Relevant and even prescient commentary on news, politics and the economy.

The Boundless Thirst for Surplus-Labor

September 22, 1956

November 7, 1960

QUESTION. This is from Mr. White, Warren, Mich.

What is your stand on the 32-hour workweek?

Vice President NIXON: Well, the 32-hour workweek just isn’t a possibility at the present time. I made a speech back in the 1956 campaign when I indicated that as we went into the period of automation, that it was inevitable that the workweek was going to be reduced, that we could look forward to the time in America when we might have a 4-day week, but we can’t have it now. We can’t have it now for the reason that we find, that as far as automation is concerned, both because of the practices of business and labor, we do not have the efficiency yet developed to the point that reducing the workweek would not result in a reduction of production. The workweek can only be reduced at a time when reduction of the workweek will not reduce efficiency and will not reduce production.

It’s inevitable… but we can’t have it.

Dick Nixon’s turnaround on the issue of the four-day workweek was epic. His original prediction of  a four-day week “in the not too distant future” came in a prepared speech, not in some unguarded moment of overheated campaign hyperbole. He even disclaimed that his “projections” were not “dreams or idle boasts” but were based on the continuation of President Eisenhower’s economic policies.

Following up on Nixon’s 1956 prediction, United Auto Workers president Walter Reuther responded with a telegram calling on the administration to outline a legislative program to achieve the shorter workweek. Nixon sent a telegram in reply and President Eisenhower endorsed Nixon’s reply in a press conference on September 28.

Nixon’s reply was that “mere artificial legislation” would not accomplish a four-day workweek. What was necessary was “dedicated joint efforts of labor, management, government and research.” For his part, Eisenhower “saw nothing wrong with” Nixon’s answer, which he thought also represented his own view that it would be “wonderful” to have more leisure time, but that “no man can say it is going to come about because I say so.” A month after his first comment, Nixon reaffirmed his expectation of a shorter workweek, based on partnership between government, business and labor.

The adamant wording of Nixon’s 1960 dismissal of the idea takes on added resonance in the context of Eisenhower’s earlier caveat that “no man can say it is going to come about because I say so.” Four years later, it “just isn’t a possibility… we can’t have it now. We can’t have it now… [because I say so].”

This wouldn’t be the first time that self-contradiction has appeared in the rhetoric of opposition to shorter work time. The Sandwichman has amassed the world’s largest collection of lame excuses offered by opponents. I assembled 21 of them and sorted them into eight categories having to do with productivity, new consumer wants, unsatisfied needs, labor costs, government policy, self-adjusting markets, history and inevitability, and the devious motives of proponents.

To be kind, the rationales are opportunistic. Mostly, they are jejune partial equilibrium statements invoked as if they were eternal verities. More bluntly, they are mendacious. Every single reason given for not shortening the hours of work is complemented by a contradictory reason for not shortening the hours of work. Damned if you do and damned if you don’t.

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Which Is More Important, China Or Syria?

by Barkley Rosser {originally published at Econospeak)

Which Is More Important, China Or Syria?

For the world as a whole and the US in particular, when it is put like that it is pretty obvious: China.  It has the world’s largest population, largest economy in PPP terms, a rising military, expanding interests around the world, including making territorial demands on several neighbors, not to mention being a nuclear superpower as well as cyberpower, and more.  Syria has a population of 22 million and an economy half the size of Puerto Rico’s.  It is not a major oil exporter.

However, last week it certainly looked like Syria was more important.  President Trump meets with President Xi at Mar-a-Lago, and almost nothing is reported about the meeting other than some vague remarks.  Important matters such as trade policy (the US has initiated an  anti-dumping suit against China in steel), South China Sea issues, North Korea nuclear testing issues (US has just sent a major naval group towards the place), issues over currency management (with Trump long charging China with currency manipulation, even though it is now widely accepted that while they did it in the past the Chinese are not doing so now), climate change (where China is becoming world leader on the international policy stage while Trump claims that global warming is a “Chinese hoax”).  They barely had a press conference, and what really went on in the meeting remains largely mysterious.

So, wow, much better to have the headlines and the commentaries taken up with the apparently one-shot firing of 59 Tomahawk missiles at a base in Syria, after apparently warning both the Russians and the Syrians we were going to do it, in response to a chemical attack in Syria that killed about 80 civilians, including some children.  This was certainly a bad attack, but it remains unclear if it was the Syrian military or some rebel groups, although probably it was the government, and if it was the government, it is unclear if it was done by some local commander on his own or with the explicit orders of President Assad, and if the latter, was it done with the foreknowledge of their allies, the Russians, and most especially President Putin.  The Russians and Iranians are claiming that the rebels did the chem weapons attacke and are denouncing the US attack.  But who really knows?  I sure as heck do not, and I  am not sure anybody in the US government knows either, especially given the 25 reasons that have since been given for this by various administration officials.

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Prime working age employment up, participation up (finally) – now how about wages?

by New Deal democrat

Prime working age employment up, participation up (finally) – now how about wages?

The March jobs report finishes the first quarter, which make it easier to update some labor participation trends, which, along with wages, has really lagged in this nearly 8 year old expansion.

In order to eliminate the issue of the huge Baby Boom generation retiring, and to a lesser extent college and graduate students, we have some good data on the prime age 25-54 demographic.

Historically, labor participation continues to decline after a recession ends, and picks up after the employment to population ratio does.  Put another way, people come off the sidelines and enter the workforces once the unemployment rate declines significantly.  Here’s the long term trend, comparing the YoY% change in each:

Now let’s zoom in on this expansion:

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Only So Much To Go ‘Round

The Sandwichman commented the other day on The Economist article, “Britain’s Green Party proposes a three-day weekend.” Regrettably, though, I didn’t pay much attention to their “rebuttal” to the alleged assumption of a fixed amount of work:

In fact, if people worked fewer hours, demand would drop, and so fewer working hours would be on offer.

I have seen stupid explanations before of why there is not a fixed amount of work. Layard, Nickell and Jackman argued that if work time reduction and redistribution succeeded in reducing unemployment, it would be inflationary and that would probably cause the central bank to intervene to re-establish the “non-accelerating inflation rate of unemployment.” That’s pretty stupid but not nearly as stupid as what The Economist article claimed as “fact.” Pardon me for repeating the whole dreadful argument:

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Thank God it’s Boilerplate!: The Economist is lumping its labour

by Sandwichman

Thank God it’s Boilerplate!: It’s Thursday and The Economist is lumping its labour

The Economist and Jonathan Portes are at it again. “Lump of labor! Lump of labor!” The occasion? A proposal for a four-day workweek announced by the U.K. Green Party at their convention this week in Liverpool.

 The Economist pretended to find “two problems” with the Greens’ proposal:

The Greens’ proposals encounter two problems. First, the theory. They argue that the reduced hours worked by some could be redistributed to others in order to lower underemployment. They thus fall prey to the “lump of labour fallacy”, the notion that there is a fixed amount of work to be done which can be shared out in different ways to create fewer or more jobs. In fact, if people worked fewer hours, demand would drop, and so fewer working hours would be on offer.

Second, the cost. Increased productivity could cover some of the costs of paying a five-day wage for a four-day week, suggests Sarah Lyall of the New Economics Foundation, a think-tank. She points to a Glasgow marketing company that did just that, and experienced a 30% leap in productivity. But that is an astonishing increase to expect across the board.

First the theory: why does the idea of redistributing work require a “fixed amount of work to be done”? I can cut up a pie in many different ways. I can also cut two, three, many pies in different ways. In what sense does redistribution imply a constant amount? It doesn’t.

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When you hear ‘growing our economy’ to pay for services

Via Naked Capitalism is a post by Pavlina R. Tcherneva of Bard College at New Economic Perspectives. Worth reading the whole post…

by Pavlina R. Tcherneva   (originally published at New Economic Perspectives)

Inequality Update: Who Gains When Income Grows?

Growth in the US increasingly brings income inequality.  A striking deterioration in this trend has occurred since the 80s, when economic recoveries delivered the vast majority of income growth to the wealthiest US households.  This note updates my original inequality chart (reproduced below) with the latest data. For earlier discussions, see e.g., here, here, and here.

Figure 2inequality2: bottom 90% vs. top 10%, 1949-2012 expansions (incl. capital gains)   (Figure 2 is a more accurate graph than the previous ‘Figure 1 it replaces)

The chart illustrates that with every postwar expansion, as the economy grew, the bottom 90% of households received a smaller and smaller share of that growth. Even though their share was falling, the majority of families still captured the majority of the income growth until the 70s. Starting in the 80s, the trend reverses sharply: as the economy recovers from recessions, the lion’s share of income growth goes to the wealthiest 10% of families. Notably, the entire 2001-2007 recovery produced almost no income growth for the bottom 90% of households and, in the first years of recovery since the 2008 Great Financial Crisis, their incomes kept falling during the expansion, delivering all benefits from growth to the wealthiest 10%. A similar trend is observed when one considers the bottom 99% and top 1% percent of households (for details, as well as complete business cycle data, see here).

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March jobs report: participation up, unemployment down, wage growth miserly

by New Deal democrat

March jobs report: participation up, unemployment down, wage growth miserly

HEADLINES:

  • +98,000 jobs added
  • U3 unemployment rate down 0.2% from 4.7% to 4.5%
  • U6 underemployment rate down 0.3% from 9.2% to 8.9%

Here are the headlines on wages and the chronic heightened underemployment:

Wages and participation rates

  • Not in Labor Force, but Want a Job Now:  up +284,000 from 5.597 million to 5.781 million
  • Part time for economic reasons: down -151,000 from 5.704 million to 5.553 million
  • Employment/population ratio ages 25-54: up +0.2% from 78.3% to 78.5%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.04 from $21.86 to $21.90,  up +2.3% YoY.  (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)

January was revised downward by -22,000. February was also revised downward by -16,000, for a net change of -38,000.

NOTE: Beginning next month, I will begin keeping track in the headlines of both manufacturing and mining job growth.  Better news in these numbers was a central part of Trump’s campaign, and after a 3 month grace period, I think it is fair to begin to see how well – or poorly – he is keeping that promise.

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The Overseas Cash Grab

NYT Dealbook points to a how the 2 trillion dollar overseas money can come “home” and how money is spent.  2005 comes to mind the last time repatriation of “overseas money” comes to mind.

Linda Beale Repatriation holiday lobbying – Money Speaks and More on repatriation.

Taxprof blog here and Senate report here.

The Overseas Cash Grab (from Dealbook)

Corporate chiefs in the United States have bemoaned for years the taxes that they would face if they brought home more than $2 trillion in cash kept overseas.

They may soon stop complaining. President Trump and the Republican-controlled Congress are widely believed to be open to lowering taxes on funds that companies bring back.

For lawmakers, the idea of a tide of funds coming home creates visions of infrastructure investment and job creation. But on Wall Street, it has set off hopes for another spending priority: mergers and acquisitions. And deals often lead to job losses.

The differing visions come amid a broader debate about whether cutting taxes spurs investment or leads to higher incomes and more jobs.

Among other things, there are questions about the ways people respond to lower taxes. If your tax is lowered, would you strive to be more productive at work? Or would you take advantage of a higher income that came at no extra effort?

Either way, the more pressing issue may be at whether a tax overhaul can happen at all.

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Jamie Dimon on labor force participatioin and disability

by New Deal democrat

Jamie Dimon on labor force participation and disability

First of all, sorry for the light posting this week. I’ve had some urgent business I need to attend to irl.

But I wanted to post this for future reference. Via Business Insider, this is from Jamie Dimon’s letter to stockholders:

If the work participation rate for this group [men ages 25-54] went back to just 93% – the current average for the other developed nations – approximately 10 million more people would be working in the United States. Some other highly disturbing facts include: Fifty-seven percent of these non-working males are on disability ….

I don’t know where he got the 57% statistic from, but if it is true it is potent evidence that the main factor behind the 60 year long decline in prime age labor force participation by men is an increase in those on disability, probably due to both the expansion of the program, and better longevity and diagnostics — and probably also tied in to opiate addiction as well.

cross posted with Bonddadd blog

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Could Incompetence Lead To Reelection?

by Barkley Rosser  (originally published at  Econospeak)

Could Incompetence Lead To Reelection?

I know, I know, it is way too early to talk about the presidential election of 2020, so maybe this is more relevant to midterms, and more likely it is just something merely momentary.  Nevertheless, it occurs to me that the increasingly apparent incompetence of our current president could possibly play into helping him get reelected in 2020.

His incompetence is manifesting itself substantially in his inability to achieve many of the things that he campaigned on most loudly, including repealing and replacing Obamacare, introducing massive trade protectionism, sharply cutting taxes for the rich, and sharply stopping immigration. Of course his new administration, which included probably the most incompetent, insane, and corrupt set of cabinet secretaries and other officials in US history, are doing and will be doing things that will be terribly damaging to American society on many fronts, including the environment, education, womens’ rights, the arts, financial market stability, minority rights, and a long list of others, with many of these very important.  The Trump administration is doing and will do a great deal of damage.  But none of  these were really red meat headline issues in his campaign.  They were not the items that got his angry mobs at rallies chanting and yelling and more generally making public fools of themselves while scaring much of the rest of the population.  Those issues were the ones I mentioned up front, the ones that Trump seems so far not to be actually doing much about after all the ranting and raving.

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