Friday, April 3, 2015

Update on self-employment and total employment

Again the headlines (today: "below expectations") are different from the totals including self-employment. Below uses the same methodology I displayed last month.

Monday, March 30, 2015

Burtless: Two Economic Mistakes in One Sentence

Brookings' Gary Burtless writes

It seems odd that critics of the ACA emphasize the potentially adverse impacts of the law on workers forced to accept part-time jobs but fail to notice that their logic suggests more workers in total must be employed.

Dr. Burtless should have read my book, or some of the labor economics literature dealing with part-time work cited therein, to see why he has the economic logic backwards, and in fact nothing here is "odd."

My revised edition (to be published by University of Chicago Press), has the clearest explanation:

A conventional wisdom [e.g., Burtless quote] says that employment rates increase to “compensate” for work hours lost from taxes on full-time schedules. Under this view, more people working 29 hours rather than, say, 35, would mean that employers simply have to hire more or keep workers on the payroll longer in order to accomplish the tasks necessary to conduct their business. The conventional wisdom fails in two ways. ...full-time employment taxes can be avoided by reducing employment and increasing hours per employee. My conservative estimates suggest that this case will be far more prevalent than the twenty-niner situation: the ACA will reduce the nationwide weekly employment rate by 3 percent below what it would have been without the ACA.

...Moreover, even if full-time employment taxes were avoided by reducing weekly work hours, there would not be a commensurate increase in the employment rate because weekly hours would not be reduced for normal business or personal reasons, but rather to avoid penalties and implicit taxes. The penalties and implicit taxes make the business of an employer more expensive, or being an employee less rewarding, even in those cases when people avoid the new tax by adjusting their employment conditions rather than writing a check to the federal treasury. Some employers may go out of business, or never start their businesses in the first place, because of the extra cost of the tax (or the costs of adjustments needed to avoid the tax) or because of the additional costs (e.g., higher wages) needed to attract workers to positions that render them ineligible for exchange subsidies. The net result is that the labor market will involve fewer total hours, and that higher employment rates, if any, will not be enough to compensate for the reduced hours per week. This economic reasoning has been confirmed by empirical studies of previous public policies that raised the relative employer cost of weekly work hours, and failed to create a commensurate increase in employment because the average hour worked by employees had been made more expensive or less productive.

Wednesday, March 25, 2015

Friday, March 6, 2015

Fewer jobs in February?!

The headline payroll employment was (seasonally adjusted) higher in February than in January. However, the headline does not include the self employed or agricultural workers. If we add those in (from the household survey), the number of jobs fell from Jan to Feb. If we also look at it per capita terms, jobs per capita fell two months in a row after being essentially constant Nov-Dec.

Jobs in Thousands through Feb 2015

Jobs per Adult through Feb 2015

To be clear, I am measuring the vast majority of jobs from the same establishment survey that makes headlines. All I'm doing is adding an estimate for the narrow category of workers known to be excluded (in terms of FRED series, my formula is PAYEMS + LNS12027714 + LNS12032184). Interestingly, self employment fell 340,000 in the past month and 238,000 over the past year.

Friday, February 27, 2015

The War on Poverty

According to Milton Friedman

The war on poverty of which so much has been made since then has been a very good thing indeed for many thousands of civil servants who have been able to make excellent careers and many thousands of academic people who have been able to do study after study on poverty.

From Friedman on Galbraith

Monday, February 23, 2015

Opeds about Redistribution and Obamacare

I published three opeds in the Wall Street Journal, but do not reproduce them here in real time to be consistent with WSJ's copyright. Here are some shortcuts to ungated versions:


Monday, January 12, 2015

Robocall cost-benefit analysis

I just answered a Robocall from Covered Illinois touting Obamacare policies.  Will the time I spent answering the call be counted in any cost-benefit analysis?

Thursday, January 8, 2015

Republicans help to socialize medicine

Wow!  A widespread failure to consider the economics of health reform has led Republicans to push legislation to (unwittingly, may we suppose?) promote socialized medicine, and Democrats to oppose it!

The new Republican-sponsored bill ("Save American Workers Act") is about changing the "definition of full-time work" from 30+ hours to 40+ hours. But we are not really talking about definitions because the federal government does not publish the English dictionary.

What we are talking about the threshold for getting free stuff: government-financed health care in this case. Because of the original ACA, it is much more difficult for full-time workers to get subsidized coverage without experiencing an employment penalty than it is for part-time workers or non-workers. So the new bill is vastly increasing the number of people who would be deemed part time (for the purposes of getting free stuff), or could be deemed part time with a trivial change in their work schedule.

As a result, the bill will take millions of people off employer coverage and put them on Obamacare, all at taxpayer expense.  The bill will put the U.S. dramatically closer to "single payer" than it would be with Obamacare as originally written.

The great political question is: which party will consider the economics first? Maybe Democrats? The White House statement makes me think that they understand the economics pretty well, and the Wall Street Journal editorial suggests that the Republicans may be lagging.  Maybe the President will sign the bill, laughing all of the way to the history books?

Even if they are not concerned about the economic effects, do Republicans really want to bet that the President is not bluffing about veto?  Ie, bet that he is NOT willing to take another big step toward single payer with a Republican-sponsored bill that increases the deficit?  And bet that the President is NOT willing to make his Department of Health and Human Services even more powerful than it already is?  And bet that the President is NOT willing to make a move that makes several 2016 Presidential contenders look like fools?

(Original here)

P.S. The Congressional Budget Office estimates than "only" one million people would change coverage coverage as a result of the bill. With all due respect for their admirable efforts, the CBO is wrong on this.  They are using a variant of the Gruber microsimulation model (all of the sudden, even the Wall Street Journal is relying on the nonsense output from the model), which fails to include any market analysis and improperly uses elasticities from an era where the (non-elderly) alternatives to employer coverage primarily were Medicaid or being uninsured. All of this is explained in my book about the economic consequences of the health reform.

Friday, December 12, 2014

Program participants sometimes OVERestimate disincentives; good new book

I commonly hear it claimed that health insurance assistance does not discourage work because the rules are too complicated for people to understand that work does not pay. This claim is full of errors of logic and fact (see here and scroll to Q8). But let's look at one: why should we assume that people underestimate work disincentives rather than overestimate them?

Here's one story in which one man, Dave Campbell, decided to reduce his work hours in order to reduce his income in order to qualify for Medicaid, when it now appears that he probably would have qualified without reducing income.

... when Dave returned to work a few months after the accident, he pared his hours down to meet the $2,100 [monthly] level: why work more when it would all go to Medi-Cal [California's Medicaid program]...

Dave had been getting advice from a social worker and Medi-Cal expert, as well as his very smart Harvard/MIT professor/social-policy expert sister. Nevertheless, it appears that he/they overestimated the program's disincentives (as the disincentives applied to him).

I have not yet read Professor Campbell's new book that contains the full story. I expect that it is very good, because I did read her earlier book and found it to be excellent!


Tuesday, December 9, 2014

Prof. Gruber "No one has ever questioned the quality" of GMSIM

That's a quote from today's hearing (about the 46 minute mark), referring to the Gruber MicroSImulation Model.  It's reminiscent of this quote:


Both claims are contradicted here, especially Chapter 7.

The testimony also said that he was happy to "answer questions about the model and how it works" but I received no reply to the inquiry I sent Professor Gruber by email June 10, almost 3 months before my book would be published containing criticisms of GMSIM.