No Apparent Motive

Almost 40 percent of low-wage workers (defined as those in the bottom fifth of the wage distribution) have no health insurance from any source. Only about 25 percent of low-wage workers have coverage through their employers.

Source: Schmitt (2012).

Coverage rates have been on the decline for all workers over the last three decades, but the fall-off has been steepest for low-wage workers. Which makes low-wage workers the biggest potential beneficiaries of the Affordable Care Act (ACA). According to rough estimates in my most recent report (pdf) for CEPR (and released jointly with the Kalmanovitz Initiative for Labor and the Working Poor at Georgetown), the ACA will likely cover more than half of low-wage workers currently without insurance.

Yesterday’s New York Times has a high-production-values piece on differences in the recent labor-market performance of France and Germany. Reporter Steven Erlanger, whose foreign reporting I’ve admired in other contexts, builds the story around a comparison of two small towns –Sélestat and Emmendingen– located on either side of the French-German border. Unfortunately, the side-by-side comparison is not well-situated in the available national data, and the story falls quickly into a “lazy Latins” versus “industrious Prussians” frame that gives a misleading picture of the economic problems facing France today.

Let’s take a closer look at one particularly problematic sentence that captures the core themes of the piece:

But while the French may admire German rigor, they are reluctant to make some of the same sacrifices, including longer hours and less job security.

So, the Germans are rigorous, make sacrifices, work long hours, and accept less job security; the French are reluctant, work less, and cling to their job security.

This may be the way folks on the ground tell the story, but we actually have a lot of reliable internationally comparable data that suggest this view is almost entirely wrong.

First, as my colleague, Dean Baker noted yesterday, the average French worker puts in more hours per year than the average German worker. According to the Organization for Economic Cooperation and Development (OECD), in 2009 (the most recent data available), the average French worker spent 1,554 hours on the job, compared to only 1,390 in Germany. (The corresponding US number was 1,768.) Longer French hours have been the case for years, and are not simply a function of the Great Recession. Even in the context of this particular story, longer French hours shouldn’t be surprising: early on, the piece notes President Sarkozy’s desire for France “to allow more part-time work, like the Germans.”

Second, the average German worker actually has more job security than the average French worker. On a summary scale of the strength of “employment protection legislation” developed by the OECD, which runs from 0 (no legal job protections) to 6 (something approaching what a US Supreme Court Justice has), France scores a 2.5. Germany, meanwhile is at 3.0, with close to the strictest employment protection among all OECD countries. (The United States rates a 0.2 on the same scale. See Figure 6 in this report for details.)

Third, despite the impression left by this quote and the rest of the piece, French workers are, on average, more productive than their German counterparts. According to the most recent data (pdf) from the Conference Board, which compiles internationally comparable data on national productivity, in 2011, the average French worker produced $59.70 of goods and services in an hour of work, almost 8 percent more than the average German worker, at $55.50. (The average output per hour for US workers in the same year was $62.10.)

Street-level views of the economy can be extremely useful, but they have to  be anchored securely in the available, broader data. France has its share of economic problems, but yesterday’s New York Times article did a poor –even misleading– job describing them.

I testified yesterday at a hearing on “Employment Trends and Analysis,”  held by  the subcommittee on Commerce, Manufacturing, and Trade of the House Energy and Commerce Committee.

My written testimony is here. A video of the proceedings is available here (my statement starts at minute 34:00). My basic argument was that the labor market is looking better now than at any point in years, but that we are not out of the woods.

I was a panelist at a Center for American Progress (CAP) event this morning on “Rebuilding the Middle Class.”

The two other panelists were Isabel Sawhill of the Brookings Institution and Heather Boushey of CAP. CAP’s Michael Ettlinger moderated.

The panel discussion followed a speech (pdf) by Senator Tom Harkin, outlining the main elements of his “Rebuild America Act.” The six main points of the proposed legislation: “(1) investing in infrastructure and manufacturing; (2) providing the education and skills necessary for a 21st century workforce; (3) empowering workers; (4) bolstering retirement security; (5) strengthening families, and (6) paying for the bill by creating a fairer tax structure.”

You can watch a video of the full event here.

After losing 1.4 million members between 2008 and 2010, the labor movement managed a small increase in membership in 2011. Data released by the Bureau of Labor Statistics this morning show union membership rose by about 49,000 last year. In the private sector, membership jumped 110,000, which was partially offset by a decline of 61,000 union members in the public sector.

Janelle Jones and I analyze the numbers in a CEPR “Union Byte” released this morning. Our work is also cited in good stories in the Associated Press and the Wall Street Journal.

As I write in a new CEPR briefing paper (pdf) out today, the United States leads the wealthy world in the share of its workforce in low-wage jobs. According to the commonly used international definition of low-wage work –earning less than two-thirds of the median hourly wage– about one-fourth of US workers are low-wage.

The report draws five lessons from the experience of the United States and other rich countries over the last several decades:

Lesson 1: Economic Growth is not a Solution to the Problem of Low-wage Work

Lesson 2: More “Inclusive” Labor-market Institutions Lead to Lower Levels of Low-wage Work

Lesson 3: The United States is a Poor Model for Combating Low-wage Work

Lesson 4: Low-wage Work is Not a Clear-cut Stepping Stone to Higher-wage Work

Lesson 5: In the United States, Low Wages are among the Least of the Problems Facing Low-wage Workers

The countries that have been most successful in reducing the share of their population in low-wage work have typically done so by having widespread collective bargaining or by funding a reasonable and reliable safety net (which, among other things, raises the bargaining power of low-wage workers). See, for example, Figures 4 and 5 from the paper:

The United States, meanwhile, has relied primarily on the minimum wage and the Earned Income Tax Credit (EITC). Both could dramatically reduce the share of the workforce on low pay (see, for example, this excellent paper by Jeannette Wicks-Lim and Jeffrey Thompson), but the US minimum wage and EITC have both been set too low to have a meaningful impact on low-wage work. This figure, for example, shows the gap between the low-wage threshold (what a worker would have to earn to rise above “low-pay”) and the federal minimum wage, in each year from 1979 through 2010.

But as the paper also emphasizes, low-pay isn’t even the worst of it. Low-wage workers are also much less likely to have health insurance (of any kind, employer-provided or from other sources), paid sick days, paid parental leave, or paid vacation. Not to mention very little in the way of job security.

Source: Alan Krueger, Council of Economic Advisers.

Economist Miles Corak, one of the world’s leading experts on economic mobility, has written a devastating take-down of the core of two recent pieces by the Brookings Institution’s Scott Winship. Winship has been arguing that President Obama, his economics team, and many others on the political left are wrong to claim that economic mobility has been on the decline in recent decades. But, as Corak documents, it is Winship that is misreading the data.

Winship’s first piece was written in response to President Obama’s much-commented-on speech last December in Osawatomie, Kansas, where the president argued that a child born into poverty today has a lower chance of reaching the middle class –about 33 percent– than a child born into poverty just after World War II  –about a 50 percent chance.

Writing in the National Review Online, Winship said that the president’s “claim of falling upward mobility … rang false” and is “contradicted [by] most of the research that has been conducted to date.” Winship’s criticisms focused on some pretty technical issues in research conducted by Berkeley economist David Card, one of the country’s foremost labor economists and winner of the 1995 John Bates Clark medal. After reviewing Card’s numbers, Winship concludes that upward mobility today “is no worse than it has ever been and it does not translate into a general lack of opportunity for the middle class.”

Next, Winship took aim at the chair of President Obama’s Council of Economic Advisers, Alan Krueger, another prominent labor economist who was at Princeton before joining the Obama administration in 2009. In a speech last week at the Center for American Progress, Krueger presented what he called “The Great Gatsby Curve,” a graph (see above) that shows a strong relationship across rich countries between higher levels of economic inequality and lower levels of economic mobility.

Winship called out Krueger in a guest post at Reihan Salam’s blog at the National Review Online, calling Krueger’s speech “deceitful.” Again, Winship’s piece revolves around a number of technical points in Krueger’s analysis, and again, Winship concludes: “The data indicate that it is no less true today than it was in the past that poor children can make a better life for themselves.”

But, here is where Miles Corak steps in. At his personal site, Corak writes that Winship “does a disservice to a well-established literature on generational mobility.” After Corak’s own detailed review of the data, Corak arrives at a pretty damning series of conclusions: “All of Winship’s statistical concerns with estimates of the generational elasticity have been addressed since the beginning of this literature”; “Winship’s questioning of the robustness of the empirical literature on the intergenerational elasticity by citing one study is misleading”; “Making projections is tricky, but not because of anything Winship says”; and, finally, Alan Krueger “got his facts right.”

UPDATE: Winship has already posted a lengthy response to Corak, at Salam’s National Review Online blog. I’m guessing this isn’t the last of it.

UPDATE 2: And Corak.

UPDATE 3: Justin Wolfers, at the Freakonomics blog, scores the fight for Corak, saying it’s “not even close.”

The current issue of Dissent includes my review of Guy Standing’s latest book, The Precariat: The New Dangerous Class.  The “precariat” is Standing’s term for the precariously employed workforce that has emerged over the last three decades and that has increasingly replaced the traditional working class. The one sentence review: a great description and diagnosis, but weaker on the prescription and politics. You can read the whole thing (behind the paywall) at Dissent.

In a new CEPR report (pdf) out today, Janelle Jones and I argue for rethinking our understanding of “long-term unemployment.”

From the executive summary:

First, we encourage shifting from a narrow focus on long-term unemployment toward a broader concept of “long-term hardship” in the labor market. Many workers or potential workers who do not fit the official definition of long-term unemployment – including “discouraged” and “marginally attached” workers and those involuntarily working part-time jobs – face long-term hardship in the labor market, but are not captured in the standard measure of long-term unemployment.

Second, we suggest complementing the standard measure of long-term unemployment, which reports the share of the unemployed who have been out of work for 6 months or more, with an alternative measure, which reports the share of the total labor force that has been unemployed for 6 months or more. This alternative measure avoids some counter-intuitive properties of the standard statistic and is better for making comparisons across demographic groups.

The broader measure of long-term hardship that we propose, which adds “discouraged workers,” the “marginally attached,” and half of the workers who are “part-time for economic reasons” to the standard measure of long-term unemployment, is more than twice as large (7.0 percent of the working-age population) as the official long-term unemployment count (3.1 percent).

Dean Baker and I have a piece at Salon that takes another look at the increases in the minimum wage that went into effect last Sunday in eight states and the city of San Francisco.