Tag: jobs

$2 trillion: The Infrastructure Answer To What Question?

Media reports suggest President Trump and Democratic leaders have agreed in principle to a $2 trillion infrastructure plan “to upgrade the nation’s highways, railroads, bridges and broadband.”

Minor details such as how to finance it have yet to be agreed. White House Chief of Staff Mick Mulvaney doubts the deal will come to fruition anyway, given differences between the parties on environmental regulations surrounding new projects.

But it’s difficult to think of a worse way to make major policy than to dream up a big round number and then work backwards in deciding how money is spent.

Indeed, if $2 trillion is the answer, then what, exactly, is the economic question?

Is $2 trillion the amount needed to invest in targeted public goods that the market would not or could not provide? Is $2 trillion the amount the politicians think is needed for specific projects to enhance long-term economic growth? Is $2 trillion the amount politicians feel is necessary to repair existing infrastructure? Is $2 trillion what they feel the federal infrastructure contribution needs to be to alleviate negative externalities such as pollution? Or is $2 trillion maybe what they think is necessary to create shovel ready jobs to minimize unemployment?

Judging by the joint post-meeting statement from Speaker Pelosi and Senator Schumer, the Democrats have no coherent answer here. Within their 224-word statement, they outlined no fewer than 9 distinct policy aims or ambitions that any infrastructure package would be trying to meet:

  1. “creating jobs immediately”
  2. “bolstering commerce”
  3. “advancing public health with clean air and clean water”
  4. “improving the safety of our transportation”
  5. “expanding broadband to…underserved areas”
  6. “being for the future”
  7. paying “the prevailing wage”
  8. involving “women, veteran and minority-owned businesses in construction”
  9. addressing needs in “every congressional district”

Whatever the economic case for a major infrastructure program (and for my thoughts on that, read here), it should be obvious that these aims contradict one another.

Lots of projects with high returns take extensive planning and won’t “create jobs immediately.” Investment in safety might come at the expense of other projects that bolster commerce. Paying “the prevailing wage” will likely leave fewer resources to address needs in more districts. Selecting contractors based on the demographics of the owners might trade-off the safety quality of the job. Focusing on safety upgrades for existing infrastructure means fewer resources for “the future.” Addressing needs in every district and expanding rural broadband is almost certainly not the best way to bolster overall commerce. I could go on.

This plethora of aims is grist to the mill for a conclusion I reached back in 2017:

The sad truth is that infrastructure investment through the political process rarely prioritises long-term growth. Other considerations dominate, whether electoral advantage or regeneration of an area – even when market signals point to the need to expand booming regions.

And:

The conflicted role of being both the promoter of a project and being responsible for examining its failures and risks leads politicians to make over-optimistic claims about a scheme’s benefits relevant to costs.

In principle, smart investments in infrastructure can sometimes improve economic welfare. But when huge amounts of federal money is seen as a communal pot for a host of social, environmental, local and “make work” objectives, the chances that such money will be spent wisely looks slim.

Another Lesson from Bastiat: So-Called Employment Protection Legislation Is Bad News for Workers

Frederic Bastiat, the great French economist (yes, such creatures used to exist) from the 1800s, famously observed that a good economist always considers both the “seen” and “unseen” consequences of any action.

A sloppy economist looks at the recipients of government programs and declares that the economy will be stimulated by this additional money that is easily seen, whereas a good economist recognizes that the government can’t redistribute money without doing unseen damage by first taxing or borrowing it from the private sector.

A sloppy economist looks at bailouts and declares that the economy will be stronger because the inefficient firms that stay in business are easily seen, whereas a good economist recognizes that such policies imposes considerable unseen damage by promoting moral hazard and undermining the efficient allocation of labor and capital.

We now have another example to add to our list. Many European nations have “social protection” laws that are designed to shield people from the supposed harshness of capitalism. And part of this approach is so-called Employment Protection Legislation, which ostensibly protects workers by, for instance, making layoffs very difficult.

The Hidden Costs of ObamaCare’s Millennial Mandate

Guests mingle during the second annual Future of America gala at the House of Sweden in Washington, D.C., U.S., on Friday, Oct. 3, 2014. "Our guests are not people that are traditionally struggling with unemployment," said David Pattinson, founder of David Pattinson's American Future, a Washington-based nonprofit, which aims to get the millennial generation more fully employed. Photographer: T.J. Kirkpatrick/Bloomberg

There is a current running through the ObamaCare debate that goes something like this:

Every other advanced country provides health insurance to all its citizens for a fraction of what Americans spend on health care. ObamaCare emulates what those countries do. Anyone who complains about ObamaCare increasing premiums or imposing other costs is therefore a right-wing nut who doesn’t understand that universal coverage results in lower spending, not higher spending.

This line of reasoning, so to speak, leads supporters to believe ObamaCare is a free lunch. Their ignorance is not accidental. MIT health economist and ObamaCare architect Jonathan Gruber helpfully explained some years ago that he and his co-architects deliberately designed the law to hide its costs and make the benefits seem like a free lunch.

ObamaCare’s “Millennial mandate”—the requirement that employers who offer health coverage for employees’ dependents continue to offer such coverage until the dependents turn 26 years old—is one of those supposed free lunches. This mandate’s benefits unquestionably come at a cost. Expanding health insurance coverage among adults age 19-26 leads them to consume more medical care. When those people file insurance claims, health-insurance premiums rise. Yet ObamaCare does an amazing job of hiding those costs from voters.

Does ObamaCare impose a special tax that the IRS collects to pay for that extra coverage? No. That would be far too transparent. The cost just gets added to your premiums.

Does ObamaCare require employers to include a line-item on your premium payments, to show you how much this additional coverage is costing you? Absolutely not. That, too, would make the costs dangerously noticeable. The additional cost just gets thrown onto the pile, hidden among the costs of all the other mandated coverage you don’t want, and the coverage you actually do want.

Maybe workers see their premiums rising, and are merely ignorant of the fact that the Millennial mandate is part of the reason? Nope. ObamaCare hides the cost further still. Explaining how requires a little bit of labor economics.

Ted Cruz, PolitiFact, ObamaCare & Jobs

I have two posts up at Darwin’s Fool on ObamaCare’s impact on jobs. In one post, I critique Politifact’s ruling that GOP presidential candidate (and Iowa caucus winner) Sen. Ted Cruz (TX) is a liar for claiming that ObamaCare is a job-killer. An excerpt:

In their rush to label Ted Cruz a liar, PolitiFact ignored economic theory, ignored economic consensus, ignored problems with the evidence they had amassed, ignored that some of the evidence they collected supports Cruz, ignored reams of anecdotal evidence, and dismissed Congressional Budget Office projections based on nothing more than a subjective and arbitrary distinction PolitiFact themselves invented.

In the other post, I offer a compilation of media reports about employers who have eliminated jobs or switched to part-time hiring. 

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How Will the Transatlantic Trade and Investment Partnership Affect U.S. Jobs?

Today’s Cato Online Forum essay comes from economist Laura Baughman, who laments the typical methodological approaches to estimating relationships between trade agreements and jobs, pointing out how those approaches seem to be used to validate a priori positions, either pro- or anti-trade, rather than reveal best estimates.  While economists are better at estimating the relationships between trade agreements and output or between trade agreements and trade flows, Baughman explains that if the likely impact of on jobs is sought, there is a more objective approach to take.  And the results of that method suggest that “it will be hard to argue that [TTIP] will not be a job ‘winner’ for the United States.”

Read it. Provide feedback.  And sign up for the Cato TTIP conference on October 12.

 

The Great Job-Creating Machine

As the Guardian recently reported, technology has created more jobs than it has destroyed, and the new jobs it has created have been of higher quality. Technology eliminated many difficult, tedious, and dangerous jobs, but this has been more than offset by a rise in the caring professions and in creative and knowledge-intensive jobs, resulting in a net increase in jobs.  The sectors to lose the most jobs have been agriculture and manufacturing, which are both difficult and dangerous, while work opportunities in medicine, education, welfare, and professional services have become more abundant. (For example, there are more teachers per student, improving student-teacher ratios, and there are also more physicians per person than in the past).

In 1980, almost a quarter of the world’s employment was still in agriculture. Now, only around 15% of the world’s workers are engaged in agricultural labor. Yet we are feeding more people, undernourishment is at an all-time low, and food is becoming less expensive. Technological advances liberated humanity from toiling in fields by mechanizing many processes and boosting productivity, allowing more food to be produced per hectare of land, and freeing hundreds of millions of people to pursue less grueling work.

The elimination of so many unsafe jobs in manufacturing and agriculture means fewer worker deaths. According to data from the International Labor Organization, from 2003 to 2013, the number of work fatalities in the world decreased by 61% (i.e., over 20,500 fewer deaths). This occurred even as the world population grew by over 700 million over the same time period. If the most dangerous thing you have to face at work is the threat of a paper cut, you quite possibly have technological innovation to thank for that.

Even if in the future robots steal some jobs, advancing technology will likely make several higher-quality jobs available for every job lost. As the Guardian article cited earlier says, technology has proven to be a “great job-creating machine,” eliminating toilsome work but bringing into existence more—and better—opportunities than it takes away.

But note that behind every machine, there lurks human ingenuity. As Matt Ridley wrote in his book The Rational Optimist:

It is my proposition that the human race has become a collective problem-solving machine and it solves problems by changing its ways. It does so through innovation driven often by the market.

Learn more about what market-driven technological innovation has done to improve the state of humanity at HumanProgress.org.

Washington Post Half-Heartedly Seeks Clarity About Export-Import Bank Jobs Claims

It was good of the Washington Post Editorial Board to raise questions yesterday about the veracity of the “jobs-created-by-Export-Import-Bank-policies” claims proffered by the Bank’s supporters. I just wonder whether the editorial pulled its punches where a reporter on assignment or a more inquisitive journalist would have delivered an unabashed blow to the credibility of the Bank’s primary reauthorization argument: that its termination will lead to a reduction in U.S. exports and jobs.

Kudos to the Post for raising an eyebrow at the Bank’s claims of “jobs created” or “jobs supported” by Ex-Im financing:  

[W]hen it comes to jobs, well, just how rigorous are [Ex-Im’s] estimates, really? Congress ordered a study of that very question when it last reauthorized Ex-Im in 2012. In May 2013, the Government Accountability Office (GAO) produced its verdict: Meh.”

“GAO noted that Ex-Im must speak vaguely of “jobs supported,” rather than concretely of jobs created, since its methodology cannot really distinguish between new employment and retained employment. To get a number for “jobs supported,” which includes both a given firm and that firm’s suppliers, Ex-Im multiplies the dollar amount of exports it finances in each industry by a “jobs ratio” (calculated by the Bureau of Labor Statistics).

Using that approach, Ex-Im estimates an average of 6,390 jobs are “supported” by every billion dollars of exports financed. The Post is right to note the GAO’s conclusion:

These figures do not differentiate between full-time and part-time work and, crucially, provide no information about what might have happened to employment at the firms in question, or others, if the resources marshaled by Ex-Im had flowed elsewhere in the economy.

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