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Prices Do Actually Matter, 1984 Edition Print
Written by David Rosnick   
Thursday, 14 April 2011 14:15

Last month, the real of the dollar against other currencies hit a new record low.  Aside from a brief spike in late 2008 — the result of a crisis-induced "flight to safety" — the dollar has undergone a steady decline since early 2002.  Over the last nine years, the dollar has fallen 27 percent relative to those of major trading partners.

What happens to the economy as the dollar falls?  At first, U.S. importers of (say) British goods trade more dollars to get the pounds they need to purchase British goods.  This means that the cost of imports measured in dollars rises, increasing the size of the trade deficit (imports minus exports).  Similarly, British importers of American goods find they require fewer pounds to get the dollars they need to buy American goods.

Over time, Americans notice that British goods have become more expensive in comparison to domestically produced goods. In other words, the price of U.S.-made sweaters becomes cheaper relative to the price of sweaters imported from Britain. This will lead us to buy fewer sweaters from Britain and more domestically manufactured sweaters.



Mad Men, Then or Now? Print
Written by John Schmitt   
Monday, 11 April 2011 16:30

The fictional television series "Mad Men"” does a great job dramatizing the astonishing cultural, social, and political transformation of the United States since the early 1960s. A new report (pdf) from the Institute for Policy Studies now adds some insight into one of the key economic differences between then and now.

This graph from the report compares the actual income taxes paid by the rich in 1961 and 2011. As it happens, 1961 falls right between the time covered by seasons one (March to November, 1960) and two (February to October 1962) of "Mad Men."


Source: Institute for Policy Studies

Back in 1961, Don Draper and his partners at Sterling Cooper paid somewhere between 27 and 43 percent of their income in federal income taxes. Their counterparts today pay somewhere between 20 and 24 percent. As the IPS report argues, we don’t need austerity, we need tax increases at the top.

This post originally appeared on John Schmitt's blog, No Apparent Motive.

Right-to-Rent Would Ease Foreclosure Mess Print
Written by Dean Baker   
Monday, 11 April 2011 15:45

While the rate of foreclosures may have finally peaked, it is not going to come down quickly. We are virtually certain to see at least a million foreclosures in 2011 and comparable numbers in 2012 and 2013. Many more homeowners will lose their homes through distressed sales.

This is a crisis for both the homeowners themselves and also for the communities where these foreclosures are concentrated. There is considerable research showing that foreclosed properties are a blight on neighborhoods, bringing down property values and creating eyesores and safety risks. For these reasons, there is a strong argument for taking measures to reduce the pace of foreclosures.

However, few would argue for yet another round of the federal Home Affordable Modification Program. HAMP has proven bureaucratic and ineffective. Only a small share of threatened homeowners have received permanent modifications and a large portion of this select group is expected to re-default.

I've said it before, and I'll say it again: There is a simple alternative that involves no government money and no new bureaucracy. We could temporarily change the rules on foreclosure to allow homeowners the right to stay in their home as renters for a substantial period of time (e.g., 5 years) following a foreclosure.



Ryan In Your Pocket: # 3217 Print
Written by Dean Baker   
Sunday, 10 April 2011 13:31

House Budget Committee Chairman Paul Ryan proposed a 2012 budget that would essentially end Medicare as we know it and replace it with a voucher system. The payments proposed under this plan would be far less than the payments Medicare is projected to pay, leading to large savings for the government.

However the Congressional Budget Office projects that costs to retirees would rise by far more than just the cutbacks in spending by the federal government. In addition to shifting the burden onto retirees, the Congressional Budget Office (CBO) projects that the Ryan plan will make the Medicare system much less efficient.

The CBO analysis projects that a Medicare equivalent plan will cost much more under the Ryan plan than if purchased through Medicare both because private insurers have much greater administrative costs and they would be less effective in constraining costs. (We know this, we have tried privatization before.) This additional cost is a pure waste from the standpoint of the economy as a whole.

The additional expense resulting from the Ryan plan is real money. Over the next 75-years (the planning period for Medicare and Social Security) the projections imply that the extra payments to the insurance and health care industry would come to $20.3 triliion if everyone purchased a Medicare equivalent policy. This is almost 4 times the size of the projected Social Security shortfall. That is equal to almost $70,000 for every man, women and child in the country.


Source: CBO, Social Security Trustees, and author's calculations.

Note that this $20.3 trillion figure does not count the savings to the government from the lower Medicare payments. It is the pure waste that results from a having less efficient health care system in place for the Medicare population. We can think of this money as being equivalent to a tax since from an economic standpoint it has roughly the same impact on the economy if the government imposes taxes on the health care sector equal to $20.3 trillion, as if the inefficiency in the sector raises the cost of cost by care by $20.3 trillion. So we can view this $20.3 trillion as the Paul Ryan Medicare tax.

Labor Market Policy Research Reports, April 4-8, 2011 Print
Written by Sairah Husain   
Friday, 08 April 2011 11:15

This week, we post links to reports from Center for American Progress, Center for Economic and Policy Research, Center on Budget and Policy Priorities, and Economic Policy Institute.

Center for American Progress

The Importance and Promise of American Manufacturing: Why it Matters if We Make it in America and Where We Stand Today
Michael Ettlinger and Kate Gordon

Center for Economic and Policy Research

The Ryan Medicare Plan: Winners and Losers
Dean Baker and David Rosnick

Center on Budget and Policy Priorities

Earned Income Tax Credit Overpayment and Error Issues
Robert Greenstein and John Wancheck

Chairman Ryan’s Proposal to Block Grant SNAP (Food Stamps) Rests on False Claims about Program Growth: Recent Increases in SNAP Spending Largely Reflect the Recession; Program Does Not Contribute to Nation’s Long-Term Budget Problems
Dottie Rosenbaum

Tax Holiday for Overseas Corporate Profits Would Increase Deficits, Fail to Boost the Economy, and Ultimately Shift More Investment and Jobs Overseas
Chuck Marr and Brian Highsmith

Economic Policy Institute

'Right-to-Work Wrong for New Hampshire'
Gordon Lafer

Medicare Vouchers: Ryan Versus Baker Print
Written by Dean Baker   
Tuesday, 05 April 2011 21:12

Since Representative Ryan is running around pushing his Medicare vouchers I might as well take the opportunity to push my own. It seems that Mr. Ryan and I have something in common, we both like Medicare vouchers.

Of course there are big differences between our systems. Ryan's voucher system would deny seniors the option to stay in the existing Medicare system. It would give them a lump sum which they could then apply towards the cost of an insurance premium. There is no guarantee that either the insurance they bought would be as good as Medicare, nor that the voucher would cover the full cost of the insurance.

By contrast, the Baker voucher leaves the current Medicare system intact, seniors would always have the option to be in the Medicare system just as they do today. The change created by the Baker voucher is that seniors would also be able to buy into the health care systems of any of the countries with longer life expectancies than the United States.

The big advantage to seniors is that they would be able to pocket half of the savings. The government gets the other half. Because our health care system is so inefficient, this is big money.

The cost to the government per beneficiary is projected to be nearly $13,000 (in 2008 dollars) by 2020. The average cost of treating a person over age 65 in the countries with longer life expectancy is projected $9,600 (also in 2008 dollars). If we allow the receiving country a 10 percent premium (this ensures that they share in the savings) and split the difference, the value of the voucher would be $11,300, allowing the federal government to save $1,700 for every beneficiary that took advantage of the voucher.

The gains to seniors will depend on which country they chose. Since they also would have substantial out of pocket medical expenses if they stayed in the United States (including their Medicare premiums) their savings from moving to another country to get care would be considerably larger than just the difference between the value of the premium and cost of care in the receiving country.

Seniors that moved to Canada would be able to pocket $5,600 a year. Those that moved to Spain could pocket $10.900, and those that went to New Zealand could pocket $11,200. These numbers get much larger through time. By 2045, the annual savings to a senior moving to Canada, Spain, and New Zealand would be $22,600, $26,700 and $29,400, respectively. This would more than double the income of many retirees. The savings to the government would rise accordingly.

The deal gets even better for people who qualify for both Medicare and Medicaid. For these people, the government would just split the savings, handing half to the beneficiary and pocketing the other half. This deal would allow dual beneficiaries going to Canada, Spain, and New Zealand in 2020 to pocket $13,500, $18,700, and $18,900, respectively in 2020. By 2045, the annual savings for seniors going to these countries would rise to $37,800, $41,700 and $41,900, respectively.

That's the Baker proposal. It doesn't require setting up a complex new domestic voucher system. It just requires some negotiations that would allow our retirees to buy into foreign health care systems. Hey, even a trade negotiator should be able to do that.

The big difference is that the Baker proposal is likely to take some money out of the hides of the domestic health care industry, while ensuring that seniors continue to get quality care. By contrast, Representative Ryan's plan takes money out of the hides of retirees while protecting the incomes of the health care industry. It's a matter of priorities.

Labor Market Policy Research Reports, March 28 – April 1, 2011 Print
Written by Sairah Husain   
Tuesday, 05 April 2011 15:30

This week, we post links to reports from Economic Policy Institute, UCLA Institute for Research on Labor and Employment, and National Employment Law Project.

Economic Policy Institute

The State of Working America's Wealth, 2011: Through Volatility and Turmoil, the Gap Widens
Sylvia A. Allegretto

Paid Sick Days: Measuring the Small Cost for Connecticut Businesses
Douglas Hall and Elise Gould

'Right-To-Work' Wrong for New Hampshire
Gordon Lafer

UCLA Institute for Research on Labor and Employment

An Opportunity Not Taken...Yet: U.S. Labor and the Current Economic Crisis
Chris Tilly

National Employment Law Project

Fair Pay for Home Care Workers: Reforming the U.S. Department of Labor's Companionship Rules Under the Fair Labor Standards Act
National Employment Law Project

Representative Ryan's Plan Would Increase U.S. Borrowing from China and Other Foreign Creditors by Almost $1 Trillion Print
Written by Dean Baker   
Tuesday, 05 April 2011 12:41

That's the analysis from the Heritage Foundation. They calculate the cumulative trade deficit over the next decade will be almost $1 trillion greater under the plan put forward by Representative Ryan than under the current baseline. This is measured in 2005 dollars. If we used current dollars then the sum would be more than $1.3 trillion over the course of the coming decade.

The borrowing from China theme is one that many of the deficit hawks have harped on repeatedly so it is interesting that their own plan, by their own assessment, will lead to more borrowing from China and other foreign investors than the status quo. This analysis is helpful because it points out that our borrowing from foreigners is determined by the trade deficit, not the budget deficit. So even though Representative Ryan's plan is projected to substantially reduce the budget deficit, it still leads to a larger trade deficit and more borrowing from abroad.

Of course caution would be advised in using the Heritage Foundation analysis that is the basis of these projections. This analysis shows the Ryan plan creating an additional 831,000 jobs compared with the baseline over the year 2012. This additional job growth is projected to be associated with a 2.1 percentage point decline in the unemployment rate. With a civilian labor force of more than 150 million, this doesn't seem to add up. The Heritage Foundation projections also show the unemployment rate falling to 2.8 percent by 2020, a level not seen since the end of World War II.

Employment Among Blacks Falls Almost to Its Low-Point for the Downturn Print
Written by Dean Baker   
Friday, 01 April 2011 10:45

The economy added 216,000 jobs in March, pushing the overall unemployment rate down to 8.8 percent, but African Americans do not appear to be sharing in the benefits of recent growth, according to the latest Bureau of Labor Statistics' employment report. The employment-to-population ratio (EPOP) for African Americans fell by 0.3 percentage points to 51.9 percent, just 0.1 percentage points above the recession low hit in September. The EPOP for black teens stands at just 14.8 percent. The overall unemployment rate for African Americans rose by 0.2 percentage points to 15.5 percent.

Overall, the recent acceleration in job growth is encouraging, but it is still an extremely weak recovery from a severe downturn. Based on the experience of the last two severe recessions, 1974-75 and 1981-82, we should be expecting job growth in the range of 400,000 a month. Instead, we are still seeing a rate of job growth that is below the 250,000-a-month average from the 90s.

For more information, read our latest Jobs Byte.

CEPR News March 2011 Print
Written by Dawn Lobell   
Thursday, 31 March 2011 14:00

The following highlights CEPR's latest research, publications, events and much more.

CEPR on Pensions and Budgets
CEPR Co-Director Dean Baker co-authored a report with the Center on Wisconsin Strategy that found that the Wisconsin retirement system is one of the healthiest in the country. The paper was mentioned in this Reuters article, among others.

Dean authored several op-eds on public pensions, and on March 15th he testified before the House Oversight and Government Reform Committee’s Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs on state and municipal debt. A video of the testimony can be seen here. Dean also discussed cuts to state budgets on MSNBC’s Rachel Maddow Show.

An earlier CEPR report shows that many of the problems facing state and local governments are due to the recession and not, as some have claimed, public worker compensation packages. CEPR Co-Director Mark Weisbrot also weighed in on events in Wisconsin in this op-ed for The Guardian Unlimited.



Investment Is Not the Problem Print
Written by Dean Baker   
Wednesday, 30 March 2011 14:51

Paul Krugman tears apart a new post from John Taylor in which he attributes high unemployment to the falloff of investment, noting the sharp decline of investment as a share of GDP. Taylor's remedy for this problem is to spur investment by cutting business taxes. 

Krugman shows that the bulk of the falloff was due to a falloff in residential investment. In other words, housing construction plummeted following the collapse of the housing bubble. Actually, Taylor's case is even even weaker than the picture Krugman shows. There was also a bubble in non-residential real estate. The falloff in non-residential construction is due to the fact that there was enormous over-construction in most categories of non-residential construction. Tax breaks are not going to persuade builders to put up another office building or mall in a glutted market.

Investment in equipment and software is down by less than 0.8 percentage points as a share of GDP from its pre-bubble peak. That is not bad given the falloff in demand. I have also included a line that subtracts vehicle leasing from investment. The issue here is that a leased vehicle will count as investment by the car leasing company, whereas a purchased vehicle will count as consumption by the consumer. There was a big surge in car leasing in the 90s which explained about 0.3 percentage points of the increase in the investment share of GDP over the course of the decade. (The calculation here just subtracts the current lease expenditures. In principle we would want to pick up the value of cars purchased for leasing. The expenditures on leased cars likely lag the purchases by a year or so. They will also not be exactly the same, but they should give the right general size of this effect.)

Click to Enlarge
Source: Bureau of Economic Analysis.

House Prices Continue Plunge in January Print
Written by CEPR   
Tuesday, 29 March 2011 10:45

For the fourth consecutive month, the Case-Shiller 20-City index fell by at least 1.0 percent. It is now down by 5.4 percent from its peak in July. Of the 20 cities in the index, 19 had a drop in housing prices in January, with the exception again being Washington, D.C. Prices in D.C. edged up by 0.1 percent. Prices are now down by 3.1 percent from their year-ago-levels. In nominal terms, prices are still 1.1 percent above their previous post-bubble low in April of 2009; however, in real terms they are already 2.2 percent lower.

Seattle and Portland continue to rank near the top for largest price declines, with prices falling by 2.4 percent in January in Seattle and by 1.8 percent in Portland. Over the last three months prices have fallen at an annual rate of 19.9 and 16.3 percent respectively in the two cities. The Midwest cities continued to see sharp declines, with prices in Minneapolis falling by 3.4 percent, in Chicago by 1.8 percent and in Detroit by 1.7 percent. Over the last three months, these cities have seen annual rates of price decline of 24.6 percent, 19.6 percent and 17.3 percent, respectively. The California cities are also continuing the process of deflating their bubbles. Prices in January fell by 0.6 percent in Los Angeles, by 1.2 percent in San Diego, and by 1.7 percent in San Francisco. The annual rate of decline over the last three months in these cities was 9.2 percent, 7.2 percent, and 14.9 percent, respectively. These declines may accelerate as the impact of the state’s homebuyer tax credit fades.

Check out our latest Housing Market Monitor for more.

Can the U.S. Economy Survive the Republicans' Definition of Success? Print
Written by Dean Baker   
Sunday, 27 March 2011 13:29

That's what millions are asking after the Republican staff of the Joint Economic Committee (JEC) put out a paper outlining their strategy for achieving economic prosperity by cutting government spending and laying off workers. The central claim in the paper, that cutting spending even in the middle of a downturn will lead to growth, is contradicted by a careful analysis of this topic that the IMF published last fall. But maybe the problem is more basic than a disagreement on economic research and a reading of data. It seems that the problem might stem from the meaning of the word "success."

Readers of the JEC report will see that New Zealand in the years since 1986 is highlighted as one of the success stories. The Republicans tell us that if we make the same sort of harsh cuts in domestic spending as New Zealand and have the government take comparable steps to weaken the power of labor unions then we can look forward to the same sort of economic progress as New Zealand.

This should have people really worried. If we go the OECD and look up New Zealand's growth in real per capita income since 1986 we find that it came in third from last, beating out only Switzerland and Iceland. According to the OECD data, real per capita income in New Zealand grew by a total of 18.9 percent in the 22 years from 1986 to 2008.



Source: OECD and Bureau of Economic Analysis.


This is less than 40 percent of per capita income growth in the United States over this period. Do the Republicans really wish that we had followed New Zealand's path back in the mid 80s so that we could be 20 percent poorer today? 

We were not the only ones who outpaced New Zealand's "success" story. Germany and France both had almost two and half times as much income growth as New Zealand. Those flaky Scandinavian types in Denmark and Sweden also had more than twice as much income growth as New Zealand over this period. If we think there is a regional aspect to New Zealand's slow growth it does not appear to have infected Australia, which also had more than two and half times the income growth as the Republican role model.

In fact, even depression wracked Japan had more than two and half times the income growth as New Zealand over this period. Japan has certainly had its problems over the last quarter century, but they don't seem to have damaged its economy to the point where it performed worse than New Zealand's by this basic measure of economic progress.

Clearly the Republicans have some other measure of success than the ones that economists usually apply. New Zealand's economy did grow slowly but there was also a large increase in inequality and a serious weakening of the rights of workers. Perhaps that is what they see as the country's success since 1986.

A Fairer Shot at Employment Print
Friday, 25 March 2011 13:59

Back in November, John Schmitt and I wrote a report that estimated the number of people in the United States that have ever been to prison or convicted of a felony. We were interested in the number because a prison record or a felony conviction is a major impediment to employment. We concluded that there were about 6 million people with a prison record and somewhere between 12 and 14 million with felony convictions. Our calculations suggested that the difficulties that these groups face in the labor market probably reduce employment by 1.5 million jobs and cost the economy about $60 billion a year in lost output.

This week, the National Employment Law Project (NELP) has put out a study dealing with a broader group – those who have a criminal record of any kind, including arrests for misdemeanors and felonies, whether or not they were ultimately convicted of the crime. The estimates produced by the report's authors, Michelle Natividad Rodriguez and Maurice Emsellem, suggest that there are 65 million people in the United States with a criminal record. NELP notes that people with criminal records often face difficulty in finding a job because of overly broad (and sometimes illegal) criminal background checks. As the report says:

"In the right situations, criminal background checks promote safety and security at the workplace. However, imposing a background check that denies any type of employment for people with criminal records is not only unreasonable, but it can also be illegal under civil rights laws. Employers that adopt these and other blanket exclusions fail to take into account critical information, including the nature of an offense, the age of the offense, or even its relationship to the job."

While the report notes "a promising shift in policy and practice" towards "fairer and more accurate criminal background checks for employment," perhaps what is most discouraging is that existing anti-discrimination laws are often not being enforced, at the federal, state, or local level. NELP lays out four recommendations that would steer our country towards more reasonable employment screening procedures: 1) That the federal government enforce existing protections relating to background checks, 2) that the federal government adopt fair hiring policies for federal employment and contracting, serving as a model for all employers, 3) that state and local governments certify that their hiring policies comply with federal regulations and launch employer outreach and education campaigns, and 4) that employers take a more active stance in promoting fair hiring policies, for both their own and workers' best interests.

The authors highlight the compelling, obvious reason for following these recommendations: "millions of deserving workers will have a fairer shot at employment, allowing them to contribute to their communities and help rebuild America’s economy."

Labor Market Policy Research Reports, March 19-25, 2011 Print
Written by Sairah Hussain   
Friday, 25 March 2011 12:33

This week, the LMPRR features reports from Center for Economic and Policy Research, Center on Wisconsin Strategy, Economic Policy Institute, UCLA Institute for Research on Labor and Employment, and National Employment Law Project.

Center for Economic and Policy Research and Center on Wisconsin Strategy

The Wisconsin Retirement System is One of the Healthiest in the Country

Center for Economic and Policy Research

The Wage and Employment Impact of Minimum-Wage Laws in Three Cities

John Schmitt and David Rosnick

Economic Policy Institute

Farm Exports and Farm Labor: Would a Raise for Fruit and Vegetable Workers Diminish the Competitiveness of U.S. Agriculture?

Philip Martin

The State of Working America's Wealth, 2011: Through Volatility and Turmoil, the Gap Widens

Sylvia A. Allegretto

UCLA Institute for Research on Labor and Employment

An Opportunity Not Taken...Yet: U.S. Labor and the Current Economic Crisis

Chris Tilly

National Employment Law Project

65 Million “Need Not Apply”: The Case for Reforming Criminal Background Checks for Employment

Michelle Natividad Rodriguez and Maurice Emsellem

Political Economy Research Institute

Unemployment Benefits and Work Incentives: The U.S. Labor Market in the Great Recession

David R. Howell and Bert M. Azizoglu

Job Creation and Destruction Print
Written by Nicole Woo   
Thursday, 24 March 2011 16:00

As CEPR economists Dean Baker, Eileen Appelbaum and Mark Weisbrot have written here, here, here and here, work-sharing is a policy that has helped many countries keep their unemployment rates lower during the recession.

In a nutshell, Dean's work-sharing tax credit proposal would pay employers to keep workers' pay constant while reducing hours. For example, rather than laying off 10% of her employees, an employer would reduce all of her workers' hours by 10% and get a tax credit to keep their pay whole.

Some critics claim that recent (weak) job growth in the economy means that work-sharing is no longer needed. But this misses the fact that the reported jobs numbers are the *net* total of jobs created and lost. Since employers both hire and fire workers, work-sharing would help by preventing some of the millions of layoffs that happen every month.

Yesterday, the Census Bureau's Business Dynamics Statistics (BDS) released a report with a graph of job creation and destruction rates since 1980 that nicely illustrates this point.


As Census explains:

Figure 1 shows the BDS patterns of gross job creation and gross destruction rates for the U.S. private sector from 1980 through 2009.... It is evident from Figure 1 that there is always a swift pace of U.S. gross job creation and destruction. The difference between the two determines whether the economy expands or contracts (i.e., the difference is, by definition, equal to the net employment growth rate of the economy).

...It also is evident from Figure 1 that job creation and job destruction tend to move in opposite directions during expansions and contractions. All of the recessions since 1980 experienced a large increase in job destruction in one or more years, accompanied by a decline in job creation.

Structural Unemployment, Housing Lock, and Inter-state Migration Print
Written by Sairah Husain and John Schmitt   
Tuesday, 22 March 2011 15:00

Even former President Bill Clinton thinks that structural unemployment – unemployment stemming from a mismatch between job seekers' skills and job requirements – is an important cause of unemployment today. One oft-cited cause of structural unemployment is "housing lock," which happens when unemployed workers can't move to where the jobs are because they can't sell their houses in depressed housing markets.

However, according to a recent CEPR analysis of data from the January 2010 Displaced Workers Survey (DWS), staying rates for displaced workers in states where house-price declines were steepest have not been significantly different from those in states where there was little or no change in house prices.

If housing lock existed, we would expect to see the inter-state migration rates to fall after the housing bubble burst in 2007. But, as economists Greg Kaplan and Sam Schulhofer-Wohl recently showed, inter-state migration rates have not responded in any obvious way to the recession. Instead, they've continued on their same long-term path evident from 1996.



The CEPR Fix for Generational Inequity Print
Written by Dean Baker   
Monday, 21 March 2011 09:16

The NYT treated us to this column from a recent college grad complaining about the prospect that he will be faced with higher taxes to pay for his parents' and grandparents' Social Security and Medicare. The idea that our children and grandchildren are going to be poorer on average than we are is a regular theme of much of the budget reporting and advocacy work (think Peter Peterson funded enterprises) that we see regularly.

It is of course absurd on its face, as all economists and budget analysts know. Real per capita disposable income has risen at average rate of just under 2.0 percent year as shown in the chart below.


Source: Bureau of Economic Analysis.


All projections show that real per capita disposable income will continue to rise, meaning that future generations will on average be richer than we are today and much richer than our parents and grandparents' generations. Of course there is an issue of inequality, if most of the gains from growth go to the Goldman Sachs-Mark Zuckerberg types, then most today's children may not be much better off than their parents and grandparents, but that is an issue of inequality within generations, not between generations.



Firing Government Workers to Create Jobs Print
Sunday, 20 March 2011 08:42

The Republican proposals to slash the budget seem to work from the premise that if we fire government employees that we will induce private employers to hire more workers. This runs directly opposite to the idea behind the stimulus, that if the government stimulated demand by spending money and/or cutting taxes it would create more jobs. Interestingly, there is new research that indicates that the stimulus did raise employment. In fact, it seems that its effect was even larger than the Obama administration had predicted.

But the Republicans seem uninterested in these research findings. They instead claim that the best way to create private sector jobs is by having the government fire workers and spend less.

It is difficult to follow the logic of this view. If we think of a cross section of employers – hospitals, construction companies, car factories, retail stores and restaurants – which ones on this list do we think will hire more workers after a big round of federal budget cuts and layoffs?

Do we think that hospitals will suddenly rush out and hire more nurses and doctors because because of the National Institutes of Health is cutting funding for cancer research? Will Wal-Mart expand its sales staff because the government is laying off people from Head Start? These stories don’t seem very plausible.

Undoubtedly some of the government employees losing their jobs will be experienced and highly educated workers who private employers will be anxious to hire, but this will generally be for positions that would have existed in any case. These former government employees will simply be displacing other workers who would have held these jobs; there will not be new jobs in the private sector created for them.



OECD: Retire As I Say, Not As I Do Print
Written by Nicole Woo   
Friday, 18 March 2011 11:18

One of the most e-mailed articles on the New York Times webpage today is "Report Urges Even Higher Global Retirement Ages," about a new OECD report, “Pensions at a Glance 2011.”  The article summarizes the report:

Retirement ages in advanced economies will have to rise more than currently planned if countries hope to cover the increase in costs caused by aging populations, a global economic organization warned Thursday....

In a report, the organization said that by 2050, the average age in industrialized countries for drawing pensions would reach 65 for both sexes. This represents an increase of about 1.5 years for men and 2.5 years for women from current levels.

Question: When will the OECD bring their own pension scheme into accordance with their recommendations?  According to the OECD's salaries and benefits webpage, OECD staff can start receiving reduced pensions at the ripe old age of 51:

The maximum age for retirement is 65, but staff members are entitled from the age of 63, and after at least 10 years of service, to a pension amounting to 2% of the final basic salary per year of service up to a maximum of 70 per cent for 35 years of service. A reduced pension can be paid to retiring staff members from the age of 51.

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