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Friday, May 3, 2013

Part Time for Economics Reasons: Hardly Obamacare

The quacks are out in force suggesting that our economy is undergoing a transformation whereby we have less full-time workers and more people forced to work part-time.   That part is true.   The part that isn't true is the reason often given as the main cause:  Obamacare and the uncertainty of regulations. 

The truth is something different.  As you can see, the issue of part-time employment taking the place of full-time employment became an issue well before the health care legislation ever even become a law. 

In fact, since Obamacare was signed into law the overall number of part-time employed for economic reasons has fallen a bit, just as our unemployment rate overall has been slowly falling. 

Despite the obvious evidence that the phenomenon is almost solely attributable to the financial crisis and resulting recession, it hasn't stopped some economists and conservatives from blaming Obamacare (which by the way I don't disagree that Obamacare is being rolled out poorly, but to blame the entire employment situation on it is counter to the evidence):
here and here, for example.

Never-mind the fact that employment numbers have been revised upward and the unemployment rate continues to drop at a steady, albeit slow pace.   Consumer confidence continues to rise along with the stock markets.   The naysayers still insist that Obamacare is dragging everything down.

And it may yet be true that it might....but the data presently shows that it is the continuing effects of the crisis that are dragging us down.   Anyone who suggests otherwise is likely talking more out of politics than economics.  Yes, U-6 did tick up ever so slightly (unemployment rate including part-timers that would rather work full-time and discouraged workers) but as I've said before on this blog, you should never take one month's report and assume it is a new trend.   It is likely Obamacare will cause a slightly further shift to part time employment but only marginally, and for my money, we should be concerned about the mountain, not the mole hill.

Wednesday, May 1, 2013

Continuing Evidence: Mainstream Economists are Just Politicians in Disguise

On the right


On the left

The point of disagreement is disguised as being a disagreement over the Keynesian multiplier:  is it 1, is it less than 1, is it greater than 1 (recall the multiplier is simply the effect of a $1 cut or increase in spending on GDP)....

But really, economists' views on the multiplier have almost nothing to do with scientific inquiry and have almost everything to do with where they lie on the political spectrum.   Mankiw, being a Republican thinks the multiplier is small (big surprise) and that therefore the cuts won't hurt GDP or employment much.   Goolsbee (for example) being a Democrat thinks the multiplier is bigger - and that the cuts may in fact take a noticeable chunk out of GDP and employment.

The point is, all these economists pretend their differences are a matter of math and science, when they really are almost soley a  difference of politics.  

[Not to mention that both sides are ignoring that the Keynesian multiplier says nothing about employment - it only says what the effect of spending cuts on GDP is.   To the degree that GDP and employment are not 100% correlated (which of course they aren't), the multiplier itself says very little about employment.]

From Keynes' General Theory, Chapter 20:
"It follows from this that the assumption upon which we have worked hitherto, that changes in employment depend solely on changes in aggregate effective demand ... is no better than a first approximation, if we admit that there is more than one way in which an increase of income can be spent."