What's happening to the workweek in low-wage industries?

http://news.investors.com/politics-obamacare/020714-689319-low-wage-workweek-hits-new-low-with-obamacare.htm

Gerri and Sebelius

http://video.foxbusiness.com/v/3223019970001/white-house-denying-obamacares-impact-on-jobs/

Lou Dobbs and Me

http://video.foxbusiness.com/v/3218002758001/is-obamacare-a-disincentive-to-work/

The ACA and wages

The ACA reduces hourly employer cost in at least 3 ways:

(1) employer penalty. I doubt the national accountants will count this as employee comp, so it will lower measured employer cost even if it raises marg prod of labor

(2) productivity. the aca changes the allocation of factors to sectors and the allocation of spending to sectors. my best estimate is that it lowers productivity one percent

(3) for large segments of the population, quasi-fixed costs of employment are amortized over fewer hours. ie, part-time jobs pay less per hour than full-time jobs do.

Trevor and I have a paper with two of these effects. "wedges, wages and productivity under the ACA"

A paper with the third is almost ready for NBER wp. Trevor also looks at the productivity losses from inducing employers to keep FT employment below 50.

Far more important than any of this is what the ACA does to AFTER-TAX wages: sends them to zero in too many cases. I'd like to see the empirical labor economists try to take the log of that!

Cutler and Pollack are not with the White House Economists

Both Cutler and Pollack got the wrong impression that I called them dishonest. I did not write the WSJ article and did not call them dishonest. I told the WSJ interviewer that the 2011 letter authors and signers were unaware of the disincentives in the ACA:

there was "a general lack of awareness" and economists simply didn't realize everything that government was doing to undermine incentives for work. "You have to dig into it and see it,"

Regarding the White House economists and their allies this week (neither Cutler nor Pollack are in that group. Hardly any of the letter signers are either) who now praise the market-contracting/drudgery-avoiding attributes of their policies, I said "it looks like they're trying to leverage the lack of economic education in their audience by making these sorts of points."

To be clear, Cutler and Pollack did not and are not trying to leverage the lack of economic education ... That's Furman, Krugman, etc.

Remember what the President said about the ACA and the Labor Market

CBO moves toward my estimate

I have predicted that the ACA would contract the labor market about 3 percent. Maybe more, maybe less, but that was my best guess. I continue to work on it.

Meanwhile, CBO was saying 0.5 percent, and my critics (rather than giving an economic argument), point to the "nonpartisan CBO's" estimate as proof that I am out on the fringes.

Today CBO revised -- tripled -- its estimate to 1.5 percent. They still have a bit of the economics wrong, but it is a major step that they now acknowledge most (but not all) of the incentives that have been identified, and their analysis is vastly closer to mine now.

CBO should be credited for honestly re-assessing perhaps their most cited estimate ever. I imagine that it might have been tempting to stick with the original. But CBO Director Elmendorf was one of my teachers in college, and knowing him I expected that a better estimate would be forthcoming as research increasingly clarified what was missing in the original.

I also give the CBO credit for never falling into the trap that ACA = Romneycare, ergo the ACA's labor market effects are minimal. HHS will be asked to answer the CBO's revision, and I guarantee you that they will tempt the rest of America to fall in the trap.

The real problem for America was not the CBO estimate but that such a sweeping law was passed before the best economists in the nation could digest the incentives and unintended costs that it contained.

Prediction Comes True, Belatedly

A year and a half ago, I predicted "I suspect that ... in less than a year major carriers will have to reduce their monthly cellular charges to be much closer to Straight Talk [the Walmart cell services plan]." (emphasis added)

I'm not sure when T-Mobile cut their prices, but AT&T did not, until now.

She's a 29er

Copyright, The New York Times Company

Much has been made of the burdens of the Affordable Care Act on healthy young men, but young women are the ones most likely to see the law push them out of full-time work.

A “29er” refers to someone working 29 hours per week, the maximum that an hourly employee can work and still be considered part time by the federal government, as defined under the Affordable Care Act.

Before 2014, when the new federal definition took effect, Census Bureau data suggest that hardly anyone worked exactly 29 hours a week: about one in 1,000. Only six in 1,000 worked 26 to 29 hours a week.

The Affordable Care Act requires that, beginning next January, large employers provide health insurance for their full-time employees (by the federal definition) or pay a penalty per full-time employee on the payroll. The annual penalty is $2,000 and, unlike employee salaries and benefits, is not deductible from business taxes. Small employers do not owe a penalty, unless they cross the 50-employee threshold, in which case the annual penalty is $40,000 for having that 50th employee. Subsequent hires would each carry a $2,000 annual penalty.

Part-time employees do not create a health-insurance requirement or a penalty for their employer, which gives large and small employers an incentive to reduce at least some employees’ hours to 29 hours. A number of employers plan to do exactly this.

But the incentives are not limited to penalty avoidance by employers, and began this month. Employees in families with income of less than 400 percent of the poverty line will lose access to generous federal subsidies if they make themselves eligible for employer health coverage by working full time at an employer that offers coverage to such employees.

In other words, employees may have something to gain, or less to lose than they did before this year, by limiting themselves to a 29-hour work schedule. For full-time salaried workers (as opposed to hourly workers) the federal definition is those who work more than three days a week. (For the purposes of discussion, I will refer to the three-day limit as “29 hours,” although in practice it may be, say, a 26-hour schedule).

As the new law goes into full effect the next couple of years, I expect that more than 2 percent of workers will be 29ers, an increase by more than a factor of 10. Moreover, as the labor market adjusts to avoid penalties and enhance subsidies, the adjustments will tend to be those that are least costly.

One of the least costly ways to move full-time workers to the 29er group would be to focus on those who already work slightly more than 29 hours. It is usually less costly for a 35-hour-per-week worker to cut hours to 29 than for a 55-hour-per-week worker to do so.

I used the Census Bureau’s data to put together a sample of people likely to be 29ers over the next couple of years, based on working 30 to 37 hours per week before this year and not having health insurance available through a spouse (if married). Women outnumber men more than 2 to 1 among likely 29ers. The 29ers are also likely to be less than 30 years old.

Naturally, working fewer hours means less pay. By disproportionately reducing women’s work hours, health reform may have the unintended consequence of increasing the gap between men’s and women’s wages and salaries.

[Note: this does not mean that women are "hurt" by the ACA ... it just means that (on average) they experience the ACA's costs differently than men will]

Just Compensation for Jurors

Copyright, The New York Times Company

“Jury service is a serious, meaningful and important responsibility,” says Cook County Court in Illinois and many other courts in the United States. Yet the courts pay jurors far less than minimum wage. In Cook County, jurors are paid $17.20 a day; working eight hours at the state’s minimum wage would pay almost quadruple that.

Employers are sometimes forced by state law to pay jurors while they serve the court, but that is no help for the self-employed, students and people without jobs.

Jurors are selected randomly from state-compiled lists of residents and forced to participate unless excused by the court for specific circumstances, such as a medical condition that prevents service. People who do not report for duty can be punished at to the court’s discretion, including jail time.

With random selection, low pay, medical excuses and the potential for severe punishment, a jury summons has a lot in common with a Vietnam-era draft notice, although, of course, the skill and activities associated with the service itself is far different for jurors than for Vietnam soldiers.

Many people summoned for jury duty search desperately for excuses. Their efforts increase the burden on the court system, which has to summon and process a large number of people in order to empanel its juries.

The court system might alleviate these problems by following the example of the modern military: recruit people for service by paying them far more than minimum wage. Jurors could still be selected randomly, but with a nice paycheck waiting for them, they would not try as hard (or at all) to be excused by the court.

Critics of a market-oriented recruitment system might say the pool of jurors would not fully represent the population because, among other things, people getting high pay in their normal jobs would be less willing to serve on a jury because of the loss of pay. But let’s not pretend that the conscripted jurors we have today are a random sample of the population.

If jurors were paid at a generous hourly rate, might they deliberate longer? And would that be a good thing or not? If it were desirable to shorten juror deliberation time, jurors could be paid a flat rate for that part of their service.

The Fifth Amendment to the United States Constitution prohibits the taking of private property “for public use, without just compensation.” Did the founding fathers really think that it was much worse to take property without just compensation than to take a citizen’s time?

Taking property and drafting citizens into government service without market compensation have many of the same economic problems: they fail to spread the burden of supporting government activity, they encourage socially wasteful avoidance behaviors, and enforcement runs the risk of special treatment for the politically connected.

The modern military pays soldiers with both appreciation and money. Jurors should be paid that way, too.