Dean Baker's Blog, page 46

Explaining Things Which Are Not There: The Weak Wage Growth Conundrum

The Wall Street Journal had a piece last week that purported to explain why wage growth remains weak. The explanation is that people are more reluctant to switch jobs than they had been in the past.

While this is a concern (I have often noted the surprisingly low quit rate, given an unemployment rate of less than 4.0 percent), real wage growth is roughly where we might expect given the extraordinarily low productivity growth of recent years. The real average hourly wage has risen a bit more than 1.1 pe...

Elizabeth Warren Goes for the Big Bucks on Prescription Drugs

Margot Sanger-Katz has a very useful Upshot piece on Elizabeth Warren's transition plan for Medicare for All, highlighting steps that the president can take unilaterally. The piece mentioned that one of these proposals is to take advantage of current law, which allows the government to effectively end patent monopolies on drugs that it helped to develop.

This is a really huge deal since the vast majority of drugs do include a government research component. Ending a patent monopoly will typically reduce th...

Making Andrew Yang Smarter

The New York Times ran a column by Andrew Yang, one of the candidates for the Democratic presidential nomination. Mr. Yang used the piece to repeat his claim that automation is leading to massive job loss.

His one piece of evidence is a study that purports to find that 88 percent of job loss between 2000 and 2010 was due to automation. As I and others have pointed out, it is difficult to take this claim seriously. This was a period in which the trade deficit exploded from 3.0 percent of GDP to almost 6....

Impeachment Is a Kitchen Table Issue

(This post originally appeared on my Patreon page.)

As the Democrats have pushed ahead with impeachment proceedings, there have been criticisms from both the right and left that impeachment is a needless distraction from the pocketbook issues that people really care about. The argument is that people will see the Democrats as playing political games rather than focusing on health care, jobs, wages, and other issues that directly affect people’s lives.

This sort of argument ignores the world we now live i...

The Logic of Medical Co-Payments

Aaron Carroll had a very useful NYT Upshot piece highlighting research showing that even modest co-payments discourage people from getting necessary medical care. The article is about co-payments for prescription drugs where it highlights research showing that people will often skip taking prescribed drugs to avoid co-payments. There are a couple of points worth making about co-payments in this context and more generally.

First, if a drug has been prescribed for a patient, then it is the judgement of a medi...

Declining Labor Shares of GDP Are Not the Story of Inequality

It is a popular theme in news reporting that there has been a sharp decline in the labor share of income over the last four decades, and that this is a big part of the story of wage stagnation. The data don't quite agree.

Part of the confusion is that people often look at the labor share of GDP, a measure which includes depreciation of capital equipment. Since the depreciation share of GDP (the amount of spending needed to replace worn out or obsolete capital) has risen, that would definitionally lead to a fal...

Most Obvious Avoidance of Wealth Tax: Renounce Citizenship

It is a bit bizarre that in the various discussions of a wealth tax no one mentions the most obvious way that rich people can avoid paying: renounce their U.S. citizenship. This would make them completely exempt from a U.S. wealth tax.

While Warren's proposal, and presumably Sanders' as well, would include a steep exit tax on the wealth of people renouncing their citizenship, this would only apply after the tax is in place. While there is little reason to believe that most billionaires are especially bright, it un...

If Corporations Are Being Run to Maximize Returns to Shareholders, Why are Returns So Low?

(This post originally appeared on my Patreon page.)

This summer, the Business Roundtable, a group that includes most of the country’s largest corporations, made big news. It issued a statement that its members would no longer be concerned exclusively with maximizing returns to shareholders. Instead, Roundtable members would take into account the well-being of their workers, the communities in which they do business, and the environment.

This statement was given a mixed reception. While some applauded the idea...

Steven Rattner's Rant Against Warren

The New York Times gives Steven Rattner the opportunity to push stale economic bromides in columns on a regular basis. His column today goes after Senator Elizabeth Warren.

He begins by telling us that Warren's plan for financing a Medicare for All program is "yet more evidence that a Warren presidency a terrifying prospect." He goes on to warn us:

"She would turn America’s uniquely successful public-private relationship into a dirigiste, European-style system. If you want to live in France (economically), Elizabet...

The United States Is the World's Second Largest Economy: When It Comes to Climate Change, It Matters

The New York Times has an article on the Trump administration's decision to pull the United States out of the Paris Agreement on climate change. The first sentence wrongly describes the United States as "the world's largest economy." Actually China passed the United States as the world's largest economy early in the decade. According to the I.M.F. its economy is now more than 25 percent larger than the U.S. economy. It is projected to be more than 50 percent larger by 2024.

This matters because China actually...