic work.

As the Soviet economy sputtered in the 1970s and ’80s, a dearth of consumer goods also made household tasks infinitely harder. It was impossible to procure disposable diapers or washing machines. (Politburo wives, by stark contrast, had access to special stores filled with otherwise scarce goods at discounted prices.) Women with Ph.D.s and full-time jobs spent their evenings pickling mushrooms and mending clothes. Even basic menstrual products were scarce."

Europe Must Look Inward to Drive Growth, ECB’s Lagarde Says

Its growth model is ‘geared towards a world that is gradually disappearing’

By Paul Hannon of The WSJ. Excerpts:

"Instead of relying on fading external demand, Lagarde said the European Union must quickly lower its internal barriers, which prevent businesses from offering goods and services in other countries without costly efforts to comply with local regulations.

“ECB analysis finds that internal barriers in services and goods markets are equivalent to tariffs of around 100% and 65%, respectively,” Lagarde said." 

"“Reforms such as harmonizing VAT rules or establishing a common consolidated corporate tax base remain stuck because of national vetoes, leaving firms to navigate a maze of fragmented tax regimes,” she said.

Lagarde also advocated for the creation of what are known as “28th regimes”, or legal frameworks that apply across the EU which businesses could choose over national laws."

Parts of Europe at Risk of Downward ‘Spiral’ if Older Voters Stymie Reforms, EBRD Warns

By Paul Hannon of The WSJ. Excerpts:

"the EBRD [European Bank for Reconstruction and Development] concluded that later retirement, higher immigration and the adoption of new technologies to boost productivity could help offset much of the hit to growth from a shrinking working-age population." 

"political support for those measures may be weak in countries where older voters are dominant"

"Fertility rates in most post-Communist countries are below the 2.1 children per woman that would ensure a stable population. In parts of central Europe, the fertility rate is between 1.3 and 1.6 children"

"Fewer workers also mean that the annual growth of gross domestic product per head will be lower on average by 0.4 percentage points through 2050"

"governments should embrace overhauls that increase immigration, extend working lives, restructure pensions and harness technological innovation to boost productivity" 

Is Europe Awakening at Last to Its Economic Peril?

Milder-than-expected regulations, pro-business thinking. Something may be happening in the EU.

By Joseph C. Sternberg. Excerpts:

"on Nov. 13 [the EU] passed a tranche of climate regulations"

"lawmakers greatly reduced the number of European companies that would face onerous new reporting requirements by increasing the company-size thresholds at which the rules kick in."

"the European Commission (the European Union’s bureaucratic arm) proposed a weakening of Europe’s digital regulations. The goal is to make the Continent safe-ish for artificial intelligence—and for American tech companies."

"more permissive approach to regulating new AI technology."

"Ms. von der Leyen and other leaders are starting to demonstrate a capacity for self-reflection and reform"

"The steady productivity convergence with the U.S. that marked the decades after 1945 stopped around 1990 when European output per capita was 80% of America’s. Since then Europe has been drifting backward in relative terms, with per-capita output these days around 70% of the U.S."

"Taxes across the Continent are far too high to be consistent with investment and job creation."

"an impassioned plea for a looser regulatory approach to new technologies, less hostility to successful companies and financial reforms to let Europe funnel more capital toward its own entrepreneurs."

"Mr. Draghi’s warning that if Europe does not deregulate, it will not prosper."

"last year’s Continent-wide election for that body [European Parliament]. The result was a majority for parties of the political right" 

"Europeans will have to abandon the safetyism that created their regulatory morass and the magical thinking that spawned their net-zero climate policies." 

Bans on Artificial Food Dyes are Unjust

By Chris Freiman.

"Artificial food dyes have been garnering a surprising amount of attention over the last few months. The FDA recently banned Red No. 3 due to concerns about the product’s safety. Now a number of states are making a push to prohibit even more artificial food dyes. These bans are defended on the grounds that artificial dyes pose health risks, add nothing of nutritional value, and serve only to make food and drinks more visually appealing. So why not prohibit them? It seems like a ban would be all benefit and no cost.

Let’s assume, at least for the sake of argument, that the above concerns are justified; even so, we shouldn’t ban artificial food dyes. The reason is simple: people have the right to decide for themselves whether they have good reason to accept risks to their own health. Suppose, as some claim, that the bans on artificial dyes would make the relevant products more expensive. For instance, the National Confectioners Association suggests that they “will make food significantly more expensive for, and significantly less accessible to, people in the states that pass them.” Someone should be free to buy and consume riskier food to save money given that people generally have the right to take health risks for financial reasons. Jane is free to quit her desk job to start work on a commercial fishing vessel for a trivial increase in salary even though commercial fishing is a lot riskier than working from an office. Similarly, someone should be free to consume products with artificial dyes to save money if they prioritize savings over safety.

Now, the claim that the artificial dye bans will make food more expensive is contested. So let’s suppose it’s false and prices won’t change at all. Maybe the only reason why these dyes are used is to make food and drinks more aesthetically appealing. Still, people have the right to take risks for purely aesthetic reasons. Imagine you’re at a car dealership choosing between a gray car and a red car. They’re the same price, but the red car has fewer safety features than the gray one. However, you simply prefer red and so you buy the red car. Maybe that’s an unwise choice, but it’s yours to make. Or suppose you’ve got a headache and you’re choosing between two pain relievers. The red pill carries greater risks than the gray pill. But here again, you simply prefer red to gray, and so you opt for the riskier pill. Few would dispute that you should be free to make this choice.

The right to make decisions regarding your own health is grounded in the right of bodily autonomy, which is sometimes summarized as “your body, your choice.” Since it’s your body, you have the right to take risks with it. You can undergo risky surgeries, climb Mount Everest, or simply refuse to take needed medication. Think of it this way: if the Picasso painting is yours, you have the right to play Frisbee with it. This risks harming the painting, but it would be wrong for others to forcibly stop you. Similarly, maybe consuming artificial food dyes is risky and unwise, but you’re taking the risk with your own body. So, it would be wrong for others to forcibly prevent you from consuming them.

Lastly, consider that the state doesn’t ban substances that are far more harmful than artificial food dyes, such as cigarettes. This is strange—it’s analogous to the state making it illegal to stub your toe to ensure that you’re taking care of your health, while at the same time legalizing dueling. If we’re unwilling to ban products that are more harmful than artificial food dyes, we shouldn’t be willing to ban artificial food dyes either."

Your Fridge Is Bigger and Cheaper Today, Thanks to Global Trade and Innovation

By Jeremy Horpedahl.

"In the summer of 2024, a passage from J.D. Vance’s memoir Hillbilly Elegy gained widespread attention on social media platforms, including X/​Twitter. Vance described his refrigerator from the 1980s, asserting that it preserved lettuce for weeks beyond the capabilities of contemporary models.

This was not just an offhanded comment by Vance, as he also said his takeaway from this anecdote is that “economics is fake.” By “fake,” he means that “we became less good at manufacturing in this country, too focused on low cost and not on durability.” While Vance’s comment was in the context of antitrust policy and consumer choice, we can also interpret this within Vance and Trump’s broader policy agenda, which views international trade as, in many cases, a net harm to the US—including, in this case, for consumers (not just the alleged loss of manufacturing jobs). 

As we shall see, major appliances such as refrigerators have gotten both bigger and cheaper, though Vance would claim they are inferior in some other way (not preserving food as long).

It is certainly true that imports of major appliances now account for a significantly larger share of US consumption than they did in the early 1980s. A report from the US International Trade Commission in 1989 (see Table 3–13) shows that in the early 1980s, imports of major household appliances were less than 10 percent of sales (by both volume and value). This began to climb throughout the 1980s, and today, over half of large appliances (which include refrigerators) sold in the US are imported. As we will see, this period of increasing imports of refrigerators and other large appliances has been marked by higher affordability, larger sizes, and greater efficiency.

Affordability: A Dramatic Decline in Real Costs

A fundamental economic principle in assessing “value” is opportunity cost, the labor or resources forgone to acquire a good. Nostalgic accounts often overlook how prohibitively expensive appliances were, both in absolute and relative terms, during the 1980s.

Consider a premium Sears Kenmore side-by-side refrigerator-freezer from 1984, offering 25.7 cubic feet of capacity with in-door water and ice dispensers. Its list price was $1,359.99. Adjusted for inflation to 2024 dollars, this equates to approximately $3,900. Yet inflation alone understates the burden; we must account for prevailing wages to gauge accessibility.

In 1984, the average hourly earnings for production and nonsupervisory workers (representing about 80 percent of the private workforce) stood at roughly $8.32. Acquiring the Kenmore would thus require approximately 163 hours of labor, equivalent to more than three full workweeks.

By contrast, a comparable 2024 model from a major retailer like Home Depot—matching size and features—retailed for $998 in nominal terms in 2024, when I last checked it, a direct reduction without inflation adjustment. With average hourly earnings in 2024 at about $29.85 for the same worker category, the labor investment drops to around 33 hours. In relative terms, refrigerators have become nearly five times more affordable, reflecting efficiencies from global supply chains, automation, and competition.

Interestingly, that fridge has increased in price sharply since 2024, almost certainly in part because of trade policy, and is currently listed at $1,658—even so, it is still much cheaper when measured in time prices, requiring just 53 hours of labor, compared with 163 hours in 1984 (and you can probably find a Black Friday deal on it too).

And while I made an apples-to-apples comparison of fridges in 1984 and 2024, today’s models are generally much bigger. According to the Association of Home Appliance Manufacturers, the average fridge size in 1980 was 19.6 cubic feet, and it had grown over 30 percent to 25.8 cubic feet in 2021—the same size as I used in the comparison. Indeed, in the 1984 Sears catalog, the largest unit offered was 25.7 cubic feet. Today, you can find models that are over 30 cubic feet.

Energy Efficiency: Quantifiable Gains in Operating Costs

Beyond upfront costs, the total cost of ownership includes ongoing expenses, particularly energy use—a factor amplified by refrigerators’ constant operation. Here, the divergence between eras is stark, driven by regulatory standards and engineering innovations.

A typical 1984 Sears model consumed an estimated 1,415 kilowatt-hours (kWh) annually, according to the catalog listing. At the national average residential electricity rate of 8.2 cents per kWh that year, this translated to about $116 in yearly operating costs. Scaled to 2024 rates of approximately 17.6 cents per kWh, the same unit would cost $233—doubling the expense and straining modern budgets.

Contemporary refrigerators, however, have achieved marked efficiency improvements through advanced insulation, variable-speed compressors, and, to some extent, government regulations. A similar 2024 model uses roughly 647 kWh per year—less than half the energy of its predecessor. At current rates, annual costs fall to about $118, yielding savings of over $115 compared to running a vintage unit.

Appliance Longevity: Myth Versus Empirical Evidence

A common rebuttal to modernization critiques is that newer refrigerators fail prematurely, eroding long-term value. While individual experiences vary, aggregate data from the EIA’s Residential Energy Consumption Survey (RECS) challenge this narrative.

The 1990 RECS, the earliest with granular appliance age data, reported that 8.4% of households had a primary refrigerator over 20 years old, with 38.2% exceeding 10 years. By the 2020 RECS, these figures were 5.5% and 35.1%, respectively. These declines in longevity are much more modest than the anecdotes about old fridges in your grandparents’ garages. Hard data from the industry don’t go back to the 1980s, but when the New York Times talked to those who worked in the industry, many said things like “appliances made three or four decades ago lasted only 10 to 15 years [on average].” And, the Times grudgingly acknowledges, some of the small decline in longevity can be blamed on “federal regulations for water and energy efficiency for most frustrations with modern appliances,” which result in substituting cheaper parts. So, perhaps not all of the efficiency gains are driven by consumer demand, but they should still be considered in the overall calculation. And the substitution for cheaper parts could partially be due to another factor: tariffs. As tariffs on metals used in appliances make domestic parts more expensive, some manufacturers may switch to plastic components.

While the longevity of appliances hasn’t increased in recent decades, it has also not fallen dramatically, which is offset by the gains in affordability and efficiency. These three trends are summarized in Figure 1.

 

Reflections and Broader Implications

Vance’s anecdote may resonate with many Americans, but we need to examine the hard data before succumbing to economic nostalgia. Since 1984, median nominal wages have increased by about 250 percent, while quality-adjusted appliance prices have fallen, as shown in Figure 2.

 

The quality-adjusted appliance price index comes from the Bureau of Economic Analysis, though as we have seen earlier in this post, even without quality adjustments, appliances are cheaper in nominal terms. I can’t say whether the quality adjustment takes into account Vance’s claim that his fridge makes lettuce last longer, but given that lettuce and almost all other grocery items are more affordable than they were in the early 1980s, we can safely celebrate the fact that refrigerators are dramatically more affordable today.

When Americans think about their refrigerator and other appliances, they shouldn’t think, “Economics is fake.” Instead, they should recognize that this is one area of their consumption that has become more affordable, thanks to globalization and other competitive forces, whereas housing, healthcare, and education have become less affordable. And while those services are an important part of the typical household budget, the story of increasing affordability for refrigerators is in no way unique for goods produced under a free market economy. Despite claims of economic stagnation since the 1970s, Marian Tupy has shown that finished goods have become increasingly abundant relative to wages since 1971.

While the long-term trends in the affordability of finished goods are favorable for consumers, there is one recent factor pushing in the opposite direction: tariffs. For example, a paper published in the American Economic Review showed that the 2018 tariffs on washing machines increased prices by about 12 percent. And while Figure 2 above showed increasing affordability of appliance prices, if we zoom in on the most recent years, the trends have started shifting in the wrong direction again after the much broader 2025 tariffs were imposed. Figure 3 shows that, after rising in tandem with almost everything else during the pandemic, appliance prices began to fall in 2022 and continued to decline through 2024, but then reversed in 2025. While the increase since March 2025 (before the biggest tariff announcements) has been somewhat small, it would have been much larger if we had expected the pre-2025 trend to continue."

 

Did California's Carbon Cap and Trade Program Increase Toxic Waste?

By Jeffrey Miron.

"Apparently, yes:

In California, recent evidence shows that facilities subject to cap-and-trade have reduced their greenhouse gas emissions by 3–9 percent. Our findings, however, reveal that toxic emissions from facilities subject to cap-and-trade policies were about 26–42 percent higher on average in the five years after the introduction of the program than they would have been otherwise.

Why? Treating toxic waste is a substantial source of greenhouse gas emissions; hence, increasing the cost of greenhouse gas emissions also makes treating toxic waste more expensive. As a result, cap-and-trade has inadvertently prompted firms to strategically cut back on their efforts to treat toxic waste, causing them to release more of it.

These results do not, by themselves, mean the cap and trade program was a mistake; that depends on the magnitude of the harms from carbon emissions versus those from toxic waste.

The example nevertheless illustrates that reducing environmental harms can be difficult; reducing one kind can increase another, since most productive activities generate a range of externalities."

Race and economic well-being in the United States

From Tyler Cowen.

"We construct a measure of consumption-equivalent welfare for Black and White Americans, which incorporates life expectancy, consumption, leisure, and inequality. Based on these factors, welfare for Black Americans was 40 percent of that for White Americans in 1984 and 59 percent by 2022. There has been remarkable progress for Black Americans: The level of their consumption-equivalent welfare increased by a factor of 3.5 over the last 38 years when aggregate consumption per person only doubled. Despite this progress, the welfare gap in 2022 remains disconcertingly large at 41 percent, much larger than the 16 percent gap in consumption per person.

That is from a new article by Jean-Félix Brouillette, Charles I. Jones, and Peter J. Klenow, just published in American Economic Journal: Insights."

It states that black "consumption-equivalent welfare increased by a factor of 3.5 over the last 38 year." It also states that it "40 percent of that for White Americans in 1984." 

So then I will assume that blacks in 1984 had a score of 40 and whites had a score of 100. But it is now (in 2022) 3.5 times higher for blacks. That would give them a score of 140, which is 40% higher than what whites had in 1984. That sounds pretty good because I have never heard anyone say that whites were suffering terribly in 1984. 

 

The Pilgrims’ Real Thanksgiving Lesson

By Benjamin Powell of Texas Tech University.

"Feast and football. That’s what many of us think about at Thanksgiving. Most people identify the origin of the holiday with the Pilgrims’ first bountiful harvest. But few understand how the Pilgrims actually solved their chronic food shortages.

Many people believe that after suffering through a severe winter, the Pilgrims’ food shortages were resolved the following spring when the Native Americans taught them to plant corn and a Thanksgiving celebration resulted. In fact, the pilgrims continued to face chronic food shortages for three years until the harvest of 1623. Bad weather or lack of farming knowledge did not cause the pilgrims’ shortages. Bad economic incentives did.

In 1620 Plymouth Plantation was founded with a system of communal property rights. Food and supplies were held in common and then distributed based on “equality” and “need” as determined by Plantation officials. People received the same rations whether or not they contributed to producing the food, and residents were forbidden from producing their own food. Governor William Bradford, in his 1647 history, Of Plymouth Plantation, wrote that this system “was found to breed much confusion and discontent and retard much employment that would have been to their benefit and comfort.” The problem was that “young men, that were most able and fit for labour, did repine that they should spend their time and strength to work for other men’s wives and children without any recompense.” Because of the poor incentives, little food was produced.

Faced with potential starvation in the spring of 1623, the colony decided to implement a new economic system. Every family was assigned a private parcel of land. They could then keep all they grew for themselves, but now they alone were responsible for feeding themselves. While not a complete private property system, the move away from communal ownership had dramatic results.

This change, Bradford wrote, “had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been.” Giving people economic incentives changed their behavior. Once the new system of property rights was in place, “the women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability.”

Once the Pilgrims in the Plymouth Plantation abandoned their communal economic system and adopted one with greater individual property rights, they never again faced the starvation and food shortages of the first three years. It was only after allowing greater property rights that they could feast without worrying that famine was just around the corner.

We are direct beneficiaries of the economics lesson the Pilgrims learned in 1623. Today we have a much better developed and well-defined set of property rights. Our economic system offers incentives for us—in the form of prices and profits—to coordinate our individual behavior for the mutual benefit of all; even those we may not personally know.

It is customary in many families to “give thanks to the hands that prepared this feast” during the Thanksgiving dinner blessing. Perhaps we should also be thankful for the millions of other hands that helped get the dinner to the table: the grocer who sold us the turkey, the truck driver who delivered it to the store, and the farmer who raised it all contributed to our Thanksgiving dinner because our economic system rewards them. That’s the real lesson of Thanksgiving. The economic incentives provided by private competitive markets where people are left free to make their own choices make bountiful feasts possible."

The Poverty Line is Not $140,000

By Jeremy Horpedahl.

A recent essay by Michael W. Green makes a very bold claim that the poverty line should not be where it is currently set — about $31,200 for a family of four — but should be much higher. He suggests somewhere around $140,000. The essay was originally posted on his Substack, but has now gone somewhat viral and has been reposted at the Free Press. (Note: that actual poverty threshold for a family of four with two kids is $31,812 — a minor difference from Mr. Green’s figure, so not worth dwelling on much, but this is a constant frustration in his essay: he rarely tells us where his numbers come from.)

I think there are at least three major errors Mr. Green makes in the essay:

1. He drastically underestimates how much income American families have.
2. He drastically overstates how much spending is necessary to support a family, because he uses average spending figures and treats them as minimum amounts.
3. He obsesses over the Official Poverty Measure, since it was originally based on the cost of food in the 1960s, and ignores that Census already has a new poverty measure which takes into account food, shelter, clothing, and utility costs: the Supplement Poverty Measure.

I won’t go into great detail about the Official Poverty Measure, as I would recommend you read Scott Winship on this topic. Needless to say, today the OPM (or some multiple of it) is primarily used today for anti-poverty program qualification, not to actually measure how well families are doing today. If we really bumped the Poverty Line about to $140,000, tons of Americans would now qualify for things like Medicaid, SNAP, and federal housing assistance. Does Mr. Green really want 2/3 of Americans to qualify for these programs? I doubt it. Instead, he seems to be interested in measuring how well-off American families are today. So am I.

Let’s dive into the numbers.

1. Measuring Income

Mr. Green’s essay is about income and spending. He mentions income 26 times in the essay. But he never (so far as I can tell) links to any measure of income. The only hard number he references from any data source is median household income, which he mentions several times as $80,000 (note: again this number isn’t quite right: it was $83,730 in 2024). But median household income probably isn’t the best number for his analysis. Households include people living alone, elderly couples, and various non-family structures. His essay primarily focuses on a “family of four (two earners, two kids),” and we have some measures of income that come more closely to approximating this type of family. And they are all much greater than $80,000.

For example, a very readily available number he could have used is median family income, which was a much higher $105,800 in 2024. But that’s all families, regardless of whether they have kids or how many earners they have. For married couples with children (regardless of number of earners), it is a much higher figure: $132,959 in 2024. For families with two earners, median income is even higher: $142,200 in 2024. I can’t find in the publicly calculated Census tables a number for married-couple-dual-earner families with children, but it would likely be in this ~$140,000 range if not higher.

So already we can see that ~$140,000 is not some mythical number that is unattainable by American families. For the type of family Mr. Green is interested in, half of the families are already at this income level. True, that does mean that half are also below it, but the $80,000 figure he keeps using as a baseline isn’t anywhere near the right number. When he says things like “If one parent stays home, the income drops to $40,000 or $50,000” (from the supposed $80,000 baseline), he is drastically understating the financial situation of a typical family.

Again, Mr. Green: “To reach the median household income of $80,000, most families require two earners.” No. The median income for a male that works full-time in the US was $75,440 in 2024. So many narratives about American decline claim that one male income isn’t enough to get by these days. But remember any time you see that median household income figure, this is basically what the median male earns, not what a dual-income family earns. For the median female working full-time, median income is $61,020. If the median male and female full-time worker are married, they earn $136,460 (just adding those two medians together), once again, right in the range that Mr. Green thinks is necessary to support a family of four.

Mr. Green has understated typical family income by something like 70 percent. Knowing this fact alone would, I think, cause him to reconsider his entire essay. But it’s worse than that: he also overstates the amount of spending required to support a family!

2. Family Spending

Mr. Green uses what he calls “conservative, national-average data” to construct a “Basic Needs budget” for our family of four. He lists spending data for childcare, housing, food, transportation, healthcare, and “other essentials” (undefined, but actually his third largest category), then throws in an income tax estimate, to get to a figure of $136,500 as the Basic Needs budget (he also then just refers to this number as $140,000 throughout most of the rest of the essay).

Again, he lists no sources for any of these numbers. I could probably track most of them down, but that would actually miss the main error he makes: he is using average spending levels as minimum spending levels needed to support a family. But the average spending levels probably represent a lot of spending that is not necessary to support a family, but is merely a reflection of how wealthy we are today!

Take food spending. The essay says the family needs to spend $14,717 on food as a minimum. This number probably comes from the Consumer Expenditure Survey, which shows a family of four spent $14,325 on food in 2023, and maybe adjusted it up by food inflation since then. But that’s how much a family actually spent, which will include, for example, at least some discretionary dining out experiences: groceries are just 60% of this total!

What’s a better number? Thankfully, the USDA puts out regular estimates of the cost of a “thrifty food plan,” and their reference family is two adults with two kids. Perfect for our purposes. Unfortunately, in 2021 the Biden administration increased the cost of this thrifty food plan by about 21% — that is, above the cost of food inflation — so I’m not totally confident in this number anymore. Nonetheless, the figure can be useful: USDA says it is currently $1,002.20 per month, or about $12,000 per year, for our family of four. Prior to the Biden revision, the figure was $687.40 per month in May 2021, which if we adjust for grocery inflation since then comes to $850 per month or about $10,200 per year.

So $10,000-$12,000 per year is probably a better number, rather than almost $15,000 in Green’s essay. You might say this is only a few thousand dollars, but notice he is overstating food costs by 22-47 percent! If all of the costs are being overstated by 1/3 or so, it no longer takes $118,000 of post-tax income to support the family, but closer to $90,000, already putting us well below median family income.

Are all of the costs as overstated as the food costs? I won’t dive into each category. I can’t even begin to dive into the big $22,000 “other essentials” category, because we don’t know what it is! But let’s talk about housing for a moment. He puts that annual housing costs at $23,267, or $1,938 per month. Is it possible to house a family of four for less than that?

Again, clearly it is. First, we can note that median gross rent in the US was $1,487 in 2024. Of course, most Americans aren’t renters, but rent is a useful figure to use because it generally resets annually at market rates (whereas homeowners are somewhat insulated, so averages including long-term homeowners aren’t especially useful), and we don’t need to add in things like property taxes or maintenance. The rent already reflects those. If that number is reasonable, then housing costs have been overstated by 30 percent.

Can a family of four house themselves for under $1,500 per month? Probably not in NYC. Probably not in LA. But if we look in Chicago, the central city of America’s third largest MSA, we see almost 200 homes for rent that are at least 3 bedrooms and under $1,500. If we look in Dallas-Fort Worth (without going to the outer suburbs), America’s fourth largest MSA, we can find there are currently 350 homes for rent under $1,500 with at least 3 bedrooms on Zillow.

Are all of these rentals perfect? No. Is Zillow a comprehensive listing of rentals? Also, no. So the fact that there are currently hundreds of rentals available in two of America’s largest metro areas that could house a four-person family for less than $1,500, clearly the $1,900 figure is too high (if we expand the search filter to $1,900, we get 760 rentals in Chicago and whopping 2,000 rentals in DFW). The housing figure is probably also 30-40% overstated.

Before leaving the discussion of housing prices, I should emphasize that I am not trying to minimize the housing affordability question. As I have written about numerous times in the past, housing has become much less affordable in recent years. But at the same time, we need not overstate how much it costs. You can certainly pay $2,000 per month if you want, but in most of America you could house a family of four for much less than that.

One final cost I will discuss is childcare. I won’t quibble too much with the number he uses, about $16,000 per child per year, other than to say that childcare costs vary significantly by state, and only a handful of states have an average of $16,000 or more. But the most important thing about childcare costs is that these are temporary costs, thank goodness. Most kids will only be in full-time daycare for a maximum of 5 years, so for a 2-child household this is 10 years of full-time daycare costs, or about $160,000 total over the kids’ younger years.

A median-income female makes that much income in just three calendar years. It doesn’t make sense to put $32,773 into the permanent basic needs budget of a 2-child family, since it is a temporary expense. And it’s also wrong to say, as Green does, that the “second earner is working to pay the stranger watching their children so they can go to work and clear $1-2K extra a month.” The median female is making double the cost of daycare — and yes, while she pays taxes, there are also tax credits. And they are only bearing that full cost for 5 full calendar years, compared with a working career of perhaps 40 years of the second earner’s salary. I’m not saying everyone should choose daycare and two earners! But as with housing, Mr. Green is radically overstating the full impact of this choice on the household budget.

3. Other Poverty Thresholds Exist

Finally, Mr. Green seems to take a lot of issue with the Official Poverty Measure. He is certainly not the first person. Again, read Winship’s essay on this topic for more on the history of this measure. But since Mr. Green is not the first to complain about the OPM, it will not surprise you to learn that there are many alternative measures of poverty that have been developed over the years. A very well-known one, also produced by the Census Bureau, and even included in all of the same reports as the OPM is a newer measure called the Supplemental Poverty Measure.

The SPM overcomes most of the criticisms of the OPM. First, it is not merely linked to a historical cost of food. It is based on, and annually updated with, a budget that includes all of the essential spending categories: food, but also housing, clothing, and utilities. True, it does not include healthcare and childcare, but a low-income family will almost certainly qualify for government healthcare, and a low-income family in the range of these thresholds (as we will see) likely has one primary earner (if they are in the middle of the distribution).

Another way that the SPM is better than the OPM is that it has those housing costs vary by geographic area, unlike the OPM which is a single number for the entire nation (technically, Alaska and Hawaii have different thresholds, but they aren’t radically different). This does mean that for the SPM we can not state one single number for the nation, which makes sense! But it is problematic for this kind of essay. Are the SPMs generally close to the OPM of about $32,000 for a family of four? Or closer to Mr. Green’s $140,000?

The answer is they are much closer to the OPM than Mr. Green’s figures. For research purposes, BLS has created a representative national number for a family of four under the SPM: it’s about $40,000 for renters and homeowners with mortgages. Of course, the nice thing about the SPM is that it takes account of different housing costs, so these numbers vary by location. But the highest is in the San Jose MSA, at almost $60,000 for renters. The NYC MSA is $45,000. Chicago is just $40,000. Little Rock, Arkansas, the MSA that I live in, is $35,000. All of these are higher — in some cases much higher — than the national Official Poverty Measure, however none of them are anywhere near $140,000!

Are the SPM thresholds to be believed? Can you really live in San Jose for $60,000 per year? It would be hard, and you would certainly be living in poverty. But I have no doubt you can find some families in that MSA living on that little. It is a challenging financial situation. It is probably exactly what you think of when you hear the word poverty. But it is not impossible.

Minimum wage in San Jose is about $18/hour, so two workers working not quite full time would hit about $60,000. Average rent there is about $3,000, which would be hard to afford on $60K — it’s half of your income! But keep in mind that the average rent is not something that everyone pays. According to the Harvard’s Joint Center for Housing Studies, 45 percent of renters in the San Jose MSA are “cost burdened,” meaning they spent at least 30 percent of their income on housing costs (JCHS says median housing costs for renters, including utilities, are about $2,600 per month). That’s a very high number. But people are doing it right now, and it is probably accurate to describe these folks as living in poverty. However, this is a far cry from $140,000, which even in San Jose would mean less than one-quarter of your pre-tax income is going to housing, well below the “cost burden threshold” and rules-of-thumb about housing budgets.

I’ve gone into a bit of detail on San Jose, but keep in mind this is the most expensive MSA in the country. Even there $140,000 is a decent income, enough to get by. But by drilling too deeply into the most expensive MSA, we miss the forest of the rest of the country: in most of the nation, $140,000 is a very high income, but also an income that can very comfortably support a family. Perhaps not in the early years, when you face those high childcare costs, when you are trying to save for that first home, when you have not yet hit your peak earning years. Yes, life can be hard!

But it’s ridiculous to use $140,000 as a poverty measure. And there is no need to reinvent the poverty wheel: Census has already done so with the SPM, overcoming almost every objection to the OPM. Using the more realistic SPM does increase the poverty rate, from 10.6% all the way up to 12.9% in 2024. But it gets you nowhere near the 2/3 of families that Mr. Green identifies as being in poverty.

Finally, perhaps the SPM isn’t a perfect measure of poverty either! Researchers continue to come up with new methods, as in this 128-page summary report from the Interagency Technical Working Group on
Evaluating Alternative Measures of Poverty from 2021. Perhaps some day we will have an even better measure than the SPM (one of the recommendations from the working group is to account for healthcare costs), but if we do get such as measure it will be based on carefully calculating how much income is needed to support a family, not wildly adding together overinflation national spending averages."

The effects of unemployment benefit duration

What happened to the US labor market after the Emergency Unemployment Compensation Act expired after the Great Recession?

By Tyler Smith of The AEA. 

"In December 2013, when Congress failed to reauthorize the Emergency Unemployment Compensation Act, many prominent economists predicted a substantial decline in employment and labor force participation.  

In a paper in the American Economic Journal: Macroeconomics, authors Marcus Hagedorn, Iourii Manovskii, and Kurt Mitman show, to the contrary, that this abrupt end to unemployment benefits actually led to a surge in employment and labor force growth, especially in states with larger cuts in benefit duration.

The sudden termination of federal support for unemployment benefits and its variation across states provided an ideal natural experiment for understanding the relationship between these benefits and the labor market.

Figure 1 from the authors’ paper shows the reform's impact through two panels tracking employment-to-population ratios and labor force participation rates. The dashed vertical line indicates the expiration of the Emergency Unemployment Compensation Act.

 

The chart displays the difference between states that had high benefits and low benefits before the reform, normalized to zero in the fourth quarter of 2013. Prior to the reform, both panels show a steady downward trend, indicating that high-benefit states experienced persistently deteriorating labor markets relative to low-benefit states.

In 2014, the downward trend abruptly changed direction. Employment in previously high-benefit states surged by 0.008 points relative to low-benefit states within a year, completely reversing the multi-year decline. Labor force participation in generous states also recovered, rising by nearly 0.005 points relative to less generous states. This sharp discontinuity at precisely the moment of the policy change, along with the absence of other major changes in the policy environment, provides strong evidence that the benefit cut drove the employment recovery.

The researchers estimate that a 1 percent reduction in benefit duration increased employment by 0.02 log points after four quarters. Nationally, this translated to 2.5 million additional employed Americans by late 2014, accounting for 75 percent of that year's employment growth.

The findings suggest that while unemployment insurance provides crucial support during economic downturns, extended benefits may delay full recoveries.

♦

“The Impact of Unemployment Benefit Extensions on Employment: The 2014 Employment Miracle?” appears in the October 2025 issue of the American Economic Journal: Macroeconomics."