Kevin Drum

If You Pay Them, They Will Come

| Wed Oct. 8, 2014 8:23 PM EDT

Here's something you don't see every day: a news article about employers who desperately want to hire more people but just can't find workers with the right skills. Oh wait. You do see that every day. What you don't see are articles which make it clear that a willingness to pay higher wages is all it takes to fix this problem:

Manufacturing wages are rising at a rapid clip in some major industrial states as shortages of certain skills and gradually falling unemployment rates force more companies to pay up to attract and retain workers.

....“What we mainly need is welders,” said Terry McIver, chief executive and owner of Loadcraft Industries Ltd., a maker of parts for oil rigs in Brady, Texas....Dewayne Roy, head of the welding program at Mountain View College in Dallas, said he recently had a waiting list of about 250 people seeking to enroll. One student, Logan Porter, 22, started working for a metal-fabrication shop in the Dallas area in February and is putting in 55 to 60 hours a week. He earns $17 an hour, but with time and a half for overtime, his weekly take-home pay typically exceeds $800. “I love the work,” he said.

....Steve Van Loan, president of Sullivan Palatek Inc. in Michigan City, said job hopping is becoming more of a problem. “They get an offer for more money across town, and they’re gone,” he said. Wages on average at his firm, which makes compressors that power drills and other tools, are rising 4% to 5% this year, compared with 2% to 3% in recent years, Mr. Van Loan said.

How about that? If you pay more, you attract workers with the right skills. If you pay more, training programs start to fill up. If you pay more, you can steal folks away from your competitors.

Pay is the great equalizer. There are always going to be shortages of specific skills in specific times and places. But a long-term nationwide shortage? That just means employers aren't willing to pay market wages. They should read their Milton Friedman. If you pay them, they will come.

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Jon Stewart Would Have Been a Terrible Host of "Meet the Press"

| Wed Oct. 8, 2014 5:02 PM EDT

Gabriel Sherman says that Chuck Todd wasn't NBC's first choice to replace David Gregory as host of Meet the Press:

Before choosing Todd, NBC News president Deborah Turness held negotiations with Jon Stewart about hosting Meet the Press, according to three senior television sources with knowledge of the talks. One source explained that NBC was prepared to offer Stewart virtually “anything" to bring him over. "They were ready to back the Brinks truck up," the source said. A spokesperson for NBC declined to comment. James Dixon, Stewart's agent, did not respond to multiple requests for comment.

....Though not a traditional journalist, Stewart can be a devastatingly effective interrogator, and his Meet the Press might have made a worthy successor to Tim Russert’s no-bullshit interviews.

Help me out here, folks. Who's crazy: me or NBC (and Gabriel Sherman)? This whole thing sounds nuts to me because Jon Stewart is a terrible interviewer. He's congenitally unprepared for any serious policy discussion and frequently creates awkward moments where he literally seems to have run out of anything to say even though he's still got a couple of minutes left before the next ad break. When he's shooting the breeze with other comedians, his interviews can be pretty funny. But when he's talking to serious folks? It's almost painful to watch.

Am I wrong here? Am I missing something? Is Stewart really "devastatingly effective" and I'm just too shallow to see it?

The Great Wage Slowdown of the 21st Century Is About a Lot More Than Just Wages

| Wed Oct. 8, 2014 2:47 PM EDT

David Leonhardt writes about why the economy looks so bad even though unemployment has fallen below 6 percent:

American workers have been receiving meager pay increases for so long now that it’s reasonable to talk in sweeping terms about the trend. It is the great wage slowdown of the 21st century.

Yes indeed. This started around the year 2000 and hasn't changed since. But as I've written before, that's not all that changed around the year 2000. Here's a more comprehensive list:

  1. Median income growth slowed in the mid-70s, but it stalled almost completely around 2000 and hasn't recovered since.
  2. Real-world investment opportunities began stagnating around 2000.
  3. Labor markets slackened permanently starting around 2000.
  4. The employment-population ratio among women plateaued around 2000 and continued its long-term decline among men.
  5. The labor share of income in the nonfinancial sector dropped steeply starting in 2000 and never recovered.
  6. The number of jobs created by new businesses peaked around 2000 and has been falling ever since.
  7. State and local government output suddenly stagnated around 2000.
  8. Globally, the energy intensity of GDP stopped growing around 2000, which means world economic growth became limited by energy growth.
  9. Household debt inflected upward in 2000, and kept growing until the Great Recession put a stop to it.

I call this the Inflection Point of 2000, and it seems like too many things, all happening at about the same time, to be mere coincidence. In my piece last year about our robotic future, I suggested that much of it might be the barely visible early signs of a more automated economy, and I still suspect that may be part of what's going on. But I don't know for sure, and the evidence on this score is distinctly fuzzy.

And yet. It sure feels like something changed right around 2000. But what?

Immigration, ISIS, and Ebola: A Perfect Right-Wing Storm

| Wed Oct. 8, 2014 12:31 PM EDT

Here is Republican congressman Tom Cotton, currently running for a Senate seat in Arkansas:

Groups like the Islamic State collaborate with drug cartels in Mexico who have clearly shown they’re willing to expand outside the drug trade into human trafficking and potentially even terrorism.

And here is Republican congressman Duncan Hunter, currently running for reelection in California:

At least ten ISIS fighters have been caught coming across the border in Texas.

You will be unsurprised to learn that neither of these things is true. They were just invented out of whole cloth, much like Rep. Phil Gingrey's fear that immigrant children might be bringing Ebola across the border. And I think we can expect more of it. The confluence of immigration, ISIS, and Ebola is like catnip to the Republican base. It appeals to their deepest fears. It demonstrates how feckless President Obama is. And it confirms that we need to be far more hawkish about national security. What's not to like?

You Should Avoid Doctors and Judges in the Late Morning

| Wed Oct. 8, 2014 10:39 AM EDT

We already know that judges become considerably more severe in their sentencing as the morning wears on and they get tired and hungry. Today, Susannah Locke passes along a new tidbit of research showing that doctors prescribe more antibiotics as the morning wears on. Why? Probably because they're making poorer decisions thanks to growing fatigue, or perhaps giving in more easily to patients who are demanding a damn pill even if it won't do any good.

So here's your choice. If you want your doctor to do something you think they probably don't want to do, make an appointment for late morning or late afternoon. There's a better chance they'll just give up and give you what you want. On the other hand, if you actually want a proper diagnosis, your best bet is early morning or, in a pinch, right after lunch.

This has been your latest installment of news you can use. I wonder if this advice also applies to bloggers?

Is Another Housing Bubble Sneaking Up On Us?

| Tue Oct. 7, 2014 11:52 PM EDT

Nick Timiraos points to an interesting IMF chart today. It breaks the world into two sorts of countries. The first, which includes the US, UK, Spain, and others, saw a big housing bubble during the aughts and a big housing bust during the Great Recession. The second, which includes Canada, Germany, and others, had only a modest runup in housing prices during the aughts and a correspondingly small decline during the Great Recession.

So what's happening now? Well, countries that already had a housing bubble continue to struggle. Housing prices today are more than 20 percent below their 2007 peak. And the other countries? Well, they're having their own housing bubble now, with prices nearly 30 percent higher than their previous peak.

Is this a problem? Maybe. With the exception of China, the IMF reckons that housing prices in the rebounding economies are still only modestly overvalued. Still, it sure looks as though there was a big pot of money chasing returns in one set of countries in the aughts, contributing significantly to the housing bubble. Now, with those countries no longer looking very attractive, the pot of money has moved on. More sensible controls on mortgages are supposedly what saved these other countries from the mid-aughts bubble, but I wonder if that's enough now that lots of money is apparently sloshing its way in their direction? Stay tuned.

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Does Amazon Have to Pay Workers for Going Through Its Security Lines? The Supreme Court Is About to Decide

| Tue Oct. 7, 2014 3:00 PM EDT

Here's the newest front in the war to pay low-wage workers even less:

The latest battle, which goes before the U.S. Supreme Court on Wednesday, was launched by former warehouse workers for Amazon.com, who argue they should have been paid for the time they spent waiting in security lines after their shifts....Those security lines could take more than half an hour, the workers said, and that was time when they should have been getting paid.

....Amazon said it would not comment due to the pending litigation, but a spokesperson said the "data shows that employees walk through post shift security screening with little or no wait."

Well now. If employees truly walk though security screenings with "little or no wait," then it wouldn't cost Amazon anything to pay them for that time. So why are they fighting this? Perhaps it's because Amazon is lying. Sometimes the wait really is substantial, and Amazon doesn't want to (a) pay more security guards to speed up the lines or (b) pay workers for the time spent in slowpoke lines.

So this really does seem like a simple case. If Amazon is telling the truth, they should have no objection to paying employees for time spent in line. If they're lying, then they should be given an incentive to speed up the security process—and the best incentive I can think of is to pay employees for time spent in line. Either way, the answer is the same: pay employees for time spent in security lines.

Needless to say, the Supreme Court will figure out a way to spend a hundred pages making this more complicated so that they can justify a different ruling. After all, it wouldn't do to allow workers to get above their stations, would it?

Chart of the Day: Overweight Teenagers Earn Less as Adults

| Tue Oct. 7, 2014 1:14 PM EDT

Here's a stunning chart for you. It comes from a paper by a team of Swedish researchers, and it shows the relationship between earnings and weight among men. As you can see, adult earnings reach a peak around a BMI of 23—smack in the middle of the normal weight range—and then steadily decline as you get more overweight. But here's the kicker:

In particular, we contribute to the existing literature by showing that there is a large labor market weight-related penalty also for males, but only for those who were already overweight or obese in adolescence. We replicated this pattern using additional data sets from the United Kingdom and the United States, where the results were strikingly similar. The UK and U.S. estimates also confirm that the penalty is unique to those who were overweight or obese early in life.

The earnings penalty for overweight (and underweight!) men isn't due to simple discrimination. Men who become overweight as adults face no special career penalty. It's only a problem for men who become overweight as teenagers. The Economist summarizes the paper's conclusions:

At first glance, a sceptic might be unconvinced by the results. After all, within countries the poorest people tend to be the fattest....But the authors get around this problem by mainly focusing on brothers....They also include important family characteristics like the parents' income. All this statistical trickery allows the economists to isolate the effect of obesity on earnings.

So what does explain the “obesity penalty”? They reckon that discrimination in the labour market is not that important. Neither is health. Instead they emphasise what psychologists call “noncognitive factors”—motivation, popularity and the like. Having well-developed noncognitive factors is associated with success in the labour market. The authors argue that obese children pick up fewer noncognitive skills—they are less likely, say, to be members of sports teams or they may face discrimination from teachers.

In other words, social ostracism of both underweight and overweight teenagers produces lower cognitive skills and lower noncognitive (i.e., social) skills, and this in turn leads to lower earnings as adults. It may seem like harmless teenage clique behavior, but it has real consequences.

Spending During a Recession Is an Even Better Idea Than We Thought

| Tue Oct. 7, 2014 10:59 AM EDT

Matt O'Brien points today to a new paper that tries to estimate the value of the fiscal multiplier during recessions. The multiplier is a number that tells us how effective government spending is. For example, if the government spends a dollar on donuts, and then the baker uses part of that dollar to buy sugar, and then the sugar distributor uses part of that to pay her truckers, then the original dollar of government spending might spur total spending of more than a dollar.

On the other hand, if government spending simply takes a dollar out of the pockets of taxpayers, the net effect might be zero. Total spending might not change at all.

The value of the multiplier during the Great Recession has been a subject of considerable dispute over the past few years, but a new trio of researchers has produced an estimate higher than most previous ones:

Riera-Crichton, Vegh, and Vuletin took this analysis a step further. They focused squarely on countries that, between 1986 and 2008, had both been in a recession and increased spending. This last point is critical. Stimulus, remember, is supposed to be countercyclical: the government spends more when the economy shrinks. But historically-speaking, countries have actually cut spending about half the time that they've been in a slump. So counting all that austerity as "stimulus," as most do, gives us a misleadingly low estimate of the multiplier, something like 1.3. But it turns out, based on this new better sample, that the multiplier is really around 2.3 during a garden-variety recession, and 3.1 during a severe one.

Hmmm. I can't say that I understand this. Every estimate of the fiscal multiplier I've seen acknowledges that it's different during recessions. And why would previous research have included countries that cut spending during a recession? This is a bit of a mystery. Nonetheless, if this new paper really does do a better job of estimating the multiplier, then it makes a very strong case that stimulus spending during a recession—especially a severe one—is critical to recovery. America's obsession with austerity starting in 2011 is probably a big reason our recovery was so weak, and cutting spending now, as the eurozone is doing even as its economy decays yet again, is the worst thing they could do.

More infrastructure spending, please. After all, why not do it now when it's practically a free lunch?

BREAKING: Wall Street Is a Sinkhole of Corruption and Fraud

| Tue Oct. 7, 2014 1:26 AM EDT

The New York Times reports on the latest in Wall Street malfeasance:

With evidence mounting that a number of foreign and American banks colluded to alter the price of foreign currencies, the largest and least regulated financial market, prosecutors are aiming to file charges against at least one bank by the end of the year, according to interviews with lawyers briefed on the matter. Ultimately, several banks are expected to plead guilty.

....The charges will most likely focus on traders and their bosses rather than chief executives.

Ha ha ha. That goes without saying. Everyone knows that the CEOs of big banks know absolutely nothing about what's actually going on in their banks.

In any case, I think we might all have an easier time from now on if we wrote stories explaining which areas of banking aren't under investigation for collusion and gobsmacking levels of fraud and corruption. You know, just to save time.