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Consumer Reports: Obamacare reduced bankruptcy rate

A new article at consumerreports.org suggests that the Patient Protection and Affordable Care Act* (PPACA) played a substantial role in the decline of annual personal bankruptcies that we have seen since the high of 1.5 million in 2010.

As I showed several years ago, international bankruptcy data support the oft-heard claim that medical bills make up one of the biggest, if not the biggest, causes of personal bankruptcy. That is, if the United States has a bunch of medical bankruptcies and other countries don’t, all other things equal you would expect the U.S. to have a higher overall bankruptcy rate than other countries. And the only article I was able to find on this showed that it was true: In 2006, the U.S. had a rate (6000 per million population) that was twice Canada’s (3000 per million), which in turn far outstripped #3 Germany (1200 per million). The U.S. and Canadian rates have long been the highest because they had the most debtor-friendly bankruptcy systems, so debtors took advantage of it when they could.

Canada and the U.S. had similar rates in 1982, but thereafter the U.S. rate increased substantially more rapidly than Canada’s did. As this period was also marked by U.S. health care costs outstripping those of other OECD countries, this is definitely evidence that medical bills were contributing to the higher U.S. bankruptcy rate.

Now, as suggested by Consumer Reports, the increase in insurance coverage rates and the many consumer protections due to the Affordable Care Act are contributing to a falling bankruptcy rate. Certainly, part of the fall is due to the passing of the worst part of the Great Recession, but the numbers are still striking.

A chart showing how the number of personal bankruptcy cases dropped after the ACA was introduced.
As the article points out and the chart above emphasizes, protections that surely reduced bankruptcy rates were contained in even the initial phase of the ACA. In 2011, the Obama administration rolled out the ban on yearly and lifetime limits, guaranteed coverage for pre-existing conditions, and implemented the rules allowing adult children to remain on their parents’ policies until they were 26. By the time all ACA provisions were in effect in 2014, there was already a decline of over 600,000 bankruptcies per year. In the next two years, bankruptcies declined by a further 160,000 per year.

With the possibility that the American Health Care Act (AHCA) could reverse many of those protections, the conclusion is inescapable that medical bankruptcies will once again increase. Just how much, of course, depends on the particulars after (and if) the bill goes through the Senate, but this new study shows us just how much we have gained, and how much we have at risk.

* I use the full name of the law because both the patient protection and affordability aspects of the legislation contributed to this outcome.

Consumer Reports has not responded to my request to use the chart. It will be removed if so requested.

Cross-posted from middleclasspoliticaleconomist.com.

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Strong growth in labor force participation is correlated with weak real wage growth

by New Deal democrat

Strong growth in labor force participation is correlated with weak realwage growth

Prof. Jared Bernstein has a piece in the Washington Post today (and at his blog) noting that, even with much improved unemployment and underemployment rates, wage growth is still subpar.

One item I wanted to add to the conversation is the inverse correlation between the prime age labor force participation rate and wage growth.  As I I’ve pointed out several times in the last few months, most recently on Friday, more than 1% of the prime working age population has left the sidelines and entered the workforce since the beginning of 2016. This surge of participation has only been equalled twice in the last 30 years — in 1989 and 1995, as shown in the graph below:


In terms of supply and demand, this surge in participation means a big increase in the supply of potential workers. If the demand for labor has not changed materially, then we ought to expect lower wages to be paid to the new workers hired than would otherwise be the case.

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Declinable medical conditions

Lifted from Alternet:

Which ailments are on the list of preexisting conditions that can drive up prices for coverage? The Kaiser Family Foundation catalogs “so-called declinable medical conditions” before the ACA.

  • AIDS/HIV
  • Alcohol or drug abuse with recent treatment
  • Alzheimer’s/dementia
  • Anorexia
  • Arthritis
  • Bulimia
  • Cancer
  • Cerebral palsy
  • Congestive heart failure
  • Coronary artery/heart disease, bypass surgery
  • Crohn’s disease
  • Diabetes

More listed below the fold.

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Immiseration Revisited: The four phases of working time

Is there a neo-classical theory of immiseration?
Below is the marvelous Chapman hours of labor diagram (follow the link for a more detailed explanation). It looks complicated but it really only contains four curves representing, roughly, long-term and short-term productivity, income [correction: actually income minus the value of leisure foregone] and fatigue. But there is more to it than Chapman realized or that I have previously noticed.

The context for this diagram is William Stanley Jevons’s discussion of work effort in his Theory of Political Economy:

A few hours’ work per day may be considered agreeable rather than otherwise; but so soon as the overflowing energy of the body is drained off, it becomes irksome to remain at work. As exhaustion approaches, continued effort becomes more and more intolerable.

The “L” curve in Chapman’s diagram echoes the lower curve in Jevons’s figure VIII, presented to illustrate the “painfulness of labour in proportion to produce”:

In this diagram the height of points above the line ox denotes pleasure, and depth below it pain. At the moment of commencing labour it is usually more irksome than when the mind and body are well bent to the work. Thus, at first, the pain is measured by oa. At b there is neither pain nor pleasure. Between b and c an excess of pleasure is represented as due to the exertion itself. But after c the energy begins to be rapidly exhausted, and the resulting pain is shown by the downward tendency of the line cd.

Chapman was primarily concerned with the length of the day optimal for output, which would be measured on the X axis of his diagram by the distance Ob. The optimal working day from the workers’ perspective, however, would be On and would terminate at the point where the marginal income from another time unit of work would just equal the marginal pain of working.

But the intervals from n to i and from i to b add another dimension to the diagram that has been overlooked. From n to i the worker gives up proportionally more in work effort than he or she receives in extra income. Finally, during the interval from i to b, workers endure additional pain in exchange for a decrease in total income. Beyond b, the incomes of both workers and employers are reduced.

The four phases of working time can be labeled cooperation, exploitation, immiseration and ruin. The incentive for employers is to progress inexorably toward the last phase unless regulated by legislation or collective bargaining. The following animation illustrates the contrast between the workers’ gains (green) and losses from lengthening of the working day and the employers’ gains (blue) and loses.

The conflict between labor and capital over the length of the working day can also be illustrated less kinetically by the following close-up of the X axis from Chapman’s diagram. The green arrows indicate income gains, the red arrows income losses or pain cost:

The bottom line, showing the social aggregate, indicates that the income gain for capital at the optimal point b for output is essentially a transfer of income from labor, which also has to invest additional work effort to accomplish that transfer. Up to the output optimum point there is a small net surplus of income that is, however, dwarfed by the quantity of work effort pain cost required to generate it. This does not even qualify for the Kaldor-Hicks compensation criteria. From capital’s perspective, however, the small net return and larger transfer appears to be all simply gain from expanded output — growth is good! (Just don’t look under the hood).

Chapman gave no indication of being aware of the immiseration implications of his analysis. John Hicks gave even clearer indication that he was not aware of the immiseration implications of Chapman’s analysis. Hicks observed that “it had never entered the heads of most employers that it was at all conceivable that hours could be shortened and output maintained” but asserted that trade unions “will not usually need to exert any considerable pressure in order to bring about a reduction” in circumstances where the working day exceeded the output optimum. As if workers should be content to be ground down into wretched poverty provided they didn’t drag their employer down with them! The output optimum is not a good place on the X axis for workers to be.

Only the Marxist economist, Maurice Dobb, appears to have noticed the importance of the relationship between wages and “the worker’s expenditure of energy and his ‘wear and tear.’”

What was implied in the economists’ retort to the advocates of the so-called Work-Fund leads to the apparent paradox that the more the workers allow themselves to be exploited, the more their aggregate earnings will increase (at least in the long run), even if the result is for the earnings of the propertied class to increase still faster. And on this base is erected a doctrine of social harmony between the classes. But it does not follow that the workers will prefer to be exploited to a maximum degree, or that attempts to limit this exploitation are based on fallacious reasoning.

There is no scale on the Chapman diagram and this turns out to be a useful feature. Different occupations, technologies, individuals and wage levels generate a variety of scales. One could conceive of aggregating these scales either in an overall average or clustered in quintile or decile groups. The latter procedure would be valuable in exploring whether a substantial number of workers were being pushed into conditions of immiseration even though the overall average was still safely in the exploitation range.

It is worth remarking that based on the relative length of the segments in Chapman’s diagram, the optimal length of the day for workers would be less that 72 percent of the optimal output day. For example, if the optimal length of the workweek for output was 48 hours, the optimal week for workers would be 34.4 hours. Of course Chapman’s diagram is not based on empirical measurement but Chapman had investigated in depth the extensive statistical and experimental data available at the time he was formulating his theory, so, while his proportions cannot be assumed to be precise they probably represent an informed impression — a ballpark estimate — of general relationships.

In conclusion, yes, there is a neo-classical immiseration theory. The economists who propounded it apparently were unaware that it was such a theory. By extension, that immiseration theory is a crisis theory. There is no built-in mechanism of negative feedback from prices that militates against the passage from the immiseration phase to the ruin phase. Hicks assumed that a “very moderate degree of rationality on the part of employers will thus lead them to reduce hours to the output optimum as soon as Trade Unionism has to be reckoned with at all seriously [emphasis added].” But by the time exploitation has progressed to the immiseration phase, trade unionism doesn’t have to be “reckoned with at all seriously” by employers. The trade unions would already have been defeated somewhere between point n and point b on the Chapman diagram’s X axis.

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Scenes from the employment report

by New Deal democrat

Scenes from the employment report

As I described in my detailed post on the April jobs report, below, almost everything moved in the right direction, and significantly so.  Let me lay out a few graphs to show the longer-term stronger and weaker points.

In the good news department, the U6 underemployment rate has been falling at a good clip in the last few months, and at 8.6%, is about 0.6% from representing a reasonably “full” employment situation:


Part of the U6 calculation is those employed part time for economic reasons.  This isn’t down to normal yet, but continues to make good progress:

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Messing Up Badly In Korea

by Barkley Rosser

Messing Up Badly In Korea

In many areas where many were worried that President Trump would do this that or the other crazy thing he has held back for one reason or another.  But one very serious location where he has recently made a total botch of things has been in Korea, a series of unforced errors.  Of course before he got into it in Korea it looked like he might get in a shooting war with China, but then he decided that Xi Jinping is a great guy after the Chinese paid his family gobs of money and Trump realized that he needed to make nicey nice with Xi in order to deal with unquestionably serious problem of the North Korean nuclear weapons program, possibly the most dangerous situation in the world right now.

So then he proceeded to talk tough on North Korea, making noises about starting a war with them if they tested a nuclear weapon (which they did not, making a failed rocket test instead) with this supposedly being backed up by him supposedly sending the USS Carl Vinson to back up his threats, only to have it come out a few days later that the Vinson was sailing off into the Indian Ocean.  I gather it has finally shown up in the neighborhood, but now Trump has messed up with longtime US  ally South Korea, the only party involved in this arguably more important than China even.

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April jobs report: a blowout — except (sigh) for wages

by New Deal democrat

April jobs report: a blowout — except (sigh) for wages

HEADLINES:

  • +211,000 jobs added
  • U3 unemployment rate down -0.1% from 4.5% to 4.4%
  • U6 underemployment rate down 0.3% from 8.9% to 8.6%

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

Wages and participation rates

  • Not in Labor Force, but Want a Job Now:  down -74,000 from 5.781 million to 5.707 million
  • Part time for economic reasons: down -281,000 from 5.553 million to 5.272 million
  • Employment/population ratio ages 25-54: up +0.1% from 78.5% to 78.6%
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.06 from $21.90 to $21.96,  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.)

Holding Trump accountable on manufacturing and mining jobs

Trump specifically campaigned on bringing back manufacturing and mining jobs.  Is he keeping this promise?

  • Manufacturing jobs rose by +6,000 vs. the last severn years of Obama’s presidency in which an average of 10,300 manufacturing jobs were added each month.
  • Coal mining jobs rose by +200 vs. the last severn years of Obama’s presidency in which an average of -300 jobs were lost each month

February was revised upward by +13,000. March was revised downward by -19,000, for a net change of -6,000.

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were positive with one exception.

  • the average manufacturing workweek rose +0.1 from 40.6 hours to 40.7 hours.  This is one of the 10 components of the LEI.
  • construction jobs increased by +5,000. YoY construction jobs are up +173,000.
  • temporary jobs increased by +5,800.
  • the number of people unemployed for 5 weeks or less increased by +1,000 from 2,334,000 to 2,335,000.  The post-recession low was set nearly 18 months ago at 2,095,000.

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