Yes, it's Monday and Robert Samuelson is badly confused about economics again. Today he complains about the White House's "fairy-tale economics."
Robert Samuelson is upset because the Obama administration has been arguing that it is possible to raise the minimum wage without any job loss. He apparently feels that he can now dismiss this claim as fairy-tale economics because the Congressional Budget Office (CBO) issued a study that put its best guess of the job loss from the administration's proposal at 500,000.
It's worth noting that in its report CBO did not dismiss the possibility of zero job loss as fairy-tale economics. CBO noted the economic research on the topic and commented that the plausible range of impact would include near zero. CBO did not do original research; rather it chose to pick a number for its estimate that was a midpoint of the findings of recent research. (See my colleague John Schmitt's post for a longer discussion.) So the dismissal of a zero estimate of job loss as fairy-tale economics is Samuelson's invention, not a conclusion based on CBO's analysis.
It is also worth doing a little arithmetic to assess the 500,000 figure. As Samuelson points out, CBO projects that the minimum wage hike would affect 16 million people directly and another 8 million through spillover effects. This means that the lost jobs will be roughly equal to 3 percent of the workers directly affected and 2 percent of the total number of workers who see wage hikes.
For the most part, the reduction in employment of 500,000 will not correspond to workers being laid off. More likely it means that workers will not be replaced when they leave and that firms will be slower to hire when they see an increase in demand.
This is important to keep in mind, because we are not talking about 500,000 workers being permanently unemployed. Minimum wage jobs tend to be high turnover jobs. As a practical matter, a loss of 500,000 jobs means that workers will spend more time looking for jobs when they first enter the labor force or change jobs. This means that they can expect to spend roughly 2-3 percent less time working, but when they do work they will get close to 19 percent more per hour. Note this is not "fairy-tale economics," this is Robert Samuelson's economics if he bothered to think through what he was saying.
There are other fun items in Robert Samuelson's piece. He is still unhappy about the Affordable Care Act. He tells readers;
"In another report, the CBO estimated that the health insurance subsidies in the Affordable Care Act (Obamacare) would discourage people from working, resulting in a loss of the equivalent of 2.5 million full-time workers by 2024."
Let's try a little logic here. CBO says that being able to get access to health care insurance outside of the workplace will lead people to reduce the number of hours they work by the equivalent of 2.5 million full-time jobs. This means that near retirees, people in bad health, and parents with young children will opt to work less. Samuelson apparently thinks this is really bad for some reason -- maybe he can explain why in a later column.
But from the standpoint of employment, it's hard to see why this is not good news. In effect, this is saying that 2.5 million people who would rather not be working will be opting out of the labor force. This means that 2.5 million jobs will be opening up for people who do want to work. And the problem is?
Finally, Samuelson is upset that President Obama has not approved the XL pipeline, which he describes as a "job-creation project." Here too a bit of arithmetic is in order. According to the standard estimates, the XL pipeline would increase employment by about 0.007 percent for two years. The jobs added would be the equivalent of two days' worth of normal job creation. That would not seem to fit the bill of a "job-creation project."
However, the other side of the story is that it will facilitate the extraction of oil that is very dirty from the standpoint of global warming. In other words, it will contribute in a big way to global warming and the destruction of the planet.
This is especially ironic coming from Samuelson. One of the main themes of his columns is that the old are stealing from the young with their Social Security and Medicare. However Samuelson apparently sees nothing wrong with handing our kids a wrecked planet so that we can increase employment by 0.007 percent for two years.
Hey, this is the Washington Post and Robert Samuelson, you were expecting an argument that made sense?
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