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Travel days

Posted: 18 August 2017 in Uncategorized
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library-owl

I’ll be traveling for the next few days. No posts then until I arrive. . .

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Special mention

Charlottesville  BrancJ20170817_low

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Last fall, just before the presidential election, I posted a report on the perilous condition of the American working-class.

Now, thanks to the Rand Corporation [ht: ja], we have a report on how terrible working conditions are in the United States.

Most Americans between the ages of 25 and 71 spend most of their available time in a given day, week, or year forced to have the freedom to sell their ability to work to a small group of employers. Thus, as the authors of the study note,

The characteristics of jobs and workplaces—including wages, hours worked, and benefits, as well as the physical demands and risk of injury, the pace of work, the degree of autonomy, prospects for advancement, and the social work environment, to name a few—are important determinants of American workers’ well-being. Some of these job characteristics also affect workers’ social and family lives.

Here are some of the major findings, which paint a picture of a work environment that is often stressful, taxing—both physically and mentally—and demeaning:

  • Nearly three-fourths of Americans report either intense or repetitive physical exertion on the job at least one-quarter of the time.
  • More than one-half of Americans report exposure to unpleasant and potentially hazardous working conditions.
  • Nearly one in five workers—a share the study calls “disturbingly high”—say they face a hostile or threatening environment at work, which can include sexual harassment and bullying.
  • Most Americans (two-thirds) frequently work at high speeds or under tight deadlines, and one in four perceives that they have too little time to do their job.
  • Only 57 percent of workers can take breaks when they want to, and just 31 percent can choose with whom they work.
  • Nearly two-thirds of workers experience at least some degree of mismatch between their desired and actual working conditions, and this fraction rises to nearly three-quarters when taking job benefits into account.

And those conditions spill over into the rest of workers’ lives:

  • About one-half of American workers do some work in their free time to meet work demands.
  • While many Americans regularly adjust their personal schedules to accommodate work matters, many (31 percent) are unable to adjust their work schedules to accommodate personal matters.

Overall, as the authors of the study conclude,

for many Americans, work can be taxing across a range of core dimensions, including at the physical, social, mental, and time levels.

What then?

As that prescient Manchester industrialist wrote to American readers 131 years ago,

The development of production on the basis of the capitalistic system has of itself sufficed. . .to do away with all those minor grievances which aggravated the workman’s fate during its earlier stages. And thus it renders more and more evident the great central fact, that the cause of the miserable condition of the working class is to be sought, not in these minor grievances, but in the Capitalistic System itself.

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White-Whine

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Russia is back in the news again in the United States, with the ongoing investigation of Russian interference in the U.S. presidential election as well as a growing set of links between a variety of figures (including Cabinet and family members) associated with Donald Trump and the regime of Vladimir Putin.

This year is also the hundredth anniversary of the October Revolution, which sought to create the conditions for a transition to communism in the midst of a society characterized by various forms of feudalism, peasant communism, and capitalism. But we shouldn’t forget that, in addition, the Red Century has clearly left its mark on the political economy of the West, including the United States—both in the early years, when the “communist threat” undoubtedly led to reforms associated with a more equal distribution of income, and later, when the Fall of the Wall reinforced the neoliberal turn to privatization and deregulation.

Now we have a third reason to think about Russia, which happens to intersect with the first two concerns. A new study of income and wealth data by Filip Novokmet, Thomas Piketty, Gabriel Zucman reveals just how much has changed in Russia from the time of the tsarist oligarchy through the Soviet Union to rise of the new oligarchy during and after the “shock therapy” that served to create a new form of private capitalism under Putin.

As is clear from the chart, income inequality was extremely high in Tsarist Russia, then dropped to very low levels during the Soviet period, and finally rose back to very high levels after the fall of the Soviet Union. Thus, for example, the top 1-percent income share was somewhat close to 20 percent in 1905, dropped to as little as 4-5 percent during the Soviet period, and rose spectacularly to 20-25 percent in recent decades.

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The data sets used by Novokmet et al. reveal a level of inequality under the new oligarchs that is much higher that was the case using survey data—a top 1-percent income share that is more than double for 2007-08.

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Novokmet et al. also show that the income shares of the top 10 percent and the bottom 50 percent moved in exactly opposite directions after the privatization of Russian state capitalism in the early 1990s. While the top 10-percent income share rose from less than 25 percent in 1990-1991 to more than 45 percent in 1996, the share of the bottom 50 percent collapsed, dropping from about 30 percent of total income in 1990-1991 to less than 10 percent in 1996, before gradually returning to 15 percent by 1998 and about 18 percent by 2015.

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In comparison to other countries, Russia was much more equal during the Soviet period and, by 2015, had approached a level of inequality higher than that of France and comparable only to that of the United States.

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Finally, Novokmet et al. have been able to estimate the enormous growth of private wealth under the new oligarchy, especially the wealth that was captured by a tiny group at the very top and is now owned by Russia’s billionaires. As the authors explain,

The number of Russian billionaires—as registered in international rankings such as the Forbes list—is extremely high by international standards. According to Forbes, total billionaire wealth was very small in Russia in the 1990s, increased enormously in the early 2000s, and stabilized around 25-40% of national income between 2005 and 2015 (with large variations due to the international crisis and the sharp fall of the Russian stock market after 2008). This is much larger than the corresponding numbers in Western countries: Total billionaire wealth represents between 5% and 15% of national income in the United States, Germany and France in 2005-2015 according to Forbes, despite the fact that average income and average wealth are much higher than in Russia. This clearly suggests that wealth concentration at the very top is significantly higher in Russia than in other countries.

Clearly, there is nothing “natural” about the distribution of income and the ownership of wealth. This new study demonstrates that different economic structures and political events create fundamentally different levels of inequality in both income and wealth, both within and between countries.

The Russian experience is a perfect example how inequality can fall and then, later, be reversed with radical economic and political transformations—thus creating a new oligarchy that dominates the national political economy and seeks to intervene in other countries.

Not unlike the United States.

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As regular readers know, I have written about minimum wages many times over the years on this blog. However, after reading about the much-publicized study by Ekaterina Jardim et al., according to which Seattle’s decision to raise the minimum wage actually hurt low-wage workers, I decided to turn to my old friend and minimum-wage expert Dale Belman to see what he thought of the study. Dale is a professor in the School of Human Resources & Labor Relations at Michigan State University and coauthor (with Paul J. Wolfson) of What Does the Minimum Wage Do? I am pleased to publish his guest post here. 

Seattle embarked on an audacious policy change in raising its minimum wage from $9.47 to $15.00 over five years.* The first two increments, to $11 in April 2016 and $13.00 in January 2017, have gone into effect. This policy has notable positive effects for employed low-wage workers and also provides an “experiment” central to the ongoing debate over the employment effects of the minimum wage.

The conventional analysis of the minimum wage suggests that, in the face of a typical (downward-sloping demand curve), a higher minimum wage must cause a reduction in the employment of workers “bound” by the new minimum wage–those who currently work between the old and new minimum wage. However, since 2000, a large body of empirical research has found few-if-any employment effects for historical increases in the minimum wage. Although not universally accepted, many economists are increasingly open to the view that moderate increases in the minimum wage may be good policy for low- wage workers, increasing their earnings with negligible employment costs.

An important remaining issue is whether increases outside of the range of historical experience, such as the increases sought by Fight for $15, reduce employment. The Seattle minimum-wage increase provides data to test the employment effect. One study, “Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle,” by Jardim et al., uses Washington state unemployment data that, unique among such state data sets, provides not only quarterly earnings, but quarterly hours of work. This allows computation of the hourly wage. Using established regression methods, the authors report that the increase in the minimum wage to $13 resulted in a 6.8-percent decline in low-wage employment in Seattle. It should come as no surprise that this result reinvigorated the argument that the minimum wage causes large declines in employment, and has been widely featured in the Washington Post (but, interestingly, not the New York Times).

The results are not as decisive as portrayed by Jardim et al., as there are several unresolved methodological issues. The first is that the estimated elasticity of employment (the percentage change in employment for a 1% change in the wage) is well outside the bounds of prior research. Jardim et al. report an elasticity of -3. In contrast, the work of [first name] Neumark and [first name] Wascher, the most prominent researchers arguing for a negative employment effect, finds an average elasticity of -1. Jardim et al.’s elasticity is particularly unexpected since, although Seattle’s $13 minimum wage is high for the United States, it is not unusually high relative to Seattle’s wage structure. Second, the study finds the increase in the minimum wage is associated with a 21-percent increase in employment and hours among workers earning at least $19 per hour. Given that high-wage workers employment should only be marginally affected by the increase, this suggests the study does not properly account for the employment effects of Seattle’s booming labor market. Finally, the study excluded the 38 percent of Washington employees who work for firms with multiple locations. These employees cannot be included because the U.I. data does not record whether they work in Seattle. These multi-location firms, which tend to be larger than single location firms, may respond differently to the minimum wage than single location firms. If there is a shift of employment from single- to multi-location firms in response to the minimum wage, the large magnitude of the elasticity may well result from measuring only part of the relevant labor force.

The literature on the minimum wage developed “falsification” tests that can be used to determine whether or not an estimated results from spurious correlations. These include such issues as estimated results that may be well outside the range that could be expected from a minimum wage increase, whether the effect is found among groups that should not have been affected by the minimum wage, and whether the effect of the minimum wage is found prior to its implementation.

Until the authors include these tests in their research, we cannot know if their results do in fact represent a serious challenge to the emerging consensus on the employment effects of increases in the minimum wage.

 

*I want to acknowledge the work of Michael Reich et al. and John Schmidt and Ben Zipperer for the analysis of “Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle.”