The gap exists, but is it a problem? Women make 20+% less than men depending on what study you point to. Ok. So what. Just saying it, doesn't make it a problem. Black men make less than white men. People with college degrees make more than those with high school degrees only. Do we need to 'fix' those issues too?
The Indianapolis Star obviously isn't interested in the actual research - just more interested in assuming the gap is something that needs 'fixing' (without of course explicitly stating how, though implicity suggesting employers just need to pay more to women).
The fact that the author dismisses the anger from those that think the wage gap is something that needs fixing is unfortunate. There is anger because the wage gap, while not a myth itself, perpetuates the myth that by itself it is a problem that needs solving.
Economists have studied this for years and a main reason a gap exists is because women self-select into lower paying jobs than men. Also, many of these gap studies only focus on basic wages and salaries and ignore the benefits side of the equation which for many employers is 30+% of labor cost. Additionally, women tend to work fewer hours than men. Due to child-rearing norms, women tend to have less workforce attachment than men. Education levels, training, and work experience differences have also been found to be factors. That is why they get paid less for the most part. Is sexism part of it? I'm sure it is, but to imply that the entire gap of 20+% is sexism that needs to be 'fixed' is ridiculous.
The anger comes from the fact that many people don't think that gap should be 'fixed' - because it's either not really that broken or the part that might need fixing itself is much lower that it is purported to be. In other words, they are angry because they feel there are erroneous assumptions being made. The St. Louis Federal Reserve estimates that the gap, just after adjusting for benefits and job characteristics, may be less than 5%. This is not to mention any of the other points I mention above. Or, if you do think it needs fixing, perhaps folks should focus on why these differences exist from a sociological perspective, as opposed to just looking at this as a quick fix that means 'employers need to pay women more'. Should we pay women more if the reason they are getting a lower wage is due to their own job choice, or due to their education/training/job attachment, or due to the fact that they get more in benefits...? If so perhaps we need to start paying blacks more. Perhaps we need to start paying high school drop-outs more. Perhaps we need to start paying the less experienced more. I don't suggest the answer is one way or the other to any of these. But to ignore these deeper issues is to ignore the statistics.
Wednesday, September 25, 2013
Sunday, August 25, 2013
Krugman - Still pacing the halls of his ignorant tower.
Rather that me attempting to write a long post about Paul Krugman's lack of understanding endogenous money, I'll let Naked Capitalism do it for me: http://www.nakedcapitalism.com/2013/08/james-tobin-versus-paul-krugman.html
Wednesday, June 5, 2013
"Price Gouging": Both Sides Get It Wrong
I was reading my facebook feed recently and someone mentioned something about how firms that price gouge (like gas stations) are shameful, etc. etc. etc. This reminded me that the topic is one of my favorite microeconomics topics. So I thought I'd write about it. Price gouging is defined differently by the various State laws covering the term, but generally it is a situation in which a firm raises prices of a necessity good(s) (like gasoline) during a short-term shock (emergency - like a weather disaster) that is not easily justified by the cost of producing or exchanging said good.
To most conservatives or economists the very term "price gouging" is misleading and far from being a 'bad' thing, it is a necessary component to capitalism. IE, it's just supply and demand. When a hurricane hits, supply of gasoline falls, demand rises, so profit-maximizing firms raise their prices. It's not outside of supply and demand - it IS supply and demand. [the example/link given by the way is just an example and is not what I would technically define as a true price gouging situation unless you view bullets to be a necessity ;)]
Nevertheless, laws were put in place to protect consumers: to block price increases for situations when otherwise prices would increase based on reasons that cannot be explained by supply. In other words - to prevent firms from increasing prices based on a demand spike (caused by people trying to flee a disaster). The intentions are obvious and mostly on moral grounds. The idea is that people are already suffering enough, it is not right to hit them financially during these times in life.
Consumerists have it correct that there is something morally amiss about jacking up prices during emergencies on necessity goods. But their solutions are inelegant and target the wrong problem: unfairly targeting businesses. Essentially they are telling profit-maximizing firms to temporarily stop profit-maximizing and to somehow only increase prices based on supply and not demand pressures, as if that is a simple napkin calculation during such times. And if they don't comply, they could be fined.
Conservatives/Economists have it correct that it is all just supply and demand but they err in assuming that 'efficiency' (as defined in economics) is something society values or should value in time of emergency. Consider an emergency where everyone is trying to fill up their tanks to leave the site. The 'efficient' way to allocate resources is via the price mechanism - using supply and demand. In other words 'price gouging' is efficient. But the problem there (or at least a problem) is that only the well off are then able to flee, leaving the poorer members of society to suffer. The rich full up their tanks and the top 5% flees while the 95% dies. Whereas, in a disaster, sometimes it makes more sense to ration or do something less 'efficient' to ensure safety and fairness. (So instead of the rich filling up, everyone fills up just enough to escape). Demand, remember, is about the willingness AND ability to buy a good. In other words, efficiency is not always welfare-enhancing or moral.
But here is why both groups, the conservatives/economists and the consumerists talk past each other. In short, they both are correct, but missing the main problem. The main problem is that we, as a society, don't like capitalism in all situations. We particularly don't like it during emergencies. (And many of us don't like it with regards to necessity goods in general - think health care). But instead of altering our system to accommodate such emergencies (or even attempting to do so) we just pass these laws that essentially tell businesses to stop being themselves for some undefined amount of time. In other words, price 'gouging' is not the problem, it is a necessary effect of capitalism. The problem is that we chose to ignore that fact.
To most conservatives or economists the very term "price gouging" is misleading and far from being a 'bad' thing, it is a necessary component to capitalism. IE, it's just supply and demand. When a hurricane hits, supply of gasoline falls, demand rises, so profit-maximizing firms raise their prices. It's not outside of supply and demand - it IS supply and demand. [the example/link given by the way is just an example and is not what I would technically define as a true price gouging situation unless you view bullets to be a necessity ;)]
Nevertheless, laws were put in place to protect consumers: to block price increases for situations when otherwise prices would increase based on reasons that cannot be explained by supply. In other words - to prevent firms from increasing prices based on a demand spike (caused by people trying to flee a disaster). The intentions are obvious and mostly on moral grounds. The idea is that people are already suffering enough, it is not right to hit them financially during these times in life.
Consumerists have it correct that there is something morally amiss about jacking up prices during emergencies on necessity goods. But their solutions are inelegant and target the wrong problem: unfairly targeting businesses. Essentially they are telling profit-maximizing firms to temporarily stop profit-maximizing and to somehow only increase prices based on supply and not demand pressures, as if that is a simple napkin calculation during such times. And if they don't comply, they could be fined.
Conservatives/Economists have it correct that it is all just supply and demand but they err in assuming that 'efficiency' (as defined in economics) is something society values or should value in time of emergency. Consider an emergency where everyone is trying to fill up their tanks to leave the site. The 'efficient' way to allocate resources is via the price mechanism - using supply and demand. In other words 'price gouging' is efficient. But the problem there (or at least a problem) is that only the well off are then able to flee, leaving the poorer members of society to suffer. The rich full up their tanks and the top 5% flees while the 95% dies. Whereas, in a disaster, sometimes it makes more sense to ration or do something less 'efficient' to ensure safety and fairness. (So instead of the rich filling up, everyone fills up just enough to escape). Demand, remember, is about the willingness AND ability to buy a good. In other words, efficiency is not always welfare-enhancing or moral.
But here is why both groups, the conservatives/economists and the consumerists talk past each other. In short, they both are correct, but missing the main problem. The main problem is that we, as a society, don't like capitalism in all situations. We particularly don't like it during emergencies. (And many of us don't like it with regards to necessity goods in general - think health care). But instead of altering our system to accommodate such emergencies (or even attempting to do so) we just pass these laws that essentially tell businesses to stop being themselves for some undefined amount of time. In other words, price 'gouging' is not the problem, it is a necessary effect of capitalism. The problem is that we chose to ignore that fact.
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.
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.
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
and
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:
and
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."
Saturday, February 23, 2013
Wednesday, January 30, 2013
Economics Not the Problem in Egypt, Freedom Maybe
Many in the media make the claim that Egypt's original uprising and continued discontent has more to do with economics than anything else (poverty, income inequality, etc).
However, something I stress in my macro class, is that statistics don't seem to bare a lot of that out - particularly when you compare Egypt to the Untied States (where there is no US Spring).
Egypt has less income inequality as measured by GINI (the data is a decade or two old but I don't think that affects the analysis much):
However, something I stress in my macro class, is that statistics don't seem to bare a lot of that out - particularly when you compare Egypt to the Untied States (where there is no US Spring).
Egypt has less income inequality as measured by GINI (the data is a decade or two old but I don't think that affects the analysis much):
The Egyptian economy, additionally, has grown by 25% as measured by GDP per capita from 2000-2008 - before the Arab Spring. During this same time, the US has grown by a measly 9%.
The unemployment rate in Egypt in 2009 leading up to the Arab Spring was 9%, which was actually less than the unemployment rate in the United States during the same time-frame. Even looking at just youth unemployment - the rates in Egypt are not really that out of line compared to its neighbors or even the United States.
So, I for one simply don't buy into the fact that the Egypt uprising is economic. It is far more likely that it is more about political freedoms than anything else. I think that that is supported by the new uprisings taking place - which are stemming from the government failing to create legitimacy among the people.
Either that or this begs the question - why aren't WE in uprising?
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